Porter's Generic Strategies Framework

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Marketing Strategies in the
Competition between
Branded and Generic
Antibiotics (A)
Clamoxyl in 1996

02/2007-5057
This case was prepared by Pierre Chandon, Assistant Professor of Marketing at INSEAD, Olivier Kovarski, Professor of Marketing at ESC Normandie, Jacques Lendrevie, Professor of Marketing at HEC, Sarah Spargo, Research Associate at INSEAD, and Marc Vanhuele, Associate Professor of Marketing at HEC, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. We thank Pierre Chahwakilian from GSK for his help and support.

Copyright © 2003 INSEAD
N.B. PLEASE NOTE THAT DETAILS OF ORDERING INSEAD CASES ARE FOUND ON THE BACK COVER. COPIES MAY NOT BE MADE WITHOUT PERMISSION.

Paris, October 10, 1996
Pierre Chahwakilian, Marketing Director of SmithKline Beecham laboratories (SB) for France, was re-reading a letter sent in July 1996 to all French doctors by the CNAM, the French health management governing body (see Exhibit 1). The letter urged doctors to protect the cherished French social security system by prescribing generic drugs instead of the more expensive—but therapeutically equivalent—branded drugs. Clamoxyl, the original amoxicillin antibiotic and one of SB’s ‘jewel’ drugs, was specifically targeted because its substitution by generic amoxicillins could save up to €26.5 million for the French social security system, more than any other drug.

Clamoxyl was no ordinary drug. It was the first amoxicillin (a type of antibiotic) introduced to the market (in 1974) and, despite losing its patent in 1980, was still the highest selling amoxicillin in France. Virtually every doctor in France knew and prescribed Clamoxyl, many developing an emotional attachment to a brand that had helped them cure countless respiratory infections for adults and children over the years. Yet sales of Clamoxyl had dropped by 30% in the three months since the CNAM letter had been sent and Pierre Chahwakilian was considering four responses:1 1. Change nothing and hope Clamoxyl’s brand equity would be strong enough to protect it from generic competitors. French doctors were fiercely protective of their independence and generics had, so far, failed to take off in France. Indeed, the CNAM letter simply appealed to the social responsibility of doctors and many felt that only financial penalties could persuade doctors to switch to generics.

2. Milk Clamoxyl and invest all SB’s support in Augmentin, a more specialized and still patent-protected amoxicillin combined with an inhibitor prescribed for specific therapeutic conditions and in cases of resistance to regular amoxicillin. This option, a typical strategy of the pharmaceutical industry upon the loss of patent, had been followed in countries where the patent for Clamoxyl had already expired.

3. Reduce the price of Clamoxyl. This strategy had never been selected by SB when facing similar situations and conflicted with its corporate commitment to invest in the development of innovative drugs commanding a high price. Even if this path was chosen, how large should the price reduction be and how quickly should it be implemented? 4. Strengthen Clamoxyl’s brand equity among doctors. As direct-to-consumer advertising is not legal in France, this could be done either by increasing promotional support for Clamoxyl (through the sales force or ads in the specialized press) or by introducing new forms of packaging. But with almost 100% awareness and a very strong brand image, which message could be communicated to doctors that they did not already know?

1

A fifth strategy, to produce SB’s own generic amoxicillin, was not under consideration for a variety of reasons and is ignored in this case.

Copyright © 2003 INSEAD

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02/2007-5057

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