Lifecycle: End Game - Pharmaceutical Executive


Lifecycle: End Game
In their twilight years, old brands are increasingly being snapped up by specialty marketers rather than kicked to the curb

Pharmaceutical Executive

However, since MCOs came to the fore in the '80s, the situation has become harsher because the so-called formulary effect makes the sales of end-of-lifecycle products decline even more steeply. MCOs, prizing cost containment, switch to generic equivalents as soon as a drug goes off patent. Given this, end-of-lifecycle products are hard-pressed to attract new prescriptions. Increasingly, branded originator products lose as much as 90 percent of market share to generics. As a result, companies are eager to get rid of many of these end-of-lifecycle products, saving the cost of maintaining them.

The Move to Specialty Markets

New Sellers of End-of-Lifecycle Drugs
Today, branded pharmas are putting enormous resources and effort into product lifecycle management. Commonly used tactics include creating new formulations, expanding indications, contracting with authorized generics producers, and switching Rx drugs to over-the-counter (OTC). Yet such tactics are all costly—and do not guarantee market success. For the large-cap pharmas with multibillion-dollar annual sales, products generating less than $100 million a year are rarely worth the effort. As a result, a niche market exists for those end-of-lifecycle drugs: specialty pharmaceutical companies can buy and continue to manage those products profitably, at least for a limited time (see "Top Seven Specialty Pharmas").

Specialty pharmas usually focus most of their efforts on sales and marketing in one or two therapeutic areas with tightly focused physician populations, such as psychiatrists, obstetrician-gynecologists, or gastroenterologists. These specialists can be managed with smaller sales forces (often less than 300, but as few as 35). Numerous companies have been notably successful at focusing on managing end-of-lifecycle drugs as an important part of their business model, including King, Ovation, and Valeant pharmaceuticals.

Status of Branded Drugs, 2005
Another reason for jettisoning an old product is that it no longer jibes with the current image or identity of a firm's portfolio in a particular therapeutic class. And more and more are coming to this niche market.

Spotting the Trends

In order to track the evolution in how the industry is dealing with the opportunities and challenges of end-of-lifecycle products, we started by recording the top 200 drugs annually published in Pharmacy Times for every five-year-interval from 1975 to 1995. (We stopped in 1995 because that cutoff allowed for a sufficient lifecycle for the originator company to sell the product—and for us to observe the pattern of sales and prices under the new owner, plot trends, etc.) Then we checked the 2005 Red Book for the current manufacturers. This revealed how many of the drugs remained with the original manufacturers and how many belonged to a new owner in 2005. The year in which the ownership transfer took place was confirmed.

At the beginning, a total of 1,000 drugs for every five-year interval between 1975 and 1995 was obtained. After screening out duplicates, 522 products were left. Of these, only 85 currently belonged to branded manufacturers other than their original inventors.


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