A cogent description of this dynamic by Aaron Smith ran on CNN Money way back in 2005. He described GlaxoSmithKline’s strategy, which should look familiar by now:
GlaxoSmithKline lost its patent on Paxil in 2003. Sales of the former blockbuster totaled $172 million in 2004 in the U.S., about one-fifth the sales for the newly-available generic version, paroxetine, according to Drug Topics, an industry publication, and Verispan, a healthcare information provider.
GlaxoSmithKline has stayed in the game with Paxil CR, a once-a-day “controlled release” drug that had $824 million in U.S. sales last year. Even with Paxil CR, the company lost half its revenue to the generic market. But the daily capsule “tends to prevent overall erosion of the flagship product,” said Amusa, who rates GlaxoSmithKline a buy.
The big advantage of once-a-day Paxil CR over twice-a-day generic is that “patients with depression don’t always take their pills,” said Amusa. “The generics can’t do once-a-day but Glaxo can, and that permits a lot of patients to continue to be loyal to the branded product.”
Yes, loyal to a branded product. And also stuck with a higher price tag.