Introduction to Pharmaceutical Products
Pharmaceutical drugs are chemicals with beneficial biological activity. Modern drug development is an outgrowth of recent research into the specific causes of illness and disease, coupled with advances in chemistry and industrial technology that allow scientists to manufacture chemicals to improve these conditions. The explosion of scientific knowledge about human biology in the past 40 years, and in particular, the discovery that the chemistry of proteins is involved in many illnesses and diseases, has provided a wide array of protein “targets” for drugs to act on. R&D is the major activity of most drug companies.
While some drugs can now be designed from the ground up to fulfill a specific biological function, drug development in most cases still involves testing a large number of chemicals “in vitro” (in a test tube) to see if they have biological activity. Many of these chemicals are derived from natural sources, especially plants. A company may test thousands of chemicals before finding a few that have the desired effect. The pharmaceutical industry has about 2,700 compounds in various stages of development. The entire drug development process may take many years (while patent protection is running down), with only a small percentage of candidate drugs surviving the testing and approval process. On average, the industry claims, discovering and developing a new drug takes 10 to 15 years and can cost more than $1 billion.
Major areas of research include the cardiovascular system (high blood pressure, high cholesterol); cancer; the endocrine system (diabetes, osteoporosis); the gastrointestinal system (ulcers); HIV/AIDS; neurological disorders (Alzheimer’s and Parkinson’s disease); arthritis; infections; and antidepressants. The actual manufacture of drugs involves one of three major methods: synthesis (using well-known chemical reactions to build a drug from simpler components); extraction (using solvents to remove and purify a drug from a natural source); or biotechnology (such as gene-splicing to produce large quantities of drugs from bacterial fermentation, or the production of monoclonal antibodies using mouse or human cells).
Small companies may use a contract manufacturer to produce their products. Because large research budgets don’t guarantee new products, many large companies supplement their own efforts by buying or licensing products from other companies. Companies often buy smaller ones that have a promising research program, to ensure a future stream of products. Some large companies manufacture over-the-counter (OTC) medications, dietary supplements, or personal care products in addition to patent drugs. Offering a more diverse product line can often mitigate potential cash flow issues that can stem from patent drug development costs. Joint research is also becoming more common as the cost of research increases.
Introduction to Pfizer Products
- Lipitor, for the treatment of elevated LDL-cholesterol levels in the blood, is the most widely-used branded prescription treatment for lowering cholesterol and the best-selling pharmaceutical product of any kind in the world.
- Norvasc, for treating hypertension, lost exclusivity in the U.S. in March 2007 and has also experienced patent expirations in most other major markets, including Japan in July 2008 and, most recently, Canada, in the third quarter of 2009.
- Caduet is a single pill therapy combining Lipitor and Norvasc for the prevention of cardiovascular events.
- Chantix/Champix, the first new prescription treatment to aid smoking cessation in nearly a decade, has been launched in all major markets. Pfizer is continuing educational and promotional efforts, which are focused on the Chantix benefit-risk proposition, the significant health consequences of smoking and the importance of the physician-patient dialogue in helping patients quit smoking. For further information on Chantix/Champix, including label changes, see the discussion under the heading Biopharmaceutical-Selected Product Descriptions, Chantix/Champix in the Financial Review section of Pfizer’s 2009 Financial Report, which is incorporated by reference.
- Lyrica is indicated for the management of post-herpetic neuralgia (PHN), diabetic peripheral neuropathy (DPN), fibromyalgia, and as adjunctive therapy for adult patients with partial onset seizures in the U.S., and for neuropathic pain, adjunctive treatment of epilepsy and general anxiety disorder (GAD) outside the U.S.
- Revatio is for the treatment of pulmonary arterial hypertension.
- Geodon/Zeldox, a psychotropic agent, is a dopamine and serotonin receptor antagonist indicated for the treatment of schizophrenia, acute manic or mixed episodes associated with bipolar disorder and maintenance treatment of bipolar mania.
- Aricept, discovered and developed by Eisai Co., Ltd., is the world’s leading medicine to treat symptoms of Alzheimer’s disease. Pfizer co-promotes Aricept with Eisai in the U.S. and several other countries and have an exclusive license to sell this medicine in certain other countries.
