Soon to Expire: During the next two years, US market will experience the patent expiration of a group of products with more
than $ 15 billion in revenues.
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When generic versions of Lilly's antidepressant Prozac (fluoxetine) were introduced in 2001, Prozac's volume fell precipitously—losing
73 percent of its share of new prescriptions within two weeks. Although that may be the most well -known example of the impact
of generics, the Federal Trade Commission reports that between 1984 (when Congress passed the Hatch-Waxman Act) and 2002,
generics' prescription share has risen from 19 to 47 percent. Today, the figure is widely reported to be more than 50 percent.
Based on review of recent patent expiration data, such rapid losses of revenue for brand owners appear to be more common.
Generic companies are stronger and more sophisticated, and payers are more effective in their efforts to influence the way
prescriptions are written and filled. Review of data from recent expirations suggests that pharmaceutical brands are losing
more share, on average, in the first 12 months after generic entry today than they did several years ago. Next year, products
with combined US sales totaling more than $15 billion will face generic competition for the first time. (See "Soon to Expire,".)
For brand companies, the difference between a more rapid and less rapid drop in product share could translate into a revenue
difference of several hundred million dollars.
Predict the Blow
Not surprisingly, brand companies have aggressively pursued a variety of lifecycle-management tactics. Transferring brand
equity (and prescriptions) to a follow-on product, reformulation, or new delivery system, can sustain the franchise. Switching
the Rx brand to an over-the-counter product, when possible, is another way to retain revenue.
Despite these tactics—and the great effort devoted to them—the bulk of the expiring brand revenues will at some point give
way to generics. The question for a pharma company is: How quickly? And a key corollary question is: If a company can predict
how quickly brand revenues will erode, are there different tactics it should use depending on the rate of decline?
Case Study Comparison: Prozac and Intal demonstrate how brands can experience different market share patterns after patent
expiration
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Pharma brands are not all equal. The rapid erosion of Prozac's share can be contrasted with that of Intal (cromolyn), an asthma
treatment, which fared much better. (See "Case Study Comparison.") Some products have obvious attributes that make rapid switching
less likely. In this case, Intal has a complex metered-dose inhalant system that makes it more difficult for generics to copy
and manufacture.
The challenge, though, is not just to recognize a brand's potential loss to generics but also to forecast it effectively.
Companies must account for the timing of generic launches as well as other circumstances that may affect postexpiration performance.
Investment decisions—continued brand promotion or a clinical trial for a new formulation—depend on a reliable forecast. As
generics enter, brand teams must grapple with planning and forecasting decisions that differ from those encountered during
the patent's life and may include strategic options such as the possibility of an authorized generic.
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