Pharmaceutical industry challenges - part 2

• Generic competition

All research-based pharmaceutical companies have to cope with the expiry of the patents protecting their biggest products. The 80% decline in sales of Prozac of Eli Lilly within months of generic competitors entering the market in late 2001 was an indication of the damage that can be done when a drug’s market exclusivity is lost. Many companies are facing a similar meltdown in the sales of certain major products over the next few years. By 2009, all major cardiovascular drug classes will be genericised, thus potentially commoditising the largest and most lucrative therapy area.

Although the impact is greatest in the US, recent regulatory changes in previously ungenericised European markets such as France have ensured that companies have to deal with this threat in almost every major territory. It is no longer sufficient to begin efforts to extend a product’s lifecycle as patent expiry looms. Companies need to be developing a strategy to combat patent expiry even before a product is launched. There are many potential strategies to follow, and the choice depends on the particular circumstances of the product; second-generation versions with improved safety or efficacy, new formulations, combination products, licensed generics, and Over-the-counter (OTC) switching, are all potential choices. Companies must be able to estimate the potential value of any investment in one or more of these brand protection strategies. The answer to this question will depend on the company’s corporate strategy, capabilities, resources and pipeline, and an understanding of brand and market specific factors will also be critical. The identification and implementation of lifecycle management and portfolio planning processes, tools and organisational structures will provide a strong foundation, enabling companies to confidently plan for generic competition.

• Intellectual property protection

 Intellectual Property (IP) is a pharmaceutical or biotech company’s most valuable resource, and its protection is a key to that company’s future success. Recent challenges over patents for HIV drugs has reminded the industry that progress is still needed in balancing the opposing forces of innovation through protection of IP rights, versus the provision of affordable drugs for the developing world. Pharmaceuticals companies must face the daily challenge of creating value through the exploitation of IP rights, but avoiding considerable reputational harm. This situation was well illustrated in South Africa during the late 1990s when the balance between IP protection and the urgent needs of patients were not aligned. Since then, companies have become more aware of the potential damage that can be caused by too strict an interpretation of IP rights..

In relatively strong emerging markets such as China and India though, additional issues prevail. Multinational pharmaceuticals companies require and expect IP rights to be strictly enforced in countries where there are countless local manufacturers with the ability to produce cheap counterfeit copies of patented drugs, which often find their way back to western markets. At the same time, the implementation and enforcement of IP laws in India and China is improving. Combined with the ability to leverage lower cost expertise, on the whole, these countries are still very much an opportunity rather than a threat. Nevertheless, companies need to be aware of and able to manage the considerable risks of doing business there. With the generics industry consolidating and becoming more aggressive, pharmaceutical companies are facing more rigorous and frequent challenges to their intellectual property monopolies and growing pressure internally to bring the realisation of value in Research & Development (R&D) forward, without compromising standards or regulatory compliance