‘How Pfizer can sustain growth after Viagra’

For the past 15 years, the impotence drug has generated billions for its manufacturer Pfizer. In 1990, the company had been testing a new blood pressure drug called Sildenafil Citrate at its research facility in Kent. Although its effects on high blood pressure were disappointing, doctors involved in the patient trials reported a fascinating, if unexpected, side effect. Many of the test patients, who had previously struggled to achieve and maintain erections, were experiencing an unexpected revitalisation in the downstairs department.

Further tests confirmed the result and in 1998 Pfizer went to its naming bank, picked the name Viagra and launched the drug with a massive fanfare of publicity. Pfizer knew it had a wonder drug but also that without strong marketing its success would be severely limited by the social stigma of impotence.
So Pfizer created a new condition – erectile dysfunction – to imply that the problem was not the man but the penis, and that the penis could be easily fixed by Viagra.

The potential was huge. Approximately 10 per cent of the male population suffer from some form of erectile dysfunction; around 750,000 British men took Viagra last year. And because Viagra does not cure the disorder but merely treats it, Viagra’s lifetime value is just as impressive as its potential penetration. Add to that the unpalatable nature of the alternative treatments – either two vigorous hours with a vacuum pump before love making or multiple injections into the head of your penis – and it was clear that Viagra was a wonder drug. Within a year of Viagra’s successful launch Pfizer’s share price had doubled. Despite discovering the method for the mass production of penicillin, it was Viagra that made Pfizer’s corporate brand famous.     

But all good things come to an end. The European patent that has protected Viagra from copy-cat generic companies for more than a decade expired on Friday. It’s the kind of nightmare that would keep most marketers up all night. Imagine losing your ability to protect your product formula, brand equity, most of your key accounts and your pricing strategy overnight. That is what it means to lose patent protection.

Viagra will still be marketed by Pfizer in the UK and across Europe. But it will now face competition from more than 20 different generic manufacturers which will flood the market with identical versions of Sildenafil Citrate. The extra competition combined with the lower research and development costs of these generic players means that, aside from suddenly facing multiple competitors, the average price for treatment will drop from around £10 per pill to less than £1 within weeks.

Like all good big pharma organisations, Pfizer has been expecting and planning for the loss of patent protection for several years. It will attempt to keep Viagra in the market, albeit at a lower price, and encourage patients to continue to request the drug by name thus side-stepping the generic threat. For patients prescribed the drug via the NHS, however, one or more of the generics will replace Viagra on the government tender, saving the UK taxpayer millions of pounds but eliminating one of Viagra’s biggest sources of patients. Pfizer will almost certainly introduce its own generic version of Sildenafil Citrate, codenamed ‘White Diamond’, this week in an attempt to retain market share among the new generic options.

Whatever its strategy, the loss of Viagra’s patent protection will be very hard on Pfizer. When the company’s cholesterol treatment, Lipitor, lost its American patent in 2011 revenues declined by an eye-watering £4bn in a single year. There are only two long-term responses to the challenge of losing patent protection. First, optimise the brand while you have a patent. Unlike FMCG where brands often only reach their zenith 50 years after launch, big pharma marketers know they usually have only a 10-year window to make their profits and they act accordingly. Second, make sure your product pipeline is ready with the next big blockbuster. Once the profit potential of an off-patent brand like Viagra begins to diminish, there has to be a new brand with a protectable formula waiting to explode from your pipeline.

The big question keeping Pfizer up at night is not what it will now do about Viagra, but what it has that can possibly replace it.