Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

12 Months Ended

Dec. 31, 2021

Restructuring and Related Activities [Abstract]

Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

In 2019, we substantially completed several multi-year initiatives focused on positioning us for future growth and creating a simpler, more efficient operating structure within each business.

A. Transforming to a More Focused Company Program

With the formation of the Consumer Healthcare JV in 2019 and the spin-off of our Upjohn Business in the fourth quarter of 2020, Pfizer has transformed into a more focused, global leader in science-based innovative medicines and vaccines. We have undertaken efforts to ensure our cost base and support model align appropriately with our new operating structure. While certain direct costs transferred to the Consumer Healthcare JV and to the Upjohn Business in connection with the spin-off, there are indirect costs which did not transfer. This program is primarily composed of the following three initiatives:

•We are taking steps to restructure our corporate enabling functions to appropriately support our business, R&D and PGS platform functions. We expect costs, primarily related to restructuring our corporate enabling functions, to total $1.6 billion, with substantially all costs to be cash expenditures. Actions include, among others, changes in location of certain activities, expanded use and co-location of centers of excellence and shared services, and increased use of digital technologies. The associated actions and the specific costs will primarily include severance and benefit plan impacts, exit costs as well as associated implementation costs.

•In addition, we are transforming our commercial go-to market model in the way we engage patients and physicians. We expect costs of $1.1 billion, with substantially all costs to be cash expenditures. Actions include, among others, centralization of certain activities and enhanced use of digital technologies. The costs for this effort primarily include severance and associated implementation costs.

•We are also optimizing our manufacturing network under this program and incurring one-time costs for cost-reduction initiatives related to our manufacturing operations. We expect to incur costs of $800 million, with approximately 25% of the costs to be non-cash. The costs for this effort include, among other things, severance costs, implementation costs, product transfer costs, site exit costs, as well as accelerated depreciation.

The program costs discussed above are expected to be incurred primarily from 2020 through 2022, and may be rounded and represent approximations.

From the start of this program in the fourth quarter of 2019 through December 31, 2021, we incurred costs of $2.2 billion, of which $856 million is associated with Biopharma ($712 million in 2021, $79 million in 2020 and $64 million in 2019).

B. Key Activities

In 2021 and 2020, we incurred costs of $1.3 billion and $838 million, respectively, composed primarily of the Transforming to a More Focused Company program. In 2019, we incurred costs of $820 million composed of $548 million for the 2017-2019 and Organizing for Growth initiatives, $288 million for the integration of Array, $94 million for the integration of Hospira, and $87 million for the Transforming to a More Focused Company program, partially offset by income of $197 million, primarily due to the reversal of certain accruals upon the effective favorable settlement of an IRS audit for multiple tax years and other acquisition-related initiatives.


The following summarizes acquisitions and cost-reduction/productivity initiatives costs and credits:
	Year Ended December 31,
(MILLIONS)		2021		2020		2019
Restructuring charges/(credits):
Employee terminations		$	680	$	474	$	108
Asset impairments		53		66		69
Exit costs/(credits)		8		(6)		50
Restructuring charges/(credits)(a)		741		535		227
Transaction costs(b)		20		10		63
Integration costs and other(c)		41		34		311
Restructuring charges and certain acquisition-related costs		802		579		601
Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net(d)		(63)		3		23
Additional depreciation––asset restructuring recorded in our consolidated statements of income as follows(e):
Cost of sales		63		21		29
Selling, informational and administrative expenses		23		—		3
Research and development expenses		—		(3)		8
Total additional depreciation––asset restructuring		87		17		40

Implementation costs recorded in our consolidated statements of income as follows(f):
Cost of sales		45		40		61
Selling, informational and administrative expenses		426		197		73
Research and development expenses		1		1		22

Total implementation costs		472		238		156
Total costs associated with acquisitions and cost-reduction/productivity initiatives		$	1,298	$	838	$	820

(a)Represents acquisition-related costs ($9 million credit in 2021 and $192 million credit in 2019) and cost reduction initiatives ($750 million charge in 2021, $535 million charge in 2020, and $418 million charge in 2019). 2021 and 2020 charges mainly represent employee termination costs for our Transforming to a More Focused Company cost-reduction program. 2019 restructuring charges mainly represent employee termination costs for cost-reduction and productivity initiatives, partially offset by the reversal of certain accruals related to our acquisition of Wyeth upon the effective favorable settlement of an IRS audit for multiple tax years (see Note 5B). The employee termination costs for 2019 were primarily for our improvements to operational effectiveness as part of the realignment of our business structure, and also included employee termination costs for the Transforming to a More Focused Company cost-reduction program.

(b)Represents external costs for banking, legal, accounting and other similar services.

(c)Represents external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs. 2021 costs primarily related to our acquisition of Trillium. 2020 costs primarily related to our acquisition of Array. 2019 costs mainly related to our acquisitions of Array, including $157 million in payments to Array employees for the fair value of previously unvested stock options that was recognized as post-closing compensation expense (see Note 2A), and Hospira.

(d)Amounts include the impact of a change in accounting principle. See Note 1C.

(e)Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.

(f)Represents external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.


The following summarizes the components and changes in restructuring accruals:
(MILLIONS)	Employee Termination Costs		Asset Impairment Charges		Exit Costs		Accrual
Balance, January 1, 2020	$	770	$	—	$	46	$	816
Provision	474		66		(6)		535
Utilization and other(a)	(462)		(66)		(25)		(554)
Balance, December 31, 2020(b)	782		—		15		798
Provision	680		53		8		741
Utilization and other(a)	(449)		(53)		34		(468)
Balance, December 31, 2021(c)	$	1,014	$	—	$	57	$	1,071

(a)Includes adjustments for foreign currency translation.

(b)Included in Other current liabilities ($628 million) and Other noncurrent liabilities ($169 million).

(c)Included in Other current liabilities ($816 million) and Other noncurrent liabilities ($255 million).