Pfizer
Phase III evaluates how effective the drug is, it has to run on large number of people (300-3000). The last phase is called Post Marketing Surveillance trial. It ensures the safety of the new drug even after marketing; it can determine any rare or long term side effects.
Pfizer Incorporated is the world’s largest research based biomedical and pharmaceutical company; its main headquarter is located in Brooklyn, New York.3 Pfizer products are in cardiovascular and metabolic diseases, central nervous system disorders, arthritis and pain, infectious and respiratory diseases, urology, oncology, ophthalmology, and endocrine disorders. Pfizer ranks number one in the world and USA in sales. Its global sales were $44.4 billion and US sales were $23.5 billion in 2007.
It produces the number one selling drug Lipitor that achieved $12.7billion in sales which represented 28.4% of 2007 revenues. Lipitor (atorvastatin) is one of statins class that used to lower blood pressure.
Pfizer has seven top drugs that are the main source of its huge revenue; they are Lipitor, Norvasc, and Celebrex. Each delivered at least $2 billion in revenues while Lyrica, Viagra, Detrol/Detrol LA, Xalatan/Xalacom and Zyrtec/Zyrtec D each got $1 billion in 2007. Those seven drugs represent 58% of the total revenues.
There are many companies in the pharmaceutical industry that compete with each other.
The top ten companies that rival with Pfizer for first place are
· GlaxoSmithKline
· Merck
· Johnson & Johnson
· AstraZeneca
· Amgen
· Novartis
· Hoffman-Laroche
· Sanofi-Aventis
· Lilly
· Bristol-Myers Squib4
Pfizer, the world’s largest pharmaceutical company implemented IT infrastructure to be the best and the leader in the pharmaceutical industry. In the following section, we will discuss three types of information technology Pfizer has implemented, Groove technology, virtualization technology and RFID.
The IT department at Pfizer is using Groove Technology with Pharmacia Corporation which was merged with Pfizer. Groove technology is collaborative software to connect IT departments together and to manage departmental projects. By Groove application, IT departments are operating to be integrated and functioning as a one big department. Groove uses remote relay server to store documents, data and messages. Employee should have an account to log on the server to access and share documents with others. Teams can work together from different departments, share information and documents, and in the same time they don’t need to worry about the security of exchanging those information. “Groove's peer-to-peer architecture eliminates many of the headaches of setting up a secure, server-based collaboration application, so users don't have to worry about synchronizing data and checking documents in and out.” Said Courville the senior director of Pfizer's IT leadership team.5
Pfizer is using another technology called VMware’s virtualization technology to make server integration which has achieved a big reduction in the operating cost. Pfizer implemented VMware’s virtualization technology to reduce the errors that resulted from using many servers. Integrating servers help Pfizer to reduce the maintenance costs (operation, maintenance, and troubleshooting) for each server, shrink data center space and decrease fixed assets. The HP Server Virtualization VM solution enables Pfizer to improve server utilization, respond to changes in business quickly, maintain better control over utilization of resources, and access critical application during downtime. 6
Pfizer is using radio-frequency identification (RFID) to monitor drug movement till it reach to wholesalers and pharmacists. The Food and Drug Adminstration (FDA) recommends using of RFID technology to guarantee the safety and authenticity of drugs in the United States. By using RFID, Pfizer can track their drugs to get to the correct destinations. Pfizer is collaborating with SupplyScape through SupplyScape's RxAuthentication Service which is an online server; pharmacists and wholesalers have to subscribe to this website. After a pharmacist or a wholesaler receive Pfizer’s product, each one use an RFID interrogator that is linked to RxAuthentication Service to be able to read the drug tag. The RxAuthentication Service’s role is to check if this drug is produced by Pfizer or not. RFID aids Pfizer to reinforce its supply chain globally and keep patients safe by preventing any counterfeiting drugs from reaching them. "Pfizer is taking a leading role in attacking counterfeit and diversion threats to the drug supply chain to ensure patient safety," says Shabbir Dahod, founder and chairman of SupplyScape. 8
PORTER’S FIVE FORCES ANALYSIS
Buyer Bargaining Power (Low-medium)
There is little bargaining power for individuals who end up consuming the drugs because there are few alternatives for any specific drug and the individuals cannot form any unions or movements which may gain some bargaining power.
