Drugs: The Little Company That Got Well

It sells lipstick and dog shampoo, perfume and dishes, crop sprays and baby products — more than 2,500 items in all, retailed in 100 countries. Sears Roe buck? Montgomery Ward? The Army's PX system? Not at all. The purveyor of this wide assortment of products is an ethical drug house,* Manhattan-based Charles Pfizer & Co., and the unusual mix of its products is the chief reason that Pfizer (pronounced fyzer) is one of the fastest-growing drug houses in the U.S. Pfizer's diversification has raised its sales tenfold since 1949—to $470 million—and changed it from a small and specialized drug firm into the nation's second biggest (after American Home Products).

Controversy also seems to be part of Pfizer's growth. To protect its patent on tetracycline, a widely used miracle drug, the firm is suing about 20 companies and groups, many of which import the drug from Italy. Last week rival McKesson & Robbins joined the fray by announcing that it will produce and sell tetracycline in the U.S. without being licensed—and Pfizer moved to file yet another suit.

Most pharmaceutical companies that bring out a new drug try to recoup their research costs as quickly as possible and skim the cream off a lucrative market, later lower prices as many competitors flock in with their own drugs. The price of tetracycline has dropped 43% since its introduction in 1954, and Pfizer will probably have to drop it further: McKesson & Robbins plans to sell its drug at one-third Pfizer's present price. In the fiercely competitive drug industry, nothing stays the same very long.

Melting Market. Pfizer learned that lesson well. It was a relatively unknown little manufacturer of chemical compounds until World War II, when it discovered how to mass-produce penicillin. The firm began to do a major part of its business in supplying bulk penicillin to eight U.S. drug companies. But its big customers soon found that they could produce the penicillin themselves, and Pfizer discovered its market melting away.

Just about this time, John E. McKeen, a longtime Pfizer employee, moved into the presidency, saw immediately that Pfizer had to broaden its base rapidly to survive. When Pfizer's chemists came up with Terramycin, a new wonder drug, he decided that the firm would handle its own packaging and marketing, despite lack of experience in both fields. The new management hired swarms of salesmen overseas to open untapped markets for Pfizer products, and embarked on a high-speed acquisition program to give them more products to sell. In ten years Pfizer has swallowed 13 companies, including such recent acquisitions as Coty and Barbasol. Though the companies often seem to bear little relationship to each other, all of their products are in some way involved with chemistry, thus enabling Pfizer, as one executive puts it, "To get the maximum squeal out of the research pig."