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Strategic implications of packaging for generics


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Strategic implications of packaging for generics

  1. 1. Strategic Implications of Packaging Choice in the GenericSectorDavid Barkeris Marketing Development Manager for Honeywell Healthcare & Packaging. As a world leader inpharmaceutical packaging materials, Honeywell Healthcare & Packaging is working to developindustry leading packaging solutions which can deliver increased competitive advantage to thegenerics industry.Charles Rowlands and Amy Morganare founding partners of RM Consulting, an international market and competitive intelligenceconsultancy focused on providing management support services to the global pharmaceutical,biotechnology, chemical and healthcare sectors. Jointly they have more than three decades’experience and have worked on numerous strategy development and market research projectsin both developed and emerging markets.Keywords: generics, profitability, primary packaging, competitive advantage, high barrier,thermoforming, blister film, Aclar®, Alu/Alu, Switch-IN, Switch-OUT.AbstractThis paper reports on the issues highlighted at the recent Honeywell Generics Forum andexamines the strategic implications of packaging choice in the generics industry. It looks at howcompanies are leveraging ultra high barrier thermoform solutions like Aclar® to create new valuepropositions. Meeting regulatory and quality needs are a basic standard and a givenrequirement for any primary packaging solution. However, in order to meet the challenges oftoday’s generics marketplace, innovative generic companies are now looking beyond these basictechnical needs and are optimising packaging platform choice to realise market advantage andprofitability gains. It is now recognised that pack differentiation offers an ideal opportunity tocreate a sustainable competitive market advantage. 1
  2. 2. Introduction – Issues Highlighted at the packaging. Generic companies need to findHoneywell Generics Forum cost savings and efficiencies to maintain profit margins. One approach is toThe Honeywell Generics Forum, held in standardise primary packaging as much asJanuary 2009 in Brussels, brought together possible on efficient high barrierover 20 senior management attendees from thermoforming solutions such as Aclar®.15 companies in 11 countries for a topicaldebate on the current issues facing theindustry as well as to examine new Alu/Alu Pipelinepackaging strategies. Recent market research conducted byThe generics sector has been experiencing Honeywell with generic manufacturersan unprecedented period of growth and highlighted some major concerns:generic firms are set to further capitalise onthe opportunities offered by patent expiry • Large numbers of pipeline productson an estimated $150 bn worth of revenues packed in Alu/Alu even when not necessary for barrier reasonsby 2015. Generics contribute to the long-term affordability of healthcare systems. • Increasing Capex required toDrivers such as aging populations, accommodate latest Alu/Alu pipelineincreasing medical consumption, cost • The need to increase OEE and plantcontainment and restrictions in government utilisationhealthcare budgets have all brought about • Internal strategic marketing teamsincreasing focus on the cost savings offered demanding differentiated packaging toby the generic drug industry. On closer exploit profit poolsexamination; however, this is an industry in • Wholesalers and pharmacies bothtransition as the implications of existing demanding smaller pack sizestrends work their way through the sector: Not all products packed in Alu/Alu actually - Increasing pressure to lower drug costs as healthcare cost containment gains need to be in Alu/Alu – many can be moved greater impetus driven by the to high barrier thermoform materials. But Economic Crisis why does the generics sector continue to use so much Alu/Alu? The answer often - Globalisation of the industry increasing results from 2 simple reasons … firstly pressure for companies to develop both regional and global strategies generic companies are copying originator choices, and secondly they are not fully - Fewer launches by innovators in recent considering all packaging options in the years will translate into fewer development phase. Generic companies can opportunities for generic companies be too restrictive in material choices with down the line only 2-3 materials on stability. - Increasing number of originator evergreening strategies to stop At the time of patent expiry the originator’s generics coming to market packaging decision may be 16 years old. It was probably taken in a hurry with littleThe result will be intense competition and regard to pack size and prior to the launchto survive generic companies need to and common use of ultra high barrierseriously improve product profitability thermoform materials. Therefore the majorwhile avoiding commoditisation through question for generic developers is: “Do weinnovative competitive strategies … e.g. 2
  3. 3. really want to copy an old product or should Increasingly generic companies arewe develop something better?” choosing to revisit packaging choices. Many have already initiated a switch-OUT strategy1 and are turning existingGenerics Can Be Different “inefficient packs” into “efficient packs.” Others are initiating switch-IN strategies2Generic drugs are pharmaceutical and building packaging material flexibilitypreparations that contain the same active into their development process by adding aingredients in the same concentration as high barrier thermoform material such asthe originator product. On one hand they Aclar® to their stability protocols.must be therapeutically equivalent to theoriginator drug; but on the other, thegeneric product’s shape, size, colour ... and Thermoforming Advantagespackaging material can be different andbetter! One of the greatest challenges for generic companies is managing very large drugThe old maxim: “originators innovate while portfolios often