<>"Pharmaceutical companies have a profit margin of 16.4 percent,”
Newman reports, “seventh highest of the 215 industries that Morningstar
tracks.”
This is why I’m skeptical when drug-makers say that they couldn’t possibly afford to lower prices on drugs—or that if they did, they wouldn’t be able to do research. The fact is that if drug-makers, and their shareholders, could be satisfied with margins of, say 8% or 9% they could, in fact, slice prices. And since roughly 16 percent of the .6 trillion that we spend on healthcare goes to the pharmaceutical industry, we are talking about significant savings. (Commentators frequently say that drugs account for “just” 10% to 11% of the nation’s total health care bill. But that’s because they are only looking at the dollars you and I spend, retail, buying prescription drugs in a pharmacy. When you add in the cost of drugs administered in a hospital, a nursing home, or in a doctor’s office --plus the cost of the many medical devices that drug-makers now sell—you find that their share of the .6 trillion pie rises to 16%. And if anything, those devices—ranging from stents to artificial knees—are even more over-priced than the drugs.)
Prescription-drug makers are not the only companies turning a nice profit on our health care, other industries with profit margins well above the 2.2 percent median for all U.S. industries include: healthcare information (9.4 percent), home healthcare firms (8.5 percent), medical labs (8.2 percent), and generic drug-makers (6.5 percent).