Pfizer earnings add evidence to pharma's challenge

The newest evidence of challenges for pharmaceutical companies came Tuesday when Pfizer Inc. reported revenue and profit declines for the third quarter against the same period in 2012. A day earlier, Merck & Co. reported similar results.

Patients want safe and effective medicine - at no or low cost. Drug companies say that to produce safe and effective medicine, they need high prices. (They rarely mention seven- and eight-figure salaries for executives.)

That inherent conflict - heightened when those patients have drug companies in their stock portfolios or 401(k) plans - is part of the changing landscape as the United States and other nations strive to pay less for health care.

Patients and insurers are pushing for lower prices, so some big drug companies are under pressure from Wall Street to shed jobs and less-profitable units while trying to generate profitable new drugs. Once patents expire on drugs, generic competitors take slices of the market because they usually charge less for the medicine.

Merck is based in Whitehouse Station, N.J., and is Montgomery County's largest employer, with a big plant in West Point. Merck said Oct. 1 it would cut 8,500 more jobs after deciding to slice 7,500 earlier in 2013.

Merck had 4 percent less sales revenue and 35 percent less profit in the third quarter compared with a year earlier. Chief executive officer Ken Frazier is under pressure to sell Merck's animal health and consumer products units in hopes of generating cash and improving the focus on drug-making. Frazier told analysts Monday that Merck was looking at those units to "determine whether these businesses are more advantageous inside or outside the company."

Pfizer's stock has risen more than Merck's in recent years, in part because profits were maintained by earlier cuts in jobs and research spending, and the sale of noncore units.

Still, Pfizer said Tuesday that generic competition and other factors led to a quarterly profit of $2.59 billion, 19 percent less than the same period in 2012. One factor in the profit decline was a $490.9 million payment to settle criminal and civil allegations by the U.S. Justice Department that Wyeth, which Pfizer bought in 2009, had illegally marketed its drug Rapamune.

Pfizer shares closed at $31.25 Tuesday, up 51 cents, or 1.7 percent.

Pfizer is based in Manhattan and has a big operation in Collegeville. Some of those in Collegeville work in the oncology division, which had a 26 percent increase in sales.

In June, Pfizer finished spinning off its animal health unit, now named Zoetis. It is also reorganizing its drug operations into three groups, each with a separate profit-and-loss statement, starting in 2014. One unit will have older products that already face generic competition and generate less profit than in the past. The cholesterol medicine Lipitor is one example. CEO Ian Read was pressed by analysts Tuesday on when or whether Pfizer might sell that division.

"Once those businesses are up and running and once there is transparency," Read said, "then we'll see how the market evaluates the some of the parts of those businesses."