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article imageBig Pharma and Big Placebo: how does their research compare?

By Bart B. Van Bockstaele     Jun 2, 2010 in Business
One of the most-heard criticisms by people who are in favour of alternology and opposed to the big pharmaceutical companies –also known as Big Pharma– is that these have enormous budgets for marketing and far smaller budgets for research.
This devastating criticism is then often followed by claims suggesting that the alternological industry, also known as Big Placebo, is so much more gentle and ethical and that they do lots of proper research, in spite of being hindered by the fact that the products they are interested in cannot be patented, and that only very little money can be made with them.
These claims can be found all over the Internet. However, the popularity of an idea is not known to be a measure for its veracity and even if it were, it couldn't hurt to have a quick look at it.
Is it true that only very little money can be made with non-patentable products? Possibly, but Thamno reports that the numbers don't seem to provide supporting evidence for this claim. According to Boiron, one of the world's largest manufacturers of homoeopathic products, 51.8% of its sales were made with non-proprietary homoeopathic products while 48% was made with its specialty products.
The reader should bear in mind that "sales" is not the same as "profit" and that it remains possible that Boiron has a more substantial profit margin on its proprietary products than on the other ones. However, they did not publish this information in the documents I have consulted.
Merck is a pharmaceutical giant and very well known by the public. On the other hand, Boiron is one of the largest and best-known manufacturers of homoeopathic products, a giant in the alternological world. How do they measure up?
In 2009, Merck had approximately 7.38 billion euros worth of sales. This is a big company by anyone's standards. Boiron is clearly a lot smaller. They had approximately 526 million euros worth of sales in 2009.
Merck had profits after tax of 376.7 million euros (about 5.1% of sales), while Boiron had a consolidated net income (their name for profits after tax) of 59.9 million euros (about 11.4% of sales). This makes Boiron more than twice as profitable as Merck.
Merck spent 1.34 billion euros worth on research (about 18.2% of sales), while Boiron spent 4.28 million euros worth on research (about 0.81% of sales). This indicates that Merck spent 22.47 times as much on research as Boiron, in relative terms.
Merck spent about 2.23 billion euros on marketing (about 30.8% of sales), while Boiron spent 114.94 million euros on marketing (about 21.85% of sales). In other words, Merck spent about 1.4 times as much on marketing as Boiron, in relative terms.
The research/marketing ratio for Merck is therefore approximately 0.59 (1,344.6/2,272.3), whereas that for Boiron is approximately 0.037 (4,277/114,941). This means that while Boiron spent an amount equivalent to about 3.7% of its marketing budget on research, Merck spent an amount equivalent to about 59% of its marketing budget on research, or close to 16 times as much as Boiron, in relative terms.
It is clear that Merck does indeed spend substantially more on marketing than on research, close to 1.69 times as much. Therefore, the often-heard claim is true. However, it is equally clear that Boiron also spends more on marketing than on research and that the difference with Merck is not negligible, since it spent 26.87 times as much on marketing as it did on research in 2009.
This is not a complete overview of the two BPs. The value of this comparison must therefore be interpreted accordingly. However, it should be obvious to even the most superficial reader that the claim that Merck spends more on marketing than on research, may be less complete than it should be and that Boiron could maintain a level of profitability comparable to that of Merck while substantially increasing its research budget.
More about Merck big pharma, Boiron big placebo, Research marketing
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