Impact of Lipitor Patent Expiry on Pfizer. Paper
IMPACT OF LIPITOR PATENT EXPIRY ON PFIZER. TABLE OF CONTENTSPAGE NO Executive Summary3 CHAPTER 1: INTRODUCTION 1. 1 Introduction4 1. 2 What is Lipitor5 1. 3Expiry of Lipitor patent5-6 CHAPTER 2: CHALLENGERS 2. 1 Challengers6 2. 2 Pfizer’s strategies7 CHAPTER 3:FINANCIAL IMPACT ON PFIZER AS LIPITOR GOES GENERIC 8-9 Recommendations10 Conclusion11 Executive summary: This report is about the impact of patent termination of Lipitor on Pfizer pharmaceutical company. Lipitor has been in the market since 1997 and is the mother of all drugs. wsj_live, 2011) As of November 30th 2011 Pfizer lost the patent of Lipitor opening path to generic competitors for America’s most popular medication and now all generic producing companies will be able get hold of the patent and produce their own stock legally. Pfizer was the first to earn 11$ billion in a year selling Lipitor and 130 $ billion over the patent’s life Lipitor is responsible for the one sixth sales of Pfizer. Due to the patent expiration of the drug Lipitor now other generic producing companies will be able to produce the drug and sell it at much lower rate than Lipitor which is a branded drug.
Lipitor is a blockbuster drug of Pfizer which is responsible for making a huge profit and has kept the company at the no1 position. Until now Pfizer was the sole producer and enjoyed the monopoly of the drug. As Lipitor goes generic the rates of the drug are falling down massively so as to keep the current users of the drug to continue it. Pfizer is putting up a fight with all generic producing companies and as it is the best marketing pharmaceutical company in the world it is using strategies to keep the sales up and to make the consumers eep using Lipitor even after the expiration. It is good news for the consumers but not so much for the pharmaceutical industry. Lipitor is a blockbuster drug which going generic is a very big deal in the world of pharmaceuticals; it has been responsible for making a 27% of total sales revenue for all biopharmaceuticals. Pfizer is the best marketing pharmaceutical company in the world which is why it will squeeze out all of the value of the brand by using all strategies which are applicable in this case.
It has a lot of challengers who have been waiting to get an opportunity to start producing the generic version of Lipitor like Ranbaxy and Watson pharmaceutical who have the approval to produce the generic Lipitor for 180 days after the patent expiry. While Pfizer thanking on the fact that the price difference between the branded and generic will not be much for the first six months. (sanburn, 2011) Pfizer is hoping for all the current users of Lipitor to remain loyal to the brand and at the same time is negotiating and made deals with sellers to have them sell Lipitor in the market at the generic prices. wsj_live, 2011) The impact on Pfizer financially is at large in the start but due to its solid financial risk and excellent business risk profile it will be able to withstand the loss in the coming time. The investors are warned at expecting lower numbers and with plans to stabilize them in a short period of time. It is a very complex situation but due to Pfizer’s creative process to deal with the situation it will help to bring the numbers up. With the patent expiry of Lipitor it is challenging to present the investors with the numbers Pfizer has hit before but it’s not impossible. philippidis, 2011) INTRODUCTION: PFIZER is the world’s largest pharmaceutical company. It was created in the year 1849 by Charles Pfizer and company, a chemical business; over the last century it has associated itself with developing trends to become a research-based pharmaceutical company. The penicillin used during the World War 2 was produced was Pfizer. The company is situated in New York with its research department in Groton, Connecticut, united states. It owns the best cholesterol lowering drug Lipitor and has other 14 blockbuster drugs.
In the first year it generated revenues of 67. 8$ billion and net income of 8. 26$ billion. (philippidis, 2011)Pfizer is the largest player in the pharmaceutical market having the best power in marketing and forming associations. It also posts the highest dividends in the industry. Pfizer faces challenges common to all pharmaceutical companies such as patent expiration and FDA regulation. It is dedicated to applying science and global resources to progress health and well-being at every stage of life. Subsidiary members are Agouron pharmaceuticals, G.
D Searle & company, Greenstone, Park- Davis, Wyeth, Pharmacia, Upjohn, Warner &lambert. (control, 2011) Pfizer‘s ceo Ian Reid announced that company would dissociate substantial portions of the company with the aim to focus on pharmaceuticals. Its business is divided into two divisions which are biopharmaceutical with 86% of revenues which consists of primary care, speciality care, established products, emerging markets and oncology. The diversified makes 14% of revenues which consists of consumer healthcare, animal health, nutrition among others.
