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Regulation

Do you know ... about the differences between co-promotion and co-marketing agreements in Europe?

How do co-promotion and co-marketing differ?
A: Co-promotion and co-marketing are both typical collaboration arrangements in the pharmaceutical industry, as companies use them to build brands and reach markets that otherwise would not be available to them.

The material costs involved in research and development makes choosing an effective commercialisation strategy an integral factor in determining the success of a new product.

Co-promotion is where two or more companies promote a single product under a particular brand. The product will generally be marketed and sold under a single trademark, using a single marketing authorisation, with one firm responsible for both manufacturing and the booking of sales. However, the two parties will co-operate in the commercialisation process, often with different areas of responsibility, or different territories.

Co-marketing arrangements are those through which a product is sold under two, or more, trademarks, with each company promoting its own brand and booking its own sales. Each firm will have separate promotional materials and will operate under separate marketing authorisations, with each marketing authorisation being identical in all respects except for the trademarks.

Q: What are the considerations in selecting a brand strategy?
A: Commercial:

Co-promotion arrangements are appropriate where the parties wish to promote sales of a particular product in an established field.

Small-to-medium-sized biotechnology companies often seek to enter into this type of arrangement with large pharma companies. The arrangement provides access to the well-resourced and extensive network of pharma's sales teams, thereby opening up new markets that the biotechnology company would not have been able to access on its own.

Co-marketing arrangements are used when the parties wish to promote a new product-type over and above a particular brand. Where an existing technology platform has an established market presence, it can be difficult to capture market support for an alternative type of product. In these situations, co-marketing arrangements are useful in that they give the impression of an established market for the new technology, and give customers the comfort that the success of the new technology is not dependent solely on the continued existence of one company.

Co-promotion and co-marketing arrangements are used in general when a company wishes to control the marketing of its products, instead of merely licensing its rights to a third party. Yet, it is possible to combine the two arrangements:

A small biotechnology firm that wishes to commercialise its products across a wide range of jurisdictions may decide that it does not have the resources to actively co-promote or co-market in each jurisdiction. Therefore, it may be prudent to enter into some co-promotion or co-marketing arrangements in its key markets, and to grant licences to third parties to commercialise the product in the remaining territories.

A: Branding:
In co-promotion agreements, both parties sell products under the same trademark. Given the potential for damage to be caused by a co-promotion party to the reputation and goodwill in a trademark, it is important that there is consistency of approach between the two parties in relation to their use of trademarks and marketing techniques.

Co-promotion agreements generally contain detailed obligations regarding the co-promoter's right to use the trademarks, and restrictions on doing anything that would prejudice the distinctiveness, goodwill or validity of the trademarks.

A: Competition:
Competition issues can often arise through co-marketing arrangements, as the co-marketers are actually competitors in relation to the sale of the products.

In particular, where two companies are selling the same product under different trademarks, there is an incentive for them to seek to agree a price, which is likely to constitute a breach of competition legislation. Arrangements to divide up territory, by allocating specific areas within which each party is permitted to sell products, are also likely to constitute a breach.

Given these restrictions, the operation of joint committees needs to be regulated carefully so that they do not become a forum in which parties agree matters that would result in a breach of the law.

Co-promotion agreements are generally less problematic in terms of competition issues unless there is some form of agreement on downstream prices.

A: Regulatory
There is no conformity to co-promotion and co-marketing in different countries. In agreements for multiple jurisdictions, parties may be forced to take a different approach for each country.

For co-promotion, consider carefully which party is going to be the marketing authorisation holder; in some countries, the regulator will only deal with the marketing authorisation applicant. Small firms may not want to be the marketing authorisation holder where they have a lack of experience in regulatory issues or in dealing with the relevant regulator.

In addition, authorisation holders must comply with certain obligations, including pharmacovigilence, labelling and promotions, breach of which could constitute a criminal offence.

The author
Sarah Hanson is a partner in CMS Cameron McKenna's international lifesciences practice

2nd September 2008

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