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Original article
Journal of Medical Marketing 12(3) 150158 ! The Author(s) 2012 Reprints and permissions: sagepub.co.uk/journalsPermissions.nav DOI: 10.1177/1745790412445292 mmj.sagepub.com
Abstract A product lifecycle is the succession of stages from the products birth until its final withdrawal from the market. While each stage brings significant changes, a succession of strategies for the management of product lifecycle is required. The product lifecycle management creates and manages a companys product-related intellectual capital starting from an idea to its final retreat. In pharmaceutical industry, it benefits through enhancing the lifespan of patent and pricing strategies. Improved patient compliance, revenue growth, expanded clinical benefits, cost advantages life extension exclusivity and quicker market launch are amongst the main applications of product lifecycle management. To fabricate an effective and fruitful product lifecycle management program many attributes are considered. The chief ones are: early start; strategic planning clear leadership; supporting knowledge and skills, preparedness for changing rules of government and organizations.The present manuscript focuses on product lifecycle management, its applications and the key considerations for a successful product lifecycle management.
Keywords Pharmaceuticals, product lifecycle, return of investment, product lifecycle management, strategy
Introduction
During the last years, the period of true marketing exclusivity for pharmaceuticals has shrunk dramatically. Todays pharmaceutical industry is facing tremendous pressure when a blockbuster drug patent expires owing to short drug lifecycles, strong competition, heightened health authority scrutiny, rising development costs coupled with lower drug prices and the need for the latest technologies.1,2 As a concept, product lifecycle management (PLM) has existed for many years originating in electronics and automotive sectors. It allows a company to actively manage the way in which a product is being sourced, manufactured and planned throughout its lifecycle. PLM is a strategic approach for creating and managing a companys product-related intellectual capital starting from its initial conception to retirement. PLM improves a companys product development processes and its ability to use product-related information to make better business decisions and deliver greater value to customers.3,4 Many manufacturers pursue lifecycle management tactics in reactive manner. Franchise can be sustained if brand equity (and prescriptions) can be transferred to a follow-on or derivative product, even a reformulation or new delivery system. This is generally done
through secondary patents or second generation patent. These patents seek to protect a drug after the original patent on that drug expires. Thus, patent lifecycle management is a part of PLM. Switching a prescription drug to an over-the counter drug is also another tactic to have an edge over generics. But these tactics, despite great efforts, at some point give way to generics although they enhance the return of investment.5,6 The PLM program should be based on the development and implementation of intellectual property (IP). Rapid changes in markets, technologies, regulations and laws and new competitor products and offerings make lifecycle management programs highly dynamic. Thus, PLM strategies should be constantly reassessed for new opportunities. The PLM program has become an increasingly more challenging due to recent developments in the U.S. courts and potential
Department of Pharmaceutical Sciences, MD University, Rohtak, India Corresponding author: Harish Dureja Department of Pharmaceutical Sciences, MD University, Rohtak 124001, India Email: harishdureja@gmail.com
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Prajapati and Dureja legislative changes Hence, companies should not only constantly reassess their strategies but overall approaches towards PLM.7 Pharmaceutical companies are now determined to extend the life of their drug beyond patent expiration, devising strategies to manage the lifecycle of their most important medicines that begin in the clinical phases. PLM has become a necessity to the continued success of pharmaceutical companies. Companies that have instituted a comprehensive lifecycle management strategy and a detailed plan to guide their progress toward their goal are reaping nancial and clinical rewards. Successful PLM involves the continued development of scientic, technical, regulatory and marketing strategies that enhance the value and extend the life of medicines.8 It is of critical importance that IP protection permits the innovators of successful products to recoup their investment. With rising development costs, the pressure to utilize IP protection to the fullest extent permitted has become even greater. Thus, the most successful innovator companies have developed sophisticated IP strategies. For the purpose of pharmaceuticals, PLM does not mean a way to protect their innovation through different patents or obtaining patent term extensions to take the benet of all available protection. It also means to co-ordinate worldwide IP litigation strategies to achieve the desired result at a global level. Successful PLM enforcement strategy involves three distinct but interrelated laws: patent law, regulatory law and competition law. An integrated approach of all three aspects is necessary. An understanding of the regulatory process by which drug products obtain their marketing authorizations and prices is fundamental; however, patent litigation is the key ingredient. To make a rather crude analogy, if PLM strategy is considered a road vehicle, regulatory information is the steering, patent litigation the engine and competition law both the seat belt and the brakes. PLM requires rm grip over these three laws and technical expertise necessary to make the most informed decisions in litigation. This is more important for secondary patents, for example, patents protecting a route of chemical synthesis or a particular tablet composition. If the patent protects the new chemical entity, a technical analysis for the purpose of elucidating infringement need only to determine whether the active substance is present or not. For a secondary patent, the analysis could be required to assess whether a competing synthetic process or tablet composition is the same or equivalent to that protected by the patent. The interplay, between the laws and the technical foundations, is of critical importance to strategy. For example, an understanding of the regulatory drug