Some major products of biopharmaceutical (86%of total revenue) are; (sanburn, 2011) Lipitor- statin that decreases LDL levels, best-selling and and the most important for Pfizer as it contributes significantly to the growth of the company. However, the patent expired opening it to competition with the generic drugs. Enbrel- for arthritis, plaque psoriasis ankylosing spondiltis. this with the purchase of Wyeth was the largest drug acquired with Pfizer. Lyrica- used for the treatment of epilepsy9most successful pharmaceutical launches of Pfizer. Also used for treating central nerve pain and anxiety disorder.
Prevnar- for invasive pneumonia. Celebrex- used for arthritis joint pain. Viagra-Important drug for Pfizer lost its patent in 2010. It’s used for erectile dysfunction. Norvasc- most prescribed branded medicine for lowering blood pressure. Pfizer has an enormous R&D budget spending 9. 48$ billion in 2010 for research and development purposes. LIPITOR (GENERIC NAME IS ATORVASTATIN CALCIUM) Lipitor is the mother of all drugs. It is a statin that is used to lower cholesterol levels. Pfizer best-selling drug and the world’s largest selling drug. It is sold in 10, 20, 40 or 80mg.
Lipitor came in the market in 1997 and collected in 100$ billion even in a crowded market containing many other cholesterol lowering statins many of them have already gone generic. Pfizer’s sales from Lipitor have made 11$billion in a year which is about one-sixth of Pfizer’s total sales. 8. 7 million American’s use Lipitor to lower their cholesterol levels. Lipitor contributes significantly for the growth of Pfizer; it is one of its blockbuster drugs. It has been the most profitable prescription drug in the history with millions of users. It is a big change for the consumers and for the world of pharmaceutical companies.
EXPIRY OF LIPITOR’S PATENT: Lipitor has been in the market since 1997 being the only drug available in the market for lowering cholesterol levels but Pfizer lost patent rights of Lipitor on nov30th 2011 making pathway for the generic competitors for America’s most popular medication. Pfizer made an 11$ billion in 2010 worldwide selling Lipitor and a 130$billion over the patents life. Lipitor is one of the blockbuster drugs of Pfizer. After patent expiry of Lipitor other generic producers will be able to produce it and sell it at a much cheaper rate making it lose it exclusivity.
The most profitable drug in the history loses its exclusivity after being in the market for 14 yrs. Pfizer took a hit of 4% or 1. 5 $billion due to patent expiration of Lipitor. (time, 2011) Before patent expiration it cost 5$ a pill for the consumers but after patent termination it has come down to 4$ per month, it is likely to reduce much further in the next coming 6 months in which there would be a price war. People will now be able to buy Lipitor for 80% off its original cost. Lipitor global sales were 10$ billion last year and they are to go as low as 3. 2$ billion in the year 2012. cnbc news, 2011) Pfizer has already lost exclusivity of Lipitor in Brazil, Mexico, Canada, and Spain last year but is still making revenues from the developing countries. Pfizer is forced to sell their branded drug Lipitor at generic prices as the patent ends. Now any pharmaceutical company can get hold of the patent and manufacture their own stock legally. Pfizer enjoyed the monopoly of the drug for all these yrs. and was the sole producer of the drug Lipitor until November 2011. Pfizer has been able to maintain its global no1 ranking for years because of Lipitor sales.
THE CHALLENGERS: There are many generic drug making companies around the world. Ranbaxy India’s largest generic drug maker had to settle proceedings with Pfizer back in 2008 who has won the rights to sell the drug exclusively for the next six months after the patent expiration. Ranbaxy got the approval from the food and drug administration (FDA) to make the generic version of the drug Lipitor which will be manufactured in New Brunswick at the ohm laboratories and will be sharing its profit with Teva pharmaceuticals for the first six months.
