Choose the right generic strategy for your mature brands!
By Dr. Neal Hansen, expert-trainer of the Late Stage Pharma Lifecycle Management course.
When companies approach patent expiry, an increasingly common consideration is the option of developing a generic strategy to operate alongside their core brand strategy to maximise success. The concept is based on the view that some market segments will always be captured by a generic post patent expiry, so competing with the brand alone might leave money on the table.
However, the reality is much more complex, and the choice of the right generic strategy, or any generic strategy at all, is dependent on the interplay of a number of factors, including:
- Company capabilities
- Expected competition
- Therapeutic dynamics
- The stakeholder balance of power in the target country
Generic strategies are most effective for a branded player when the generic competition itself is limited to a smaller number of players – if there are 10-20 generics players already expected to launch, the probability that the parent company’s own generic strategy will succeed is small. If however, there are less than 3 or 4 generics players launching, establishing a reasonable market share could be viable.
So how to choose the right strategy? Should you go with an authorised generic, a licensed generic, or sell your own? While these are all viable options, they are fundamentally different when it comes to execution and environment. To choose the right strategy, at its most basic level, companies can follow the following decision flow:
Question 1 – Can you manufacture a competitive generic product?
Seems like an easy question to answer, as most companies assume that they have the lowest cost manufacturing anyway. However, this is not always the case, as generics companies themselves can often reduce the COGS for a target product below that of the originator as their facilities are more flexible and up-to-date. If the answer to the question is yes, then all three strategies are viable, but if not, then an authorised strategy is the only way forward – after all, how could your generic compete profitably if it costs more to make than the competition?
Question 2 – Do you have the capabilities to sell a generic in-house?
Again, a seemingly easy question: after all, what can be hard about selling a cheap product! This is perhaps the commonest misconception about winning with a generic – that price is the only relevant lever. Generics companies win through superior relationships with the key stakeholders (typically wholesalers and pharmacists) evolved portfolio strategies that offer value for money across a ‘bundle’ of products and streamlined operating and decision making processes that leave big pharma lagging behind. Without these capabilities, an ‘own’ generic strategy will likely fall on its face, succeeding only if the own generic can be priced lower than the competing generics, and even then likely to cause further damage to the originator brand reputation. In this world, the licensed generic option is by far the best approach.
Question 3 – Is there a first to market advantage for the generic?
This is the key question for an authorised generic strategy, in which a generics player will pay up-front to be allowed to launch ahead of patent expiry, and thus ahead of its generic rivals. For this to work, the generic company must be confident that it can sustain its first to market benefit, be that in terms of price or market share, and thus be willing to pay the branded company more up-front than it will lose from the additional weeks/months of generic competition. This is by far the cleanest and easiest strategy to employ, but requires confident modelling of the effects and impacts of early generic competition to ensure the finances work out.