US Taxpayers Subsidize Wealthy Drug Companies

Drug companies are some of the wealthiest and profitable companies in the world. Yet these multi-billion dollar corporations use taxpayer money to develop more products to sell and increase their profits. A story from the July 24,2001 Associated Press exposes the fact that some of the richest companies in the world receive large amounts of taxpayer money.

According to the Associated Press story, more than half the money needed to create top-selling prescription drugs came from U.S. taxpayers and not industry investment. Best sellers like the ulcer-curing Zantac or Zovirax, which treats herpes simplex, were developed and tested chiefly through grants from the National Institutes of Health. The study was performed by the National Institutes of Health and showed that out of 131 studies, clinical trials and other tests on five best sellers from 1995, only one industry study was key to a drug’s development for use and sale.

The drug companies claim to need this money and large product markups for research to develop new drugs. Yet according to a report by the Families USA, a consumer group based in Washington, DC. and reported in Reuters Health July 10, 2001, drug firms spent more than twice as much last year on advertising, marketing and administration as they did on research and development. The report, based on companies’ financial disclosures to the Securities and Exchange Commission, also points out that a number of the largest drug makers continue to lavish their top executives with compensation packages worth tens of millions of dollars per year.

According to the report by Families USA, Pfizer last year spent 39% of its nearly $30 billion in revenue on advertising, marketing, and administration. Only fifteen percent of revenue went to new drug development, while 13% went to profits. The company paid Chairman William C. Steere over $40 million in salary, bonuses, stock options and other compensation in 2000, the report states.

“The drug industry is stealing from us twice,” said Frank Clemente, director of Public Citizens Congress Watch. “First it claims that it needs huge profits to develop new drugs, even while drug companies get hefty taxpayer subsidies. Second, the companies gouge taxpayers while spending millions from their profits to buy access to lawmakers and defeat pro-consumer prescription drug legislation.”