Innovation and New Product Development Case Study

Pfizer’s Foray into Sedatives: The American Dream?

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Abstract:
It is boom time in the US sedatives market. Sales have been on the rise and pharmaceutical companies have been bombarding the public with their latest generation of branded drugs which claim to have negligible side effects while giving the user a good night’s sleep. The lifestyle of the Americans in the twenty first century had given rise to a culture of insomniacs. While pharmaceutical companies and sleep centers have been advocating the immediate addressal of the problem, critics are convinced that these were mere money mongering activities.

Pfizer, the largest global pharmaceutical company has been working on a new sleeping drug generically named indiplon which was due for launch in 2006. By end 2002, Pfizer and Neurocrine entered into an agreement for the commercialisation and development of Indiplon. Neurocrine had received an initial payment of $100 million. Pfizer has also taken the responsibility of funding the further development of the drug, payment of royalties on worldwide sales and co promotion fees in US. Pfizer’s entry into this category which was hitherto dominated by Ambien with an 80% market share and Lunesta (about 11% share), has caused an increase in activity in the market. The existing players have upped their ad spends and are working towards coming up with advanced versions of their drugs.

Analysts feel that given the current low penetration levels of sleeping pills in the American market there was a huge potential for growth and room for many more players. At the same time there is also criticism about pharmaceutical companies and medical practitioners, that they are hand-in-hand, in promoting the sales of these drugs. These critics are of the opinion that sleeping pills are not an effective solution to the problem of insomnia. They advocate the identification and treatment of the underlying problem which is the root cause of insomnia, and also the adoption of proper lifestyle and habits which they feel would solve most insomnia related problems.

Pedagogical Objectives:

• Trends in the American Pharmaceutical industry using the Porter’s Five Forces Model
• Strategic groups within the pharmaceutical industry.

Keywords : Sleeping Pill Market; Sedatives Market; American Pharmaceutical companies; Ambien; Indiplon; Insomnia; Corporate Reputation; Social Responsibility; Innovation Management Case Study; Ethical Marketing; Deceptive Marketing; Blockbuster drugs; Direct to consumer advertising; Patents; Generic drugs; Sleep centers