TALKING WITH THE MEDIA ABOUT "PROFITING FROM PAIN" REPORT 

July 2002

Drug companies charging skyrocketing drug prices like to sugar coat the pain by saying those prices are needed for research and development. The truth is that this claim is a scare tactic that misleads the public. Drug companies are directing much more of their money towards marketing the most expensive drugs and keeping generics from coming to market than finding cures for Americans. These practices are all happening in a climate where millions of Americans still cannot afford to pay for their medications.

Drug companies are marketing machines rather than pharmaceutical research houses:

• Eight of these nine industry leaders spent more than twice as much on marketing, advertising, and administration than they did on research and development in 2001.
• In addition six of the nine drug companies brought in more in profits than they spent on research and development in 2001.

The drug industry continues to experience high levels of prosperity:

• The pharmaceutical industry has been by far the most profitable industry in America for the past 10 years. In 2001, it was five-and-one-half times more profitable than the average for Fortune 500 companies.
• In 2001, these drug companies paid their top executives an average of nearly $24 million, exclusive of unexercised stock options. The highest paid executive received a total of nearly $75 million, exclusive of unexercised stock options.
• The report clearly shows that the industry's repeated refrain about research and development is extraordinarily misleading. The industry's own numbers on marketing, advertising, and administration and overall profits suggest that R&D is not the only area where a moderation in prices could be absorbed.

The drug companies in this study are all industry leaders that use this power to protect their profits at the expense of consumers:

• The drug companies in this study market many of the 50 most prescribed drugs to seniors. The price of these drugs rose by nearly 3 times the rate of inflation last year.
• This report highlights the importance of adding a guaranteed prescription drug benefit in Medicare. A drug benefit in the Medicare program would mean that Medicare could use the use the purchasing power of millions of seniors to leverage for better prices for consumers.