Monday, May 05, 2008

Proctor & Gamble Pharmaceuticals: Why Our Medications Are So Expensive

At the end of our workout at Curves today, my friend and I were handed this elaborate package. The woman who gave them to us said they're giving them out to every member.

Curves has over 4 million members.

NOW: Let's do some math.

THE BOX: I get boxes like this at the dollar store at (of course) $1 each. Now, I'm sure I'm not getting wholesale prices, but I'm also not paying to have my name printed on the lid of each box, and I'm not having the box custom-designed to fit my product. So I think it's fair to say that each box costs $1 each. That's $4 million dollars in boxes alone.

I doubt the boys at Proctor & Gamble do much penny pinching, so I really can't see them dickering over such a 'low' price, can you? My bet is that it's even higher, but we'll give them the benefit of the doubt here.

THE ASSEMBLY: Let's say it was assembled in China (which is, of course, highly likely). We'll say the Chinese paid their workers 10 cents a box. Fair enough? That would add another $400,000 to the price. BUT, the literature is printed in the USA. If they didn't ship the literature overseas, then the assembly costs would be much higher.

THE DOODAD: Here we are told this is an 'ergonomic massager'. I found this exact massager here. Obviously THIS cannot "help protect your bones", so it's a gift to both instill a sense of obligation (classic Marketing 101) and will hopefully be used repeatedly so that the name of the product becomes familiar to the user(s).

The cheapest price for these is $1.57 a unit. For 4 million units, that would be a total cost of $6,280,000.

THE LITERATURE: Let me start by saying that although I may be the youngest member of Curves, this is obviously targeted to the elderly. The Baby Boom Generation is a tougher one to market to than the one before them. These people are consumer savvy and discriminating. As a marketing guru, I must admit that this is really beautiful literature. Kudos to their marketing team on design and layout.

BUT: Let's get down to the cost of all this printing. Let's equate all this to a simple full-color brochure. The best prices I've been able to find on the internet can be found here.

Now, because these are custom-sized and designed, and because Proctor & Gamble would have had to either pay for the models or the right to use the models in their advertising, their cost would be much higher than this. However, let's again give them the abilities of the thriftiest marketers in the world, and ascribe the cost of 6 cents a brochure to them. That would be an additional $240,000 for each of the 4 brochures in the case, or a total of $960,000.

Finally, the standard warning material is enclosed. We'll figure that at a mere 1 cent a brochure, which would cost a total of $40,000 (which is a yearly wage for many people in America).

So, the grand total of this little package comes to $11,680,000. Yes: That's eleven million, six hundred and eighty thousand dollars.

All this, and we haven't even factored in the cost of their marketing firm!

And we wonder why we pay so much for our medications.


Uncle Joe said...

AJ works for a medical office.
There are probably 11 employees.
Once or twice a week the drug reps bring in a feast to feed everybody.

Doing the math on that makes my brain hurt.

Anonymous said...

I think that looks like a weird sex toy.

I think you are on with the cost, but let me see if I can throw some stuff out to maybe couch it differently.

The boxes are probably made overseas as well and probably cost about .05 a package. The printing is mass done and comes out to about .01 per label as well as the iserts. The actual device ... mmmm, maybe .20 each. And we probably aren't targeting all Curves, it's probably a regional marketing thing. So I bet you are really talking about 400,000 units instead of 4 million.

My cost is different, BUT I think pharmaceuticals are WAY out of control. They make so much money. It's what my next book is going to be about.


CrazyCath said...

You've done some serious research here! Without a doubt, pharmaceutical companies spend a lot of money to plug their product. Working in a surgery opened my eyes to just how much is "given" to GPs (who can really afford to buy!" in the name of salesmanship. Astounding and criminal.

Great post. Thanks for your visits and comments at mine. Come again!

Fred said... did your homework.

I have acid reflux and sometimes the doctor prescribes two per day when it get really bad. Unfortunately for me, the insurance company will not allow me to refill the prescription because I'm "over the limit." So, either I suffer, or pay for the meds myself.

I usually do the latter. It's not right.

The Lazy Iguana said...

You know how many of those 4 million members have only gone into the gym once? And that was to buy the membership.

Each place probably got so many "kits" and when they were gone they were gone. If every gym even got them. They may have randomly selected some locations to bomb with propaganda.

daveawayfromhome said...

As I understand it, the marketing budget of your average pharmaceutical company is at least as much as their research budget. Remember this next time someone wants to regulate drug prices and they cry, "but then we wont be able to afford to do research!".

At my doctor's office, at least one drug rep passes through the office every time I go there. You'd think that therefore I'd be innundated with free samples for whatever ails me. Think again.

The Lazy Iguana said...

Ill take some free samples! Then sell them to Rush. Then Ill have more money to buy gas for the boat. And maybe some outriggers? And a fishing kite setup or two? OH YEA and a larger sea anchor! I could use one of those. And a bigger cast net.

Ill need a lot of free oxy samples.

Or better yet, if the drug companies buy me a nice new 28 foot twin engine catamaran walk around cuddy cabin, they can paint whatever they want on the sides! Ill even make "Actonel" the name of the boat! Fill it up with propaganda and Ill hand it out to people. That would count for marketing right?

Oh yea, Ill need a fuel budget too. And a larger vehicle to pull the new boat - or a budget for a wet slip with a lift at the Miami Beach Marina.

MUCH cheaper than buying 4 million little cheap plastic doodads!!

Saur♥Kraut said...

Lazy, I'm chuckling, but ... it actually pays to get marketing companies to pick up the tab. Being a marketing guru, I almost had a wedding that would've been sponsored by all different kinds of companies... I gave up on the wedding, and the idea. Tacky? Yeah... a little.

Lazy & Edge, Good point about how they may have a selective market but I am betting at the most it would halve the number produced. So even at 2 million, and with the cheaper costs that Edge suggested, you're still looking at a big expense.

Daveawayfromhome, so true.

Fred, I agree. I think that much is overpriced in the industry. And, when you combine that love of the almighty dollar with the ease of subbing out production to China, then you're talking about the deaths of many - all in the name of profit.

CrazyCath, Thanks! I'm glad you liked it and enjoyed the debate at Jamie Dawn's. I'll pop over again soon!

Unca Joe, yeah, I've heard of such expenses. :P

Beaver said...

Scary figures. I guess my instinct to stick to Canada and free medicare was a good one.

Saur♥Kraut said...

Beaver, I believe you made the right choice. ;o) BTW, I keep trying to leave comments at your blog but they all come back to me with a note saying basically that your email doesn't work anymore.