After six months another authorised generic version of Lipitor will be sold by Watson pharmaceuticals that have an exclusive agreement with Pfizer, according to which Pfizer will manufacture and sell generic Lipitor to Watson for the next five years. But those generics won’t be significantly cheaper than Lipitor if at all. (narayan, 2011) After the Ranbaxy settlement several other legal issues were resolved with generic drug making companies which were looking in for some action which included Mylan, Teva pharmaceuticals and one of the most recent was Dr. Reddy’s laboratories. philippidis, 2011) Teva pharmaceutical company clashed with Pfizer for quite some time but then on October 7 both decided that Teva would not sell generic Lipitor in the UK market till the expiration of the drug in the country which is still may 2012. More generics mean more competition and fewer sales . PFIZER STRATEGIES: Lipitor has made millions in profit for Pfizer therefore Pfizer using an extensive plan to keep its 10 million patients using Lipitor to stay on it. Pfizer is fighting against all generic producing companies to keep the Lipitor sales as high as possible.
Pfizer strategy to prevail the loss of patent rights of its bestselling drug Lipitor has resulted in making deals to sustain a part of 11 billion annual sales from Lipitor and to hold on to the exclusivity of the drug in the market. Deals like, ? Drug-benefit agencies providing discounts to the patients for prolonged use of the drug even after the patent termination. ?Making it available over the counter to stand the attack expected from generics. ?Negotiations made with insurance providers blocking pharmacies from making generic version of Lipitor available to the patients. (wsj_live, 2011) ?
Providing patients with discount cards so they can purchase the drug for 4$ a month (25$ lower from the average co-pay for a brand name drug) (sanburn, 2011) ? Paying pharmacies to mail patients with a 4$ copay card and to continue it. (wsj_live, 2011) ? Deals made with catalyst health insurance Inc. and Coventry health care Inc. to not let the generic version of Lipitor gets into the hands of customers until next summer. ?And Pfizer made deals with other health care companies will keep Lipitor at a low price for the next 6 months. ?Pfizer negotiated terms with Medco health solutions Inc. to supply Lipitor through its direct mail services. Pfizer’s lipitor. com website is another online channel set up to sell Lipitor. ?Pfizer’s program called “Lipitor for you” according to which the drug is delivered to your house, focusing on the consumers. Pfizer being the best marketing pharmaceutical company in the world will do everything to squeeze out every possible value from the brand. From each 90 day supply of Lipitor Pfizer will make a profit of 100$ from the usual 225$ which it made before the market opened to generics. If the manufacturing companies were to scale back their marketing campaign profits for Pfizer could stay up.
Due to the new changes in the statin market it could be a win-win situation for all as consumers have the option to stay on the original Lipitor which is available at cut off prices and also the benefit to the consumers from low cost generics. Pfizer is using a very creative process to deal with this complex situation. (sanburn, 2011) FINANCIAL IMPACT ON PFIZER AS LIPITOR GOES GENERIC: After 14 years world’s most profitable prescription drug goes generic with many people using it for all these years (newshour, as patent of lipitor expires is era of blockbuster drugs over, 2011).
Pfizer has made 130$ billion over Lipitor’s patent life. A Lipitor pill cost about 5$ a pill while costing only a dime to make it has come down to costing 4$ a month, it has come down and will initially fall lower then that. As generic are as good as branded drugs that is why people would choose to buy the low cost generic version of the drug. Lipitor roughly is responsible for one sixth of Pfizer’s total sales. (sanburn, 2011) Pfizer’s sales in 2010 were 67. 8$billion while after the expiration of Lipitor the sales forecast in 2012 will be as low as 63 to 63. $ billion. (dupont, 2011)Lipitor’s sales were 10$ billion in 2010 and in 2012 they are forecasted to be down to 3. 8$ billion. Lipitor which costs 120$ a month will fall down 30% in December 10 to 20% more than the usual drop of price when a patent expires of a drug. Pfizer will not be able to compensate the drop of price in short term but Pfizer maintaining the solid minimal financial risk and excellent business risk profile will be able to withstand the revenue loss in the next 2 years.
