Low Price Strategy in Brand Pharmaceutical Companies:

Impact of Authorized Generic and its Positioning

Abstract

new business model called ‘Authorized Generic (AG) ’ appeared in the pharmaceutical industry in Japan in 2013, and its sales volume has steadily increased. Although AG has 'generic' in its name, it has many characteristics similar to that of ‘branded’, and the subsidiaries of brand pharmaceutical companies sell AG in many cases. Compared with general generics, AG has some merits in terms of its pre-sale, advanced efficacies, or other competitive advantages. Since AG has both elements of being generic (considering its price or sales timing) and branded (pertaining to its manufacturing process, manufacturing factory, drug substance, and additives), its position has not been decided yet. Therefore, we surveyed and analyzed the AG business based on its characteristics and so on.

After a thorough study, we came to a conclusion that AG is more of a branded, with reduced prices, than being a generic. In addition, we have also found out that AG has the role of preventing generics from dominating the market; it can be thought of as Product Life Cycle Management which is a strategy to maximize product values for innovating companies. As a result of comparison with other Product Life Cycle Management strategies, AG is considered to be an effective strategy in the declining phase of Product Life Cycle. Moreover, the competitive advantage of AG is high and it even gains an overwhelming share in the market. Therefore, there is a possibility that generic companies will decline as concerns about changes in the industrial structure of generic companies arise.

A lot of discussions have been done in the United States, which has been an advanced country of AG business since 2000s, but a full-scale discussion has not been conducted in Japan. However, because the drug prices of Bio-same (as AG) and Biosimilar as general generics are different, the influence on AG's medium and long-term industrial structure has finally become a problem in biopharmaceuticals in the recent year. In the future, it is hoped that an active discussion on AG in low molecular drugs will be done.