- Celebrex is for the treatment of the signs and symptoms of osteoarthritis and rheumatoid arthritis and acute pain in adults. Celebrex is supported by continued educational and promotional efforts highlighting its efficacy and safety profile for appropriate patients.
- Zyvox is the world’s best-selling branded agent for the treatment of certain serious Gram-positive pathogens, including Methicillin-Resistant Staphylococcus-Aureus.
- Viagra remains the leading treatment for erectile dysfunction and one of the world’s most recognized pharmaceutical brands after more than a decade.
- Detrol/Detrol LA, a muscarinic receptor antagonist, is the most prescribed branded medicine worldwide for overactive bladder. Detrol LA is an extended-release formulation taken once a day.
- Sutent is for the treatment of advanced renal cell carcinoma, including metastatic renal cell carcinoma (mRCC), and gastrointestinal stromal tumors (GIST) after disease progression on, or intolerance to, imatinib mesylate. Pfizer continues to drive total revenue and prescription growth, supported by cost-effectiveness data and efficacy data in first-line mRCC—including 2-year survival data, which represents the first time overall survival of two years has been seen in the treatment of advanced kidney cancer, as well as through access and health care coverage. As of December 31, 2009, Sutent was the best-selling medicine in the world for the treatment of first-line mRCC.
- Xalatan, a prostaglandin, is the world’s leading branded agent to reduce elevated eye pressure in patients with open-angle glaucoma or ocular hypertension. Xalacom, a fixed combination prostaglandin ( Xalatan) and beta blocker (timolol), is available outside the U.S. In the first quarter of 2009, Pfizer entered into a five-year agreement with Bausch & Lomb to co-promote prescription pharmaceuticals in the U.S. for the treatment of ophthalmic conditions, including the Xalatan product and certain Bausch & Lomb products.
- Genotropin, the world’s leading human growth hormone, is used in children for the treatment of short stature with growth hormone deficiency, Prader-Willi Syndrome, Turner Syndrome, Small for Gestational Age Syndrome, Idiopathic Short Stature (in the U.S. only) and Chronic Renal Insufficiency (outside the U.S. only), as well as in adults with growth hormone deficiency. Genotropin is supported by a broad platform of innovative injection-delivery devices.
- Vfend, as the only branded agent available in intravenous and oral forms, continues to build on its position as the best-selling systemic, antifungal agent worldwide. Vfend’s overall global sales continue to be driven by its acceptance as an excellent broad-spectrum agent for treating yeast and molds. In October 2009, Pfizer settled certain patent litigation involving Vfend by entering into an agreement granting two subsidiaries of Mylan Inc. the right to market voriconazole tablets in the U.S. beginning in the first quarter of 2011.
- Effexor is Pfizer’s antidepressant for treating adult patients with major depressive disorder, generalized anxiety disorder, social anxiety disorder and panic disorder. See Patents and Intellectual Property Rights for further information on Effexor. Prevnar/Prevnar7 is Pfizer’s vaccine for preventing invasive pneumococcal disease in infants and young children.
- Enbrel is Pfizer’s treatment for rheumatoid arthritis, juvenile rheumatoid arthritis, psoriatic arthritis, plaque psoriasis and ankylosing spondylitis, arthritis affecting the spine. The approval of a number of competing products for the treatment of psoriasis is expected to increase competition with respect to Enbrel in 2010. Pfizer has exclusive rights to Enbrel outside the U.S. and Canada and co-promote Enbrel with Amgen Inc. (Amgen) in the U.S. and Canada. Pfizer’s co-promotion agreement with Amgen expires in 2013, and Pfizer is entitled to a royalty stream for 36 months thereafter, which is significantly less than the current share of Enbrel profits from U.S. and Canadian sales. Pfizer’s rights to Enbrel outside the U.S. and Canada will not be affected by the expiration of the co-promotion agreement.
- Zosyn ( Tazocin internationally), Pfizer’s broad-spectrum intravenous antibiotic, faces generic competition in the U.S. and certain other markets.
- Pfizer’s Premarin family of products remains the leading therapy to help women address moderate to severe menopausal symptoms.
- Pfizer’s Hemophilia family of products, which includes BeneFIX, ReFacto AF and Xyntha, provides state-of-the-art products that offer patients with this lifelong bleeding disorder the potential for a near-normal life.
