'
`
`=-----
`PHARMACEUTICAL
`LIFE CYCLE
`MANAGEMENT
`MAKING THE MOST OF EACH
`AND EVERY BRAND
`
`Tony Ellery
`Ellery Pharma Consulting
`Magden, Switzerland
`
`Neal Hansen
`Datamonitor Limited
`London, United Kingdom
`
`~WILEY
`A JOHN WILEY & SONS, INC., PUBLICATION
`
`Page 1 of 18
`
`ACRUX DDS PTY LTD. et al.
`
`EXHIBIT 1567
`
`IPR Petition for
`
`U.S. Patent No. 7,214,506
`
`

`

`This book is dedicated to
`Judith, Glyn, Simon, and David Ellery
`and to Nicky, Bethany, and Alex Hansen.
`
`Copyright© 2012 by John Wiley & Sons, Inc. All rights reserved
`
`Published by John Wiley & Sons. Inc., Hoboken, New Jersey
`Published simultaneously in Canada
`
`No part of this publication may be reproduced, stored in a retrieval system, or transmitted in
`any form or by any means, electronic, mechanical, photocopying, recording, scanning, or
`otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright
`Act, without either the prior written permission of the Publisher, or authorization through
`payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222
`Rosewood Drive, Danver~ MA 01923, (978) 750-84(10, fax (978) 750-4470, or on the web at
`www.copyright.com. Requests to the Publisher for permission should be addressed to the
`Permissions Department, John Wiley & Sons. Inc., 111 River Street, Hoboken. NJ 07030, (201)
`748-6011, fax (201) 748-6008. or online at http://www.wiley.com/go/permissions.
`
`Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best
`efforts in preparing this book, they make no representations or warranties with respect to the
`accuracy or completeness of the contents of this book and specifically disclaim any implied
`warranties of merchantability or fitness for a particular purpose. No warranty may be created
`or extended by sales representatives or written sales materials. The advice and strategies
`contained herein may not be suitable for your situation. You should consult with a professional
`where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any
`other commercial damages, including but not limited to special, incidental, consequential, or
`
`other damages.
`For general information on our other products and services or for technical support, please
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`visit our web site at www.wiley.com.
`
`Library of Congress Cataloging-in-Publication Data:
`
`Ellery, Tony.
`Pharmaceuticallifecycle management making the most of each and every brand I
`
`Tony Ellery, Neal Hansen.
`p.;cm.
`Includes index.
`ISBN 978-0-470-48753-2 (cloth)
`I. Hansen, Neal. II. Title.
`[DNLM: 1. Drug Industry-economics. 2. Drug Approval-economics. 3. Economics,
`Pharmaceutical-legislation & jurisprudence. 4. Marketing-methods. 5. Pharmaceutical
`
`Preparations-economics. QV 736)
`
`338.4'76153-dc23
`
`Printed in the United States of America
`
`ISBN: 9780470487532
`
`2011041435
`
`Page 2 of 18
`
`

`

`-
`
`xvii
`
`xix
`
`3
`
`4
`8
`9
`
`12
`16
`17
`18
`20
`21
`22
`22
`23
`24
`26
`
`30
`
`30
`32
`34
`34
`35
`35
`36
`36
`
`vii
`
`-CONTENTS
`
`ACKNOWLEDGMENTS
`
`INTRODUCTION
`
`PART A LIFECYCLE MANAGEMENT BUSINESS
`ENVIRONMENT
`
`1. Challenges Facing the Branded Drng Industry
`1.1
`1.2
`1.3
`1.4
`
`Depleted NME Pipelines/Lower R&D Efficiency
`Higher Development Costs
`Safety Concerns
`Tougher Environment for Pricing, Reimbursement,
`and Listing
`Increased Competition
`Earlier Genericization
`Faster Sales Erosion Following Patent Expiry
`Poor Image of Branded Drug Industry
`1.8.1
`Prosperity of the Branded Drug Industry
`1.8.2
`Lack of Innovation
`1.8.3 Marketing Spend and Tactics
`1.8.4
`Safety Issues
`1.8.5 Keeping Generics Off the Market
`Diversification
`
`1.5
`1.6
`1.7
`1.8
`
`1.9
`
`2. The Life Cycle of Industries, Technologies, and Brands
`2.1
`2.2
`2.3
`
`Diffusion of Innovations
`The Lifecycle Curve
`Lifecycle Phases
`2.3.1 Development Phase
`2.3.2
`Introduction Phase
`2.3.3 Growth Phase
`2.3.4 Maturity Phase
`2.3.5 Decline Phase
`
`Page 3 of 18
`
`

