Why Are Drug Prices So High? (Hint: It’s Not R&D)
Turns out you're funding commercials, not cures.
Before the pandemic, in 2019, it was Democrats who were anti-pharma.
This phrase is a statement that I’ve heard countless times, showing how quickly the tide can shift in a population. Now, since post-COVID, the liberals are the ones who are “trust the science” —the mainstream science that is.
And by trusting the mainstream science, one ends up trusting in the producer of that science: Big Pharma.
I’ve touched on Big Pharma in a variety of articles, such as:
The Power of the Clinical Trial: How Big Pharma uses data to get a drug approved, but then hides specific data that shows dangerous side effects.
The Hidden Struggle in Health Care: How Big Pharma is now educating medical students to see obesity as a disease—instead of lifestyle choices—to push GLP1 drugs.
Donating to a Good Cause: How Big Pharma came into existence when it was discovered that petroleum could be sold as petrochemicals.
In those articles, I also explore the influence that Big Pharma has over our technocratic society. However, to question this control is to be seen as a “right-winger” or a “conspiracy theorist.”
In fact, according to liberals, we need Big Pharma around because Big Pharma cures diseases, like obesity with its GLP1 products or how it saved us from the pandemic, with its mRNA vaccines—least we forget that vaccines have been tied to polio paralysis, autism, and SIDS—and why vaccinated children are sicker than unvaccinated ones.
Nevertheless, we need, and we understand why drugs cost so much: because Big Pharma needs that money for research, innovation, and a cure.
A cure for cancer, dementia, you name it.
So, because of this elusive cure that’s just around the corner, sort of like Space Travel, Big Pharma needs to charge high costs for drugs so they can fund more clinical research.
Well, what if I told you that isn’t the truth? What if I told you that’s one of the biggest false narratives out there?
To do this, we’ll dive into what previous outlets have reported on the spending of Big Pharma. We’re going to show why Big Pharma needs to charge so much for all the drugs out there.
Because if they don’t, who else will pay for all the advertisements on TV that you see?
Without further ado, let’s dive right in.
Past Outlets and Big Pharma’s Spend
I wanted to focus on other outlets because, as I mentioned, how narratives can switch, media outlets are pivotal in leading that switch. During the pandemic, The Atlantic was so “trust the science,” but quick to call for an “amnesty” after the science was wrong—as I mentioned here in 2022.
Well, when the tide is “argue the science,” they do just that.
In the following article from 2019, titled Big Pharma’s Go-To Defense of Soaring Drug Prices Doesn’t Add Up1, from the Atlantic, we read:
How is it that pharmaceutical companies can charge patients $100,000, $200,000, or even $500,000 a year for drugs—many of which are not even curative?
Abiraterone, for instance, is a drug used to treat metastatic prostate cancer. The Food and Drug Administration initially approved it in 2011 to treat patients who failed to respond to previous chemotherapy. It does not cure anyone.
The research suggests that in previously treated patients with metastatic prostate cancer, the drug extends life on average by four months… At its lowest price, it costs about $10,000 a month.
Abiraterone is manufactured under the brand name Zytiga by Johnson & Johnson. To justify the price, the company pointed me to its “2017 Janssen U.S. Transparency Report,” which states: “We have an obligation to ensure that the sale of our medicines provides us with the resources necessary to invest in future research and development.”
In other words, the prices are necessary to fund expensive research projects to generate new drugs.
This explanation is common among industry executives. To many Americans, it can seem plausible and compelling. It’s easy to conjure images of scientific researchers in their protective gear and goggles carefully dropping precious liquids into an array of Erlenmeyer flasks, searching for a new cure for cancer or Alzheimer’s.
But invoking high research costs to justify high drug prices is deceptive.
Yet every time Congress debates doing something about drug prices, the industry—and the advocacy groups it funds—vociferously returns to the point that lower prices will thwart innovative research.
