Loss of Exclusivity (LOE) Management for Branded Products Returns Forecasting
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Loss of Exclusivity (LOE) Management for Branded Products Returns Forecasting Monday , March 4 | 3:30 PM-4:30 PM - PowerPoint PPT Presentation

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Loss of Exclusivity (LOE) Management for Branded Products Returns Forecasting Monday , March 4 | 3:30 PM-4:30 PM. Ed Crimmins, Partner, Kindler & Crimmins Associates, LLC Steve Kindler, Partner, Kindler & Crimmins Associates, LLC. Session Objectives.

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Loss of Exclusivity (LOE) Management for Branded Products Returns Forecasting Monday , March 4 | 3:30 PM-4:30 PM

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Loss of Exclusivity (LOE) Management for Branded Products Returns Forecasting

Monday, March 4| 3:30 PM-4:30 PM

Ed Crimmins, Partner, Kindler & Crimmins Associates, LLC

Steve Kindler, Partner, Kindler & Crimmins Associates, LLC

Session Objectives

  • Discuss the impacts of Loss of Exclusivity (LOE) events

  • Review HDMA’s LOE: An Inventory Management Case Study report

    • Project overview

    • Challenges

    • Findings

LOE Event Definition

A branded pharmaceutical product with an expiring patent is facing new competition from one or more generic manufacturers selling equivalent product at a fraction of the cost of the branded product.

Why Study LOE Events?

  • The ‘Patent Cliff’-

    • Drugs having $77bn in annual 2010 US sales will undergo an LOE event during the next 10 years

      • Over 82% of that number going in the next 5 years. *

    • 27 significant drugs were scheduled to lose patent protection and marketing exclusivity in 2012 and another 14 in 2013**

      *Non-Foods Magazine, “Drug Patent Expirations”, Volume 15 No. 1 2012-2013, Pgs. 153-154.

      **2011-2012 HDMA Factbook, “Table 95 Brand Patent Expirations: 2012-2013”, 2011, Pgs. 84-85.

LOE Impact by Year

Source: “Drug Patent Expirations”, Non-Foods Magazine, Volume 15 No.1 2012 – 2013, 153-154.

LOE Conversion

In 2006, branded drugs accounted for 36.6% of the prescription count and 80% of the prescription sales dollars.*

By 2010, the branded prescription count had dropped to 22.4% while the prescription sales dollars dropped to 74.6%.*

The pace of this movement is dependent on many factors, but is quickening with almost every LOE event.

* 2011-2012 HDMA Factbook, “Table 89 US Prescription Drug Market Share by Generic and Branded Pharmaceuticals: 2006-2010”, 2011, Pg. 79.

Historic LOE Business Model

  • Leverage robust pipeline to replace negative sales impact of LOE

    • Pipelines can no longer be counted on to replace LOEs

  • Sell what you can while you can

    • Future impact of returns not fully considered or appreciated- “We’ll worry about that when the time comes.”

  • Increase product cost to offset sales decline

    • Historic price increases may contribute to ‘investment’ or speculative buying of LOE product

Significant Financial Impact

  • LOE accelerates and magnifies the impact of reduced demand

  • Options are limited once generic hits the market

    • Merchandise will often sit until it expires

  • All stakeholders have a shared goal

    • Increase inventory productivity

    • Reduce product returns

    • No negative impact on sales or customer service

Project Beginnings

  • Return Roundtable

    • Held at conclusion of 2011 Product Lifecycle Management seminar

    • Goal to identify case study opportunities based on the ‘Understanding the Drivers of Expired Pharmaceutical Returns’ report

  • Loss of Exclusivity

    • Overwhelmingly identified as the greatest potential case study opportunity

    • Presents an opportunity for a collaborative effort between all trading partners

  • ‘LOE: An Inventory Management Case Study’ project was commissioned by HDMA

LOE- An Inventory Management Case Study Goal

To help trading partners better communicate and manage inventory before and after LOE event, ultimately reducing unproductive inventory and eventual unsalable / outdated return volume.

LOE- An Inventory Management Case Study Overview

  • An exploration of how trading partners may be able to better communicate (both internally and externally) in order to improve management of the typical LOE sales and return trends

  • Based upon an analysis of historical LOE events, the report identifies strategies a company can use with its trading partners to mitigate onhand inventory levels and reduce the volume of future expired product returns

LOE- An Inventory Management Case Study Overview

The report is solely focused on analyzing and developing successful strategies for fixed date LOE events

‘At risk’ launches do not allow trading partners to prepare for and execute pre-launch activities aimed at proactively reducing and managing inventory levels

Any Surprise?

Questions We Hoped to Answer

Is a collaborative model between the manufacturer, distributor, and retailer possible?

Can an LOE event be managed and controlled by following a structured, well communicated plan?

Do data and findings support established assumptions and theories?


Manufacturer and distributor members of the HDMA’s Returns Task Force, along with representatives of retail pharmacies provided subject matter expertise and / or data for the report

Kindler & Crimmins Associates (KCA) acted as the clearing house for the collection of data and information


  • KCA compiled and analyzed the data and authored the report

  • Due to the sensitivity of the subject matter and the proprietary nature of the data and information provided

    • All data has been de-identified.

    • No participating companies are identified in this presentation or the final report.

Sources of Information

  • Manufacturers

    • LOE Product and Attribute Information

    • Sales and Return Data

    • Process Interview

  • Distributors

    • Sales and Return Data

    • Process Interview

  • Retailers

    • LOE Event Process Questionnaire

    • Process Interview

Why Retail Focused?

