Founded more than 170 years ago in Brooklyn, New York, Pfizer is one of the largest pharmaceutical companies in the world. It produces some of the best-known brand-name drugs, including Lipitor®, Lyrica®, Viagra®, Xeljanz®, Celebrex®, EpiPen®, and even Advil®, Robitussin®, and ChapStick®. Despite its long-term international success, the firm has struggled in recent decades.
The legal, political, and socioeconomic segments of the external environment have combined to pose serious threats for Pfizer and other big pharma companies. Bringing a new drug to market can cost billions of dollars in R&D, and Pfizer’s biggest successes have averaged close to $8 billion, largely due to the extensive testing required by the Food and Drug Administration. When a drug is finally approved, the firm only has about 10 years left on the patent, which means it must recoup its R&D costs in a relatively short amount of time. Thus, the cost of prescription drugs is quite high. Added to that, firms such as Pfizer and others need to continue to drive revenue, so they often boost drug prices even higher. These practices have the vast majority of consumers up in arms, and even President Trump has spoken out against this situation.
As an alternative route to securing new drugs and other medical technologies, Pfizer has made a number of important acquisitions, on average every 18 months or so. These acquisitions have enabled the firm to move into growth areas in the pharmaceutical field, although some analysts predict that there are no truly breakthrough categories of drugs left to be developed. Pfizer has also made two attempts to merge with competitors—AstraZeneca and Allergan—with the intention of relocating Pfizer headquarters in a foreign country where it will be subject to lower taxes. However, both attempts have fallen through.
When Ian Read, a Pfizer "lifer," assumed the position of CEO in 2010, he made some significant changes. He restructured the firm into two main divisions: Established Products and Innovative Products. The Innovative Products category was further subdivided into the Global Innovative Pharma and Global Vaccines, Oncology, and Consumer Healthcare businesses. He also undertook a change in organizational culture with a strong emphasis on accountability. To communicate this message, he had cold coins made with the words "Straight Talk" on one side and "OWNIT!" on the other. OWNIT! has since become an empowering aspect of Pfizer’s culture.
Pfizer seems to be challenged on all sides, pressured to produce innovative products, please shareholders, meet legislative demands, and assuage consumers who are outraged at the high cost of prescription medication.
Describe two ways in which Pfizer has gained access to innovative drugs and other medical technologies. What challenges do you suppose the firm has faced in pursuing each of these strategies?