Strategic Options for Brand-Name Prescription Drugs When Patents Expire

Abstract

ABSTRACT Pharmaceutical companies face a very hostile competitive environment from generic drugs once the patents on their brand name drugs expire. Depending on the country, such patents usually last 10-15 years but no sooner do the patents expire then copies of off-patent brand name drugs, called generics, are introduced, generally by smaller-size and lesser known companies, at significantly lower prices. As health care costs escalate all over the world, efforts to control medication costs have created a major market for generic prescription drugs, particularly in government funded hospitals and in dispensing general practitioner markets of the Asia Pacific and the third world. The world market for generics is estimated at US$20 billion, doubling in only five years and capturing over 30% of the market share. Because of adverse effects on sales and profitability due to the launching of generics, most research based companies that produce original brand-name patented drugs are forced to take counter measures to overcome this problem, particularly when R&D costs for new patents are skyrocketing. This paper develops a brief perspective on this problem and then examines the experiences of many multinational companies in the Singapore market in dealing with the problem. While several different approaches are identified, only one company experience appeared to work successfully and this is discussed in relative detail.