>>Why/how would not entering into an authorized generic arrangement maximize Sanofi's profit?
Assume that Momenta gets generic approval and it is substitutable - Sanofi does not offer an "authorized".
MNTA would want to set the price at a sufficient discount to L to pick up a significant share of the units and still maximize their profit. If they are the only generic - they may chose 80% of L's price. Say that moves half the unit sales to MNTA. It still leaves Sanofi with the other half of unit sales and at full price so they still do well.
Alternatively, say Sanofi offers an "authorized".
Now we have three different prices and competitors for about the same sales (admittedly there may be some demand response to the price cut).
Sanofi at full price, MNTA now cuts to 60% of L's price and the authorized gets set at 80%. MNTA sales driven by managed care still picks up half the units and the other half go to Sanofi but with pricing at full and 80%. And I would guess, that those who did not shift to MNTA on price would opt for the Sanofi authorized in greater number and that full price sales would end up less that half of the half. Since the costs of the product are largely fixed, the incremental loss of revenue on the authorized hit Sanofi's bottom line.
And for what? One reason would be to establish the authorized as a serious competitor with significant share when the drug is fully genericized. But there is not point in doing that until you think there are other generics coming, unless the company is willing to cut their profits in order to prevent the funding of competitors. With firms like TEVA strong and well funded - that battle has already been lost. Even wrt MNTA their partnering of gL already makes a scorched-earth approach meaningless.
So I see no reason for an authorized generic L until multiple companies are near approval.
I suspect that the drug companies have some rather sophisticated models to help them make these kind of decisions since they would not be hard to build.
ij
There are times when rules and precedents cannot be broken; others when they cannot be adhered to with safety. (Thomas Joplin)
