Biomedical Engineering Reference
In-Depth Information
establishment of brand loyalty by locking out competition. Their main focus is on
“leveraging patents though trademarks”: the combination of patents and trademark
protection may have two main benefi ts for a fi rm: the exclusivity secured by the
patent might lower the marketing costs of creating a strong brand and simplify the
establishment of brand loyalty by locking out competition.
Explanatory case studies on Round-Up, NutraSweet, Tagamet, Zovirax, and
Bayer Aspirin show that a former patentee's loyal customers are willing to pay a
premium price on an off-patented product, even though competing products on
competitive price levels are available. Therefore those companies were able to shift
profi ts ensured by from the formerly patent protection to the trademark, enabling
those companies to charge premium prices even though the patent has expired.
This leads these legal scholars to the hypothesis that a long-term interested pat-
entee also taking future profi ts into account (after the patent expired) will charge
less than the maximum monopolistic prize during the patent period and invest more
in product quality to build up brand loyalty. To test this hypothesis they constructed
a stylized two-period model: during the fi rst phase the patent protection enables
companies to maximize their profi ts. When the patent protection is expiring in the
second phase, companies need to build up and rely on brand loyalty and trademark
protection to insure competitive results, without exploiting the above mentioned full
monopoly power a patent grants. Finally Parchomovsky and Siegelman (
2002
)
expand the above mentioned theory to trade secrecy and copyrights, suggesting that
this would create comparable synergy effects.
In independent work that follows similar logic, Jenneweins (
2005
) assumption is
that brand equity might be combined with patents (referred to as technological pro-
tection) to build a “multi-layer, complex intricate shield” protecting against com-
petitors and imitating products. To support his argument he presents two in depth
case studies one on Bayer Aspirin and another on Cisco Systems, showing how
these companies were able to build and tighten their dominant market positions over
time even when the protection by patents expired. Starting with these case studies
he develops a life cycle model showing how intangible technological assets may
interact with brand equity to create an enduring protection, ensuring signifi cant
margins, and market shares.
9.2.3
Pharmaceutical Marketing Mix Models
Given the pharmaceutical landscape ground rules and opportunities described above
and summarized in Table
9.1
, what does the literature say about marketing mix
variables (product, place, promotion, price) that can be managed when an incumbent
drug manufacturer is confronted with patent expiry?
The least regulated variable of the marketing mix in the US context is price. Post
expiry competition from generics that enter a pharmaceutical market is what drives
down the incumbent's sales revenue curve as illustrated in Fig.
9.1
. Postlaunch and
pre-expiry Lu and Chomanor (
1998
) found that the extent of therapeutic advance of
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