Earlier this month, Pfizer Consumer Healthcare announced that it had agreed to activist demands that its Centrum brand amend its marketing practices. With the prospect of a lawsuit from the Center for Science in the Public Interest (CSPI) looming, the company agreed to discontinue claims that some Centrum products promote “colon health” and “breast health.” The company also agreed to qualify statements made on the Web and in traditional advertising that certain supplements contribute to “heart health.” All of the changes, including revised product labeling, will be in effect by January 5, 2013.
The agreement represents one of those rare instances in which a major corporation – they don’t get any bigger than Pfizer in the pharmaceutical industry – quickly backs down in the face of activist pressure. Some may wonder why Pfizer would make such a move. But don’t fault the company for capitulating just yet. There are least three good reasons why Pfizer’s decision made sense under the circumstances.
First, Pfizer put the issue in the rear view mirror without much negative attention. And the company probably earned a few points with the consumer crusader crowd at the same time. At the very least, it took a potentially troublesome weapon away from its antagonists. With rumors swirling that the company may spin off its consumer business before long, Pfizer has every reason to want to take off the table any lingering issues that could make the unit less attractive to potential suitors.
Second, by voluntarily agreeing to change its practices Pfizer took the regulators out of the game. The U.S. Food and Drug Administration (FDA) doesn’t have the sharpest teeth when it comes to product labeling in the supplements market. Why give the Agency any incentive to get involved? Right now, regulatory agencies are feeling emboldened. They are eager to show activist supporters that they will go after big business on even the shakiest pretext. That kind of scrutiny is one factor that could lead potential acquirers of Pfizer’s consumer unit to offer a lower price.
And third, Pfizer has avoided a fight that would not have been worth winning. If you’re big company facing an issue like this, and the product involved does not represent a large percentage of your business, your overall interests are probably better served by flight than fight. Save your reputational and political capital for more important battles sure to come in an aggressive legal and regulatory environment.
David Bartlett is a Senior Vice President at LEVICK and a contributing author to LEVICK Daily.
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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