Appendix A
`2011 Financial Report
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`

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`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`INTRODUCTION
`
`Our Financial Review is provided to assist readers in understanding the results of operations, financial condition and cash flows of
`Pfizer Inc. (the Company). It should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated
`Financial Statements. The discussion in this Financial Review contains forward-looking statements that involve substantial risks and
`uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of
`various factors such as those discussed in Part 1, Item 1A, “Risk Factors” of our 2011 Annual Report on Form 10-K and in the
`“Forward-Looking Information and Factors That May Affect Future Results”, “Our Operating Environment” and “Our Strategy”
`sections of this Financial Review.
`
`The Financial Review is organized as follows:
`
`• Overview of Our Performance, Operating Environment, Strategy and Outlook. This section, beginning on page 2, provides information
`about the following: our business; our 2011 performance; our operating environment; our strategy; our business development initiatives,
`such as acquisitions, dispositions, licensing and collaborations; and our financial guidance for 2012.
`
`• Significant Accounting Policies and Application of Critical Accounting Estimates. This section, beginning on page 11, discusses those
`accounting policies and estimates that we consider important in understanding Pfizer’s consolidated financial statements. For additional
`discussion of our accounting policies, see Notes to Consolidated Financial Statements—Note 1. Significant Accounting Policies.
`
`• Analysis of the Consolidated Statements of Income. This section begins on page 16, and consists of the following sections:
`
`O Revenues. This section, beginning on page 16, provides an analysis of our revenues and products for the three years ended
`December 31, 2011, including an overview of important product developments.
`
`O Costs and Expenses. This section, beginning on page 30, provides a discussion about our costs and expenses.
`
`O Provision for Taxes on Income. This section, beginning on page 35, provides a discussion of items impacting our tax provisions.
`
`O Discontinued Operations. This section, beginning on page 36, provides an analysis of the financial statement impact of our
`discontinued operations.
`
`O Adjusted Income. This section, beginning on page 36, provides a discussion of an alternative view of performance used by
`management.
`
`• Analysis of the Consolidated Balance Sheets. This section begins on page 40 and provides a discussion of changes in certain balance
`sheet accounts.
`
`• Analysis of the Consolidated Statements of Cash Flows. This section begins on page 41 and provides an analysis of our consolidated
`cash flows for the three years ended December 31, 2011.
`
`• Analysis of Financial Condition, Liquidity and Capital Resources. This section, beginning on page 42, provides an analysis of our
`financial assets and liabilities as of December 31, 2011 and December 31, 2010, as well as a discussion of our outstanding debt and
`other commitments that existed as of December 31, 2011. Included in the discussion of outstanding debt is a discussion of the amount
`of financial capacity available to help fund Pfizer’s future activities.
`
`• New Accounting Standards. This section, on page 45, discusses accounting standards that we recently have adopted, as well as those
`that recently have been issued, but not yet adopted by us.
`
`• Forward-Looking Information and Factors That May Affect Future Results. This section, beginning on page 45, provides a description of
`the risks and uncertainties that could cause actual results to differ materially from those discussed in forward-looking statements
`presented in this Financial Review relating to our financial and operating performance, business plans and prospects, in-line products
`and product candidates, strategic review, capital allocation, and share-repurchase and dividend-rate plans. Such forward-looking
`statements are based on management’s current expectations about future events, which are inherently susceptible to uncertainty and
`changes in circumstances. Also included in this section are discussions of Financial Risk Management and Legal Proceedings and
`Contingencies.
`
`2011 Financial Report
`
`1
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`

`

`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND
`OUTLOOK
`
`Our Business
`
`Our mission is to apply science and our global resources to improve health and well-being at every stage of life. We strive to set the
`standard for quality, safety and value in the discovery, development and manufacturing of medicines for people and animals. Our
`diversified global healthcare portfolio includes human and animal biologic and small molecule medicines and vaccines, as well as
`nutritional products and many of the world’s best-known consumer products. Every day, we work across developed and emerging
`markets to advance wellness, prevention, treatments and cures that challenge the most feared diseases of our time. We also
`collaborate with other biopharmaceutical companies, healthcare providers, governments and local communities to support and
`expand access to reliable, affordable healthcare around the world. Our revenues are derived from the sale of our products, as well
`as through alliance agreements, under which we co-promote products discovered by other companies.