consisting of 200+ drugs ingenerics differentiate,” is often forgotten in multiple pack variants for differentthe race to get a new product to market. countries. This vast array of products andPack differentiation is an ideal opportunity packs creates massive complexity into create a sustainable competitive market packaging and operations and drives upadvantage. Increased marketing costs. The situation has been furtherconsiderations during the generic complicated by industry consolidation withdevelopment phase are already tipping the some companies struggling to maximise sitebalance in favour of high barrier and machine utilisation across multiplethermoforming - a process which enables a sites, multiple geographies and multiple,broader selection of design possibilities for non-uniform capabilities.a differentiated pack solution. Initial packaging material choices have far- reaching and long-lasting impact. ThePackaging Decisions choice affects total packaging costs beyond the cost of material per square meter duePharmaceutical packaging is no longer to factors such as: cost of secondarypurely functional. It can deliver value both materials, material usage, scrap rate,internally (improved operational efficiency, maintenance and production rates, etc. Inreduced complexity, reduced total costs) addition, choice of packaging platform hasand to the end-user (wholesalers, patient, major supply chain implications. Industrycare-giver); but to leverage this value, feedback strongly indicates that pack sizepackaging decisions should result from can be the main differentiator after priceinformed, cross-functional, collaborative for major wholesalers and pharmacies.processes. Primary packaging decisions thatmay have been correct for R&D during Figure 1 demonstrates that by choosing andevelopment may not be correct, or may ultra high barrier thermoform material sucheven hamper, manufacturing operationsand marketing post launch and for years to 1 Migrating a product already launched income. The strategic impact of packaging Alu/Alu into an ultra high barrier thermoformchoice on crucial factors such as pack size, pack 2total costs and machine utilisation is often Migrating a product out of Alu/Alu and into annot fully considered. ultra high barrier thermoform material prior to launch 3
  4. 4. Switch-INas Aclar® instead of Aluminium Cold FormFoil can result in a 55% reduction in pack Adding a high barrier thermoform materialsize. to a stability protocol can have a relatively low impact on development time, resourcesThermoform packaging can dramatically and costs while increasing the potential forincrease tablet density providing cost launch in the most advantageous material.savings across the board. The increase in This in turn can potentially offer substantialtablets packaged per machine stroke benefits in downstream costs andincreases the effective capacity and speed efficiencies as well as increased sales.of each packaging line compared to Generic companies are greatly increasingAluminium Cold Form Foil. Faster their product advantage by simply addingproduction rates and the ability to use Aclar® to stability studies.machines interchangeably can be translatedinto fewer packaging lines required, lowermaintenance labour costs, and lower capitalequipment expenditures. Thermoforming Switch-OUToffers increased production capacity and Switch-OUT is a process to change anflexibility which impacts on the bottom-line existing launched product from Alu/Alu toand a major reason why many generic firms an ultra-high thermoform pack e.g. Aclar®.are now developing robust Switch-IN and The resultant reduction in pack size andSwitch-OUT strategies - see Figure 2. increased efficiencies offer many advantages to Generic firms. 4
  5. 5. There are cost and resource implications in format. Equally a competitive advantagemaking this variation but increasingly can be obtained by cost reduction and/orgeneric companies are finding that efficiency gains thus improving productresources spent maximising the profitability margins and overall portfolio profitability.of existing packs can offer greater returns Choice of packaging platform has strategicthan launching new products alone. Smart implications for generic firms because it cancompanies are now choosing to piggyback have profound implications on overallmaterial switch-OUT on top of existing company profitability. Standardising wherescheduled variations. possible on high barrier thermoforming materials such as Aclar® can enable generic companies to reduce complexity costs,Conclusion improve operational flexibility and overallEver strengthening competition in the profitability. While Cold Form Foil has agenerics sector is placing more importance vital part to play in blistering in the future,on creating and exploiting a competitive when total barrier is not required genericadvantage through packaging choice. A firms have much to gain by moving to a highmarketing advantage can be achieved by barrier thermoform solution.offering wholesaler and pharmacyadvantages through an improved pack PVC ACLAR® Alu/Alu (low barrier) (ultra high barrier) (highest barrier) Quick & easy, Change-overs Quick & easy comparable to PVC Slower Fast, comparable to Run Rate Fast PVC Slower More difficult: Controlling → pinholes Properties Easy Easy → delamination (quality) → product feeding High Cost of Tooling Standard Standard (increased maintenance) Figure 2: OEE considerations. Thermoforming vs. Cold Forming. 5
  6. 6. RM Consulting is now part of Parioforma Limited (, anindependent business consultancy headquartered in London, UK.For further information on our services or for an informal discussion on yourinformation and/or research needs please dont hesitate to contact us:  Either by telephone on: +44 (0) 207 225 3538; or by  Email at: charles.rowlands@parioforma.comLONDON OFFICE ASSOCIATE OFFICES Intrix Corp, DarienCharles Rowlands USA ConnecticutSenior Partner Eastern IMRP, Moscow55 Prince’s Gate EuropeExhibition RoadLondon SW7 2PN Brazil Intrix Corp, São PauloUnited KingdomTel: +44 (0) 7803 Japan TRN, Tokyo 6