In a marketing move which is already getting huge free attention -- including (on a tiny scale) this blog post -- Pfizer (PFE) has decided to give away its products -- including Lipitor and Viagra -- to the jobless. Is this a waste of shareholder money or will the benefits of the free publicity offset the lost revenue?
First, let's examine Pfizer's offer. It will give people who lost jobs since January 1st free drugs -- more than 70 of its prescription drug products -- for up to a year. To qualify, a person must be an unemployed, uninsured American and have been on the Pfizer drug for at least three months.
How much revenue will Pfizer lose? The amount could conceivably be as high as $1 billion. How so? Between 2004 through 2008, Pfizer's patient assistance programs helped 5.1 million people get 51 million Pfizer prescriptions for free or at reduced cost, with a total value of $4.8 billion.
So what is the benefit to Pfizer of giving away all that revenue? For one thing, keeping the jobless on its drugs for free will keep them from switching to a less expensive generic version. So assuming they get jobs in a year, those currently jobless folks will probably return to buying the Pfizer products through their future employers' health plans instead of defecting permanently to the generic version.
As the U.S. initiates a major effort to lower health care costs, Pfizer is also hoping it can bank a huge amount of popular goodwill that could protect it against lawmakers' efforts to force Pfizer and its peers to cut prices on their products.
And unless all its competitors follow suit, Pfizer will be able to stand out from the crowd when it comes to its advertising message.
Viva Pfizer!
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in Pfizer securities.
