Copycats: Where Fashion and Pharmaceuticals Meet

By Gregory DeYong, Hubert Pun and Carol Lucy

Copycats are every industry’s nightmare. Consumers are becoming more budget-conscious and many start to favour generic products than brand names. Major companies should implement rational measures to guarantee profit against product-stealing and low-cost copycats. Consumer behaviour should also be taken into consideration to retain their old customers and acquire new ones.

One is an utter luxury; the other is a necessity of life. Although the fashion and pharmaceutical industries are worlds apart in terms of products, both face a very similar challenge – copycats who sense an opportunity to produce lower-cost versions of the original product. In the case of pharmaceuticals, the production of generic versions of popular medications is a common event once the patent protection of the developer expires. In 2016, generic pharmaceuticals accounted for over $100 billion of the total spending on medicines in the United States.1 For fashion designers, the burgeoning fast-fashion industry excels at taking hot new designs and quickly making them available to the masses. In either case, a firm that spent its time and resources to develop a unique product sees its hard-won advantage eliminated by a copycat. At the same time, consumers are faced with a choice – purchase the expensive original or take a chance on the low-cost version.

Whether we view copycats as predatory imitators who steal designs for their own profit or as a type of Robin Hood, bringing hyper-expensive products into reach for the masses, the question of how a designer of new, innovative products should react to the threat of copycats is still valid. Despite extensive lamentation by fashion designers, enforcing copyright claims against fast-fashion retailers remains both difficult and rare.2 Similarly, pharmaceutical manufacturers face not only patent expiration, but also significant risk of public backlash if they are perceived as limiting supplies to consumers.

A prime example is the recent outcry against Mylan over its pricing of the emergency allergy treatment, EpiPen. Facing imminent FDA approval of a generic version of the EpiPen (from generic drug titan Teva Pharmaceutical Industries, Ltd.), Mylan shocked consumers and regulators by dramatically raising prices of its EpiPen product (by over 400%). This led to accusations of price gouging, particularly when FDA’s approval of Teva’s product was delayed, leaving Mylan with a virtual monopoly. Many observers offered explanations for the price increase, ranging from price gouging to condemnation of the pharmaceutical patent process itself. However, it is also possible that Mylan’s move was a rational reaction to an impending generic version of the EpiPen. In another situation involving Teva, Valeant Pharmaceuticals International dramatically raised the price of its Syprine medication (from $652 to $21,267) in 2015 as its patent protection neared an end. According to the New York Times, “When Teva Pharmaceuticals announced recently that it would begin selling a copycat version of Syprine – an expensive drug invented in the 1960s – the news seemed like a welcome development for people taking old drugs that have skyrocketed in price.”5

However, their hopes were dashed when Teva priced the product at $18,375 per 100 pills, significant savings, but a huge increase over the price charged for the brand name drug just five years earlier.

With the advent of widespread generic pharmaceuticals, many other examples of major pharmaceutical companies attempting to protect their valuable brands and patents can be identified. In 2007, AstraZeneca sued a group of seven generic drug makers over alleged infringements on the AstraZeneca patent on the cholesterol drug, Crestor ®.6 AstraZeneca has been fighting an ongoing legal battle against generic versions of the drug, recently losing an effort to extend its market exclusivity by arguing that Crestor® was entitled to consideration as an “orphan drug” as it can be used to treat a rare high cholesterol condition in children.7 Similarly, in 2013, a U.S. biotech firm, AbbVie, sued an Indian firm, Dr. Reddy’s Laboratories (DRL) over the latter’s application to produce a generic version of the AbbVie drug, Zemplar. In 2016, the British pharmaceutical firm Indivior faced allegations that it had attempted to reestablish a monopoly on suboxone (used to treat heroin addicts) by developing a new delivery mechanism for the medication. Indivior then claimed this should entitle it to renewed patent protection from generics, which it had lost in 2009 as its exclusive rights to the tablet form of suboxone expired. One issue the copycat firms faced in this case was that the customers had switched to the new form of suboxone (a dissolvable strip) and were reluctant to return to the tablet form.

Major fashion designers are excoriated for their high prices, leading many to portray fast-fashion copycats as performing a valuable service by bringing fashion designs to budget-conscious consumers.

Similar accusations are often bandied about in the fashion world. Major fashion designers are excoriated for their high prices, leading many to portray fast-fashion copycats as performing a valuable service by bringing fashion designs to budget-conscious consumers. These copycats have developed the fast-fashion market as firms such as Forever21 and Zara have become specialists at avoiding litigation while delivering products that closely resemble high-end fashion goods offered by firms such as Burberry. Of course, fashion designers complain about seeing their creativity stolen by unscrupulous retailers who are only out to make a fast profit. Could it be that the apparent tension in the fashion industry is again just a rational reaction by firms?

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About the Authors

Gregory DeYong is an Assistant Professor at Southern Illinois University. His research focuses on production scheduling, purchasing, and counterfeit products.

Hubert Pun is an Associate Professor at the Ivey Business School (Western University). His research interests include co-opetition, counterfeiting product, and how blockchain can be used as an enterprise solution.

Carol Lucy is an Assistant Professor at Emporia State University.  Her research interests include entrepreneurship, organisational behaviour, and small business management.

 

References
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