Pharma's Number One!

Where will we get our information when all news comes online and the full-page advertisement becomes history?

Leave it to the oil and gas industry to bring the only news worth commenting on this morning. The entire back page of my Washington Post contains an ad with a bar graph comparing the profit margins of various industries during the first nine months of 2007. Guess who's number one?

Did you say pharmaceuticals at 20 percent of sales? The industry may be dogged by expiring patents, a collapsing new drug pipeline, and a steady drumbeat of bad news on its best-selling drugs like Vytorin, but none of it appears to have affected the bottom line. Only beverage and tobacco companies came close to the drug industry's profit margins. Even with $3-a-gallon gasoline, the oil and gas industry lagged far behind with profits at 8.7 percent of sales.

Perhaps the pummeling the drug companies are taking on the campaign trail from the leading Democrats signals the salad days are behind the industry. Each of the leading candidates is promising to give Medicare the right to negotiate drug pricing, which, given the larger role the government is playing in overall drug sales because of the senior drug benefit, should put a dent in those profit margins.

But a quick look at that bellwether of future performance -- the stock market -- suggests not much is going to change, at least according to investors looking for a safe haven to weather the current storm in financial markets. According to a blog post on the Wall Street Journal website yesterday after the market's close, drug stocks are down just 1.23 percent this year, compared to 10.75 percent for the S&P 500.

Full disclosure: Because this blog writes so often about health care and drug industry issues, I make it a point not to invest my shrinking retirement savings in stocks in those sectors. Damn.