Position Your Pharmacy to Profit from Brand-to-Generic Conversions


As Major Branded Drugs Lose Their Patents, Help Your Pharmacy and Patients Benefit from Generics

While some observers have declared an end to the “patent cliff” that began in 2011, a stream of major drugs will continue to lose their patent protection through 2018. Specifically, nine more major drugs, including Nexium, Cymbalta, Symbicort, Celebrex and Nasonex, which are estimated at more than $15 billion in yearly brand drug sales,1 are losing their patent protection by the end of 2014.

Additional major brand patents set to expire in the coming years:

  • 2015: Abilify ($4.6 billion), Gleevac ($4.3 billion),2 and Namenda
  • 2016: Crestor ($6 billion), Benicar ($2.5 billion),3 and Symbicort XR
  • 2017: Zetia and Cialis
  • 2018: Spiriva and Lyrica

Although generics are priced lower than branded drugs, they can offer a gross profit that is up to 50% higher, at $5 to $7 more per script by some estimates.4 Industry expert Adam Fein’s 2011 Drug Channels article noted that before a branded drug loses its marketing exclusivity, a pharmacy’s gross profit on prescriptions averages about 6.5%, but a pharmacy’s gross profits jump to 13–15% per prescription when the first-to-file generic enters the market.5

Per Fein, a pharmacy’s gross profit per prescription is even higher when an authorized generic has competition during the first 180 days.6 In one example offered by Fein, the gross profit per prescription can jump from $11 for a brand-name product to $22 in the 180 days after two generics go on the market. After that first six months, more competitors usually enter the market and push prices down.

To capitalize on the profit opportunity that generics present, consider:

  • Planning ahead. Be sure to optimize generic product launches and work with a wholesaler that provides rapid access to these new-to-market products and includes extended price protection with each autoshipment. Also, be sure to work closely with your personal generics specialists who will help you plan for new generic launches and can provide detailed updates on market events.
  • Navigating a complex market. Prices for some generics have jumped dramatically, such as doubling within six months.7 These price hikes can squeeze potential profits out of your pharmacy. Choose a distributor that provides a solution to these market price changes, supporting your business during a time of transition.
  • Reaching out to prescribers. When a pharmacist recommends a brand-to-generic drug change to a healthcare provider, the provider accepts that recommendation about 80% of the time.8 By reviewing prescriber data in your area, available through McKesson’s Physician Outreach Program, you can identify which providers are prescribing drugs about to go generic and talk with these prescribers about whether a switch may be appropriate for their patients.
  • Educating customers. Post in-store signs announcing the latest generic blockbusters. Also program prompts into your point-of-sale systems and train your staff to ask patients who are dropping off or picking up prescriptions whether they would like to speak with the pharmacist to learn more about an available generic equivalent. While most customers expect that a generic drug will be cheaper, they may have questions about the product quality and whether it is the right choice for them.

Regularly take a few minutes to see which generic launches are coming soon and develop plans to work with your distributor and their generics specialists to plan accordingly, and consult with prescribers and patients to possibly migrate branded prescriptions to generics. Planning for upcoming generic launches can benefit your customers’ wallets and your pharmacy’s bottom line.

Related Article:

1 “Will 2014 Lead to Higher Margins for Pharmacies?” Brian Nichols, The Motley Fool, Jan. 9, 2014
2 Ibid.
3 Ibid.
4 “Growing Generic Drug Sales Offers Hope of Higher Margins for Walgreen,” Trefis, Dec. 5, 2013
5 “Pharmacy Profits from Authorized Generics,” Adam Fein, Drug Channels, Sept. 22, 2011
6 Ibid.
7 “Rapid Price Increases for Some Generic Drugs Catch Users by Surprise,” Elizabeth Rosenthal, The New York Times, July 8, 2014
8 2012 NCPA Digest, National Community Pharmacists Association