Pfizer Plans to Fight for Lipitor

Joel Anderson |

PFE, WPI, PUTT, pharmaceuticals, pharmacists, plan sponsors, PBMs, prescription benefit managers, generics, Lipitor, PUTT,Pfizer (PFE) has been hot lately, up 22 percent since December of last year and only 5 percent off its 52-week high reached at the end of May. However, one could say that its about to have its profits Lipi-torn away from them. The patent on the popular cholesterol drug Lipitor expired today, allowing a flood of generic options to hit the market and potentially putting a major dent in Pfizer's bottom line. Pfizer, though, is fighting back with efforts to keep Lipitor in the forefront even as serious competition emerges from a glut of new generic drugs.

Pfizer Defending Lipitor Brand

Pfizer has good reason to fight for Lipitor. It is the best selling drug in history, with sales peaking at $13 billion in 2006 and routinely provided Pfizer with $11 billion in annual sales, almost one-sixth of its total revenue. Clearly, this warrants serious concern from Pfizer if the end of its patent for Lipitor marks the sort of decline that's common in these situations. Typically, generic alternatives take over all of the market share within one or two years while the company that makes the original moves on to other drugs. In the case of Lipitor, though, Pfizer is taking action to keep Lipitor on the market and in the black. This includes spending tens of millions of dollars on reducing Lipitor's copay, paying pharmacies to promote Lipitor, maintaining marketing spending right up to the end of the patent, and cutting deals with insurance plans and prescription benefit managers, or PBMs, to block the distribution of Lipitor generics.

Tactics are Controversial but Common

Some of Pfizer's efforts are simple and direct, like discount cards being mailed to consumers or available online that allow them to buy Lipitor for only a $4 copay, a huge discount on the typical copay of $25. However, the deals Pfizer is cutting with PBMs and insurers to block the distribution of generics are viewed as being unfair and/or unethical by some. Paul Bisaro, President and Chief Executive Officer of Watson Pharmaceuticals (WPI), the maker of generic atorvastatin, appeared on CNBC's Squawkbox Wednesday and indicated his frustration at Pfizer's business practices. “What’s happening now is that Pfizer is blocking the ability of the pharmacists to dispense the generic. They can only dispense the Pfizer product. When the pharmacist takes the script and punches in the code and your health insurance number, it says that he can only dispense this brand drug,” he said. "The pharmacy benefit managers are an area where [the brand manufacturer] can easily attack the situation, because  they can control the script."

However, this practice is typical of major pharmaceutical companies trying to protect profits. By targeting plan sponsors, PBMs have been able to help block the distribution of generic drugs by forcing insurance providers to bear the cost load of staying on Lipitor instead of shifting to generics, some $35 per prescription according to estimates from Dave Marley, a pharmacist and spokesman for Pharmacists United for Truth and Transparency, PUTT. “Plan sponsors are employers, Medicare Part D patients and taxpayers. PBMs are multi-billion dollar corporations pulling money out of the economy when Main Street needs it most,” said Dr. Kenneth Fields, CEO of ApproRx.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
WPI Watson Pharmaceuticals Inc. n/a n/a n/a 0
AFCO American Farmland Company 7.78 -0.03 -0.38 147,830
PFE Pfizer Inc. 31.70 0.76 2.46 29,350,843

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