Innovation in the Pharmaceutical Industry: The Process of Drug Discovery and Development - Innovation and Marketing in the Pharmaceutical Industry - page 40

subsidiary or an independent third party to sell a generic drug, sometimes known as
a pseudo - generic or authorized generic , under the original patent. Sometimes the
pseudo-generic drug is still manufactured by the originator fi rm, but is marketed
under a different brand name. The introduction of pseudo-generics is usually a pre-
emptive strategy originator fi rms may undertake pending the invasion of true gener-
ics (Hollis 2002 , 2003 ). The intention is to ward off the signifi cant loss of market
share upon patent expiry and to retain greater market control by being the fi rst
fi rm to offer a generic option. However, the practice of introducing pseudo-generics
is sanctioned differently across countries. As national regulators may fi nd it objec-
tionable enough to challenge it, it has not become routinely used yet.
As the differentiation value of generics is associated with their low price, the fi rst
generic entrant in a market seems poised to capture a considerable part of the price-
sensitive segment and can essentially lock it in, ensuring long-lasting market domi-
nation. Late generic entrants would have to overcome pharmacy inertia and patient
switching costs to displace the fi rst generic entrant. Therefore, if a pseudo-generic
is the fi rst generic drug to enter a market previously dominated by the originator
fi rm, the fi rm can retain more of its market power, although its sales revenue will
inevitably plummet. Hollis ( 2002 ) points out that in Canada, where the practice of
originator fi rms offering pseudo-generics is legal, it may cost about $1 million to
introduce the fi rst generic drug in the market. Still, the benefi ts are certainly worth-
while as the fi rst generic can reach a sustainable market share advantage of 20-35 %
relative to late generic entrants (Hollis 2002 ).

2.2.7.2 Changes in the Between-Molecule Competitive Dynamics

The incursion of generic drugs in the wake of a major patent loss will almost cer-
tainly affect the sales of the other branded, non-bioequivalent drugs in that class,
even if they are still under patent protection. Price - sensitive physicians may increase
the prescription incidences of generic drugs to the detriment of most branded drugs
in a therapeutic class, regardless of their patent status. Moreover, the branded drug
that has lost its patent will often scale back on its detailing efforts, enabling the drug
representatives of rival non-bioequivalent brands to more easily switch detailing -
sensitive physicians to their own brands. Gonzalez et al. ( 2008 ) fi nd empirical evi-
dence that with generic entry, the ensuing within-molecule price competition and
the reduced marketing support of the fi rm losing its patent can also affect the
between-molecule, non-bioequivalent competition in the same class. The overall
effect on the sales of patent-protected non-bioequivalent drugs in that class will
depend on: (a) their own marketing response in the wake of the patent loss; (b) the
size of the price-sensitive and the size of the detailing-sensitive physician segments;
and (c) the already established patient loyalties to the brand that is under attack
because of patent loss.
In summary, the competitive landscape will get irreversibly altered when a major
pioneer brand loses its patent protection, giving rise to interesting dynamics within
the affected therapeutic class. In addition to the within-molecule rivalry instigated