Drugs Are Not Immune To Adversity

by David Jenyns on December 5, 2008

In 1959 and 1960, drug industry profits fell. As a result, investors began to cast doubt on drugs as a growth industry. Moreover, Kefauver’s Senate antitrust investigations put the drug industry in a bad light. The industry was said to have made undue profits at the expense of the public. Many drugs, especially the “wonder” drugs, were said to be obtainable abroad at considerably lower prices than those charged by domestic makers.

Testifying before the Senate subcommittee, W. G. Malcolm, president of American Cyanamid, said the company set a profit goal of 15 percent on sales after taxes which, though twice the average profit margin of American industries, was said to be moderate in view of drug makers’ heavy costs.

As a percentage of sales, the drug industry probably spends more on research than any other established industry. Research expenditures reached 9 percent of sales in 1959 against only 4.6 percent of volume as recently as 1955. That was proportionately twice as much as chemistry (another research-minded industry) was spending or four times the 2.2 percent of America’s average industry.

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