Lipitor’s sales have been downsizing since the last few years, in 2006 it accounted for 27% of total biopharmaceuticals revenues by making sales of 12. 9$ billion in that year, while coming down to 11. 4$billion in 2009 , yet at 10. 7$billion in sales worldwide while US alone responsible for 5. 3$billion in sales. Lipitor has been the best prescription drug sold all around the world and Pfizer’s best blockbuster drug for years. The drug alone accounted for 18% revenues of biopharmaceutical worldwide. (philippidis, 2011) Pfizer’s EPS investors losing 3% or gaining 1%over last year’s 2. 3$. EPS is expected to fall somewhere between 2. 16 to 2. 26$. Pfizer lowers the R&D spending this year to 8 to 8. 5$ billion from 9. 4$ billion in year 2010. Before the companies merger between Wyeth and Pfizer of 65$ billion, R&D spending were 11$ billion in the year 2009. pfizer has warned the investors to expect lower number in the year 2012 with the revenue ranging between 62. 2$ to 64. 7$billion which is 5% at the lower end and 3% at the higher end. R&D to fall again after every guidance. Pfizer expects the EPS to bounce back 2. 25 to 2. 35 which is up 4% at both ends.
Without a blockbuster drug like Lipitor it is challenging to present investors with numbers that Pfizer has hit before. Lipitor has been the blockbuster drug of Pfizer for years making it a very successful company and is responsible for the growth of the company keeping it at the no1 position for years. (philippidis, 2011) RECOMMENDATIONS: As the situation is complex and Pfizer should use a very creative way to deal with the situation so as to maintain the sales of Lipitor in the market and to have all the current consumers to continue with the drug even at a low rate as the generics.
The drug is clinically approved and the most reliable which is used for low cholesterol. The same formulation drug which will be available at a low rate after the expiry of the patent, therefore the company should make deals with generic producers of Lipitor where they will agree to sell the drug which will be manufactured by Pfizer for a certain period of time, likely for the first 6 months pricing it to the same value as the other generic versions of Lipitor.
And to use marketing strategies which would help in making the consumers use the best medicine which has been used for the past 14 years and is known all around the world as the best and most profitable prescription drug. The generic Lipitor will be manufactured by Pfizer and will be sold all around the world through different generic making pharmaceutical companies where Pfizer will also supply the drug to the companies at a lower rate. The supply cost of the drug to the companies will be lower than the other companies.
Pfizer can use the drugs which are still in the pipeline and make another blockbuster drug which will not be able to take place of Lipitor but would help in increasing the revenues of the company and make up for the loss of profit from the lowering of the prices of Lipitor. at present having no other blockbuster drug to fill that hole is creating problems and Pfizer trying to hang on to all the revenues that can come from Lipitor, therefore it’s important to pay attention to making another blockbuster available in the market as soon as possible to compensate the loses.
Pfizer can make deals with other pharmaceutical companies also to sell their drug without the brand label and in turn share the revenues with them. it costs less than a dime to make a pill and now saving on the costs of advertising and marketing the branded drug will also be saved, which would help in making more deals to sell the drug in the market. Making agreements with all the generic producers which are vast in number all around the world and to get them to give a percentage or royalty on the sale of that then Pfizer will be benefitting from all those companies.
CONCLUSION: After a patent of a drug expires it is assumed that the drug will vanish after that from the market but Pfizer has fought and will continue to fight for Lipitor and will stay with it, as it has been proved by the company by using all types of strategies and making deals and programs to keep the sales up and protecting it from vanishing. All efforts have been made by Pfizer to stave off initial competition by offering Lipitor at the same price as the generic equivalents that are to flood the market.
Due to the limited competition in the start as only two companies have got the approval to produce the generic Lipitor, it will be easy for Pfizer to keep the market for Lipitor users and to be able to still maintain sales of the drug in the market. The company has also cut the co-pays of all the eligible patients to as low as 4$ a prescription which is for branded Lipitor and also it will cover up to 50% for a co-payment of every prescription through December 2012.
It is too early to know if the approach used by Pfizer will benefit or not after 6 months and if Pfizer will continue to fight with all other generic makers after that period as that would result in lowering the prices even further more which would not be profitable for Pfizer. (linda a. johanson, 2011) In conclusion of this report it can be said that the impact of the patent expiration of Lipitor has proven to be a very complex matter and the company has taken ever possible step towards reducing this impact and will continue to do so in the future.
Pfizer the best marketing pharmaceutical company in the world and it will be able to fight with other generic making companies at least for the first 6 months due to the limited competition. (wsj_live, 2011) Pfizer is not ready to let their gig money maker go down without a fight and will continue to do so even after generics hit the market. Lipitor is not going to just exit stage left, as it is the expiration of US biggest drug in history. REFERENCES: Bibliography pfizers big problem: lipitor patent expiration. (2011, november 15th).
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