pfizer pharmaceutical presented by: brian hennessy
TRANSCRIPT
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
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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
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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 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
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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
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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
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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
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Over The Counter
BenedrylBenedryl
ListerineListerine
NeosporinNeosporin
Generic DiphenhudramineGeneric Diphenhudramine
EquateEquate
Triple Antibiotic CreamTriple Antibiotic Cream
Pfizer Products Generic Brands
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Prescription DrugsPrescription Drugs
ViagraViagra
CelebrexCelebrex
ZoloftZoloft
LevitraLevitra
VioxxVioxx
PaxilPaxil
Pfizer Products Non-Pfizer Products
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Explicit CostExplicit Cost
Out-of-pocket expensesOut-of-pocket expenses
Machinery, lab materials, and Machinery, lab materials, and purchasing outside resourcespurchasing outside resources
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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
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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 $7 billion
Oncology and ophthalmology
Constantly developing new drugs.
R&D
In Monopolistic competition
Aside from High Start-Up costs, R&D, no real barriers to entry/exit
Government patents
Price Discrimination
Medicaid and Medicare.
Many buyers and sellers competes w/ Merck and generic brands
Downward sloping demand curve, can’t change price too much.
Government encourages price discrimination for pharmaceutical companies
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Price DiscriminationPrice Discrimination
When customers get reduced prices When customers get reduced prices
Those paying full price are being Those paying full price are being discriminated againstdiscriminated against
Pfizer gives price cuts to those…Pfizer gives price cuts to those…
Without moneyWithout moneyDesperate for the productDesperate for the productWho lack drug coverageWho lack drug coverage
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Purpose of Purpose of AdvertisementAdvertisement
Reduce search and opportunity costsReduce search and opportunity costs
Promote efficient resource allocationPromote efficient resource allocation
Promote competitionPromote competition
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Types of Pfizer Types of Pfizer AdvertisementsAdvertisements
TV commercials TV commercials
Magazine articlesMagazine articles
Newspaper articlesNewspaper articles
BrochuresBrochures
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TOP 10 NETWORK TV ADVERTISERS
2002 2001 1 General Motors Corp.$ 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 ??QUESTIONS ??
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History
Factors of production
Input Prices
Substitutes
Implicit/Explicit Costs
Price Discrimination
Advertising
Minimizing Cost/Profit Maxmization
Monopolistic Competition
Subsidies