Between 2006 and 2011, many of the top-selling branded drugs will lose their patent protection. The producers of generic versions of the branded drugs will enter markets with hundreds of billions of dollars of annual sales. The producers of branded drugs are responding to the increased competition in two ways. First, they are launching their own versions of the generics, in cooperation with other firms. Merck has an agreement with Dr. Reddy s Laboratories, an Indian firm, to produce generic versions of Zokor. Pfizer will produce a generic version of Zoloft through Greenstone, a subsidiary.
The second response to increased competition is to cut the prices of branded drugs to compete with generics. Anticipating the entry of a generic version of Zokor, Merck cut its price so aggressively that the company was accused of trying to prevent the producers of generics from entering the market. Sanofi and BMS, the makers of the branded drug Plavix, cut their price to undercut the generic version introduced by Apotex.