On average, do large pharmaceutical companies have higher or lower net profit margins than other large companies?
From 2006 to 2015, the average net profit margin for the 25 largest drug companies ranged from 15% to 20%. During this same period, the average net profit margin for the 500 largest non-drug companies ranged from 4% to 9%. Per the U.S. Government Accountability Office, a major factor in these higher profits is less competition due to federal laws that award companies with "certain periods of exclusive rights, or market exclusivity, for new FDA-approved drugs, during which time FDA generally cannot approve a similar competing version of the drug for marketing." These exclusive rights are above and beyond the standard protection of patent laws. Another major factor in drug company profits is that most drug costs are covered by governments and insurance, which leaves patients little incentive to shop for the best prices.
DocumentationGAO StudyThird-Party Payments