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Key Findings
This report examines data from the top seven U.S.-based pharmaceutical companies, with combined 2004 revenues of more than $190 billion. In order of size (based on 2004 revenue), these companies are: Pfizer Inc.; Johnson & Johnson; Merck & Co., Inc.; Abbott Laboratories; Bristol-Myers Squibb Company; Wyeth; and Eli Lilly and Company.
Profits (Net Income)
In 2004, these seven drug companies together reported over $34 billion in profits. (See Table 1 and Appendix II for details on each company.)
- Pfizer reported profits of over $11 billion, which represented 22 percent of the company’s reported revenue.
- Johnson & Johnson reported over $8.5 billion in profits.
- Wyeth, which reported the “lowest” profits, still had profits of more than $1 billion.
Profits and Spending Patterns
Not only did the seven companies all record substantial profits, but all spent more on marketing, advertising, and administration than they did on R&D. Four of the seven companies reported more in profits than they spent on R&D. And five of the seven companies spent more than twice as much on marketing, advertising, and administration as they did on R&D. (See Table 1.)
- The seven companies together reported nearly $62 billion in spending on marketing, advertising, and administration.
- No company spent more than 19 percent of its revenue on R&D, whereas all the companies spent 25 percent or more of their revenues on marketing, advertising, and administration.
- On average, spending on marketing, advertising, and administration represented 32 percent of company revenues, whereas spending on R&D represented 14 percent of company revenues.
- On average, these companies reported 18 percent of revenue as profits, compared to 14 percent of revenue reported as going to R&D.
Annual Compensation, Exclusive of Unexercised Stock Options, for the Chief Executives in Each of the Seven Pharmaceutical Companies
- The average annual income, exclusive of unexercised stock options, of the chief executives of the seven companies was more than $13 million in 2004. The median income was nearly $9 million (see Table 2 on page 6).
- The highest-paid of these executives was Raymond V. Gilmartin, Chairman, President, and CEO of Merck & Company. In 2004, his compensation, exclusive of unexercised stock options, was $37,786,981.
- The total compensation, exclusive of unexercised stock options, received by these seven executives was more than $91 million.
Annual Compensation, Exclusive of Unexercised Stock Options, for the 36 Highest-Paid Executives
The average annual income, exclusive of unexercised stock options, received by the 36 most highly compensated executives of the seven companies was more than $5 million in 2004.
The total compensation, exclusive of unexercised stock options, received by these 36 executives was nearly $188 million in 2004 (see Table 3).
Value of Unexercised Stock Options for the Chief Executives of the Seven Companies
- The value of unexercised stock options for the chief executive of each of the seven companies was, on average, more than $19 million in 2004, with a median value of nearly $24 million (see Table 4).
- The largest value of unexercised stock options received by the chief executives of the seven companies was worth more than $30 million in 2004.
- The total reported value of unexercised stock options for these seven executives was almost $135 million in 2004.
Value of Unexercised Stock Options for the 36 Highest-Paid Executives in 2004
- The value of unexercised stock options for the 36 most highly compensated executives was, on average, more than $8 million in 2004 (see Table 5).
- The total reported value of unexercised stock options for the 36 most highly compensated executives was nearly $297 million in 2004.
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