One of the standard clichés alternative medicine proponents like to employ is the David and Goliath Myth: pharmaceutical companies and the mainstream medicine are profit-driven behemoths and alternative medicine is the plucky little guy, small practitioners and innovators fighting against the machine to bring inexpensive natural remedies to those in need. This is quite clearly belied by that inconvenient thing called reality.
I have written before about the large and growing for-profit and corporate element of the alternative medicine movement, the underhanded and deceptive marketing practices of herb and supplement manufacturers, and the financial ties between the supplement industry and alternative veterinary practitioners and politicians. Now, Canadian Erik Davis at Skeptic North has provided a detailed and insightful article comparing the finances of several leading herbal remedy and supplement manufacturers and the largest pharmaceutical companies.
In this article, Davis shows quite clearly that while herbal remedy and supplement companies are truly much smaller in financial terms than the leading pharmaceutical companies, they spend proportionally at least as much of their money of marketing and far less on research.
I am certainly not one to deny the myriad sins of the pharmaceutical industry, and I am a strong supporter of vigorous and strict regulation of this industry. Profit is seldom an optimal motive to most effectively meet the medical needs of ordinary people, or veterinary patients. However, the herb, supplement, and homeopathy industries are far less closely regulated, and the numbers show quite clearly that they engage in exactly the same kind of venal behavior Big Pharma is so often accused of. And without the pressure of regulation, these companies make far less of an effort to investigate or demonstrate the safety and effectiveness of their products.
Here’s just one of many examples Davis provides
French giant Boiron (EPA:BOI) is by far the largest distributor of natural health products in Canada – they’re responsible for nearly 4000 (15%) of the 26,000 products approved by Health Canada’s Natural Health Products Directorate. They’re also one of largest natural health products companies globally, with 2010 revenues of €520M ($700M CAD)…
“Since 2005, we have devoted a growing level of resources to develop research,” they proclaim in the opening pages of their latest annual report, citing 70 in-progress research projects. Yet the numbers tell a different story – €4.2M in R&D expenditures in 2009, just 0.8% of revenues.
But if Boiron’s not spending like pharma on research, there’s one line item where they do go toe to toe: Marketing. The company spent €114M – a full 21% of revenues on marketing in 2009. By contrast, GSK, Pfizer and Merck reported 33%, 29%, and 30% of revenues respectively on their “Selling, General, and Administrative” (SG&A) line – which includes not just sales & marketing expenses, but also executive salaries, support staff, legal, rent, utilities, and other overhead costs. Once those are subtracted out, it’s likely that Boiron spends at least as much of its revenues on marketing as Big Pharma.
I can think of nothing to add to Davis’ conclusion, which is an eloquent argument against the faux altruistic PR of Big CAM and for real, effective regulation of the supplement and herbal remedy industry.
Big Herba is clearly big business, and on a purely financial level, it’s hard not to be impressed by what they’ve achieved. But that success — $2.5B in revenues concentrated in the seven companies above — makes it equally difficult to give them a pass on their research deficit. Simply put, the leading natural health products companies have the coin for research, they just choose to spend it on marketing products and buying their competitors instead. The result: while pharma typically spends upwards of 15-20% of revenues on research, Big Herba contributes less than a tenth of that.
To the question of why, I’d like to propose simply that they don’t need to. The products are clearly selling well already, and without the regulatory approvals pharmaceuticals require, spending money on research presents more risk than reward. After all, if you don’t conduct research, you can’t find out that your product doesn’t work.
In other words, Big Herba is behaving exactly as Big Pharma might if it had no government oversight. And if that doesn’t give you reason for pause before you pop that next Ginko tablet, I don’t know what will.