Patent Expiry and Pharmaceutical Market Opportunities at the Nexus of Pricing and Innovation Policy - Innovation and Marketing in the Pharmaceutical Industry - page 270

large, globally dispersed, and growing in size. The GERD drug category in the
United States at that time was dominated by H2 receptor antagonist prescription
medicines such as Tagamet (cimetidine) or Zantac (ranitidine). These solutions
attempted to minimize the damage that might be done by the refl ux of acid that was
already in the digestive track.
With the US introduction of Prilosec (omeprazole) in the fall of 1989, 12
Astrazeneca (AZ) offered a new breed of medicines known as proton pump inhibi-
tors (ppi). The treatment consisted of a daily dose regimen that slowed down the
production of the stomach acids. Subsequent refl uxing with more neutral stomach
content is less irritating to the patient and minimizes the damage that leads to
advanced GERD disease states such as erosive esophagitis. Prilosec 13 was the fi rst
proton pump inhibitor to enter the GERD category in the US. Proton pump inhibitors
raised the performance of GERD medications and created a new expected standard
of patient outcome or quality. Multiple other pharmaceutical fi rms eventually entered
the ppi market with similar patented prescription drugs such as Protonix, Prevacid,
and Aciphex but these did not have the same level of effi cacy for GERD as Prilosec.
Prilosec maintained a premium price during the pre-expiry period of $4/pill. 14
By 1993 AZ had become a “blockbuster” with annual global sales of more than
US$ 1 billion. Formal planning for sustaining the AZ revenue in the category
beyond patent expiry began in 1995 by an interdisciplinary group of AZ marketers,
scientists, and lawyers known as the “Shark Fin” project (Harris 2002 ). This group
considered a host of marketing and intellectual property-based options including
many described in Table 9.1 .
The GERD category sales and marketing maneuvers of Astrazeneca over the
period 1993 through 2011 are illustrated in Fig. 9.3 . The fi gure is a compilation of
management activities related to the product and its improvements, AZ marketing
spending on various ppi offerings, intellectual property maneuvers, and AZ category
revenue. 15 Note that the AZ revenue line in the fi gure is superimposed on an adjusted
curve of “top decile” average sales dynamics for all pharmaceuticals (Fig. 9.1 ).
Comparing the two revenue lines in the fi gure, the AZ Prilosec revenue closely
mirrors the sales growth activity of other blockbusters rising to an industry best
and peak of US$6.2 billion/year by 2001. 16 After patent expiry, the top decile of
sales drugs typically experiences a dramatic fall off in sales revenue as shown in
Figs. 9.1 and 9.3 due to aggressive price-based competition from generics. But the
12 AZ received US FDA approval for Prilosec on September 14, 1989.
13 Outside the United States, Prilosec was marketed as Losec. AZ was not allowed to use the name
Losec in the United States since it was believed that this might be confused with a blood thinner
called Lasix.
14 All prices discussed in this paper are full retail price in the US market and denominated in US$.
15 Figure 9.3 revenue refl ects global sales and come from public sources including US SEC 10 K
fi lings.
16 Sixty-eight percent or all AZ ppi sales in 2000 were in the US market. Hence focus of analysis is
US market.