Pillhead

the personal views of a doctor in industry

Branded Generics, a Mug’s Game

with one comment

During the patent life of a drug, Big P must recoup its costs, cover its expenses and make some profit. Throughout those 10 years many of the normal rules of economics are suspended: our volume goes up and, in the absence of competition, our price goes up too (strangely in spite of massively higher volumes going through manufacturing, we do not appear to develop any competitive advantage in the manufacturing process, but that is another article).

And at the end of these happy years, we find that we have put a price umbrella over the market and in so doing we have literally built the market for generic competition to our drug.

Our response has been disappointing: branded generics (also called second brands).

While attempting to maintain the price of our premium branded drug, we launch a branded generic version closer to the generic competition’s price.

There is nothing wrong with pricing your product to different market segments, but the differential must be based on features which some are willing to pay extra for. In the drug business, all three of these drugs options are deemed by the regulators to be clinically the same.

We have a schizophrenic attitude to generic drugs. On the one hand we like them so much that we are selling them, while on the other we keep our original brand implying that there is some superiority. We then launch branded generic drugs which are somewhere in between. We never actually claim that brands are better than generics, we never claim that our generic is in any way less good than our brand.

There is no marketing angle for us in the current model.

You have to take your hat off to the brazen business of offering a drug to a person at one price, and essentially the same drug to a richer looking person at another.

We may learn to our chagrin that people do not like being thought of as mugs.

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Written by Pillhead

June 10, 2009 at 3:22 pm

One Response

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  1. You state “You have to take your hat off to the brazen business of offering a drug to a person at one price, and essentially the same drug to a richer looking person at another.” Come on, this I believe has traditional mode in Pharma for a long time as one compares US prices to most other countries. This is complex as has more to do with price controls but is effectively the same outcome. Likewise when it comes to “Volume Sales” it may be reversed situation but drugs are sold deeply discounted to some Pharmacies/Hospitals/Governments verses smaller purchasers.

    Rather than a “Branded Generic” Pharma should just lower the price on the Branded Drug once competition resets the costs.

    CMCguy

    June 12, 2009 at 3:44 pm


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