Despite this, the market is growing rapidly.
Overall, in EU states, the proportion of total health-
care costs accounted for by outpatient drug costs
rose from 13.3% in 1980 to 15.3% in 1999
(Martikainen, 2002), a faster increase than overall
health spending.
The pharmaceutical market is also very compe-
titive. In England in 2003, almost 650 million
prescription items were dispensed in the commu-
nity, with a total net ingredient cost of over £7.5
billion (PCA, 2003). However, there were 390
pharmaceutical manufacturers competing for a
share in this market (BNF 48, 2004).
51.4 Product versus brand
The pharmaceutical industry relies on patent laws
to maximize its income from a new product (see
above). However, patents were a late addition to
pharmaceutical industry regulations, with many
European countries only permitting patent pro-
tection after their industries had reached a degree
of development – France in 1960, Germany in
1968, Japan in 1976, Switzerland in 1977 and
Italy and Sweden in 1978 (Oxfam Briefing
Paper, 2001).
Generic drugs were introduced in the 1980s, as
cheap equivalents to branded drugs that outlived
their patent protection. The R&D costs for generic
products are much lower than for the original
branded products, and unit production costs are
very low. This means that once patent protection
ceases and generic versions are in the market, sales
of the more expensive branded product tend to fall.
Pharmaceutical companies need strategies to cope
with this limited time span of patent prote-
ction (Certified Medical Representatives Institute,
2002).
One strategy to deal with the competition from
cheap generic drugs is to promote the concept of
brand rather than product. Branding was originally
used to denote product purity by the early pharma-
ceutical companies, in much the same way as other
industries did (e.g. soaps). The term ‘Brand equity’
refers to the unique set of assets linked to the brand
name, which adds value to the product and gives
customers a reason to prescribe and use them. The
brand is now seen as the only tangible unit of value
in the pharmaceutical company and its greatest
asset. Brands are also highly significant to patients
as something in which to trust and of importance to
their health (James, 2004).
Positioning is the process of establishing a brand
in the mind of the target consumer so that the brand
is seen to meet their needs. The attributes of the
product are compared to the requirements of the
consumer. Market leaders often show ideal posi-
tioning, when the product attributes are unique and
highly relevant to customers (James, 2004).51.5 The customers
Although the ultimateconsumersof the product are
the patients,customersinclude anyonewho can make
a decision about prescribing, spending money on or
taking a drug, and as such each group requires a
different marketing strategy (James, 2004).
Prescribers can be classed according to how
rapidly they change their practice when faced with
information about a new product. Those most
willing to try something new are known as inno-
vators or ‘early adopters’, and they generally
account for 15% of the group. The next third are
termed the ‘early majority’, followed by another
thirdofthe‘latemajority’,withthelast16%willing
to change commonly, being called ‘laggards’
(James, 2004).51.6 The product life cycle
Rapid penetration strategies around the launch of a
new product tend to target early adopters and early
majority prescribers. The next phase of the drug
life cycle, the growth phase, is aimed at increasing
perception of value and loyalty among users and
recruiting new customers from nonusers. During
the maturity phase the only new prescribers are
laggards, and sales begin to fall due to new com-
petitors and brand saturation. Finally, the product
loses its patent, which usually results in a signifi-
cant drop in sales (James, 2004).51.6 THE PRODUCT LIFE CYCLE 655