- Protonix (pantoprazole sodium) is Pfizer’s proton pump inhibitor for the treatment and maintenance of healing of erosive esophagitis with associated gastroesophageal reflux disease symptoms. Sales of Protonix are affected by the December 2007/January 2008 “at risk” launches of generic pantoprazole tablets in the United States. In response, Pfizer sells generic version of Protonix tablets.
- Spiriva is Pfizer’s inhaled maintenance prescription treatment for breathing problems associated with chronic obstructive pulmonary disease (COPD), a lung condition that includes chronic bronchitis, emphysema, or both. Pfizer co-promotes Spiriva in the U.S. with Boehringer Ingelheim Pharmaceuticals, Inc.
Pfizer Product Performance
Pfizer had four drugs topping $2 billion in sales in 2008: Lipitor, Norvasc, Celebrex, and pain medication Lyrica. (Wyeth’s top three products — antidepressant Effexor, arthritis treatment Enbrel, and pneumonia vaccine Prevnar — also pulled in over $2 billion each.) Five more Pfizer drugs pulled in over $1 billion, including Viagra, overactive-bladder treatment Detrol, and antibiotic Zyvox. However, Pfizer’s revenues from these established blockbusters continue to slide due to one of the pitfalls of the drug game: patent expiration. Bestsellers Norvasc and antidepressant Zoloft lost patent protection in 2007, and former bestselling allergy medication Zyrtec (which the company has since divested) faced generic competition starting in 2008. Knockoff versions of the top Wyeth drug, Effexor, have been on the market for several years.
|2008 Sales||$ millions||% of total|
|Japan & Asia||7,166||15|
|Canada, Latin America||5,715||12|
Pfizer’s largest patent threat has been over cash cow Lipitor, the world’s top-selling drug that brings Pfizer over $12 billion in annual sales. After a years-long court battle over a proposed generic equivalent release by Ranbaxy, Pfizer reached a settlement agreement with the generics maker in 2008 allowing Ranbaxy to sell a generic Lipitor version in the US after November 30, 2011.
The drug giant claims that it will be able to launch new blockbusters from its robust pipeline to make up for the off-patent losses and return to revenue growth. Investment in R&D has increased (Pfizer spent about $8 billion on R&D in 2008) in order to bolster its pipeline. Pfizer’s pipeline includes about 100 projects in development, including drugs for diabetes, breast cancer, epilepsy, pain, and anxiety disorders. Pfizer has increasingly relied on acquisitions and partnerships to build its R&D activities. Products launched in 2007 and 2008 include AIDS drug Selzentry, smoking-cessation aid Chantix, and overactive-bladder treatment Toviaz.
The company seems to have an awareness that it’s not the only company in the pipeline bind; it has begun to work with its competition on developing replacement blockbusters. In 2007, for example, the company inked a 60/40 deal with Bristol-Myers Squibb for collaboration on cardiovascular and metabolic candidates.
Vaccines have taken on a new luster for many druggernauts looking for the next big therapeutic treatment. As such, Pfizer purchased Coley Pharmaceutical in early 2008 to gain access to Coley’s vaccine-facilitating technology. Pfizer also expanded through acquisitions in key growth areas including oncology (Serenex), cardiovascular therapies (Encysive Pharmaceuticals), and animal health (Embrex and several European products of the former Schering-Plough, which is now part of Merck). Pfizer is also looking to establish a presence in the generic drug business by licensing rights to off-patent pharmaceuticals from other manufacturers.
Sales & Marketing
Sales and Marketing efforts primarily focus on physicians. Doctors are the primary customers of pharmaceutical manufacturers, because the success of a prescription drug depends largely on whether doctors will prescribe it for patients. The big drug companies have large sales forces to regularly call on doctors, hospitals, wholesalers, pharmacists, and managed care organizations (MCOs). To market their products, drug companies also advertise heavily in medical journals, send direct mail advertising and samples to doctors, and participate at medical meetings. Some prescription drugs are marketed directly to consumers via TV, radio, print, and online advertising. The US pharmaceutical industry spends more than $4 billion per year on direct-to-consumer advertising (DTCA), according to the US Government Accountability Office. Small companies can’t match the marketing efforts of big companies and therefore often license their drugs to big companies or enter into marketing agreements with them. Companies distribute drugs directly to large users such as MCOs, hospital chains, and retail drug chains, as well as through drug wholesalers. Relative to development cost, the manufacturing cost for many drugs is low. Pricing decisions therefore are based mainly on market demand and the sunk costs of development.
