Biomedical Engineering Reference
In-Depth Information
Short-term Impact
Medium-term Impact
Long-term Impact
Pricing
Differentiation
Switch to OTC
Marketing
Promotion
Branded generics
Divestiture
New indications
Combination drugs
Research and
Reformulations
Next generation
Development
Products
Legal
Generic settlements
Patenting strategy
Fig. 8.2 Pharmaceutical lifecycle extension Strategies classifi ed according to their impact.
Source : Adapted from Sandner and Ziegelbauer ( 2008 )
studies fi nd that generic entry decreases the total market size of the molecule,
branded prices increase after generic entry, and marketing expenditures decrease
before and after patent expiry.
The combination of higher costs of drug development and an increasing share of
generics has lead fi rms to focus on alternative strategies to make profi ts. An impor-
tant development in the industry is the focus on strategies that increase the returns
from an already approved drug. Firms have various possibilities to extend the life-
cycle and profi tability of a branded drug, before and after its patent has expired.
These lifecycle extension strategies can be divided into marketing strategies, R&D
strategies, and legal strategies (see Fig. 8.2 ). 1 In this chapter, I discuss these pharma-
ceutical lifecycle extension strategies and focus on providing an overview of prior
academic research and directions for future research. 2
Marketing strategies to extend the lifecycle of a branded drug include the pricing
of the drug before and after patent expiry, the promotion strategy, differentiation
strategies, the divestment of a drug, the introduction of branded generics, and mak-
ing the drug available over-the-counter (OTC). Marketing strategies can be executed
relatively quickly compared to other lifecycle extension strategies. The price of the
branded drug before and after patent expiry is important as generics enter the mar-
ket with substantially lower prices and margins than the branded drug (Frank and
Salkever 1997 ; Grabowski and Vernon 1992 ). When the number of generics
increases the generic prices approach marginal costs (Reiffen and Ward 2005 ). The
branded manufacturer may decide to decrease its price to face head-to-head
competition with generics, or maintain or even increase its price to focus on the
1 Another consequence of the increasing market share of generics is that many branded manufac-
turers have recently moved into the generics industry via acquisitions.
2 There are plenty of cases written about specifi c lifecycle extension strategies. For example,
Kvesic ( 2009 ) discusses various lifecycle extensions of nifedipine (Adalat, Procardia) over a
30-year period, such as new indications, new dosages, a combination drug, etc. Chandon ( 2004 ) is
another excellent case, discussing the strategies used by Clamoxyl in France to fend off generics.
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