Assessing future loss of exclusivity scenarios

By Mike Mabey and Gerard Loosschilder, Ph.D.
The forecasting of scenario consequences helps brand teams contemplate “what if” situations regarding market possibilities and alternative courses of action. The discipline and focused thinking involved in scenario forecasting ensures the brand team considers all of the alternatives.

Forecasting allows one to quantify various scenarios to identify the most effective solution for the business moving forward. It is also useful for developing strategies for dealing with worst-case scenarios. Forecasting outputs include the number of prescriptions under a scenario resulting in a sales number, and/or the share of prescriptions to be had across patient groups in the indication area, resulting in a market position.

There are five archetypal loss of exclusivity scenarios that benefit from applied forecasting.

No. 1: A generic launches; how bad will it be?
If a generic Rx launches, insurance companies will usually push their members to switch to the generic version. Even though your brand may count on prescribers’ and patients’ loyalty, the push creates price and sales pressure. A forecast can help assess the effects of the generic by helping to estimate physician loyalty to your brand for existing and new patients under the new reimbursement scheme. In addition, forecasting will help determine the timeframe for worst-case scenarios and the pressure points where the brand team can develop defensive actions.

No. 2: What about biosimilars?
Biosimilars are officially approved subsequent versions of innovator biopharmaceutical products made by a different sponsor. Their launch follows the patent and exclusivity expiry on the innovator product. Reference to the incumbent brand is an integral component of their approval. For the incumbent, the opportunity is to forecast the cannibalization effect of the biosimilar, or to review options to respond strategically to the competitive launch. For the challenger, the opportunity is determined by the conditions under which the biosimilar or follow-on biologic are launched. For example: Is a lower price enough to sway the market and overcome physicians’ loyalties?

No. 3: How can you extend your branded drug’s lifetime?
A very relevant type of scenario involves extending a drug’s lifetime beyond its patent expiration date by introducing new ways of adding value. One option is to combine drugs and therapies including fixed dose combinations to decrease the pill burden in poly-medicated patients. The number of poly-medicated patients is increasing in many Western countries as the population ages and the prevalence of obesity and lifestyle diseases increases. Another option is to find more comfortable administration methods, such as moving from injectable to oral forms, or administration through proprietary drug-device combinations. Forecasting these scenarios allows the brand team to examine the effects of combination therapies and administration methods on patient retention for the branded drug, and its ability to recruit new types of patients.

No. 4: How does a changing pricing strategy affect the landscape?
Government bodies and payers are seeking new ways of exercising control. This involves a variety of eligibility scenarios for patient groups, co-payment and deductible scenarios in payer policies – even different splits in public and private insurance programs. There is an opportunity to explore the impact of pricing scenarios and reimbursement schemes on business performance.

One class of scenarios involves differentiating the drug to target specific patient groups and niches. Those groups can be smaller in terms of absolute business opportunity, but one position may be more defendable than another. The special nature of the drug or its administration, described under scenario No. 3, may allow for reimbursement in spite of the availability of the generic. The forecast helps the brand assess the opportunity because of the size of the patient group and the willingness of the payer and physician to make the drug eligible to this group.

No. 5: Move the brand to OTC or branded generic?
Traditionally, forecasting approaches primarily examined the impact of a complete loss of competitive strategy. However, moving to OTC or branded generic is one way of preserving and/or leveraging brand equity built up over the life of the patent. Decision behavior modeling forecasts allow the brand team to assess the residual value of the brand equity and how long that equity might last. These studies can be executed in two ways: First, one can study patients only, assessing how patients can be enticed to switch from Rx to OTC solutions under variable pricing scenarios (copayment or full out-of-pocket payment), benefit descriptions and administration methods. Second, one can study both patients and physicians to model their interaction and mutual influence. How open is the physician to the patient’s questions and request for a drug? How likely is the patient to follow up on a prescription or recommendation? Powerful, new forecasting methods replicate the conversation, helping to achieve a balance between physician push and patient pull.

How to deal with the inherent uncertainty of all forecasting scenarios
As conditions change and market-altering events occur, decision-making data and analogues based on historic events and data may not be available, consistent, or valid. This uncertainty requires approaches that are flexible and work within various scenarios or potentially combine scenarios taking into account the likelihood of a scenario to happen. In addition, the importance of emerging and underdeveloped markets, for which analogues and historic data are not available, is increasing. Approaches that incorporate those uncertainties, such as Monte Carlo, are valuable tools for putting parameters around the uncertainty. Monte Carlo forecasts allow for combinations of scenarios and their likelihood of happening, generating a forecast that supports decision making within uncertain conditions. A traditional forecast produces a single number (e.g., number of prescriptions or revenue), whereas a Monte Carlo type of forecast produces a range estimate accounting for uncertainties in the scenarios. Brand managers can decide what level of risk they are comfortable assuming, as well as the business potential for certain defense scenarios at that risk level.

Forecasting in general is a powerful tool for understanding how the market will change when a drug goes off patient and to assess the effectiveness of alternative courses of action and defense strategies. While very analytic in nature, forecasting is an act of creativity. After all, it takes creativity to envision the “what if” questions and think through the ramifications of the answers. As such, forecasting is a strategic management tool that fosters exploration and builds confidence in potential solutions. The archetype scenarios presented here on one hand help to assess the severity of the situation, and on the other hand help to assess the effectiveness of defense strategies. Mixing them, and accounting for their likelihood of happening, is key to building an actionable forecast.

Mike Mabey is director client solutions Americas and Gerard Loosschilder, Ph.D., is chief methodology officer at SKIM, an international market research agency.

Posted: December 2013

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