Pfizered

November 30, 2011 9:56 AM

Generic sales of Lipitor, the world’s number 1 selling pharmaceutical drug, start today. (via)

Accounting approximately one fifth of Pfizer’s revenue over the last few years, Atorvastatin was originally discovered in 1995 by Bruce Roth at Warner-Lambert’s Ann Arbor facility. Warner-Lambert teamed up with Pfizer to market the drug, and at the end of its first years of sales Lipitor had 18% of the statin market and stock prices soared. When Warner-Lambert was about to be bought by rival drug company American Home Products Pfizer sparked a bidding war, eventually buying the company for $9B in 2000. (history)

Sales of Lipitor reached $12.4B in 2008, and Pfizer has attempted to repeat their success over the years with a number of high profile acquisitions, including Pharmacia in 2003 and American Home Products, now Wyeth, in 2009. These acquisitions have helped make Pfizer the largest drug maker in the world, but results have been mixed at best, with some claiming a significant hit to long-term research productivity. (discussion at In the Pipeline)

Dependent on a number of currently marketed drugs and with few hopes on the horizon, Pfizer is facing one of the largest patent cliffs in the industry. Their research centres have been rocked by a number of prominent lay-offs, including the entire 2400 person facility in Sandwich, England (the home of Viagra) and the Ann Arbor facility where Lipitor was first discovered. Research spending is set to equal 10% of total expenses, in an industry that typically spends between 15% and 20%, and the word “Pfizered” is taking on a life of its own. It is expected that by the end of 2012 Pfizer will no longer be the world's largest pharmaceutical company, slipping to 4th place by 2017.

The response from management has been the source of some confusion, with a number of ill fated research projects (pic) and embarassing tell-alls.

Current hopes seem to rest on “Pay to Delay”, deals in which the drugmaker offers incentives to its generic rivals in order to prevent the introduction of lower priced alternatives. Unsurprisingly, the FTC is not amused, with a bill to formally ban the deals in congress.

posted by Orange Pamplemousse (37 comments total)

Coming soon: Lipitor with Retsyn.
posted by Slack-a-gogo at 10:02 AM on November 30, 2011 [7 favorites]

Wow. Great post.
posted by the young rope-rider at 10:04 AM on November 30, 2011 [4 favorites]

Marketplace had a good piece yesterday on some of the backroom dealings Pfizer has been engaging in to keep it's patent (the "Pay to Delay" referenced above).
posted by Panjandrum at 10:09 AM on November 30, 2011 [1 favorite]

I really don't understand public companies and the stock market. Pfizer courted the stockholders and shareholders by cutting money to R&D, and stock prices rose. Merck devoted more money to R&D, and stock prices dropped. But isn't R&D the core of these businesses?
posted by filthy light thief at 10:14 AM on November 30, 2011

But isn't R&D the core of these businesses?

Perhaps it's a reflection on the short-term profit motives rampant in current investing?
posted by Celsius1414 at 10:17 AM on November 30, 2011 [20 favorites]

Thanks rope-rider.

I missed a via link for "embarassing tell-alls". I really recommend the (long) article. It was fascinating.

filthy light thief, it's like a farmer selling his seed corn. Short term-profit, long term loss. I'd imagine most of the people investing in Pfizer stock around those sorts of announcements aren't holding things for long.
posted by Orange Pamplemousse at 10:18 AM on November 30, 2011

Stocks are not a rational force that maximize benefit to the public interest.
posted by Stagger Lee at 10:18 AM on November 30, 2011 [11 favorites]

Good, maybe in addition to saving ordinary people money, this will reduce the incentive to push statins on enormous demographics of people for whom there is zero evidence of reduced mortality. It might even weaken the already-discredited and immensely harmful (IMO) idea that low-fat diets are good for you and that (therefore) carbs are good for you as well.
posted by callmejay at 10:23 AM on November 30, 2011 [8 favorites]

"When Pfizer cut its research budget this year and laid off 1,100 employees, it was not because the company needed to save money.

In fact, the drug maker had so much cash left over, it decided to buy back an additional $5 billion worth of stock on top of the $4 billion already earmarked for repurchases in 2011 and beyond.

The moves, announced on the same day, might seem at odds with each other, but they represent an increasingly common pattern among American corporations, which are sitting on record amounts of cash but insist that growth opportunities are hard to find.

...