Pfizer Marketing & Sales
In the global Biopharmaceutical segment, Pfizer promotes products to health care providers and patients. Through Pfizer’s marketing organizations, they explain the approved uses, benefits and risks of the products to health care providers, such as doctors, nurse practitioners, physician assistants, pharmacists, hospitals, Pharmacy Benefit Managers (PBMs), Managed Care Organizations (MCOs), employers and government agencies. Pfizer also markets directly to consumers in the U.S. through direct-to-consumer advertising that communicates the approved uses, benefits and risks of its products while continuing to motivate people to have meaningful conversations with their doctors. In addition, Pfizer sponsor general advertising to educate the public on disease awareness, prevention and wellness, important public health issues, and patient assistance programs.
In January 2009, Pfizer announced the creation of customer-focused units within its Biopharmaceutical segment to better meet the diverse needs of physicians, patients and customers while maximizing value for the Company and shareholders.
The Biopharmaceutical segment includes five human health, customer-focused units: Primary Care, Specialty Care, Oncology, Established Products and Emerging Markets. Upon the closing of the Wyeth acquisition on October 15, 2009, the Specialty Care customer-focused unit expanded to include vaccines.
In April 2009 in the U.S., Pfizer also restructured into regional units in order to create a more flexible organization empowered to identify and address local market dynamics and customer needs. Pfizer’s structure aligns the sales, marketing, and medical functions to work closely to meet the needs of key customer segments while ensuring common coordination, focus and accountability across the organizations.
Pfizer’s prescription pharmaceutical products are sold principally to wholesalers, but also sells directly to retailers, hospitals, clinics, government agencies and pharmacies. Pfizer seeks to gain access to health authority, PBM and MCO formularies (lists of recommended, approved, and/or reimbursed medicines and other products). Pfizer also works with MCOs, PBMs, employers and other appropriate health care providers to assist them with disease management, patient education and other tools that help their medical treatment routines.
During 2009, Pfizer revenues generated from three largest biopharmaceutical wholesalers were as follows:
- McKesson, Inc.-17% of Pfizer’s total revenues;
- Cardinal Health, Inc.-11% of Pfizer’s total revenues; and
- AmerisourceBergen Corporation-10% of Pfizer’s total revenues.
Sales to these wholesalers were concentrated in the Biopharmaceutical segment. Apart from these instances, neither of the business segments is dependent on any one customer or group of related customers.
Pfizer’s global Diversified segment consists of four global units: Animal Health, Consumer Healthcare, Nutrition and Capsugel. Each unit utilizes its own sales and marketing organization to promote its products, and occasionally uses distributors in smaller markets.
The Animal Health unit’s advertising and promotions are generally targeted to health care professionals, directly and through veterinary journals. Animal Health products are sold through veterinarians, distributors and retail outlets as well as directly to users.
The Consumer Healthcare unit’s advertising and promotions are generally targeted to consumers through television, print and other media advertising, as well as through in-store promotion. Consumer Healthcare products are sold through a wide variety of channels, including distributors, pharmacies and retail chains.
The Nutrition unit supports and adheres to the World Health Organization code and national codes on the marketing of breast milk substitutes. Nutrition encourages breastfeeding as the best nutrition for infants, and provides important products for infants who are not exclusively breastfed. Advertising and promotion of Nutrition products for older children and adults generally target consumers and health care professionals through print and media advertising and television. Nutrition products are sold through a wide variety of channels, including distributors, pharmacies, hospitals and retail chains.
Recommended Interview Questions:
- How much do current and future patent threats affect the organization, and what are the plans to combat these threats?
- How much importance does Pfizer place on acquiring new patents?
- How does Pfizer plan to continue to deliver new products while advancing the Wyeth integration?
Recommended Facts to Include in Your Answers:
- Determine the product(s) that apply to the job opening and include information from analysts, market and the current state of the product to demonstrate product market knowledge.
- Be sure to include information about a products performance and state in the product life-cycle. The products state in the lifecycle will often indicate the types of people they are seeking.