1. Strategic Implications of Packaging Choice in the Generic
Sector
David Barker
is Marketing Development Manager for Honeywell Healthcare & Packaging. As a world leader in
pharmaceutical packaging materials, Honeywell Healthcare & Packaging is working to develop
industry leading packaging solutions which can deliver increased competitive advantage to the
generics industry.
Charles Rowlands and Amy Morgan
are founding partners of RM Consulting, an international market and competitive intelligence
consultancy focused on providing management support services to the global pharmaceutical,
biotechnology, chemical and healthcare sectors. Jointly they have more than three decades’
experience and have worked on numerous strategy development and market research projects
in both developed and emerging markets.
Keywords: generics, profitability, primary packaging, competitive advantage, high barrier,
thermoforming, blister film, Aclar®, Alu/Alu, Switch-IN, Switch-OUT.
Abstract
This paper reports on the issues highlighted at the recent Honeywell Generics Forum and
examines the strategic implications of packaging choice in the generics industry. It looks at how
companies are leveraging ultra high barrier thermoform solutions like Aclar® to create new value
propositions. Meeting regulatory and quality needs are a basic standard and a given
requirement for any primary packaging solution. However, in order to meet the challenges of
today’s generics marketplace, innovative generic companies are now looking beyond these basic
technical needs and are optimising packaging platform choice to realise market advantage and
profitability gains. It is now recognised that pack differentiation offers an ideal opportunity to
create a sustainable competitive market advantage.
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2. Introduction – Issues Highlighted at the packaging. Generic companies need to find
Honeywell Generics Forum cost savings and efficiencies to maintain
profit margins. One approach is to
The Honeywell Generics Forum, held in standardise primary packaging as much as
January 2009 in Brussels, brought together possible on efficient high barrier
over 20 senior management attendees from thermoforming solutions such as Aclar®.
15 companies in 11 countries for a topical
debate on the current issues facing the
industry as well as to examine new Alu/Alu Pipeline
packaging strategies.
Recent market research conducted by
The generics sector has been experiencing Honeywell with generic manufacturers
an unprecedented period of growth and highlighted some major concerns:
generic firms are set to further capitalise on
the opportunities offered by patent expiry • Large numbers of pipeline products
on an estimated $150 bn worth of revenues packed in Alu/Alu even when not
necessary for barrier reasons
by 2015. Generics contribute to the long-
term affordability of healthcare systems. • Increasing Capex required to
Drivers such as aging populations, accommodate latest Alu/Alu pipeline
increasing medical consumption, cost • The need to increase OEE and plant
containment and restrictions in government utilisation
healthcare budgets have all brought about
• Internal strategic marketing teams
increasing focus on the cost savings offered demanding differentiated packaging to
by the generic drug industry. On closer exploit profit pools
examination; however, this is an industry in
• Wholesalers and pharmacies both
transition as the implications of existing
demanding smaller pack sizes
trends work their way through the sector:
Not all products packed in Alu/Alu actually
- Increasing pressure to lower drug costs
as healthcare cost containment gains need to be in Alu/Alu – many can be moved
greater impetus driven by the to high barrier thermoform materials. But
Economic Crisis why does the generics sector continue to
use so much Alu/Alu? The answer often
- Globalisation of the industry increasing
results from 2 simple reasons … firstly
pressure for companies to develop
both regional and global strategies generic companies are copying originator
choices, and secondly they are not fully
- Fewer launches by innovators in recent considering all packaging options in the
years will translate into fewer
development phase. Generic companies can
opportunities for generic companies
be too restrictive in material choices with
down the line
only 2-3 materials on stability.
- Increasing number of originator
evergreening strategies to stop At the time of patent expiry the originator’s
generics coming to market packaging decision may be 16 years old. It
was probably taken in a hurry with little
The result will be intense competition and
regard to pack size and prior to the launch
to survive generic companies need to
and common use of ultra high barrier
seriously improve product profitability
thermoform materials. Therefore the major
while avoiding commoditisation through
question for generic developers is: “Do we
innovative competitive strategies … e.g.
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3. really want to copy an old product or should Increasingly generic companies are
we develop something better?” choosing to revisit packaging choices. Many
have already initiated a switch-OUT
strategy1 and are turning existing
Generics Can Be Different “inefficient packs” into “efficient packs.”
