Innovation in the Pharmaceutical Industry: The Process of Drug Discovery and Development - Innovation and Marketing in the Pharmaceutical Industry - page 69

range from severe to mild, a dual-market diffusion model with a switching regime,
which is a version of the Generalized Bass Model, is warranted. Differences in need
intensity can essentially create two segments, distinguished by their market poten-
tial and by their ability to postpone treatment in anticipation of follow-on drugs of
enhanced value.
Subsequent research can systematically examine the market dynamics upon
entry of follow-on, me-too, and generic drugs in the presence of differential effects
associated with idiosyncratic class characteristics. For example, the gravity and the
prognosis of the disease, or the intensity and duration of its symptoms may moder-
ate the repeat-purchase behavior of the market, its price elasticity, or the tolerance
for potential side effects, systematically changing the diffusion patterns of pioneers
and late entrants alike.
Diseases can range from acute to mild, from genetic to lifestyle-induced, and
may run the gamut from life-threatening conditions to brief discomforts. Some are
highly contagious, others are exceedingly rare. Some can be cleared once and for
all, others occur intermittently, and still others become chronic. Related symptoms
can also vary from debilitating to hardly detectable. Important distinctions in
market behavior may be uncovered along these dimensions, and future research can
elucidate specifi c diffusion patterns linked to disease type, severity, and trajectory.

2.3.6.5 Factors That Affect the Market Diffusion of a New Drug

Although this volume contains another dedicated chapter on the topic of market dif-
fusion, a brief recount of some notable fi ndings seems warranted here to wrap up
our review of pharmaceutical innovation. Rao and Yamada ( 1988 ) and Hahn et al.
( 1994 ) have developed repeat purchase diffusion models in which drug prescrip-
tions are a function of the fi rm's marketing efforts (detailing to physicians) and
word-of-mouth effects. As the informative role of detailing assumes higher signifi -
cance with innovative drugs, as well as with drugs that address a broader spectrum
of ailments, the effectiveness of detailing is shown to increase for these drug types
(Rao and Yamada 1988 ). The effects of word-of-mouth vary by the type of prescrib-
ing physicians and are more pronounced when specialists are the source.
Empirically analyzing the market diffusion of 21 ethical drugs in seven therapeu-
tic classes, Hahn et al. ( 1994 ) fi nd that a brand's promotion effectiveness and the
corresponding trial rates are linked primarily to the brand's effi cacy and dosage,
whereas the repeat purchase rate (indicator of the brand's long-term market share)
is affected by the drug's side effects and dosage. Greater word-of-mouth effects are
found with drugs for acute diseases.
Ding and Eliashberg ( 2008 ) examine the infl uences of physicians and patients on
the market adoption of drugs by accounting for dyadic decision-making. Using pre-
scription probability matrices for categories with multiple new brand offerings, the
authors fi nd that both patients and physicians can impact the prescription decisions
for new drugs, but the effects would vary with symptom intensity. In case of serious
symptoms, the patients' infl uence is limited, and the effect of brands' marketing
activities is diminished.