The Successful Launch and Diffusion of New Therapies - Innovation and Marketing in the Pharmaceutical Industry - page 189

Assess the New
Treatment's
Poten al

Extract the
New Treatment's
Poten al

Leverage the New
Treatment's Poten al
Across Countries

Fig. 7.1 The launch and diffusion decision chain

which approvals for such drugs occur, the successful execution of a new product
launch has gained importance in the pharmaceutical industry.
This chapter gives a broad overview of the strategic and analytical tools that
pharmaceutical firms can use to increase the success of a new product launch, given
that these firms have attained the enviable position of having a new drug approved
by regulatory authorities. Marketing scientists have made significant contributions
to thought leadership in this area, and we will review those contributions in the fol-
lowing sections (also see, Stremersch and Van Dyck 2009 ).
We organize our discussion according to the components of the launch and dif-
fusion decision chain . This chain, depicted in Figure 7.1 , represents the sequence of
decisions that managers must make with regard to the launch and diffusion of new
drugs.
The decisions include the following:

• Decisions regarding the speciic methods for the assessment of a treatment's
commercial potential. In step 1, we will review several ways in which pharma-
ceutical firms can gauge the commercial potential of a new treatment over time.
Developing a clear vision of a new treatment's commercial potential is essential
for making sound decisions in subsequent steps.
• Decisions aimed at optimally extracting the new treatment's potential. In step 2,
we review the means by which a manager can decide to extract the new treat-
ment's commercial potential and generate value for the firm, either by stimulat-
ing unit sales or through per-unit pricing. Pricing and promotion are prime
instruments for pharmaceutical firms to extract maximum value.
• Decisions regarding the strategy that will be used to leverage the new treatment's
potential across countries. Pharmaceutical firms are often global firms. Therefore,
launch teams are global teams that consider a worldwide launch strategy to suc-
cessfully diffuse their drug in as many markets as possible. However, the inter-
national realm is complicated in pharmaceutical markets. Different geographic
markets have different regulations, spending power for healthcare, prescription
practices, and the like, and therefore differ in their attractiveness to firms from a
new drug diffusion perspective. Moreover, different geographic markets may not
be independent. For instance, prices may spill over from one market to another,
because of gray trade or because of government regulations. A pharmaceutical
firm needs to take such spillovers into account in its launch strategy. An impor-
tant characteristic of launch strategies in the pharmaceutical industry is that the
launch of new pharmaceutical drugs is never a “sprinkler launch” (i.e., launching
in all countries at once) but rather is always a “waterfall strategy” (i.e., countries
are staggered one after the other). Note, however, that this does not imply that all