Considering most drugs fail to get to market, I’d offer that the profit margins aren’t all that good if you start from scratch.
Saying profit margins are too high is easy if you just count the winners.
Saying profit margins are too high is easy if you just count the winners.
People on HN love to point this out, as if it somehow implies that companies are wasting money.
Marketing is how companies secure their revenues from the drugs that do make it to market. Without marketing, they'd have even less money to spend on R&D.
(And yes, marketing takes place in countries besides the US. Marketing is more than just consumer advertising).
Second, marketing produces a positive ROI (or why else do it). So you spend $10M on marketing and get more than $10M back.
Third, you can’t sell a drug without some type of marketing. I know HN is full of engineers who build products that sell themselves, but that’s BS. Doctors often have misconceptions or lack information about new drugs and getting someone in front of them to educate them is necessary.
People are also buying insurance which is priced based on the assumption people will get useless prescriptions. So, this advertising really adds a lot more costs without nessisarily any net benefits.
It’s a question of how many similar drugs are out there.
In what other industry do organizations get away with charging customers such exorbitant amounts of money to cover their failures?
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Don't believe the hype. The total R&D cost of an entire industry has a tenuous connection to those for a single product or organization.
The lion's share of early stage R&D in pharmaceuticals happens in academia or start ups. The big players "acquire" the successful ones somewhere around phase II trials.
In the semiconductor industry, like pharma, failed startups go out of business and disappear. Intel would get laughed out of the room if they tried to claim the R&D costs of such failures as their own. Yet for some reason everyone buys this argument from the pharmaceutical companies.