Biomedical Engineering Reference
In-Depth Information
Chapter 8
Pharmaceutical Lifecycle Extension Strategies
Eelco Kappe
Abstract The combination of higher costs of drug development and an increasing
share of generics has lead pharmaceutical fi rms to focus on alternative strategies to
make profi ts. An important development in the pharmaceutical industry is the focus
on strategies that increase the returns from an already approved drug. Firms have
various possibilities to extend the lifecycle and profi tability of a branded drug,
before and after its patent has expired. These lifecycle extension strategies can be
divided into marketing strategies (pricing, promotion, divestiture, differentiation,
over-the-counter drugs, and branded generics), R&D strategies (new indications,
reformulations, combination drugs, and next-generation drugs), and legal strategies
(generic settlements and patenting). For example, when the patent of the block-
buster drug Prilosec was about to expire in 2001, its manufacturer was pursuing
many different lifecycle extension strategies concurrently. Already 6 years before
patent expiry its legal, marketing, and R&D experts had started with the develop-
ment of over 50 different strategies to soften the impact of the patent expiry, such as
a next-generation product, introducing branded generics, and improving the patent
protection of the product. This chapter provides a comprehensive framework to
classify the various lifecycle extension strategies, gives an in-depth overview of the
research on the different strategies, and identifi es gaps in our knowledge on these
strategies to guide future research.
The pharmaceutical industry is heavily spending on developing new prescription
drugs, which are protected by patents to enable fi rms to recoup their research and
development (R&D) costs. When the patent on a branded drug expires, generic
drugs enter the market to compete based on price. Dimasi et al. ( 2003 ) estimate the
development costs of an average drug at $802 million in 2000. While the costs of
E. Kappe ( * )
Smeal College of Business, Pennsylvania State University , University Park , PA 16802 , USA
e-mail: erk11@psu.edu
Search WWH ::




Custom Search