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Posted on October 13, 2004

Drug Makers Spend More on Stock Dividends Than Research, Analysis Indicates

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During the past 18 months, the nine largest pharmaceutical companies have spent a greater percentage of their money on dividends for shareholders and on company stock buy-backs than they have spent on research and development, according to a Banc of America Securities analysis, USA Today reports. According to the study, the nine drug makers have returned about $56 billion to investors during the past six fiscal quarters. At Pfizer, the world’s largest pharmaceutical company, $22.2 billion was spent on stock buy-backs and dividends during that time period — about 210% the amount spent on R&D. Merck returned $7.3 billion, or 143% of R&D spending. Despite the amount of dividends for investors, share prices only grew by 5% during the study period. The study comes as rising prescription drug prices have made drug makers’ R&D expenditures “a political lightning rod,” according to USA Today. While the drug industry maintains higher U.S. prices are necessary to fund research of new drugs, critics say “the industry has plenty of money” for R&D and concentrates too much of its research on copycat drugs instead of innovative treatments, USA Today reports (Appleby, USA Today, 10/11).