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Perspectives on Loss of Exclusivity Management
Discussion with Eli Lilly | January 31, 2017Deloitte Consulting LLP
Our Understanding of Loss of Exclusivity (LOE) Management at Lilly
Some of Lilly’s major products have lost exclusivity in recent years, providing an opportunity to learn from prior experiences
Brand-specific LOE management will likely be a focus as eight products totaling $5.7B in 2015 sales prepare for LOE in 2017
◦ What worked well? What did not work well?
◦ How consistent was the LOE process managed across brands?
◦ How can the process be improved for the future?
◦ How effective are Lilly’s LOE tools relative to competition?
21 Nov
26 May14 Oct19 Feb
1 Nov 21 Nov
12 Feb 8 Dec
2017 2018
Oct 2011
Dec 2013
Mar 2014
Source: Evaluate Pharma
The opportunity cost of not managing LOE effectively is high
$7.1M $0.6M$0.3M $0.6M $1.0M $1.7M
0
2000
4000
6000
8000
20
60
100
140
2015(A)
2016(F)
2017(F)
2018(F)
2019(F)
2020(F)
2021(F)
2022(F)
$34.5M$17.6M$8.2M$5.6M$4.6M$3.5M
0
10000
20000
30000
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2015(A)
2016(F)
2017(F)
2018(F)
2019(F)
2020(F)
2021(F)
2022(F)
14 Oct
21 Nov
1 Nov
21 Nov
26 May
19 Feb
$300
M-$
1B>
$1B
<$3
00M
WW
Rev
enu
e in
2
01
5
Upcoming US LOEs in 2017
ILLU
STR
ATI
VE
Revenue, 2015-22(In $ Million)
Additional Revenue with 10% less sales erosion (In $ Millions)
Source: Evaluate Pharma, Monitor Deloitte Analysis
$0.0M
$22.3M$118.5M$35.7M$14.5M $… $6.0M
0
50000
100000
150000
300
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1,300
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2015(A)
2016(F)
2017(F)
2018(F)
2019(F)
2020(F)
2021(F)
2022(F)
Additional Revenue with 10% less sales erosion (In $ Millions)
Additional Revenue with 10% less sales erosion (In $ Millions)
Traditionally actual/forecasted revenue Forecasted revenue with 10% less sales erosionKey:
Potential Strategies / Tactics
Preventing cumulative sales erosion by just 10% would equate to $292M in additional revenue through 2022, with a present value of $272M
Co-Pay Cards
Adherence
Contracting
HCP Awareness
PatientAwareness
Direct to Patient
Fulfillment
Competitors have historically deployed a variety of strategies as part of LOE management
Strategy Description Industry Examples
• Shift focus from core marketing and sales activities to a new set of activities intended to drive patient acquisition and retention
• Maximize sales through the LOE period
• Create an OTC version of the branded product to maintain and/or grow volume post-LOE
• Offer a generic alternative of the branded product
• Variations of this strategy include Branded generic, Authorized generic and Licensed generic
• Divest the product, in whole or in part (e.g., commercial rights in specific markets) to a strategic buyer
• Maximize value of existing asset while enabling investment into new products
• Continue manufacturing of the product but suspend all marketing and sales investment
• Timing impacted by product and market dynamics, such as the number of generics entering the market
• Considered a last resort option
Historical norm leading up to the early 2000’s1
Preserve brand equity and patient loyalty
Create an OTC formulation
Launch a generic
1
2
3
Divest branded product
4
Sunset the brand5
1 Pharmaceutical Executive
We recommend that Lilly consider a range of LOE strategies anchored in the Ten Types of Innovation™ frameworkTen Types of Innovation™
Efforts often over-emphasize experimenting with the offering itself…
…while we focus on exploring the entire business
system
Companies with strong innovation track records manage their innovation efforts as parts of a highly interrelated whole – they look beyond product innovation to develop an integrated program.
The Ten Types of InnovationTM framework provides a structured approach for developing new programs.
Configure assets differently to deliver value
Experience-centric Innovation
Reinvent or recombine capabilities to deliver
value
Engage patients differently to deliver
value
Business Model-centric Innovation
Platform-centric
Innovation
There is an opportunity for Lilly to think beyond the core tactics that have been embraced by the industry till date to exploring more disruptive moves
LOE environment drives key choices on how to engage the market
Partnership to share value (eg. Contracting)
Co-pay Cards
30 pills for $30
Sell throughthe current
system
By-pass the current system
Create a new system
MARKET ENGAGEMENT STRATEGIES SAMPLE TACTICS
1
2
3
Post-LOE Environment
Physicians
Government
Partnership strategies and creating new systems can avoid organizational risk and policy issues in the long term
Pharma Co.
Pharma Co.
Pharma Co.
LOE Management – An integrated set of choices
Portfolio
Organization
What is the firm’s organizational commitment to this product, post-LOE?
What are the downstream organizational implications based on the LOE strategy?
What are the organizational levers to reduce product costs post-LOE?
External Environment and Triggers
What are the uncertainties that exist?
What are the product specific and macro level dynamics that can impact the LOE event?
What are the potential trigger events / scenarios?
Portfolio
What is the overall strategy for the therapeutic area and how does this product fit within it?
How does the TA strategy fit into the company’s portfolio strategy?
What are potential opportunities to impact the portfolio (pipeline, license, partnership / out-license, divestiture, etc)?
