Biomedical Engineering Reference
In-Depth Information
Then we move on to discuss me-too and follow-on drugs. The foray of generic
drugs, the market conditions most conducive to their entry, and the drastic market
changes triggered by such entry are detailed next. This discussion is followed by a
review of theoretical arguments and empirical fi ndings related to economies of scale
and scope in the pharmaceutical industry. We then proceed by presenting the funda-
mental types of organizations that operate in this industry and discuss the modes of
collaboration that have emerged in drug innovation, with a particular focus on
alliances. Next, we present a summary of recent fi ndings and insights from the aca-
demic literature. We touch upon the precursors to the current industry structure in
the USA, the synergistic and preemptive benefi ts of investing in own R&D, the
implications of early and late timing for market entry, the dynamics of market adop-
tion in the case of pent-up demand, and the key factors that affect the market diffu-
sion of a new drug. Then we outline the most recent trends related to pharmaceutical
innovation. We conclude the chapter by suggesting directions for future research.
2.2
An Overview of Innovation in the Pharmaceutical
Industry
The nature of the pharmaceutical industry makes it a veritable standout compared to
others. Profound understanding of market needs is necessary but woefully insuffi -
cient for a fi rm to succeed. Even when fi nding effective medications is vitally
important for the wellbeing of millions of patients, decades of painstaking research
may still fail to produce a satisfactory new product.
No other industry is expected to affect how long people can live or how fast they
can recover from an illness. No other industry is focused on relieving the physical
pain and other discomforts everyone gets to experience in life. Consequently, no
other industry is under such tremendous pressures to innovate. Still, no other indus-
try can burn through billions of dollars and man-hours only to end up empty-handed,
with not much to show for its vast expenditure, dedication, and effort.
Unlike many other market-driven industries, the pharmaceutical industry follows
the so-called technology-push model. Life sciences are at the center of its endeavors
to alter or reverse the processes in the human body. The onus of creating value for
patients is squarely dependent on a meandering path of scientifi c advances and tech-
nological breakthroughs with largely unpredictable results and uneven timing.
From a business perspective, the positive momentum created by successful inno-
vation can have dramatic, long-lasting implications for the pharmaceutical fi rm. The
impact of a new drug launch often goes beyond the hefty profi ts associated with
patent protection and fi rst-mover advantage. Incremental, follow-up improvements
involving greater effi cacy, fewer or less severe side effects, a more convenient dos-
age regimen, changes in the application method, modifi ed formulations, or new
indications can signifi cantly expand the market potential for the fi rm by making the
drug appropriate for new patients (e.g., patients who can benefi t from different dos-
age protocols). Notably, more than half of the new brands of drugs introduced in
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