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Marketing Expenses Double R & D Investment

Mon, 01/07/2008 - 6:54am
A new study estimates that the US pharmaceutical industry spends almost twice as much on promotion as it does on research and development.

This estimate by researchers at York University, Toronto, Canada, based on the collection of data from the industry and doctors during 2004, shows the U.S. pharmaceutical industry spent 24.4% of the sales dollar on promotion, versus 13.4% for research and development, as a percentage of US domestic sales of US$235.4 billion.
 
"The Cost of Pushing Pills: A New Estimate of Pharmaceutical Promotion Expenditures in the United States" is co-authored by PhD candidate Marc-André Gagnon, who led the study with Joel Lexchin, a researcher of pharmaceutical promotion, Toronto physician, and Associate Chair of York’s School of Health Policy & Management in the Faculty of Health. Their study appears in the January 3, 2008 issue of PLoS Medicine, an online journal published by the Public Library of Science.

The authors examined the 2004 reports of IMS Health (IMS) and CAM Group (CAM), two international market research companies that provide the pharmaceutical industry with sales/marketing data and consulting services. IMS obtains its data by surveying pharmaceutical firms, while CAM surveys doctors, which explains important discrepancies in the data they provide.
 
The researchers used 2004 as the comparison year because it was the latest year in which information was available from both organizations.
 
Gagnon's and Lexchin's report that the new estimate of total promotional costs is consistent with estimates of promotional spending by the U.S. pharmaceutical industry from other sources they scrutinized, including reports by Consumers International, a non-governmental organization which represents consumer groups and agencies worldwide; Office of Technology Assessment, which extrapolated results from the cost structure of Eli Lilly; Marcia Angell, former editor-in-chief of the New England Journal of Medicine, who extrapolated data from Novartis Inc., a company which distinguishes marketing from administration expenditures in its annual reports; and the United Nations Industrial Development Organization.

The study's findings supports the position that the US pharmaceutical industry is marketing-driven and challenges the perception of a research-driven, life-saving, pharmaceutical industry, while arguing in favor of a change in the industry's priorities in the direction of less promotion, according to Gagnon and Lexchin.


Release Date: January 3. 2008
Source: York University

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