Patents: extending the golden years

pharmafile | July 5, 2006 | Feature | Sales and Marketing |  patents, sales, strategy 

Much like death and taxes, one of the certainties of this world is that patents expire, and if a product is to survive beyond this point, any pharmaceutical company will find itself facing a huge challenge.

Thinking about how to manage this process before a product is even launched might seem to be a little like pension planning before your baby is born, but much as with planning for retirement, if you leave it until the last minute, then it's too late. Planning the end of a product's patent life should be given as much consideration as the launch itself if the product's total return is to be maximised.

There are those who argue that the answer lies in simply ensuring that revenues are at their highest possible levels in the first years of a product's life, and, indeed, there is pressure on companies to obtain a rapid return on investment. But there are sound strategies available to ensure – or at least increase the chance – that revenue can continue to be earned beyond the initial years of exclusivity, once generic versions flood the market.

Extending the patent

Colin Wight, chief executive of strategic healthcare consultancy GalbraithWight, comments: "Lack of effective life cycle management and patent expiry management is a common weakness within many major pharmaceutical companies. This is sometimes due to the constant churn of marketing staff working on a brand over time, together with the need to constantly focus on delivering short-term results, which can result in lack of long-term planning."

The most obvious strategy is to find ways to extend the initial period of exclusivity. Despite the growth of generics, this approach is still possible, via some well-worn but, nevertheless, effective paths.

Gaining patents for new indications, new delivery systems, or even developing second-generation molecules can all extend the exclusivity period. But these are not things that can be achieved overnight. To be effective, they require the clinical data to back them up and it can take up to five years to obtain this, meaning these kinds of developments must be planned right from launch.

Unfortunately, the introduction of a new formulation is too often in very close proximity to patent expiry, as happened with AstraZeneca's tablet form of Losec MUPS. To avoid this problem, new forms must always be launched well in advance of expiry, and so forethought is essential.

"New forms and added delivery systems can help not only to improve the user experience, but in so doing, facilitate patient compliance," says Rebecca Robins, global marketing director at Interbrand Wood Healthcare.

"A once-a-week formulation, instead of a once-a-day, or replacing an invasive formulation with a non-invasive one, can be critical to making a patient's life less complicated and, hence, enhancing their quality of life."  

This tactic can positively contribute to the patient-pull effect, which can be so effective in maintaining demand for a branded product even when it has gone off-patent.

But despite the development of new delivery systems, combination drugs and second-generation molecules, can a branded drug really hope to survive once the patent on the basic molecule expires and is available for every generic producer to copy?

The answer is almost certainly no, which means that extending the life of the drug needs to go much further than attempting to retain exclusivity in the market. Most marketing strategists agree that developing a strong brand positioning is crucial to creating continued demand from both clinicians and patients, even where similar – or indeed identical – products are available at lower prices in the market.

To push or pull?

Rebecca Robins explains: "Unlike patents, brands do not have an expiry date. A brand has the potential to last forever. With leaner pipelines, fewer true innovations, stronger and more sophisticated generics, and companies becoming more aggressive in their approach, as well as the rising costs of bringing a drug to market, mean the focus is very much on the value of both pipeline and existing brands. What's top of the agenda is how to make healthcare brands work harder and for longer."

Strong branding is the key to extending the lifecycle of a product, and even the strategy of line extensions is based on the brand. By reformulating a product via its delivery system or its dosage, for example, what the pharma company is doing is exploiting the goodwill associated with the brand in order to help minimise the impact of patent expiry, which is why investment in the brand right from the start is so important.

Unfortunately, this doesn't always happen. In particular, in the case of innovative products, there tends to be a reliance on this uniqueness at launch stage, with brand development often coming as an afterthought only as the spectre of patent expiry starts to appear on the horizon.

By this time, it is generally too late to build the kind of brand equity on the market which will be effective in extending the life of the drug once its functional benefits are more widely available after the patent protection has been stripped away.

Chris Marks of The MSI Consultancy says: "The brand must always add value beyond pure product benefit. As new therapies start to reduce the clinical differentiation and as patients start to get more involved in the choice of medicine, the role of the brand starts to change. Foreseeing this in the early stages of product lifecycle planning means that the investment in the brand can be made in the right way."

The key here is the extent to which consumer/patient-pull can play a part in ensuring that the branded product continues to be used after generic equivalents are available.

Traditionally, the pharma industry has operated on the push principle, inventing new products, and then using large sales forces to flood clinicians with information and reasons to prescribe. But the emergence of a more knowledgeable patient base, accessing increasing amounts of information from many sources (not least the internet), means the dynamics are changing, and consumer brand loyalty is starting to exert a most definite pull.

Chris Marks adds: "Increasingly, patient-pull is playing a bigger role in the eventual life cycle of products, because patients are becoming much more involved in the decisions which are made about their treatment.

"Building a brand, which can take advantage of that patient pull, is a long-term proposition, which is why it isn't something which can be started as patent expiry looms.  

"If you are going to build a consumer-related brand, you need to take into account the rational and emotional elements of the brand – in other words, what the patient knows about it, and what they feel about it. Both the rational and emotional propositions must of course be based in truth – you have to both promise and deliver real benefits."

Rebecca Robins argues that achieving this is easier in some cases than in others. "Brands which engender de facto a more tangible and frequent interface as part of a day-to-day regime, such as asthma inhalers, engage the end-user in a very different relationship to that of a tablet, for example, that is taken for a one-off infection.  

