Biomedical Engineering Reference
In-Depth Information
practice and promotion has been found to deter entry in medium-sized markets.
After patent expiry, fi rms often maintain or increase the branded drug's price and
focus on the price-insensitive customers to retain a profi table market share. Research
to date on pricing and promotion mainly describes the rationale behind branded
price changes around patent expiry. Future research is warranted on the optimal
pricing and promotion of a branded drug around patent expiry, balancing both its
competitive effects on generic and branded competitors and its effect on entry deter-
rence. Empirical studies on the profi tability of these strategies are also welcome.
Future research can also focus on the impact of trademarks before patent expiry on
the post-patent success of a branded drug and how this infl uences its pricing and
promotion strategy.
Research into differentiation strategies and divesting the drug is limited to case
evidence. Future research can focus on the impact of various differentiation strate-
gies on sales for the branded product. It is also valuable to investigate theoretically
and empirically the optimal pricing and promotion path to divest a drug. This is
especially relevant when a fi rm has multiple related products that may cannibalize
each other.
The introduction of branded generics has two potential effects on the market.
First, they can deter entry, but its effect on long-term prices is limited and works
mainly in small to medium-sized markets. Second, a branded generic can provide
the branded manufacturer with a profi table share of the generics market. The latter
applies mainly to large markets with many generic entrants. Further research is
necessary on branded generics' infl uence on the branded drug and on how to price
and market both. Furthermore, it is valuable to investigate whether preannounce-
ments of branded generics is an effective entry deterrence mechanism.
Switching a prescription drug to OTC status is a viable alternative for some
drugs. The challenge for empirical analysis on the impact of such a switch is that
different datasets need to be combined, prescription drug sales and OTC sales,
which are collected by different data providers (Berndt et al.
2003
). This is an
important reason for the lack of research in this area and interesting questions
remain to be answered to assess the impact of switching a drug to OTC status. For
example, how to price the OTC drug compared to the branded drug and compared
to possible generic alternatives. What is the optimal moment to switch to OTC?
How does brand equity transfer from the prescription drug to the OTC drug? Should
the OTC brand name be related to the prescription drug?
8.4
R&D Strategies
R&D strategies build on an existing drug in the market. Development strategies
mainly build on reputational assets, as they are extensions of an existing drug. They
make use of a patent extension or extended market exclusivity of several years.
They improve on convenience for the patient, increase drug effectiveness, reduce
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