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This article was originally published in The Tan Sheet

Executive Summary

PFIZER CONSUMER HEALTH CARE 1992 SALES GREW 1% TO $ 372.2 MIL. from $ 366.7 mil. in 1991, according to Pfizer's just-released 1992 annual report. Operating profit for the OTC business was $ 33.6 mil. in 1992, a 36% slide from $ 53.8 mil. the year before. The report notes that the consumer health unit accounted for only 5% of Pfizer's total ongoing sales in 1992, but remains "an integral part of the Pfizer health care strategy." Pfizer acknowledged in the annual report that sales "increased only slightly in 1992 as we lost some competitive position in several of our major product lines." Operating income "declined significantly primarily because of poor performance in Japan and increased advertising and marketing investment in the U.S. in order to better position our brands for future growth," the company said. Highlighting the year were positive performances by Pfizer's Canadian and Mexican businesses, the annual report notes. In the U.S., sales and operating income "were hurt both by the continuing recession and by price pressure from 'private label' or store brands," Pfizer said. The company noted that many of its brands -- including Visine, Ben-Gay, Desitin, Unisom, Plax, Barbasol and Rid -- are category leaders and, therefore, are targeted by private label products. Pfizer said it is "responding to the challenge of the private labels" by "better communicating our products' benefits, by emphasizing the quality and value of our national brands and by competitively pricing them." For instance, Pfizer said it is overhauling its marketing strategy for Plax after "disappointing" sales of the product in 1992. Based on marketing research, Pfizer determined that "a large percentage of people do not realize" that Plax is not a mouthwash but a pre-brushing rinse that helps to remove plaque. To remedy those misconceptions, Pfizer designed a series of television ads that emphasize Plax' intended use and how the product differs from mouthwashes. The TV spots, which began running in January, are being handled by New York-based Ally & Gargano. Other promotional vehicles for Plax this year include free-standing inserts and other coupons, free toothbrushes with a purchase of Plax, and bonus packaging (i.e., getting a 32-ounce bottle for the price of a 24-ounce bottle). Regarding pricing, Pfizer noted that it has increased the average price for its consumer products by "slightly above" 1% for 1993. By contrast, the firm increased OTC prices an average of 4%- 5% each year during the 1980s. The company indicated that it has become more sensitive to pricing concerns, in part due to the spotlight now being directed at prescription pricing. Pfizer is one of several drug companies that has promised to keep prescription prices in line with the general rate of inflation. In particular, Pfizer has said it will not raise prices, on average, above 3% in 1993. The annual report states that Pfizer is "repositioning" its consumer health care group by continuing to invest more in ads/marketing for current brands. Part of this effort includes developing "value-added line extensions," the annual report notes, such as Vanishing Scent Daytime Ben-Gay, which was launched at the end of 1992. Pfizer indicated that it also plans to expand its Visine product line. The firm's strategy also includes "adding entire new product lines through internal R&D, licensing and acquisitions," and focusing more on potential Rx-to-OTC switch candidates. "We are actively evaluating the OTC potential of not only Pfizer drugs but those from other companies as well," Pfizer commented. At a Feb. 26 presentation to securities analysts, Pfizer Exec VP and Chief Financial Officer Henry McKinnell, PhD suggested that the nonsedating antihistamine Reactine (cetirizine) "may be an interesting candidate" for an Rx-to-OTC switch despite the recent relabeling of other drugs in its class -- Marion Merrell Dow's Seldane (terfenadine) and Johnson & Johnson's Hismanal (astemizole) ("The Tan Sheet" March 8, In Brief). An NDA for prescription Reactine was submitted to FDA in June 1988.

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