`

`viii
`
`CONTENTS
`
`3.2
`
`3. The Life Cycle of a Pharmaceutical Braud
`3.1
`Lifecycle Curve of Pharmaceuticals
`3.1.1
`Slow Rate of Growth during the Growth Phase
`3.1.2 Lack of a True Maturity Phase
`3.1.3
`Precipitous Decline Phase
`Factors Affecting Rate of Conversion to Generics
`3.2.1 Government Policy
`3.2.2 Disease
`3.2.3
`Size of Brand
`3.2.4 Hospital versus Nonhospital Drug Usage
`3.2.5 Active Substance and Other Barriers to Entry
`The Life Cycle of a Pharmaceutical Brand
`
`3.3
`
`PART B LIFECYCLE MANAGEMENT REGULATORY
`AND LEGAL ENVIRONMENT
`
`4. The Generic Approval Process
`
`4.1
`4.2
`4.3
`
`United States
`Europe
`Japan
`
`5. Hatch-Waxman Legislation and Its Effects on LCM
`
`5.1
`5.2
`5.3
`5.4
`5.5
`
`Hatch-Waxman Act of 1984
`Medicare Modernization Act of 2003
`FDA Amendments Act of 2007
`Q1 Program Supplemental Funding Act of 2008
`Discussion of Hatch-Waxman Legislation
`
`6. U.S. Health-Care Reform 2010
`
`7. European Sector Inquiry
`
`PART C PATENTS AND EXCLUSIVITIES
`
`8. Patents and Other Intellectual Property Rights
`8.1
`Nonpatent Intellectual Property Rights
`8.2 What Are Patents?
`8.3 What Is Patentable?
`8.3.1
`Patentable Subject Matter
`8.3.2 Novelty
`
`CONTENTS
`
`Inventive Step
`8.3.3
`8.3.4 Utility
`8.3.5 Disclosure
`How Long Does a Patent Last?
`8.4
`Patent Term Restoration in the United States
`8.5
`Supplementary Protection Certificates in Europe
`8.6
`Patent Term Extension in Japan
`8.7
`How Are Patents Obtained?
`8.8
`Patent Enforcement
`8.9
`8.10 Types of Patents
`8.10.1 Composition of Matter Patent
`8.10.2 Medical Use Patent
`8.10.3 Formulation Patent
`8.11 KSR versus Teleflex- Raising the Nonobviousness Bar
`8.12
`Patent Strategy
`
`9. Nonpatent Exclusivities
`9.1
`NCE Exclusivity (United States)
`9.2
`New Clinical Study Exclusivity (United States)
`9.3
`Data and Marketing Exclusivity (Europe)
`9.4
`Data Exclusivity (Japan)
`9.5
`Orphan Drug Exclusivity
`9.6
`Pediatric Exclusivity
`9.7
`180-Day Generic Product Exclusivity
`
`10. Patent Settlements
`
`PART D DEVELOPMENTAL LCM
`
`11. Strategic Principles of Developmental LCM
`11.1 Developmental LCM Goal1: Provide a Meaningful
`Improvement in Clinical Profile
`,
`11.2 Developmental LCM Goal 2: Increase the Potential
`Real-World Patient Potential for the Brand
`11.3 Developmental LCM Goal 3: The Ability to
`Generate an ROI
`11.4 Developmental LCM Goal 4: The Ability to Enhance
`Market Exclusivity of the Brand Franchise
`
`12. Indication Expansion and Sequencing
`
`12.1 Categories of Indication Expansion
`
`IX
`
`85
`86
`86
`87
`87
`88
`89
`89
`91
`92
`93
`93
`94
`94
`96
`
`99
`99
`100
`100
`101
`101
`103
`105
`
`107
`
`113
`
`115
`
`116
`
`118
`
`120
`
`121
`
`123
`
`123
`
`38
`
`41
`42
`43
`43
`44
`44
`44
`45
`45
`46
`46
`
`55
`
`57
`
`57
`59
`61
`
`62
`
`62
`64
`65
`66
`66
`
`69
`
`72
`
`77
`
`79
`
`79
`81
`83
`83
`84
`
`Page 4 of 18
`
`

