Biomedical Engineering Reference
In-Depth Information
For instance, the pharmaceutical industry has been a leader (across a wide-variety
of industry groups) in terms of investments in R&D as a percentage of sales; so, under
what circumstances is there likely to be an under-investment problem in this industry?
In that sense, replicating the empirical/theoretical findings from non-pharmaceutical
contexts seems valuable. In particular, given the structure of the NME approval
process, spillovers may be more of a problem in some settings than in others.
A related issue is that richer countries can afford higher market prices for new
drugs, and allow companies to recoup their R&D investments. By contrast, poorer
countries exhibit a lower willingness to pay and limit the return on investment. In
practice, new drugs are introduced in both types of countries (usually with a delay;
see e.g., Desiraju et al.
2004b
). However, parallel trade can diminish the drug firms'
ability to price discriminate among countries (Danzon and Keuffel
2007
). Further,
empirical research has shown—see Narayanan et al. (
2004
)—that DTCA by com-
peting firms raises consumer awareness and expands category demand, while detail-
ing affects market shares; by contrast Fischer and Albers (
2010
) find across a wide
variety of categories that DTCA and detailing have quite the opposite effects. It will
help to understand the extent to which competing firms may take into account such
externalities in category demand in determining equilibrium investments in DTCA
and detailing.
In order to extend the revenue stream from approved NMEs, drug companies
often explore alternative indications that may be treated by each NME. We highlight
a potentially important spillover in that context (that is worthy of research attention)
via three examples:
1. In October 2010, Botox (manufactured by Allergan Inc.) received approval for
chronic migraine. However, for sales to ramp up, Allergan needs a sufficiently
large group of physicians that are trained to use the product and believe that it
will benefit their patients. In other words, physicians' perception of Botox (from
its earlier approval) will likely play an important role in affecting their response
to the newer detailing efforts. Although the company has a large proportion of
its sales staff dedicated to this end, Botox for headache probably will not have
enough momentum in the short-run.
2. Next, Bristol-Myers Squibb's Abilify (anticipated sales of $2.9 billion) is indi-
cated for Schizophrenia in adults; but it can also be used in the treatment for
Bipolar Disorder (Manic or Mixed), and helps as an add-on for treating depres-
sion. However, if word were to spread about the side-effects from Abilify when
used to treat one of the indications (e.g., see Andy Behrman's video on You Tube),
then there can be an unintended spillover onto the use of Abilify for the other
indications.
3. Similar is the point with respect to Revlimid (from Celgene Corporation); this
drug's approved indication (by the FDA) is relapsed or refractory myeloma. It is
also being considered for maintenance therapy after chemo; however, the results
from a drug trial in France observed heightened reoccurrences in patients who
received a maintenance level dosage of Revlimid. These results can have ramifi-
cations for Revlimid inasmuch as, e.g., how physicians (and educated patients)
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