Strategies Brand Companies Use to Delay Generic Competition After Patent Expiry

Brand-name pharmaceutical companies often employ various strategies to maintain their market share and delay the entry of generic drugs after the expiration of their patents. These tactics aim to minimize generic competition and protect the brand’s revenue streams, even after their exclusivity rights end from primary patents. These typically focus on leveraging brand loyalty by preemptively launching a generic, differentiating the product with minor changes, and engaging in regulatory maneuvers for line extension. With proper execution of these strategies, companies can increase their profitability, renewal, and continued growth rate.

As we know, patents grant the right to exclude all but the patent holder from making, using, offering for sale, and selling an invention. However, these patents come with expiration dates. Delaying even a day past the expiration can financially hurt generic brand companies tremendously.

Here are some of the most common approaches of how pharmaceutical companies work around this situation:

Pre-expiration strategies to overcome generic competition:

1. Preemptive Launch of a Generic

In this strategy, pharma companies release a generic – or mimicked – version of the product, also known as an “authorized generic” before the patent expires. Because of this, pharma companies can selectively license the brand-name drug to a preferred generic company, or its own generic subsidiary, before the full generic competition kicks in. This would allow them to sell and possibly manufacture an “authorized” version of the drug and launch on the same day as the first generic competitor. This strategy would ensure the brand company can still earn significant money and not lose profit to a generic company after patent expiration. One example of this in the past was when Upjohn maintained 90% of the generic market for its patented drug Xanax by introducing its own generic over-the-counter version one month before the Xanax patent expired.

2. Layering Innovations

This occurs when the original patent holder is granted additional patents for improvements to the base products. Basically, the company makes its own product obsolete by touting an upgraded version and therefore extends its monopolistic profit stream. This method usually presents a patent holder with a scaled-down version of its original R&D decision, depending on the market potential of the improved product. This usually involves lower risks of product failure and market rejection, but it also forecasts lower expected financial returns than the initial product investment decision because of dynamic consumer and competitor options in the meantime.

3. Line Extension

In this strategy, the patent holder finds new ways to employ the patented idea into the market. The goal is to switch current users to a new version of the drug before generic introductions of the old versions can appear in the market. For example, this can be in the treatment of additional diseases, semiconductors that can be patented for use in new applications, and software that can be modified and patented to incorporate additional features are all examples of line extensions. This method is advisable when market niches have been identified that would welcome a tailored version of the product. It’s important to evaluate the market size and cost when considering this approach to ensure it is financially self-sufficient. To further extend exclusivity, brand-name companies may also reformulate the original drug or introduce new formulations that offer additional benefits. With the patent extension, the generic brands would have to wait longer to step into the market.

Conclusion:

Brand companies often several strategies to ensure they can still be profitable after the primary patent expires. Along with the strategies mentioned above, some pharma companies also lower their brand-drug price margins, making it more difficult for generic to compete. They utilize a combination of pricing strategies, authorized generics, product innovations, and aggressive patent management to extend their market exclusivity and minimize generic competition once the patent for a drug expires. While these tactics can be effective in prolonging market dominance, they also raise concerns about drug affordability and access to the general public, especially as generic alternatives become a crucial part of reducing healthcare costs.

Reference

https://www.sciencedirect.com/science/article/abs/pii/S0024630105000592