Schakowsky specifically focused on the drug companies' profits and their "ridiculous" claims that any legislation would cut into their research and development funds, thus limiting their ability to produce new products.  Below is Schakowsky's statement:

On October 20, 1999, the New York Times reported: If the world's largest pharmaceutical companies were to choose a theme to accompany this week's third-quarter earnings announcements, it might be "Let the Good Times Roll."  It may be Mardi Gras time for the drug industry, but it's Lent for those seniors who are forced to give up food and other essentials in order to afford prescription drugs.

The pharmaceutical industry cannot provide any plausible explanations for continuing to gouge seniors and here are the reasons why:

1. The pharmaceutical industry is the most profitable industry in the world.

According to a study by the Access and Affordability Monitoring Project of Boston University's School of Public Health, the pharmaceutical industry is the most "durably profitable" US industry.  Over the past 40 years, it has consistently been more profitable than other Fortune 500 companies.  In the 1970's and 1980's, its median return on equity was one and a half times the all-industry average.  In the 1990s, it was 2.3 times.

Last year, the drug industry was the most profitable industry in terms of return on equity, revenues and assets.  In 1999, its operating profit margin was 28.7% -- 3 times higher than manufacturers of other branded consumer goods.  In 1999, the top 4 companies spent more on net income than on R&D.  Its average profitability rose over the three decades, from 15% in the 1970s, to 20.5% in the 1980s, to 29.7% in the 1990s.  Between 1970 and 1998, median profits in the drug industry were 21.5% a year – nearly twice that for Fortune 500 companies (12.6%).  As profitable as the U.S. Pharmaceutical industry is, it receives substantial taxpayer funded subsidies directly through the National Institutes of Health and significant tax breaks.
 

2. The drug industry can lower prices and still make reasonable profits.

In 1997, Ford Motor Company's R&D expenditures were equal to 90% of its profits, Merck's were only 37% of its profits.  The top 15 drug companies spend twice as much on marketing, advertising and administrative expenses than on R&D.  In 1997, total compensation for the 10 best paid drug company CEOs was $229 million.
 

3. Drug company R&D figures are overstated.

It comes as no surprise that many R&D costs are not for new, innovative drugs but for copycat drugs.  R&D costs can also include buying drugs developed by small companies. In 1991, the US Senate Committee on Aging found that "many of the dollars that drug manufacturers claims are spent on research of new pharmaceutical products are actually spent on marketing research."  
 

4. This is not the first time that the industry has cried wolf.

In 1984, the industry said that passage of the Waxman-Hatch bill, increasing the availability of generic drugs, would harm R&D.  Over the next 5-year period, R&D investment doubled, going from $4.1 billion to $8.1 billion.

In 1990, again, the industry said that passage of a bill to help reduce Medicaid drug costs would threaten development of new drugs.  R&D more than doubled afterward, rising from $8.4 billion in 1990 to $18.9 billion in 1997.
 

5. Patients will benefit from lower prices.  So, too, could the industry.

Lower prices will spur greater demand.  According to a June 1999 in-depth report by Merrill Lynch, "volume increases could overwhelm negative pricing impacts" of Medicare prescription drug coverage and other reform.  "On a worst care scenario" -- worst case for the drug industry, best case for consumers, -- "we believe the top-line impact could be a negative 6% if all Medicare recipients had access to drugs at a 40% discount to the manufacturer's price.  On a best case scenario the sales impact would be slightly positive." 

Given the high profit levels mentioned above, pharmaceutical companies would still be the most profitable industry around even if their profit levels were lowered by 6%.

The pharmaceutical industry would stop at nothing to protect its bottom line, including using scare tactics and misleading advertisements to kill our initiatives here in Congress.   They may have succeeded in the past, but the tide is turning and seniors will soon have access to what they deserve -- affordable prescription drugs.