Big Pharma But Not Such Big Money

There is a general view that Big Pharma companies are unduly successful. When the BBC argues that the industry is way too profitable and overcharges for new medicines, people accept this as fact.  When Sen. Elizabeth Warren, a potential candidate for the U.S. Presidency, says that large drug companies have grown “wealthy beyond imagination”, most nod their heads in agreement.  These types of statements paint Big Pharma as a profit making machine that needs to be controlled like Wall Street and Big Oil.

However, facts can get in the way of such arguments. Recently, Tracy Staton of FiercePharma published a list of “The top 15 pharma companies by 2014 revenue” and the data presented are pretty surprising. The list contains all of the traditional Big Pharma players: J&J, Novartis, Roche, Pfizer, Sanofi, Merck, GSK, AstraZeneca, Bayer, AbbVie, Lilly and Bristol-Myers Squibb, as well as some relative new comers: Gilead Sciences, Teva, and Amgen. These 15 companies amassed 2014 sales of just under $527 billion. That sounds pretty impressive. However, these same companies had 2013 sales of about $514.5 billion, and so the year on year growth was only 2.4%. (It should be noted that these revenues represent the total income that each company had across all of its businesses and not just drug sales.)

Looking at the individual company data is even more revealing. J&J’s revenues increased by slightly more than $3 billion (4%), Roche grew by $1.3 billion (2.7%), Amgen was up by roughly $1.4 billion (7%), Bayer rose by $1.3 billion (5%), and AbbVie grew by almost $1.2 billion (5.8%). These gains are pretty reasonable. However, they were off-set by some significant declines. Pfizer revenues decreased by almost $2 billion (3.8%), Merck was off $1.8 billion (4%), GSK was down $3.65 billion (8.8%), and Lilly dropped $3.5 billion (15%).

Essentially, 14 of the top 15 companies had total 2015 revenues comparable to those of 2013. The difference maker in 2014 was Gilead Sciences. Thanks to their hepatitis C drug, Sovaldi, Gilead saw its revenues soar from $10.8 billion in 2013, to almost $24.5 billion in 2014. Without this $13.7 billion increase in sales, the 2014 revenues for the top 15 companies would have slightly decreased from the previous year. Clearly, 2014 was not a banner year. Furthermore, it is possible that this sales trend will continue.

In the wake of revenue stagnation and/or decline, a number of these companies have announced cost cutting measures. Unfortunately, R&D is not immune to such cuts. In recent weeks, GSK announced significant job eliminations in their Research Triangle and Philadelphia labs.  Similar steps are being taken by Pfizer in yet another R&D reorganization, and by Sanofi with the elimination of its cancer R&D group in Boston. These cuts, along with others that have been occurring over the past few years, diminish Big Pharma’s capacity to capitalize on the incredible new breaking science in the fundamental causes of disease.

Big Pharma critics are not likely to be sympathetic to the plight of these companies. However, as the revenue figures for 2014 show, the industry in not exactly rolling in dough despite claims to the contrary. Discovering and developing important, new medicines is more challenging than ever, and these revenue figures show that. The pharmaceutical industry is certainly not above criticism, but claims that companies are wealthy beyond imagination are far from the truth.

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Big Pharma But Not Such Big Money
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