The principle behind buybacks is simple. With fewer shares in circulation, earnings per share can rise smartly even if the company’s underlying growth is lackluster. In many cases, like that of the medical device maker Zimmer Holdings, executives are able to meet goals for profit growth and earn bigger bonuses despite poor stock performance.

...

In addition, executives, who are often large shareholders, stand to benefit from even a small, short-term jump in stock prices. "

-- As Layoffs Rise, Stock Buybacks Consume Cash (NYTimes, Nov 21, 2011)
posted by Auden at 10:25 AM on November 30, 2011 [7 favorites]

If you are spending 15% on research and not getting anything out of it, it's surely tempting to cut the research budget and spend the money acquiring smaller companies that have promising drugs.
posted by smackfu at 10:28 AM on November 30, 2011

I really don't understand public companies and the stock market. Pfizer courted the stockholders and shareholders by cutting money to R&D, and stock prices rose. Merck devoted more money to R&D, and stock prices dropped. But isn't R&D the core of these businesses?

Based on the above I'd say their core has moved more to the "R&D through Acquisition" side of things.
posted by Big_B at 10:29 AM on November 30, 2011

Pfizer (and the other big companies) already discourage generics from entering the market by offering their own aggressively-priced generic brand, Greenstone.

This, combined with natural market forces prevents generics from being sold at anything other than bare-minimum margins, especially in the case where only one firm is producing the generic drug (which would allow that firm to undercut Pfizer, but still take a huge cut for themselves).

For obvious reasons, I don't think they're legally allowed to sell at a loss, but if you want to make a generic drug, you've got to be absolutely sure that you can produce it as cheaply as Pfizer can, or risk being run out of the market.

Of course, Greenstone are never first-to-market. They wait until the first generic is released, and then drop their product within approximately 12 hours of that, engaging in a bidding war that lasts either until either party hits their minimally-acceptable profit margin.

In some cases, the release of a generic can actually take weeks/months after the patent expiration if there are a limited number of companies interested in producing a generic version, or they run into legal/production issues along the way.

Whether or not this is beneficial to consumers is up for debate.

Disclaimer: I was an intern at Greenstone several years ago. I actually don't think Pfizer or the industry are satan incarnate*. They get a bad rap, and aren't exactly making money hand-over-fist, as the popular perception would imply; bring a pharmaceutical product to the market is fucking expensive, and the patent lengths are very short (not to mention that the clock starts ticking when the patents are filed, which can be years before the introduction of the drug to market).

However, they do occasionally do boneheaded/evil things like the "Pay to Delay" deal, and Hank McKinnell was a bad CEO that did not deserve the golden parachute that he was given.

The R&D cutbacks can be explained several ways. Firstly, the company was hemmoraging cash, while the R&D group were having increasingly few successes. Even more frustratingly, several promising drugs failed to make it through trials. The company's decision to begin trimming fat was understandable, even though it did directly effect several friends and relatives who were laid off by the company. Closing Ann Arbor was probably a mistake, though.

Secondly, the company decided to shift its R&D methodology by investing and acquiring promising small biotech firms. Though this reduces overall "R&D" expenditures on the balance sheet, it's actually not at all a bad strategy, and points to a potential paradigm shift in the industry, in which big pharma companies take the role of manufacturing, distribution, marketing, and venture capital to be directed toward smaller research firms. This model vaguely resembles the role of a movie studio or record label. In practice, results have been mixed, but I think that you can make a strong case for this model, especially in light of the stagnation that many "big pharma" labs have seen over the past decade.

The issue of the stock market is a weird one that I also don't understand, and the market doesn't seem to be rewarding successes or good business practices in the industry. Back when Pfizer was doing well and investing heavily in promising R&D projects, its stock continuously tanked (but did pay large and reliable dividends). Now that the company is fucked and is cutting back on R&D, the stock seems to be recovering. It makes no sense, and I'll go ahead and blame Wall Street for this absurd paradox that rewards bad behavior and poor performance.

When McKinnell sold the consumer products division (OTC drugs; Listerine; etc) to J&J, the stock market rewarded that decision, even though the division was a continuously profitable cash cow. However, it was seen as a good decision to shed the division, because the profits weren't large enough, and it wasn't growing fast enough. In hindsight, almost everybody views this as a bad decision (except for J&J, who did a great job of increasing the market-share of the products and brands that they acquired).
posted by schmod at 10:29 AM on November 30, 2011 [15 favorites]

Previously on Metafilter AskMeFi.

