The Wall Street Journal reported this week that Pfizer is giving up on Lipitor, dramatically cutting back on marketing support.
This isn’t surprising. Lipitor, Pfizer’s multi-billion dollar cholesterol lowering medication, lost patent protection at the end of 2011. A number of generic medications will soon enter the market, so Lipitor won’t be able to maintain a premium price as pharmacies and insurance plans aggressively move patients to the generics.
The move highlights perhaps the biggest single issue facing the pharmaceutical industry in the United States: brands have no value.
When you really think about it, the idea that Pfizer would give up on Lipitor is very strange. Lipitor is the most successful pharmaceutical product in the history of the world. Thousands and thousands of people take it and the product actually works. Lipitor is a well known and trusted brand. But once that patent goes off, well, Lipitor has pretty much no value, so Pfizer gives up.
Coke isn’t built on patents. Tiffany isn’t built on patents. The Mayo Clinic McKinsey, Rolex, Advil, McDonalds, Tide, Target and BMW aren’t built on patents. A brand doesn’t need a patent; the brand creates value through the associations built around a trademark.
So why give up on Lipitor?
Part of the issue is that the pharmaceutical industry has let this happen. Pharma companies generally cut spending on a product when the patent expires. Lilly basically gave up on Prozac, another huge brand. Merck gave up on Fosamax. There wasn’t a big fight when pharmacies and insurance companies helped create regulations that let them automatically swap a generic for a branded product.
The idea of swapping in a generic for a brand is very odd. Applied to the soda industry, someone who went to Wal-Mart to buy Coke would instead be handed Wal-Mart Cola, on the theory that it is pretty much the same thing on a molecular level.
Giving up on brands might have made sense when there were lots of new pharmaceutical products coming along. There isn’t much reason to spend on building brands that lack a patent when there is a new patented product on the horizon.
Today, the situation is very different. Pharma companies are struggling to identify new medicines and get them through the rigorous FDA approval process. Without strong brands, pharma companies will always be a few years away from disaster. Solving the branding dilemma should be a top industry priority.
Continuing to support the brand isn’t really a credible option though, given the reimbursement situation in most global markets drives very rapid conversions to generics. it’s a bit difficult to compare branded Rx products in regulated markets, which have protectable share and nearly unlimited price elasticity till Gx entry, with soda. Instead of marketing to extend brand life post Gx, the same funds could likely be better invested in tweaking these products to improve clinical outcomes – to earn continued share instead of buying it.
I totally agree that at the moment it doesn’t make sense to support the brand after the patent expires. But long term I think the industry has to address this issue. As the need for numerous, often long-term clinical trials goes up, there is less and less time to justify the high cost of commercialization before the patent ends.
The economics change dramatically when brands are a factor.
I’m not at all certain pharma companies can thive long term if they rely on patents alone to differentiatve and justify margins.