The Pharmaceutical Business   7 of 13  
     3. Is pharmaceutical manufacturing like other industries?
graph of life cycle
Figure 17. Product life cycle for a typical medicine.
We have seen on page 6 that a medicine takes at least 12 years and hundreds of millions of pounds to develop. On this page, we'll look at how the developing company can protect its investment.
Medicine life cycle
As soon as a promising molecule is found, the company applies for patents. A patent gives the company intellectual property rights over the invention for 20 years. This means that the company owns the idea and can legally stop other companies from profiting by copying it. This is vital. If the company fails to do this then other companies will use its ideas and produce similar rival drugs. This is likely to severely damage sales and hence profits. A drop in profits will prevent future R&D.

Figure 17 shows the product life cycle for a typical medicine.

Notice that

  • the vast majority of patent time may be over before the medicine even hits the market
  • once it is produced it takes some time for the medicine to build up sales and so achieve market share; in its early years the company needs to persuade doctors to prescribe and use the medicine
  • once the medicine has become established then it enters a period of maturity; this is the period when most profits are made
  • finally as the medicine loses patent protection, copies (generic products) hit the market at a lower cost; therefore, sales of the original medicine start to fall.
Photo of medicines
Figure 18. Shape and colour are used to make the product look unique.
How to retain market share?
Once the medicine loses patent protection, a number of things can happen. The sales in this period depend on how successful the company has been at marketing the medicine. This is shown in the last part of figure 17. Marketing strategies which might boost sales could include improving the product and re-launching the ‘new improved’ version, though this has a cost.

One powerful way the company can try to reduce the loss of sales in the last period is to have established a very strong brand identity. Consumers will then stick with the product they know because they do not regard the alternatives as effective substitutes.

An effective way of branding is to make the product look unique. This could be achieved by making the tablet or capsule a special shape. Also it can be coloured or produced with special graphics printed on it.

A distinctive use of unusual shapes and colours make it more difficult for competitors to produce a medicine that the consumer might confuse with the original. Names, logos and packaging are all protected by registering them as trade marks. This makes direct copying illegal.
Assignment trigger 3

What are patents? Why are they important for pharmaceutical manufacturers? What is a generic product? Why are they such a threat to an established medicine coming off patent? What is the difference between a patent and a trade mark?

Check your answer

Look at figure 17. Try to explain the shape of the curve in the last section of the diagram.

Check your answer

Evaluate the extent to which pharmaceutical manufacturing is different to the rest of UK manufacturing (you could relate back to figure 4 R&D expenditure of different manufacturing sectors).

Check your answer
Our experts' view Close

A patent provides legal protection for an idea or invention while a trade mark just protects a name or logo from being copied.
Our experts' view Close

The Product Life Cycle in figure 17 shows sales falling once the medicine come out of patent but it suggests that the fall in sales could be slowed down by the use of marketing techniques such as relaunching a "new improved" version.
Our experts' view Close

Pharmaceutical manufacturing could be seen as different in the following ways:

  • High level of R&D expenditure (Figure 4 Page 2)
  • Importance of ideas in adding value
  • Stable levels of employment (Figure 9 Page 3)
  • Growing trade surplus (Figure 5 Page 2)
  • Rapidly growing productivity (Figure 8 Page 3)