In all seriousness, the problem with Pfizer is that Pfizer is not a science company and doesn't get that knowing what the hell you're doing might have some effect on the outcome of your work. Unfortunately, they're hardly alone in that.

What's worse that Torcetrapib or Exubera are the really promising things where Pfizer has chosen to punt on on the second down rather than try to run them in.

My personal favorite was "Protein On Demand" which seemed to reason that all proteins are pretty much the same so once you had a purification scheme of one, you'd only have to tweak it for every other protein that came down the pike. It was like someone was looking at Kindler's career and was trying to repeat the magic of adding meatloaf and pork roast to a menu rich in fried chicken, not realizing that protein purification was maybe just a little more complex than meatloaf.
posted by Kid Charlemagne at 10:30 AM on November 30, 2011

Slightly OT but whatshisname HG Wells' novel _Tono Bungay_ offers a critical look at the early days of the English pharma/marketing/pr industries.

As with much Wells, either it's his prescience keeping it relevant, or it's just that some things never change.
posted by notyou at 10:31 AM on November 30, 2011 [1 favorite]

I see now I made a mistake filling my 3 month prescription at once as I overpaid for 2 months worth. Also, I miss eating grapefruit.
posted by Obscure Reference at 10:35 AM on November 30, 2011 [2 favorites]

Secondly, the company decided to shift its R&D methodology by investing and acquiring promising small biotech firms. Though this reduces overall "R&D" expenditures on the balance sheet, it's actually not at all a bad strategy, and points to a potential paradigm shift in the industry, in which big pharma companies take the role of manufacturing, distribution, marketing, and venture capital to be directed toward smaller research firms. This model vaguely resembles the role of a movie studio or record label. In practice, results have been mixed, but I think that you can make a strong case for this model, especially in light of the stagnation that many "big pharma" labs have seen over the past decade.

Which basically means that they outsource the risk inherent in R&D to other companies. The small biotech firms that succeed get a big payday, whereas the ones that fail get nothing. That business model only works in industries where there is a huge barrier to entry for startups though. Otherwise if a small biotech firm had a valuable new drug they could use it to raise money to do the manufacturing, distribution, etc. themselves and become the next Pfizer. And such a barrier to entry is usually built and maintained through anti-competitive practices, which means that the companies doing the acquisitions are more or less rent-seekers who make money through controlling the industry rather than through actually innovating or improving anything.
posted by burnmp3s at 10:44 AM on November 30, 2011 [1 favorite]

BACON FOR EVERYONE!
posted by crunchland at 10:55 AM on November 30, 2011 [8 favorites]

A few years back I represented a generic pharmaceutical manufacturer in patent litigation (actually we worked for a chemical company that made the active ingredient and sold it to the "generic" companies to make into pills). The amount spent by the name-brand pharma company to keep the generics out of the market was truly enormous.

There were about a dozen companies party to the litigation, each with their regular outside lawyers plus local counsel in the district where the court was. For regular telephone status conferences with the judge, we regularly had twenty or more lawyers on hold waiting for the judge to be ready, sometimes for over half an hour (he had criminal and other cases to deal with). I figured the legal fees for all the lawyers waiting amounted to a total of about $120 to $180 per minute. Of course there was all the usual discovery, depositions, etc. going on as well. One memorable letter came from a lawyer representing one of the generic companies - it basically said "Sure, big pharma lawyer, you can depose my client in India later this month, but as you may know it's monsoon season so you might be stuck in the mud for a few days."

We live in a screwy world.
posted by exogenous at 11:09 AM on November 30, 2011 [3 favorites]

Schmod, how can Pfizer (or anybody) be "hemoraging cash," when they're posting record profits? And while corporate executives can justify laying off highly trained scientists and researchers into an economy with the fewest opportunities for scientists in generations as "trimming the fat," I will not.
posted by Jon_Evil at 11:12 AM on November 30, 2011 [3 favorites]

For really good analyses of the near-complete destruction of value and innovation in Phama by the 'market' (read: management class) chasing quick buck shareholder value and behaving like an investment bank rather than a drug discovery operation) see In the Pipeline.


Because of the structure of the market compounding the low-hanging fruit problem, we will have fewer new drugs and lose millions of lives, and condemn countless more to misery.

