Case Detail

Case Summary

AstraZeneca, Prilosec, and Nexium: Marketing Challenges in the Launch of a Second-Generation Drug

Case Number: 5-404-775, Year Published: 2006, Revision Date: April 01, 2005

HBS Number: KEL336

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Authors: James Gerard ConleyRobert C. Wolcott; Eric Wong

Key Concepts

Pricing, New Product Launch, Positioning, New Channels, Channels, Promotion, Generic Drug Competition, Competition, Innovation, Pharmaceuticals, Life Cycle

Abstract

Tom McKillop, CEO of AstraZeneca, faced the classic quandary of large pharmaceutical firms. The firm’s patent for Prilosec (active ingredient omeprazole) was expiring. Severe cost-based competition from generic drug manufacturers was inevitable. Patent expirations were nothing new for the US$15.8 billion in revenues drug firm, but Prilosec was the firm’s most successful drug franchise, with global sales of US$6.2 billion. How could the company innovate its way around the generic cost-based competition and avoid the drop in revenues associated with generic drug market entry? AstraZeneca had other follow-on drugs in the pipeline—namely Nexium, an improvement on the original Prilosec molecule. Additionally, the company had the opportunity to introduce its own version of generic omeprazole, hence becoming the first mover in the generic segment, and/or introduce an OTC version of omeprazole that might tap into other markets. Ideally, AstraZeneca would like to move brand-loyal Prilosec customers to Nexium. In this market, direct-to-consumer advertising has remarkable efficacy. Classical marketing challenges of pricing and promotion need to be resolved for the Nexium launch as well as possible product and place challenges for the generic or OTC opportunity. Which combination of marketing options will allow the firm to best sustain the value of the original omeprazole innovation?

Number of Pages: 20

Extended Case Information

Teaching Areas: Economics, Marketing, Strategy

Geographic: Global

Industry: Pharmaceuticals

Organization Name: AstraZeneca

Organization Size: Large

Decision Maker Position: CEO

Decision Maker Gender: Male

Year of Case: 2001