Pharma treads a fine line to the tipping point where there is insufficient time to recoup a drug’s cost due to the number of years left that the patent can run. When drugs reach their patent expirations, generic manufacturers typically enter the market with products, mostly far cheaper than the original. This is the so-called “patent cliff”.
This places pharma companies in a difficult position due to huge expenditures on R&D, possibly irretrievable costs, and the potential to lose up to 90 percent of their sales. However, companies can adopt methods to maximize the time to commercialize a drug within the patent protection period and execute life cycle management strategies that enable business sustainability for a drug well beyond its patent cliff.
The need to obtain a significant return on investment within the patent protection period
The Food and Drug Administration (FDA) normally grants a patent for 20 years. While this may seem like a long period in which to gain a significant return on investment (ROI), it is important to remember that it can take from eight to 12 years to gain FDA approval.
One example of this lengthy process is that, according to US Federal Law, an approved marketing application must be obtained before a drug can even be trialed or distributed across state lines. This means that clinical trials in other states, especially orphan drugs for rare diseases where it is hard to find sufficient participants, require an exemption.
Foreseeing the paper storm
For the launch process to be successful for market access needs to begin when a pharma company plans its first set of trials. Plotting a winning trajectory in the first year of the launch can be achieved through planning from the initial stages through to market launch. Payer power has grown in recent years, and a robust end-to-end strategy is all the more important for smaller companies with limited portfolios and slimmer margins. Large companies, with a diverse portfolio of products, can accept smaller returns and are better equipped to weather the paper storm in negotiations with payers.
Standing on the brink of a patent cliff
Early on, pharma companies must prepare their strategies to continually promote a product well beyond the patent expiration to help ensure market share and sustain revenue. Three life cycle management strategies that drug manufacturers adapt to overcome the patent cliff include:
Delaying the entrance of generic competitors
Applying for secondary patents is an astute tactic to help to delay the market entrance of generics. Manufacturers of branded medicines can re purpose a drug for a different indication, with a different trademark, for which the FDA can grant a three-year new use/new clinical studies exclusivity. This patent extension prevents the FDA from granting approval to generic drug makers who are utilizing the clinical study findings of the branded drug. Drug makers can also extend the product line by making alterations to the chemical formulation or the manufacturing procedure for the originator products, for which manufacturers can then apply for a patent. These alterations can lead to improved compound performance, such as reduced side-effects, a new administration route, or reduced dosing, as well as generate cost savings.
Maintaining brand loyalty
To mitigate revenue losses, some companies develop follow-on products, which are designed to be superior to the reference drug and engage its customer base. Some pharma companies also seek growth in other markets. An example of this, when faced with a patent cliff in 2007, Novartis expanded its presence in developing high-growth markets, such as China, India, and Brazil. From a typical hiring rate of 150-200 people per year for China operations, Novartis CEO, Joseph Jimenez, increased the count to 500 a year for the next four years. By 2011, Novartis’ China markets grew by 38 percent. By the second quarter of 2012, sales from high-growth markets accounted for almost a quarter of the pharma giant’s total global sales
Taking an active role in the generics market
By developing a “branded generic”, pharma companies can establish a presence to try and capture a share of various drug-class markets. The manufacturer of the branded drug has a strong position in the face of competition as it has a distinct manufacturing advantage. The various drains on pharma patent lead time forces manufacturers to have informed strategies to ensure they recoup the huge R&D costs behind the creation of a drug.Back
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