.....I yearn for the Welcome Trust and organizations like it being an active player in pharma discovery. .....
posted by lalochezia at 11:13 AM on November 30, 2011 [1 favorite]

I have been on Lipitor for over five years now. Lipitor became generic in Canada in 2010, so, to bring it down to a personal level, here's the difference in cost (to me, no drug plan, post-tax dollars, for five years): Pfizer Lipitor, $13.500. Generic Atorvasatin, $4,744. Make of this what you will.
posted by HarrysDad at 11:35 AM on November 30, 2011

Three stone-faced directors, representing the company's board, sat inside a drab airport conference room as the CEO, trained as a trial lawyer, struggled to argue his most important case.

I may have diagnosed the problem...
posted by delmoi at 11:51 AM on November 30, 2011

I have been on Lipitor for over five years now. Lipitor became generic in Canada in 2010, so, to bring it down to a personal level, here's the difference in cost (to me, no drug plan, post-tax dollars, for five years): Pfizer Lipitor, $13.500. Generic Atorvasatin, $4,744. Make of this what you will.

Gee, I take Pravistatin and I think I get it free. Sure I have decent insurance, but it's a cheap alternative. A statin is a statin is a statin.

Also, I don't know if this is a counter-point or not, but I'm on a low carb diet, so....it doesn't really matter if the chicken or the egg came first, I'm eating both of them. In large amounts.
posted by Ruthless Bunny at 11:51 AM on November 30, 2011

Good, maybe in addition to saving ordinary people money, this will reduce the incentive to push statins on enormous demographics of people for whom there is zero evidence of reduced mortality.

The last time I tried wading through the primary literature on this, it looked like there was pretty good evidence that you could prevent one cardiovascuar incident (I think they included serious angina as well as heart attacks) per 50-some high-risk men taking the drug. And yeah, I don't think there were studies showing this translated into reduced mortality.

There's a lot more evidence that stains can prevent a large number of recurrent heart attacks after the first one.

I did a back-of-the envelope estimate that, for me, it was roughly as likely to prevent a heart attack as having my life saved by wearing a seat belt. (But, of course, statins are more expensive and have more risks than seat belt use).
posted by straight at 11:52 AM on November 30, 2011

That business model only works in industries where there is a huge barrier to entry for startups though. Otherwise if a small biotech firm had a valuable new drug they could use it to raise money to do the manufacturing, distribution, etc. themselves and become the next Pfizer.

The barrier in this case is clinical trials. Getting approval for drugs is time consuming (years), extremely expensive (much more so than basic development), and requires lots of specialized expertise and a multi-continental presence.
posted by a robot made out of meat at 12:06 PM on November 30, 2011 [1 favorite]

how can Pfizer (or anybody) be "hemoraging cash," when they're posting record profits?

What is selling your possessions on E-bay? OK, I'll take bad long term business planning for $1000. Well, Dovebids actually, but you get my point.

Seriously, in the big lay off before the big layoff when I got let go they also announced that they were selling all the buildings they owned in St. Louis to Monsanto and then renting them back. That's some serious future-blindness right there.

And while corporate executives can justify laying off highly trained scientists and researchers into an economy with the fewest opportunities for scientists in generations as "trimming the fat," I will not.

If it makes you feel any better, I found it quite serene. After like eight big layoffs over the course of my career I was so ready to get out of their that having to traverse a cave full of rabid hyena would not of have seemed like much of an impediment.

Also, the time I spent cleaning out my desk, looking back at how good the work was that I did five or ten years prior (compared to the crap I churned out in the last few years) was exactly the tonic needed to exorcize any specter of remorse I might have been feeling. On my way out to the car on my last day, the only thing that kept me from doing the Snoopy dance was the knowledge that I had friends who were going to be coming back on Monday who might be watching.
posted by Kid Charlemagne at 12:14 PM on November 30, 2011 [4 favorites]

What's worse that Torcetrapib or Exubera are the really promising things where Pfizer has chosen to punt on on the second down rather than try to run them in.

This isn't a fair summary. Torcetrapib suffered from the unfortunate side effect of killing people, for example.
posted by Justinian at 12:35 PM on November 30, 2011

A statin is a statin is a statin.



Absolutely untrue.
posted by lalochezia at 12:41 PM on November 30, 2011

Jon_Evil: "Schmod, how can Pfizer (or anybody) be "hemoraging cash," when they're posting record profits? "

Easy. Because they weren't posting "record profits", were doing worse than their competitors, and also because they knew they had a huge number of patents expiring, with nothing at all in the R&D pipeline to replace them. (Click in 'Full' on that graph to get a better idea). They were spending a fortune on R&D, and had nothing to show for it.

