The Pharmaceutical Industry...
The Godfathers

Since there are so many firms in the somewhat fragmented pharmaceutical industry, focusing on the the top ten will suffice as being representative of the entire industry. The top ten shown below account for about 60% of total market share.

The table below lists the top ten worldwide drug companies for 2008 by sales and shows the net profit margin for each. The industry average profit margin was 18.60% and the top ten are right in there with a 17.26% average margin.

If we take out Eli Lilly which had a loss, the top nine showed a 20.31% margin.

How do manufactureres in the drug industry make so much money filling our medicine cabinets while other industries are struggling to keep 7 to 10 cents on each dollar of sales? Well in the ensuing pages, it will become clear why the top ten are the Godfathers of the pharmaceutical industry.

We will answer that question but for now we will go with an intuitive answer that excessive prices yield excessive profit margins. In the following page, we will test that hypothesis.

To go on to the next page, click on Pharmaceutical Marketing.