Innovation in the Pharmaceutical Industry: The Process of Drug Discovery and Development - Innovation and Marketing in the Pharmaceutical Industry - page 34

Me-too brands have been criticized primarily on the grounds of offering little or
no additional advantages relative to the pioneer drug. However, clinical responses to
different drugs in the same class can vary signifi cantly by individual patient.
Traditionally, physicians have adopted a trial-and-error process for fi nding the drug
that works well for each patient. The availability of extra therapeutic options is not
only clinically advantageous in case of adverse side effects induced by the pioneer
drug, but is also economically and socially benefi cial.
To the pioneer drug, the impending entry of me-too drugs is a threat that dimin-
ishes the incentives for costly breakthrough innovation. Despite the regulatory pro-
tection conferred upon FDA approval, the market dominance of the pioneer drug
can be curtailed by the entry of closely positioned, yet differently formulated me-
too alternatives. Due to relatively minor differences in formulation or action, me-too
drugs can circumvent the mandated exclusivity that deters the generics, and can
place the pioneer drug under intense competitive pressures much sooner, diluting its
sales and eroding its market share.
Recent studies show that the effective period of marketing exclusivity enjoyed by
the pioneer drug in a specifi c class has declined dramatically—from a median of 10.2
years in the 1970s to a mere 1.2 years in the late 1990s—due to the market entry of
me-too alternatives (DiMasi and Paquette 2004 ). Insuffi cient value differentiation by
the me-too brands is perhaps the worst case scenario: it can undermine the intent of
patent protection and market exclusivity, and may effectively split the market without
offering additional therapeutic benefi ts or lower price to patients. In this case, the vast
resources fi rms have spent on R&D may never be recouped as the market proceeds are
divided among multiple fi rms. Patients are not generally better off either except for
those intolerant to the pioneer drug, as they will have extra options. 9
Follow - on drugs . In contrast to me-too drugs (the product of parallel development
but belated launch, the timing of which can be beyond the fi rms' control), the incep-
tion of follow-on drugs is rather deliberate and their launch is timed to occur after
the pioneer drug. Even drugs that have gained FDA approval may have clinical
shortcomings that are just not serious enough to terminate the project, but can nev-
ertheless be improved upon by introducing minor alterations to the chemical struc-
ture of the breakthrough drug. Such incremental improvements are called follow-on
drugs, and they constitute the majority of new drug introductions.
Developing breakthrough drugs that are safe and effi cacious is very costly while
the outcomes are unpredictable. In this case, another fi rm might see a modestly lucra-
tive option in the incremental improvement of an existing drug. There is assurance
that comes from exploiting an effective, tried-and-tested method of therapy. Besides,
even the residual returns from a very large market can be rather substantial.
Overturning the conventional fi rst-mover advantage, an improved follow-on
drug may even surpass the pioneer drug through enhanced effectiveness, greater
9 For at least one therapeutic category (antibiotics), there is defi nite value in the presence of more
drug diversity per se. It is well known that bacteria mutate and can become resistant to the most
common existing drugs, necessitating a wide variety of medication choices.