Patent cliff and strategic switch: exploring strategic design possibilities in the pharmaceutical industry

Chie Hoon Song,Jeung-Whan Han

doi:10.1186/s40064-016-2323-1

Abstract

Extending the period of the market exclusivity and responding properly to the recent agglomeration of patent expiries are pivotal to the success of pharmaceutical companies. Declining R&D productivity, rising costs of commercialization, near-term patent expirations for many top-selling drugs are forcing companies to adopt new systems to introduce innovative products to market and to focus on strategies that increase the returns from the existing product portfolio. This systematic review explores various strategic and tactical management approaches by synthesizing the relevant literature and practical examples on patent expiration strategies. It further discusses how the mix of competition policies and strategic instruments can be used to maintain declining revenue streams from the blockbuster business model of the pharmaceutical industry. The review provides a comprehensive overview of the research on various strategies, offers both theoretical and practical guidelines for strategy transformation that companies can use to prolong the market exclusivity, and identifies knowledge gaps that needed to be addressed in order to improve efficiency in policy design.

Highlights

Ensuring the long-term profitability and revenue upon launching of new drugs raises serious concerns for the involved parties in the pharmaceutical industry
As many companies are conducting researches in similar indication areas and working on influencing the same enzyme activity or the interaction with receptors, it seems opportune to file a patent application as early as possible for the discovered drug candidate. This approach has the disadvantage that the patent expiration is expected to occur much earlier than usual and the effective market life of drugs is significantly reduced (Hemphill and Sampat 2012). It takes an average of 12–13 years to complete the research and development activities, from the initial patent filing to the regulatory approval of new drug, thereby reducing the effective time of market exclusivity to 7–8 years
(1) A thorough understanding of the business environment and anticipation of possible shifts in the pattern of industry dynamics; (2) devising strategies that deliver a competitive advantage for perceived value or delivered cost; (3) promoting the collaboration between scientists, attorneys and marketing manager in order to make maximum use of a global view of product lifecycle management; (4) a combination of product modification, promotional and pricing strategies

Summary

Introduction

Ensuring the long-term profitability and revenue upon launching of new drugs raises serious concerns for the involved parties in the pharmaceutical industry. As it becomes increasingly important to defend revenues from an existing product portfolio and slow down the sales losses associated with the market entry of generics, there is a need to better understand and critically review the strategic options for research-driven pharmaceutical companies.

Results

Conclusion