Pharmaceutical companies generated significantly more profits than similarly sized public companies between 2000 and 2018, according to study data published in JAMA. Although profit gaps were somewhat attenuated by adjustments for company size, year, and research expenses, the relative wealth of pharmaceutical companies suggests that lowering medication prices would create no significant deficit. These results may be pertinent to the development of evidence-based policies to improve medication affordability.

Investigators conducted a cross-sectional study of audited financial data for the years 2000-2018 from 35 large pharmaceutical companies and 357 large public companies from the S&P 500 Index. The primary outcome was difference in profits between the pharmaceutical and S&P 500 datasets. Profit differences were calculated by median regression and reported as percentage of revenue (“margin”). A total of 3 corporate profit measures were compared: (1) gross profit, the difference between revenue and cost of goods sold; (2) earnings before interest, taxes, depreciation, and amortization (EBITDA); and (3) net income, the difference between all revenue and expenses.  Bivariate regression was used to compare median annual profit margins between pharmaceutical and public companies. Bonferroni correction for 3 comparisons was performed, such that the new significance threshold was P <.016.

Between 2000 and 2018, cumulative revenue of the 35 largest pharmaceutical companies was $11.5 trillion, with gross profit of $8.6 trillion (74.5% of cumulative revenue), EBITDA of $3.7 trillion (32.2%), and net income of $1.9 trillion (16.2%). In the same time period, 357 public companies reported cumulative revenue of $130.5 trillion, gross profit of $42.1 trillion (32.3% of cumulative revenue), EBITDA of $22.8 trillion (17.5%), and net income of $9.4 trillion (7.2%). In regression models, median annual profit margins were significantly greater in pharmaceutical vs S&P 500 companies for the 3 primary outcome measures of gross profit, EBITDA, and net income (all P <.001). The difference in median gross profit margin was 39.1%; the difference in EBITDA margin was 10.4%; and the difference in net income margin was 6.1%. In regression models adjusted for company size and time trends, margin differences were attenuated: differences in gross profit margin, EBITDA margin, and net income margin were 34.6% (P <.001), 8.6% (P <.001), and 4.1% (P =.02), respectively. In analyses restricted to companies that reported research and development expenses, margin differences continued to decline but remained significant.  

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The profitability of pharmaceutical companies compared with other public companies is relevant to ongoing debates regarding medication pricing. In all models, the greatest difference between pharmaceutical and S&P 500 companies was observed in gross profit. “Pharmaceutical profits data may be integrated in policy proposals to lower medication prices,” investigators wrote.


Ledley FD, McCoy SS, Vaughan G, Cleary EG. Profitability of large pharmaceutical companies compared with other large public companies. JAMA. 2020;323(9):834-843.