The graphic "Attribute-Based Forecast" uses an Analysis Group model to demonstrate the estimated and actual share erosion
of two products: one that has retained significant share (Coumadin) and one that has seen substantial share erosion (Prozac).
In a second, hypothetical example, this model would suggest that Lovenox (enoxoparin), which poses many of the retention attributes,
will be able to hold on to substantially more share than Cefzil (cefprozil), which has none.
More Attributes=More Share
As with the share impact, the pattern of generic prices after patent expiration can be predicted as a function of the compound's
product and class attributes. In response, brand managers can adjust brand prices, and the choices made for brands have varied
widely. Two obvious strategies are: (1) follow the generic price (downward) and attempt to retain share through existing relationships
with distributors and possibly through rebates to selected managed care plans; or (2) maintain or increase price while share
erodes by maintaining margin on remaining sales. Evidence suggests that although brand price can affect market share after
patent expiration for products with retention attributes, for others the relationship is weaker, and pricing at parity with
the generics to retain share can backfire. Such was the case with Eli Lilly's heart failure therapy Dobutrex (dobutamine),
which dropped its price in an attempt to retain share but instead lost as much share as would be expected with a steady price.
Another important factor to consider is the interaction of generics with other brands and other therapeutic classes. Generics
often expand a molecule's share of the class by drawing market share from other brand-name agents in the class or by drawing
new, untreated patients to the class. Generics also may expand the class share of a broader therapeutic category. For example,
generic ACE-inhibitors could expand the ACE-inhibitor share of the antihypertensive category. Knowing the degree to which
a generic entrant could expand the molecule or class, versus gaining share from the brand, is essential to determining brand
potential. Analyzing data from prior patent expirations by looking only at the share of molecule can result in underestimating
the brand's true potential.
Authorize or Not?
Among the set of decisions managers must make as they determine the right path for a brand losing exclusivity, there are
two critical choices:
- whether to participate in the generic arena with an authorized generic product
- how aggressively—if at all—to support the brand with investments aimed at differentiating it from generic competitors (pricing,
promotion level/mix, and clinical studies).
The authorized generic is a recent development that is generating some debate. It is negotiated when the manufacturer of a
drug nearing patent expiry contracts with a generic company to sell an "authorized" version of the molecule, in some cases
actually supplying the product to the generic company. Particularly in those instances in which a legal challenge (under paragraph
IV of the Hatch-Waxman Act) creates the potential for the first generic to enjoy a 180-day exclusivity period, brand owners
have begun to use this "join rather than fight" approach.
In recent months, several brand-name pharma companies, including Bristol-Myers Squibb, GlaxoSmithKline, Johnson & Johnson,
and Pfizer, have drawn a great deal of attention for their launched or planned authorized generics. While regulatory opinion
still evolves and long-term results have yet to be observed, evaluation of an early case offers useful insights.
GlaxoSmithKline contracted with Par to sell a generic version of Paxil (paroxetine). In September 2003, Par launched its generic
simultaneously in the market with a generic from Apotex, the company that had challenged GSK's patent under paragraph IV and
been awarded a 180-day exclusivity period. By launching concurrently with Apotex, Par gained access to the higher generic
prices of the first 180 days, although its presence may have pushed the prevailing generic price lower than it would have
been if Apotex's version had been alone during that period. In addition, Par gained the opportunity to establish contracts
and distribution with pharmacies that could help it sustain share after other generics entered the market.