The fear of missing a cure for Alzheimer’s or Lou Gehrig’s disease or depression contributes to stalling reform. But there are many reasons to question the widely held notion that high drug prices and innovative research are inextricably linked.
If you watch television, you know part of the answer to where this extra money is going: sales and advertising. Of the 10 largest pharmaceutical companies, only one spends more on research than on marketing its products.
Interestingly, they mentioned Congress because, as stated in the article The Ruling Class of the United States, Congress ultimately answers to lobbyists, and these lobbyists have written more than 80% of the policies in place. So, this is an excellent callout by The Atlantic, even though it is skirted around in the rest of the article.
Another source that I found, which shed a lot of light on this, was the National Nurses United site. They conducted a study titled The R&D Smokescreen2. From their article3, we read:
“In justifying skyrocketing drug prices, the pharmaceutical industry typically claims that it needs massive profits to conduct research and development (R&D) for critical new medications. But the drug giants actually spend far more of their enormous wealth on marketing and sales than they do on R&D, a portion of which is actually funded by taxpayers, according to the latest research from the California Nurses Association/National Nurses United.
In “The R&D Smokescreen,” researchers found nearly two thirds of the 100 biggest pharmaceutical corporations spent at least twice as much on marketing as they did on R&D, 43 spent five times as much, and 27 spent ten times as much on marketing than on R&D.
Meanwhile, a number of the drug giants are actually cutting R&D spending while rapidly escalating spending on marketing, especially in direct to consumer advertising and direct payments to physicians to encourage them to prescribe the drug firms’ high priced drugs.
Among the findings in “The R&D Smokescreen”:
On average, the top 100 drug companies spent just nearly three times as much on marketing and sales as they devoted to research and development.
Financial markets have actually rewarded companies in increased stock prices for cutting R&D departments. Cutting research spending is a frequent occurrence of a merger and acquisition wave throughout the pharmaceutical industry…
Drug corporations increasingly rely on taxpayer funding, through the National Institutes of Health, for most of the most innovative R&D.
As economist Mariana Mazzucato wrote in the Los Angeles Times last year 75 percent of the research for the most innovative drugs are “trace their existence to NIH funding” while pharma’s focus is on “me too” drugs, slight variations of existing brand name medications for which the drug giants can receive new patents to freeze out generic competition and keep prices high.
In 2013, 68 percent of all pharma marketing expenses target payments to physicians, clearly intended to encourage those doctors to push the company’s products.
One study by ProPublica this past March found that “doctors who received industry payments were two to three times as likely to prescribe brand-name drugs at exceptionally high rates as others in their specialties.” Drug companies also make payments to physicians by paying for travel, research, gifts, speaking fees and meals. From 2013 to 2015, total amounts spent by pharma on doctors nearly doubled from $3.9 billion to $7.4 billion.
The U.S. is one of only two countries (along with New Zealand) that permits drug companies to advertise directly to patients and other consumers, a practice sharply criticized by the World Health Organization.
Physician groups have condemned the direct advertising (which anyone who owns a TV can readily see) as dangerous to health, including the inadequate transparency on risks of particular medications, and promoting the most expensive treatments.
In 2015 alone, Pfizer spent $1.4 billion on ads. Humira, a drug to reduce joint pain, topped all individual drugs in direct marketing in 2015; manufacturer AbbVie spent $357 million to hook Humira.
I worked with AI to create a breakdown of all the dollars that Big Pharma gets when a drug comes to market. Below is the breakdown
Marketing accounts for the second-highest cost of Big Pharma.
I’m sure most people did not know that.
Closing Thoughts
One of the reasons I like writing is that I learn new things. For example, I did not know that most of the research done for new drugs doesn’t come from Big Pharma, but rather from the NIH.
Why pay more money for it when you can use what the NIH provides? For free, since taxpayer dollars are already paying for it.
