Pharmaceutical Lifecycle Extension Strategies - Innovation and Marketing in the Pharmaceutical Industry - page 244

experience with the single components. If the single components are already
approved, drug agencies move more swiftly. For example, the FDA may allow the
combination drug to start testing in Phase III.
While empirical research on the sales success of combination drugs is lacking,
they can be considered as a form of product bundling (Stremersch and Tellis
2002 ). Bundling can be done to leverage market power from one to another mar-
ket, but also to provide a quality signal, which lowers the informational costs for
customers.

8.4.4 Next-Generation Drugs

An alternative way to use R&D to build on an existing drug is to develop next-
generation drugs. Their development builds on the mode of action and pharmacol-
ogy of the fi rst generation product and needs to demonstrate signifi cantly improved
properties. It changes the underlying chemical structure of the active ingredient and
requires a NDA.
Research on the success and marketing of next-generation drugs is lacking and
evidence on their effectiveness to extend the product lifecycle of a drug is limited to
case studies (e.g., Conley et al. 2006 ). However, in press these strategies are widely
debated. On the one hand, the next-generation drug can build on the brand equity of
the previous generation drug, while on the other hand it may need to differentiate
itself enough to induce customers to switch. Two well-known examples are Nexium
and Clarinex. Claritin is the fi rst generation product and a metabolized version of
the drug was approved to the market as an NME (Fleming and Ma 2002 ). The next-
generation drug was named Clarinex, clearly positioning it as the “next Claritin.”
Nexium is a successful single-isomer version of fi rst generation drug Prilosec; how-
ever, it was positioned as a new drug. The link between the two drugs was made
through the trademark “the purple pill” and Nexium was strongly differentiated
from Prilosec in the marketing communications.

8.4.5 Summary of R&D Strategies

New indications and drug reformulations are frequently used lifecycle extension
strategies. New indications require no change to the existing product and usually
keep the same brand name. One challenge for new indications is that the set of com-
petitors for a product may change to which a fi rm should adapt. In case the new
indication is very different from existing indications, a fi rm may consider marketing
it under a new brand name. Reformulations build on an existing drug and brand
name. They are line extensions and fi rms typically shift their promotional expendi-
tures from the original drug to the reformulation.