Dealing with the generic threat

pharmafile | September 14, 2005 | Feature | Sales and Marketing |   

The looming spectre of generics is one which no pharma company with successful medicines on the market can afford to ignore. In recent years, the growth of the generics industry has been explosive, leaving the branded pharma business for dust.

Today's generic industry is worth a whopping $40 billion and this growth is expected to continue, with $80 billion worth of blockbuster drugs set to lose patent protection by 2008.

Even the most conservative of estimates predict double-digit growth for generics over the next five years, compared to just 6% for branded businesses. With generic drugs now accounting for more than 50% of prescriptions filled in the US, pharma is being forced to expend considerable energies warding off the onslaught of generics.

"It's not just the innovative new drugs that are drawing pharma's attention – now there is a genuine realisation that value is being left on the table by not keeping a keen focus on the management of existing drug lifecycles," says Jeff Smith, associate partner at Prophet, a management consultancy focused on the creation and implementation of brand strategies.

In line with the growing threat, an ever-expanding menu of patent and generic defence strategies have evolved.

"Pharmaceutical companies will typically take a multifaceted approach to protecting a successful brand from competition," says Kevin Ostrander, director of commercial development at NexMed, an emerging company which is leveraging its drug delivery technology to help pharma businesses extend their patent lifespans and maintain brand equity.

Pharma now has a wide range of countermeasures at its disposal, ranging from the development of line extensions and next-generation drugs, to generic deal-making and market crossover strategies, pursuit of paediatric indications, consumer switching and legal litigation. Despite the many successful and sometimes crushing, patent battles won by generic companies Reuters reports that aggressive legal defence remains the most favoured brand defence strategy.

Making the most of what you've got

Line extension – through reformulation, next-generation product development, innovative delivery, new combinations and new indications – remains one of the most tried and trusted weapons in the war against generics.

According to Cutting Edge Information's (CEI) new report: Combating Generics: Pharmaceutical Brand Defense, the practice of evergreening or developing line extensions or next-generation franchises has proven to be one of the most successful strategies for retaining market share even as generics prepare their copycat drugs for market.

"Most companies and all good brand managers understand the important role that line extensions and next-generation drugs play in realising the full financial benefit of the significant investment made to commercialise a new chemical entity," explains NexMed's Ostrander. "By the time a product is commencing phase III clinical trials, most brand managers are planning for the second-generation product."

Prophet's Smith agrees with the importance of lifecycle extension but makes the point that first and foremost, to extend a brand, you must have a brand.

"Without the presence of a valuable brand, line extensions become merely a regulatory tactic. With the existence of an extendable brand, a franchise is able to capture the minds and hearts of individuals and is able to leverage the trust that has been built up over the years."

Evergreening

Switching patients from a successful, yet threatened, branded product, to its next-generation, patent-protected offspring, before the onslaught of generics is a crucial tactic in keeping the lifecycle of a drug evergreen.

"If a pharmaceutical company is able to transfer their existing franchise of patients to a next-generation drug before expiration, it represents millions of upside," Smith explains.

Yet, despite the apparent simplicity of the premise, companies should take care as the risks and pitfalls inherent in this tactical approach are high. Researching and developing next-generation drugs is a costly proposition and, if the strategy fails, companies risk losing hundreds of millions, says CEI.

Similarly, some products will simply not be suited to the line extension strategy, forcing pharma to look elsewhere for a safeguard against generic erosion.

"Products that routinely make for good line extension candidates tend to be highly prescribed and administered on a chronic basis," notes Ostrander. "Products that have delivery limitations to some degree will make for the best technical candidates…If a product has a short half-life and needs to be administered two or more times daily, reformulating this as an extended-release product for once daily dosing will enhance patient compliance and reduce the cost."

New and improved?

