What is Loss of Exclusivity?
When a new prescription drug is launched by a pharmaceutical manufacturer, that manufacturer maintains the legal right to develop, sell, and market the drug for a set amount of time, generally around 10-15 years, depending on the drug type. After that period of time concludes, the manufacturer must then relinquish control of the drug formula to the marketplace, a transition called loss of exclusivity (LOE). After LOE, multiple manufacturers can sell generic versions of the original drug.
For the manufacturer holding the original patent, loss of exclusivity can feel like a dramatic shift, forever changing the brand’s profitability. However, this doesn’t have to be your brand’s fate. At Truveris, we have shepherded multiple Life Sciences brands through loss of exclusivity and we are eager to confront five misconceptions about the process.
Misconception 1: The generic version is always at least 80% cheaper than the branded drug after loss of exclusivity.
Reality: Because more than one manufacturer can sell the drug after the drug patent expiration, the price of the drug drops due to increased competition. Manufacturers usually assume that the generic versions of their branded drug will be sold at an 80% discount. However, that’s not always the case. The competition for some drugs and therapeutic areas might not be as strong as others, which means that sometimes the generic is only 20-40% cheaper than the branded drug.
Pharmaceutical manufacturers approaching LOE should research the market to gauge how much competition is expected after their drug goes off-patent. For example, when the PreP HIV drug Truvada went through LOE, the competing generic entered the market at only approximately 30% less cost. This example serves as a reminder that competitive pressure after LOE can vary – brands shouldn’t create a pricing strategy around the 80% discount benchmark until they receive competitive signals from the market.
Misconception 2: Patients will know that the branded drug is approaching loss of exclusivity and they will switch to the generic.
Reality: While LOE might seem like front-page news within the pharmaceutical company’s walls, patients are likely not aware of drug patent expiration dates. Patients usually get their information from their doctor, whose top priority is to write a safe and effective prescription. If a branded drug is working well, a patient and their doctor may agree not to switch to the generic. Some therapeutic areas tend to have especially strong brand affinity, such as contraceptive and neurologic brands.
Before LOE, pharmaceutical manufacturers should work within their CRM systems to identify and develop retention strategies for their most loyal patients. It is important to continue communicating to these loyalists throughout the LOE process, either via text message, email, or a combination of the two.
Misconception 3: After the drug goes through loss of exclusivity, it is not valuable to continue extending co-pay assistance offers to the non-covered population.
Reality: The non-covered population could be comprised of brand loyalists who would stick with the branded drug post-LOE but need financial support to do so. By eliminating a co-pay assistance program for non-covered patients after the drug patent expiration, brands could be cutting ties with a valuable segment of their consumer base. And remember – after loss of exclusivity, covered patients will become non-covered.
Prior to going off-patent, it is critical for pharmaceutical manufacturers to redesign their copay assistance programs, with a focus on maintaining compelling offers. The right price optimization could be the difference between maintaining key consumer segments and losing them.
Misconception 4: Patients will be penalized by their PBM for taking a drug after it goes off-patent.
Reality: One way that PBMs control their costs is by creating drug formulary structures that encourage patients to take cheaper generic drugs over the branded alternative. However, if a patient and their doctor agree that a branded drug is producing better health outcomes than the generic, the doctor can write a prescription with a “dispense as written” code, which overrides the PBM’s formulary requirements. In this scenario, the PBM passes the incremental cost of the branded drug onto the patient.
With a smart copay assistance program, pharmaceutical manufacturers can cover the incremental cost that the PBM passes to the patient. In other words, using a copay coupon, manufacturers can remove the penalty that the patient experiences for selecting a branded drug not on their formulary. This strategy maximizes access for long-time patients and also drives long-term patient adherence.
Misconception 5: A drug cannot command market share in its space after it goes through loss of exclusivity.
Reality: Going from on-patent to off-patent will change the business of the brand. Competitors will enter the space, resulting in fewer claims and a decrease in revenue. However, manufacturers can prepare for the LOE process years in advance. During that time, they can develop robust plans for the evolution of operations, marketing, and customer retention. As the patent expiration date approaches, manufacturers can use competitive intelligence to shape their plans to proactively address market signals. Before and after LOE, manufacturers should communicate with their brand loyalists and make sure that their copay assistance programs are compelling and supportive.
Ultimately, without diligent strategic planning and smart patient access strategies, LOE can significantly disrupt a brand’s business. But with thoughtful and well-designed strategic plans, manufacturers can go off-patent and still command meaningful market share and profitability.