Pfizer 2013 Annual Report Download - page 106

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
2013 Financial Report 105
Note 17. Commitments and Contingencies
We and certain of our subsidiaries are subject to numerous contingencies arising in the ordinary course of business. For a discussion of our
tax contingencies, see Notes to Consolidated Financial Statements––Note 5D. Tax Matters: Tax Contingencies.
A. Legal Proceedings
Our non-tax contingencies include, among others, the following:
• Patent litigation, which typically involves challenges to the coverage and/or validity of our patents on various products, processes or
dosage forms. We are the plaintiff in the vast majority of these actions. An adverse outcome in actions in which we are the plaintiff could
result in a loss of patent protection for the drug at issue, a significant loss of revenues from that drug and impairments of any associated
assets.
• Product liability and other product-related litigation, which can include personal injury, consumer, off-label promotion, securities-law,
antitrust and breach of contract claims, among others, often involves highly complex issues relating to medical causation, label warnings
and reliance on those warnings, scientific evidence and findings, actual, provable injury and other matters.
• Commercial and other matters, which can include merger-related and product-pricing claims and environmental claims and proceedings,
can involve complexities that will vary from matter to matter.
• Government investigations, which often are related to the extensive regulation of pharmaceutical companies by national, state and local
government agencies in the U.S. and in other countries.
Certain of these contingencies could result in losses, including damages, fines and/or civil penalties, and/or criminal charges, which could be
substantial.
We believe that our claims and defenses in these matters are substantial, but litigation is inherently unpredictable and excessive verdicts do
occur. We do not believe that any of these matters will have a material adverse effect on our financial position. However, we could incur
judgments, enter into settlements or revise our expectations regarding the outcome of certain matters, and such developments could have a
material adverse effect on our results of operations in the period in which the amounts are accrued and/or our cash flows in the period in which
the amounts are paid.
We have accrued for losses that are both probable and reasonably estimable. Substantially all of our contingencies are subject to significant
uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss can be complex. Consequently, we are
unable to estimate the range of reasonably possible loss in excess of amounts accrued. Our assessments are based on estimates and
assumptions that have been deemed reasonable by management, but the assessment process relies heavily on estimates and assumptions
that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those
estimates and assumptions.
Amounts recorded for legal and environmental contingencies can result from a complex series of judgments about future events and
uncertainties and can rely heavily on estimates and assumptions.
The principal pending matters to which we are a party are discussed below. In determining whether a pending matter is a principal matter, we
consider both quantitative and qualitative factors in order to assess materiality, such as, among other things, the amount of damages and the
nature of any other relief sought in the proceeding, if such damages and other relief are specified; our view of the merits of the claims and of
the strength of our defenses; whether the action purports to be a class action and our view of the likelihood that a class will be certified by the
court; the jurisdiction in which the proceeding is pending; any experience that we or, to our knowledge, other companies have had in similar
proceedings; whether disclosure of the action would be important to a reader of our financial statements, including whether disclosure might
change a reader’s judgment about our financial statements in light of all of the information about the Company that is available to the reader;
the potential impact of the proceeding on our reputation; and the extent of public interest in the matter. In addition, with respect to patent
matters, we consider, among other things, the financial significance of the product protected by the patent. As a result of considering
qualitative factors in our determination of principal matters, there are some matters discussed below with respect to which management
believes that the likelihood of possible loss in excess of amounts accrued is remote.
A1. Legal Proceedings––Patent Litigation
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 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 are being challenged in various other countries.
Viagra (sildenafil)
We and Teva Pharmaceuticals USA, Inc. (Teva USA) entered into an agreement to settle our patent-infringement action against Teva USA with
respect to the Viagra use patent, which expires in 2020 (including the 6-month pediatric exclusivity period resulting from the Company’s
conduct of clinical studies to evaluate Revatio in the treatment of pediatric patients with pulmonary arterial hypertension; Viagra and Revatio
have the same active ingredient, sildenafil). The settlement became effective upon the satisfaction of certain conditions, including court
approval, in December 2013. As a result of the settlement, Teva USA will be allowed to launch a generic version of Viagra in the U.S. in
December 2017, or earlier under certain circumstances. Teva USA will pay a royalty to us for a license to produce its generic version of Viagra.