Simple repackaging of the active ingredient into a different formulation is not always enough to breathe life into an old drug. According to the recent Reuters Business Insights report Generic Defence Strategies, a high percentage of reformulations will ultimately fail as a result of poor timing, inadequate promotional support or lack of competitive differentiation. Some will simply fail because, although new, they fall short of being improved.

"The one thing that all tactics require to be successful is actually developing something that is scientifically better. If an extension or next-generation drug does not offer a new and better benefit than the current drug, generics will win. So, there has to be significant science behind the marketing strategies of lifecycle management," Smith notes.

Also, despite the need for differentiation, if patients are to be successfully switched to a successor product, a certain degree of commonality with the popular and trusted original brand is important.

As CEI reports, when it came to the delicate task of swapping Prilosec (marketed as Losec in the UK) for Nexium, 'The drive to equate the new arrival with the older blockbuster included the design of the pills appearance. AstraZeneca made Nexium purple and very similar looking to the original Prilosec.'

There is no doubt that drug delivery technologies have been seized on by pharma as a significant method of turning old into new and improved. As Ostrander remarks: "there are a multitude of drug delivery technologies available to choose from, which cover all routes of product administration".

According to the NexMed expert, the most common choices for oral solid dosage forms are modified-release systems (delayed, pulsatile and extended), fast-dissolving tablets and bioavailablity enhancement technology (to improve the onset of action, minimise a fed/fasted effect or increase overall drug absorption). For injectable products, common approaches to date have included: liposomal delivery; extended-release, PEG-based/depot technologies; and package innovations to enhance convenience, such as needle-free delivery.

More haste

A branded product can expect to concede 70% of its market share to generics in a mere four weeks. In their 2004 report on the pharma industry Bruised but Triumphant IMS Health notes this stark reality has spurred branded pharma businesses to launch more creative and quicker counter strategy approaches.

It seems that when it comes to getting ready for the generic war, you can never be too prepared. The example of Claritin stands as testament to this: delays experienced by Schering-Plough in gaining FDA approval for manufacturing facilities for their next-generation Clarinex product gave the 'me too' industry the window of opportunity it needed. Less expensive generic alternatives were subsequently brought to market before patients could be swapped to Clarinex. The result: Clarinex failed to achieve blockbuster status while Claritin prescriptions continue to tumble.

IMS describes how pharma companies are working hard to ensure line extensions and next-generation products hit the market with sufficient time to begin transitioning patients to the newer medicine, before the generic wave hits. "While they will never be able to keep the generic floodgates closed, they are at least ensuring that their products are outfitted with life preservers," remarks IMS.

Two is better than one

Strategic product combination is another evergreening tactic which is rising in popularity. Manufacturers are combining the threatened product with another branded product to treat two concomitant conditions with one therapy, reports IMS Health. The combination can thus reclaim its unique position beyond the reach of the generic.

Old drug, new use

Perhaps the greatest indigenous hope for line extension success lies in the use of older therapies for new indications. A good example of this is the recent data indicating the therapeutic potential of thalidomide in the treatment of multiple myeloma.

"As we learn more about the mechanisms of certain diseases, the potential for some existing medicines, either alone or in combination with others, may become evident and judged to be worth testing," says Dr Joel Dobbs from the Stevens Institute of Technology.

Ostrander agrees, saying: "Depending upon the drug, it may have additional therapeutic uses that span beyond its initial label indication, providing for further marketing avenues of the same drug substances."

Targeting the consumer

Pharma companies may also look at switching their drug from prescription status to pharmacy medicine, squeezing out further drops of value by tapping into the consumer market.

According to Reuters' report, marketing and selling drugs direct to the consumer via the pharmacy is a key means for pharma companies to propagate their profitable relationships with patients. However, Reuters adds that "legislative differences between countries have so far prevented this channel from being fully effective."

CEI sees OTC switching as a strategy which, when executed properly, can salvage revenue streams and minimise the impact of generic market entrants.

The FDA has increased its budget for OTC switching evaluations and the list of Rx-to-OTC switch candidates has grown dramatically since 1997, now encompassing notable blockbuster drugs, such as Pravachol, Celebrex, Flonase and Vioxx.

