“You’ve seen these ads. You know who’s paying for them, right? You are,” Edwards reportedly told the gathering. He went on to claim that medicine makers spend “twice as much” on marketing and administration as they do on research.
But that’s not true. U.S. drugmakers shelled out more than $55 billion on medical research in 2006, according to market research firm IMS Health. That compares to just $12 billion companies spent on sales, promotion to doctors, and ads targeting patients.
snip
In arguing that Big Pharma spends more promoting itself than researching cures, Edwards’ speechwriters conveniently lumped “marketing” and “administrative” costs together. That’s grossly misleading.
In most Fortune 500 financial reports “administrative costs” or “general expenses” are often catchall categories for anything that isn’t related to the direct costs of manufacturing or sales. It often includes, for example, office leases and accounting costs.
Unfortunately for them, many drug companies use a combined line item in their financial reports for sales and administrative costs, which is probably the source of the oft-repeated myth that high marketing costs are the primary culprit behind rising drug costs.
As for Edwards’s idea of a two-year moratorium on advertising for newly introduced drugs? That might be wise for, say, medications with long lists of side effects. But it’s hard to get policy wonks to pay attention to worthwhile proposals as long as politicians are chasing bigger headlines.
CNN Money 10/30/07
http://money.cnn.com/2007/10/29/news/companies/edwards_drug_ads.fortune/?postversion=2007103010
