Tighten Up Your Product Lifecycle Management
This month, I highlight the importance of integrating multiple lifecycle management strategies into your organization to prolong the protection given to existing products and to manage competition from generic manufacturers.
As manufacturers’ revenue streams continue to be threatened by looming patent expiration dates and the simultaneous influx of generic competition, what actions should companies consider taking to protect their businesses and extend their products’ value?
The “patent cliff” will continue to be a significant issue for the next few years as several manufacturers risk losing up to 90% of the revenue for some of their biggest products to generic competition. Coupled with the rising costs and uncertainty of creating a sufficient pipeline of new drugs to fill the gap, there is a growing pressure on manufacturers to adopt effective lifecycle management strategies for their products. Successful product lifecycle management seeks to accomplish one of two goals: to preserve the revenue stream of a product by either extending its patent in order to delay competition or, alternatively, to decelerate the pace of revenue loss following patent expiration.
Ideally, companies will have discovered and developed a new product for which they can transition their franchise.
Pharmaceutical companies invest numerous resources into preserving the patent life and the subsequent profits of products which take years to produce. Patent extension for successful products is an effective strategy for fending off generic competition and extending the product lifecycle. Ideally, companies will have discovered and developed a new product for which they can transition their franchise as AstraZeneca did with Nexium®when Prilosec was nearing patent expiration. Alternatively, manufacturers can extend a product’s lifecycle by obtaining a new patent on an already existing product. This can be accomplished in a number of different ways:
- Developing modified formulations that result in improved therapeutic outcomes or that promote patient compliance (e.g. Eli Lily was granted approval for a once-weekly, sustained-release fluoxetine formulation when blockbuster Prozac was facing patent expiration)
- Identifying new methods of use (e.g. clinical indications) based on real world evidence
- Combining two or more drugs into a single product
The aforementioned patent extension strategies can offer pharmaceutical companies tremendous economic rewards. However, manufacturers must also consider the following – as healthcare continues to move away from a model that emphasizes incremental improvements to one that focuses on providing optimal therapy that generates better outcomes at a lower cost, there is a greater demand from key stakeholders for data that demonstrates the benefit and cost-effectiveness of manufacturers’ products. This shift has major implications for manufacturers considering these particular life cycle management strategies. The pre- and post-market studies required for modified formulations or to confirm new indications are costly and inherently unpredictable. Thus, manufacturers must also consider more conservative strategies that bear fewer risks.
For many years now, it has been common practice for pharmaceutical companies to pay generic drug manufacturers to drop their patent challenges. These so-called “pay-to-delay” agreements have allowed pharmaceutical companies to maintain market exclusivity, albeit only for a short period of time, by essentially paying their generic competition to “stay out” of the market. Until recently, this strategy has placed minimal risk on branded manufacturers despite critics’ claims critics that these actions, while legal, deter market competition and ultimately burden the consumer with higher drug prices.
With that being said, the Supreme Court recently ruled that these settlements raise anti-trust concerns.[i]This does not mean that manufacturers should abandon this practice and neglect their intellectual property rights. What it does mean is that executives shouldconsider the stakes in these patent cases. They need to weigh the relative strength of their patent and the sensibility of offering a reasonably valued settlement in pay-to-delay cases, with the implications of their decisions on their brand’s reputation. They’ll have to look at each situation based on the specific facts.
Companies like Pfizer have started offering patients coupons to reduce co-payments on brand-name medicines.
In cases where patent extension is not an option and a product’s patent is nearing termination, it is important that manufacturers adopt other strategies to cushion against the losses from generic competition. For instance, companies like Pfizer have started offering patients coupons to reduce co-payments on brand-name medicines, in this case Lipitor, thereby disincentivizing consumers from switching to generics. However, with payersbecoming increasingly more critical of direct-to-consumer marketing efforts, aggressive and persistent couponing efforts may be perceived as a lack of consideration for the payer’s cost and could negatively impact market access relations.
Historically, most large pharmaceutical companies have dedicated only modest resources to their off-patent business. However, as the demand for more affordable healthcare continues and as companies continue to face looming patent expiration dates for their blockbuster drugs, some manufacturers are expanding their business model into the generic space to compensate for brand erosion. Specifically, manufacturers are developing own-label generic drugs and forming product supply alliances to compete on the basis of price with the goal of retaining market volume. For instance, among growing generic competition, Sanofi recently accelerated its diversification strategy in the generics market to accommodate the needs of more patients.Companies electing to take this business approach must first ensure they have the infrastructure in-place to compete in a market defined by lower margins. A transition into the generic space must be understood as a cultural shift throughout the organization which will allow manufacturers to determine the operating model that will best enable them to succeed.
The lifecycle management strategies highlighted in this column as well as other effective strategies, including the development of OTC derivatives and seeking indications pertaining to pediatric use, should be considered by manufacturers throughout a product’s lifecycle. Those approaches that have the biggest impact on extending a product’s value must be initiated earliest in the product’s lifecycle. In contrast, those steps taken toward the end of a product’s patent life can be performed more quickly but may only provide short-term sales benefits. Ultimately, manufacturers will need to consider the costs and risks associated with each of these strategies and ensure they have measures in-place to generate the necessary data to justify and support their business decisions.
[i]Wyatt E. “Justices Rule for the F.T.C. in a Generic Drug Case.” The New York Times. 18 June 2013: B1. Print
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