Prozac decision ushers in era of branded generics co-operation, not litigation

Loss of patent protection for Prozac (see related article) may have an influence far beyond the lost revenues to Eli Lilly. Knee-jerk legal protectionism, a strategy that served to protect branded drugs from generic competition for so long, has reached the end of its useful life. Not only have generics companies wised up to the legalese, but the vicious competition that characterised the branded-generics divide is itself becoming outmoded. Gone or going are the legal battles, price cannibalisation, and bad mouthing that have sullied the sector. Co-operation, co-marketing, and co-ordinated strategy are now the order of the day.

"Sweetness and light will not flood the pharmaceutical industry," says Richard Clifford, a healthcare consultant for Promar International, a strategic consultancy. "But there is no question that recent events demonstrate a growing partnering dynamic spreading throughout and between generics and branded organisations. It is the failure to grasp this changing mood that has cost Lilly dearly—perhaps up to $30 billion to 2010."

In relying on legal means to guarantee Prozac's patent life to the end of 2003, Lilly was gambling that it would be able to switch the estimated 30% of depressed patients prescribed Prozac to its replacement drug—R-fluoxetine or 'new Prozac'—and maintain market share. Had the company succeeded, it would have seized the lions share of a rapidly growing therapy—worth up to $25 billion each year by 2010.

The court decision has left the replacement strategy in tatters and effectively guaranteed that generic companies will absorb the market before R-fluoxetine hits pharmacy shelves.
"Lilly's strategic error is having a wider impact on pharmaceutical share prices and other big pharma operators will have to take heed," says Clifford. "The gamble misjudged the political attitude toward pharmaceuticals in the US today. Drug prices and anti-competitive behaviour are coming under increasing scrutiny from the government and consumers; they were never likely to be sympathetic toward a company representing all the bad, old practices of the branded sector. Lilly would have been better advised to enter into partnering arrangements with select generics companies to reduce patent expiry impact. By sticking with an outdated mindset the company has seen its major revenue earner cut off and left itself open to acquisition in the consolidating drugs industry."

Promar has recently completed a major study investigating strategic issues for branded and generics companies in the changing pharmaceutical landscape.

For more information: Richard Clifford, Consultant, Promar International, Northcroft House, West St., Newbury, Berkshire RG14 1HD, UK. Tel: 44-1635-43363. Fax: 44-1635-43945.

Edited by Angelo DePalma
Managing Editor, Drug Discovery Online