Last month, Neil Dobson and Mark Spedding identified how ad hoc market research projects for pharmaceutical brands in the latter stages of their life-cycle still have a key role to play. This month, we look more explicitly at the role of research in minimising the impact of generic competition.
Neil Dobson 
Mark Spedding 
17 Nov, 2009
Researching Brands In The Latter Stages Of Their Life-Cycles: Line Extensions, Brand Boosters and Market Exit Strategies
In the first part of this article, we identified some of the ways in which market research can make a significant contribution to brand success in the latter stages of the life-cycle, looking at such factors as:
- Line extensions
- The tone of communications
- Landmark trials
- Price changes
- Support services
In this second part, we will look more explicitly at the role of research
in minimising the impact of generic competition. The measures which companies
use here tend to be known as “exit strategies”, though in practice they are
more likely to be adopted before the brand exits the market (or is forced to
exit the market). Such measures are aimed at preserving sales until loss of
patent cover forces the brand out of the market, or so drastically reduces
its presence that the company chooses to end all marketing, or sells the product
on to another company which specialises in marketing old brands which have
lost patent cover. However, in some cases, particularly when highly useful
support services are offered, the brand may not “exit” from the market at all.
The approach which is best described as an exit strategy is a POM to P switch
– when this is done effectively, the brand is exited from one market to another,
where different rules apply, but where it can still perform strongly.
Market research can be very important in formulating and implementing the full range of exit strategies. We will go on to summarise the key ways it can make such a contribution.
Competitor Genericisation
Most pharmaceutical companies are aware of how much loss of patent protection can affect their revenues. However, in an increasingly cost-conscious healthcare environment, it is becoming apparent that a competitor arriving at this point at an earlier date can also be a huge issue. Healthcare providers, such as the NHS in the UK, may impose compulsory prescribing of the first product in a therapeutic class which becomes available generically, even if later drugs in the class offer clinical advantages. Typically, prescribers may only be allowed to prescribe the patent-protected drugs if patients have been tried on the generic first and problems have occurred. More draconian authorities may insist on mass-switch programmes.
Market research designed to help companies minimise this situation is often
a very wise investment, and is most effective if the sample includes, or even
consists entirely of, those elusive creatures collectively known as “payors”.
In the UK these may be prescribing advisors or more senior 
commissioners, while
in other markets insurance company staff or regional policy makers (very influential
in Spain, for example) may be important. As a rule, research with payors is
more productive the more thought-through and tailored it is. A project where
the sample mainly consists of GPs/PCPs with “a few payors thrown in” will probably
produce some useful insights. However, a project entirely consisting of payor
respondents, particularly one which is aimed at getting them to act like an
advisory board and provide suggestions on how the company should respond to
the prospect of generic competition will be more productive. Such research
may be more expensive than a typical project, and take longer to complete,
as recruitment of payors is rarely straightforward, but it is likely to repay
the investment in money and time. This is particularly true for brands in markets
where method of administration is important, as it tends to be easier to defend
a specific inhaler or injection device against a switch than it is with more
conventional oral preparations.
Defending Revenue Streams
Companies adopt different strategies to defend their revenue streams from actual and imminent generic competition. Prior to patent loss, it is common for promotional resource to be gradually withdrawn, with fewer representatives detailing the product, or detailing it in third slot rather than first, etc.. After patent loss, marketing may still continue, though this is often at a very low level, such as mailings or initiatives with wholesalers. Research has a relatively limited role to play here, though it can still make important contributions such as measuring the impact of reduced representative activity and helping to refine mailers.
Some companies respond to the prospect of genericisation with a price cut,
on the basis that this will increase the number of patients on the medicine
to a degree that will more than compensate for the loss of revenue per patient.
This can also be used to make the case that, when the generic arrives, the
cost savings to the payor will be extensive, partly because so many patients
are already on the molecule, and partly because this means there will be less
“hassle” if a mass switch policy is implemented. This is a high-risk strategy,
as there is no guarantee the increased uptake will happen, and it can also
start a “price war” among the companies active in the market, which often ends
with everyone making less money and is resented by prescribers as it can lead
to regular and confusing changes of payor policy.
The forecasting models discussed earlier clearly support companies in making such decisions. Primary research is also important, with two key aspects of particular note. First, it is often useful to speak to HCPs and payors about any change in pricing strategy – if they say it’s not going to make any difference, and the product will not be used any more than it already is, the decision to cancel the price change could result in the protection of significant amounts of revenue. Any company would rather keep all its existing patients, at the existing revenue per patient, than drop the price by 20% without seeing any increase in patient numbers. In addition, pricing research (along the lines discussed in the first part of this article) is also very important if a price cut is introduced. Pharmaceutical markets can be very price-sensitive and what may appear to be a minimal change in cost per month could have a very significant effect on produt uptake.
Support Services and Patient Initiatives
Some companies try to maintain brand loyalty by offering support services
to committed users. This is particularly effective with secondary care brands
for chronic conditions where patients may have significant problems that the
healthcare provider cannot afford to deal with unless help 
comes from a third
party such as a pharmaceutical company. Examples include the delivery of medicines
to patients’ homes, 24-hour helplines and monitoring services. Some companies
have made a virtue out of a necessity. Novartis had to provide blood monitoring
services for their antipsychotic brand Clozaril as it would not be used otherwise,
but the quality of the service provided has led to massive customer loyalty
in the face of generic clozapine products, whose manufacturers are unable to
invest in the level and quality of service needed to dislodge the brand.
