Pfizer 2013 Annual Report Download - page 114

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
2013 Financial Report 113
Hormone-Replacement Therapy
Pfizer and certain wholly owned subsidiaries and limited liability companies, including Wyeth and King, along with several other
pharmaceutical manufacturers, were named as defendants in approximately 10,000 actions in various federal and state courts alleging
personal injury or economic loss related to the use or purchase of certain estrogen and progestin medications prescribed for women to treat
the symptoms of menopause. Although new actions are occasionally filed, the number of new actions was not significant in the fourth quarter
of 2013, and we do not expect a substantial change in the rate of new actions being filed. Plaintiffs in these suits allege a variety of personal
injuries, including breast cancer, ovarian cancer, stroke and heart disease.
Most of the unresolved actions against Pfizer and/or its affiliated companies have been outstanding for more than five years and could take
many more years to resolve. However, opportunistic settlements could occur at any time. The litigation process is time-consuming, as every
hormone-replacement action being litigated involves contested issues of medical causation and knowledge of risk. Even though the vast
majority of hormone-replacement therapy actions concern breast cancer, the underlying facts (e.g., medical causation, family history, reliance
on warnings, physician/patient interaction, analysis of labels, actual, provable injury and other critical factors) can differ significantly from
action to action, and the process of discovery has not yet begun for a majority of the unresolved actions. In addition, the hormone-replacement
therapy litigation involves fundamental issues of science and medicine that often are uncertain and continue to evolve.
As of December 31, 2013, Pfizer and its affiliated companies had settled, or entered into definitive agreements or agreements-in-principle to
settle, more than 99% of the hormone-replacement therapy actions pending against us and our affiliated companies. Since the inception of
this litigation, we recorded aggregate charges in previous years with respect to those actions, as well as with respect to the actions that have
resulted in verdicts against us or our affiliated companies, of approximately $1.7 billion. These charges also include approximately $25 million
for the expected costs to resolve all remaining hormone-replacement therapy actions against Pfizer and its affiliated companies, excluding a
few pending class actions and purported class actions. The approximately $25 million charges are an estimate and, while we cannot
reasonably estimate the range of reasonably possible loss in excess of the amounts accrued for these contingencies given the uncertainties
inherent in this product liability litigation, as described above, additional charges may be required in the future.
Rebif
We have an exclusive collaboration agreement with EMD Serono, Inc. (Serono) to co-promote Rebif, a treatment for multiple sclerosis, in the
U.S. In August 2011, Serono filed a complaint in the Philadelphia Court of Common Pleas seeking a declaratory judgment that we are not
entitled to a 24-month extension of the Rebif co-promotion agreement, which otherwise would have terminated at the end of 2013. We
disagreed with Serono's interpretation of the agreement and believed that we have the right to extend the agreement to the end of 2015. In
October 2011, the court sustained our preliminary objections and dismissed Serono’s complaint. In March 2013, the Superior Court of
Pennsylvania affirmed the decision of the Philadelphia Court of Common Pleas dismissing Serono’s complaint, thereby upholding our right to
extend the Rebif co-promotion agreement to the end of 2015. In May 2013, the Superior Court of Pennsylvania denied Serono’s petition
seeking reconsideration of the decision.
B. Guarantees and Indemnifications
In the ordinary course of business and in connection with the sale of assets and businesses, we often indemnify our counterparties against
certain liabilities that may arise in connection with the transaction or related to activities prior to the transaction. These indemnifications
typically pertain to environmental, tax, employee and/or product-related matters and patent-infringement claims. If the indemnified party were
to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnifications
are generally subject to threshold amounts, specified claim periods and other restrictions and limitations. Historically, we have not paid
significant amounts under these provisions and, as of December 31, 2013, recorded amounts for the estimated fair value of these
indemnifications are not significant.
Pfizer Inc. has also guaranteed the long-term debt of certain companies that it acquired and that now are subsidiaries of Pfizer.
C. Purchase Commitments
As of December 31, 2013, we have agreements totaling $3.4 billion to purchase goods and services that are enforceable and legally binding
and include amounts relating to advertising, information technology services, employee benefit administration services, and potential
milestone payments deemed reasonably likely to occur.
Note 18. Segment, Geographic and Other Revenue Information
A. Segment Information
We regularly review the approach used by management to evaluate performance and allocate resources throughout the company. At the
beginning of our fiscal year 2014, our commercial operations were restructured. Prior to that restructuring, we managed our operations
through four operating segments––Primary Care, Specialty Care and Oncology, Established Products and Emerging Markets, and Consumer
Healthcare. Each operating segment had responsibility for its commercial activities and for certain research and development activities related
to in-line products and IPR&D projects that generally had achieved proof-of-concept. Generally, products were transferred to the Established
Products unit in the beginning of the fiscal year following loss of patent protection or marketing exclusivity.