There is no doubt that a large drive behind pharma's voluntary OTC-switching strategy is to ward off generic competition.

After UK approval for the first OTC statin last year in the shape of Johnson & Johnson MSD's Zocor Heart-Pro, the popular cholesterol-lowering products are widely believed to go OTC in the US next.

Although Merck's Mevacor and Bristol-Myers Squibb's Pravachol applications for US OTC status were initially rejected, the industry is acting rapidly to reverse this decision as many blockbuster statin products hurtle towards patent expiry.

Winners and losers

A large number of pharma companies have already reaped the rewards of canny lifecycle management, milking success from line extensions. Forest Laboratories developed a single isomer product of its popular antidepressant Celexa that was launched as Lexapro, converting a number of patients prior to patent expiry.

Two examples of successful dose frequency changes include Merck's Fosamax and Lilly's Prozac which went from daily therapies to weekly medicines for certain well-managed patients. In the extended-release area, GSK's antidepressant Wellbutrin SR, Pfizers' Procardia XL, Abbott's antibiotic Biaxin XL Filmtab, Biovail's Cardizem LA and Ambien CR from Sanofi-Aventis are five of many such formulation changes designed to side-step generics through improved patient compliance and convenience.

Furthermore, GSK has launched no less than four different versions of its Imitrex migraine product. In the world of macromolecules, Amgen has utilised its PEG technology to reduce the dosing frequency of its Neulasta product to once per chemotherapy cycle, an improvement on the earlier Neupogen product.

BMS has also enjoyed success leveraging its Glucophage brand for type II diabetes, via the timely introduction of Glucophage XR and Glucovance. According to Smith, "BMS used the equities of Glucophage to introduce these two new entrants and was able to successfully transfer Glucophage patients over to these brands. This slowed the rapid decline in revenue upon expiration of the Glucophage patent."

But there have been less successful attempts too. "Schering-Plough's attempt to shift Claritin patients to Clarinex and subsequently switch Clarinex to an OTC medication backfired," warns CEI.

Nexium – industry benchmark

Even while pursuing legal challenges in the courts, AZ was strategically planning for the 2001 patent expiry of this top-selling product by developing its next-generation successor – Nexium – a single enantiomer form of the parent drug. "AstraZeneca has set a lofty industry benchmark for franchise management with the transition of patients from Prilosec to Nexium," states CEI.

Nexium was approved in February 2001, months ahead of Prilosec's first patent loss later that year, and launched amid a fanfare of promotion which CEI describes as: "One of the most massive DTC and detailing campaigns in US history. The goal: quickly transition patients receiving Prilosec to the newer, more effective Nexium, which enjoys a new, longer, patent protection timeline."

The company employed hundreds of new salespeople to detail doctors and hospitals, spent millions on TV and magazine ads and handed out masses of free samples.

And AZ's aggressive defence of its successful brand has borne fruit with market success. CEI describes how Nexium's sales are gathering momentum while Prilosec's continue to wane. As of 2002, 40% of Prilosec patients had switched to Nexium, which notched up sales of $3.9 billion in 2004. Concomitant with the switch to Nexium, AZ has actually managed to grow its overall GI franchise – by nearly 9% from 2001 to 2002.

As CEI's report summarises: "Transitioning patients from a blockbuster drug like Prilosec to a generic counterpart or other class of drug can cause episodes of pain or discomfort. AstraZeneca's massive efforts have thwarted generic competition and kept it among the upper echelon of the GI market."

There is no doubt that most leading pharma companies are now taking lifecycle management very seriously. With so many branded giants on the verge of succumbing to patent expiration, pharma's carefully devised line extension strategies look set to have their mettle severely tested in the not-too-distant future.

Time will then tell which tactics and strategies pay dividends, with Smith predicting "we will see the real stars emerge over the next five years".