Abstract
This paper explores the academic literature and empirical evidence associated with the strategic and tactical opportunities available to pharmaceutical firms confronted with the loss of patent protection on their branded drug. The marketing dimensions of product innovation, pricing, and brand equity options are considered together with exclusivity options available through government regulators such as the US Food and Drug Administration. These options are then considered in the context of the legal monopolies available to innovators through the policy lenses of intellectual property. This paper further explores the maxim that sustainable competitive advantage for pharmaceutical innovators is realized at the nexus of marketing choices, intellectual property, and regulatory regimes. Separate examples in gastrointestinal and neurological medications will be used to explore how the various options might be integrated together and used in a time sequenced, longitudinal manner to extend the market advantages and earnings levels of the original pharmaceutical compound innovation. Areas of potentially fruitful future academic research are described.
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Notes
- 1.
To address this question it is helpful to consider the marketing mix management variables of product, price, promotion, and place (Kotler 1988). In the pharma context the place variable is constrained to the dispensation system of established prescribers (doctors) and dispensers (pharmacists) in most countries. The mix variables that have the potential to be varied and hence managed are product (alter or improve the formulation/extend), promotion (DTC advertising and aggressive detailing to doctors), and or price. In the context of the US market, product, and promotion activities are both government regulated and require considerable advanced planning.
- 2.
This type of ANDA is sometimes referred to as a Paragraph IV certification in the pharmaceutical literature.
- 3.
Three years or additional marketing exclusivity granted for each new approved indication.
- 4.
Beyond the FDA marketing exclusivities outlined above, incumbent firms also have the options to extend their pre-expiry market advantages through patents that are invented and filed subsequent to the original molecule patent. While scaling to production there may be new inventions and process patents on the methods of fabrication that are relevant to efficient scale production of the NDA approved drug. These process patents will have an expiry date years beyond that of the molecule patent and are listed on the FDA orange book (orange book reference here). All interested generic providers who may file an ANDA can see the process patents related to the NDA approved drug via orange book (available online). Generic firms need to certify in their ANDA application that production of the bioequivalent product that they seek to have approved has avoided the infringement of valid orange book patents (Hill 2005).
Patents on reformulations of the active ingredient can also lead to market place exclusivities of a sort, at least to the extent that patients using the older formulation can be switched to the new, patent protected formulation pre-expiry of the older formulation patent (Yoshitani 2007). This tactic is central to life cycle planning for a portfolio of products or for a drug offering in a particular class and may play into pricing strategies.
- 5.
Appropriately defined brand equity such as color or pill shape can be registered as a trademark (see Table 9.2) with a life that can be indefinite assuming continuous use of the mark (Conley and Orozco 2005). These same trademark rights can be bundled into licensing agreements that can have regional and or global specificity to help with the controlled expansion of the drug to multiple markets (Downing 2003).
- 6.
Copyright on Disneys original animated version of the Snow White story dates back to 1937.
- 7.
Disney’s image of the Snow White registered as a US trademark in 2005.
- 8.
Going over the counter in those markets where it is possible is not in and of itself a strategy for avoiding the sales decreases associated with patent expiry (Berndt et al. 2003).
- 9.
Records of pill shape and color US trademark prosecutions and registrations are searchable through the Trademark Electronic Search System and Document Retrieval available at http://www.uspto.gov.
- 10.
It is important to note here that the 1997 changes in US FDA governed direct to consumer marketing regulations resulted in a dramatic, fivefold increase in spending in DTC advertising. This change has brought about a new era of informed consumer behavior that should be accounted for in any comprehensive, academic review of the literature examining the effect of DTC promotional advertising on the market success of pharmaceutical products.
- 11.
Gastrointestinal track acid reflux or “Heartburn” is a symptom of GERD.
- 12.
AZ received US FDA approval for Prilosec on September 14, 1989.
- 13.
Outside the United States, Prilosec was marketed as Losec. AZ was not allowed to use the name Losec in the United States since it was believed that this might be confused with a blood thinner called Lasix.
- 14.
All prices discussed in this paper are full retail price in the US market and denominated in US$.
- 15.
Figure 9.3 revenue reflects global sales and come from public sources including US SEC 10 K filings.
- 16.
Sixty-eight percent or all AZ ppi sales in 2000 were in the US market. Hence focus of analysis is US market.
- 17.
All media advertising expenditures in Fig. 9.3 from Kantar Media, Ad$pender, http://products.kantarmediana.com/security/. Accessed 1 Dec 2011.
- 18.
Registered US marks eventually included the use of the color purple on the pill, purple pills with two and or three gold stripes, purplepill.com, Prilosec, Nexium, and Prilosec OTC.
- 19.
The AZ molecule patent for omeprazole was in force when AZ entered the US market with Prilosec as a purple colored pill in October of 1989. A Hatch Waxman extension based on NDA approval delays at the US FDA was filed and led to a patent term extension until April 2001. A further 6 month marketing exclusivity was realized through pediatric studies that extended the expiry date to October 2001. Additional US patents on manufacturing related inventions and the enteric coatings used in popular Prilosec embodiments would expire a number of years after 2001 and were all listed on the FDA Orange book.
- 20.
Some of these ANDA’s had paragraph IV certifications asserting that the AZ patents were invalid.
- 21.
AZ orange book patents in litigation w/generics included US Patents 4,786,505 and 4,853,230.
- 22.
The Prilosec OTC medication was a pink tablet and not a purple pill. The only purple pill on the market would remain as Nexium. AZ eventually realized formal trademark registration for the exclusive use of the color purple on a pill in the “preparations for gastrointestinal diseases” category in 2004, US TM registration #2806099.
- 23.
The CAFC appeals court ruled on August 9, 2000 that Lilly’s claim 7 of US patent 4,626,549 as invalid.
- 24.
Data from http://www.drugs.com/stats/zyprexa. Accessed 5 July 2012.
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Jain, D.C., Conley, J.G. (2014). Patent Expiry and Pharmaceutical Market Opportunities at the Nexus of Pricing and Innovation Policy. In: Ding, M., Eliashberg, J., Stremersch, S. (eds) Innovation and Marketing in the Pharmaceutical Industry. International Series in Quantitative Marketing, vol 20. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7801-0_9
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