Innovative marketing strategies after patent expiry: The case of GSK’s antibiotic Clamoxyl in France Received (in revised form) 7th August, 2003
Pierre Chandon is Assistant Professor of Marketing at INSEAD, where he teaches brand management to MBAs and executives. His area of expertise is in brand management and in consumer behaviour for low-involvement products, with applications in the areas of sales promotions and point-of-purchase marketing. He has published articles and books on these topics in leading academic journals, including the Journal of Marketing Research and the Journal of Marketing.
INTRODUCTION Before assessing how best to respond to a loss of patent protection, it is important to consider whether radical change is really necessary. It may be that the pharmaceutical product is operating in a niche category that is too small to attract challenging generic competition, at least in the short term. It could also be that the awareness and image of the brand is so strong in patients’ and doctors’ minds that it would retain most of its equity even after the loss of patent protection. In most cases however, the entry of generic competitors radically alters the competitive landscape and calls for appropriate radical responses. In the next section, the five major strategies available to pharmaceutical brands facing competition from generics are briefly reviewed. This is followed by a review of the innovative marketing strategy adopted by SmithKline Beecham in France in the late 1990s, when its Clamoxyl antibiotic faced a sudden increase in competition from generic amoxicillin.
Pierre Chandon Assistant Professor of Marketing, INSEAD, Boulevard de Constance, Fontainbleu F-77300, France Tel: +33 1607 24987 Fax: +33 1607 46184 e-mail:
[email protected]
FIVE STRATEGIES FOR COMPETING AGAINST GENERIC PHARMACEUTICAL PRODUCTS Figure 1 shows that the five major marketing strategies available for a prescription drug facing competition from generics involve a trade-off between brand
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building and price competition. Of course, a company can also resort to nonmarketing oriented strategies such as legal efforts to extend patent protection or tactical alliances with generic makers and can simultaneously implement different strategies, thereby creating a hybrid model. In a first stage, it is nevertheless useful to review each strategy independently, starting from the most common to the least common.
Divest This strategy involves cutting all promotional and research expenses once the brand faces direct competition from
High
Innovate (new forms, dosage, services, etc.)
Provide more value for the money (new flavour, packaging, etc) Brand building Invest in generics
Reduce price Low
Divest
Low
High Price competition
Figure 1: Marketing strategies after patent expiry
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generics and redirecting the savings towards brands that are still enjoying patent protection. Sometimes, this ‘milking’ strategy actually involves price increases to take advantage of the higher brand equity of the brand among the smaller segment of hard-core loyal customers. This strategy leads to the lowest levels of brand building (because the brand is not supported) and price competition (because the price advantage of generics is not challenged). The success of this strategy hinges on the inertia of doctors, patients and the other stakeholders (pharmacists, HMOs, governments). When their motivation to switch to the newly-available generic is low, either because of low financial incenti