Innovation in the Pharmaceutical Industry: The Process of Drug Discovery and Development - Innovation and Marketing in the Pharmaceutical Industry - page 68

growth prospects as market entry during maturity shortens the proverbial window of
opportunity for these brands and pits them against scores of entrenched rivals.
Analyzing sales data and marketing expenditure from 29 brands in six prescrip-
tion categories, Shankar et al. ( 1999 ) fi nd that the market response to total market-
ing spending by brands in the same therapeutic class steadily declines over the PLC.
It is the highest at the time of pioneer entry, then declines through the growth stage
and reaches its lowest point in the maturity stage. Market expansion is confi ned to
the early stages of the PLC, which is also when marketing efforts are most effective.
The market's reaction to brands' quality, however, follows an inverted U-pattern—it
is the highest during the growth stage (when perceived drug improvements can
expand the market most effectively given the benchmark set by the pioneer), but is
relatively lower in the maturity stage. Moreover, competitor diffusion affects rivals
differently: it hurts the pioneer, has no effect on growth-stage entrants, and may
even help maturity-stage entrants.
In a model that focuses on competitor reactions in the case of market entry, Shankar
( 1999 ) shows that an incumbent will tend to accommodate a new entrant if the entrant
is: (a) more experienced (the entrant's marketing is likely to be more effective); (b)
entering with a strategy of high marketing spending (an aggressive response by the
incumbent can trigger an advertising war), or (c) when the incumbent and the entrant
face each other off in multiple markets (the incumbent is exposed to the hazard of
retaliatory attacks in those other markets). In addition, small incumbents have limited
ability to react, which is recognized by entrants as absence of competitive threats. An
entrant would spend more on marketing (advertising and sales force effort) if it is a
large fi rm and if the new drug is of a higher quality (Shankar 1999 ). Note that these
results are also consistent with the arguments advanced in Sect. 2.3.5 to explain the
expediency of downstream alliances for small biotech fi rms seeking the market lever-
age conferred by large partners.

2.3.6.4 Market Entry in the Presence of Pent-up Demand

If the new drug is indeed so revolutionary that no effective alternative has been
available prior to its release, there might be a vast pent-up demand at the time of
market launch. With such drugs, an atypical diffusion pattern can occur. Patients
diagnosed with severe symptoms will know about the imminent launch and will be
eagerly anticipating it. In this case, sales may soar sharply upon market entry, then
embark on a steep decline as the wave of critical patients complete their treatment
(Vakratsas and Kolsarici 2008 ). If the condition can be cleared relatively fast and
there is no need for long-term treatment, repeat purchases will fail to materialize.
However, a second market of less-intense demand can emerge, composed of the
purchases made by newly diagnosed or mild case patients. The drug adoption in this
second segment may evolve at a much lower rate, with sales growing gradually over
time before a slow decline sets in.
Vakratsas and Kolsarici ( 2008 ) fi nd evidence of such bimodality in the market
adoption pattern for a lifestyle-related drug. The authors posit that such a pattern
can stem from an underlying spectrum of treatment urgency. If need intensity can