Research Article: The Cost of Pushing Pills: A New Estimate of Pharmaceutical Promotion Expenditures in the United States

Date Published: January 3, 2008

Publisher: Public Library of Science

Author(s): Marc-André Gagnon, Joel Lexchin

Abstract: None

Partial Text: In the late 1950s, the late Democratic Senator Estes Kefauver, Chairman of the United States Senate’s Anti-Trust and Monopoly Subcommittee, put together the first extensive indictment against the business workings of the pharmaceutical industry. He laid three charges at the door of the industry: (1) Patents sustained predatory prices and excessive margins; (2) Costs and prices were extravagantly increased by large expenditures in marketing; and (3) Most of the industry’s new products were no more effective than established drugs on the market [1]. Kefauver’s indictment against a marketing-driven industry created a representation of the pharmaceutical industry far different than the one offered by the industry itself. As Froud and colleagues put it, the image of life-saving “researchers in white coats” was now contested by the one of greedy “reps in cars” [2]. The outcome of the struggle over the image of the industry is crucial because of its potential to influence the regulatory environment in which the industry operates.

There are many concerns about the accuracy of the IMS data. First, IMS compiles its information through surveys of firms, creating the possibility that companies may systematically underestimate some of their promotional costs to enhance their public image. Second, IMS does not include the cost of meetings and talks sponsored by pharmaceutical companies featuring either doctors or sales representatives as speakers. The number of promotional meetings has increased dramatically in recent years, going from 120,000 in 1998 to 371,000 in 2004 [6]. In 2000, the top ten pharmaceutical companies were spending just under US$1.9 billion on 314,000 such events [7]. Third, IMS does not include the amount spent on phase IV “seeding” trials, trials designed to promote the prescription of new drugs rather than to generate scientific data. In 2004, 13.2% (US$4.9 billion) of R&D expenditures by American pharmaceutical firms was spent on phase IV trials [5]. Almost 75% of these trials are managed solely by the commercial, as opposed to the clinical, division of biopharmaceutical companies, strongly suggesting that the vast majority of these trials are done just for their promotional value [8].

According to its Web site (http://www.imshealth.com/), IMS provides business intelligence and strategic consulting services for the pharmaceutical and health care industries. It is a global company established in more than 100 countries. IMS gathers data from 29,000 data suppliers at 225,000 supplier sites worldwide. It monitors 75% of prescription drug sales in over 100 countries, and 90% of US prescription drug sales. It tracks more than 1 million products from more than 3,000 active drug manufacturers. IMS data for 2004 were obtained from its Web site for the amount spent on: visits by sales representatives (detailing), samples, direct-to-consumer advertising, and journal advertising.

For 2004, CAM reported total promotional spending in the US of US$33.5 billion [10], while IMS gave the figure of US$27.7 billion for the same year [4]. Both CAM and IMS cited the media intelligence company CMR as the source for the amount spent on direct-to-consumer advertising (US$4 billion), and they also gave the same figure for journal advertising (US$0.5 billion).

Our revised estimate for promotional spending in the US is more than twice that from IMS. This number compares to US$31.5 billion for domestic industrial pharmaceutical R&D (including public funds for industrial R&D) in 2004 as reported by the National Science Foundation [15].

From this new estimate, it appears that pharmaceutical companies spend almost twice as much on promotion as they do on R&D. These numbers clearly show how promotion predominates over R&D in the pharmaceutical industry, contrary to the industry’s claim. While the amount spent on promotion is not in itself a confirmation of Kefauver’s depiction of the pharmaceutical industry, it confirms the public image of a marketing-driven industry and provides an important argument to petition in favor of transforming the workings of the industry in the direction of more research and less promotion.

Source:

http://doi.org/10.1371/journal.pmed.0050001

 

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