The New ‘Stylized’ Brands in Pharma – Part Two

6 Jan
Page copy protected against web site content infringement by Copyscape
P. Mohan Chandran
Friday, September 21, 2007

JUMPING ON THE “BRAND” WAGON

Never before has the importance and impact of brand been felt so strongly upon the pharma industry as in the new millennium. More and more pharma companies are now realizing the need for brand building and are making serious efforts to promote their product brands, along with their corporate brands. Reiterating this point, Rehl said, “Strong corporate branding is necessary whatever the industry. In the post Enron and Worldcom era, public and consumer confidence in corporations is low, and there is increased pressure on companies to rebuild trust and to demonstrate responsibility. Corporate branding plays a vital role in achieving this because it clearly defines who you are and how you behave.”6 Pharma companies have now started seriously working on developing their brands even before their product is fully tested and ready. Pharma companies and markets have never witnessed such intense brand competition as it is today. The number of sales representatives for pharma brands seeking the health providers has more than doubled over the last 10 years. Because of innumerable ‘me-too’ and look-alike pharma brands that compete with the established brands, branding has now assumed increased significance.

Pharma branding is vital as it not only creates public awareness about the potential benefits of the drugs but also distinguishes a company and its products from other competitors. Branding enables a company to stay ahead of the competition. It increases the sales revenue of the company and also its corporate value (See Table-4). For instance, according to a survey by Interbrand in July 2005, the top 10 brands accounted for a cumulative value of over $388,359 million at an average of 34.8% market capitalization for those companies. Branding acts as the primary driver of customer purchase decision. Whenever a consumer has to choose between buying a known branded product and an unknown, new product, he will always opt for the former. Branding is directly proportional to the sales revenue of a company. The higher the brand perception and the stronger the brand value, the greater will be the sales revenue and profits for the company that owns the brand. Says Howard Kosgrove, Vice-principal of Marketing at Lindsay, Stone and Briggs Advertising, “The value of brand is huge compared to physical assets.”7

TABLE-4

TOP TEN BRANDED DRUGS BY SALES DOLLARS (2001-2004)

Company Name

Brand Name

Sales ($ Billion) 2001

Rank

Sales ($ Billion) 2002

Rank

Sales ($ Billion) 2003

Rank

Pfizer

Lipitor

4.5

1

5.2

1

5.5

1

Takeda/Abbott

Prevacid

3.2

3

3.4

2

3.6

2

Merck

Zocor

2.7

4

3.1

4

3.3

3

Astra Zeneca

Nexium

0.5

62

1.8

10

2.7

4

Pfizer

Zoloft

2.2

6

2.4

6

2.6

5

Glaxo Smithkline

Advair Diskus

0.5

63

1.4

20

2.0

10

Wyeth

Effexor XR

1.2

22

1.5

16

2.0

9

Bristol Myers Squibb

Plavix

0.9

35

1.3

25

1.7

14

Pfizer

Celebrex

2.4

5

2.4

5

2.2

6

Warner Lambert

Neurontin

1.5

16

1.8

11

2.1

8

Source: http://www.drugtopics.com

Bertek Pharma, a branded products subsidiary of Mylan Labs Inc., increased its brand sales by 47% from $83 million in 1999 to $122 million in 2000. Bertek’s brand sales contribution to Mylan Labs also increased from 11% of net sales in 1998 to 15% of net sales in 2000.

Branding enabled six diabetes drugs to achieve sales of about $1 billion in 2001. Moreover, during the same year, the ranking of the 100 highest selling pharma brands globally included six diabetes drug brands, which clocked aggregate sales of $8.2 billion. The top six brands of Astra Zeneca contribute 80% to the company’s sales. This emphasizes the importance of branding in positioning a company in a competitive market and also in its overall market performance in a dynamic environment. The companies’ shift from focus on physical assets to intangible assets, such as brand name and patents, is now clearly visible. Having understood the importance of intangible assets and branding for his company, Yutaka Kobayashi, President and COO of Kobayashi Pharma, said, “In implementing our corporate brand management initiatives, we have understood that the basic foundation of company strength has changed. Previously, a strong company would have had large tangible assets such as land, buildings, and facilities. However, in today’s business environment, a company’s competitive strength will not be judged on the size of its assets, but on how efficiently those assets are marshaled and employed. Corporate brand is one of the most important intangible assets, equivalent in importance with a company’s intellectual assets and human resources. Thus, we have decided that to ensure our future growth, we must ensure our corporate brand.”8

Astra Zeneca also launched and promoted a new branded drug for heart burns called ‘Prilosec.’ The drug costs $4 for a single pill and for a year’s consumption, it costs around $1500 for a single patient. This drug became a cash cow for Astra Zeneca and also the world’s No.1 prescription drug with sales of about $6 billion per annum. In 1998, Prilosec became the first ever drug in the world to touch the $5 billion global sales. In 2001, General Motors bought Prilosec worth $55 million for its employees.