`

`CONTENTS
`
`13. Patient Subpopulations and Personulized Medicine
`
`13.1 What Does a Good Patient Selection Strategy
`Look Like?
`Patient Selection without Predictive Criteria:
`Post Hoc Approaches
`13.3 What about the Patients Who Are Not Selected?
`
`13.2
`
`14. New Dosage Strengths, New Dosage Regimens
`
`14.1 New Dosage Strengths
`14.2 New Dosage Regimens
`
`15. Reformulation, New Routes of Administrution,
`and Drug Delivery
`15.1 Reformulation and New Routes of Administration
`15.1.1 Switch and Grow Strategy
`15.1.2 Expand and Grow Strategy
`15.1.3 Generic Defense
`15.2 Drug Delivery Devices
`
`16. Fixed· Dose Combinations (FDCs) and Co· Packaging
`
`17. Second-Generation Products and Modified Chemistry
`
`17.1
`17.2
`17.3
`17.4
`
`Isomerism
`Polymorphism
`Salts, Ethers, and Esters
`Prodrugs and Metabolites
`
`18. Other Developmental LCM Strategies
`
`18.1 Manufacturing Strategies
`18.2 White Papers and Citizen Petitions
`
`PARTE COMMERCIAL LCM
`
`19. Strategic Principles of Commercial LCM
`
`19.1
`
`Commercial LCM Goal1: The Ability to Drive
`Widespread and Preferential Patient Access to
`the Brand
`19.2 Commercial LCM Goal 2: The Ability to Defend
`Market Access and Formulary Position
`19.3 Commercial LCM Goal 3: The Ability to Optimize
`Profitability of the Brand Franchise
`
`131
`
`135
`
`138
`139
`
`140
`140
`141
`
`143
`143
`143
`145
`145
`149
`
`152
`
`159
`
`160
`161
`162
`163
`
`165
`165
`166
`
`167
`
`169
`
`170
`
`170
`
`171
`
`CONTENTS
`
`xi
`
`20. Geographical Expansion and Optimization
`
`20.1 Geographic Expansion
`20.2 Harmonization and Rationalization
`
`21. OTC Switching
`
`21.1
`21.2
`21.3
`21.4
`
`What to Switch: Choosing the Best Approach
`Where to Switch: Dealing with lntermarket Variability
`When to Switch: Balancing the Product Life Cycle?
`How to Make the Switch Successful: What Corporate
`Support Is Required?
`
`22. Brand Loyalty and Service Programs
`
`23. Strategic Pricing Strategies
`
`23.1
`
`23.2
`
`Pricing Strategy and Tactics in the Launch and Growth
`Phases
`Pricing Strategy and Tactics Following Patent Expiry
`
`24. Generic Strategies and Tactics
`
`Building a Generic Portfolio: Old versus New Thinking
`
`25. Exit Strategies
`
`Executing the Exit Strategy
`
`PART F BIOLOGICS AND BIOSIMILARS
`
`26. Biologics and LCM
`
`26.1
`26.2
`
`Emergence of Biotech
`Some Definitions
`26.2.1 Biologics
`26.3 Uptake and Value of Biologics
`26.4
`LCM of Biologics
`26.4.1 Next-Generation Biologics
`26.4.2 Reformulation
`26.4.3
`Indication Expansion
`26.4.4 Self-Injection Devices
`
`27 · lliosimilars and Their Impact on Biologic LCM
`27.1
`27.2
`
`Changing Terminology: Biogenerics, Biosimilars, and FOBs
`Why Are Biosimilars a Big Deal?
`
`172
`174
`175
`
`178
`
`179
`181
`183
`
`184
`
`186
`
`190
`
`190
`193
`
`198
`
`202
`
`204
`
`206
`
`207
`
`209
`
`209
`210
`210
`211
`213
`213
`214
`215
`215
`
`217
`
`217
`219
`
`Page 5 of 18
`
`