Pharmacies also have little bargaining power because they merely sell what the individuals demand especially when the product is recommended by a doctor. However, HMO’s and other health insurance agencies have significant amounts of bargaining power because they can choose not to subsidize certain drugs (deeming them unnecessary) or they can subsidize certain drugs more than others. Often a HMO will have a partnership with certain companies to favor that company’s drugs9. Insurance carriers set pricing and dictate which drugs their plan covers putting downward pressure on drug pricing and at least partly forcing pharmaceutical firms to conform to the level of reimbursement mandated by the institutional buyers.
Supplier Bargaining Power (Low)
Chemical plants and material suppliers such as Aldrich have very little bargaining power. Prior to the expiration of a patent, the cost of actually producing a brand name drug is very low compared to the retail price of the drug, as seen in the many-fold drop in price when a comparable generic is released. Even when a generic drug is released, there are still a number of suppliers to choose from; the resources required to produce the pharmaceuticals are not restricted to a limited set of suppliers, they are often commodity inputs10.
Pfizer for security, integration, and quality control reasons often owns part of its suppliers.
Individual scientists that work for a pharmaceutical company such as Pfizer have very little bargaining power since they sign away the intellectual rights to any discovered product while working for the company.
However, if a group of scientists independently, either in an institution or small company, make a discovery, that institution or company can have a potentially large amount of bargaining power for that discovery.
The institution will often license the right to the discovery while small companies often merge with the buyer.
Threat of New Entrants (low)/Barriers to Entry (High)
There are a number of barriers to entry, which is what contributes to making the pharmaceutical industry and the biotech pipeline very profitable. However, these high profits are what drive entry, which is made all the more attractive if there is a good product.
With a specific type of drug already on the market, a competitor will need time to research and develop its own version of that drug and patent any technological advances that arise during this phase. It also requires a talented group of lawyers to create the patents and be prepared to litigate in order to enforce them11.
In addition, the competitor will need to prove to doctors, hospitals, and health care professionals that the product is as good, if not better, than the original product.
With regards to a new type of drug, a company first needs a marketable product, which means either a successful and large research and development team, or quite a bit of serendipity. A large amount of capital ($800 million on average to bring a drug into the market) and time are necessary to take the drug from its conceptual stage to the final production and distribution. This includes animal and human testing, passing government regulations (FDA approval), and convincing people that the product is both effective and necessary11.
In addition, existing pharmaceutical companies can lobby the government against new entrants to make it more difficult to gain access to the drug market. Pfizer has one of the largest lobbying arms in the industry today and should be able to exercise this muscle further to keep entrants out.
A new entrant lacks the strong brand name and reputation, as well as the necessary connections that could help to facilitate this process and reduce cost. They also lack the economies of scale and distribution networks already in place for existing players in the industry.
Again, the company will require a group of lawyers to protect this novel drug from encroachment.
Effect of Substitutes and complements
Substitutes (Medium-High)
When a drug is in its period of exclusivity, there aren’t (by definition) many viable substitutes. Once the period of exclusivity has ended, there are a variety of substitutes as generic drugs come into the picture. Prolonging this exclusivity period then is a desirable strategy to keep a pharmaceutical company profitable.
Complements (High)
For a specific drug, the main complement is whatever the drug is designed to treat, prevent, or cure, whether it is a disease, an illness, an injury, or a side effect caused by another drug.
If the health issue is capable of mutation, the complements can include related drugs since an increase in a drug’s usage could lead to immunity to that particular drug, resulting in the increased usage of a related drug (e.g. the high turnaround time associated with AIDS and cancer drugs)12.
In general, complements also include well-educated doctors, favorable government policies (thus the necessity for strong lobbying), and insurance companies including Medicare.
Rivalry (medium)
For a drug that is within its period of exclusivity, the company that distributes it can exercise monopoly pricing since it is the only drug available to treat a certain condition.
This patent tends to reduce competition between pharmaceutical industries during this phase. However, companies can try to subvert the patent law by developing a similar drug to treat the health condition that goes about the problem in a different manner; this will undercut the monopoly and increase the rivalry between the companies. Patents offer monopoly pricing once approved by the FDA, bur rival firms can re-engineer therapies to get around patents and enter market (e.g. Eli Lilly exploring other mechanisms to break into erectile dysfunction market currently owned by Viagra (Pfizer).
Several companies have prescription drugs in a specific category such as second generation painkillers or prescription stomach acid reducing drugs – these products can usually be substituted with one another, increasing the rivalry in this market. Several conditions have multiple players in the same market that are relatively substitutable (e.g. Claritin and Allegra) 12.
Price competition is not particularly strong in this industry due to pressure from insurance companies and government regulation. Price cutting will not increase revenues or units sold significantly because each drug possesses a unique set of attributes, i.e. targets and side effects. In general, such drugs are prescribed by physicians who will not factor price into their decision of which drug a patient should receive.
