Numerous articles have trumpeted the upcoming five-year patent cliff for innovative pharmaceutical companies, during which
18 of the top 20 prescription best sellers—representing over $142 billion in global sales—will face generic competition in
the leading developed markets. Unfortunately, these articles fail to tell the more important story: Over the past decade,
the frequency and intensity of brand versus generic competition has grown dramatically and will surge globally as the industry
continues its transition into the competitive stage of its lifecycle.
There are several reasons for increasing brand versus generic competition. Generics companies have intensified their patent
challenges, entered markets earlier, and targeted more off-patent blockbusters, including biosimilars, as well as smaller
brands. In addition, generics companies have taken advantage of more supportive laws, regulations, and policies in many markets.
At the same time, innovator companies, with weaker pipelines and fewer new products, are trying to extract maximum sales from
their existing brands by continuing post-patent promotions. Moreover, innovator companies have focused on emerging markets,
where brand versus generic competition is more common.
Increasing generic competition cuts across most products, lifecycle stages, and markets. Generics companies are targeting
not only megasellers such as Lipitor and Plavix, but also smaller-selling agents, including some with less than $10 million
in sales and 1 percent market share. According to a 2009 Thomson Reuters report, generics companies targeted as many US products
with sales less than $50 million dollars as they did blockbuster agents with sales over $1 billion. Over the past five years,
generics companies have initiated 65 percent more US patent lawsuits against branded pharmaceuticals and won 70 percent of
cases, often resulting in generic copies coming to market years before scheduled patent expirations. In addition, innovator
companies are realizing that generic competition in emerging markets can be even more formidable, often with dozens of generic
copies for a single brand.
Consequently, most innovator company professionals, who are experienced in brand versus brand competition, need to transfer
and enhance their skills to compete against generics companies. It is important for innovator professionals to understand
the new dynamics of brand versus generic competition and the potential implications and actions for their companies.
For years, brand and generics companies have competed in virtually distinct worlds, separated by patent protection of branded
products, a discrete corporate focus on a single product type, and a wide disparity in prices. However, over the past decade,
these two worlds have collided to create a new space, which I term "Braneric Competition." Three competitive factors have
catalyzed this fusion.
1) Competitive Duration:
Historically, innovators promoted their products against other brands only until the patent expired, at which time multiple
generic copies entered the market and often rapidly devoured the brand's market share. Over the past decade, the patent demarcation
line has blurred as innovator and generics companies have entered earlier and more aggressively into each other's turf.
Generics companies are no longer waiting for patent expiration to attack originators' products. Teva Pharmaceuticals, the
world's largest generics company, has executed over a dozen "at-risk launches" of generic products while patent litigation
is pending in the US. In international markets such as Russia, India, and China, some generics companies market brand copies
before the originator's brand is launched. For example, there were generic versions of the rheumatoid arthritis biologic agent Enbrel
in China prior to the launch of the original brand.
For their part, innovator companies are either launching—or authorizing generics partners to launch—generic versions of their
brands prior to patent expiry and before competitive generic entry. In addition, originators are now continuing brand promotion
long after patent expiration in mature markets or giving them new life by launching into developing markets. Many multinational
innovator companies have established mature products divisions specifically designed to market their off-patent brands. According
to IMS, innovators may be able to retain over 50 percent share in some markets and generate over 25 percent of a brand's total
value after patent expiration. For example, Pfizer, which created an Established Products Division in 2008, has preserved a 60 percent
market share in Spain following patent expiration of its cholesterol-lowering agent Lipitor. This combination of earlier generic
entry and longer brand promotion has expanded and extended brand versus generic competition.