The pharmaceutical industry says it plows profits back into research and development, but some question that argument. Drug manufacturers receive the bulk of a drug's retail price , said Stephen Schondelmeyer , a University of Minnesota researcher who tracks drug pricing. Such branded drug makers as Pfizer Inc. spend, on average, 30 percent of that to cover manufacturing, shipping, and distributing products, he says, quoting federal government research. They devote roughly 13 percent to research and development that can lead to new therapies and expanded uses for existing drugs. Six percent pays for taxes and such expenses as defending against product liability lawsuits.
But they spend 31 percent on such administrative expenses as sales and marketing.
A Government Accountability Office report released last month said the drug industry's spending on prescription drug advertising grew twice as fast as research and development spending. The GAO found that costly advertising contributed to increases in drug spending.
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