Drive commercial success by effectively navigating loss of exclusivity

When patent expiration looms, strategic planning across functions can help pharma leaders increase value.

In brief

• Pharmaceutical companies are facing major headwinds due to loss of exclusivity (LOE) as product patents are set to expire, with billions in sales at stake.
• While sunsetting products is not new, maximizing value in today’s environment requires a strategic approach.
• Savvy industry leaders are aligning sales, marketing, legal and other functions to reduce costs and drive value at the end of a product’s lifecycle.

When a new prescription drug is launched by a pharmaceutical company, the innovator maintains the exclusive legal right to develop, sell and market the drug during the patent period, generally around 10 to 15 years, depending on the drug type. After that period concludes, the brand faces loss of exclusivity (LOE) and is bound to relinquish monopoly while getting ready for the entry of several lower-cost generic (Gx) alternatives. This natural and inevitable milestone signals a dramatic shift and thus requires careful adjustment of brand strategy from all aspects.

Defensive strategies, such as intellectual property (IP) litigations and patent extensions, are usually the first options that are deployed prior to LOE. However, when the innovator company exhausts legal and IP options, the effect of Gx entry on volume can be immediate and severe. The Gx impact can, however, be softened if the company is able to maximize the revenue potential of the brand through line extensions and by capitalizing on the brand’s stickiness. This approach requires strategic planning around commercial priorities, in close coordination with other functions, similar to how companies execute the drug launch phase. In cases where companies can no longer extract value from the brand, they usually look to switch patients to either a next-generation product or to an over-the-counter (OTC) product, while gradually sunsetting the original brand.

With US$356 billion of worldwide branded sales at risk from patent expiration during the period from 2023 to 2028,¹ this paper aims to take a deeper look into the nuances involved in helping innovators continue deriving value from their brands by tailoring market access, sales and marketing strategies.

Approaches to manage through LOE

Source: EY analysis

Defining a bespoke market access, pricing and contracting strategy closer to LOE

In response to Gx entrants, innovators also tend to restructure their market access strategies to maintain the brand’s equity and to mitigate or delay the declining revenue. Planning for LOE from a market access perspective requires specific focus on pricing, contracting and rebate strategy, which is driven by both the company and brand, as well as other factors:

These factors often dictate the course of market access, pricing and contracting strategies near LOE. Brands accordingly deploy strategies that directly impact their ability to harness market position and accessibility even after patent expiration.

Market access strategy for LOE products

Source: EY analysis

LOE strategy - examples in action

Optimizing sales rep strategy to maintain the desired ROI

Note: Analysis is based on a proprietary EY survey of 12 commercial and market access pharma executives conducted in November and December 2021.

An impending LOE and its associated patent cliff drive the need to deploy cost-effective strategies to help minimize costs and increase ROI. Sales teams comprise the largest promotional expenditure, accounting for an average 15% of drug revenue, which usually declines as LOE approaches, as brands find that these products are expensive to maintain.⁹ According to our proprietary survey of 12 commercial and market access pharma executives, brands see a significant reduction in their field force spend upon patent expiration. This approach may include either redeploying sales representatives to other drugs or growth priorities or furloughing them if they cannot be absorbed in any other role.

In the classic example of AstraZeneca’s Nexium (the blockbuster oral pill for gastroesophageal reflux disease, or GERD), the company reduced its field force by 50% and redeployed those representatives to other mature brands.¹⁰ These actions were completed by the end of 2009, while the LOE was set to take place in 2014. The company replaced all 300 Nexium reps with websites and on-call operators for on-demand activities, such as sample distribution and reimbursement queries.¹¹

In a more recent example, AbbVie has announced a move to prepare for the entrance of Humira biosimilars in 2023. Two years prior to LOE, AbbVie shifted some of its field force resources from Humira to new-generation immunology products Rinvoq and Skyrizi.¹²

We have seen a similar trend with smaller players. In late 2021, a midsize pharma company announced a 60% reduction in sales reps and shift to a more digital marketing approach for its hypertriglyceridemia drug, following the approval of multiple Gx drugs.

While there does not appear to be any standard template to design a brand’s field force strategy as LOE approaches, several key considerations may impact decision-making on the timing and extent of operational readjustments related to LOE:¹³

Finding the right promotion mix 

Similar to sales, there is no one-size-fits-all approach for managing LOE brands from a marketing perspective. Generally, brands maintain a steady marketing spend as a percentage of drug revenue before starting to reduce it at LOE, regardless of the product type, revenue, ROA and other factors. At this product cycle stage, marketers generally increase their focus on targeted marketing, relying on digital channels (in lieu of sales representatives) and pursue continuous customer education, albeit at a lower cost.¹⁴

Note: Analysis is based on a proprietary EY survey of 12 commercial and market access pharma executives conducted in November and December 2021.

% allocation of marketing spend by LOE lifecycle

Note: Analysis is based on a proprietary EY survey of 12 commercial and market access pharma executives conducted in November and December 2021.

Marketers essentially respond to the patent loss by either investing further in the original brand to extract maximum value during the pre-LOE period or switching patients to another product from the company’s portfolio. Marketing strategies vary and are customized based on several fundamental factors:¹⁵,¹⁶

Archetype 1 and 2

This article includes contributions from Shashank Rao, EY-Parthenon Senior Director, Ernst & Young LLP; Tanushree Jain, Senior Manager, EY India LLP; and Dhanvi Arora, Senior, EY India GDP.