impairment charges of $1.8 billion in 2010, (see below);

• higher charges for litigation-related matters of $1.5 billion in 2010, primarily associated with the additional $1.3 billion (pre-tax) charge for asbestos litigation related to our wholly owned subsidiary, Quigley Company, Inc. (for additional information, see Notes to Consolidated Financial Statements—Note 17. Commitments and Contingencies);

• higher interest expense of $565 million in 2010, primarily associated with the $13.5 billion of senior unsecured notes that we issued in March 2009 and the approximately $10.5 billion of senior unsecured notes that we issued in June 2009 to partially finance the acquisition of Wyeth, as well as the addition of legacy Wyeth debt;

• lower interest income of $345 million in 2010, primarily due to lower interest rates coupled with lower average investment balances; and

• the non-recurrence of a $482 million gain recorded in 2009 related to ViiV (see further discussion in the “Our Business Development Initiatives” section of this Financial Review),

partially offset primarily by:

• higher royalty-related income of $336 million in 2010, primarily due to the addition of legacy Wyeth royalties. Asset Impairment Charges

For information about the asset impairment charges in each year, see the “Significant Accounting Policies and Application of Critical Accounting Estimates—Asset Impairment Reviews—Long-Lived Assets” section of this Financial Review as well as Notes to Consolidated Financial Statements Note 4. Other Deductions—Net and Note 10B. Goodwill and Other Intangible Assets: Other Intangible Assets.

          During the fourth quarter of 2010, we reached a settlement with the U.S. Internal Revenue Service (IRS) related to issues we had appealed with respect to the audits of the Pfizer Inc. tax returns for the years 2002 through 2005, as well as the Pharmacia audit for the year 2003 through the date of merger with Pfizer (April 16, 2003). The IRS concluded its examination of the aforementioned tax years and issued a final Revenue Agent’s Report (RAR). We agreed with all of the adjustments and computations contained in the RAR. As a result of settling these audit years, in the fourth quarter of 2010, we reduced our unrecognized tax benefits by approximately $1.4 billion and reversed the related interest accruals by approximately $600 million, both of which had been classified in Other taxes payable, and recorded a corresponding tax benefit in Provision for taxes on income (see Notes to Consolidated Financial Statements––Note 5. Taxes on Income).

2011 vs. 2010

The higher effective tax rate in 2011 compared to 2010 is primarily the result of:

• the non-recurrence of the aforementioned $1.4 billion reduction in unrecognized tax benefits and $600 million in interest on those unrecognized tax benefits in 2010, which were recorded as a result of the favorable tax audit settlement pertaining to prior years; and

• the non-recurrence of a $320 million reduction in unrecognized tax benefits and $140 million in interest on those unrecognized tax benefits in 2010 resulting from the resolution of certain tax positions pertaining to prior years with