Abstract:
The loss of patent protection for a pharmaceutical product is a significant event for
manufacturers. Although this phenomenon has been occurring in the industry for
decades, it has been of increased interest during the past few years due to the much
publicised “patent cliff” experienced by a number of major pharmaceutical
manufacturers. Recent developments in emerging economies such as India and South
Africa have brought the concept of intellectual property rights under review. The
traditional approach to extend market exclusivity through the use of secondary patents
is no longer valid. New product strategies are now required to transition from a patent
protected market to an open market. This study adds to the current literature by
investigating post-patent strategies pursued in the South African private
pharmaceutical market. The primary focus was to determine the rationale behind
choosing a particular strategy.
This study, exploratory in nature and structured around five propositions, investigated
strategies to manage the patent expiry and potential entry from generic competitors.
These included manipulating price, increasing promotion, developing value adding
product extensions or launching a clone. Information was gathered through 14
interviews with product managers responsible for implementing the chosen strategy.
The interviews were conducted using a structured questionnaire as well as open-ended
questions. Five companies were selected for the study using purposive sampling and
each company then self-selected which products would be discussed.
The most pursued strategy for the sample was to launch a clone. This allowed the
manufacturer to compete with lower priced generics using the clone as well as continue
to profit from the remaining brand loyal, price insensitive consumers with the original
product. The price of the original product was not used to deter entry or compete with
generic products. Profit-maximising behaviour was exhibited by the reduction in
advertising and promotional spend after patent expiry. When available, the use of
product extensions to extend market exclusivity continued to be a preferred strategy.
