There are three circumstances which define the “field of play” when launching a product.
The first instance deals with price erosion. An FDA approved generic can reasonably expect to obtain at least 50% market share by giving up 5 – 40% on AWP. As a second generic enters market, competitive price erosion is often aggressive and market share declines sharply. To maintain margin and profitability, generic offerings attempt to reduce cost of goods (COG) by pressuring suppliers and transferring manufacturing offshore. The financial consequences are devastating, since product pricing falls sharply while the COG will reach an asymptotic minimum. This is a losing proposition. Even an “authorized generic” will inevitably be hard hit.
The second option to consider is an extension of an innovator’s product line. As a product nears the end of its patent life, it’s strategically smart to pump new innovation into the product. This approach can be accomplished by re-formulation, and potentially, by new patents. New patents may take many forms including new therapeutic application, combination products and so on. Clearly, the intent is to maintain sales related to the existing product, but this also presents a moving target to potential generic competitors who have the added burden of overcoming new patent protection.
It’s all too common today to see generic market approval granted simultaneously to several companies with essentially disastrous financial consequences to all. In order to play at all, it’s a race to the bottom—the lowest prices, the lowest margins and the lowest profitability.
The third option requires Paragraph IV filings. Some companies are willing to accelerate the time component to wrestle away patent coverage from the innovator. Paragraph IV filings and other litigious methods sometimes are effective, but the odds with this approach are not favorable either.
At Pisgah Labs, we don’t “race to the bottom.” Our approach is to partner with companies to launch products where the API’s safety and efficacy are well established, and for which additional features are provided in the product offering. Critical to this approach is a branding strategy and patented technology; together market protection and predictability are provided.