John Edwards and the drug spending myth

(Fortune) -- Some myths just never die. Democratic presidential campaigner Toilet Jonathan Edwards helped to propagate a whopper at a tree stump address in Laconia, New Hampshire on Sunday: That is, that drugmakers pass more than on gross sales and advertisement than on scientific research.

To most telecasting viewers, that probably sounds about right. But it's far from the truth.

John Edwards, the campaigner for president, desires to enforce new bounds on drug advertising.

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A talking with Linda Dillman, No. 33 on Fortune's Most Powerful Women list, on how large concern can change the human face of healthcare.

Edwards, while introducing constituents of a broader healthcare plan, proposed to ban direct-to-consumer advertising of new pharmaceuticals until after the drugs have got been on the marketplace for two years.

"You've seen these ads. You cognize who's paying for them, right? You are," Jonathan Edwards reportedly told the gathering. He went on to claim that medical specialty shapers pass "twice as much" on selling and disposal as they make on research.

But that's not true. U.S. drugmakers shelled out more than than $55 billion on medical research in 2006, according to marketplace research house IMS Health. That compares to just $12 billion companies spent on sales, publicity to doctors, and advertisements targeting patients.

Drug companies, of course, are obvious targets. For a host of reasons, consumers are disbursement more on medicine than ever before. At the same time, however, only 21 percentage of Americans believe Big Drug Company makes a good occupation serving its customers, down from 60 percentage a decennary ago, according to a recent Townsend Harris Poll. The lone industries that have got fallen more than in the public's esteem: Oil and airlines.

Then again, drug companies rate some criticism. They pass the majority of their selling dollars meeting with docs and advertisement in medical journals, while consumer instruction is mostly limited to cursory 30-second television spots. That's a missed chance that leaves of absence drugmakers vulnerable to claims of terms gouging.

Still, Edwards' knocking is unwarranted.

In arguing that Big Drug Company passes more than promoting itself than researching cures, Edwards' speechwriters conveniently lumped "marketing" and "administrative" costs together. That's grossly misleading.

In most Luck 500 fiscal studies "administrative costs" or "general expenses" are often catchall classes for anything that isn't related to the direct costs of manufacturing or sales. It often includes, for example, business office rentals and accounting costs.

Unfortunately for them, many drug companies utilize a concerted line point in their fiscal studies for gross sales and administrative costs, which is probably the beginning of the oft-repeated myth that high selling costs are the primary perpetrator behind rising drug costs.

As for Edwards's thought of a two-year moratorium on advertisement for newly introduced drugs? That mightiness be wise for, say, medicines with long listings of side effects. But it's hard to acquire policy swots to pay attending to worthwhile proposals as long as politicians are chasing larger headlines.