The arrangement clearly benefited Par. Apotex, by contrast, was forced to share what could have been a period of exclusivity. Not surprisingly, manufacturers in Apotex's position have objected to these arrangements. To date this year, generics companies have filed four citizen's petitions with FDA regarding authorized generics, all of which were rejected. In its most recent ruling, FDA stated that the entry of authorized generics and the resulting lower drug prices benefit US consumers. This situation will continue to evolve but regulatory sentiment at this time favors the benefit to consumers over any losses of generic exclusivity.

Authorize or Defend? Product A: Fast Erosion Brand, Product B: Slow Erosion Brand

Product B illustrates a more complicated dynamic. In this case, (with fewer generics and slower erosion) the authorized generic materially affects brand sales. The additional generic and the greater generic price erosion have the effect of increasing total generic share at the expense of the brand. In such circumstances, it may take substantially longer for the authorized generic deal to break even for the brand owner. Or, depending on the contract terms, it may not be worthwhile. In addition, in cases where an authorized generic is warranted, the most effective brand pricing strategy is likely to involve maintaining or increasing the price.

Support the Brand or Not? In addition to deciding whether to participate in the generic arena, the innovative company must also decide whether to continue investing in the brand. Although the historical norm—and likely the right answer for many products—has been to withdraw all investment from brands at or before the patent expiration time, the decision should be carefully considered. When there are product and class attributes that correlate with high share retention, some amount of continued investment may be warranted.

The case of Fisons' Intal provides one example in which continued investment was likely merited. Intal is a mast cell stabilizer used primarily for asthma. The delivery mechanism was not a widely diffused technology at the time (1995), and relatively few companies were able to reproduce the product. The first generic entrant did not use an identical delivery technology, and Fisons invested in communicating these differences. Intal maintained more than 40 percent share 12 months after patent expiration and, as late as 2000, it was still generating significant revenue.

There are other examples of manufacturers successfully differentiating and maintaining a branded product after patent expiration. Coumadin is a well-known example. Armed with several intrinsic attributes associated with share retention (mortality risk, dosing concerns, few prescribers) and supported by studies, DuPont, and then BMS, continued to promote the product and communicate the data to agencies and payers. Although such circumstances are relatively rare, there will be more cases in years to come, particularly as biologics lose exclusivity.

In the arena of more typical products, the question is likely to be whether any form of investment, such as a small study on therapeutic equivalence, should be undertaken. For example, if a delay with a planned follow-on creates a substantial gap between the original product's expiration and the launch of its successor, the brand owner needs to consider the merits of remaining engaged in the category during that period.