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Developing an effective strategy for weathering the storm of drug patent expiration is hard.
There are many ways to soften the landing after patents expire and generic competitors emerge.
Branded drugs typically lose 40% or more of their market share to generics, and in the 35 years since the Hatch-Waxman bill was enacted into law, nearly all drugs have had to face generic competition. Before that, only around 35% of branded drugs had to compete with generics.
Currently, however, through the year 2023, 46% of estimated sales revenues of the top 100 drugs won’t be affected by generics because patent expiration won’t yet have occurred. But it’s smart to strategize well in advance of patent expiration, to engineer a softer landing than the traditional “patent cliff” has allowed. Here are five steps to take when drug patent expiration looms.
1. Explore Traditional Loss of Exclusivity (LOE) Countermeasures
Traditional countermeasures against revenue hits that come with LOE include:
- Delaying generic entry temporarily through a pediatric license indication
- Developing product line extensions that can be patent protected
- Engaging in short-term promotional campaign and pricing strategies
Not all of these are appropriate for every drug, but they are a traditional first line of defense against the financial consequences of drug patent expiration.
2. Consider Strategic Line Extensions Well Before LOE
Strategic line extensions worked well for the psychiatric drug Risperdal, whose patent expired in 2008. Through a series of novel drug delivery methods in the form of increasingly long-lasting injections (twice-weekly, then once-monthly, then once-a-quarter), Johnson & Johnson was able to manage the effects of the original drug patent expiration and eventually return to peak sales levels. Lowering the dosing burden from twice-daily tablets to a quarterly injection effectively counteracted losses from generic competitors.
3. Maximize Profits Before LOE, or Mitigate Losses After?
Attempting to maximize profits (by maintaining or raising drug prices) before LOE can soften the landing after falling off the patent cliff, and for some drugs, this may be the only real option. Mitigating losses after drug patent expiration is possible for many drugs, however, and there are several fairly straightforward ways of doing this:
- Vouchers and e-vouchers for free drug samples
- Co-pay discount cards to assist underinsured or uninsured patients
- Patient rebates
- Adherence programs for targeted populations (like elderly patients with memory loss issues)
Vouchers, coupons, and rebates are some ways branded drugs maintain market share after LOE.
4. Know Your Share Retention Predictors
Predicting retention of market after patent expiration is based on factors surrounding the drug itself as well as factors related to the drug class. Factors supportive of better market retention related to the drug itself include:
- Difficulty in manufacturing the drug
- Narrow therapeutic index
- Availability of follow-on products
- Potential for taking the drug over the counter
Factors related to drug class that correlate with better market retention after LOE include
- Potential for a high number of generics in the drug class
- Less subjectivity to managed care control
- Smaller drug category size
- Being part of a class with less new brand activity
The more of these factors associated with a product, the more market share the branded drug is likely to retain after generics are introduced. Knowing these factors can help shape a post-LOE strategy.
5. Decide Whether an Authorized Generic Is a Good Idea
Before authorizing a generic, manufacturers must determine if loss of revenue from the branded drug would outweigh royalties for the authorized generic. The success of authorized generics tends to depend on three key factors:
- Whether the branded drug has “fast erosion” attributes, i.e., where many generics are expected to erode prices quickly
- How big the market for the product is and how likely it is to attract multiple generic competitors
- The ability of the manufacturer to attract a strong generic licensing partner
Drug patent expiration can result in more of a “patent slope” than a “patent cliff” depending on product attributes, market size, and development of innovative line extensions. In some cases, the best approach to impending patent expiration is simply maximizing profits before generics arrive on the scene. However, in many cases, it is possible for branded drug manufacturers to take steps that extend drug life cycles beyond patent expiration and allow them to compete effectively with generics.