Patent litigation the most commonly used generic defense strategy among pharmaceutical companies

Nov 4 2004

Patent litigation remains the most commonly used generic defense strategy among pharmaceutical companies. 71% of drug companies have used legal battles to defend their patents in the past three years, according to research from pharmaceutical business intelligence firm Cutting Edge Information.

The pharmaceutical industry faces a significant threat from generics companies who challenge existing patents and erode branded product sales. While patent defense constitutes a very costly strategy, failing to react may lead to a bleaker outcome. On average, branded drugs lose 15-30% of their market share when a first generic version reaches the market. Sales decline by as much as 75-90% when companies introduce subsequent generics.

Cutting Edge Information's study, "Combating Generics: Pharmaceutical Brand Defense" ( http://www.pharmagenerics.com/ ), examines an array of legal- and product-based strategies available to combat generic drug competition. The report, which also contains illustrative case studies, explores a number of strategies in detail, including developing franchise and line extensions, "flanking" generics, Rx-to-OTC switching, and market-crossover strategies.

Companies turn to defensive pricing strategies or increase investment in advertising and patient outreach programs when courts deem a patent unenforceable or litigation simply becomes too expensive. However, many innovative alternatives enable companies to buy time.

"In the age of generics, speed is key," says Jon Hess, senior analyst at Cutting Edge Information. "Drug-makers spend an average 12 years turning a patented compound into a marketable drug and a few more producing and marketing it. In reality, innovative drugs have just five to seven years to earn returns before the core compound's patent expires."

The report focuses on four core areas: strategic planning, lifecycle management and portfolio planning, key trends and industry development, and generic company profiles. The study also identifies five critical principles for success:

• Protect existing brands from patent challenges and generic competition
• Switch patients to next generation drugs to balance existing brand defense strategies
• Assimilate public, political, and regulatory changes into generic planning
• Initiate generic defense planning earlier and support it with necessary resources
• Explore licensing, deal-making, and market-crossover strategies as viable solutions to generic competition