`

`ail
`
`CONTENTS
`
`27.5
`
`27.3 How Are Biosimilars Different?
`27.4 Biosimilar Approval Pathways
`27.4.1 Biosimilars in Europe
`27.4.2 Biosimilars in the United States
`27.4.3 Biosimilars around the World
`Substitution of Biosimilars
`Automatic Substitution
`27.5.1
`27 .5.2 Therapeutic Substitution
`Innovator Responses to Biosimilar Threats
`27.6
`27.7 The Future for Biologics LCM
`27.7.1 Legal Strategies in the United States
`Indication Expansion in Europe
`27.7.2
`27.7.3 Brand Loyalty Programs and Services
`The Emergence of the "Innovasimilar" Biopharma
`Company
`Final Words
`
`27.8
`
`27.9
`
`PARTG THE INTEGRATED BRAND LCM STRATEGY
`AND ITS IMPLEMENTATION
`
`28. Strategic Goals of LCM Brand Plans
`
`Position to Market
`28.1
`28.2 Comparative Clinical Profile versus Gold Standard
`Level of Market Unmet Need
`28.3
`
`29.1
`
`29. Ten Keys to Successful LCM
`Excellent Functional Expertise
`29.1.1 Patent Attorneys
`29.1.2 Regulatory Affairs
`29.1.3 Clinical Development
`29.1.4 Formulation Scientists
`29.1.5 Marketing and Sales
`29.1.6 Manufacturing
`29.2 Visible Management Support
`29.3 Unambiguous Ownership
`29.4 An Early Start
`29.5 A Robust "Broad to Bespoke" Process
`Focus on "High LCM Value Brands"
`29.6
`29.7 Adequate Resources
`29.8 Measurements and Rewards
`Training and Support
`29.9
`29.10 Realism
`
`CONTENTS
`
`xiii
`
`30. Organizational Structures and Systems for Ensuring
`Successful LCM
`30.1 Organization of Project and Brand Management
`30.1.1 Functional Structure
`30.1.2 Project Structure
`30.1.3 Matrix Structure
`Project and Brand LCM Structures
`30.2
`LCM Center of Excellence
`30.3
`30.4 Composition of the LCM CoE
`
`31. The LCM Process: Description, Timing, and Participants
`
`Purpose of the LCM Process
`31.1
`31.2 Timing of the LCM Process
`31.3 Description of the LCM Process
`
`INTEGRATING LCM WITH PORTFOLIO
`PARTH
`MANAGEMENT
`
`32. Principles of Portfolio Management
`
`33. LCM Projects in the Development Portfolio
`
`34. Managing Established Brand Portfolios
`34.1 What Do You Do with a Priority Established
`Brand?
`34.2 What about the Nonpriority Brands?
`34.3 Building the Ideal Established Brands Portfolio
`
`CONCLUSIONS
`
`APPENDIX: CASE IDSTORIES
`A.1 Market and Product-Shaping Dynamics in Action
`Alzheimer's Disease Therapies: Aricept®, Exelon®,
`and Reminyl®/Razadyne®
`Learnings
`A.2 Optimizing Clinical Profile versus Gold Standards
`Angiotensin II Receptor Blockers (ARBs): Cozaar®,
`Micardis®, and Benicar®
`Learnings
`
`254
`
`254
`255
`255
`257
`259
`263
`266
`
`268
`
`268
`269
`271
`
`277
`
`279
`
`284
`
`286
`
`288
`289
`290
`
`291
`
`294
`
`294
`
`294
`297
`298
`
`298
`299
`
`220
`220
`220
`221
`222
`223
`223
`224
`225
`226
`227
`228
`229
`
`229
`231
`
`233
`
`235
`
`235
`237
`237
`
`238
`
`238
`239
`240
`240
`241
`242
`243
`244
`245
`246
`248
`249
`250
`250
`252
`252
`
`Page 6 of 18
`
`

`

`xiv
`
`CONTENTS
`
`CONTENTS
`
`XV
`
`A.6
`
`A.9
`
`A.3
`
`Partnering to Ensure Reimbursement
`and Collection of Cost-Effectiveness Data
`Aricept
`Learnings
`A.4 Active Metabolites and Late-Listed Patents
`Buspar®
`Learnings
`A.5 A Fixed-Dose Combination (FDC) That Could Not Fail.
`or Could It?
`Caduet®
`Learnings
`Indication Expansion
`Certican®/Zortress® and Afinitor®
`Learnings
`A.7 Killing a Franchise through Over-the-Counter
`(OTC) Switching
`Claritin®
`Learnings
`A.8 Moving FDCs to the Fore in Diabetes
`Diabetes Therapies: Glucophage®, Avandia®, Aetas®,
`and Januvia®
`Learnings
`FDCs and Multiple Dosage Strengths
`Diovan® and Tekturna®/Rasilez®
`Learnings
`A.10 Building a Compliance Support Program
`Enbrel®
`Learnings
`A.ll Targeting Responders with High-Price Cancer Agents
`Erbitux®
`Learnings
`A.12 Failure of a "No-Brainer" LCM Strategy
`Exubera®
`Learnings
`A.13 At-Risk Launches and Prodrug Patents
`Famvir®
`Learnings
`A.14 New Dosages, FDC, and Patent Litigation
`Fosamax®
`Learnings
`
`299
`299
`301
`301
`301
`303
`
`303
`303
`304
`305
`305
`306
`
`307
`307
`308
`308
`
`308
`310
`310
`310
`312
`312
`312
`314
`314
`314
`315
`315
`315
`319
`320
`320
`321
`322
`322
`324
`
`A.15 High Regulatory Hurdles for Lifestyle Drugs
`Girosa®
`Learnings
`A.16 Big Money from Orphan Indications
`Gleevec®
`Learnings
`A.17 Not Giving Up on a Controversial Brand
`Iressa®
`Learnings
`A.18 Expanding a Medical Aesthetics Franchise with an
`Ophthalmic Drug
`Latisse®
`Learnings
`A.19 Patent Expiry of the Biggest Drug Brand Ever
`Lipitor®
`Learnings
`A.20 Early Out-Licensing by Biotech: Take the Money
`and Run
`Macugen®
`Learnings
`A.21 Codevelopment and Comarketing Deals End in
`a Megamerger
`Merck and Schering-Plough: Zetia®Nytorin® and
`Claritin/Singulair®
`Zetia!Vytorin
`Claritin/Singulair
`Learnings
`A.22 A Hugely Successful LLCM Switch Strategy: Business
`Needs and Reputational Issues Collide
`Prilosec® and Nexium
`The Facts
`The Public Reaction
`Learnings
`A.23 Combining Production Outsourcing with Settlement
`with a Generic Competitor
`Nexium
`Learnings
`A.24 Reformulating for Success in Osteoporosis
`Osteoporosis Drugs: Fosamax, Actonel®, Boniva®,
`and Aclasta®
`Learnings
`
`325
`325
`327
`327
`327
`329
`330
`330
`332
`
`332
`332
`334
`335
`335
`336
`
`336
`336
`338
`
`338
`
`338
`339
`342
`343
`
`344
`344
`344
`345
`347
`
`349
`349
`351
`351
`
`351
`353
`
`Page 7 of 18
`
`

