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The World's Leading Pharmaceutical Companies Face Difficult Times Due to the Generics Erosion

Posted on: Thursday, 2 February 2006, 15:00 CST

Research and Markets (http://www.researchandmarkets.com/reports/c32058 ) has announced the addition of Follow-On Products as a Defense Against Generics to their offering.

The pace of generics erosion has accelerated significantly in the past few years, and the world's leading pharmaceutical companies face difficult times unless they can devise effective defense strategies. The ideal defense is a pipeline full of highly innovative new drugs in advanced stages of development, but currently, relatively few manufacturers enjoy such an advantage. Therefore, many companies have had to look for new opportunities in their existing portfolios. Follow-on drugs-products that offer significant modifications of established medicines-are one of the options that manufacturers have tried, albeit with mixed results.

Decision Resources examines the potential of follow-on drugs as a defense against generics competition. We begin by considering the recent impact of generics and the responses of research-based pharmaceutical companies. We then review several examples of follow-on products that have succeeded or failed commercially. We explore critical factors for success and explain how companies can complete the essential process of a prelaunch market analysis. We conclude with a brief assessment of the outlook and implications for the pharmaceutical industry.

Business Implications

-- Many manufacturers of blockbuster drugs have tried to

forestall generics erosion of their businesses by developing

follow-on drugs to protect, or even increase, their sales and

market share. A manufacturer launches a follow-on drug in the

hope that prescribers and patients will continue to use the

new agent long after generic versions of the earlier drug

become available. However, payers generally try to promote use

of generics in preference to follow-on drugs.

-- Companies have employed a variety of approaches to developing

follow-on drugs, including isolating single isomers, active

metabolites, or pro-drugs of blockbusters; creating

extended-release formulations; and producing distinct but

chemically related active substances. To succeed commercially,

follow-on drugs must be sufficiently different from their

predecessors to be patentable and thereby safe from the threat

of immediate generics competition.

-- Follow-on products must offer a clear clinical advantage over

the drugs they aim to supersede--generally in terms of

efficacy, side effects, dosing frequency, or mode of

administration. Placebocontrolled or non-inferiority trials

are unlikely to be adequate to persuade prescribers to adopt a

follow-on drug. However, head-tohead trials that prove the

follow-on product's advantages over the gold-standard therapy

(ideally the company's own established drug) or other

competing treatments can be very helpful in persuading

physicians to switch patients.

-- Experience suggests that a follow-on product should ideally be

introduced at least one to two years before the company's

predecessor drug loses patent protection. This time frame

allows enough time for the majority of patients to be switched

to the new medicine before the advent of generic versions of

the older drug. Each patient who is still taking the

predecessor drug after its patent expires is a patient at risk

of being lost to generics competition.

-- To expedite the switching process, it is generally advisable

to set the price of a follow-up product below that of its

predecessor. The shorter the interval between the launch of a

follow-on product and the expiration of its predecessor's

patent and/or the smaller the degree of clinical improvement

offered by the follow-on product, the greater the need to set

the price of the follow-on product below that of the original

drug.

-- A thorough prelaunch market analysis is indispensable to

developing the right positioning strategy, managing

cannibalization, setting the optimal price, and adapting to

changes in the pricing and reimbursement environment in

individual markets. It is particularly important to confirm

that a follow-on product has strategic competitive advantages

in the criteria that matter most to prescribers. The

techniques described in this report can be used to drive this

analysis.

-- Many European countries permit, or even encourage, pharmacists

to substitute generics for branded versions of off-patent

drugs. Following the recent expansion of the European

definition of generics, pharmacists in some countries might be

authorized to dispense a generic version of an older drug in

place of a follow-on product that is available only as a

brand.

Topics Covered - Generics--An Unstoppable Avalanche? - Research-Based Companies' Responses to the Generics Threat - The Potential of Follow-On Drugs - Successes and Failures - Critical Factors for Success - Demonstrable Clinical Superiority - Timing - Launch Price - Commitment from Senior Management and Marketing - Promotional Support - Prelaunch Market Analysis - Product Value, Relative Performance, and Positioning - Cannibalization - Optimal Launch Price - Risk of Generics Substitution - National and Regional Pricing and Reimbursement Issues - Outlook and Implications for the Pharmaceutical Industry Companies mentioned in this report include: - Schering-Plough - Bristol-Myers Squibb - Eli Lilly - AstraZeneca - Merck Sharp - Sepracor - Prilosec - Nexium - Forest Laboratories - Novartis - Pfizer - GlaxoSmithKline - Dieckmann

For more information visit http://www.researchandmarkets.com/reports/c32058

Source: Business Wire

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