Pfizer 2006 Annual Report Download - page 74

2006 Financial Report 73
Notes to Consolidated Financial Statements
Pfizer Inc and Subsidiary Companies
We are a party to a number of other proceedings brought under
the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, (CERCLA or Superfund) and
other state, local or foreign laws in which the primary relief
sought is the cost of past and/or future remediation.
F. Government Investigations and Requests for
Information
Like other pharmaceutical companies, we are subject to extensive
regulation by national, state and local government agencies in the
U.S. and in the other countries in which we operate. As a result,
we have interactions with government agencies on an ongoing
basis. Among the investigations and requests for information by
government agencies are those discussed below. It is possible
that criminal charges and fines and/or civil penalties could result
from pending government investigations.
Since 2003, we have received requests for information and
documents from the Department of Justice concerning the
marketing of Genotropin as well as certain managed care
payments. In 2005, the Department of Justice informed us that it
is investigating Pharmacia’s former contractual relationship with
a healthcare intermediary. We are in discussions with the
Department of Justice seeking to resolve the Genotropin and
healthcare intermediary matters.
Since 2003, we have received requests for information and
documents concerning the marketing and safety of Bextra and
Celebrex from the Department of Justice and a group of state
attorneys general. We have been considering various ways to
resolve these matters.
Since 2005, we have received requests for information and documents
from the Department of Justice concerning certain physician
payments budgeted to our prescription pharmaceutical products.
The Company has voluntarily provided the Department of Justice
and the Securities and Exchange Commission with information
concerning potentially improper payments made in connection
with certain sales activities outside the U.S. Certain potentially
improper payments and other matters are the subject of
investigations by government authorities in certain foreign
countries, including the following: A wholly owned subsidiary of
Pfizer is under criminal investigation by various government
authorities in Italy with respect to gifts and payments allegedly
provided to certain doctors operating within Italy’s national
healthcare system. In Germany, a wholly owned subsidiary of
Pfizer is the subject of a civil and criminal investigation with
respect to certain tax matters. The Pfizer subsidiaries are fully
cooperating in these investigations.
G. Guarantees and Indemnifications
In the ordinary course of business and in connection with the sale
of assets and businesses, we often indemnify our counterparties
against certain liabilities that may arise in connection with the
transaction or related to activities prior to the transaction. These
indemnifications typically pertain to environmental, tax, employee
and/or product-related matters and patent infringement claims. If
the indemnified party were to make a successful claim pursuant to
the terms of the indemnification, we would be required to reimburse
the loss. These indemnifications are generally subject to threshold
amounts, specified claim periods and other restrictions and
limitations. Historically, we have not paid significant amounts under
these provisions and as of December 31, 2006, recorded amounts for
the estimated fair value of these indemnifications are not material.
20. Segment, Geographic and
Revenue Information
Business Segments
We operate in the following business segments:
•
Pharmaceutical
– The Pharmaceutical segment includes products that prevent
and treat cardiovascular and metabolic diseases, central
nervous system disorders, arthritis and pain, infectious and
respiratory diseases, urogenital conditions, cancer, eye
disease, endocrine disorders and allergies.
•
Animal Health
– The Animal Health segment includes products that prevent
and treat diseases in livestock and companion animals.
For our reportable operating segments (i.e., Pharmaceutical,
Animal Health), segment profit/(loss) is measured based on income
from continuing operations before provision for taxes on income,
minority interests and the cumulative effect of a change in
accounting principles. Certain costs, such as significant impacts of
purchase accounting for acquisitions, acquisition-related costs
and costs related to our AtS productivity initiative, are included
in Corporate/Other only. This methodology is utilized by
management to evaluate our businesses.
Certain income/(expense) items that are excluded from the
operating segments’ profit/(loss) are considered corporate items
and are included in Corporate/Other. These items include interest
income/(expense), corporate expenses (e.g., corporate
administration costs), other income/(expense) (e.g., realized gains
and losses attributable to our investments in debt and equity
securities), certain performance-based and all share-based
compensation expenses not allocated to the business segments,
significant impacts of purchase accounting for acquisitions, certain
milestone payments, acquisition-related costs, intangible asset
impairments and costs related to our AtS productivity initiative.
Each segment is managed separately and offers different products
requiring different marketing and distribution strategies.
We sell our products primarily to customers in the wholesale
sector. In 2006, sales to our three largest U.S. wholesaler customers
represented approximately 20%, 13% and 11% of total revenues
and, collectively, represented approximately 26% of accounts
receivable as of December 31, 2006. In 2005, sales to our three
largest U.S. wholesaler customers represented approximately
20%, 14% and 11% of total revenues and, collectively, represented
approximately 27% of accounts receivable as of December 31,
2005. These sales and related accounts receivable were concentrated
in the Pharmaceutical segment.
Revenues exceeded $500 million in each of 10 countries outside
the U.S. in 2006 and 2005. The U.S. was the only country to
contribute more than 10% of total revenues in each year.