Pharma "still the most profitable US industry"

A new report from the US Kaiser Family Foundation says that, compared toother industries, the drug sector continues to earn the highest profit rates. Profits as a percentage of revenues for the industry were over four times the median rate for all Fortune 500 firms in the late 1990s, at 18.6% of revenues for drug firms against 4.5% for all Fortune 500 firms in 2000, it found.

The finding was part of a larger study that showed the drug sector spends more than any other US industry on consumer advertising (see page 14). Since 1996, spending on drug advertising has more than tripled, said Larry Levitt, who helped direct the study. In 2000, drug firms spent $15.7 billion, or 14% of their revenues, on promotions, compared with 3.7% of revenues spent by department stores, 3.9% for tobacco products, 10.7% for soap and detergents and 12% for games or toys.

While companies blame the high costs of their drugs on R&D expenses, in fact they spend only 14% of revenues in this area, says the study, adding that profits exceeded R&D, at 24% compared to 14%.