`
`The majority of our revenues come from the manufacture and sale of biopharmaceutical products. The biopharmaceutical industry is
`highly competitive and we face a number of industry-specific challenges, which can significantly impact our results. These factors
`include, among others: the loss or expiration of intellectual property rights, the regulatory environment and pipeline productivity,
`pricing and access pressures, and increasing competition among branded products. (For more information about these challenges,
`see the “Our Operating Environment” section of this Financial Review.)
`
`The financial information included in our consolidated financial statements for our subsidiaries operating outside the United States
`(U.S.) is as of and for the year ended November 30 for each year presented.
`
`The assets, liabilities, operating results and cash flows of acquired businesses, such as King Pharmaceuticals, Inc. (King) (acquired
`on January 31, 2011) and Wyeth (acquired on October 15, 2009) are included in our results on a prospective basis only
`commencing from the acquisition date. As such, our consolidated financial statements for the year ended December 31, 2011 reflect
`approximately 11 months of King’s U.S. operations and approximately 10 months of King’s international operations, and our
`consolidated financial statements for the year ended December 31, 2009 reflect approximately two-and-a-half months of Wyeth’s
`U.S. operations and approximately one-and-a-half months of Wyeth’s international operations. (For more information about these
`acquisitions, see the “Our Business Development Initiatives” section of this Financial Review.)
`
`On August 1, 2011, we completed the sale of our Capsugel business. In connection with our decision to sell, the operating results
`associated with the Capsugel business are classified as Discontinued operations––net of tax in our consolidated statements of
`income for all periods presented, and the assets and liabilities associated with this business are classified as Assets of discontinued
`operations and other assets held for sale and Liabilities of discontinued operations, as appropriate, in our consolidated balance
`sheets as of December 31, 2010. (See “Our Business Development Initiatives” and “Discontinued Operations” sections of this
`Financial Review for more information.)
`
`On July 7, 2011, we announced our decision to explore strategic alternatives for our Animal Health and Nutrition businesses, which
`may include, among other things, a full or partial separation of each of these businesses from Pfizer through a spin-off, sale or other
`transaction. We expect to announce our strategic decision for each business in 2012. (For further information, see the “Our Business
`Development Initiatives” section of this Financial Review.)
`
`2
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`2011 Financial Report
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`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`Our 2011 Performance
`
`Revenues increased 1% in 2011 to $67.4 billion, compared to $67.1 billion in 2010, due to the favorable impact of foreign exchange,
`which increased revenues by approximately $1.9 billion, or 3%, and the inclusion of revenues of $1.3 billion or 2% from our
`acquisition of King, partially offset by a net operational decline of $2.9 billion, or 4%, primarily due to the loss of exclusivity of certain
`products.
`
`The significant impacts on revenues for 2011, compared to 2010, are as follows:
`
`(MILLIONS OF DOLLARS)
`Prevnar 13/Prevenar13
`Lyrica
`Enbrel (Outside the U.S. and Canada)
`Skelaxin(a)
`Celebrex
`Sutent
`Pristiq
`Zyvox
`ReFacto AF/Xyntha
`Medrol
`Norvasc
`Vfend(b)
`Aromasin(b)
`Detrol/Detrol LA
`Zosyn/Tazocin(b)
`Protonix(b)
`Xalatan/Xalacom(b)
`Prevnar/Prevenar (7-valent)
`Effexor(b)
`Lipitor(b)
`Alliance revenues(b)
`All other biopharmaceutical products(a), (c)
`Animal Health products(a)
`Consumer Healthcare products
`Nutrition products
`
`2011 vs. 2010
`INCREASE/
`(DECREASE)
`$ 1,241
`630
`392
`203
`149
`121
`111
`107
`102
`55
`(61)
`(78)
`(122)
`(130)
`(316)
`(482)
`(499)
`(765)
`(1,040)
`(1,156)
`(454)
`1,056
`609
`285
`271
`
`%
`CHANGE
`51
`21
`12
`*
`6
`11
`24
`9
`25
`12
`(4)
`(9)
`(25)
`(13)
`(33)
`(70)
`(29)
`(61)
`(61)
`(11)
`(11)
`19
`17
`10
`15
`
`(a) 2011 reflects the inclusion of revenues from legacy King products.
