Pfizer 2009 Annual Report Download - page 91

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
17. Lease Commitments
We lease properties and equipment for use in our operations. In addition to rent, the leases may require us to pay directly for taxes,
insurance, maintenance and other operating expenses or to pay higher rent when operating expenses increase. Rental expense, net
of sublease income, was $364 million in 2009, $370 million in 2008 and $398 million in 2007. This table shows future minimum
rental commitments under non-cancelable operating leases as of December 31 for the following years:
(MILLIONS OF DOLLARS) 2010 2011 2012 2013 2014
AFTER
2014
Lease commitments $266 $183 $144 $119 $97 $890
18. Insurance
Our insurance coverage reflects market conditions (including cost and availability) existing at the time it is written, and our decision
to obtain insurance coverage or to self-insure varies accordingly. Depending upon the cost and availability of insurance and the
nature of the risk involved, the amount of self-insurance may be significant. The cost and availability of coverage have resulted in
self-insuring certain exposures, including product liability. If we incur substantial liabilities that are not covered by insurance or
substantially exceed insurance coverage and that are in excess of existing accruals, there could be a material adverse effect on our
results of operations in any particular period (see Note 19. Legal Proceedings and Contingencies).
19. Legal Proceedings and Contingencies
We and certain of our subsidiaries are involved in various patent, product liability, consumer, commercial, securities, environmental
and tax litigations and claims; government investigations; and other legal proceedings that arise from time to time in the ordinary
course of our business. We do not believe any of them will have a material adverse effect on our financial position.
Beginning in 2007 upon the adoption of a new accounting standard, we record accruals for income tax contingencies to the extent
that we conclude that a tax position is not sustainable under a “more likely than not” standard and we record our estimate of the
potential tax benefits in one tax jurisdiction that could result from the payment of income taxes in another tax jurisdiction when we
conclude that the potential recovery is more likely than not (see Note 1P. Significant Accounting Policies: Income Tax
Contingencies). We record accruals for all other contingencies to the extent that we conclude their occurrence is probable and the
related damages are estimable, and we record anticipated recoveries under existing insurance contracts when assured of recovery.
If a range of liability is probable and estimable and some amount within the range appears to be a better estimate than any other
amount within the range, we accrue that amount. If a range of liability is probable and estimable and no amount within the range
appears to be a better estimate than any other amount within the range, we accrue the minimum of such probable range. Many
claims involve highly complex issues relating to causation, label warnings, scientific evidence, actual damages and other matters.
Often these issues are subject to substantial uncertainties and, therefore, the probability of loss and an estimation of damages are
difficult to ascertain. Consequently, we cannot reasonably estimate the maximum potential exposure or the range of possible loss in
excess of amounts accrued for these contingencies. These assessments can involve a series of complex judgments about future
events and can rely heavily on estimates and assumptions (see Note 1C. Significant Accounting Policies: Estimates and
Assumptions). Our assessments are based on estimates and assumptions that have been deemed reasonable by management.
Litigation is inherently unpredictable, and excessive verdicts do occur. Although we believe we have substantial defenses in these
matters, we could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on our
results of operations in any particular period.
Patent claims include challenges to the coverage and/or validity of our patents on various products or processes. Although we
believe we have substantial defenses to these challenges with respect to all our material patents, there can be no assurance as to
the outcome of these matters, and a loss in any of these cases could result in a loss of patent protection for the drug at issue, which
could lead to a significant loss of sales of that drug and could materially affect future results of operations.
Among the principal matters pending to which we are a party are the following:
A. Patent Matters
Like other pharmaceutical companies, we are involved in numerous suits relating to our patents, including but not limited to those
discussed below. Most of the suits involve claims by generic drug manufacturers that patents covering our products, processes or
dosage forms are invalid and/or do not cover the product of the generic manufacturer. Also, counterclaims as well as various
independent actions have been filed claiming that our assertions of, or attempts to enforce, our patent rights with respect to certain
products constitute unfair competition and/or violations of the antitrust laws. In addition to the challenges to the U.S. patents on a
number of our products that are discussed below, we note that the patent rights to certain of our products, including without limitation
Lipitor, are being challenged in various other countries.
Lipitor (atorvastatin)
In November 2008, Apotex Inc. (Apotex) notified us that it had filed an abbreviated new drug application with the U.S. Food and
Drug Administration (FDA) seeking approval to market a generic version of Lipitor. Apotex asserts the invalidity of our enantiomer
patent, which (including the six-month pediatric exclusivity period) expires in June 2011, and the non-infringement of certain later-
expiring patents. In December 2008, we filed suit against Apotex in the U.S. District Court for the District of Delaware and the U.S.
District Court for the Northern District of Illinois asserting the validity and infringement of the enantiomer patent. In August 2009, our
action in the District of Delaware was transferred to the Northern District of Illinois and consolidated with our pending action there.
2009 Financial Report 89