VOI News

New Study on Time-to-Peak Sales for US Pharmaceuticals

Drug launch curves in the modern era, a new article in the January 2017 issue of Nature Reviews: Drug Discovery, contains projections of relevance for forecasting pharmaceutical sales in the US market. Relying on unit sales for 61 innovative drugs receiving FDA approval between 2000 and 2002, the authors determined that the median product follows an S-shaped launch-to-peak penetration curve: achieving 11% of peak sales in Year 1, 31% in Year 2, 58% in Year 3, 76% in Year 4, 89% in Year 5, and 100% (i.e. peak sales) in Year 6. On an interquartile basis, time-to-peak (TTP) ranged from 4 to 9 years; the minimum TTP was 2 years and the maximum was 14.

Using data from the Supplemental Materials file we find that the average for TTP for first-in-class drugs is 5.65 years as opposed to 6.93 years for subsequent entrants. Unlike other research on the subject, however, the authors did not that there was a statistically significant relationship between entry order and TTP. But, as they note, TTP is distinct from factors such as market share and revenue potential that may be more indicative of first-mover advantage.

Empirical study: “What is the value of 'me-too' drugs?”

We came across an interesting study while doing research for a recent client project. Although it was published in 2013, we thought it was worth sharing as it has some very interesting findings on a subject that gets a lot of attention but not a whole lot of quality research: i.e. the value of me-too drugs in the US health care system.

According to the study, “in certain circumstances, me-too drugs are cost saving for payers. Namely, price discounts have to be sufficient and me-too drugs have to be launched within a few years after the first entrant. If me-too drugs are launched late, they could save payers money in the short and medium term, but could represent a cost in the long term, as they prevent conversion to low-priced alternatives after the first entrant becomes generic.” The article contains a much more detailed quantitative model of these trade-offs that may be of interest for the econometrically minded.

In addition to providing an empirical analysis of the value of me-too products from payer and societal perspectives, the study provides further evidence for a key pharmaceutical industry dynamic that we’ve noted many times over the years: products that are not first to market, a group that includes all me-too drugs by definition, have to spend disproportionate amounts on marketing just to stay in the game.

Specifically, the study reports that “on average, me-too drugs launch 2.5 years after the first entrant, with 20% more promotional investment, and capture 38% of market share within 4 years. Peak market share is significantly affected by share of voice (p<0.001) but not price discount (p=0.77).” Put differently, investing in marketing is more effective at driving market share than offering steep discounts. Whether this attempt to, in effect, buy market share through higher promotional spending, translates to a positive ROI for the pharmaceutical company is something that would vary considerably in different circumstances. (This study could, however, be used as a framework to perform the necessary calculations.)

In addition, “launch delay was significant in terms of reducing both market share (p< .001) and price (p<0.05).” Thus, while price discounts won’t drive share, the drug-maker may have no choice but to offer low prices, particularly for products that are launched well after the originator.

Another notable finding: “The time trend coefficient was negative, meaning that the first in class’s advantage increased over time. In other words, and with everything else being equal, it was better on average for a me-too drug to launch in the 1990s than in the 2000s.” The author, Stephane Régnier, hypothesizes that this may be attributable to more effective cost containment measures implemented by managed care organizations over time.

The study abstract, along with a link the full version, may be found at http://www.ncbi.nlm.nih.gov/pubmed/23440390.

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