In addition, a number of companies can have the same type of drugs in development. For highly publicized types of drugs, such as those designed to cure AIDS, this increases the rivalry, as it soon becomes a race to whoever can patent the drug first.
Pfizer competitive advantage and role of Strategic Information Systems (SIS)
Investing on ongoing research, always be the first
For Pfizer to maintain its competitive advantage it has to protect and control sensitive information regarding its research and development according to Steve Nyman, director of information security at Pfizer Inc. in charge of protecting the research, chemical formulations and financial information at the $35 billion research-based pharmaceutical company. The company's portfolio also includes eight $1 billion prescription medicines, including arthritis medicine Celebrex, the antidepressant Zoloft, Zithromax, an oral antibiotic, and probably Pfizer's most talked-about drug, Viagra, for erectile dysfunction. With that kind of financial, market-share and research power under its belt, Pfizer's most valued commodity is easily its information. And safeguarding relies on strategic information systems13. Pfizer spends 4.7 billion dollars in research and development every year and safeguarding your innovations relies on the use of secure technology.
Market dominance-Skimming strategy, Information quality and large sales force
Pfizer Inc is using Ardent(TM) DataStage(R) to build a fully-integrated business intelligence infrastructure for its U.S. Pharmaceuticals Group. The infrastructure will help the leading pharmaceutical company maintain its competitive advantage by allowing decision-makers in Pfizer's U.S. Pharmaceuticals Group to obtain the most up-to-date information on marketing and sales trends, enabling them to make informed decisions based on customers' purchasing habits. Pfizer's U.S. Pharmaceuticals Group executives require immediate access to data to gain a complete understanding of product profitability and emerging market trends in the pharmaceutical industry13. As Pfizer continues to grow at an unprecedented rate, Ardent DataStage will provide a comprehensive data integration solution allowing executives in the group to make faster and more informed business decisions based on quality enterprise data.
Pfizer deploys the largest sales force in the pharmaceutical industry. To maintain a competitive edge in such a high-risk, high-reward industry, it is crucial that marketing and sales professionals within Pfizer's U.S. Pharmaceuticals Group have a data warehouse that enables access to accurate and timely data. It is also important for all group personnel to work with a single set of data at all times to best produce consistent reports.
Competition is getting stiffer with Viagra treatment for erectile dysfunction, is losing sales to Cialis, from Lilly. This is prompting Pfizer to cut prices but still keeping the margins high by keeping it costs low.
Acquisition of other pharmaceutical firms
Global Pharmaceutical Group is focused on creating applications that can be shifted and shared as services to get more out of IT resources, a so-called service oriented architecture14. Pfizer has a flexible IT infrastructure that allows for integration as Pfizer shops for acquisition targets. Integration allows for products and services to move faster through Pfizer’s pipeline resulting to lower costs and faster product launch. A flexible IT infrastructure allows for future strategic agility such as the acquisition of an organization with different business processes.
Diversification of both products and regions
Information technology is a fundamental aspect of diversification of products and also regions. The Pfizer IT team, called Global Business Technology, is an integral part of the planning teams in efficiently managing a global enterprise in 35 countries and many products that Pfizer offers.
IT contributions range from the ordinary, which system to select and how to merge disparate systems, to the extraordinary, how to unwind shared business service across 35 countries. These services included HR, IT, Financial, and other services shared across Pfizer’s companies. Along the way, IT has found a way to position itself for future business growth by building out best in class systems in areas that matter most to a consumer business, specifically trade and forecasting systems15.
SWOT Analysis
Strengths
Pfizer has a number of advantages. Pfizer’s strengths lie in its strong pipeline of innovative pharmaceutical compounds and strong marketing capabilities. It has a strong and large sales force that is capable of effectively marketing their products.
Pfizer, whose top drugs have lost sales to generic rivals, is planning a bigger push into the generics market itself. Pfizer even plans to sell cheaper versions of its competitors' branded drugs when they lose patent protection
The company also has a strong reputation in the industry, which confers a threefold advantage – a) it eases the approval process by the FDA, b) makes the drug more likely to be recommended by doctors and approved by insurance carriers, and c) gives Pfizer an edge when trying to convince others to license new products to it.
By holding the top position in the industry, Pfizer has the most fluid capital to reinvest into research (about $5 billion per year), take risks in high return type products, or outbid rivals on a crucial product.
In addition, Pfizer already has large research facilities and production capabilities, while also spending the most in research and development of new products.