`(b) Lipitor lost exclusivity in the U.S. in November 2011, Canada in May 2010, Spain in July 2010, Brazil in August 2010 and Mexico in December 2010.
`Aromasin lost exclusivity in the U.S. in April 2011. Xalatan lost exclusivity in the U.S. in March 2011. Vfend tablets lost exclusivity in the U.S. in
`February 2011. Effexor XR lost exclusivity in the U.S. in July 2010. The basic U.S. patent (including the six-month exclusivity period) for Protonix
`expired in January 2011. Zosyn lost exclusivity in the U.S. in September 2009. We lost exclusivity for Aricept 5mg and 10mg tablets, which are
`included in Alliance revenues, in November 2010.
`(c) Includes the “All other” category included in the Revenues—Major Biopharmaceutical Products table presented in this Financial Review.
`* Calculation not meaningful.
`
`Income from continuing operations was $8.7 billion in 2011 compared to $8.2 billion in 2010, primarily reflecting:
`
`• higher impairment charges of $1.3 billion (pre-tax) in 2010 compared to 2011, (see further discussion in the “Costs and Expenses––
`Other (Income)/Deductions––Net” section of this Financial Review and Notes to Consolidated Financial Statements—Note 4. Other
`Deductions––net);
`
`• lower purchase accounting impacts of $1.5 billion (pre-tax) in 2011 compared to 2010, primarily related to inventory sold that had been
`recorded at fair value;
`
`• lower merger restructuring and transaction costs of $2.0 billion (pre-tax) in 2011 compared to 2010; and
`• the non-recurrence of a charge of $1.3 billion (pre-tax) in 2010 for asbestos litigation related to our wholly owned subsidiary Quigley
`Company, Inc. (see Notes to Consolidated Financial Statements––Note 17. Commitments and Contingencies),
`
`partially offset by:
`
`• higher charges of $2.5 billion (pre-tax) in 2011 compared to 2010 related to our non-acquisition related cost-reduction and productivity
`initiatives; and
`
`• the non-recurrence of a favorable settlement with the U.S. Internal Revenue Service in 2010.
`
`2011 Financial Report
`
`3
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`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`Our Operating Environment
`
`U.S. Healthcare Legislation
`
`Principal Provisions Affecting Us
`
`In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act
`(together, the U.S. Healthcare Legislation), was enacted in the U.S. This legislation has resulted in both current and longer-term
`impacts on us, as discussed below.
`
`Certain provisions of the U.S. Healthcare Legislation became effective in 2010 or on January 1, 2011, while other provisions will
`become effective on various dates. The principal provisions affecting us provide for the following:
`
`• an increase, from 15.1% to 23.1%, in the minimum rebate on branded prescription drugs sold to Medicaid beneficiaries (effective
`January 1, 2010);
`
`• extension of Medicaid prescription drug rebates to drugs dispensed to enrollees in certain Medicaid managed care organizations
`(effective March 23, 2010);
`
`• expansion of the types of institutions eligible for the “Section 340B discounts” for outpatient drugs provided to hospitals meeting the
`qualification criteria under Section 340B of the Public Health Service Act of 1944 (effective January 1, 2010);
`
`• discounts on branded prescription drug sales to Medicare Part D participants who are in the Medicare “coverage gap,” also known as
`the “doughnut hole” (effective January 1, 2011); and
`
`• a fee payable to the federal government (which is not deductible for U.S. income tax purposes) based on our prior-calendar-year share
`relative to other companies of branded prescription drug sales to specified government programs (effective January 1, 2011, with the
`total fee to be paid each year by the pharmaceutical industry increasing annually through 2018).