What was also interesting was that marketing did not consist only of TV ads. From ChatGPT, we read the following:
In fact, it’s well documented that for many big pharma companies, SG&A (which covers sales forces, marketing campaigns, and corporate admin) exceeds their R&D spending. For example, in one analysis Merck spent about 27% of revenue on SG&A versus 17% on R&D, and Pfizer about 33% on SG&A versus 14% on R&D4.
It’s worth noting that marketing in pharma is not just TV commercials. In the U.S., direct-to-consumer advertising is actually a modest portion of spending – on the order of only 2–3% of revenues in recent years5 – but drugmakers invest heavily in less visible marketing channels. For instance, one study found that promotion to physicians (via sales reps, free samples, medical education) was about 5–6 times the amount spent on consumer ads6. Those costs are rolled into SG&A.
One of the most pressing questions we must ask is why? Why is so much money pumped into marketing?
Well, there are a couple of reasons. For one, it’s the sales, of course. Patients go into their doctor’s offices asking for this product, and the doctor gives it to them; that’s one. But there may be something deeper.
Two, it normalizes the narrative of taking poison—with dangerous side effects—as the right thing to do.
In all the ads you see, you see the patient suffering, the medication being used, and then the patient happy. Problem, Reaction, Solution. But what gets lost in the sauce are the damaging side effects that come with the drug.
We have to remember that these drugs are synthetic chemicals, petroleum-based, petrochemicals, that are now marketed as “safe and effective.” To uphold this industry, the same way Rockefeller spun a thousand different narratives around oil, so too are narratives being spun about drugs. And drug ads, plus doctor “education,” are effective tools to do so.
To close, in my article on Modern Medicine as Poison, I discuss how historically, we’ve come to see the body’s natural healing process as “diseases.” The ads and visits help reinforce the fact that we need these “marvels of modern medicine.”
However, time and time again, the data shows a different story—these drugs are killing us. It’s time we wake up to the sorcery occurring in front of us and choose the right path.
Again, here are the articles I’ve written on Big Pharma:
The Power of the Clinical Trial: How Big Pharma uses data to get a drug approved, but hides data showing dangerous side effects
The Hidden Struggle in Health Care: How Big Pharma is educating medical students to see obesity as a disease, instead of lifestyle choices, to push GLP1 drugs.
Donating to a Good Cause: How Big Pharma came into existence when it was discovered that petroleum could be sold as petrochemicals.
How vaccines have been tied to polio paralysis, autism, and SIDS,
Why unvaccinated children are healthier than vaccinated ones.
As always, thank you for your time and attention. If you have any questions or feedback, please let me know in the comments below.
Ashe,
Franklin O’Kanu
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Notes and References
https://archive.ph/KHElC#selection-2219.0-2231.45
https://www.nationalnursesunited.org/sites/default/files/nnu/files/pdf/research/TheRDSmokecreenv1_1.pdf
https://www.nationalnursesunited.org/press/rn-report-pharma-giants-spend-far-more-marketing-sales-they-do-research-and-development
https://www.fiercepharma.com/regulatory/does-pharma-spend-more-on-marketing-than-r-d-a-numbers-check#:~:text=If%20you%20look%20at%20the,care%20meds
https://schaeffer.usc.edu/research/how-did-the-public-u-s-drugmakers-sales-expenses-and-profits-change-over-time/#:~:text=In%20contrast%20to%20the%20public,in%202018
https://www.fiercepharma.com/regulatory/does-pharma-spend-more-on-marketing-than-r-d-a-numbers-check#:~:text=DTC%20spending%20is%20only%20part,was%20just%20over%20%244%20billion
Excellent Franklin!
Your article is spot on! I worked for a large pharmaceutical company for a few years. I found out that the marketing department made more than any other employee of the company including the scientists. It was a real eye opener that as an engineer of over 20 years I made less than a fresh out of college marketing hire. The top marketing folks made at least 3 times the top scientists (phds and mds). If a marketing director came to a “team” meeting they were treated as if they were above the team. It gave me a very clear understanding of how it works.