Loss of Exclusivity
By Robert Boyce
After years of intensive and expensive brand building, when a drug hits the patent wall, its equity evaporates overnight. Over the last few years, loss of exclusivity (LOE) has slashed the market share of the most well-known drugs in a matter of months. In 2001 Prozac lost 73 percent of its share in just two weeks. In 2011 Plavix accounted for nearly a third of Bristol-Myers Squibb’s total revenue. The patent expired in May 2012 in the United States, and within months it lost most of its share to generics. There is no other industry where a brand, built through millions of dollars of sales and marketing effort, is suddenly worth virtually nothing.
The strategy for drugs facing LOE differs by brand and category. The ability of the brand to retain some exclusivity after patent expiration will depend somewhat on switch behavior in the category. Surprisingly, there is a wide range of sales retention post-LOE. (For example, in anti-epileptics, patient advocates were able to create a substitution carve-out for the drug Keppra, blocking automatic generic switch at the pharmacy.) But ultimately, after the legal challenges have been settled, most pharmaceutical brands face the scenario where there is a known date after which a generic version of the product will be available. When that happens, the effect on share and sales is immediate and severe. Commercial directors are faced with an essential question: how to squeeze the most value from the drug in the limited time that they have available.
At the risk of oversimplification, brands typically take one of two approaches. The first is retreat to gradually pull back on sales and marketing expenses. There are many scenarios where this makes the most sense given other brand alternatives, new drugs in the pipeline, or the perceived value of the brand by the customer base.
The second approach is Final Drive. This is where the commercial organization redirects (or even increases) its sales and marketing investment to squeeze out extra revenue. For example, Lipitor spent more than $87 million on heavy advertising, promotion and price rebates at the end of its life. Pfizer started its final drive prior to expiration and continued for a number of months after trying to hold the line against generic atorvastatin as long as possible.
Mid-sized brands that don’t have the scale or resources of a Plavix or Lipitor can still marshal limited resources to drive incremental revenue at LOE. In addition, sub-blockbusters generally have fewer generic competitors waiting for them in the wings than brands over $500 million in sales. They are also less often in the crosshairs of payers who are typically focused on high cost, high utilization drugs. Accordingly, sub-blockbuster drugs are particularly well-poised to deploy strategies aimed at retaining some post-LOE sales.
As brands are planning their strategy, the critical cost drivers are the renegotiation of contracts, consumer rebates and promotions, continued advertising, and the size and eff ort of the fi eld force.
In mature brands, patient-centric tools and resources are the currency of the rep in field calls. Brands can buffer against switch if the field force reinforces brand benefit and arms physicians with co-pay cards for their patients. Some brands are experimenting with increasing redemption at the pharmacy using digital versions of co-pay cards that send text messages with instant rebates.
Of course it’s not just a matter of distributing co-pay cards widely. Brand marketing agencies need to work at LOE to deliver a communication strategy that bolsters the brand attributes, designed to differentiate the brand from imminent generic competition. Proven efficacy, trust, and experience are often themes that are driven home in the final quarters. Patient education and support materials are typically lost as generics come into the marketplace. Manufacturers should utilize these resources to reinforce brand value.
At the end of a brand’s life, every script matters, and promotional support should be extended far beyond the traditional called-on universe. In many cases, by the time LOE is imminent, the call list has contracted with sales representatives redeployed onto newer brands. How do brands effectively reach beyond the traditional highest writers to drive value across all writing segments?
Many brands have looked for alternative approaches to the field to deliver messaging and resources. Instead of relying exclusively on the field force, multichannel approaches have been found effective. This requires synchronizing an effort that involves digital, direct mail, email, and tele-sampling. Execution of multichannel marketing differs depending on vendor relationships that are in place and how agile vendors are at sending and receiving data. A fully-integrated approach that coordinates all channels and ensures that the number of touches are commensurate with value, channel preference, and call-on status is ideal.
Speed and flexibility are critical success factors at LOE, and while brands should be planning well in advance of hitting the patent cliff , there is often never enough time. New messages need to be written and approved within the dictates of approved claims. Segmentation and strategic direction need to be approved. All of this simply means that multichannel marketing tools and vendors need to be able to integrate the agreed-upon approaches and implement assets in a matter of weeks, not months.
At end of life, brands might reconsider the net effect of their overall sales organization efforts. Many brands choose to keep the pedal to the metal, with frequent sales calls to high writers until the bitter end. This may make intuitive sense for a sub-blockbuster generating, let’s say $1 million to $2 million per day. But with the sales force accounting for the largest portion of commercial cost, shifting the curve to the right by only weeks before LOE, can have a substantial payoff. While loyalists may miss rep visits, they are not going to give up writing the brand, particularly if multichannel support efforts pick up the slack.
Precise measurement of effectiveness at LOE is also critical. The old adage is never more true: “what gets measured gets managed.” Instead of monthly sales metrics which are sufficient for a mature brand, LOE requires a lens that looks at sales and share on a daily basis. An integrated multichannel approach includes data capture from every point in the marketing funnel melded to clear measures of success. Since speed of switch is regional, dictated by the aggressiveness of payers and the rules governed by state pharmacy boards, measurement needs to be assessed on a local level.
With adequate advanced planning, brands can make choices prior to LOE that buff er against the patent cliff and serve to wring-out incremental revenue from the broadest possible target audience at an affordable cost. Even nominal investments in integrated multichannel approaches can be worthwhile to deliver extra value in the final chapter of a brand’s life.