Strategies when your product is losing patent protection

Expiring patents is one of the Pharma industry’s weak points. When a product goes out of patent the generic manufacturers are often quick to grab the opportunity and erode the market with cheap copies. The price is often reduced by 70-90% and has a significant effect on the revenue made by the original producer.

As I see it the originator has four strategic alternatives:

• Follow the price level of the generic competitors
• Waive the product and let it generate as much profit as possible with a minimum of resources utilized
• Launch a generic copy and try to cannibalize the market
• Launch an improved version and pull the patent losing version out of the market before the patent expires (the company can of course keep both on market)

The last alternative is often applied because of the possibility of protecting the revenue by moving all patients from the patent losing product to the new and improved version. For this strategy to succeed the company has to demonstrate a better efficiency or safety compared to the old version. The Danish pharmacies cannot substitute between the generic and the new improved version – if the benefit is approved and acknowledge by the Danish health department, and hereby is the generic risk bypassed.

Imigran (sumatriptan): a case study of applied patent strategies

Imigran from GSK lost DK patent protection in May 2006 and 10 companies has eroded the Danish market with different tablet variations of sumatriptan (GSK has a nasal and an injectable variation of sumatriptan with no generic competition on the Danish market). GSK tried to protect their revenue stream by using the second and last strategic alternative:

The first strategic move was to introduce Imigran Sprint and deregister the four pack of Imigran[1]. GSK could hereby get around the generic challenge, but the Danish health department did not find the rapid formulation of Imigran Sprint evident and made the new and the old version substitutable.

The second strategic move was to launch a generic copy and try to cannibalize the market. Sumatriptan “GSK” was launched when the patent expired in May 2006 and the idea behind this move must have been to compete on price with the other generic alternative from Sandoz – many generic manufactures followed.

If you examine the sales figures of Imigran it gets evident that the revenue was reduced by half from 2006 to 2007. The three biggest Migraine products on the Danish market are Imigran (GSK), Maxalt (Merck) and Relpax (Pfizer). GSK has protected their position as a market leader, but I think it is only a matter of time before the market share of Maxalt or Relpax exceeds the one of Imigran.

To sum up: GSK tried to apply two of the described strategies and has to some extend protected their market share – Imigran is still the market leader in selective 5HT-receptor agonists. But the revenue was cut by half when the patent protection expired.

[1] http://www.laegemiddelstyrelsen.dk/db/filarkiv/5938/20060406.pdf