Pfizer’s Lipitor, which my doctor will prescribe for me one of these days, is going off patent and facing generic competition. This leads typically to intense price competition and collapsing sales for the brand name.  But Pfizer is trying to stave that off by offering deals such as a $4 co-pay rather than the $10 co-pay required with most generics. The mystery is why they are doing all this.

All the special discounts have the same impact as a price cut and the deals actually involve a price cut anyway.  So, what’s in it for Pfizer?

The only rationale I can think of is that there is something weird going on at the insurance company level.  That is, consumers are getting deep discounts and want to stick to their favored brand name product.  So that consumers can consume what they want, the insurance companies will be forced to pay for the drug at the back end. But this does not hold water either because the insurance companies can simply stipulate that only generics be prescribed.  hence, they have to be offered a deal to tick with Lipitor.

So, still the Pfizer strategy does not make sense because it replicates the Bertrand competition solution with funkier pricing schemes but no real advantage….