`

`xvi
`
`CONTENTS
`
`A.25
`
`A.28
`
`Isomerism, Polymorphism, and Settlements
`Plavix®
`Learnings
`A.26 Payers versus Brand for Patient Selection
`Plavix and Brilinta
`Learnings
`A.27 Litigation Can Delay Generic Entry in the OTC
`Field Too
`Prilosec OTC
`Learnings
`Inconsistent Court Decisions Can Hurt Both Brand
`and Generic Companies
`Protonix®
`Learnings
`A.29 Holding on to an Antipsychotic Franchise
`Risperdal®llnvega®
`Learnings
`A.30 LCM Creates an Almost Immortal Brand
`Voltaren®
`Learnings
`A.31 LCM of a Women's Health Franchise
`The Yasmin® Family
`Learnings
`Indication Expansion/New Dosage Strength
`Zometa/Reclast® (Aclasta)
`Learnings
`
`A.32
`
`INDEX
`
`-
`
`ACKNOWLEDGMENTS
`
`Many other experts stand behind the authors in a book of this type, and it is
`impossible to thank them all. The authors are grateful to Duncan Emerton,
`Principal Consultant and Head of Biosimilars Practice at Datamonitor
`Consulting for his insights and expertise that support the chapter on lifecycle
`management (LCM) for biologics, and to Bruce D. Sunstein of Sunstein Kann
`Murphy & Timbers in Boston, Massachusetts, USA, for reviewing the chapters
`on patents and the Hatch-Waxman legislation. Several industry experts also
`gave invaluable advice, but asked to remain anonymous, an understandable
`request in view of some of the sensitivities surrounding LCM, and especially
`late-stage lifecycle management (LCM). The authors are also grateful to
`Krishna Balakrishnan, Emma Law, and Ruch De Silva of Datamonitor
`Consulting for support with reviewing the text, completing figures and several
`of the case studies. Any inaccuracies remain the responsibility of the authors.
`
`354
`354
`355
`356
`356
`357
`
`358
`358
`359
`
`360
`360
`361
`362
`362
`363
`364
`364
`365
`366
`366
`368
`369
`369
`370
`
`371
`
`XVII
`
`Page 8 of 18
`
`

