by Carlos E. Castañeda

FOSTER CITY (CBS SF) — A Bay Area pharmaceutical firm is among other top drug makers facing scrutiny over enormous profits, the price charged for drugs, and how much the company spends on marketing versus research and development.

Earlier this month, Foster City-based Gilead Sciences announced it had more than doubled its revenue in 2014, to nearly $25 billion dollars, and cleared $12.1 billion in profit for the year. Most of it was fueled by the sales of the company’s breakthrough hepatitis-C drug Sovaldi, which costs an average of $1,000 a pill in the U.S.

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Pharmaceutical firms often justify the high costs of their drugs by saying it is necessary to fund their enormous research and development costs. Certainly, many drugs launched are not profitable or never even make it to market.

However, a recent study by the British Broadcasting Corp. has shown that nine out of the 10 largest pharmaceutical companies in the world spend more on sales and marketing than they do on R & D.

A review of Gilead’s financial statements compiled by the Huffington Post showed that between 2003 and 2013, the company spent $12.4 billion on research, about 20% of their combined revenue for those years. Which means the company’s 2014 profit nearly equaled the what it spent on research for the previous 11 years combined.

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Moreover, the proportional allocation of Gilead’s 2014 revenue breaks shows that profit makes up 49 percent, marketing 12 percent, and research 11 percent, according to HuffPo.

Pharmaceutical profit margins are often much more than any research spending, according to the BBC report.

 

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