An overview of the product life cycle
The development of new drugs is a costly project with many hurdles. Due to this, the product life cycle must be managed efficiently to generate products which are sustainable and can repay the heavy development costs through commercialisation. Over the lifetime of a medicine there are three broad life stages: research and development (R&D), branded medicines, and generic medicines. An overview of these stages and how companies deal with them will be discussed below.
Research and development
Enabling the launch of a drug is a lengthy and costly process taking roughly 12 years and costing close to £1 billion on average1. In this stage pharmaceutical companies must prove the clinical effectiveness and safety of its product. R&D carries high risk and many products will fail before launch1, incurring losses for the companies which are developing them. This stage can be subdivided into several stages including:
- Discovery. There have typically been years of work done in basic science laboratories to understand the mechanisms of the disease and to determine disease pathways which could be therapeutically targeted. Pharmaceutical companies often then generate thousands of candidate molecules to be tested.
- Preclinical development. Candidate molecules need to be optimised and narrowed down. Molecules will be tested, firstly in vitro and then in vivo, to ensure they can effectively target the disease pathway and to assess their toxicology.
- Clinical development. Once data requirements have been satisfied from the animal studies in preclinical development, clinical trials can begin in humans. Clinical trials are in three phases. Phase I tests the pharmacokinetics in healthy patients, phase II trials takes hundreds of patients and studies the efficacy and safety of the drug and phase III trials upscales this by monitoring thousands of patients, looking at the effectiveness as well as monitoring extra factors such as patient demographics and interactions with other drugs2.
- Marketing authorisation and market access. Once companies have sufficient data, they can try to gain regulatory approval and market access. Marketing authorisation licences the product to enter the market and be used in patients. Market access is the term used to describe activities and processes that companies undertake to secure a reimbursed price which is reflective of the products value. A more in-depth overview of market access can be found here.
Once a drug has jumped over the succession of formidable hurdles to make it to the launch, it can now begin to make a return on the R&D investment. The returns of the drug will rely on having favourable pricing negotiations with payers when obtaining market access, which often depends on product’s clinical and cost effectiveness data.
After launch, products have market exclusivity for around 10 years and will typically go through phases of introduction of the product, growth of sales, and plateau of sales levels as the product reaches maturity3.
To gain the most from this stage of the product lifecycle, companies must implement a marketing strategy to achieve rapid uptake of the drug to accelerate the growth phase4. However, the plateau can only remain whilst the product is still under patent.
Patent only typically last for 20 years, and once it expires, market exclusivity is lost on a product. This means that several other manufactures can also produce the drug, which are termed generic drugs4. Generic drugs have the same ingredients, dosage forms, strength, route of administration, and other clinical characteristics as branded drug5.
As there is now competition in the market the price of the product dramatically reduces6, an event which has been coined the “patent cliff” or the generic pharmaceutical price decay7. Typically, at this stage in the life cycle, the average sale price will fall, as will the sales from the original company, and the sales of generics will rise. The fall in price is typically dependent on the number of generic producers which make the product. With a large number of producers, the generic price can be over 95% less than the branded price8.
This is exemplified by the common antiretroviral drug Tenofovir Disoproxil Fumarate, which is used to treat HIV: in the USA a packet of generic tablets sells for as low as $27, whereas the branded medicine is on the market for $1,2549.
Life extension strategies
Evidence requirements in the research and development phase for a product to successfully launch has increased in recent years10 meaning that pharmaceutical companies must make larger investments in a product, which can in turn negatively affect their profit margins.
With patent expiration leading to the “patent cliff” and stifling returns on product investment7, pharmaceutical companies need methods to maximise profit margins of products so that they have the capital to invest into the research and development of future products.
Life cycle management needs to continue after the launch of a product and should consider the financial life extension of a product. There are several ways that pharmaceutical companies can try to extend the financial life of a product11. These can include:
- Product line extension. For example, reformulations and combination drugs, this may allow extension of market exclusivity12.
- Indication extension. Finding new uses for a drug by extending into a different therapeutic area, this may allow extension of market exclusivity12.
- Introduction of next generation products. Related products which offer some improvement, this can result in an extension of market exclusivity11.
- Market expansion. For example, expanding into the over-the-counter market, allowing access to a broader market.
More details around navigating the loss of market exclusivity can be found in here.
Overall, product life cycle management is essential to consider when pharmaceutical companies are heavily investing into the research and development of a new drug. It is critical to have a plan which maximises profits and increases capital. This allows for the continued investment into the next product, and to recover investments that were made into drugs which ultimately failed.
The inevitable price drop, associated with patent expiry, means that pharmaceutical companies which developed the product can no longer continue to make large returns on their R&D investments. However, this is an essential process to allow drugs to become more accessible to more patients around the world, as the cost barrier is reduced. The reduction in price of older drugs also frees up money in healthcare budgets to allow for the integration of new drugs into the system.
- Making a medicine. Step 10: Life-cycle management. Accessed at https://toolbox.eupati.eu/resources/making-a-medicine-step-10-life-cycle-management/ September 2021
- Clinical Trials Guide, National Institute for Health Research, published 24th June 2019
- The life cycle of pharmaceutical products. Accessed at https://ec.europa.eu/competition/sectors/pharmaceuticals/cycle.html September 2021
- Hering et al. Can lifecycle management safeguard innovation in the pharmaceutical industry? Drug Discovery Today. 2018. 23(12)
- Generic Drug Facts. Accessed at https://www.fda.gov/drugs/generic-drugs/generic-drug-facts September 2021
- Dubey and Dubey. Pharmaceutical Product Differentiation: A Strategy for Strengthening Product Pipeline and Life Cycle Management. Sage Journals. 2009. 9(2)
- The CEO of Novartis on Growing After a Patent Cliff. Accessed at https://hbr.org/2012/12/the-ceo-of-novartis-on-growing-after-a-patent-cliff September 2021
- Generic Competition and Drug Prices. Accessed at https://www.fda.gov/about-fda/center-drug-evaluation-and-research-cder/generic-competition-and-drug-prices September 2021