Combating Generics - Pharmaceutical Brand Defense for 2007

A Report by Cutting Edge Information

Combating Generics: Pharmaceutical Brand Defense for 2007 (PH76) examines strategies used by branded drug companies to defend products against generic competition.

Prevalence of Different Strategies

Based on gathered data, the most popular generics defense strategy employed in the past three years was the launch of new product formulations (see Figure 1.1). Of the 33 companies surveyed for this information, 27 (82%) marketed new formulations to extend patent life in the face of pending patent expirations.

The options ranking second through fourth are less dramatic. Close control of pricing was the second-most used option – 70% of surveyed organizations employed some type of defensive pricing to retain a portion of their products’ market share. At 64%, dependence on general franchise strength was the third-most popular option. Ranking fourth was increased marketing, which found use among 58% of the surveyed companies.

These efforts are notable for the degree of control exerted over them by marketing and senior management. Other activities, such as next-generation launches, rely on R&D success and scientific breakthroughs. Some options, such as approvals for new indications (used by 55% of companies) and pediatric extensions (used by 27% of companies) may simply not be appropriate for a given class of drug or disease state.

The activities that involve proactively switching branded products to generics – authorized generics (39%) and generics subsidiary (21%) – ranked very low. Survey respondents pointed out these options are extremely unpopular within brand and lifecycle management groups, as they do little to retain market share and product revenues. The decisions to pursue these options are often handled outside of day-to-day brand management, and they are seen as a method for giving generics competitors unnecessary inroads into valued markets at the cost of branded companies. In a similar vein, serious pursuit of OTC status – impossible in many cases from a regulatory perspective – only occurred at 18% of respondent companies.

Figure 1.1: Prevalence of Generics Defense Strategies in Last Three Years (2004-2006)

Only one company surveyed for this question mentioned the use of combination products as an anti-generics strategy. Product and lifecycle managers throughout the industry, however, are monitoring the success of fixed-dose combinations as a generics defense strategy. However, they point out that only more resource-rich organizations, with well-developed R&D organizations and close marketing-R&D collaboration, will be able to produce viable combination brands.

Combination Discussion: Case Study of Lipitor/torcetrapib

(Excerpted From Chapter 2, Section 1: “Secure Revenue Streams with Line Extensions”)

Any potential combination involving Lipitor and torcetrapib is still in its infancy, and final judgment on its success must wait. Even before the situation is clear, however, one thing is certain: the prospective combination of Lipitor and torcetrapib marks new territory for the branded drug industry.

Lipitor, the world’s top-selling drug with sales of $10.9 billion in 2004, is scheduled to lose patent protection in June 2011. Already, however, Pfizer is vigorously defending Lipitor’s exclusivity while launching long-term lifecycle extension plans. The company recently won a court case preserving Lipitor’s major patents through 2011. Pfizer has also taken several steps toward developing a stable of Lipitor-based combination products to replace revenues when generic competition appears. As mentioned previously, Pfizer has already launched one product, Caduet, that combines Lipitor with another drug, Norvasc. This brand has had a steady sales uptake since its launch in May 2004, though it is still too soon to predict its success in the long run.

However, Caduet is not the combination product that has garnered the most attention and controversy. That distinction belongs to Pfizer’s effort to develop a drug combining Lipitor with torcetrapib, a compound shown to sharply increase levels of HDL, or “good,” cholesterol. This combination is expected to be one of the most promising new cardiovascular treatments, since it will blend the maintenance of both HLD and LDL, or “bad,” cholesterol

Any controversy arises from Pfizer’s strategy to only sell torcetrapib in combination with Lipitor. Existing combination products usually consist of two medicines that are independently available to patients. If Pfizer launches this combination, however, patients will not have access to torcetrapib alone. Any prescriptions for torcetrapib will naturally include Lipitor as well.

This approach means that Pfizer is taking the next-generation and combination-drug strategies a step further than other companies. By packaging Lipitor with torcetrapib, Pfizer will be able to aggressively preserve a large percentage of Lipitor’s franchise sales, which contributed to 24% of corporate revenue in 2004.

Critics feel that the combination pill will give Pfizer an unfair stranglehold on the market. However, legal specialists say that FDA approval would automatically protect the company from antitrust laws that might otherwise bar Pfizer from linking the drugs. Nonetheless, the new combination pill has more hurdles to clear before it is approved, including concerns that it might raise blood pressure.

Pfizer has been working closely with the FDA to design its clinical trials to examine whether the Lipitor-torcetrapib combination treats heart disease more effectively than Lipitor alone. If the clinical trials, which reportedly cost $800 million and involve 25,000 patients, are successful, the combination pill could be available by 2008. If approved, this combination pill will secure a sizable revenue stream to reinforce Lipitor’s stand-alone sales. At the same time, Pfizer will establish a new strategy to battle generics and lost profits.

Any potential competitor products are years from launch. Merck’s product in development, MK-0524B, is a combination of MK-0524A and Zocor that also aims to raise HDL cholesterol while lowering LDL cholesterol. Meanwhile, the current treatment for raising good cholesterol, vitamin niacin, has unpleasant side effects that limit its usage.

By strategically positioning torcetrapib in combination with Lipitor, Pfizer will have successfully increased Lipitor’s value to the company even as generics enter the market. Pfizer CEO Hank McKinnel calls the torceptrapib/Lipitor combination a $10 billion opportunity. If this combination pill and marketing strategy prove successful, it will not be long before other pharmaceutical companies seek similar opportunities of their own.