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New numbers back old meme: Pharma does spend more on marketing than R&D

November 6, 2014
Life sciences
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. And Roche’s R&D budget is the second-largest in the group.
 
As for the rest? 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. AstraZeneca has been pumping up marketing behind products such as its blood-thinner Brilinta as it preps for the onslaught of Nexium copycats.
 
The next 5 range from a 47% difference in favor of R&D on the high end–Novartis, with $14.6 billion in marketing spending–to 27% on the low end. The latter is Merck, with $9.5 billion allocated to marketing and $7.5 billion to R&D.
 
Then there’s Eli Lilly, with a mere $200 million premium to the marketing side. Its marketing spending clocked in at $5.7 billion, compared with $5.5 billion for R&D. That’s a difference of just 7%.
 
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. The industry’s move toward specialty meds has also prompted cuts, with more tightly focused drugs requiring fewer reps on the ground.
 
It’s worth noting that the lone standout, Roche, is among the more specialized companies, with its biggest guns in oncology, plus infectious disease and immunology. Few of its drugs are mass-market products. It’s near the bottom of the list when it comes to DTC ad spending. Pfizer and AstraZeneca, on the other hand, have broad ranges of drugs targeted to large populations. To reach their target audiences–primary care doctors and patients included–they have to spend more.
 
By Tracy Staton
 

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