Fending Off Generics

Between now and 2008, approximately $80 billion worth of prescription drugs are scheduled to lose patent protection. In that time, much like the cicadas who emerge every 17 years to blanket parts of the United States, generic versions of branded pharmaceuticals will flood the market, threatening to seize substantial market share from some of today’s best-selling drugs. To find out what manufacturers are doing to face this challenge Selling Power spoke to Jon Hess, a senior analyst with Cutting Edge Information (www.cuttingedgeinfo.com) and the author of a new study on combating generics. Realistically, says Hess, most of today’s solutions to the dilemma of selling against generics come more from the R&D and marketing sides than sales.

“To some degree, there really is not a lot manufacturers can do once a generic reaches the market,” he explains. “Usually, when the first generic comes to market a branded drug’s sales drop at least 20%, and sometimes as much as 70% or 80%. When second and third generics come to market, branded sales are almost sure to drop by 80% or more. As a result, companies are beginning to develop antigeneric strategies earlier and earlier in a drug’s lifecycle. This is absolutely necessary if they are to maximize the returns on their investments because many of the strategies they must use require years to implement.”

One such strategy is to develop next generation drugs in a process called evergreening. Hess says AstraZeneca recently deployed this strategy successfully. “Prior to Prilosec coming off patent, AstraZeneca launched Nexium, which is an improved drug based on Prilosec,” he says. “The company spent a ton of money to market Nexium and everyone became familiar with the purple pill. AstraZeneca used its sales force to promote the drug’s improvements over Prilosec to physicians. As a result, following Nexium’s approval by the FDA in February 2001, the company had successfully switched 40% of its Prilosec patients to Nexium by 2002.”

Evergreening is no guarantee of success, however. Schering-Plough tried the same approach in an effort to transition customers off Claritin and onto Clarinex, but along the way ran into delays with FDA approval, an opportunity generics manufacturers eagerly exploited. “From 2001 to 2003 Claritin sales dropped from $3.2 billion to $289 million,” Hess says, “and Clarinex only reached $561 million in sales by 2003. So switching patients to next-generation drugs certainly is not without risk.”

Another approach Hess has observed uses a so-called flanking strategy in which branded companies establish manufacturing and distribution agreements with generics manufacturers. These agreements usually stem from out-of-court patent lawsuit settlements.

“Typically a branded company will agree to supply a generic manufacturer with its drug so the generic company can market it under its own label,” Hess explains. “With this approach generics don’t have to spend a ton of money to set up manufacturing facilities to make the drugs themselves, and the generics pay the branded companies royalties on their sales so the branded companies can effectively retain some additional share of the market even as patients switch to generics. Again, this strategy is insufficient because branded companies still eventually give up a large portion of their market share to generics, though keeping some share of the market is better than losing it all.”

On the sales side, Hess admits there is little front-line drug reps can do to compete once the generic genie is let out of the bottle. The fact is generics are cheaper and managed care organizations and health insurance companies are always going to look at cost when developing their formularies. His best suggestion is merely to stay in close contact with physicians and remain a good source of information to them.

“Sales reps and managers can build strong relationships with their doctors from the outset,” he says, “so the docs they call on will continue to spend time with them and continue to let them deliver their messages. Reps can build these relationships by acting as a scientific and medical resource for physicians. Physicians rely on reps to keep them abreast of new meds and the latest treatments in their fields. Beyond this, once generics hit the market reps can focus on delivering messages about the differences between their company’s drugs and their generic competitors. For example, although the active ingredients must be the same in generics, the composition of generic drugs can be different to the extent that the active ingredients are absorbed into the body more slowly than a branded drug. If reps focus on these kinds of messages, they might stand a chance of convincing doctors to keep prescribing their drugs instead of generics.”