STEALING ‘BRAND’ IN A ‘GRAND’ WAY

Counterfeit drugs and products have always been on the rise, cashing in on the popular drug brands. As per the USFDA estimates, counterfeit drugs account for approximately 10% of the global pharma market. It causes a loss of $512 billion globally. According to a survey by Gieschen Consultancy9 in March 2005, IP theft accounted for 36% of global counterfeiting. Moreover, more than 95% of all counterfeit products seized by customs, law enforcement, and brand enforcement authorities related to IP theft. In the last one year, more than 1.3 billion counterfeit products, valued at $4.1 trillion were seized.

In India, the findings of a study by AC Nielsen revealed that counterfeiting costs the government more than Rs. 9 billion every year in lost excise revenues and tax evasion, while the loss for companies whose products are being counterfeited is Rs. 40 billion. In India, it is estimated that there are 128 different types of Parachute hair oil, 113 types of Fair & Lovely cream, 44 types of Vicks VapoRub, and 38 types of Clinic Plus Shampoo. Counterfeiting in India spans various product categories ranging from FMCG, medicines, and cosmetics, to food, textiles, and beverages. AC Nielsen studied 30 FMCG companies and found that eight out of every ten consumers who bought counterfeit/knock-off products knew that it was counterfeit only after buying them. Counterfeiting is also widely prevalent in the US, China and other countries (See Table-5). In the UK, counterfeiting results in loss of about 4,100 jobs to the residents there.

TABLE-5

MONEY LOST BY COMPANIES IN CHINA THROUGH COUNTERFEITING

Company

Losses ($ Million)

P&G

150

Nike

70

Unilever

24

Gillette

20

Johnson & Johnson (J&J)

15

BestFoods

6

Source: http://www.blonnet.com

Counterfeiting has been rampant in the US. The market for counterfeit products in the US is approximately between $200 and $250 billion per annum (See Table-6).

TABLE-6

LIST OF MOST COUNTERFEITED DRUGS FOUND IN THE U.S. (JAN 2005)

Sl.No.

Name of the Drug

1

Lipitor

2

Viagra

3

Zyprexa

4

Ortho Evra

5

Serostim

6

Diflucan

7

Procrit

8

Neupogen

9

Epogen

10

Ambien

11

Combivir

Source: Center for Pharmaeconomics Studies, University of Texas, Austin.

Stealing of trademarks of very popular companies in pharma and other industries also, and coining trademarks that is similar to others, or cashing in on the popularity of other brands, is continuously on the rise (See Table-7 & 8) . A Peshawar-based company tried to infringe on Tata’s brand name by launching a similar tea named ‘Tatara Tea.’ After two years of court battle, Tata group, however, won the case in October 2005. Similarly, a newspaper organization from Varanasi also tried to infringe on Tata’s brand name by launching a newspaper called ‘Tata Express.’ There was even a pornographic website launched on Tata’s name called ‘odacioustatas.com.’ A recruitment agency also collected money from prospective job-seekers assuring them of a placement with ‘Tata Management Ltd,’ which was a trademark infringement. Emphasizing the harmful effect of infringement on a company’s brand, Peter F. Corless, Partner at Edwards & Angell LLP, said, “Infringements can do much more than degrade your market share. If those knockoffs are inferior – as they often are – there’s a loss to the trademark owner of the buying public’s confidence. That can be very hard to win back.”

Similarly, P&G’s Vicks Action brand was also imitated in December 1998 by counterfeit manufacturers. The six brands were named as – Endo Action, Anadol Action, Jet Action, API Action, Vicas and Vikas cough drops. However, P&G sued the manufacturer for infringement in January 1999 and won the case, which resulted in withdrawal of the counterfeit products. In June 1999, P&G constituted a Trademark Protection Team and found out that for every 100 genuine strips of Vicks Action 500, 54 look-alike strips were sold in the market. Moreover, for every 100 genuine Vicks cough drops, there were 7 look-alikes, and for every 100 genuine Vicks VapoRub, there were five look-alikes. There were a total of about 106 infringers on the Vicks brand. Because of counterfeiting, P&G’s healthcare business plummeted between October and December 1999 and the company lost 5% sales in just six months.

TABLE-7

RECENT KNOWN CASES OF MISUSE OF TRADEMARKS

Original Trademark

Counterfeit Trademarks

Amoxil

Lymoxyl

Fortwin

Ostwin

Arelon

Arteelon

Pacitane

Parkitane

Lipitor

Lipicor

Honda CR-V

Laibao SR-V

Chevy Spark

Chery QQ

Apple (Computers)

Pineapple

YAHOO

Uhoos

Google

Oogle/Boogle

Tata Tea

Tatara Tea

Pepsi 7Up

1 Up

Lehar

Lahar

Coca Cola

Dream Cola

Vicks Action

Endo Action/Jet Action/Anadol Action

Vicks

Vikas/Vicas

Godrej

Podrej

Source: Compiled from various sources

TABLE-8

TOP-10 MOST POPULAR COUNTERFEITED BRANDS & TRADEMARKS

No.