`

`-
`
`CHAPTE . ._R::_:3:-----
`
`The Life cycle of a d
`'Bran
`·
`Pharmaceut•ca
`
`.
`cles vary considerably
`the characteristics of produc~~~~l~s of product that is the
`As we have see~,
`us now concentrat~ on
`aceutical.
`between industrtes. Let b anded prescription pharm aceutical industry that
`subject of this book, th~f ~ ecific features o~ t~e phar;al that these are fully
`There are a number ducilife cycles, and .'t IS e_sse·ng lifecycle management
`strongly influence prooin to be successful m destgnt
`understood if ~ne ts g g
`harmaceutical industry that
`(LCM) strategtes.
`. al features of the P
`·m ortant spect
`Four of the ' p he following:
`influence LCM are t
`cheap and easy to manu-
`to Make. Most drugs are rat~~:cturing is concerned are
`barriers as far as man GS) f hig\1-priced branded
`1. Drugs Are Easy
`facture, so the entr~ cost of goods sold (CO f ~es Dozens if not hun·
`low. Furthermore, t elatively low percentage o sa . . exactly the s~m_e
`drugs represents ~ re are perfectly capable o! : : :d products. Thts IS
`dreds of compantesd .
`the vast majority o
`r h t less true of large
`drug as is containe mall molecules and somew a es however, a brand
`particularly true;f s: we shall see later. In ~ost ~~ t~ manufacture the
`biological molec e~; on competitors not b~tn~~ntrast this with another
`e uality standar s.
`company carmot re
`anufacture; BoetnS
`same molecule, I? thed:lo~ment costs, aircraft:: anies will copY the
`industry with htg\1
`that dozens of other co p
`does not have to worry
`"tal investment
`loping the
`a drug, but the capt
`Dreamliner!
`Not only is it easy ~:~~ing facilities capa?~e 0~:::~ very hi~·
`to set up labs and man ducing it in large quantlttes new molecule IS
`product and then pro d heavily to prove that a t be repeated by
`innovator has to spen . vestments do not have o
`and effective, but these m
`
`h and Every Brand. first
`ent· Making the Most of Eac
`S
`Inc.
`.
`. al Lifecycle Managem
`. hed 2012 by John Wiley & ons.
`PharmaceutiC d Neal Hansen.
`Tony Ellery aWn "l & Sons, Inc. Pubhs
`© 2012 John
`' ey
`
`38
`
`THE LIFE CYCLE OF A PHARMACEUTICAL BRAND
`
`39
`
`developers of copy products, as they are using the same molecule and
`can rely on referring to the data of the originator to gain regulatory
`approval, just as long as the copy product behaves in the same way in
`the body, that is, is bioequivalent. This is, of course, the basis for the
`generic drugs industry, and as we shall see later, it was the concept of
`bioequivalence in the Hatch-Waxman legislation in 1984 that allowed
`the generics industry to take off in the United States.
`
`2. Patents Prevent Copy Products. Key to the very existence of the branded
`pharmaceutical industry is therefore the ability to patent a new molecule
`and thus obtain the exclusive rights to sell it. Only so can the brand
`company demand prices that are high enough to recover the high costs
`of developing the molecule. We will be looking at patents in considerable
`detail later in the book. From the point of time at which a new molecule
`is first discovered, the innovator company can expect about 20 years of
`protection during which time no other company is allowed to commer(cid:173)
`cialize the same molecule, and such a patent is valid in most countries of
`the world.
`
`~ Consumers Do Not Pay for Drugs. Branding in the consumer goods
`industry is very different from branding drugs. Consumer-goods advertis(cid:173)
`ing seeks to create an image of the brand in the eyes of the consumers
`which convinces them to pay a much higher price for the product than
`they would be willing to pay if that image was absent. This concept is
`called "value creation"; simply put, it convinces a consumer to accept a
`price higher than could be justified by the costs of raw materials plus
`manufacturing and distribution, and more than could be justified by an
`objective, nonemotional comparison of the value of the brand compared
`to alternative, cheaper product offerings. In some cases, the added value
`created is in the brand name of the company, in other cases, it is in the
`individual products. As an example of branding at the company level,
`customers will pay high prices for a Mercedes-Benz automobile, and the
`individual model descriptions (CLK, G550, etc.) are of secondary value;
`consumers would not pay premium prices for a Dodge G550. A good
`example of branding at the individual product level would be products
`like Lipton, Flora, Omo, Vaseline, and Lifebuoy. They are a)l made by
`Unilever, but how many consumers are aware of that? If Unilever
`changed the Lipton brand name to "Smith Teas" tomorrow, their sales
`~ould P,lung~ as the value is in the individual brand name. Indeed, when
`~llogg s decided to rebrand its kids breakfast cereal Coco Pops to Choco
`th:sses in the United Kingdom, to bring the brand name in line with
`Coc ~Ited States, Germany, and Spain, sales plummeted. In the end, the
`en ° ops brand was restored after research suggested 92% of consum-
`wanted the old brand back.
`ee!:e. 18 much less value in a brand name in the prescription pharma(cid:173)
`Industry for the simple reason that the consumer, the end user
`
`Page 9 of 18
`
`