`
`In addition, the U.S. Healthcare Legislation includes provisions that affect the cost of certain of our postretirement benefit plans.
`Companies currently permitted to take a deduction for federal income tax purposes in an amount equal to the subsidy received from
`the federal government related to their provision of prescription drug coverage to Medicare-eligible retirees will no longer be eligible
`to do so effective for tax years beginning after December 31, 2012. While the loss of this deduction will not take effect until 2013,
`under U.S. generally accepted accounting principles, we were required to account for the impact in the first quarter of 2010, the
`period when the provision was enacted into law, through a write-off of the deferred tax asset associated with those previously
`expected future income tax deductions. Other provisions of the U.S. Healthcare Legislation relating to our postretirement benefit
`plans will affect the measurement of our obligations under those plans, but those impacts are not expected to be significant.
`
`Impacts to our 2011 Results
`
`We recorded the following amounts in 2011 as a result of the U.S. Healthcare Legislation:
`
`• $648 million recorded as a reduction to Revenues, related to the higher, extended and expanded rebate provisions and the Medicare
`“coverage gap” discount provision; and
`
`• $248 million recorded in Selling, informational and administrative expenses, related to the fee payable to the federal government
`referred to above.
`
`Impacts to our 2010 Results
`
`We recorded the following amounts in 2010 as a result of the U.S. Healthcare Legislation:
`
`• $289 million recorded as a reduction to Revenues, related to the higher, extended and expanded rebate provisions; and
`• approximately $270 million recorded in Provision for taxes on income, related to the write-off of the deferred tax asset associated with
`the loss of the deduction, for tax years beginning after December 31, 2012, of an amount equal to the subsidy from the federal
`government related to our prescription drug coverage offered to Medicare-eligible retirees. For additional information on the impact of
`this write-off on our effective tax rate for 2010, see the “Provision for Taxes on Income” section of this Financial Review.
`
`Anticipated Future Financial Impacts
`
`We expect to record the following amounts in 2012 as a result of the U.S. Healthcare Legislation:
`
`• approximately $500 million recorded as a reduction to Revenues, related to the higher, extended and expanded rebate provisions and
`the Medicare “coverage gap” discount provision; and
`
`• approximately $300 million recorded in Selling, informational and administrative expenses, related to the fee payable to the federal
`government referred to above.
`
`These estimated impacts on our 2012 results are reflected in our 2012 financial guidance (see the “Our Financial Guidance for
`2012” section of this Financial Review for additional information).
`
`4
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`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`In addition:
`
`• Individual Mandate—The financial impact of U.S. healthcare reform may be affected by certain additional developments over the next
`few years, including pending implementation guidance relating to the U.S. Healthcare Legislation and certain healthcare reform
`proposals. In addition, the U.S. Healthcare Legislation requires that, except in certain circumstances, individuals obtain health
`insurance beginning in 2014, and it also provides for an expansion of Medicaid coverage in 2014. It is expected that, as a result of
`these provisions, there will be a substantial increase in the number of Americans with health insurance beginning in 2014, a significant
`portion of whom will be eligible for Medicaid. We anticipate that this will increase demand for pharmaceutical products overall. However,
`because of the substantial mandatory rebates we pay under the Medicaid program, we do not anticipate that implementation of the
`coverage expansion will generate significant additional revenues for Pfizer. The individual mandate is currently the subject of a legal
`challenge before the U.S. Supreme Court. If the Supreme Court strikes down the mandate, but allows the other provisions of the U.S.
`Healthcare Legislation to remain in force, the benefits of the U.S. Healthcare Legislation to Pfizer will diminish. However, we do not
`expect the impact on us of any such decision to be material because we anticipate that many Americans will choose coverage even in
`the absence of a mandate as a result of the government subsidies that will make purchasing coverage more affordable.
