Patent Expiry and Pharmaceutical Market Opportunities at the Nexus of Pricing and Innovation Policy - Innovation and Marketing in the Pharmaceutical Industry - page 273

In October of 2002, a US Federal trial court found that all of the above ANDA
applicants except KUDCO were guilty of infringing the AZ orange book patents for
omeprazole and hence could not enter the market. The court further found that the
two AZ orange book patents at issue were valid and hence enforceable.
With the litigation concluded, the FDA awarded the 6 months generic market
exclusivity to the fi rst applicants Genpharm and Andryx at 10 and 20 mg dose levels.
Unfortunately, neither could enter the market because of the aforementioned
infringement of orange book patents. Hence AZ could continue monopolizing the
omeprazole market.
In the last 2 weeks of October 2002, KUDCO representatives met with Genpharm
and Andryx and negotiated a deal. In exchange for revoking their respective ANDA
exclusivities, these fi rms would partner w/KUDCO, the only ANDA applicant
found not guilty of patent infringement in the litigation w AZ, to enter the generic
omeprazole market.
On October 31st, 2002 the FDA received from Andryx and Genpharm requests
for relinquishing the 6 month marketing exclusivity associated with their ANDA
approvals. On the following day, November 1st, 2002, the FDA approved the next
ANDA application (KUDCO) to enter the US generic market. In the subsequent
months KUDCO and their silent partners Genpharm and Andryx became duopolists
with AZ in the market for omeprazole. They priced their offering at a relative
discount (approx. US$3/pill) to the pre-expiry Prilosec price. In 2003, KUDCO
reported generic omeprazole sales in excess of US$1 billion. Other generics entered
the omeprazole market in subsequent years eventually realizing a 30 % share of the
ppi market.

9.3.4 Astrazeneca Strikes Back with “Sandwich” Approach

Fighting fi re with fi re, the AZ project team decided to pursue an OTC distribution
option for a 20 mg omeprazole tablet. The required SNDA was approved in
September of 2003. Following a plan dating back to 1995, AZ partnered with
consumer packaged goods fi rm Proctor & Gamble to launch, distribute, and mar-
ket what is now called Prilosec OTC. As shown in the Fig. 9.3 , the annual media
spending for this launch varied from US$40 million in 2003 to more than US$100
million in subsequent years. The messages targeted blue collar workers, laborers,
and busy mothers who could neither afford Nexium nor see a doctor for their
condition. As such, they avoided messaging confl icts that might cannibalize
Nexium sales.
As the low cost producer of omeprazole with 15+ years of volume production
experience, AZ's pricing and branding of the OTC offering became the lower por-
tion of the sandwich approach illustrated in Fig. 9.2 . AZ launched Prilosec OTC as
a 20 mg dose of omeprazole (same quality level as prescription Prilosec) and in a