The life cycle of pharmaceutical products is a bit different than consumer goods, this video explains the stages of the life cycle of a new drug, namely early, middle, and late stages and what are the strategies implemented by pharmaceutical companies to extend the life cycle over a longer period of time.
During the early stage, the new drug is submitted to certain intensive clinical and pre-clinical tests. At this stage, the company invests money without generating sales as the drug is not launched yet in the market. The company starts the pre-launch activities.
During the middle stage, the drug is launched to the market, and the company starts making profits.
When the patent expires, companies seek defensive strategies to combat generic competitors and retain market share.
There are three strategies to extend the life cycle; evergreening, flanking and RX to OTC switching.
Evergreening is a strategy involving either line extensions or launching a next-generation version of the current drug. AstraZeneca successfully implemented the evergreening strategy in extending the lifecycle of its proton pump inhibitors products by replacing Prilosec with the next generation Nexium.
Flanking strategy involves entry into the generics market. The branded drug company develops it's own generic and market it through its own subsidiary or through another company with permission.
Switching from RX to OTC is a strategy is appropriate when a branded drug, whose patent is about to expire, gains approval by the FDA for OTC sale. The switch will make the market unattractive for generics.
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