"When we scan the pharma 'brandscape' for brands which have stood the test of time, one example which stands out is Ventolin, with its now iconic, blue inhaler. It has been off-patent for more than 20 years, but patient-pull has enabled the Ventolin brand to survive post-patent."

In fact, GSK with its airways franchise still sets the gold standard for how to effectively extend life beyond patent expiry for many of its brands, including Ventolin (launched 1969), Becotide (launched 1971) and Flixotide. Ventolin alone has more than 40 lines in the UK; something of a global manufacturing person's nightmare, but a solid wall to a generic competitor.

Making the switch

One common way of taking advantage of brand loyalty among the patient group is to consider a switch from prescription-only medicine to over-the-counter status. The changing regulatory and policy landscape is making this process easier than ever before, as the health service seeks to transfer the true cost of drugs from its own prescribing budgets to the patient's pocket.

Chris Marks says: "Switching status can work well if brand heritage already exists. There are many examples where this strategy has enabled brands to keep going in the OTC environment well after the expiry of their patents.  

"Thought needs to be given as to the indications which will work best in the OTC marketplace, and these may not be the same as in the prescribing environment. For example, Zovirax has cleverly created the brand as a cold-sore treatment in the OTC environment, rather than its Rx indication for herpes. Likewise, Zantac is selling well as a heartburn drug over the counter, instead of for its original indication as an ulcer treatment.  

"Marketers need to understand the needs of their customer groups and position the brand accordingly. That, of course, should always be the case, but, sadly, in pharma it often isn't."

That consumer brand-building exercise takes time, and the timing of the switch from POM is vital, as switching at patent expiry will give no exclusivity period in which the OTC product can establish itself. Received wisdom is that such a switch should happen three years before the drug goes off-patent, which means that brand-building needs to happen even before that. In other words, planning for the product's second life should form part of the planning process prior to launch.  

But could such a switch damage Rx revenues just at the time when the manufacturer might be trying to squeeze out every last drop before generic equivalents start eroding the product's market? This can be a problem, but a good option is to switch only one particular dose or form of the molecule before expiry. This has two advantages: it protects prescription revenues while the OTC product establishes itself; and it can even increase Rx volumes as the patient-pull effect strengthens through the growth of the consumer brand visibility.

Of course, investing in a brand is an expensive and time-consuming business, and as with any investment, there should be a return. With EU legislation now facilitating mutual recognition of generics, as well as NMEs, enabling the simultaneous pan-European approval of generics following patent expiry, brand revenues can be ravaged within weeks, not months in those countries where generics are widely used, such as the UK.

On the basis of if you can't beat them, join them, some branded manufacturers have extended the revenue stream by creating authorised generics before the molecule goes off-patent, allowing it to establish its own place in the market with a degree of exclusivity. Although the profit margin falls dramatically as this happens, so too does marketing spend, and if the fixed costs of production are going to exist anyway, then continuing to manufacture makes sense if there is still some profit to be made.

Indeed, there are those who say that R&D-based companies should endorse the rapid adoption of generics, as this creates headroom for new, high-priced innovative medicines. However, studies by the LSE have shown that the beneficiaries of generics are largely the supply chain, not the healthcare system, as evidenced by the move by the UK government to try to redistribute 300 million from generic margins in the supply chain in the recent pharmacy contract.

Added brand value

Patent expiry does not have to mean the end of the story. If brand-building is started early enough to establish real brand equity as the drug ends its patent life, the possibilities for extension are genuine. Clearly, you need to consider the right vehicle for both the market and the competitive situation. In a pure generic molecule versus branded molecule, the brand will lose the fight unless you understand the drivers of value in the new market.

Chris Marks explains: "If you have the understanding of your customers' needs to give you the insight to harness the emotional drivers, and you can define clearly the core values that you wish to be associated with the brand; if you can add real brand value through combining the functional strengths of the product with the emotional benefits of the brand, then you can create demand for a product even after competitor products and generic equivalents are out there in the marketplace, provided the brand value equation has been examined in the light of generic competition – and this must include the consideration of adjusting the price accordingly, as has been evidenced by, for example, Voltarol."

Rebecca Robins agrees: "Patent expiry need not equate to brand death. Brand life cycle management is about ensuring the brand maintains its relevance and differentiation. This means reviewing a brand's health at key stages, acting on changes in the marketplace, and investing in innovation.  

"An added value strategy, which starts at pre-launch and is sustained throughout its on-patent life, will establish crucial brand equity, which can survive through and beyond patent expiry."

Life cycle checklist

Effective life cycle management, including patent expiry strategy, requires the effective use of all marketing disciplines. Any life cycle management plan checklist should include the following:

* Develop a patent cluster

* Reformulate (e.g. Zoton Fastab)

* Extend data exclusivity

* New indications (e.g. tamoxifen)

* Paediatric indications

* OTC switch (e.g. Zocor Heart Pro)

* Tighten the drug master file

 (e.g.Tagamet)

* Develop and launch follow-up

 product (e.g. Nexium to follow

 Losec)

* Continue to foster brand loyalty

 (e.g. Ventolin)

* Develop a franchise (e.g. B MS

 oncology)

The key is knowing what to do when, and knowing whether to do this alone, or in strategic partnership with others (e.g. MSD launched its OTC products through a strategic alliance with J&J).

Source: GalbraithWight

Andy Newman is a freelance medical journalist. He can be contacted at andy@newmanassociates.co.uk