Drug prices, drug profits

by Victor Perlo

The Clinton administration in the US is again chattering about the high 
cost of prescription drugs. Proposals revolve around how much the 
government "can afford" to spend to subsidise the high prices, giving rise 
to endless and inconclusive debate within the administration — and with 
the Republicans.

Of course, all health care, including medication, should be as free as 
elementary education. But with all the discussion, there's no official 
consideration of how much the companies should be required to reduce their 
outrageous prices.

The drug companies defend the extortion by claiming the high cost of 
research and development (R&D), which leads to the discovery of new life-
saving drugs. That argument is effective propaganda, but it's bunk: the 
hidden profits contained in the companies' gross profits are many times the 
expenditures for R&D.

Take Bristol-Myers Squibb (BMY). It spent US$1.6 billion for R&D in 1998. 
But it spent US$7.5 billion for advertising, bonuses of top executives and 
other mainly parasitic purposes.

Obviously, BMY could "afford" to slash prices of its drugs without taking 
anything from R&D.

Or take Pfizer Corporation, noted for its high R&D outlays — US$2.3 
billion, or one-sixth of its sales. But it spent US$6.8 billion, or nearly 
three times as much, on mainly parasitic items.

Pfizer could cut its US prices in half, or by US$4.1 billion, and still 
leave US$2.7 billion to use as the bosses see fit, for advertising, their 
pay, etc. And that would leave intact its reported US$3.4 billion after 
taxes, 51 percent more than in 1997 — and a return of 40 percent on 
capital.

No wonder the price of Pfizer stock has gone through the roof!

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People's Weekly World (abridged).