Biomedical Engineering Reference
In-Depth Information
remain its only sources of leverage. In the USA, drug formularies (lists of drugs that
are covered by the health insurance companies) would only include the cheapest
bioequivalent drug, which is typically a generic. The difference to the original
brand's price is not reimbursed by insurance companies and has to be paid out-of-
pocket by patients who want to retain their original treatment. Although the vast
price differential causes the original brand to lose much of its market share, it may
still retain a decent stream of revenue from prescriptions to patients who perceive its
quality as superior. On occasion, physicians can refuse to allow substitutions to
generic drugs for fear that switching medication may interfere with their patients'
treatment, or apprehension that the cheaper alternatives may contain inactive ingre-
dients that can cause allergies or other unwanted side effects.
It is precisely because of their bioequivalence to the original drug that, when
fi nally given access to the market, generic drugs have a limited set of marketing
tools to differentiate themselves. The lack of unique identity can prevent a generic
brand from vertical differentiation based on quality, as the ANDA process has
proven it equally effective and safe, but not superior to the original brand. This
results in predominantly horizontal product differentiation. Parity in quality, how-
ever, seems to be questioned by some patients and physicians, and these qualms
give rise to the segment that remains loyal to the original brand.
The most prominent characteristic of a generic brand is its low price relative to
the original brand.
Offering a huge price advantage relative to the much more expensive branded
drug is not problematic for the generics as they don't need to recoup the signifi cant
R&D cost associated with the discovery and the development of the original mole-
cule, and can get by on a fairly limited marketing budget. Besides, generic drugs can
take a ride on the coattails of the existing market awareness for the pioneer drug
they replicate, and often set out to exploit its brand recognition. Some generics
openly reference the original brand on their product labels, trying to gain from
favorable price comparisons and direct associations with an already familiar brand
name.
Yet, overreliance on low price in a fairly competitive market can trigger a price
war that can quickly annihilate the profi ts for the generic drug manufacturers.
Occasionally, to remain viable, generic drug manufacturers turn to offering prefer-
ential arrangements and better terms to distributors (Kanavos et al.
2008
). Branding
their products in an effort to enhance recognition and build credibility can be an
alternative strategy.
Branded generics
are prescription products that are either novel
dosage forms of off-patent products, or a molecule copy of an off-patent product
with a trade name. In either case, branded generics are produced by a manufacturer
that is neither the originator nor is licensed by the originator of the molecule. By
dispensing with the anonymity often associated with such products, generic drug
manufacturers can create recognition and differentiation through a perception of
better quality, which can also translate into higher prices.
In some countries, the original drug manufacturer may resort to a multi-branding
strategy and introduce what is essentially a fi ghting brand by licensing its own
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