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But while the rhetoric is stirring, it has very little to do with reality. First, research and development (R&D) is a relatively small part of the budgets of the big drug companies—dwarfed by their vast expenditures on marketing and administration, and smaller even than profits. In fact, year after year, for over two decades, this industry has been far and away the most profitable in the United States. (In 2003, for the first time, the industry lost its first-place position, coming in third, behind “mining, crude oil production,” and “commercial banks.”) The prices drug companies charge have little relationship to the costs of making the drugs and could be cut dramatically without coming anywhere close to threatening R&D.
Pharmaceutical companies are currently cutting more jobs than any other business sector of the economy, and plan to hire the fewest workers back, according to a survey by recruitment firm Challenger, Gray & Christmas. The numbers are only a snapshot from the January-February period this year and last year, but they suggest that the glory days of Big Pharma are behind it and won’t be coming back any time soon.