151 approval process for generic medicines enables accurate assessment of the progress of generic competition. This includes an understanding of the intensity of any given generic threat. Understanding the regulatory approvals process not only enables accurate assessment of threats but also the identication of the most suitable trigger point for entering into pre-action correspondence or commencing litigation proceedings. Trigger points for litigation can be evaluated by comparing the timeline of the drug approvals process, from ling the application to launching on the market, with the timeline for obtaining injunctive relief in the country concerned. It has to be always borne in mind the need to prove the infringing activity, or threat of infringing activity to the level required by local law.9 PLM was evolved in the 1990s and has played an important role for manufacturing companies. During the last two decades, changes have taken place due to modied regulations, technological advancements and globalization.10 In the last decade, PLM was viewed by industry as a tool to extend lifecycle of products while regulators found it a kind of antitrust activity to create monopoly. However, the previous decade has witnessed the transformation in their views. In the present scenario, the industry considers PLM as a core process to integrate its other business activities, whereas the regulators support the industry to adopt PLM in a proactive way to improve the innovation and quality of product.11 In the present manuscript, an attempt has been made to study PLM, its applications and key considerations for a successful PLM.
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152 Signicant changes occur during each phase reecting the products behavior into the market, i.e. the sales which introduce the product into the market.4,1214 A Product lifecycle of a ctitious product in terms of sales cost and prot is given in Figure 1.13
Journal of Medical Marketing 12(3) sale. In this phase, distribution arrangements are introduced. Commonly large expenditure on promotion and advertising (in case of pharmaceuticals only when permitted) is made and quick but costly service requirements are introduced. A company spends a lot of money. However, only a small proportion of that is received back.
Growth phase
This phase provides the satisfaction of witnessing the products take-off in the marketplace. This is the appropriate timing to focus on increasing the market share. When a product has been introduced rst into the market, it is able to gain market share relatively easily. Promotion and advertising continues up to some extent in this phase. In this period efciencies, product availability and services are developed and improved. The major factors in gaining customer condence include cost efciency, time to market, pricing and discount policy.
Maturity phase
When the variations of the main product saturate the market, the product enters the maturity phase. This period can provide the highest returns from the product. New brands are introduced during this phase even when they compete with the companys existing product. This is the actual time to extend the products life. Changes in the pricing and discount policies are frequent. Scope of promotion and advertising relocates from getting new customers to
Introduction phase
It includes the product launch with its requirements so that it will have maximum impact at the moment of
Figure 1. A product lifecycle of a fictitious product in terms of sales, cost and profit.12
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153
Decline phase Declining sales Low Declining profits Declining number Some competitors are already Withdrawing Milk all remaining profits from product Variations and models that are not profitable are withdrawn Maintain price level for small profit Gradual decrease
Competitors
Early entry of competitors into the market Acquire a strong market position
Price and distribution channel pressure Maintain your market position and build on it
Strategic Goal
Make the product known and establish a test Period Limited number of variations
Product
Introduction of product variations and models Aggressive price policy (decrease) for sales increase Reinforcement of product awareness and preference General & reinforced distribution through all distribution channels available
Price goal
Depend upon regulatory bodies Depend upon regulatory bodies Not applicable
Promotion goal
Creation of public market product awareness Exclusive & selective distribution through certain distribution channels and creation of high profit margins
Distribution Goal
general & reinforced distribution with good supply to the middle men with low margins of profit for them
General & reinforced distribution with good supply to the middle men with low margins of profit for them
Withdrawal from most channels of distribution except those used in the development phase
Decline phase
The decision for withdrawing a product appears to be a complex task and there are a lot of issues to be resolved before deciding to move it out of the market. Companies often retain a high price policy for the declining products to increase the prot margin and gradually discourage the few loyal remaining customers from buying it. It is the time to start withdrawing variations of the product from the market that are weak in their market position. The prices must be kept competitive and promotion should be withdrawn at a level that will make the
product presence visible and at the same time retain the loyal customer. The basic channel should be kept efcient abandoning the alternative channels.1214 Various conditions and steps to be taken in different phases of a products lifecycle are illustrated in Table 1.
