Pfizer Inc. (PFE)’s New Model

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Pfizer Inc. (NYSE:PFE) is trying a new sales paradigm, selling direct to patients. If this effort works, it could completely change the pharmaceutical industry.

Pfizer Inc. (NYSE:PFE)Little blue pills

One of Pfizer Inc. (NYSE:PFE)’s best selling drugs is Viagra, which is used to treat erectile dysfunction. That particular ailment carries material social stigma and the pills, which are still under patent protection for many more years, can be expensive. That has proven to be a prime opening for counterfeiters.

Thus, online “pharmacies” have sprouted up selling pills that they claim are Viagra at deep discounts and, sometimes, without the need for a prescription. While most would see problems in this, enough patients are buying fake Viagra that it is a big issue.

To combat the counterfeiters, Pfizer Inc. (NYSE:PFE) is going to sell Viagra directly to patients. A prescription will still be required, of course, but it is a way to ensure that the real drug is dispensed. And that Pfizer Inc. (NYSE:PFE) gets its cut of the sale.

Fake drugs or…

Stepping back, however, this may not be about fake drugs. That story, while true, could be a good cover to try a new sales channel that cuts out the middle men. Taking out the drug wholesaler and the drug store means more money in Pfizer’s coffers. In fact, Fox News reportsthat the drug giant is offering discounts of up to 30% on direct sales.

That’s a big enough discount to attract customers that want to make sure they are getting what they pay for, but don’t want to pay full fare. However, there could be even more strategic decisions taking place.

Recurring payments

Businesses from magazine publishers to gyms to web sites work hard to get customers to agree to recurring credit card payment plans. In this model, a customer gives over a credit card and allows the card to be billed without pre-approval at some regular interval. Since many people don’t pay close attention to their credit card statements or get accustomed to seeing a recurring bill and start to overlook it, this can create an annuity like revenue stream.

Creating such relationships for name brand drugs would be a blessing for the entire industry. The biggest threat pharmaceutical companies have faced in the last decade is from generic competition. Industry players like Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) have built large businesses around generics.

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