Brand/Trademark

1

Louis Vuitton

2

Nike

3

Burberry

4

Coach

5

Gucci

6

Microsoft

7

Chanel

8

NFL

9

Viagra

10

Autodesk

Source: http://www.editorials.arrivenet.com

Counterfeiting is prevalent in different countries across the world (See Table 9). The best way to counterattack it is to protect it by registration and keep a vigil in the market to pre-empt infringement. The cost of registering a trademark is very less as compared to the cost of litigation. According to one estimate, the average cost of trademark litigation in the US ranges between $400,000 and $750,000, and can sometimes even be more. In the UK too, the cost of trademark lawsuit is similar to that of US, while in other parts of Europe, it is more expensive.

TABLE-9

LEADING GLOBAL PRODUCERS OF COUNTERFEIT DRUGS

Rank

Country

1

India

2

China

3

Brazil

4

Argentina

5

Pakistan

6

Columbia

7

Mexico

8

Belize

9

Southeast Asia

Source: Center for Pharmaeconomics Studies, University of Texas, Austin.

MARKET VIGILANCE IS KEY

Constant market vigilance against infringement offers strong protection and deters the infringers from misuse of trademarks or other intellectual property (IP). Market vigilance is also a vital part of a company’s IP management strategy. The trademark filing statistics released by the USPTO, the European Community Trade Mark Office, and the China Trade Mark Office for the year 2004 indicate that brand protection is being given more importance by companies. The trademark filings at USPTO increased 12% from 267,218 in 2003 to 298,489 in 2004; while at the European Trademark Community Office it increased 2% from 57,646 in 2003 to 58,848 in 2004; and in China Trade Mark Office, the trademark filings increased 30% from 452,000 in 2003 to 588,000 in 2004. The trademark filings of 588,000 at the China Trade Mark Office for the year 2004 are the highest since the trademark office’s inception in 1994.

To counter the problem of misuse of trademarks and counterfeiting, Hindustan Lever Limited (HLL) and Procter & Gamble (P&G) are working in conjunction with the Brand Protection Committee (BPC) of FICCI, which includes 20 FMCG companies, to track the producers and vendors of spurious products and eliminate them. BPC also frequently coordinates with the Indian government agencies and the judiciary. BPC also proposed to the states to constitute a special IPR cell to provide support for those companies who would like to sue the counterfeit manufacturers. In the wake of BPC’s proposal, special IPR cells have now been set up in Maharashtra and Madhya Pradesh.

P&G formed a Special Multi-Functional Trademark Protection Team and sued all the infringers for counterfeiting. This made the consumers to be more aware about genuine P&G products and reduced the loss from 10-15% in 1999 to 2-3% in 2003.

After Pepsi’s products were counterfeited, Pepsi regularly conducted raids at suspected distributors and sellers of spurious goods. Between 2000 and 2001, Pepsi raided about 70 locations in various cities across India in Delhi, Haryana, Maharashtra and Tamil Nadu. HLL also constantly monitored its products by enquiries, checks, and other market intelligence sources. If HLL found any distributor/franchisee selling any spurious or look-alike products of HLL, it terminated its contract with that distributor/franchisee, and also sued it for losses and criminal damages. According to Ashok Gupta, General Manager (Legal), HLL, speed and constant vigilance was very important in tackling the menace of counterfeiting.

To counter the problem of misuse of trademarks and counterfeiting, Hindustan Lever Limited (HLL) and Procter & Gamble (P&G) are working in conjunction with the Brand Protection Committee (BPC) of FICCI, which includes 20 FMCG companies, to track the producers and vendors of spurious products and eliminate them. BPC also frequently coordinates with the Indian government agencies and the judiciary. BPC also proposed to the states to constitute a special IPR cell to provide support for those companies who would like to sue the counterfeit manufacturers. In the wake of BPC’s proposal, special IPR cells have now been set up in Maharashtra and Madhya Pradesh.

P&G formed a Special Multi-Functional Trademark Protection Team and sued all the infringers for counterfeiting. This made the consumers to be more aware about genuine P&G products and reduced the loss from 10-15% in 1999 to 2-3% in 2003.

After Pepsi’s products were counterfeited, Pepsi regularly conducted raids at suspected distributors and sellers of spurious goods. Between 2000 and 2001, Pepsi raided about 70 locations in various cities across India in Delhi, Haryana, Maharashtra and Tamil Nadu. HLL also constantly monitored its products by enquiries, checks, and other market intelligence sources. If HLL found any distributor/franchisee selling any spurious or look-alike products of HLL, it terminated its contract with that distributor/franchisee, and also sued it for losses and criminal damages. According to Ashok Gupta, General Manager (Legal), HLL, speed and constant vigilance was very important in tackling the menace of counterfeiting.

ENDNOTES:

6. Colyer, Edwin, Op. Cit.

7. “Building Your Brand,” http://www.va-interactive.com.

8. “Message From the COO,” http://www.kobayashi.co.jp, April 2002.

9. Gieschen Consultancy, based in Canada, provides counterfeit intelligence analysis and security research pertaining to documents, products and intellectual property.

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