Report Finds Wide Gap In Pharma Companies’ Profits And Spending On R&D

By Kim Treanor for Intellectual Property Watch

A new report from Public Citizen, the US-based consumer rights advocacy group, shows that the 20 largest pharmaceutical corporations are spending significantly less on research and development of new medicines than they are making in profits.

The report shows that, on average for these top companies, profits rose nearly 24 percent between 2014 and 2015, and that the group as a whole profited over US$100 billion each year from 2014 – 2015. Pharmaceutical companies argue that the large sums invested in research and development are what drive increases in the prices of medicine, according to the report. Public Citizen included examples of statements from industry leaders and the industry’s lobbying group, Pharmaceutical Research and Manufacturers of America (PhRMA),

These profits are contrasted with the amounts pharmaceutical corporations actually spent on R&D. Through self-reported spending on R&D to PhRMA, the corporations reveal that they spent, on average, the equivalent of approximately 82 percent of their net profits on R&D in the 2013 – 2015 time period. The report notes that these numbers themselves may be inflated, and does not necessarily reflect research into new medicines. In the United States, pharmaceutical corporations are permitted to advertise directly to potential customers, and their marketing studies are considered part of their development costs.

Public Citizen argues that these figures show that it is possible for pharmaceutical corporations to improve access to affordable medicines.

Kim Treanor is an intern at Intellectual Property Watch and a student in the graduate program of International Affairs at the New School in New York, where she studies development, trade and public health.