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154
drug of US$1.3 billion while for drugs treating genitourinary disorders, it is US$635 m.18,19 A recent Tufts CSDD study has shown that the average capitalized cost to bring one new bio-pharmaceutical product to market (including the cost of failures) is $1.24 billion, in 2005, while for conventional pharmaceutical products, the same is $1.32 billion.20 With such development costs, it is expected that only the leading and well-heeled players can afford to take a drug all the way from initial discovery through to commercialization.15
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155 medicines investigated by Americas research-based pharmaceutical companies makes it through the research and development pipeline and is approved for patient use by the US. In general, FDA approval takes an average of 10 to 15 years of research and development and may cost over $1.3 billion. Thus, it is very important for these industries to incorporate PLM.19,22 Applications of PLM include: . . . . . . In improving patient compliance For providing revenue growth To gain clinical benets For quick to market launch For obtaining cost advantages For life extension exclusivity23 PLM benets through: . . . . Revenue acceleration Unit prot enhancement Improved innovation and quality Lower costs and improved productivity Revenue acceleration opportunities provide: . Enhanced market penetration for a new indication . Ways to meet the threat posed by generic drugs by tracking them. . Greater market penetration through product line extension driven by prescriber/patient feedback . Delivery changes to bulk drug or dosage form manufacturing processes that possess a novel patent, thereby conferring additional patent protection once generic competition occurs. . Marketers to differentiate the product, reducing the effect of generic erosion after patent expiration. . Signicant improvements to the manufacturing or supply process that reduces the cost of goods, thereby preserving unit margins or enabling more competitive product pricing. . Market variants through technology transfer to regional manufacturing sites, enhancing local market acceptance and deeper penetration while reducing stock complexity that would otherwise drive up costs at high-volume facilities. Unit prot enhancement opportunities provide: . Technology transfer to sites that give economies of scale or enable cost reduction in some way, such as lower inventory, lower stock expiry, better capacity use; or relocating bulk active or dosage form manufacture to a low-tax or low-xed-variable-product costs environment
Dispersing markets
In earlier times, the physician was the main customer in the prescription-drug pharmaceutical industry. Thus, pharmaceutical companies had a relatively simple approach to promoting and marketing prescription drugs. However, presently pharmaceutical companies increasingly need to address a networked audience comprising: payer organizations and inuential advisory functions, increasingly knowledgeable consumers and other stakeholders such as nurses as well as the traditional physician base.15 Declining research and development productivity, rising costs of development and shorter exclusivity periods have increased the average cost of launching a successful new drug.21 Taking these points into consideration, it can be easily sought out that extending the lifespan of proven drugs by branded companies is a rising need and can be fullled to a greater extent by PLM.
