Pfizer Pushes to Keep Lipitor Profits Flowing

Efforts to preserve the lucrative franchise spark an antitrust suit

   

Pfizer Pushes to Keep Lipitor Profits Flowing

California pharmacies have called a foul on Pfizer (NYSE:PFE), alleging the world’s largest drugmaker has gone too far in an all-out assault to preserve its valuable Lipitor franchise. The cholesterol-lowering treatment, the biggest-selling medicine in the world, loses its patent protection Nov. 30.

Earlier this week, drug dispensers from California sued Pfizer and Ranbaxy Laboratories, the Indian company that has exclusive rights to sell a copycat version of the drug. In an antitrust complaint, the pharmacies contend the two companies put together a patent settlement that kept generic Lipitor off the market in the U.S. in exchange for an earlier launch of copies in foreign markets.

Although Pfizer dismissed the suit as having no merit, it’s clear the drug giant is pulling out all the stops in an effort to keep the Lipitor money train rolling for as long as possible. And the company seems to be doing a pretty good job at it.

In reporting third-quarter results on Nov. 1, Pifzer said sales of Lipitor rose 3% to $2.6 billion during the three-month period. A sales gain of 13% U.S. offset declines in other countries where the drug already faces generic competition. Pfizer is trading just under $20, not far from its one-year high of $21.45.

“We’re going to do our best to enable the maximum number of individuals to stay on the brand they’ve come to know and trust,” Pfizer Chief Executive Ian Read said in an interview, according to the Wall Street Journal.

Toward that end, last year Pfizer started offering cards to patients that lower insurance co-pays to $4 a month for a Lipitor prescription. The company will continue offering the co-pay cards after Nov. 30. Also, Pfizer has started a “Lipitor for You” program, which includes the $4 co-pay card, the option to receive direct delivery of the prescription and periodic emails with health information and reminders to refill Lipitor prescriptions. The program, which is also available to patients without insurance, will last through December 2012, according to a Pfizer website.

Pfizer also has negotiated deals with drug-benefit plans so the plans aren’t “disadvantaged” by continuing to pay for branded Lipitor, compared with reimbursing for generic versions, said CEO Read.

Some industry observers have found Pfizer’s tactics questionable. They think the company is undercutting efforts to control health care costs, contending that the rising use of co-pay cards has forced drug-benefit plans to reimburse for brand-name drugs instead of cheaper generic copies.

But competition is inevitable. An authorized generic version of Lipitor from Watson Pharmaceuticals (NYSE:WPI) and a competing generic from Ranbaxy are expected to be first to market. A host of generic manufacturers is expected to enter the fray in the following six months, pushing down generic prices further and cutting deeper into Pfizer’s sales of branded Lipitor.

To help ease the losses, Pfizer has an over-the-counter version of Lipitor on its wish list. The company has been talking with the FDA about an OTC version, but it appears the earliest such a product could hit the market is after 2012, and even then it’s far from a slam dunk. On several occasions the FDA rejected attempts by Merck (NYSE:MRK) to sell an OTC version of its cholesterol drug Mevacor because of concerns about patients’ ability to make the right decision about whether to use such a product.

As of this writing, Barry Cohen is long PFE and MRK.


Article printed from InvestorPlace Media, http://investorplace.com/2011/11/pfizer-lipitor-generics-ranbaxy/.

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