Very few drugs live forever. Barring remarkable scientific advances and radical market dynamics, most drugs hit old age—and
sharply declining sales—several years before their patent expires. But some drugs go out with a bang, not a whimper.
Top Seven Specialty Pharmas
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Take Merck's Vioxx, for example, which was yanked from the scene because its reputation was ruined; even if it makes a comeback,
it's unlikely to achieve the sales of its bright youth. And with the rise of generics—and their challenges not only to class
competitors but to patents themselves—even blockbusters are reaching their senior years earlier and earlier. The sales of
such champions as Pfizer's Lipitor and AstraZeneca's Crestor are being chipped away when the first drug in the category goes
generic, as was the case with Merck's Zocor late last year. Since then managed care organizations (MCOs) are increasingly
filling statin scripts with simvastatin, the generic version.
The patent for NMEs (new molecular entities) begins at registration and goes for 20 years. After spending 12 to 15 years in
development, testing, and government review, a drug has about five to eight left to recoup its investment and turn a profit.
Drugmakers have been predictably inventive in coming up with marketing and other strategies to maximize this potential.
Top 200 Drugs, 1975–1995
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End-of-lifecycle products can continue to generate revenue, but companies usually have to revise the blueprint for these brands.
Such established brands come in a variety of types: classic cash cow, merger fallouts, portfolio-burdened products, small
brands, and products with lower-than-expected growth rates. Each, in turn, requires its own specific revenue-producing programs:
alternate forms of promotion, various approaches to pricing and contracting, strategic alliances as well as different tactics
for manufacturing and operations. Many end-of-lifecycle products are a significant source of large-pharma income because they
require little effort and pose little risk. They can also be used as a hedge against the high risk of drug-development failures.
In the past, there were two ways for companies to deal with an off-patent product: either by dropping it from the portfolio
or keeping it as a "service product." Stopping it cold solves the problem of carrying a weak product, which can be very costly—and
not just in the amount of uncovered overhead and outlay. There are hidden costs—an out-of-date reputation for the firm, an
obsolete product that does not add prestige—as well as the burden of maintaining a drug that no longer fits the current product
line. However, when a company decides to drop a brand, it has to make some additional decisions. If the product has strong
distribution and residual goodwill, the company can probably sell it to another firm. If no buyers emerge, it must decide
whether to liquidate the brand quickly or slowly.
Innovators of End-of-Lifecycle Drugs
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Moreover, dropping a product disappoints and angers some physicians and patients. To avoid this scenario, a company may choose
simply to keep the product in its portfolio. A number of products have been commercially successful for 40 years and counting,
such as the Premarin brand of conjugated estrogens and the Synthroid brand of levothyroxine.
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