`

`40
`
`THE LIFE CYCLE OF A PHARMACEUTICAL BRAND
`
`of the drug, is in many cases not the person making the buying decision.
`Until comparatively recently, the physician made the buying decision; he
`decided what to write on the prescription, and the pharmacist had to
`dispense it as written. It is reasonable to suppose that physicians, with
`their scientific education, made their choices based mainly upon the
`extensive controlled scientific data generated for the different drugs, as
`well as upon their own experiences with the alternative therapies. Of
`course their choices were influenced by advertising and detailing by
`pharmaceutical sales forces, and by consumers exposed to direct-to(cid:173)
`consumer advertising requesting specific products, but the objective
`data-driven component of their choices was likely to be much more than:
`say, a housewife choosing between Omo and Persil, or a smoker choosin .
`between Marlboro and Camel cigarettes. But the prescribing decisioq
`was certainly not driven by price-indeed in most cases, the prescribin£
`physician did not even know what the price was! However, in recenl
`years, in many countries, the individual physician is no longer the dl:Q.
`sion maker. Medical insurances determine which drugs will be reim(cid:173)
`bursed and which will not, and this limits the physician's choices; once
`the patent on the drug has expired, the various government measures
`that we have already considered activate, and the patient is likely
`to receive a generic rather than the brand. The medical insurers are
`not interested in the brand name, at either the company or individual
`product level. They are only interested in choosing the cheapest drug
`available-or the cheapest available version of the same drug-unless
`there is solid, numerical evidence that an alternative brings enough addi(cid:173)
`tional benefit to justify any price premium. In the case of generics, Ur.
`price premium of the original brand is huge and a bioequivalent r
`r£(cid:173)
`sents a much better deal for the payer. Third-party payers are '
`unresponsive to advertising, and there is effectively no emotional
`ponent of their decisions.
`In self-pay markets like India and South America, pharmaceutical
`branding is more effective, because the patient can decide wheth
`pay the incrementally higher price for their preferred brand, or fnr
`brand over the generic, and then the emotional factors come into P
`just as they do with other categories of consumer goods. There is a mor
`issue here, of course, as paradoxically, the more expensive original
`thus tend to retain a higher market share than the cheaper
`precisely those poor countries which can least afford it. This
`sated for to some extent by the fact that the price differential of
`brand to the generics tends to be smaller in such countries.
`As we shall see later, one option for a brand which will soon
`generic competition in countries where prescription drugs
`for by insurers rather than the consumer may be to move the
`nonprescription, self-pay status ("over-the-counter" [OTC} drugs).
`again directly addressing the emotional preferences of the consumer
`
`·
`
`LIFECYCLE CURVE OF PHARMACEUTICALS
`
`41
`
`all ~TC switches are commercial! succ
`egones of drug cannot be obtain:d wi essful, and of course, many cat-
`Nevertheless, there have been s
`al thout a physician's prescription
`switches, including Zantac® A;~~~ ~xa~nples of very profitable OTC
`' lant~n®, and Prilosec®.
`4. Governments Set Prices a d'S
`ered this in the previous c~apt~~po~ G_enencs. V.:e have already consid(cid:173)
`depth later in the book Suffi '~nt wrll be lookmg at it in much greater
`.
`·
`cer tosayher th
`.
`d d
`e
`at m most developed
`mar ets, the pnces that a b
`for a patented new drug a:eann;t /e~:m.aceutical company can ask
`k
`and by market fo~ces, but by governme~me~ solely by competition
`governm~nts provrde many different ki d po~rcy. A~ter patent expiry,
`~ s of mcentrves for physicians
`to prescrrbe generics, pharmacist
`use them.
`s to drspense them, and patients to
`
`3.1 LlFECYCLE CURVE OF PHARMACEUTICALS
`
`.
`.
`These, then, are fo~r features of the branded h
`determme how the hfecycle curve
`"ll
`P arrnaceutrcal mdustry that
`curve varies considerably from caswrt appear for a patent-protected drug Th
`e o case the ind"
`e
`d d
`·
`f
`·
`rs use an
`the geography under consider ' .
`_rca IOn for. which the drug
`nant~ The curve shown in Figure 3 1 is fai~:wn b~mg the roam two determi(cid:173)
`(famrly practitioner-prescribed) in ihe U . Y typrcal for a mass-market drug
`Let us compare this with Figure 2.2mted States.
`pr >duct, to see where the main differen ' the curve for a typical industrial
`ces are and what causes them.
`
`,qevelopment
`
`Introduction
`
`Growth
`
`Maturity
`
`Decline
`
`.
`l.l
`f'luorm• lifecycle curve of a
`• .Consulting.
`
`Time -----+
`mass-market drug in the United States. Source:
`
`Page 10 of 18
`
`

