Pfizer

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Pfizer
Pharmaceutical
Presented By
Brian Hennessy Matt Socha Jamie Harper
Adam Ravenstahl Lindsey Rodgers
http//www.pfizer.com.html
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Summary of Presentation
Matt Minimizing Cost/Profit Maxmization Monopolis
tic Competition
Brian History Factors of production
Lindsey Input Prices Subsidies
Adam Price Discrimination Advertising
Jamie Substitutes Implicit/Explicit Costs
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HISTORY

• Began in 1849 as Charles Pfizer and Company Fine
  Chemicals
• In Brooklyn, New York
• New factory and headquarters moved to Manhattan
  in 1868
• Pfizer scientist discovered Penicillin in 1928
• Pfizer expanded company global in 1951

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HISTORY

• In 1971 Pfizer Central Research was established
• Major breakthrough medication Celebrex released
  in 1997
• Pfizer was recognized as company of the year by
  Forbes Magazine in 1999
• In 2000 Pfizer merged with Warner-Lambert
• Pfizer merges with Pharmacia in 2003

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Factors of Production

• Land The physical space of production and
  natural supplies involved

Uses nearly 2,500 separate naturally occurring
resources Spread among 4 continents

• Labor Time spent to produce product
• Research Projects
• Production
• FDA Approval

• Capital
• Physical Buildings, Machinery, Lab
  Equipment
• Human Training and Skills

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Derived Demand
The demand for an input arises from And
fluctuates according to the demand for
the Product it helps to produce

• Pfizer is 1 in therapeutics
• Anticipation of new medicines
• 32.4 Billion revenue (2002)

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Input Prices

• Research and Development
• In 2003 Pfizer budgeted 7.1 billion for research
  

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• On average it costs 500 million and 14 years to
  bring 1 new medicine from the lab to the patient
• Fewer than 1 of every 10 drugs developed ever
  reaches the market

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Subsidies

• Main focus low-income elderly
• Pfizer Patient Assistance Programs
• Working to develop programs that provide
  pharmaceutical coverage for low-income elderly
  persons with disabilities who do not qualify for
  Medicaid

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• 30 states laws provide for a direct subsidy
  using state funds
• Medicaid
• Pfizers other solutions for drug coverage

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Over The Counter
Pfizer Products Generic Brands

• Benedryl
• Listerine
• Neosporin

• Generic Diphenhudramine
• Equate
• Triple Antibiotic Cream

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Prescription Drugs
Pfizer Products Non-Pfizer Products

• Viagra
• Celebrex
• Zoloft

• Levitra
• Vioxx
• Paxil

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Explicit Cost

• Out-of-pocket expenses
• Machinery, lab materials, and purchasing outside
  resources

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Implicit Cost

• Opportunity costs associated with a firms use of
  self owned resources

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Minimizing Costs

• Mergers lower production costs

• Acquisition of Warner-Lambert cut costs by more
  than 1.8 Billion

• Repetitive jobs and equipment can be
  eliminated/sold.

• Pfizer is constantly working to become more
  efficient in production

Courtesy www.pfizer.com
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Minimizing costs contd.

• Greater volume produced decreases production cost

• Law of Diminishing Marginal Utility

• Specialization- An increased focus on Human
  Pharmaceuticals

• Discontinuing of several products

• Tetra Fish Care

• Adams Confectionary

• Schick-Wilkinson Sword shaving products

• Loestrin and Estrostep womens health products

Courtesy www.pfizer.com
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Profit Maximization

• In 2002, nearly all of Pfizers major products
  outpaced competitors

• 10 medicines w/ sales over 1 billion.
• 5 over 2 billion
• 3 over 3 billion
• 1 over 7 billion

• Constantly developing new drugs.

• RD

• Acquisition of Pharmacia will bring Pfizer into
  new areas of medicine.

• Oncology and ophthalmology

Courtesy of www.pfizer.com
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In Monopolistic competition

• Many buyers and sellers

• competes w/ Merck and generic brands

• Downward sloping demand curve, cant change
  price too much.

• Aside from High Start-Up costs, RD, no real
  barriers to entry/exit

• Government patents

• Price Discrimination

• Government encourages price discrimination for
  pharmaceutical companies

• Medicaid and Medicare.

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Price Discrimination

• When customers get reduced prices
  
• Those paying full price are being discriminated
  against
• Pfizer gives price cuts to those
• Without money
• Desperate for the product
• Who lack drug coverage

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Purpose of Advertisement

• Reduce search and opportunity costs
• Promote efficient resource allocation
• Promote competition

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Types of Pfizer Advertisements

• TV commercials
• Magazine articles
• Newspaper articles
• Brochures

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TOP 10 NETWORK TV ADVERTISERS 2002
2001 1 General Motors Corp. 777.8 661.8 2
Procter Gamble Co. 723.7 586.4 3 Johnson
Johnson 471.5 400.6 4 Ford Motor Co. 437.9
305.1 5 Pfizer 401.0 342.4 6 PepsiCo
369.3 336.1 7 AOL Time Warner 352.7 359.5
8 Walt Disney Co. 345.8 311.4 9
GlaxoSmithKline 316.2 335.4 10
Unilever 305.0 270.9 Source Nielsen Media
Research/Nielsen Monitor-Plus. Dollars in
millions.
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QUESTIONS ??
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Did You Remember?
Minimizing Cost/Profit Maxmization Monopolistic
Competition
History Factors of production
Input Prices
Price Discrimination Advertising
Substitutes Implicit/Explicit Costs
Subsidies