Pfizer 2013 Annual Report Download - page 19

Financial Review
Pfizer Inc. and Subsidiary Companies
18
2013 Financial Report
Total revenues were $54.7 billion in 2012, a decrease of 10% compared to 2011, which reflects an operational decline of $5.0 billion, or 8%.
The operational decrease was primarily the result of:
• erosion of branded Lipitor in the U.S., developed Europe and certain other markets (approximately $5.6 billion);
• the loss of exclusivity for Geodon in March 2012 in the U.S (approximately $645 million); and
• other product losses of exclusivity (approximately $1.4 billion),
partially offset by:
• the growth of certain products, including Lyrica, Enbrel, Benefix, Inlyta, Celebrex, Xalkori and Zyvox (approximately $1.3 billion) in
developed markets;
• the overall growth of the Emerging Markets business unit (approximately $1.2 billion); and
• the overall growth in the Consumer Healthcare business unit (approximately $241 million).
In addition, Revenues were unfavorably impacted by foreign exchange by approximately $1.3 billion, or 2% in 2012 compared to 2011.
In 2013, Lyrica, the Prevnar family, Enbrel, Celebrex and Lipitor each delivered at least $2 billion in revenues, while Viagra, Zyvox, Norvasc,
Sutent and the Premarin family each delivered over $1 billion in revenues. Viagra lost exclusivity in most major EU markets in June 2013. We
lost exclusivity for Lyrica in Canada in February 2013. Lipitor has lost exclusivity in all major markets.
In 2012, Lyrica, the Prevnar family, Lipitor, Enbrel, Celebrex and Viagra each delivered at least $2 billion in revenues, while Norvasc, Zyvox,
Sutent and the Premarin family each surpassed $1 billion in revenues.
In 2011, Lipitor, Lyrica, Enbrel, the Prevnar family and Celebrex each delivered at least $2 billion in revenues, while Viagra, Norvasc, Zyvox,
Xalatan/Xalacom (Xalatan lost exclusivity in the U.S. in March 2011; Xalatan and Xalacom lost exclusivity in the majority of European
countries in January 2012), Sutent, Geodon/Zeldox (Geodon lost exclusivity in the U.S. in March 2012), and the Premarin family each
surpassed $1 billion in revenues.
Revenues exceeded $500 million in each of 12, 14 and 16 countries outside the U.S. in 2013, 2012 and 2011, respectively. The U.S. is our
largest national market, comprising 39% of total revenues in both 2013 and 2012, and 41% of total revenues in 2011. Japan is our second-
largest national market, with approximately 10%, 12% and 10% of total revenues in 2013, 2012 and 2011, respectively.
Our policy relating to the supply of pharmaceutical inventory at domestic wholesalers, and in major international markets, is to generally
maintain stocking levels under one month on average and to keep monthly levels consistent from year to year based on patterns of utilization.
We historically have 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.
As is typical in the biopharmaceutical industry, our gross product sales are subject to a variety of deductions that generally are estimated and
recorded in the same period that the revenues are recognized and primarily represent rebates and discounts to government agencies,
wholesalers, distributors and managed care organizations with respect to our pharmaceutical products. These deductions represent estimates
of the related obligations and, as such, judgment and knowledge of market conditions and practice are required when estimating the impact of
these sales deductions on gross sales for a reporting period. Historically, our adjustments to actual results have not been material to our
overall business. On a quarterly basis, our adjustments to actual results generally have been less than 1% of biopharmaceutical net sales and
can result in either a net increase or a net decrease in income. Product-specific rebate charges, however, can have a significant impact on
year-over-year individual product growth trends.
The following table provides information about certain deductions from revenues:
Year Ended December 31,
(MILLIONS OF DOLLARS) 2013 2012 2011
Medicaid and related state program rebates(a) $508 $853 $1,197
Medicare rebates(a) 887 741 1,410
Performance-based contract rebates(a), (b) 2,117 1,852 3,179
Chargebacks(c) 3,569 3,648 3,212
Sales allowances(d) 4,395 4,525 4,573
Total $11,476 $11,619 $13,571
(a) Rebates are product-specific and, therefore, for any given year are impacted by the mix of products sold.
(b) Performance-based contract rebates include contract rebates with managed care customers within the U.S., including health maintenance organizations and
pharmacy benefit managers, who receive rebates based on the achievement of contracted performance terms and claims under these contracts. Outside of the
U.S., performance-based contract rebates include rebates to wholesalers/distributors based on achievement of contracted performance for specific products or
sales milestones.
(c) Chargebacks primarily represent reimbursements to wholesalers for honoring contracted prices to third parties.
(d) Sales allowances primarily represent pharmaceutical rebates, discounts and price reductions that are contractual or legislatively mandated outside of the U.S.