Pfizer slashes costs, weighs roster

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Pfizer's split with Interpublic Group of Cos.' Deutsch is just the first of a series of moves expected to conclude with the drug company's consolidation of its shops. The markter also aims to reduce fees through changes to compensation agreements, agency executives familiar with the situation said. The split with Deutsch was first reported on AdAge.com.

Pfizer spokeswoman Mariann Caprino confirmed that the company has been renegotiating its compensation agreements with its agencies for about a year (AA, Feb. 10). But Ms. Caprino cautioned that "it shouldn't be interpreted that our actions are a move to consolidate," and added that, as far as she understood, the talks were only with consumer agencies who handled Pfizer's prescription-drug accounts.

Agency executives differed on whether the negotiations also included over the counter and consumer health care accounts. Pfizer has hired consultant Beekman Associates, New York, to work on the renegotiations.

`streamlining'

"They're looking to streamline after the merger with Pharmacia is finalized," said one executive, referring to Pfizer's $60 billion stock-for-stock purchase of Pharmacia. The deal is expected to receive final approval by March 31. And any consolidation efforts appear to point to Omnicom Group shops. Aside from the accounts Deutsch held, Omnicom shops handle most of Pfizer's biggest DTC accounts. Cline Davis & Mann has the $79 million Viagra and $39 million Diflucan business; Merkley Newman Harty has been widely praised for its work on the $79 million Lipitor account; and TBWA/Chiat/Day has the $20 million Aricept business. WPP Group's J. Walter Thompson handles the $72 million Celebrex business.

Industry observers said these renegotiations will be carefully watched, particularly as Pfizer is considered a blue-chip marketer. Through November of last year, Pfizer spent $780 million in measured media according to Taylor Nelson Sofres' CMR. More than $350 million of that was on DTC advertising.

Pfizer's compensation negotiations have once again raised the debate about what information is appropriate for a marketer to demand of its agency partners.

nothing new

Ms. Caprino said renegotiations are nothing that hasn't been done before.

"We didn't invent this," she said. "A number of large companies do this. We are very focused on ensuring fiscal responsibilities, transparencies and equity in all the aspects of our consumer agency relationships. We want to verify certain elements of our agreements, and they all seem comfortable with this arrangement."

Pfizer, the biggest pharmaceutical advertising spender in the U.S., and Deutsch parted ways last week. Deutsch handled more than $120 million of Pfizer business, including the allergy drug Zyrtec and the antidepressant Zoloft.

zyrtec, zoloft options

Ms. Caprino said Pfizer is considering its options with Zyrtec and Zoloft, but several executives said Pfizer is already preparing online requests for information.

Both Pfizer and Deutsch declined to elaborate on the separation. CEO Donny Deutsch's only comment: "We cannot come to an agreement over a contract."

Executives familiar with the information being requested by Pfizer said that the marketer "was telling us how to run our business." Another specifically took issue with Pfizer asking about salaries, saying, "It doesn't need to be done. An individual's salary is sacrosanct." Asking for salaries is cited as a "worst practice" by the American Association of Advertising Agencies and the Association of National Advertisers.

Said one executive whose agency has Pfizer business: "When companies merge, you have to have cost-cutting....Pfizer is looking at transparencies and basically saying `We need to understand your books, we need to see salaries and studio costs and overhead.' "

Ms. Caprino did not disagree but said, "We're not interested in looking at any specific budget line and challenging our agencies. We just want to know we're getting what we pay for."

contributing: claire atkinson

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