They had a few good years, and a few bad years, but there was certainly no upward trend.

They're bracing for the impact that they began to feel in 2010, and will hurt them even more this year and next. I'm not going to go as far forward as to defend their actions or strategy, but they've got plenty of rational reasons for acting the way that they are.
posted by schmod at 12:42 PM on November 30, 2011

I wonder how much the advent of direct-to-consumer advertising for prescription drugs (1997) affected the economics here. A 2004 NYU study estimated that promotional spending was almost twice R&D spending.
posted by kurumi at 12:56 PM on November 30, 2011

What about the big table? (some language nsfw)
posted by stifford at 6:54 PM on November 30, 2011

I read somewhere recently that the top handful of 'big pharma' companies have so much cash on hand, they could conceivably buy out almost 95% of all the publicly traded drug-focused biotech stock in the US at a 50% premium.

In addition, while pharma profits have been relatively poor lately compared to their own historical trends, they are still doing extremely well when compared to any other industry. This article has some other interesting thoughts about big pharma and the notion of shareholder value. As the author notes, "[shareholder value is] ... vague, ill defined, and references an amorphous group of people that have things done in their name that I’m not sure they ever asked for."
posted by sevenyearlurk at 7:34 PM on November 30, 2011

Kid Charlemagne,

Is it impossible that Protein On Demand could work, for at least a large set of proteins? Not everything needs chaperones, no?
posted by effugas at 9:28 PM on November 30, 2011

People wern't pfizered. They were pfucked.
posted by eriko at 11:07 PM on November 30, 2011

This wasn't even for a system as complex as chaperons - it was just, well, imagine you've expressed a protein in E. coli. Ignore all the initial stuff like refractile bodies and just assume that you have some kind of filtered broth containing your properly folded protein and you're doing two chromatography steps, one anion exchange and one cation exchange. Different proteins have different pI's (much less surface charge topographies) and are going to come out at very different places in these purification schemes along with totally different impurity profiles and so on. Also, you never know how well a given molecule is going to cooperate with any of the assays in your analytical suite.

Once you base all your timelines on the assumption that everything can be done with minor tweaking and woe unto the poor bastards that fails to meet them (for a number of reasons, many of which have to do with external factors like scheduling events with the FDA) so you've created a high stress environment where doing things quickly and putting out fires is rewarded, but taking the time to prevent fires in the first place is punished. Pretty soon, "there's never time to do it right, but there's always time to do it over" is the foundation of your corporate culture and technically minded conscientious people grin like idiots when they get the word that they're being let go. (I suppose it's too late in the thread for me to quip, "Don't ask me how I know this.")

Eventually they revised this plan to apply only to monoclonal antibodies (where you pretty much know you're going to start with some sort of Protein A column step) but it's still a business model with a significant luck component.
posted by Kid Charlemagne at 3:37 AM on December 1, 2011 [2 favorites]

Doctors sling statins around like candy. The side effects can range from painful to deadly.

Whether generic or not, doctors like to prescribe long-term chronic medications as they guarantee a continuous revenue stream, as the patient must be monitored regularly by the prescription gatekeeper.

Far too many patients who SHOULD be advised to increase their exercise level while watching their diet more closely are instead handed a scrip for Lipitor or other statins. It's horrifying.

Yes, there are some with genuine hyperlipidemia issues who can benefit from statin use. But far too many taking this drug are actually borderline and have the ability to improve their numbers without involving whitecoats, but aren't told of this. Most doctors don't like to bite the hand that feeds...
posted by kinnakeet at 8:04 AM on December 1, 2011

Yes, there are some with genuine hyperlipidemia issues who can benefit from statin use. But far too many taking this drug are actually borderline and have the ability to improve their numbers without involving whitecoats, but aren't told of this. Most doctors don't like to bite the hand that feeds...

Except that prescribing statins actually works sometimes whereas doctors telling patients to exercise more and eat less hardly ever works.

How many people do you think (1) wouldn't know they ought to exercise and watch their diet unless their doctor told them and (2) would successfully start exercising regularly and/or changing to a healthier diet if their doctor told them to? I'd guess that number is a lot smaller than the number of people with borderline hyperlipidemia that might benefit from taking statins.
posted by straight at 10:58 AM on December 1, 2011