Market Leader Strategies: AstraZeneca Defending its Turf

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"Four years after patent expiry [of Losec/Prilosec] and three years after multiple cost-based competitors began offering omeprozole, AstraZeneca's sales in the ppi market reached an all time high of $6.4 billion in 2005. Not only has AstraZeneca avoided the shark fin, it is growing revenues - a completely counterintuitive result. Direct advertising and intellectual property management are additional factors in AstraZeneca's success, but it applied sandwich strategy basics - and market share continues to grow."^{1 2}

- Dipak C. Jain, Dean, Kellogg School of Management, in 2006.

"In the political uproar over prescription-drug costs, Nexium has become a symbol of everything that is wrong with the pharmaceutical industry. The big drug companies justify the high prices they charge - and the extraordinary profits they enjoy - by arguing that the search for innovative, life-saving medicines is risky and expensive. But Nexium is little more than a repackaged version of an old medicine."³

- Malcolm Gladwell, Journalist and Author, in 2004.

Averting The Shark Fin

In the last decade of the twentieth century, the pharmaceutical industry witnessed many strong players who were manufacturing drugs for the treatment of gastroesophageal reflux disease (GERD), commonly known as heartburn. The leader in this segment was AstraZeneca Plc. (AstraZeneca), a London, UK-based pharmaceutical major, which manufactured and marketed drugs that healed GERD under the brand name Nexium and Losec/Prilosec4. The patent of Losec/Prilosec, one of the world's largest selling drugs, was scheduled to expire in 2001.

Generally, once the patent expires, low cost generic⁵ versions of the drug enter the market, leading to a rapid decrease in the sales of the branded drug.

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1] Omeprazole is a drug used for the treatment of gastroesophageal reflux disease (GERD), a condition where the stomach acid moves to the food canal causing pain (commonly referred to as heartburn). Omeprazole belongs to the proton pump inhibitors (PPI) class of drugs. As of 2007, PPIs were the most potent treatment for GERD.

2] Dipak C. Jain, "Market Pricing and the Sandwich Strategy,"www.microsoft.com, 2006.

3] Malcolm Gladwell, "High Prices,"New Yorker, October 25, 2004.

4] Losec and Prilosec are brand names for Omeprazole. In the US, Losec was renamed as Prilosec on the request of the United States Food and Drug Administration (FDA), to avoid confusion with another drug Lasix (Furosemide). The FDA is an agency of the US Department of Health and Human Services and is responsible for the safety regulation of most types of foods, dietary supplements, drugs, vaccines, biological medical products, blood products, medical devices, radiation-emitting devices, veterinary products, and cosmetics.

5] Generic drugs (or Generics) are either copies or the basic form of a proprietary drug (or "brand-named") drugs produced by large multinationals. For example, Losec and Prilosec are the brand names for the drug Omeprazole that was patented by AstraZeneca. Any other drug with the same composition made by other companies are called generics.