Inventory Management Agreements between manufacturers and distributors have successfully reduced inventories while providing increased visibility to distributor inventory

Most manufacturers and distributors have identified retail returns as the ‘black hole’

Retail pharmacies (chain, mass, independent and food stores) represent approximately 55% of the pharmaceutical market share (2010 sales dollars)*

* 2011-2012 HDMA Factbook, “Table 109 Pharmaceutical Sales by Customer Categories: 2009-2010”, 2011, Pg. 79.

Retail Process Information

Participating retailers were asked to complete an LOE Event Process Questionnaire

The responses detailed significant retailer handling variations that appear to have impacted product return rates

This information was extremely helpful in identifying successful practices that resulted in lower rates of returns

Retail Process: Prior to LOE

Retail Process: Prior to LOE

Retail Process: Post LOE

*Total is greater than 6 since retailers communicate multiple messages related to this topic.

Retail Process: Post LOE

Retail Process: Post LOE

Data Analysis

  • Background for the LOE Event

    • Specific information for each product

  • Sales and Return Analysis

    • Illustrate the timing and pace of sales decline related to the LOE date

    • Establish the return baseline prior to LOE

  • Retailer Returns

    • Total Returns

      • Illustrate the total returns (raw dollars) for each participating retailer

    • Adjusted Returns

      • Illustrate the return rate, adjusted for company pharmacy sales, for each participating retailer

Product 1 Analysis

Background information:

  • Manufacturer handling:

    • No inventory management plan

  • Generic competition:

    • Multisource immediately

  • Product dating at LOE:

    • ‘Normal’ dating- 18-24 months of shelf life

Product 2 Analysis

Background information:

  • Manufacturer handling:

    • Basic inventory management plan

  • Generic competition:

    • Single source initially

  • Product dating at LOE:

    • ‘Long’ dating- 30+ months of shelf life

Product 3 Analysis

Background information:

  • Manufacturer handling:

    • ‘Aggressive’ inventory management plan

  • Generic competition:

    • Single source initially

  • Product dating at LOE:

    • ‘Long’ dating- 30+ months of shelf life

Product 4 Analysis

Background information:

  • Manufacturer handling:

    • ‘Aggressive’ inventory management plan

  • Generic competition:

    • Single source initially

  • Product dating at LOE:

    • ‘Long’ dating- 36+ months of shelf life

LOE Management Challenges- Manufacturer

  • Retail sales data limitations

  • Lack of pharmacy level inventory information

  • LOE date is known, but not necessarily the entrance date of LOE competitors

  • Retailer identification of return data

  • Completeness of return information

LOE Management Challenges- Distributor

  • Completeness of purchase information

  • Completeness of return information

  • Evolution of data warehousing and reporting

LOE Management Challenges- Retailer

  • Pharmacy specific inventory may not be captured or available at the NDC level

  • Lot and expiration information is generally not captured or tracked at the pharmacy level

  • Lack of available data

  • There is a significant disparity in inventory productivity between pharmacies

  • Certain product attributes may limit ability to transfer excess inventory

    • DEA Scheduled products

    • Refrigerated products

LOE Management Challenges- All Trading Partners

Other Factors Impacting Conversion:

  • Single-source vs. Multi-source generic

  • Acute vs. Maintenance

  • Titrated and neurologic product

Project Findings

Key elements in successful programs:

  • Planning

  • Communication

  • Measurement

Project Findings


  • Planning should be initiated far in advance of the LOE event to create detailed handling plan

  • All affected internal departments and stakeholders should be involved.

Project Findings


  • Internal communications to avoid departments working in silos and at cross-purposes

  • External communications to ensure that each trading partner is aware of the plans of the other trading partners

  • Includes the sharing of both information and data on a regular basis before, during and after the LOE event

Project Findings


  • Establish a baseline that all can agree upon.

  • Regularly measure progress and performance.

  • Allows trading partners to assess their respective performance against their plan.

Successful Management Illustration

Manufacturer informs distributor/retailer of LOE and relevant dates

Each trading partner holds internal meetings to develop handling plans

Distributor/retailer share inventory information and handling process with manufacturer

Replenishment orders closely monitored

Successful Management Illustration

Retailer communicates conversion and inventory information with manufacturer

Retailers utilize all available return and redistribution opportunities

Manufacturer works with distributor/retailer to address non-moving, residual inventory prior to product expiration

Other Manufacturer Approaches

  • Aggressive replenishment management prior to LOE

    • Inventory reduction

    • Potential out of stock situations

  • Shift of responsibility

    • Limit return liability through policy changes

    • Retailers bear burden

    • Does not reduce inventory or future return volume

  • Continued sales effort

    • Increased sale of branded inventory

    • Inventory and return impact not known at this time


There is no silver bullet!

Each LOE event has its own unique circumstances that must be considered

There is no ‘one size fits all’ approach that will work for every situation

Proactive planning and sharing of information is critical

Anticipate obstacles and challenges and adjust plans accordingly


  • Questions?

  • Report copies will be available through HDMA

  • Contact Information:

    • Steve Kindler

      • 717-439-1954, skindler@kindler-crimmins.com

    • Ed Crimmins

      • 717-884-6128, ecrimmins@kindler-crimmins.com

    • Website

      • www.kindler-crimmins.com

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