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Follow-On Products as a Defense Against Generics
Decision Resources, Inc., Dec 2005, Pages: 17
The pace of generics erosion has accelerated significantly in the past few years, and the world's leading pharmaceutical companies face difficult times unless they can devise effective defense strategies. The ideal defense is a pipeline full of highly innovative new drugs in advanced stages of development, but currently, relatively few manufacturers enjoy such an advantage. Therefore, many companies have had to look for new opportunities in their existing portfolios. Follow-on drugs-products that offer significant modifications of established medicines-are one of the options that manufacturers have tried, albeit with mixed results.
In this report, we examine the potential of follow-on drugs as a defense against generics competition. We begin by considering the recent impact of generics and the responses of research-based pharmaceutical companies. We then review several examples of follow-on products that have succeeded or failed commercially. We explore critical factors for success and explain how companies can complete the essential process of a prelaunch market analysis. We conclude with a brief assessment of the outlook and implications for the pharmaceutical industry.
Business Implications
- Many manufacturers of blockbuster drugs have tried to forestall generics erosion of their businesses by developing follow-on drugs
to protect, or even increase, their sales and market share. A manufacturer launches a follow-on drug in the hope that prescribers and patients will continue to use the new agent long after generic versions of the earlier drug become available. However, payers generally try to promote use of generics in preference to follow-on drugs.
- Companies have employed a variety of approaches to developing follow-on drugs, including isolating single isomers, active metabolites, or pro-drugs of blockbusters; creating extended-release formulations; and producing distinct but chemically related active substances. To succeed commercially, follow-on drugs must be sufficiently different from their predecessors to be patentable and thereby safe from the threat of immediate generics competition.
- Follow-on products must offer a clear clinical advantage over the drugs they aim to supersede—generally in terms of efficacy, side
effects, dosing frequency, or mode of administration. Placebocontrolled or non-inferiority trials are unlikely to be adequate to persuade prescribers to adopt a follow-on drug. However, head-tohead trials that prove the follow-on product's advantages over the gold-standard therapy (ideally the company's own established drug) or other competing treatments can be very helpful in persuading physicians to switch patients.
- Experience suggests that a follow-on product should ideally be introduced at least one to two years before the company's predecessor
drug loses patent protection. This time frame allows enough time for the majority of patients to be switched to the new medicine before the advent of generic versions of the older drug. Each patient who is still taking the predecessor drug after its patent expires is a patient at risk of being lost to generics competition.
- To expedite the switching process, it is generally advisable to set the price of a follow-up product below that of its predecessor. The
shorter the interval between the launch of a follow-on product and the expiration of its predecessor's patent and/or the smaller the degree of clinical improvement offered by the follow-on product, the greater the need to set the price of the follow-on product below that of the original drug.
- A thorough prelaunch market analysis is indispensable to developing the right positioning strategy, managing cannibalization, setting
the optimal price, and adapting to changes in the pricing and reimbursement environment in individual markets. It is particularly important to confirm that a follow-on product has strategic competitive advantages in the criteria that matter most to prescribers. The techniques described in this report can be used to drive this analysis.
- Many European countries permit, or even encourage, pharmacists to substitute generics for branded versions of off-patent drugs. Following the recent expansion of the European definition of generics, pharmacists in some countries might be authorized to dispense a generic version of an older drug in place of a follow-on product that is available only as a brand.
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