Benchmarking best practice at patent expiry in the US

Table of Contents

Benchmarking best practice at patent expiry in the US - Quantitative analysis of the impact of patent expiry, combined with in-depth insight into the regulatory and cost-containment policies shaping the post-patent market, competitive landscape and key stakeholder opinions in the US market

Product Code: dmhc2055

Publication Date: 21-Dec-2004

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Overview

Introduction

Successfully managing the lifecycle of molecules within marketed portfolios is an essential capability for the pharma industry. With R&D productivity stalling, and profit margins increasingly eroded by cost containment initiatives, maximizing the return on investment of in-line brands, by extending the time on the market without generic competition, is a key objective for pharmaceutical companies

Scope

· Encompasses analysis of Datamonitor's Patent Expiry Database of 45 patent expiries in the US market

· Incorporates primary research with US hospital and retail pharmacists

· Partners case study based analysis with future focused environmental assessment, to identify market-specific best practice strategies at patent expiry

· Draws on analysis of the capabilities of circa. 30 generics players operating in the US market

Report Highlights

With the closure of the multiple 30-month stay loophole of the US generic approval process, new regulatory tactics are expected to emerge. For example, branded companies may deter generics from entering the market by failing to sue for patent infringement, thereby reserving the right to file suit once the generic has reached the market

The price of oral brands tends to be maintained post patent-expiry. It is likely that there is no benefit in operating a "maximize volume sales" strategy against US commodity generics, as the presence of low cost manufacturers means generic competitors can squeeze prices further than the originator can

As other avenues become closed to branded manufacturers, companies are increasingly implementing a licensed-generic strategy, with 12 such deals occurring in 2004 prior to December, up from nine in 2003 and seven between 1993 and 2002

Reasons to Purchase

· Identify the optimal late stage lifecycle management strategy for your brand

· Identify the key stakeholders to target to secure success of your chosen brand protection strategy

· Predict the impact of patent expiry on a brand, assisting with brand business planning or generic target identification

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STUDY SCOPE AND AIMS	3
Study components	3
CHAPTER 1 ASSESSING THE IMPACT OF PATENT EXPIRY	9
The importance of planning for patent expiry	9
The operating environment: cost containment, customers and competitors	10
Regulatory environment: MMA to have widespread implications for brand defense	11
Cost containment measures: increasing focus on generic penetration	11
Stakeholder influence: patients will have final say as decisions are taken out pharmacists' and physicians' hands	12
Generics company capabilities	13
Product specific characteristics	13
Brand defense strategies: four underlying strategic options	15
Assessing the impact of patent expiry: typical generic erosion curves	17
Methodology - Datamonitor's Patent Expiry Database	17
CHAPTER 2 OPERATING ENVIRONMENT: COST CONTAINMENT, CUSTOMERS AND COMPETITORS	26
Key findings	26
Understanding the local operating environment	27
Regulatory environment	28
Exclusivity periods	29
Generic approval process	29
US regulatory and legislative reforms	32
The FDA's final rule	32
Medicare Modernization	32
Prescription drug coverage	36
Cost containment	37
Public sector initiatives - targeting brand companies for rebates	38
Private sector initiatives - exposing patients to financial implications of brand use	42
Other potential cost containment mechanisms	46
Stakeholder influence	48
Strong generic substitution policy drives generic penetration	49
Physician's highly ranked, but influence of payer often prevails	51
Regulatory factors govern the final dispensing decision	52
Generics company capabilities	55
CHAPTER 3 INFLUENCE OF PRODUCT AND MARKET SPECIFIC CHARACTERISTICS AT PATENT EXPIRY	57
Key findings	57
Predicting the impact of patent expiry: guidance from product and market specific characteristics	58
Product specific characteristics: patient is most effective target for promotion of brand-specific features	62
Market specific characteristics: US patent challenge system creates opportunity for successful own-generic strategy	64
Product formulation	64
Market size	69
Impact of patent challenges	73
CHAPTER 4 STRATEGIC OPTIONS FOR A BRAND AT PATENT EXPIRY: A CASE STUDY ANALYSIS	79
Key findings	79
Introduction	80
Strategy selection: an interplay of product, company and market guided factors	80
Regulatory strategy and legal defense	85
Reformulation	87
Launch of second generation product	88
Develop (and patent) new indication	89
Rx to OTC switch	90
Maximize brand loyalty through sales and marketing	91
Strategic pricing	91
Launch own generic	93
Launch of licensed/ friendly generic	93
Divest the product	94
CHAPTER 5 APPENDIX	96
References	96
Regulatory bodies and industry organizations	96
Conferences attended	96
References	96
List of Figures
Figure 1: Three key factors determining the impact of patent expiry	10
Figure 2: Stakeholder balance of power	12
Figure 3: Product specific characteristics influencing the impact of generic competition	14
Figure 4: Strategic aims of brand protection strategies	16
Figure 5: Average number of generics	19
Figure 6: Average generic price relative to brand	20
Figure 7: Average generic share of volume	21
Figure 8: Average generic share of value	22
Figure 9: Average brand price relative to 1Q prior to generic entry	23
Figure 10: Evolution in molecule sales following generic entry	24
Figure 11: Factors determining operating environment	27
Figure 12: Predicting time to generic entry in the US	31
Figure 13: Source of US total healthcare funding, 2002	37
Figure 14: States undertaking new Medicaid cost-containment initiatives, 2002-05	39
Figure 15: Cost containment methods used in employer-provided prescription drug coverage	43
Figure 16: Targets of effective cost containment strategies	48
Figure 17: Money flow in the Pharmaceutical distribution chain	49
Figure 18: Generic prescribing in the US is encouraged	50
Figure 19: Ranking of stakeholder influence on whether a branded or generic drug is received by the patient in the US	52
Figure 20: Ranking of factors influencing pharmacists' dispensing decisions in the US	53
Figure 21: Sales breakdown of major generics companies' top 20 US products, split by product formulation	55
Figure 22: Sales breakdown of major generics companies' top 20 US products, split by peak sales of originator's branded product	56
Figure 23: Product specific characteristics influencing the impact of generic competition	58
Figure 24: Attractiveness to generics varies by therapeutic area	59
Figure 25: Impact of product formulation on degree of generic penetration	60
Figure 26: Influence of product specific characteristics on generic substitution in the US	62
Figure 27: Average number of generics by product formulation	65
Figure 28: Average generic price relative to brand by product formulation	66
Figure 29: Average brand price relative to 1Q prior to generic entry by product formulation	67
Figure 30: Average generic share of volume and value by product formulation	68
Figure 31: Average number of generics by market size	69
Figure 32: Average generic price relative to brand by market size	70
Figure 33: Average generic share of volume and value by market size	71
Figure 34: Average brand price relative to 1Q prior to generic entry by market size	72
Figure 35: Average number of generics by patent challenge situation	73
Figure 36: Average generic price relative to brand by patent challenge situation	74
Figure 37: Average generic share of volume and value by patent challenge situation	75
Figure 38: Average brand price relative to 1Q prior to generic entry by patent challenge situation	76
Figure 39: Influence of number of generics on degree of generic penetration 4Q following launch	77
Figure 40: Pharmaceutical brand lifecycle	81
Figure 41: Implementation of early phase lifecycle management strategies prolongs time spent in maturity phase	82
Figure 42: Implementation of late phase lifecycle management strategies reduces the decline in sales in the post-patent phase	83
Figure 43: Factors determining optimal brand protection strategy	84

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