Others are initiating switch-IN strategies2
Generic drugs are pharmaceutical
and building packaging material flexibility
preparations that contain the same active
into their development process by adding a
ingredients in the same concentration as
high barrier thermoform material such as
the originator product. On one hand they
Aclar® to their stability protocols.
must be therapeutically equivalent to the
originator drug; but on the other, the
generic product’s shape, size, colour ... and
Thermoforming Advantages
packaging material can be different and
better! One of the greatest challenges for generic
companies is managing very large drug
The old maxim: “originators innovate while
portfolios often consisting of 200+ drugs in
generics differentiate,” is often forgotten in
multiple pack variants for different
the race to get a new product to market.
countries. This vast array of products and
Pack differentiation is an ideal opportunity
packs creates massive complexity in
to create a sustainable competitive market
packaging and operations and drives up
advantage. Increased marketing
costs. The situation has been further
considerations during the generic
complicated by industry consolidation with
development phase are already tipping the
some companies struggling to maximise site
balance in favour of high barrier
and machine utilisation across multiple
thermoforming - a process which enables a
sites, multiple geographies and multiple,
broader selection of design possibilities for
non-uniform capabilities.
a differentiated pack solution.
Initial packaging material choices have far-
reaching and long-lasting impact. The
Packaging Decisions choice affects total packaging costs beyond
the cost of material per square meter due
Pharmaceutical packaging is no longer
to factors such as: cost of secondary
purely functional. It can deliver value both
materials, material usage, scrap rate,
internally (improved operational efficiency,
maintenance and production rates, etc. In
reduced complexity, reduced total costs)
addition, choice of packaging platform has
and to the end-user (wholesalers, patient,
major supply chain implications. Industry
care-giver); but to leverage this value,
feedback strongly indicates that pack size
packaging decisions should result from
can be the main differentiator after price
informed, cross-functional, collaborative
for major wholesalers and pharmacies.
processes. Primary packaging decisions that
may have been correct for R&D during Figure 1 demonstrates that by choosing an
development may not be correct, or may ultra high barrier thermoform material such
even hamper, manufacturing operations
and marketing post launch and for years to 1
Migrating a product already launched in
come. The strategic impact of packaging Alu/Alu into an ultra high barrier thermoform
choice on crucial factors such as pack size, pack
2
total costs and machine utilisation is often Migrating a product out of Alu/Alu and into an
not fully considered. ultra high barrier thermoform material prior to
launch
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4. Switch-IN
as Aclar® instead of Aluminium Cold Form
Foil can result in a 55% reduction in pack Adding a high barrier thermoform material
size. to a stability protocol can have a relatively
low impact on development time, resources
Thermoform packaging can dramatically
and costs while increasing the potential for
increase tablet density providing cost
launch in the most advantageous material.
savings across the board. The increase in
This in turn can potentially offer substantial
tablets packaged per machine stroke
benefits in downstream costs and
increases the effective capacity and speed
efficiencies as well as increased sales.
of each packaging line compared to
Generic companies are greatly increasing
Aluminium Cold Form Foil. Faster
their product advantage by simply adding
production rates and the ability to use
Aclar® to stability studies.
machines interchangeably can be translated
into fewer packaging lines required, lower
maintenance labour costs, and lower capital
equipment expenditures. Thermoforming Switch-OUT
offers increased production capacity and Switch-OUT is a process to change an
flexibility which impacts on the bottom-line existing launched product from Alu/Alu to
and a major reason why many generic firms an ultra-high thermoform pack e.g. Aclar®.
are now developing robust Switch-IN and The resultant reduction in pack size and
Switch-OUT strategies - see Figure 2. increased efficiencies offer many
advantages to Generic firms.
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5. There are cost and resource implications in format. Equally a competitive advantage
making this variation but increasingly can be obtained by cost reduction and/or
generic companies are finding that efficiency gains thus improving product
resources spent maximising the profitability margins and overall portfolio profitability.
of existing packs can offer greater returns
Choice of packaging platform has strategic
than launching new products alone. Smart
implications for generic firms because it can
companies are now choosing to piggyback
have profound implications on overall
material switch-OUT on top of existing
company profitability. Standardising where
scheduled variations.
possible on high barrier thermoforming
materials such as Aclar® can enable generic
companies to reduce complexity costs,
Conclusion
improve operational flexibility and overall
Ever strengthening competition in the profitability. While Cold Form Foil has a
generics sector is placing more importance vital part to play in blistering in the future,
on creating and exploiting a competitive when total barrier is not required generic
advantage through packaging choice. A firms have much to gain by moving to a high
marketing advantage can be achieved by barrier thermoform solution.
offering wholesaler and pharmacy
advantages through an improved pack
PVC ACLAR® Alu/Alu
(low barrier) (ultra high barrier) (highest barrier)
Quick & easy,
Change-overs Quick & easy
comparable to PVC
Slower
Fast, comparable to
Run Rate Fast
PVC
Slower
More difficult:
Controlling
→ pinholes
Properties Easy Easy
→ delamination
(quality) → product feeding
High
Cost of Tooling Standard Standard (increased
maintenance)
Figure 2: OEE considerations. Thermoforming vs. Cold Forming.
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