By JONATHAN D. ROCKOFF
Goodbye, Lipitor. Pfizer Bids a Farewell
Farewell after all, Lipitor.
[Also see: "Pfizer's Lipitor Co-pay Card/PBM Discount Plan Fails
Pfizer Inc. conducted an intriguing experiment in brand marketing this year, aggressively pushing the cholesterol-fighting drug Lipitor in the U.S. even after its patent expired on Nov. 30.
But after spending more than $87 million promoting the medicine, the world's biggest drug company is quietly giving up on its once-great cash cow for good because more generic versions will soon be going on sale.
Pfizer officials told The Wall Street Journal that the company is no longer negotiating new contracts to sell Lipitor to health plans, which are signing up to sell generic versions at far lower prices. The company recently stopped sending sales representatives to promote Lipitor to doctors and halted advertising in print, on television and online, which once commanded a $271.9 million yearly budget.
"The environment, in general, is going to be much more hostile" to selling Lipitor at the levels Pfizer has, said Albert Bourla, who runs the business that sells Lipitor and other Pfizer medicines that have lost U.S. patent protection.
Lipitor, which at its peak generated $12.9 billion in annual sales for Pfizer, began facing generic competition as soon as its patent expired in late November. Typically a drug maker would have given up on marketing a medicine once cheaper rivals entered the market. But Pfizer sought to wring as much revenue from Lipitor as it could for as long as it could while generic competition was still in its infancy, with the help of heavy marketing, promotions and price rebates.
How long Pfizer would keep it up has been an open question. Pfizer officials say they consider the plan a success, and the drug held onto about 33% market share and brought in $383 million in the U.S. in the first quarter. But now they say the company can't expect the returns to continue beyond May 31, when Lipitor will face a new wave of additional generics and prices are expected to plummet.
The move in many ways marks the end of a chapter for the New York-based pharmaceutical company. Lipitor, known generically as atorvastatin, once accounted for a quarter of Pfizer's revenue and made it the world's biggest drug maker by sales. But like many facing a so-called patent cliff as blockbuster drugs encounter cheap competition, the drug company must focus on new avenues for growth. For its next act, Pfizer has been trying to reshape itself into a leaner company.
Pfizer is restructuring operations in its New York headquarters to cut costs, and agreed last month to sell its infant-nutrition business to Nestlé SA NESN.VX -0.55% for $11.85 billion as part of efforts to focus on medicines. The company is also planning to divest its animal-health unit.
To grow, the company must count on increasing sales of products like the pneumococcal vaccine Prevnar 13, greenlighted late last year for adults ages 50 years and older, and approvals of new medicines. In an 8-2 vote Wednesday, a panel of experts advising the Food and Drug Administration recommended approval of Pfizer's tofacitinib pill for rheumatoid arthritis.
Yet Credit Suisse analyst Catherine Arnold said Pfizer might still be too big for the cost-cutting and launches of new drugs like tofacitinib to have a significant effect. "It takes so much to move the needle, so they really need to" do things like buy back more shares, Ms. Arnold said.
Pfizer said it purchased $9 billion in shares last year and plans another $5 billion in buybacks this year.
Pfizer's post-expiry plan will likely encourage other companies to follow the strategy, said Ben Weintraub, director of Research at Wolters Kluwer inThought, a pharmaceutical and financial services consulting firm. "It's helped them hang on to additional volume compared to other generic erosions," he said.
In its effort to wring more sales out of Lipitor, Pfizer spent a total of more than $87 million on advertising, doctor marketing and samples since it lost patent protection Nov. 30, according to Cegedim Strategic Data. Also, the company arranged to mail pills directly to homes and, starting in December 2010, signed up 750,000 patients who would get as much as $50 from Pfizer to cover all but $4 of co-pays.
"It's the $4 coupon that kept brand utilization higher than what you'd normally see," said Martin Burruano, director of pharmacy at Independent Health, a health plan in western New York state. By the end of March, 12% of its 10,000 atorvastatin patients were still taking the brand, even though the plan tried to encourage members to choose the generic by giving it a lower co-pay.
Greg Reeder, who oversaw Lipitor's U.S. marketing, credits Pfizer's ability to maintain market share to the targeted help that the company offered to patients who wanted to stay on the brand. For instance, patients could call a toll-free hotline if they were having trouble while at their pharmacy trying to buy a new supply of Lipitor.
Pfizer says it cut the price of Lipitor to compete with generics, and by offering the price rebates, reached deals with 50 health plans that agreed to sell Lipitor instead of a generic version. The median price of a generic is $2.89 per 10-milligram tablet, down from $3.36 that a branded tablet cost a year earlier, according to DRX, Inc., a health-care pricing technology firm.
Independence Blue Cross, in the Philadelphia area, had assigned Lipitor its lowest, $14 co-pay for the first six months after limited generics entered the market. But after that first 180 days, when more generics will be allowed to enter the market, the plan will give that preferred status to a generic starting June 1 and Lipitor's co-pay will rise to about $45.
Eric Estes, senior director of pharmacy services at the Philadelphia-area health plan, expects that more than 90% of its 11,000 members taking atorvastatin will switch to a generic by the end of the year.
Pfizer says it will still try to hold on to any Lipitor patients willing to pay more out of pocket for the drug, and last week, it raised its offer of co-pay help to as much as $75 from $50. The company will continue to push the drug in emerging markets like China, where the company sees opportunities for multibillion dollar sales.
Write to Jonathan D. Rockoff at email@example.com