pfizer pharmaceutical presented by: brian hennessy

Presented By:

Brian Hennessy

Matt Socha

Jamie Harper

Adam Ravenstahl

Lindsey Rodgers

http://www.pfizer.com.html

Brian:

History

Factors of production

Lindsey:

Input Prices

Subsidies

Jamie:

Substitutes

Implicit/Explicit Costs

Adam:

Price Discrimination

Advertising

Matt:

Minimizing Cost/Profit Maxmization

Monopolistic Competition

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


HISTORYIn 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


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


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)


Input Prices Input Prices

Research and Research and Development Development

In 2003 Pfizer In 2003 Pfizer budgeted $7.1 budgeted $7.1 billion for research billion for research

Research and Developement Costs

3500

4000

4500

5000

5500

Year$ in m

illions


On average it costs $500 million and 14 years to On average it costs $500 million and 14 years to bring 1 new medicine from the lab to the patientbring 1 new medicine from the lab to the patient

Fewer than 1 of every 10 drugs developed ever Fewer than 1 of every 10 drugs developed ever reaches the market reaches the market


Subsidies Subsidies

Main focus: low-income elderly Main focus: low-income elderly

Pfizer Patient Assistance Programs Pfizer Patient Assistance Programs

Working to develop programs that provide Working to develop programs that provide pharmaceutical coverage for low-income pharmaceutical coverage for low-income elderly persons with disabilities who do not elderly persons with disabilities who do not qualify for Medicaid qualify for Medicaid


30 states’ laws provide for a direct 30 states’ laws provide for a direct subsidy using state funds subsidy using state funds

Medicaid Medicaid Pfizer’s other solutions for drug coverage Pfizer’s other solutions for drug coverage


Over The Counter

BenedrylBenedryl

ListerineListerine

NeosporinNeosporin

Generic DiphenhudramineGeneric Diphenhudramine

EquateEquate

Triple Antibiotic CreamTriple Antibiotic Cream

Pfizer Products Generic Brands


Prescription DrugsPrescription Drugs

ViagraViagra

CelebrexCelebrex

ZoloftZoloft

LevitraLevitra

VioxxVioxx

PaxilPaxil

Pfizer Products Non-Pfizer Products


Explicit CostExplicit Cost

Out-of-pocket expensesOut-of-pocket expenses

Machinery, lab materials, and Machinery, lab materials, and purchasing outside resourcespurchasing outside resources


Implicit CostImplicit Cost

Opportunity costs associated with a Opportunity costs associated with a firm’s use of self owned resourcesfirm’s use of self owned resources


Minimizing Costs Mergers lower production costs

Pfizer is constantly working to become more efficient in production

Repetitive jobs and equipment can be eliminated/sold.

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

Courtesy www.pfizer.com

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 women’s health products

Courtesy www.pfizer.com

Profit Maximization In 2002, nearly all of

Pfizer’s major products outpaced competitors

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

Courtesy of www.pfizer.com

10 medicines w/ sales over $1 billion.

5 over $2 billion3 over $3 billion1 over $7 billion

Oncology and ophthalmology

Constantly developing new drugs.

R&D

In Monopolistic competition

Aside from High Start-Up costs, R&D, no real barriers to entry/exit

Government patents


Medicaid and Medicare.

Many buyers and sellers competes w/ Merck and generic brands

Downward sloping demand curve, can’t change price too much.

Government encourages price discrimination for pharmaceutical companies


Price DiscriminationPrice Discrimination

When customers get reduced prices When customers get reduced prices

Those paying full price are being Those paying full price are being discriminated againstdiscriminated against

Pfizer gives price cuts to those…Pfizer gives price cuts to those…

Without moneyWithout moneyDesperate for the productDesperate for the productWho lack drug coverageWho lack drug coverage


Purpose of Purpose of AdvertisementAdvertisement

Reduce search and opportunity costsReduce search and opportunity costs

Promote efficient resource allocationPromote efficient resource allocation

Promote competitionPromote competition


Types of Pfizer Types of Pfizer AdvertisementsAdvertisements

TV commercials TV commercials

Magazine articlesMagazine articles

Newspaper articlesNewspaper articles

BrochuresBrochures


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.


QUESTIONS ??QUESTIONS ??


History

Factors of production

Input Prices

Substitutes

Implicit/Explicit Costs


Advertising

Minimizing Cost/Profit Maxmization

Monopolistic Competition

Subsidies

pfizer pharmaceutical presented by: brian hennessy

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