Weaknesses
As the leading pharmaceutical company in the industry, Pfizer also has the largest overhead cost and must spend a sizeable fraction of its revenues filing and defending lawsuits on its existing products.
Although Pfizer has a wide variety of drugs, it is dependent on a handful of drugs for the majority of its revenues. When patents on these drugs expire, Pfizer will face severe losses in profit unless the company can time the release of a new product when the patent on an older product runs out. For example Pfizer will lose exclusive rights for Lipitor production in 2010, which currently accounts for about 25% of its revenues worldwide. This product timing is largely a function of research and government approval, which makes it difficult for the company to plan ahead. To take measures into its own hands, Pfizer must have a strategy for the development of products and maintain healthy relations with the government.
As a late entrant into the biopharmaceuticals market, Pfizer enjoys very little market share and revenue compared to what it generates in traditional pharmaceutical drugs. Without strategic action, Pfizer risks losing ground on competitors of comparable size with a mature biopharma portfolio.
Insurance companies can pressure the company to lower prices on their products or risk being denied coverage, and therefore use by the final consumer.
Opportunities
Pfizer, whose top drugs have lost sales to generic rivals, is planning a bigger push into the generics market itself. Pfizer even plans to sell cheaper versions of its competitors' branded drugs when they lose patent protection (Loftus, 2008).
As the baby boomer generation grows older, this graying population will require an assortment of prescription medicines and services as the average life expectancy increases due to the improvement in healthcare. By catering to this demographic, Pfizer can lock in a number of these customers, who will be around for a while and will be dependent on these therapeutic drugs.
Pfizer also has an opportunity to expand globally and enter new markets such as India, China, and South Korea that have a large population base that is expected to get wealthier and older over the next few years. At present, many of Pfizer’s drugs are priced outside of the range of the average person in these countries.
Threats
The Food and Drug Administration said it may upgrade warnings on the Pfizer Inc. antismoking drug Chantix after a nonprofit safety group cited a new spate of road-traffic accidents and seizures involving people on the drug (Mundy, 2008).
Pfizer is also a huge target for lawsuits because of its natural position in the industry. Pfizer has had to settle many lawsuits because of safety concerns. In fact, “has paid $894m to settle most outstanding litigation around its two painkillers sparked by safety concerns after the withdrawal of Merck's similar drug Vioxx in 2004" (Jack, 2008).
Pfizer faces a number of threats to its premier market position. High gross profits across the industry attract entry, which, in principle, is feasible for an entrant with a novel idea or application.
Each new entrant into the industry could potentially become a long-term competitor – for instance, new startups that do not want to merge with a larger company may grow to competitive size. As an example, Amgen began its entry into the industry in 1985 and has since become a major rival to Pfizer. There is also a long-term threat from generic drugs produced by such companies as Teva and Barr that creates competition when Pfizer’s drugs come off their period of exclusivity.
Established companies can displace Pfizer as market leader in this volatile market.
Value Chain
The typical pharmaceutical value chain consists of research and development, supply chain management, manufacturing, and marketing and sales. Research and development understandably makes up a large percentage of the time spent in this value chain. In order to manage the phases of research and development, pharmaceutical companies need meticulous methods of documentation. Pfizer achieves this with Enterprise Resource Planning (ERP) systems.
Pfizer calls the research and development chain its ‘pipeline’. This pipeline consists of four main phases.
BioCommercialization Blog http://www.biocommercialization.com/
Phase 1 – this is the phase where low doses of an experimental medicine are given to humans, to ascertain safety. Most of the trial subjects are typically healthy, and are constantly monitored as doses are increased, to test absorption levels, blood medicine half life, and what doses are best tolerated.
Phase 2 - this phase includes a much wider base of trial subjects, up to several hundred, who typically have the condition that the medication is designed to treat. In this phase, different forms of the medicine are tried out, to see which is the best, as well as which is the most effective dose.
Phase 3 – At this phase, the trial subjects can number up to several thousand, and is where the ‘double-blind’ studies are done. The double blind study has several sets of subjects, who are taking either the drug being tested, a placebo, or another drug, to determine effectiveness.
In between Phase 3 and Phase 4, is the Registration to bring the drug to market. This registration includes information on the manufacturing process and the trial results.
A new drug approved for marketing is in the Recent Approval part of the pipeline.
Phase 4 – During this phase, long term results and risks are watched, during what Pfizer calls its “Post Marketing Studies”. Other uses for the drug are also researched during this phase.
