Defusing the Time Bomb

Mar 03, 2008

It is a universally acknowledged truth that every pharmaceutical product needs a solid plan early in its lifecycle for fighting off generics.

Here's another truth, though one much less acknowledged: For the most part, pharma companies don't plan early. Many barely plan at all.

In a recent survey of companies with brands facing generic competition, 66 percent revealed that they do not begin counter-generics planning until at least two years after product launch. Of that number, 34 percent wait at least six years.

Eric Bolesh
Indeed, the majority of responding companies reported first considering generics within four years of patent expiration (see Figure 2). This means most are left scrambling at virtually the last minute to come up with a strategy. By that time, it is too late to explore all the available counter-generics options.

Admittedly, in the long run, the branded product generally will lose out to the generic. Industry veterans know the scenario all too well: Patent protection disappears, and the following months brutalize brand revenues. The most obvious loss occurs when consumers switch to a lower-priced generic substitute. A second and less-evident threat involves multiple generic launches.

While the first generic entrant tends to price its product slightly lower than competing branded drugs, it is the entry of a second challenger that truly widens the chasm between generic and brand-name prices; at that point, prices fall to approximately 50 percent of pre–patent- expiration levels.

Worse, this struggle between two or more generics can occur within weeks of patent expiry. Nine months after patent expiration, it is common for an average branded pharmaceutical to face at least eight generic competitors. It is particularly intense for a blockbuster drug whose market share declines significantly as multiple generics enter the market. One year after patent expiry, the average blockbuster loses as much as 75 percent of its piece of the market (see Figure 1).

Figure 1
Fighting generics may be a losing battle, but it's one worth fighting. Mere days of extra patent protection can mean millions of dollars in revenue. Plenty of financial incentive is there to slow the uptake of generics and maintain precious market share.

Making the Most of It

But what's a brand team to do? The plain-English answer is easy: Think ahead, and do it earlier.

Because some of the strongest options for fighting generics rely on clinical development that can take years to execute, companies that launch their plans at least four to six years before patent expiration afford themselves the most possibilities in retaining revenue. Even whiz-bang new science, they point out, requires time and effective marketing to be commercially successful. It can take years to switch existing patients to new, patent-protected line extensions.

Part of the preparation challenge lies in the nature of brand marketing teams. High turnover rates mean that newly appointed brand managers find themselves in charge of drugs with little patent protection and no significant counter-generics plans in place. Whereas later brand teams must manage generic competition with little preparation, early teams have little incentive to think about their brands' long-term fortunes.

As a result, many companies systematically miss opportunities for complex, multi-tiered plans whose most appealing options require years of lead time and clinical development.

Figure 2
As seen in the above pie graph (Figure 2), 34 percent of survey respondents escape the timing trap and consider generic competitors at or prior to launch. At one such company, product managers include counter-generics strategies as part of the launch plan.

Another company uses preclinical findings to build an understanding of which strategies may be more or less appropriate later in its drugs' lives. Teams revisit these data during Phase II trials to more formally discuss and plan for long-term threats from both other brands and from generics. A formal lifecycle plan comes out of this process, and brand and lifecycle managers consult and alter this plan as a drug launches, matures, and, ultimately faces the loss of patent protection.