Pfizer Trying to Hold on to Lipitor As Patent Expires

Pfizer Trying to Hold on to Lipitor As Patent Expires [the Day, New London, Conn.]

From Day, The (New London, CT) (November 30, 2011)

Nov. 30--Pfizer Inc. may be losing patent protection today on Lipitor, which has generated more than $100 billion in sales for the company over the past decade, but the pharmaceutical giant isn't giving up its franchise without a fight.

The New York-based Pfizer, which has its largest worldwide research contingent in Groton, already has arranged deals with pharmacy benefit managers -- who arrange deals between drug companies and insurers -- that would keep patients on Lipitor, but at discounts compared to how much Pfizer could charge in the past for the cholesterol-lowering blockbuster medicine.

Members of Congress have questioned the various Pfizer discounts and incentives, worried that patients will still be spending more than they should.

But Wall Street analysts see the arrangements as smart business moves that will extend the life of the brand for at least six months, until other generic drug makers besides Ranbaxy Laboratories -- which has exclusive rights to sell a generic version -- are allowed to introduce their own versions of the medicine.

"Taking steps to slow the erosion to generics...makes sense to the extent you can do it," said Les Funtleyder, a healthcare analyst and portfolio manager for Miller Tabak and Co. in New York City.

For the uninsured, Lipitor costs about $115 to $160 a month, depending on its dosage. Generic Lipitor, known as atorvastatin, costs 30 percent to 50 percent less. Typically, brand-name drugs face one or two generic competitors initially. Six months later other generic companies are allowed to offer their versions, resulting in even steeper price drops.

The Sanford Bernstein investment house has estimated that Pfizer can make a profit of roughly $100 -- compared with about $225 before generic competition -- for a 90-day supply of Lipitor, even after various rebates and discounts. That's partly because administrative and advertising costs will decline. Lipitor's peak annual sales reached $13 billion, although it still generates $10 billion or more in sales annually.

Funtleyder and drug-industry analyst Linda Bannister of Edward Jones in St. Louis, Mo., said Pfizer executives have done a good job in managing the company's loss of patent exclusivity for Lipitor, which accounts for about 16 percent of the firm's drug sales. Lipitor had provided about 25 percent of Pfizer sales before the company's acquisition of Wyeth Pharmaceuticals two years ago.

The drastic steps required to compensate for the loss of a $10 billion blockbuster have been more than unsettling. Thousands of Pfizer employees have been laid off worldwide in the past few years, including about 20,000 in the past two years alone and an estimated 1,100 locally by the middle of next year, while research-and-development costs will be slashed by well over $2 billion on an annual basis by the end of next year compared with R&D costs in 2010.

As Bannister said, "The party is coming to an end."

Both Bannister and Funtleyder said acquiring Lipitor through the $90 billion acquisition of Warner-Lambert in 2000 turned out to be in Pfizer's favor, though subsequent mergers with Pharmacia and Wyeth were more problematic.

A recent opinion piece in the Harvard Business Review, however, questions whether Lipitor was good for Pfizer, despite the billions it meant for the company's bottom line.

"Pfizer failed to innovate on its own," said Christopher Bowe, a blogger for the review. "In an industry where the key rationale for high prices for branded drugs is that they fund innovations, the failure to fully leverage Lipitor for the long-term health of the company leaves surprising questions."

Bowe pointed out that Pfizer's stockholders also did not see the value of Lipitor, as the company's share price has dropped nearly 60 percent from highs seen only a few months after the Warner-Lambert purchase. According to Bowe's reading of company history, big money from Lipitor didn't compensate for a shift of culture at the previously spry, innovative Pfizer, which became weighed down under a pile of Lipitor-derived cash and, according to some critics, too many layers of management.

"Pfizer was a much different company than it is today: smaller, intensely aspirational, and fighting a mild inferiority complex over the then-vaunted Merck," Bowe said. "(G)etting bigger through mega-mergers has not proven to make big pharma companies better at their core task: producing innovative new products."

But analysts say that's just what Pfizer must do over the next year or two if it wants to regain its status as not only the world's leading seller of pharmaceutical products -- it is expected to lose the No. 1 ranking next year -- but also as one of the world's most innovative companies.

"It's about the pipeline," Bannister said. "At the end of the day, that's what matters."

Pfizer has several products in its mid- to late-stage pipeline, including drugs targeting rheumatoid arthritis, cancer and Alzheimer's disease, which could contribute to a turnaround. According to one recent analysis by Brian L. Wilson of Hyperion Capital Research, Pfizer has 25 products in late-stage clinical trials and is seeking regulatory approval for 10 new drug treatments.

The company also is looking into the possibility of marketing Lipitor as an over-the-counter drug, which could boost sales and reduce generic competition.

"Pfizer is certainly in trouble with the Lipitor expiration but has a host of drugs that could make up for the lost revenue," according to Wilson's analysis.

Some in the industry wonder if any drug will ever reach Lipitor's pinnacle $10 billion-plus in annual sales, and if the era of the mega-blockbuster medication is over.

More likely, according to analyst Funtleyder, Pfizer will be able to develop "niche blockbusters" -- addressing diseases affecting a relatively small but easily identifiable group -- in the $1 billion range. There are opportunities in other areas that could threaten Lipitor's hold on the top-selling medication of all time, he added.

"If somebody came up with a drug for Alzheimer's, that could be a $10 billion drug," he said. "But $10 billion opportunities are small."

l.howard@theday.com

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(c)2011 The Day (New London, Conn.)

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Posted: November 2011


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