Applications of PLM
PLM not only benets through enhancing the lifespan of patent but also pricing strategies. Thus, PLM provides benets to both large and small industries. The nancial health of large, brand-name pharmaceutical companies relies heavily on portfolios of drugs grossing in excess of one billion dollars annually. Research and development of these blockbuster drugs require a tremendous investment of resources. According to the Pharmaceutical Research and Manufacturers of America (PhRMA), only one of every 10,000 potential
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156 . Optimization of manufacturing processes in situ that drives down cost of goods, such as yield or process robustness or reduction in raw material costs.1
Journal of Medical Marketing 12(3) lifecycle management as a collection of reactive strategies to viewing it as a key organizational capability an integrated set of governance mechanisms, rigorous processes, people skills and knowledge, supported by transparent product and portfolio information and performance indicators. By concentrating their efforts in the following areas, pharmaceutical rms can develop a more integrated approach to lifecycle management and take advantage of every opportunity to increase product protability.15 The companies have established dedicated multifunctional PLM teams to drive early planning, monitor progress and benchmark efforts. They have also planned for PLM in the context of their broad business goals and product portfolios, evaluating the ROI of PLM opportunities with alternative investments in new research and development, strategic acquisitions and the like.22 For example, Abbott Laboratories has redecorated its lifecycle management teams organisation by including a central data repository for all teams to access the same information for all molecules development and clinical testing.8
Early start
PLM approach needs to be proactive and not as a latestage attempt to fend off generic competition. In practice, product lifecycle activities are rarely considered early enough for companies to execute them to the best effect, but in principle companies should develop a roadmap in a molecules early life to track the rise and falls of a molecule through various stages of development. Such a molecular mapping optimises its marketing potential. For example, Humira (Adalimumab) was approved by US FDA in December 2002 for rheumatoid arthritis. In the development phase of the rst indication, work to develop follow-up indications was started. Abbott Laboratories also initiated to understand the effect of Humira in other autoimmune diseases. As a result, Humira was approved for treating psoriatic arthritis in 2005 and Crohns disease in 2006. Similarly, Eli Lilly and Company had instigated mapping lifecycle management from discovery and developed antipsychotic Zyprexa for multiple indications. Zyprexa was approved in 1996 for manifestation of psychotic disorder, in 2003 for treatment of depressive episodes associated with bipolar disorder and in 2004 for long-term treatment of bipolar disorder.8
Strategic planning
The main purpose of PLM is to maximise the protability of a product over its lifecycle. Since the PLM is becoming more crucial to the industrys future, pharmaceutical companies need to move from viewing
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Prajapati and Dureja understanding of the complex dynamics that affect a product during its market life. No PLM option can be successful without sufcient knowledge and skills to support the process. For example, without thorough knowledge of a drugs pharmacokinetics, its safety and toxicity prole, the indications for which it is being targeted and the rst generation products format and treatment regimen, it is impossible to determine the potential of product for PLM through reformulation, expanded indications, over-the counter (OTC) switch and/or xed dose combination.24
157 cost are now rarely considered. Obviously, the cost base of the product becomes particularly important late in its lifecycle when generic is prevalent. When cost pressures do not seem to be an issue, the decisions concerned with the cost of the product need to be taken well in advance. There should be other secondary objectives which will eventually lead to protability such as the enrichment of number and type of customers (through target population expansion or indication expansion), which will directly increase the sales and fetch higher revenues to that rm.15
Conclusion
PLM, a strategic approach for managing a companys product-related intellectual capital that existed for many years in electronics and automotive sectors, can now be applied in pharmaceutical sector as well to sustain the franchise of an innovator pharmaceutical company and increase its return of investment. PLM benets both large and small industries and can be applied for improving patient compliance, providing revenue growth, gaining clinical benets obtaining cost advantages, life extension exclusivity and quick to market launch. For a successful PLM, an early start, a strategic planning, a clear leadership and supporting knowledge and skills are required. Preparation for the changing rules of the Government and related organizations, the focus on protability throughout the lifecycle, the monitoring and gauging of the success of the process are must for taking this approach to higher levels of success. Funding
This research received no specic grant from any funding agency in the public, commercial or not-for-prot sectors.
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Authors Biographies Vandana Prajapati is M. Pharm. research scholar at M. D. University, Rohtak and has drug regulatory affairs as the area of specialization. She possesses a Bachelors degree in Pharmacy. Harish Dureja is Associate Professor in Pharmaceutics at Department of Pharmaceutical Sciences, M. D. University, Rohtak. He possesses a Doctorate degree in Pharmaceutical Sciences.
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