Pharmaceutical Lifecycle Extension Strategies - Innovation and Marketing in the Pharmaceutical Industry - page 242

side effects, or are approved for new indications. Research-oriented strategies build
more on the knowledge assets of a fi rm, require extensive research, and new drugs
resulting from this strategy often qualify for a new patent on the molecule.
Ganuza et al. ( 2009 ) show that pharmaceutical fi rms target their R&D on small
innovations, such as product-line extensions. This is driven by the low sensitivity of
demand. Indeed, a large part of newly approved drugs are line extensions.

8.4.1 New Indications

As existing drugs have known pharmacokinetic profi les and side effects, new indi-
cations for them are relatively cheap to develop. The process of fi nding new uses for
the drug outside current indications is sometimes referred to as drug repositioning
and requires additional clinical testing (Ashburn and Thor 2004 ). The new indica-
tions have the advantage of starting with a Phase II trial which saves almost 40 % of
the costs of clinical testing (Chong and Sullivan 2007 ). New indications enlarge the
market potential of a drug and can extend the market exclusivity period up to 3 years
through a sNDA (Bhat 2005 ; Dubey and Dubey 2009 ; Kvesic 2008 ). It is a widely
used strategy and 84 % of the top 50 drugs in 2004 has obtained additional indica-
tions after approval (Sandner and Ziegelbauer 2008 ).
One specifi c way for fi rms to extend the market exclusivity period of a drug by 6
months is to investigate, before patent expiry, the effectiveness of the drug in chil-
dren. This pediatric exclusivity is independent of the success of the study and must
be requested by the FDA (see for the guidance document: FDA 1999 ). Upon request,
this is a standard move for successful drugs. Firms can increase the chances of
receiving such a request by proposing pediatric studies to the FDA. For example,
sildenafi l (Viagra) was initially developed for angina, but in 1998 approved for erec-
tile dysfunction, and in 2003 for pulmonary arterial hypertension under the brand
name Revatio. In addition, the manufacturer tested the drug on a rare lung disorder
for children to receive an additional 6 months of pediatric exclusivity.
Huskamp et al. ( 2008 ) fi nd that promotional expenditures of drugs in the selec-
tive serotonin reuptake inhibitor (SSRI) category increased after approval for a new
indication. Depending on the new indication, fi rms increased either detailing or
DTCA expenditures.
New indications are usually marketed under the same brand name and hence
the brand equity of the drug can be leveraged to the new indication. If the new
indication is very different from current indications, fi rms can opt to market it
under a new brand name (e.g., Viagra and Revatio, both sildenafi l; Zyban and
Wellbutrin, both bupropion; Proscar and Propecia, both fi nasteride; Prozac and
Sarafem, both fl uoxetine). Drugs with multiple indications have an increased
chance of competing in different markets and to a different set of competitors.
Firms should then carefully consider the pricing of the drug in order to be com-
petitive in the various markets.