`
`• Biotechnology Products—The U.S. Healthcare Legislation provides an abbreviated legal pathway to approve biosimilars (also referred
`to as “follow-on biologics”). Innovator biologics were granted 12 years of exclusivity, with a potential six-month pediatric extension. After
`the exclusivity period expires, the U.S. Food and Drug Administration (FDA) could approve biosimilar versions of innovator biologics.
`The regulatory implementation of these provisions is ongoing and expected to take several years. However, the FDA has begun to
`clarify its expectations for approval via the biosimilar pathway with the recent issuance of three draft guidance documents. Among other
`things, these draft guidance documents confirm that the FDA will allow biosimilar applicants to use a non-U.S. licensed comparator in
`certain studies to support a demonstration of biosimilarity to a U.S.-licensed reference product. If competitors are able to obtain
`marketing approval for biosimilars referencing our biotechnology products, our biotechnology products may become subject to
`competition from biosimilars, with the attendant competitive pressures. Concomitantly, a better-defined biosimilars approval pathway
`will assist us in pursuing approval of our own biosimilar products in the U.S.
`
`The budget proposal submitted to Congress by President Obama in February 2012 includes a provision that would reduce the
`base exclusivity period for a biologics product from 12 years to seven years. There is no corresponding pending bill designed to
`amend the U.S. Healthcare Legislation to alter the biologics provisions.
`
`The Loss or Expiration of Intellectual Property Rights
`
`As is inherent in the biopharmaceutical industry, the loss or expiration of intellectual property rights can have a significant adverse
`effect on our revenues. Many of our products have multiple patents that expire at varying dates, thereby strengthening our overall
`patent protection. However, once patent protection has expired or has been lost prior to the expiration date as a result of a legal
`challenge, we lose exclusivity on these products, and generic pharmaceutical manufacturers generally produce similar products and
`sell them for a lower price. This price competition can substantially decrease our revenues for products that lose exclusivity, often in
`a very short period of time. While small molecule products are impacted in such a manner, biologics currently have additional
`barriers to entry related to the manufacture of such products and, unlike small molecule generics, biosimilars are not necessarily
`identical to the reference products. Therefore, generic competition with respect to biologics may not be as significant. A number of
`our current products are expected to face significantly increased generic competition over the next few years.
`
`Our financial guidance for 2012 reflects the anticipated impact of the loss of exclusivity of various products and the expiration of
`certain alliance product contract rights discussed below (see the “Our Financial Guidance for 2012” section of this Financial
`Review). Specifically:
`
`• Lipitor overview—In 2011, worldwide revenues from Lipitor were approximately $9.6 billion, or approximately 14% of total Pfizer
`revenues. Of this amount, approximately $5.0 billion was generated in the U.S. and approximately $4.6 billion was generated in
`international markets, including approximately $859 million in emerging markets. We expect that the losses of exclusivity for Lipitor in
`the U.S. and various international markets discussed below will have a significant adverse impact on our revenues in 2012 and
`subsequent years.
`
`• Lipitor in the U.S.—In November 2011, we lost exclusivity in the U.S. for Lipitor.
`
`Pfizer announced in June 2008 that we entered into an agreement providing a license to Ranbaxy to sell generic versions of
`Lipitor and Caduet in the U.S effective November 30, 2011. In addition, the agreement provides a license for Ranbaxy to sell a
`generic version of Lipitor beginning on varying dates in several additional countries. (See Notes to Consolidated Financial
`Statements—Note 17. Commitments and Contingencies for a discussion of certain litigation relating to this agreement.) We also
`granted Watson Pharmaceuticals, Inc. (Watson) the exclusive right to sell the authorized generic version of Lipitor in the U.S. for a
`period of five years, which commenced on November 30, 2011. As Watson’s exclusive supplier, we manufacture and sell generic
`atorvastatin tablets to Watson. We expect the entry of multi-source generic competition in the U.S., with attendant increased
`competitive pressures, following the end of Ranbaxy’s 180-day generic exclusivity period in late May 2012.
