The economics sense of ultracheap pills ? [finances]

[Externet]

Hi all. 

Television is bombarding advertisements for the sale of Viagra pills at $0.87 each.   If it is to be believed; how sales of something that was ~$40 each is now paying for expensive commercials and still making a profit in the era of inflation ?   

If production of the chemical was $0.01 each pill, and the chain of sales takes the typical ten times every stage of handling it; how can be advertised at more intensity than the sales of automobiles with a $50k sticker each ?

[John Cuthber]

" how can be advertised at more intensity than the sales of automobiles with a $50k sticker each ?"
How often does the typical user buy 
(1) Viagra

(2) A car
?

The big cost of  bringing a drug to market is all the testing.
Having sold many pills at $40 they have paid for that.
Now they only have to cover their costs, so the price has dropped
It's interesting to look at the variation of price between manufacturers.
https://bnf.nice.org.uk/drugs/sildenafil/medicinal-forms/

And now, it's just a commodity like bread.
It gets advertised so people buy a particular brand.

[dimreepr]

17 minutes ago, John Cuthber said:

" how can be advertised at more intensity than the sales of automobiles with a $50k sticker each ?"
How often does the typical user buy 
(1) Viagra

(2) A car
?

The big cost of  bringing a drug to market is all the testing.
Having sold many pills at $40 they have paid for that.
Now they only have to cover their costs, so the price has dropped
It's interesting to look at the variation of price between manufacturers.
https://bnf.nice.org.uk/drugs/sildenafil/medicinal-forms/

And now, it's just a commodity like bread.
It gets advertised so people buy a particular brand.

Indeed, but just to add:

It's much easier to make counterfeit pill's than it is to make a counterfeit car.

[exchemist]

5 hours ago, John Cuthber said:

" how can be advertised at more intensity than the sales of automobiles with a $50k sticker each ?"
How often does the typical user buy 
(1) Viagra

(2) A car
?

The big cost of  bringing a drug to market is all the testing.
Having sold many pills at $40 they have paid for that.
Now they only have to cover their costs, so the price has dropped
It's interesting to look at the variation of price between manufacturers.
https://bnf.nice.org.uk/drugs/sildenafil/medicinal-forms/

And now, it's just a commodity like bread.
It gets advertised so people buy a particular brand.

I understand Pfizer's patents on Viagra in Europe also expired some time ago. So anyone can make it, without paying for a licence to do so.  

[CharonY]

One should also add that in pharmaceutical industries, marketing generally has a larger budget than R&D:

Quote

For example, publicly available financial reports from 1999 to 2018 show that the 15 largest biopharmaceutical companies had total revenues of $7.7tr. Over this period, they spent $2.2tr on costs related to selling, general, and administrative activities and $1.4tr on R&D.

Depending on where you are (but especially in the US) drug prices are highly inflated. Conversely, it means that the way to increase sales and revenue is indeed via marketing. Specifically for the drug in question generics are available, making it even more important to secure market share.

[swansont]

2 hours ago, CharonY said:

One should also add that in pharmaceutical industries, marketing generally has a larger budget than R&D:

Depending on where you are (but especially in the US) drug prices are highly inflated. Conversely, it means that the way to increase sales and revenue is indeed via marketing. Specifically for the drug in question generics are available, making it even more important to secure market share.

When I see drug ads I sometimes try and assess how prevalent the condition is and how much marketing there is for the drug. It speaks to the profit margin and also the fact that you're often treating but not curing an affliction, so if it's chronic any new customer is going to be paying for repeated treatments for some period of time.

It also explains how they have these coupon programs to lower out-of-pocket costs. If you're going to be buying ~30 pills a month for the next ten years, they can eat the co-pay and still make a big profit.

[iNow]

8 hours ago, CharonY said:

in pharmaceutical industries, marketing generally has a larger budget than R&D

Lobbying is a massive expense line item too 

[CharonY]

1 hour ago, iNow said:

Lobbying is a massive expense line item too 

I wonder whether they have separate pots for those. I should ask.

[swansont]

10 hours ago, iNow said:

Lobbying is a massive expense line item too 

Not really. Twenty million spent on lobbying is a pittance for a company doing >20 billion in sales. Buying congress is relatively cheap.

 

Pfizer, for example, spent almost $2.8 billion on advertising in 2022, but "only" $12.6 million on lobbying

 

https://www.zippia.com/answers/how-much-does-pfizer-spend-on-advertising/#

https://www.opensecrets.org/federal-lobbying/clients/lobbyists?cycle=2022&id=D000000138

[iNow]

2 hours ago, swansont said:

Not really. Twenty million spent on lobbying is a pittance for a company doing >20 billion in sales. Buying congress is relatively cheap.

 

Pfizer, for example, spent almost $2.8 billion on advertising in 2022, but "only" $12.6 million on lobbying

You're completely right, and I began to realize this myself a few hours after my post.

The numbers Charon cited are in the trillions, and lobbying is nowhere near that... In fact, any lobbying expenditures are likely already looped into the "sales and operational costs" bucket.

It's still a considerable amount of money spent on lobbying and makes a considerable impact on both our legislation and our lives, but it clearly can't touch the broader marketing and ad spends which are themselves nearly double what's spent on R&D