NYTimes July 11, 2001

WASHINGTON (AP) -- Major drug makers spend nearly twice as much to advertise their medicines as to research and develop them, says a consumer group that blames aggressive marketing for soaring drug prices.

Families USA also said Tuesday that drug makers sometimes spent three times as much on ads and compensation for executives than on research and development. The group analyzed data from the Securities and Exchange Commission, which regulates the stock market.

The advocates rejected contentions by some companies that the cost of developing new medicines is causing the escalation of prices.

"Pharmaceutical companies charging skyrocketing drug prices like to sugarcoat the pain by saying those prices are needed for research and development," said Ron Pollack, executive director of Families USA.

Pharmaceutical executives, however, said the group had unfairly condemned the industry for its success and distorted the money spent on promoting new drugs.

"When the pharmaceutical industry does well, patients do even better," said Jackie Cottrell, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, based in Washington.

Families USA, a frequent critic of rising drug costs and the drug industry, based its report on an analysis of company revenues from sales, the net profit made and the percentage of sales revenue spent on marketing, administration, research and development. The information used came from 2000.

The group examined companies it said were among the top 50 in making drugs for the elderly. Adding drug coverage to Medicare, a federal program for the aged and disabled, is currently a hot political issue.

Families USA said Merck & Co. netted $40.36 billion in sales in 2000. Of that amount, 17 percent was profit; 15 percent was spent on advertising, marketing and administration; and 6 percent was spent on research and development.

"All industries spend more on marketing and administration than they do on research; that's not new information," said Merck spokesman Greg Reaves. He added that company discounts and rebates over the decade have kept average price increases for Merck medicines below the rate of inflation. Merck makes Vioxx, a medication for arthritis and acute pain, and the osteoporosis drug Fosamax.

Even companies that made less profit or lost money still devoted more resources to marketing than research, the group's report showed.

Other companies examined included Pfizer, Abbott Laboratoriesand Bristol-Myers Squibb Co.

Bristol-Myers spokesman Patrick Donahue said the drug maker trade group "accurately reflects our thoughts on the Families USA study."

Cottrell of PhRMA said drug makers spent more on research than promotion and that half of all promotional spending involved free samples for patients. Industry figures show $15.7 billion was spent on marketing in 2000; of that amount, $8 billion was spent on free drug samples.

The industry group noted that research and development spending has risen steadily to an estimated $30.5 billion for 2001.

"The system works -- for patients," Cottrell said. "Because the pharmaceutical industry is profitable, Americans have the best chance in the world of getting the cure for Alzheimer's, cancer, diabetes or AIDS."