A Novel Approach to Cushioning a Blockbuster's Fall off the Edge of the Patent Cliff

Lipitor's domination of the cholesterol market ended when the blockbuster drug fell off the patent cliff on Wednesday. Less-expensive generics will eventually begin to flood the market, all but eliminating Pfizer's monopolistic share. But what would happen if Pfizer now made Lipitor available at a price differential so great that no one could afford not to continue to take it?

Let's start with the challenge of the patent cliff, the value of the Lipitor brand and the impact that Lipitor has had on the people who have been able to manage their cholesterol because of it. During the days Pfizer continued to support the patent-protected drug from a sales perspective, savvy insiders knew that "even a monkey could sell Lipitor." So why let Lipitor be substituted by a generic alternative? Why not let loyal Lipitor customers (patients and prescribing physicians) continue to take advantage of its enormous clinical value...and at a price point that can't be resisted?

Branded drugs, like everything else, have a life cycle. Generics come into the marketplace and scoop up significant share in a predictable manner. Blockbuster drugs have historically lost upwards of 70% to 90% of their market share. Within about a year of losing their patents, Eli Lilly's Prozac and AstraZeneca's Prilosec lost around 90% and 80% of their market share (or about $2.34 Billion and $4.80 Billion), respectively. Facing into this inevitable reality requires a different strategy. In fact, a new approach could help Pfizer (and for that matter, other pharmaceutical manufacturers) regain a position of trust built around patient-centeredness.

Let's imagine that convoluted drug-pricing did not exist. Essentially, pricing Lipitor at a point just enough above the generic, Pfizer could maintain loyalty and position itself very effectively as a true champion of its patients. Typically, generics average about 30% of the brand-name price. Imagine if Pfizer was able to come out and say something to the effect of, "We've recouped what we've needed to on the research, development and commercialization of the drug, and now we're able to make it available at a price competitive with generics." Patients and physicians alike would view Pfizer as the pharmaceutical company committed to patient care and bringing drugs to market to improve health and well-being. This strategic approach would be cost effective short-term, and help to reposition the corporate image to represent a focus on economic and clinical value.

While some drugs are able to go OTC, this strategy may not be right for Lipitor. In the case of Prilosec, the OTC version now accounts for over $200 million in annual sales (about 10% of overall revenues). But there are quite a few costs involved in switching from Rx to OTC (including additional studies to prove safety). While Prilosec was deemed to be safe enough for patients to decide on their own to take, Lipitor (and statins generally) may have greater safety issues. While many Americans rely on cholesterol medications, statins are not viewed as appropriate to take without proper medical oversight.

In the end, maintaining market share and enhancing a broader corporate image could be very valuable and go a long way toward restoring pharma's reputation for ethical leadership. Lipitor's household name makes it seem a perfect fit for doing just that for Pfizer, and extending this great drug's life as long as possible.

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