`
`Through the end of 2011, sales of Lipitor in the U.S. were reported in our Primary Care business unit. Beginning in 2012, sales of
`Lipitor in the U.S. will be reported in our Established Products business unit.
`
`2011 Financial Report
`
`5
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`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`• Lipitor in international markets—Lipitor lost exclusivity in Australia in February 2012; in Japan in 2011; and in Brazil, Canada, Spain and
`Mexico in 2010; and it has lost exclusivity in nearly all emerging market countries. We do not expect that Lipitor revenues in emerging
`markets will be materially impacted over the next several years by the loss of exclusivity. Lipitor will have lost exclusivity in the majority
`of European markets by May 2012.
`
`Prior to loss of exclusivity, sales of Lipitor in international markets, except for those in emerging markets, are reported in our
`Primary Care business unit. Typically, as of the beginning of the fiscal year following loss of exclusivity, sales of Lipitor in
`international markets, except for those in emerging markets, are reported in our Established Products business unit.
`
`• Other loss of exclusivity impacts—In the U.S., we lost exclusivity for Effexor XR in July 2010, for Aricept 5mg and 10mg tablets
`(included in Alliance revenue) in November 2010, for Vfend tablets in February 2011, for Xalatan in March 2011 and for Caduet in
`November 2011. The basic U.S. patent (including the six-month pediatric exclusivity period) for Protonix expired in January 2011. The
`basic patent for Vfend tablets in Brazil expired in January 2011. We lost exclusivity for Aromasin in the U.S. in April 2011 and in the
`European Union (EU) in July 2011. We lost exclusivity for Xalatan and Xalacom in 15 major European markets in January 2012. We
`lost exclusivity for Aricept in many of the major European markets in February 2012.
`
`In addition, we expect to lose exclusivity for various other products in various markets over the next few years, including the
`following in 2012:
`
`• Geodon in the U.S. in March 2012;
`• Revatio tablet in the U.S. in September 2012, which reflects the extension of the exclusivity period from March to September 2012 as
`the result of a pediatric extension; and
`
`• Detrol IR in the U.S. in September 2012.
`
`For additional information, including with regard to the expiration of the patents for various products in the U.S., EU and Japan, see
`the “Patents and Intellectual Property Rights” section of our 2011 Annual Report on Form 10-K.
`
`In Alliance revenues, we expect to be negatively impacted by the following over the next few years.
`
`• Aricept—Our rights to Aricept in Japan will return to Eisai Co., Ltd. in December 2012. We expect to lose exclusivity for the Aricept
`23mg tablet in the U.S. in July 2013.
`
`• Spiriva—Our collaboration with Boehringer Ingelheim (BI) for Spiriva will expire on a country-by-country basis between 2012 and 2016.
`As a result, we expect to experience a graduated decline in revenues from Spiriva during that period. Our collaboration with BI for
`Spiriva will expire in the EU from 2012 and 2016, in 2014 in the U.S. and Japan, and by 2016 in all other countries where the
`collaboration exists.
`
`• Enbrel—Our U.S. and Canada collaboration agreement with Amgen Inc. for Enbrel will expire in October 2013. While we are entitled to
`royalties for 36 months thereafter, we expect that those royalties will be significantly less than our current share of Enbrel profits from
`U.S. and Canada sales. Outside of the U.S. and Canada, our exclusive rights to Enbrel continue in perpetuity.
`
`• Rebif—Our collaboration agreement with EMD Serono Inc. (Serono) to co-promote Rebif in the U.S. will expire either at the end of 2013
`or the end of 2015, depending on the outcome of pending litigation between Pfizer and Serono concerning the interpretation of the
`agreement. We believe that we are entitled to a 24-month extension of the agreement to the end of 2015. Serono believes that we are
`not entitled to the extension and that the agreement will expire at the end of 2013. The lower court ruled in our favor and dismissed
`Serono’s complaint, and Serono has appealed the decision. For additional information, see Notes to Consolidated Financial
`Statements––Note 17. Commitments and Contingencies.
