Big Pharma: Marketing vs. Research

The major pharmaceutical companies, collectively known as Big Pharma, are often criticized for not enough new drugs and too much marketing. In my post "Changing Reaction to Drug Industry," I stated that only 20 new drugs were generated in 2005 for an aggregate R&D cost of $38 billion. Since at least that much was spent on marketing, critics assert that companies could double the number of new drugs if they would stop spending so much on marketing. To evaluate such criticism, let's look at the system of discovering, developing and delivering drugs.

The discovery of new drugs is similar to the initial development of movies. At times, a studio develops a movie from its own staff of writers. Successful "in-house" writing is ideal for profits as the material is much lower in cost. Unfortunately for the studios, much of the best material for movies comes from a popular writer like J.K. Rowling whose ideas are much more expensive. Despite the studio's preference for "in-house" writing, the seemingly disproportionate success of authors outside the studios is partially the natural result of so many more searching for that "great story" needle in the haystack of everyday life.

The same principles are at work in drug discovery. Big Pharma has many talented "in-house" researchers. Yet major discoveries have more frequently occurred outside Big Pharma labs. Criticism lodged against Big Pharma for this result ignores a basic dynamic: the sheer number of researchers in academia, government and small business naturally result in more discoveries. In the same vein, sheer numbers also benefit creativity.

Drug discovery is a long distance from developing and delivering a drug. To shorten this distance, academia, government and small business seek the capacities of Big Pharma. Alliances and acquisitions are necessary for the discoveries made outside of Big Pharma to impact society on a timely basis. Just as the primary purpose of a movie studio is not to write stories, but to produce and deliver movies, so the primary role of Big Pharma is not to discover drugs but to shorten the time from the discovery of a drug to its widespread use. In fact, marketing costs more than R&D provide Big Pharma's critical societal benefit: lowering "sickcare" costs while providing higher "healthcare" benefits through the safe, yet rapid application of our discovered drugs.