The talks have been a particularly sensitive issue with Interpublic Group of Cos.' Deutsch, New York. Deutsch has two of Pfizer's five biggest direct-to-consumer drug accounts, worth more than $120 million in billings, and has apparently balked at a new compensation agreement.
Pfizer and Deutsch are scheduled to meet this week to assess their relationship. Representatives from both declined to comment.
According to executives, Pfizer began renegotiation discussions almost a year ago and hopes to conclude them before its merger with Pharmacia Corp. is completed. Pfizer agreed to acquire Pharmacia last July in a $60 billion stock swap. Both companies are expecting final regulatory approval by March 31.
Pfizer-with such over-the-counter medicines as Benadryl, Listerine and Lubriderm, and with direct-to-consumer blockbuster prescription drugs like Viagra and Zoloft-uses dozens of agencies, including Omnicom Group's BBDO and Merkley Newman Harty; Cordiant Communications Group's Bates Worldwide; Cline Davis & Mann; Deutsch; Havas' Euro RSCG Worldwide; Grey Global Group's Grey Worldwide; and WPP Group's J. Walter Thompson, among others.
Most agencies declined to comment or did not return calls. Of the few that did speak, none talked in detail about the financials involved in the renegotiations. Pfizer spokesman Andy McCormick said: "We don't comment on our contractual agreements with vendors or agencies."
One agency executive whose shop has a well-known Pfizer account said he believes the pending merger with Pharmacia is one reason Pfizer is looking to change the compensation agreements. Pfizer spent $781 million in measured media through November of last year according to Taylor Nelson Sofres' CMR, including $350 million on DTC advertising.
"Big merger like that, and somebody is looking at the numbers," the executive said. "It's expected, really. If you're Pfizer, you have to do that. Plus, you never know what the compensation agreements are with the two companies. The old 15% commission is a thing of the past. It's possible that one company's compensation agreement is fee only, the other is performance-based, something like that. If somebody like a consultant has come in to take a broad look at costs, this is one of the first things they're looking at."
Pharmacia declined to comment. The two companies can discuss mutual plans, but can't implement any actions until the merger is completed.
Both are well-positioned when it comes to their premier DTC products, another reason Pfizer might have instituted discussions on compensation agreements. U.S. patents for Pfizer's Lipitor and Viagra don't expire until 2010 and 2011, respectively. Pharmacia's Celebrex patent expires in 2013 and Bextra's in 2015, meaning they all will continue to be marketed in the coming years.