I have periodically suggested that Big Pharma companies like Pfizer are primarily marketing organizations with diminishing expertise in drug discovery and pharmacology (see: How E-Detailing May Lead to Greater Knowledge by Physicians about Drugs). It now turns out that my instincts were correct and many pharma companies, including Pfizer, spend much more on marketing than on R&D (see: New numbers back old meme: Pharma does spend more on marketing than R&D). Below is an excerpt from an article on this topic:
One of the most persistent memes about the drug industry is the contention that pharma spends more on marketing than on R&D. Typically, when enterprising folks try to prove that assertion, they compare SG&A spending to R&D budgets. Of course, SG&A includes general and administrative expenses, not just sales and marketing spend. So, those comparisons are easy to critique. But now, the BBC has some numbers on marketing spend in particular. Sourced from GlobalData, they show that 9 out of 10 Big Pharma companies do in fact spend more on marketing than on R&D. In some cases, that's twice as much. We'll identify the minority party first: It's Roche..., the $50 billion Swiss drugmaker. According to GlobalData, Roche spent $9.3 billion on R&D last year--$300 million more than it earmarked for marketing....The biggest marketing premium belonged to Johnson & Johnson...with $17.5 billion in marketing spending, more than double its $8.2 billion in R&D costs. J&J has a big consumer division, with store-shelf products like baby shampoo and dental floss, which could skew the numbers toward marketing. Next in line is Pfizer..., long known for its marketing muscle. The drugmaker plowed $11.4 billion into marketing in 2013, $4.8 billion more than it spent on R&D--a difference of 72%. AstraZeneca...is close behind with a 70% difference. The U.K.-based company put $7.3 billion toward marketing last year, and $4.3 billion into R&D.....Over the past several years, Big Pharma has caught a lot of flak for unproductive R&D. Major drugmakers have restructured their R&D operations, cutting jobs, jettisoning programs and consolidating labs. The aim: To make R&D more nimble and more productive, with a better return on investment than the industry had delivered in previous years. But companies have been cutting marketing expenses, too. Sales forces around the world have shrunk by the thousands as drugmakers slashed costs to prepare for the patent cliff.
For readers who are not familiar with the term patent cliff, here's a brief discussion (see: Patent Cliff):
The world's biggest pharmaceutical firms such as Pfizer and GlaxoSmithKline stand to lose billions of dollars in revenues from the patent expiration on such blockbuster drugs as cholesterol drug Lipitor and asthma medication Advair respectively. There are numerous firms that have established profitable businesses by manufacturing "generic" alternatives to off-patent drugs, which can be sold at a fraction of the price of branded drugs. The "patent cliff" threat has spurred increasing consolidation in the pharmaceutical industry, as companies strive to replace blockbuster drugs whose patents are expiring with other drugs that have the potential to become big sellers.
All of this taken together drives me to the conclusion that a series of strategic errors have been made by the major pharmaceutical companies over the years. In their quest for larger and larger profits, they have overspent on marketing, underspent on R&D, and placed large bets on blockbuster drugs that have ultimately come off patent. Companies specializing in the manufacture of generic drugs have entered the market and undercut the cost of these blockbusters but the costs of these generics is now rising (see: High-Cost Generic Drugs — Implications for Patients and Policymakers). In summary, I think that the drug companies have come to view larger marketing expenses as a substitute for drug development. Because they have lost much of their talent and expertise in in this area, they now need to purchase smaller companies with promising new drugs in the pipeline.
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