In order to revive themselves or prevent competitors from cannibalizing their market share, the pharmaceutical industries often resort to the following:
Some larger firms prefer acquisition of generics producing smaller firms and may re-market the same drugs under their brand name (Gagnon & Volesky, 2017) This allows them to spend more resources on marketing, advertising etc. while partially avoiding the clinical trial costs. However, these acquisitions often are hampered by legal issues, back and forth paperwork and operational negotiations. Another strategy that the big pharma often uses is in-licensing products that have reached the later phases of the drug development pipeline, but it often takes up to three years for this process to complete.(David et al., 2007).
Many pharma companies also indulge in ‘Pay for Delay’ deals which mean that the Innovators pay the generic companies predetermined amounts of money in order to stop them from filing their registrations to start selling the drug. In this way, even after the Innovators have lost their exclusivity, they can still enjoy their monopoly while the generics producer (usually smaller companies) have a fixed income flow and no fear of market competition. Engaging in such deals is perceived as beneficial for both the innovators and the following generic companies. Often, the market followers i.e. the generic producing companies are looking for a periodic cash flows to keep their organizations running efficiently. The average generic price varies for about 6.6 to 66% of the innovator drug in a span of 1-5 years after the first generic has been launched. Furthermore, with market entry of one extra generic, the average relative re-imbursement for those generic drops down by 13% (Vondeling, Cao, Postma, & Rozenbaum, 2018). Hence, the generics are often inclined towards securitizing their own income flows rather than going for a head on collision with the market leaders as well as other generic manufacturing pharmaceutical companies. However such deals are now deemed anticompetitive as they don’t promote fair competition and also offer room for price manipulation of drugs.
Yet another strategy that big pharmaceutical companies use to revive the market despite losing exclusivity is to introduce Authorized Generics to the market. Authorized Generics are exactly identical in terms of the chemical composition to the original Blockbuster drug, but they are marketed and sold under a private label either via a generic producing subsidiary of the Innovator company itself or via third party collaborations with the Innovator(Hand, 2017). This is the most commonly used strategy in order to maintain a fair market share by the Innovator company albeit at much lower profit margins than previously obtained. The first generics product to enter the market (in the United States – given that it has the required regulatory approvals) after the patent expiry of blockbuster drugs is given a 180-day exclusivity period. During this period, no other firms producing the same generic drug can sell their products, the only exception being ‘Authorized Generics.’ Because, Authorized Generics originally stem from the same Innovator firms who invented the original blockbuster/branded drug, they can sell their generic version of the products even during this exclusivity period.
Trend termed as the Rx to OTC switch has been increasingly observed in the recent years. Big Pharma companies have started to apply for reviews to re-classify their drugs from a Prescription Drug (Rx) to an Over the Counter Drug (OTC). Doing so gives them a potential opportunity to market their product straight to the end-consumer which isn’t possible with prescription drugs(Kumar & Nanda, 2017). For proving that a drug is worthy to be sold as an OTC, the pharma companies invest a huge amount of resources to prove the benefit to risk ratio is considerably high and that wrong usage of the drug can be limited(Fidler & Rebecca, 2016). Usually, pharma companies intend to tap into the mass market of people suffering from allergies and other selftreatable conditions like common cold etc. This is usually done to still maintain the monopoly of
the original drug which would have been shattered by the generics.
- Fidler, B., & Rebecca, M. (2016). The Growing Number of Over-the-Counter Medications Influencing Prescribing Practices. The Journal for Nurse Practitioners, 12(3), 161–165.
- Kumar, A., & Nanda, A. (2017). Ever-greening in Pharmaceuticals: Strategies, Consequences and Provisions for Prevention in USA, EU, India and Other Countries. Pharmaceutical Regulatory Affairs: Open Access, 06(01), 1–6
- Hand, S. (2017). Pharmaceutical Industry Cannibalization: The Launch of Authorized Generics After the Loss of Market Exclusivity. Retrieved from Life Science Blogs website:
- Vondeling, G. T., Cao, Q., Postma, M. J., & Rozenbaum, M. H. (2018). The Impact of Patent Expiry on Drug Prices: A Systematic Literature Review. Applied Health Economics and Health Policy, 16(5), 653–660.
- Gagnon, M. A., & Volesky, K. D. (2017). Merger mania: Mergers and acquisitions in the generic drug sector from 1995 to 2016. Globalization and Health, 13(1), 1–7.
- David, C., Chadwick-Jones, A., Pasternak, A., Sabow, A., Weissel, M., & Hall, J. (2007). Beyond the Blockbuster. In Oliver Wyman.