Past that, most of the competition is not in innovation, but rather in marketing.
"The researchers’ estimate is based on the systematic collection of data directly from the industry and doctors during 2004, which shows the U.S. pharmaceutical industry spent 24.4% of the sales dollar on promotion, versus 13.4% for research and development, as a percentage of US domestic sales of US$235.4 billion." -- http://www.sciencedaily.com/releases/2008/01/080105140107.ht...
Finally, the NIH is picking up most of the tab for fundamental research, and as such, it isn't the drug company that is leading innovation. As such, I find the drug development argument hollow.