Product
Does the product have strong brand equity / loyalty?
What is the expected LOE competitiveenvironment?
What is the post-LOE growth potential for the product?
When preparing for LOE, it is critical to think about the interplay and inter-dependence between Product, Portfolio and Organizational strategic choices
Key LOE Considerations: Planning When to ActNo matter the strategy chosen, plans and tactics should span both the pre- and post-LOE timeframes to maximize effectiveness
Month -24 Month -18 Month -12 Month -6 Month +6 Month +12
Pre-LOE Peri-LOE Post-LOE
Develop Strategies
Execute Pre-LOE Strategies Execute LOE Strategies
Manage/ Sunset Asset
• Understand current state and future projections
• Analyze market dynamics
• Apply the Brand Affinity Checklist to determine attractive strategic options
• Tailor strategies and tactics to address brand and market dynamics
• Execute a single strategy or a combination
• Preserve/maximize brand equity
• Expand to include OTC
• Launch a generic
• Externalize Product
Loss of Exclusivity
• Monitor generic competitive environment
• Track strategy performance
• Evaluate sunsetting
Maximize product sales via pre-LOE activities
Slow sales erosion through peri-LOE activities
The peri-LOE period, 6 months before and 6 months after LOE, is the primary time to launch the selected LOE strategy in the market
Key LOE Considerations: When to launch an Authorized Generic?
12 2
1 1 13
43
5
35
21 1 1 1
21
42
4
1 12 2
1 1 1 1
0
5
10
15
20
25
30
35
40
-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 9 10 11 12 13 14 15 18 19 21 22
# o
f AG
Lau
nche
s
Month to/from LOE
Number of AG Launches Pre-and Post-LOE (2001 – 2016)
AG launch timing has varied across products since 2001, but within 1 month of LOE is the most common timing observed
• More than 40% of authorized generics have launched within 1 month of LOE
• Pfizer and Novartis have launched the most AGs with 18 and 11, respectively
− 5 of the AGs by each company were launched within 1 month of LOE
• Most launches in the 12-24 pre-LOE months include unique circumstances. For example, Mitigare was approved by the FDA in 2014, after already launching a generic. The generic was maintained to account for sudden price increase
Sources: Evaluate Pharma; FDA Authorized Generic Database
Key LOE Considerations: Authorized Generic Launch Decision FlowA simple decision tree – and key considerations at each node – can help to guide the decision regarding whether and when to introduce an authorized generic
Key LOE Considerations: Sales Force and Business Model PlaysFocusing on the following areas will support the development of LOE strategies for upcoming brands facing LOE
Explore innovative methods to engage with patients and preserve brand loyalty:
Sales Force Management Business Model Plays
Mobile application with savings card access, refill reminders, and customer care
Video messaging emphasizing that not all medications, including generics, are the same
Text-based mobile application to receive discount cards
Leverage sales force relationships, coverage, and incentives to protect sales and prepare for LOE transition:
Shifting compensation
targets over time
Adjusting territory alignments as LOE
nears
Engaging opinion leaders and keeping them apprised of
product strategy
How Can Deloitte Help?Deloitte can potentially support Lilly in developing LOE strategies in multiple ways
LOE Innovation Workshop and War Game1
• Walk in your competitors shoes to help think differently to deeply understand their motivations and strategies around LOE e.g. AG launch timing, promotions, etc.
• Use the Ten Types of Innovation™ Framework to craft LOE strategies and tactics (including disruptive moves)
• Engage internal stakeholders in a collaborative environment to share ideas to form a collective POV
• Brainstorm and prioritize on your most important needs and/or challenges that should be addressed immediately
• Strengthen existing LOE plans through insights generated from the session
Support through LOE Center of Excellence2
• Review existing LOE plans at Lilly• Develop supplementary core and innovative
strategies and tactics to strengthen the plans • Run pilots/experiments in the field based on the
tactics• Conduct real-time analytics to adjust tactics• Re-test and experiment, as needed, and scale-
up strategies and tactics• Monitor and track revenue / share preserved vs.
the base case • Continuously learn and improve from the pilot
Case Study: Deloitte supported a leading cardiovascular brand to pilot pioneering LOE strategies that changed the game and successfully preserved brand value
Results
• Worked collaboratively with a diverse group of client stakeholders to design, evaluate, and test a new pricing and promotional model whichgained strong internal leadership approval and support
• Successfully aligned a diverse group of the client stakeholders and mitigated key concerns/risks
• The program design was selected as a winner for the client’s internal innovation challenge
• The first pilot was successfully initiated and the client is on-track to deliver the remaining pilot and plan for launch
A leading pharmaceutical client was seeking expertise to develop innovative growth strategies to drive incremental revenue for the client’s broad portfolio of post-LOE assets
Issue
Designed an innovative pricing
strategy and defined key
program elements
Constructed a business case highlighting
financial impact with key
sensitivities and risks
Developed pilots to test programs in the market and
to support the execution of each
Pilot ProgramBlueprint
LOE Management and Go-to-Market
Levers
Key Activities
Sample Outputs
Case Studies: Value-extending LOE Strategies
Source: “Loss of Exclusivity: Strategies to Maximize Product Value”, Deloitte, Nov 2016
Pfizer and AstraZeneca successfully slowed generics erosion and maintained brand equity through their LOE strategies and tactics
Sources: Evaluate Pharma; Medscape; Orange Book; AstraZeneca Press Release
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