Patent Expiry and Pharmaceutical Market Opportunities at the Nexus of Pricing and Innovation Policy - Innovation and Marketing in the Pharmaceutical Industry - page 274

Fig. 9.4 AZ and sandwich pricing strategy applied to US PPI drug market
purple package suggestive of the association with the original Prilosec purple pill. 22
The launch pricing for Prilosec OTC was as low as US$0.71/pill. This was at a price
point suffi ciently low that the generics could not immediately compete. A further
advantage of Prilosec OTC over the generics was that it did not require a prescription.
The dynamics of the sandwich approach as executed by AZ both pre and post
generic entry are illustrated in Fig. 9.4 . Pre-expiry, the 20 mg dose of the prescrip-
tion Prilosec purple pill was retail priced approx. US$ 4/pill (q, p). During the
period before and after generic entry Nexium was launched and positioned as
“today's purple pill” with improved effi cacy (q+) and eventually priced at a pre-
mium (p+). Prilosec OTC was launched with an active ingredient dosage equivalent
to the generics (q) but at a substantial discount relative to the generics (p−). In the
aggregate the approach surrounded the price competitive offerings of multiple
generics effectively locking them into the middle of the market. AZ reported in
2004 that the effect of this effort lead to a 30 % drop in the generics share of the
omeprazole market during the fall of 2003. Additionally AZ sales of ppi drugs even-
tually increased to over US$6.6 billion/year in 2006 and continued at approximately
22 The Prilosec OTC medication was a pink tablet and not a purple pill. The only purple pill on the
market would remain as Nexium. AZ eventually realized formal trademark registration for the
exclusive use of the color purple on a pill in the “preparations for gastrointestinal diseases” cate-
gory in 2004, US TM registration #2806099.