Companies who plan to launch support services such as these should remember that while HCPs welcome valuable support services, they are also very touchy about their independence and partiality, and as a result they are very particular about the services they will use. Anything they perceive as gimmicky, or which is seen as compromising their prescribing integrity by tying them to closely to a brand, will receive short shrift. On the other hand, patients, who are often the end-users of the service, will also have very particular needs: an online support service, for example, will be of less value to elderly patients who cannot or will not use the internet.
The role of market research in assessing and evaluating the response of both HCPs and patients to support services is probably self-evident here. What market research can also add is a deeper understanding of cultural and economic differences across markets. In the UK, the patient may have a stronger voice than elsewhere in Western Europe, and Southern and Eastern Europe may have less overall resources for healthcare. A full understanding of such differences can help companies tailor service offerings at a pan-European level, and thus ensure that resource is used appropriately and is not wasted on inappropriate offerings.
In addition, some specialised sectors of the industry are based around service brands – that is to say, products whose distinct character is based around what comes with them rather than in their clinical profile per se. Vaccines are the classic example of pharmaceutical service brands. Such brands, because in a scientific sense they are almost generic from the outset, are more able to survive patent protection loss because the service itself is not affected by this. The companies active in such markets need to ensure that their service offering remains in tune with market needs – the ways in which market research can help with this do not need to be spelled out, but that does not diminish their importance.
POM to P Switches
Finally, many companies have attempted to preserve revenues by placing brands into a different market place – the retail pharmacy. POM to P switch, as it is known, maximises the user’s attachment to brands, and works on the basis that consumers will buy a familiar name such as Zantac in preference to a less expensive, clinically equivalent generic ranitidine preparation or even a branded but unfamiliarly-named competitor. It is certainly clear that GSK have extended the life of Zantac way beyond what might have been expected when the prescription product faced loss of patent protection in the mid-nineties. Boots/Crookes Healthcare have been even more successful with Nurofen, which started life as the prescription brand Brufen as long ago as 1969.
A POM to P switch is, essentially, a product launch, and requires the same
kind of comprehensive research programme as any other launch. The differences
compared to a POM launch are evident, however. Research with HCPs is essential
– GPs/PCPs, for example, may have concerns 
about “losing control” when products
become available over the counter, and research will identify what these concerns
are, how deep they are, and how they can be allayed. However, the core HCP
now becomes the retail pharmacist, and research with them can cover many topics
– education, training and other support needs for them and their shop staff,
pricing and distribution strategy, packaging research (pharmacists are particularly
concerned about pack sizes, as they wish to maximise the shelf and storage
space available to them), the role of representatives, customer loyalty programmes,
and evaluation of promotional display items for the shop (such esoteric articles
as “shelf enders” and “counter toppers”). Sampling is also important here,
as the needs of independent pharmacists and small chains may be very different
from those in the major high street chains.
Above all, the patient, now known as the consumer, becomes absolutely central. Research here can cover many areas, with pricing (again), packaging, information needs and advertising being the most obvious. One thing that should be considered with consumers is whether there is any interest in certain products being made available OTC at all. The performance of OTC simvastatin strongly suggests that chronic medicines are not well-suited to OTC status. A research project which shows no real value in conducting a POM to P switch may not do much to preserve revenues against loss of patent cover. However, it may save the company from the further injury of an expensive launch for a consumer brand that fails to meet sales targets.
Forecast Models and Out-Licensing
As we have shown, there are numerous mechanisms that a company can implement to manage market exit. Whatever strategy is being considered, it is essential that various scenarios and options be modelled so that a decision can be made based on sound financial judgement. Modelling these various options means that the chosen strategy should achieve the optimum return on investment and meet any additional needs that the company may have. Such needs often include maintaining a presence in the marketplace in order to retain relationships for future product launches, and rapidly redeploying resources to bolster other brands.
As with any forecast model, the output is only as good as the input - both
in terms of data and assumptions. It is therefore essential that any assumptions
made should be clearly stated and well-sourced, in order that they can be subjected
to internal scrutiny and revised if required. Research can play a useful role
here by providing a context for the model as well as data to estimate the decline
in various segments of the market.
Another other useful tool that can be employed is that of analogues, where products that have previously lost patent protection can be assessed to provide a benchmark of possible performance. These need to be chosen carefully to match the market conditions and situation as closely as possible – but can provide invaluable insight into how a product may perform in the real world.
One final, and important, role played by forecast models is in the decision to licence a brand out shortly before or after patent expiry. Some smaller companies specialise in the effective marketing of drugs which have lost patent cover, and larger companies licence or sell their brands to them, as the royalties which then come to the bigger companies are more than they would see if they retained the brand. The “purchaser” company needs to know that they are buying something that will make money for them, too: a robust forecast model is the best evidence for this.
Conclusion
There is no denying that loss of patent protection is a huge issue for every prescription-only medicine. After all, the patent protection laws for medicines are the most profound influence on the structure and dynamics of the pharmaceutical sector in its entirety. However, there are actions which companies can take to reduce its impact: market research can and should play a significant part in these actions.
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