`
`Pipeline Productivity and Regulatory Environment
`
`The discovery and development of safe, effective new products, as well as the development of additional uses for existing products,
`are necessary for the continued strength of our businesses. We are confronted by increasing regulatory scrutiny of drug safety and
`efficacy, even as we continue to gather safety and other data on our products, before and after the products have been launched.
`Our product lines must be replenished over time in order to offset revenue losses when products lose their exclusivity, as well as to
`provide for revenue and earnings growth. We devote considerable resources to research and development (R&D) activities. These
`activities involve a high degree of risk and may take many years, and with respect to any specific research and development project,
`there can be no assurance that the development of any particular product candidate or new indication for an in-line product will
`achieve desired clinical endpoints and safety profile, will be approved by regulators or will be successful commercially. On
`February 1, 2011, we announced a new research and productivity initiative to accelerate our strategies to improve innovation and
`overall productivity in R&D by prioritizing areas with the greatest scientific and commercial promise, utilizing appropriate risk/return
`profiles and focusing on areas with the highest potential to deliver value in the near term and over time.
`
`During the development of a product, we conduct clinical trials to provide data on the drug’s safety and efficacy to support the
`evaluation of its overall benefit-risk profile for a particular patient population. In addition, after a product has been approved and
`launched, we continue to monitor its safety as long as it is available to patients, and post-marketing trials may be conducted,
`including trials requested by regulators and trials that we do voluntarily to gain additional medical knowledge. For the entire life of
`the product, we collect safety data and report potential problems to the FDA. The FDA may evaluate potential safety concerns and
`take regulatory actions in response, such as updating a product’s labeling, restricting the use of the product, communicating new
`safety information to the public, or, in rare cases, removing a product from the market.
`
`6
`
`2011 Financial Report
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`Financial Review
`Pfizer Inc. and Subsidiary Companies
`
`Pricing and Access Pressures
`
`Governments, managed care organizations and other payer groups continue to seek increasing discounts on our products through a
`variety of means such as leveraging their purchasing power, implementing price controls, and demanding price cuts (directly or by
`rebate actions). In particular, as a result of the economic environment, the industry has experienced significant pricing pressures in
`certain European and emerging market countries. There were government-mandated price reductions for certain biopharmaceutical
`products in certain European and emerging market countries in 2011, and we anticipate continuing pricing pressures in Europe and
`emerging markets in 2012. Also, health insurers and benefit plans continue to limit access to certain of our medicines by imposing
`formulary restrictions in favor of the increased use of generics. In prior years, Presidential advisory groups tasked with reducing
`healthcare spending have recommended and legislative changes have been proposed that would allow the U.S. government to
`directly negotiate prices with pharmaceutical manufacturers on behalf of Medicare beneficiaries, which we expect would restrict
`access to and reimbursement for our products. There have also been a number of legislative proposals seeking to allow importation
`of medicines into the U.S. from countries whose governments control the price of medicines, despite the increased risk of counterfeit
`products entering the supply chain. If importation of medicines is allowed, an increase in cross-border trade in medicines subject to
`foreign price controls in other countries could occur and negatively impact our revenues.
`
`In August 2011, the federal Budget Control Act of 2011 (the Act) was enacted in the U.S. The Act includes provisions to raise the
`U.S. Treasury Department’s borrowing limit, known as the debt ceiling, and provisions to reduce the federal deficit by $2.4 trillion
`between 2012 and 2021. Deficit-reduction targets include $900 billion of discretionary spending reductions associated with the
`Department of Health and Human Services and various agencies charged with national security, but those discretionary spending
`reductions do not include programs such as Medicare and Medicaid or direct changes to pharmaceutical pricing, rebates or
`discounts. A Joint Select Committee of Congress (the Committee) was appointed to identify the remaining $1.5 trillion of deficit
`reductions by November 23, 2011, but no recommendations were made by the Committee prior to the deadline. As a result, the
`Office of Management and Budget (OMB) is now responsi