April 12, 2001

Pharmaceutical Industry Remains Most Profitable in the Country

New Fortune 500 Report Confirms "Druggernaut" Tops Other Industries in Profitability Last Year

WASHINGTON, D.C. – The pharmaceutical industry’s status as the most profitable industry in 2000 makes its opposition to Medicare prescription drug coverage unconscionable, Public Citizen said today.

The drug industry this week was named "more profitable than any other" by Fortune in its new Fortune 500 analysis of America’s most successful companies and industries in 2000. The industry was also rated the most profitable industry last year and has been consistently ranked number one or two by Fortune over the past few decades.

The Fortune report shows that the 11 drug companies in the Fortune 500 enjoyed rates of profitability (measured in return on revenue) that were three to four times greater than the median for all industries in the Fortune 500. Pfizer, the second-largest drug company, has seen the value of its stock increase a stunning 1,454 percent over the last decade.

Public Citizen conducted additional analysis of the 11 drug companies’ annual financial reports. The analysis shows that profits – not research and development of new medicines – were the top priority for drug companies. Public Citizen found that Fortune 500 drug companies plowed 30 percent of their revenues into marketing and administration, while committing just 12 percent of revenues to research and development. Seventeen percent of the revenues represented profit.

"Given the druggernaut’s extraordinary profits, it’s laughable that the industry – and the congressional leadership in Washington, D.C. – have fiercely opposed prescription drug coverage under the Medicare program for fear it would lead to price discounts," said Frank Clemente, director of Public Citizen’s Congress Watch.

The drug industry has spent tens of millions of dollars in recent years to lobby against a Medicare prescription drug benefit because it might lead to price discounts as the federal government becomes a bulk buyer for millions of American seniors.

"The drug industry’s insistence on price-gouging appears all the more greedy when you consider that the industry’s profitability is largely based on federal government assistance in the form of monopoly patents, taxpayer-funded research and huge tax breaks," Clemente said.

Public Citizen’s analysis also found that:

  • The largest American drug company, Merck, had profits of $6.8 billion in 2000, which was more than the profits of all the Fortune 500 companies in the airline, entertainment, food production, metals and hotel/casino/resorts industries combined.
  • Fortune 500 drug companies saw the value of their stock increase by 38 percent last year, as investors turned to these steady profit-generators during the stock market turbulence in 2000. Drug stocks have tended to be impervious to market gyrations and perform well during economic downturns.
  • The drug industry’s success in Fortune 500 profitability rankings has become a rite of spring. In the 1970s and 1980s, Fortune 500 drug companies enjoyed rates of return on revenue that were two times greater than the median for all industries in the Fortune 500. In the 1990s, the drug industry’s rates of return on revenue were almost four times greater than the median for all industries in the Fortune 500.

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