Pfizer 2007 Annual Report Download - page 17

2007 Financial Report 15
Financial Review
Pfizer Inc and Subsidiary Companies
offset by:
•a decrease in revenues for Norvasc of $1.9 billion in 2007,
primarily due to the loss of U.S. exclusivity in March 2007;
•a decrease in revenues for Zoloft, primarily due to the loss of
U.S. exclusivity in August 2006, of $1.6 billion in 2007;
•a decrease in revenues for Lipitor in the U.S. of $654 million in
2007, primarily due to competitive pressures from generics
among other factors; and
•the one-time reversal of a sales deduction accrual in 2006
related to a favorable development in a pricing dispute in the
U.S. of about $170 million.
In 2007, Lipitor, Norvasc (which lost U.S. exclusivity in March
2007) and Celebrex each delivered at least $2 billion in revenues,
while Lyrica, Viagra, Detrol/Detrol LA, Xalatan/Xalacom and
Zyrtec/Zyrtec D (which lost U.S. exclusivity in January 2008) each
surpassed $1 billion.
Total revenues were $48.4 billion in 2006, an increase of 2%
compared to 2005, primarily due to:
•the solid aggregate performance in our broad portfolio of
patent-protected medicines; and
•the revenues from products launched over the previous three
years,
mostly offset by:
•the loss of U.S. exclusivity on Zithromax in November 2005
and Zoloft in August 2006, which resulted in a collective decline
in revenues of about $2.5 billion for these two products; and
•a decrease in revenues in 2006 by $279 million, or 0.6%,
compared to 2005, due primarily to the strengthening of the
U.S. dollar relative to many foreign currencies, especially the
Japanese yen and the euro, partially offset by the weakening
of the U.S. dollar relative to the Canadian dollar, the total of
which accounted for about 96% of the foreign exchange
impact in 2006.
In 2006, Lipitor, Norvasc, Zoloft and Celebrex each delivered at
least $2 billion in revenues, while Lyrica, Viagra, Detrol/Detrol LA,
Xalatan/Xalacom and Zyrtec each surpassed $1 billion.
Revenues exceeded $500 million in each of 12 countries outside
the U.S. in 2007 and in each of 10 countries outside the U.S. in
2006. The U.S. was the only country to contribute more than
10% of total revenues in each year.
Our policy relating to the supply of pharmaceutical inventory at
domestic wholesalers, and in major international markets, is to
maintain stocking levels under one month on average and to keep
monthly levels consistent from year to year based on patterns of
utilization. We have historically been able to closely monitor
these customer stocking levels by purchasing information from our
customers directly, or by obtaining other third-party information.
We believe our data sources to be directionally reliable, but
cannot verify their accuracy. Further, as we do not control this
third-party data, we cannot be assured of continuing access.
Unusual buying patterns and utilization are promptly investigated.
Rebates reduced revenues, as follows:
YEAR ENDED DEC. 31,
_______________________________________
(BILLIONS OF DOLLARS) 2007 2006 2005
Medicaid and related state
program rebates $0.6 $0.5 $1.3
Medicare rebates 0.4 0.6 0.0
Performance-based contract
rebates 1.9 1.8 2.3
Total $2.9 $2.9 $3.6
The above rebates for 2007 were comparable to 2006 and reflect:
•changes in product mix, such as lower sales of Zoloft and
Norvasc, both of which lost exclusivity in the U.S.,
offset by:
•the impact of our contracting strategies with both government
and non-government entities, among other factors.
Performance-based contracts are with managed care customers,
including health maintenance organizations and pharmacy benefit
managers, who receive rebates based on the achievement of
contracted performance terms for products. Rebates are product-
specific and, therefore, for any given year are impacted by the mix
of products sold. Chargebacks (primarily reimbursements to
wholesalers for honoring contracted prices to third parties)
reduced revenues by $1.6 billion in 2007, $1.4 billion in 2006 and
$1.3 billion in 2005. Chargebacks were impacted by the launch of
certain generic products in 2007, 2006 and 2005 by our Greenstone
subsidiary.
Our accruals for Medicaid rebates, Medicare rebates, performance-
based contract rebates and chargebacks totaled $1.2 billion as of
December 31, 2007.
Revenues by Business Segment
We operate in the following business segments:
•Pharmaceutical
—The Pharmaceutical segment includes products that prevent
and treat cardiovascular and metabolic diseases, central
nervous system disorders, arthritis and pain, infectious and
respiratory diseases, urogenital conditions, cancer, eye disease,
endocrine disorders and allergies.
•Animal Health
—The Animal Health segment includes products that prevent
and treat diseases in livestock and companion animals.
Total Revenues by Business Segment
93.2%93.4%91.8%
4.8% 2.0%4.6%2.0%
5.4%2.8%
2006 20052007
PHARMACEUTICAL ANIMAL HEALTH CORPORATE/OTHER