Biomedical Engineering Reference
In-Depth Information
Fig. 9.2
Quality, price, time, and branding dimensions of a proactive or reactive sandwich pricing
strategy
In the pharmaceutical context execution of the sandwich approach benefi ts from
proprietary knowledge of the quality dimensions that incumbents may develop pre-
expiry. Brand equity that may be developed through DTC advertising is an impor-
tant attribute of the quality variable. If brand equity can be split (q+, q−) in a manner
that avoids consumer confusion and cannibalization then it is conceivable that the
sandwich so applied could help to minimize the negative revenue impact of price-
based competition.
The Place variable and or the distribution channels for prescription drugs are
regulated (physicians, pharmacists, apothecary etc.) in most countries. While there
has been an increase in online and mail order prescriptions delivery and cross border
prescription drug purchasing behavior in the recent past, we will limit our discus-
sion of Place to patent expiry-related moves by the incumbents into new channels
such as going over the counter (Berndt et al.
2003
). These researchers explored the
“sunset” portion of the H
2
receptor antagonist market with brands such as Tagamet,
Zantac, Pepsid, and others, all of which went over the counter post expiry. In short,
they observed that the switch to OTC failed to save the incumbent drugs from dra-
matic overall sales decline or the more damaging effects of creative destruction
from a new class of drugs that address similar disease indications (proton pump
inhibitors).
8
From the Product perspective, research into the economic returns on R&D for
118 new chemical entity (NCE) drugs introduced during the 1990s indicates that
8
Going over the counter in those markets where it is possible is not in and of itself a strategy for
avoiding the sales decreases associated with patent expiry (Berndt et al.
2003
).
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