Did the world end for Pfizer’s Lipitor when it went generic late last year? Not as far as we can tell. In fact, Lipitor seems to be writing a new book on generic defense strategy.

Generic competition began on November 30, 2011 in the U.S. For the first 180 days, only one competitor has market access, in this case Ranbaxy. This period of exclusivity is a putative reward for developing and getting approval for the first generic.

In general, when a drug switches to a generic, the “bottom falls out” of the branded product, and again, generally-speaking, the market share for the branded product falls into the single-digits. Pharmaceutical orthodoxy has the manufacturer of the branded product cut way back on promotion to doctors and consumers. Brand and marketing managers move on to new assignments. In the pharma playbook, a generic entry is “the end.”

Few drugs avoid this fate. There are a small number of drugs that generic companies have not been able to manufacture as well, and there are a couple of drugs, like Abbott’s Synthroid, where many doctors demand the branded product.

But doctors and pharmacists have mostly proven poor allies in resisting generics – most believe that generics are just as good as branded medications. Managed care companies are constantly reviewing drug reimbursement lists –  “formularies”  - to make sure that enrollees are getting the least expensive drug. Nearly all states have regulations that require the patient to be notified at the pharmacy of a generic substitute, and many laws require that the generic is filled when it is cheaper.

The Difference With Lipitor

But Lipitor is not just any drug. It has brought in the greatest improvement in cholesterol numbers to the largest number of patients. It is prescribed confidently with its very favorable safety profile. Lipitor’s “goodness” has meant annual sales for some time in excess of $7 billion in the U.S. All by itself, it is such a big business that Pfizer could not “take the typical path.”

Pfizer has been cogitating this event for years, and they have come out swinging; and kudos to them, because in the generic Lipitor era, Pfizer is writing a new playbook.

First, Pfizer has gone right to the core advantage of generics – price. They have offered co-pay subsidies of up to $50 per patient, per month. For most insured, that keeps the out-of-pocket expense to $15 or less, equivalent to or even below the generic cost. Of course the “cost to the patient” is only one small part of what a drug costs.

Second, Pfizer has worked to keep Lipitor “preferred.” For example, United Healthcare, the nation’s largest insurer (after negotiations with Pfizer), has given a preferred status to the branded product, again keeping it more accessible than the generic for a large number of covered individuals.

And in patient communications, Pfizer has maintained a “belt and suspenders” approach, where users may receive letters from Pfizer, from their insurance company, from the pharmacy trying to keep them on Lipitor.

One other note – Pfizer supplies the drug to Watson, who markets it unlabelled, and therefore holds a piece of the “generic” market. Watson’s product did not have to go through the same regulatory hurdles as other generics.

Our work has us looking at pharmaceutical marketing budgets every day, and we can state with confidence that these efforts are costing Pfizer plenty.

But the efforts are absolutely worth it. At six weeks in, Pfizer still held slightly more than a 40% market share. While we have no idea what Pfizer’s expectations were, that’s a damn good number.

That number will drop, but the worst decline has probably already occurred. One assumes that at this point Lipitor’s development costs have been fully experienced, so preserving Lipitor share, even with high costs, still works financially.

We would also praise Pfizer for making both patients and payors indifferent to their marketing efforts. While this may be rough on the generic manufacturers, it is in everyone’s interest to keep branded medications strong and viable, even after generic entry.

We suspect Pfizer will repeat some of these plays on Viagra.

We expect some very aggressive counter-marketing from generics companies. For the consumer and the payor, that’s more great news.

- Tom Young

Vice President, Healthcare, Ipsos Vantis