AUGUST 1980 - VOLUME 1 - NUMBER 7
The Pharmaceutical Industry At a Glance
The Monitor offers drug industry figures recently compiled by Dr. Robert S. Aries, the French pharmaceutical entrepreneur and industry intelligence-gatherer. The publisher of dozens of monographs and books on the pharmaceutical industry, Aries presented a version of these elements at the Aries International Symposium, "Competition in Multinational Drugs," held in Paris on June 19, 1980. '
The estimates-for the fiscal year ending in June 1980-are noteworthy in several respects. First, they rank the companies according to their pharmaceutical-related, rather than total company, sales. Gathered from company data, as well as other industry sources, most notably the reports of IMS, Inc., the sales estimates include income from raw material sales and royalties on patents and therapeutic products.
The profit margin data represent the companies' before-tax earnings on investment. Aries notes that many companies have sharply reduced their reported profit levels to cut liabilities through a variety of "cash flow and tax avoidance" operations, including the use of tax havens and profit centers.
The comparison of research and development expenses with those for publicity and information demonstrates the significance of advertising in the operations of the industry. Promotional costs generally outweigh R&D expenditures by a factor of two or three; they often equal as much as 20 percent of the sales revenue generated.
Aries estimated promotional expenses through a complex formula taking into account the number of sales people and medical and hospital 'contact personnel, space bought in professional journals, meetings and symposia held to influence purchasing decisions, and media advertising for over-the-counter products.
R & D Aries estimated also on the basis of a multi-variable equation, focusing primarily on the size and composition of the R & D workforce.
Another version, of this chart has appeared in Scrip, a twice-weekly pharmaceutical industry report published in London.