Mar 1, 2019

Pharma's research budgets are usually bigger than its profits

Data: Company filings; Chart: Chris Canipe/Axios

The biggest drug companies generally spend more money on research than they keep in profits — although their profits are still healthy.

Why it matters: Drugmakers often invoke their research costs as they try to fend off any limits on their prices, and that spending isn't insignificant. But the industry's steady profit margins are still an attractive target for critics.

Yes, but: Drug companies have plenty of other costs besides research, including their ample marketing budgets.

  • Many of these companies spend less than a quarter of their total revenues on research and development.
  • And drugmakers are still wildly profitable — far more than any other part of the health care industry. They brought in just 23% of the health care industry's revenue in the third quarter of last year, but accounted for 63% of its profits.
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