Figure 1: Typical Value Chain for a Big Pharmaceutical Company
As the number one pharmaceutical company, Pfizer could not achieve its part without its alliances and acquisitions. This process took time in order to reach Pfizer's main goal. Pfizer's operations are based in several countries around the world, Brazil, Belgium, Canada to name few. Until now, Pfizer has acquired the most beneficial pharmaceutical drug companies. Pfizer thinks that it can improve the compound and marketed to the right people, and get patented pretty easy. However, there has been some downfalls where it Pfizer lost 6% of its earnings per share (12). Pfizer anticipated its loss because it knew that its acquisition of Pharmacia two years earlier. However, what made it worse was the Cox-2, that was facing several safety concerns. Moreover, since Pfizer was facing several patents expirations from 2005, in its 2007 annual report Pfizer mentioned how optimize their patent and how to protect them. As any other products, medicine has a life cycle that ends when the paten ends, and generic brand start to be in the market. What Pfizer wants to do is to extent its medicine's life cycle; this process is described from the annual report as "patent-protected marketed medicines and compounds in development". This process is done by focusing on their investments in research and development in a clear market, where Pfizer's compound can rise as a competitive advantage over its competitors. In addition, Pfizer is rebuilding its Phase III portfolio being sure that they can advance some molecular entities and new ways for late-stage compound that can get improved for new treatments (17). This is just some of Pfizer benefits gained by its value web.
Several mergers and acquisitions were made by Pfizer that increased its core competencies some of these pharmaceutical companies are:
In 2000, Pfizer has acquired Warner-Lambert, gaining competitive advantage over its competitors by getting full rights for Lipitor, a medicine that is accepted by customers and doctors.
In 2002, Pfizer acquired its competitor Pharmacia, becoming the largest pharmaceutical
company around the world.
EUGEN that merged with Pharmacia was acquired by Pfizer when it owned Pharmacia.
EUGEN was "The focus of the enterprise was to develop drugs targeting intracellular
signaling pathways to treat cancer. Specifically, the company sought to discover competitive
ATP small-molecule kinase inhibitors which would block common cancer pathways" 20
The Pfizer's Incubator (TPI), "An entrepreneurial Approach to Drive Innovation". It provides
funding for research and labs for early stage work that is done by academics and small
biotech companies. Fabrus LLC joined TPI, partnering with this novel technology.16
Pfizer and Bristol-Myers Squibb "collaboration on metabolic disorder research. Pfizer and
Bristol-Myer Squibb are collaborating on bringing new treatment to for obesity and diabetes.
The International Association of Fire Fighters (IAFF). Pfizer and IAFF are collaborating on
smoke stopping, and making IAFF the first tobacco-free association.
References
1.http://en.wikipedia.org/wiki/Pharmaceutical_companies
2.http://en.wikipedia.org/wiki/Clinical_trial
3.http://www.pfizer.com/about/
4.http://pharmexec.findpharma.com/pharmexec/data/articlestandard/pharmexec/302008/531367/article.pdf 5.http://www.informationweek.com/news/business_intelligence/showArticle.jhtml?articleID=6503836
6. http://h71028.www7.hp.com/ERC/downloads/4AA1-7698ENW.pdf
7. http://www.hp.com/sbso/serverstorage/article/virtualization-oct.html
8. http://www.pharmacytimes.com/issues/articles/2007-08_4955.asp
9. http://www.globalaging.org/health/us/curb2.htm
10. http://www.syl.com/bc/brandnameandgenericdrugsisitworthsavingonhealth.html
11. http://www.duke.edu/web/soc142/team2/social.html
12. http://www.mcafee.cc/Classes/BEM106/Papers/UTexas/2003/JandJ.pdf
13. http://itmanagement.earthweb.com/secu/article.php/1378211
14. http://www.forbes.com/2005/04/05/cx_mh_0405pfizer.html
15. http://www.cwhonors.org/search/his_4a_detail.asp?id=5175
16. http://media.pfizer.com/files/annualreport/2007/annual/review2007.pdf
17. Loftus, Peter (2008).Plans bigger push into the generics market. The Wall Street Journal.
18. Mundy, Alicia (2008).FDA may revise warning for Anti smoking drug. The Wall Street Journal.
19. Jack, A (2008, 10, 17). Pfizer pays $894m to settle painkiller cases. FT.com, Retrieved October 20,2008, from www.FT.com
20. http://en.wikipedia.org/wiki/Pfizer#Merger_and_acquisition_activity
21. http://media.pfizer.com/files/research/pipeline/2008_0228/pipeline_2008_0228.pdf