`

`LIFECYCLE CURVE OF PHARMACEUTICALS
`
`43
`
`Often these drugs target multiple smaller indications, which are introduced
`successively over the life of the drug. Novartis's Gleevec® would be a good
`example. Initially launched to treat chronic myeloid leukemia (CML) in
`2001, by 2006 Gleevec was also approved for the treatment of a whole
`portfolio of other orphan indications. All were small, but added together
`they meant annual global Gleevec sales of over US$3 billion. Gleevec is
`included in this book as one of our case histories. As another example, biolog(cid:173)
`ics developed to treat autoimmune diseases may be tested first in psoriasis
`patients, where clinical trials are cheaper and faster to complete than, for
`example, in the bigger and potentially more profitable indication of rheuma(cid:173)
`toid arthritis.
`
`3.1.2 Lack of a True Maturity Phase
`
`With many drugs there is often no true Maturity Phase, no real plateauing of
`sales, as sales continue to grow right up to the moment when a sudden decline
`sets in. The reason for this is that branded drugs are frequently still in their
`Growth Phase when this is "artificially" cut short by patent expiry, successful
`challenge to the patent or "at-risk" launch by generic companies, and the
`subsequent appearance of multiple low-priced generics on the market.
`Increasingly, it is not even necessary that the patent on the brand itself expires
`to trigger the start of the Decline Phase. Because of the multitude of me-too
`drugs on the market, as soon as the basic patent expires on the first brand in
`a drug class, generic pressure is exerted on all the patented brands in that class
`too. This relatively new phenomenon of therapeutic substitution was first seen
`with the statins in Germany, and it is starting to reduce the attraction to com(cid:173)
`panies of developing late-entry "me-too" compounds.
`
`3.1 .3 Precipitous Decline Phase
`
`The loss of sales as the Decline Phase is entered is precipitous in many markets
`and has been likened to falling off a cliff. At patent expiry (or in the United
`States in the special situation of expiry of 180-day exclusivity, which we shall
`consider later), cheap generics flood the market. Because the ent~y barriers
`after patent expiry are low, because third-party payers do not have brand
`loyalty, and because government incentives promote the use of generics, brand
`sales are quickly lost. Usually, it is not a viable strategy for the brand company
`to. a~tempt to match the generic prices, as margins are so low. Instead, the
`ong~~ator is likely to stay with the high price-or even try to increase it-and
`:ntmue. to sell to the small, non-price-sensitive "laggards" who are suspicious
`genenc drugs.
`Un~~~~ sales decline rates are generally steep and getting steeper in the
`lesed
`.ates, Europe, and Japan, different factors do determine the rate of
`ec me.
`
`1t
`
`irowth Phase
`. dustrial products.
`•r many other tn
`. nts to a new drug
`to move patte obviously involves
`Nest cell phone
`. controlling the
`m a therapy that 1~ t which might
`ove to be better, t~ curve will be
`stifiably, the gr~wble or uncontrol-
`hitherto untrea a drug class where
`~ug or for a new
`how much
`d'
`rming well.
`\.
`·ted regar tng
`verely liDl
`o the kind of pre-
`been approved, s
`..node\ of
`d film or a new lU
`,
`Hollywoo
`a limited number of
`trug. There ar:heir new brands. For
`y premarket
`hority approval for
`y to get healt? ~u~ the major target
`~rs for the tna s m("early adopters")
`· · n leaders
`.
`nd even before tt can
`re opmlO
`;s of the new bra.
`t population to be
`ection of the pat1e:nd safety, and the
`nonstrate efficacy
`osition the new
`the trial all ser~~ol~ternet facilitates
`•ers and payers.
`. development even
`lt drugs that are ~nhigher awareness of
`also have a muc
`... ase in the past. v· x® the Food and
`..,
`d
`h
`\of lOX
`'
`e with rawa
`. .
`ve become muc
`er health auth~r_tt~~~a~; to broad popul~-
`s be introduce m~ ·ncreasingly only ln
`}f the new drug ts ~all subgroup of the
`h is often a rather sd
`Only later, once
`, ultimately use :~~ r~~· authorities alloW
`n established, Wll ea b efit may be less
`.pulations where the or:~le.In the lJ?ited
`tio therefore less favFDA the authontY to
`007 gave the
`factur-
`; of 2
`(REMS) from manu.
`its
`. 1 roduct outwelgh. o
`gation Strategy
`drug or biologtca p
`.
`le medicatlO
`teJ1lS
`· ty from s1mp
`a
`a.ry in their seve:t
`.
`d registry sys
`.
`to full monttonng an
`·~
`~
`,
`... l rowth tS
`to the relatively slow tntftlam!ll moleculeS.
`g
`1
`d · place o s
`ing develope m
`
`Page 11 of 18
`
`

`

`0
`su
`ex
`2(
`p<
`th
`in
`ic
`p:
`e1
`tc
`
`3
`v
`Sl
`Sl
`G
`
`42
`
`THE LIFE CYCLE OF A PHARMACEUTICAL BRAND
`
`3.1.1 Slow Rate of Growth during the Growth Phase
`
`Growth tends to be slower for drugs than for many other industrial products.
`
`Why should this be?
`Physicians are understandably reluctant to move patients to a new drug
`until it has proven its worth. Buying the newest cell phone obviously involves
`a lower risk than moving a sick patient from a therapy that is controlling the
`disease to one that might or might not prove to be better, but which might
`have side effects. Understandably and justifiably, the growth curve will be
`steeper in the case of a new therapy for a hitherto untreatable or uncontrol(cid:173)
`lable disease and slower for a me-too drug or for a new drug class where
`established drug classes are already performing well.
`Added to this, drug companies are severely limited regarding how much
`they can promote a new drug unti