Drug companies often justify the high prices of prescription drugs by referring to the high costs of research and development -- after all, they're just trying to get back the money they've invested in research. And for every successful prescription drug, there are a dozen unsuccessful prescription drugs, and the research cost of those must be recouped, somehow.

But exactly how much does research cost? And how much is recouped? Tonight, in a SEDHE "Just the Facts, Ma'am" special, we're going to find out.

According to Forbes magazine, Pfizer, Johnson & Johnson, and Merck are the world's three largest drug/biotech companies by revenue. (Pfizer is 24th on its list of largest companies worldwide, Johnson & Johnson is 46th, and Merck is 63rd.)

According to Pfizer's 2004 Financial Report [PDF], Pfizer made $52.5 billion in revenue worldwide in 2004, $10.8 billion of which came from the drug Lipitor alone. In fact, total revenue from its five best-selling drugs -- Lipitor, Norvasc, Zoloft, Celebrex, and Neurontin -- amounted to $24.7 billion. Its profits (revenue minus expenses, including income taxes) in 2004 were $11.4 billion. Pfizer spent $7.68 billion on all research and development in 2004, and when all the bills were paid, Pfizer had 148% of that amount left over.

According to Johnson & Johnson's 2004 Annual Report [PDF], the company made $47.35 billion worldwide in revenue. It spent $5.2 billion on research and still managed to take home $8.51 billion in profit, or 164% of its research costs. Johnson & Johnson's biggest seller is Procrit ($3.59 billion), a drug that helps relieve anemia associated with treatment of HIV, cancer, and kidney disease. It also owns the Band-Aid, Tylenol, Splenda, and Neutrogena brands.

According to the Financial Section of Merck's 2004 Annual Report [PDF], Merck made $22.9 billion in revenue worldwide in 2004. It spent $4.01 billion on research in development and ultimately made a profit of $5.81 billion, or 145% of its R&D expenses. You might remember Merck for Vioxx, Singulair, and Zocor. Vioxx is used for arthritis and was voluntarily recalled last year after the company found that the drug could lead to increased risk of heart attack. Singulair is used to treat seasonal allergies. Zocor reduces the risk of heart disease by reducing cholesterol.

The three largest drug companies in the world spent an average of $5.63 billion on research and development in 2004. Their average profits were $8.57 billion. The three largest drug companies in the world, then, made an average of 152% of their research costs in profit in 2004.