Are Drug Companies Too Profitable?

New research shows that drug companies make way more profit than similar public companies

Photo by Kayla Maurais on Unsplash

With the coronavirus outbreak dominating the headlines, there is a mad push to develop a vaccine and test drugs to treat this seemingly untreatable viral illness. Some studies have shown some promise, but as of right now, treatment for the Coronavirus is mainly supportive.

If, however, a drug to treat this infection is found, its expense will inevitably be very high. Now, it is true that it costs a lot of money to take a drug to market, and drug companies need to recoup that cost and make a profit. That is, after all, why a drug company — or any company, for that matter — is in business. The question is, though, are drug companies like any other company? New research has shed some light on the answer to this question.

In a study published March 3 in JAMA, researchers from Bentley University compared the profits of 35 large pharmaceutical companies with those of 357 large, nonpharmaceutical companies from 2000 to 2018. The main outcomes of the study were revenue and 3 measures of annual profit: gross profit (revenue minus the cost of goods sold); earnings before interest, taxes, depreciation, and amortization (EBITDA; pretax profit from core business activities); and net income, also…