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pharmafile | September 9, 2008 | News story | Sales and Marketing |Â Â lifecycleÂ
Drug lifecycle management could be the answer to the $100 billion question
Generics are finding their way onto the drugs market with increasing ease and speed. As a result, drug lifecycle management is becoming ever more important for pharmaceutical companies looking to generate the best possible revenues from their branded products.
As the entry of generics and new brands onto the market following patent expiry causes competitive pressure to mount, drug product lifecycles are becoming shorter and experiencing lower peak sales: a double edged sword for pharmaceutical companies. Products worth more than $100 billion in sales will be going off-patent and becoming subject to generic incursion between 2008 and 2012. Therefore, effective lifecycle management is becoming a must for pharmaceutical companies looking to maximize the return on their considerable investment. However, it is becoming increasingly difficult for them to do so with their current lifecycle management strategies.
With the growing pressures of cost containment, only those strategies that satisfy payers, physicians and patients by meeting a true unmet therapeutic need will ultimately be successful in the future. Consequently, the development of reformulation and fixed dose combination products will become less and less popular strategies as success becomes more difficult to achieve.
Drug lifecycles are evolving for the worse. Product lifecycles are becoming shorter for a number of reasons: a situation that is compounded by a dearth of new products needed to replace lost revenues. Thus lifecycle management strategies that prolong the patent-protected life of a drug have been propelled to the top of the agenda for many brand managers.
In 2008 alone, branded products representing $16.8 billion of revenues will be exposed to generic competition, with merchandise responsible for an aggregate of $102 billion in sales going off-patent and thus subject to generic incursion between 2008 and 2012 (based on 2007 sales of the 50 top pharmaceutical companies in the US). With many products' sales still growing at the time of patent expiry, every additional day of protected revenues can generate significant profits for the company.
Furthermore, payers such as the UK's National Health Service (NHS) have introduced a range of cost-containment measures aimed at stimulating the use of generics as a means of cutting healthcare costs. This, compounded by changes in the generics marketplace dynamics, has led to the faster erosion of brand sales in the period immediately after patent expiry and the entry of generics than in the past.
With increasing cost-containment pressures and scrutiny of the pharmaceutical industry's response to dealing with patent expiry, lifecycle management requires early consideration, a thorough understanding of each market, and strategic planning involving many different functions within the company. Payer behavior is especially important and will determine which strategies companies decide to implement in specific markets; while launching a reformulation product in one market may prove to be successful, it may be a complete failure in another one.
Strategies such as the development of reformulation products have done well in the past, but growing payer scrutiny is limiting their success under current market dynamics. Only those products offering significant improvement over the original therapy – not just in terms of patient compliance and convenience, but also in regards to therapeutic outcomes – are likely to receive the desired pricing and reimbursement terms. The same is true for fixed-dose combinations: in countries with the strongest cost-containment pressures, these drugs are unlikely to have a high uptake based on an improvement in patient compliance alone if cheaper generic combinations are available. Instead, improved outcomes will be necessary, with strong proof of better efficacy required.
With generics companies becoming increasingly aggressive in challenging pharmaceutical companies' patents, it is more difficult to protect fixed-dose combination drugs: a situation which is compounded by the raised bar for obviousness in both European and US courts. Furthermore, generics companies are becoming technologically more advanced and are now able to develop their own non-patent infringing reformulation products, thus shortening the market life of branded reformulations.
Not all markets are the same, however. In countries with less mature generics markets, such as France, Italy and Spain, there is a greater opportunity for traditional developmental lifecycle management strategies to succeed: with lower generic erosion after patent expiry, and a general distrust of generics among physicians and patients alike, reformulations and fixed-dose combination drugs are much more likely to achieve high uptake than in the UK and Germany.
While the US has generally been the prime market for the launch of reformulated products, payers are increasingly looking to cut costs, and physicians are becoming more cynical regarding the advantages such line extensions bring to patients. Consequently, reformulated products are finding it harder to achieve a high uptake, and the impact they have on protecting brand franchise sales is diminishing.
Instead, lifecycle management strategies employed earlier in the lifecycle are more likely to be successful, making indication expansion a popular strategy. However, with limited funds prohibiting development in a range of indications from the very start, manufacturers will focus on those indications that have the greatest level of unmet need in order to gain better reimbursement through preferred formulary placement, rather than launching in bigger mass markets that are becoming very crowded. With $100 billion worth of product sales becoming subject to generic competition from now until 2012, pharmaceutical companies simply must adapt to the changing market climate.
Related research
The Top 10 Generic Pharmaceutical Companies: Positioning, performance and SWOT analyses
The Pharmaceutical Industry 2008: Current and Future Trends and Strategic Issues Shaping Pharma
