Street drug dealers have used the same formula for years to push their product. They meet and sometimes befriend their target prospects. They offer them drugs for free or at a low price. They wait for their trap to spring — for the target to get hooked on the stuff. The end result is the perfect customer — one who will pay anything, or do anything, for their next hit.
Of course, this kind of marketing strategy isn’t high-toned enough to be covered in the Wall Street Journal — unless, that is, you’re Big Pharma pushing legal drugs.
According to the Journal:
Cephalon Inc. (CEPH) has launched a campaign to switch users of its best-selling drug, the stimulant Provigil, to a newer drug with longer patent protection, enticing patients with prescription co-pay assistance…
Nuvigil is chemically similar to Provigil, but Cephalon says its effects are longer-lasting than Provigil. The drugs weren’t tested head-to-head in clinical efficacy trials, but Cephalon says the drugs were compared in terms of concentrations in plasma.
From a business perspective, Nuvigil also has the benefit of patent protection through 2023. Provigil, approved in the U.S. in 1998, is due to face generic competition in the U.S. in 2012 under patent-litigation settlements Cephalon has reached with generics manufacturers. ..
Cephalon’s strategy is to switch as many Provigil patients to Nuvigil as possible to the mute the impact of Provigil’s loss of market exclusivity.
The Journal adds that as part of its strategy, Cephalon has more than doubled the price of Provigil, so that now (with discounts and promotions) Nuvigil is cheaper.
Do you see what’s happening here? Let me break it down for you by way of analogy — in street terms.
A drug dealer — we’ll call him “MC Ceph” — has made a mint selling crack on his street corner. But now pimps like Rite-A, Wal-M and CVS-Dog are close to gaining access to a cheaper supplier and are planning to undercut MC Ceph’s price dramatically.
Wal-M is even talking about selling a 30-day supply for just $4.
MC Ceph would no longer be able to live large if this happened. He would have to settle for living medium-sized.
And how would it look to the Street if he didn’t keep increasing his revenues every quarter?
Now, MC Ceph is not the gat-toting type (he’s actually kind of a wimp), so he has to win this game with his wits. Fortunately for him, he figures out just the way to do it.
He decides to jack up the price he charges for crack while he still has no competition. After all, what choice do his crackhead customers have? He’s got a monopoly in the neighborhood.
Then, he’s going to start selling something he calls “nu-crack.” It’s really the same drug he’s always been selling; he’s just “cutting” it with different additives that change the texture and color of the drug.
He offers “nu-crack” for free or super-cheap at first — until his customer base gets hooked on it and is asking for “nu-crack” instead of old crack.
When the low-cost crack dealers arrive on the next corner, MC Ceph will have already converted his customer base — so he keeps his monopoly and his high margins.
There’s a risk in MC Ceph’s plan, of course. You see, “nu-crack” really isn’t much different from old crack, and if MC Ceph’s customers ever figure that out, they’ll be off to Wal-M — and he’ll be out of business.
And so it with Cephalon. Provigil is essentially the same drug as Nuvigil. Nuvigil was only created for marketing purposes, to retain Cephalon’s monopoly and its profits.
And so it goes — on the back streets, and on Wall Street.
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