Abstract
The objective of this article is to estimate the value of ‘follow-on’ or ‘me-too’ drugs from the payer, industry and societal perspectives. Since me-too drugs do not bring additional clinical benefits, they are only valuable to payers if they save costs. An empirical model was constructed to identify the factors affecting whether a me-too drug results in cost savings to the pharmaceutical budgets of payers. These factors included the intensity of promotional spending, price discount and time to entry. Twenty-seven second-entrant products with limited differentiation were identified; their launch dates ranged from 1988 to 2009. On average, me-too drugs launch 2.5 years after the first entrant, with 20 % more promotional investment, and capture 38 % of market share within 4 years. Peak market share is significantly affected by share of voice (p < 0.001) but not price discount (p = 0.77). Launch delay was significant in terms of reducing both market share (p < 0.001) and price (p < 0.05). With a launch price 15 % below the incumbent, cumulative savings from use of a me-too drug peak at over $1000 million, but decrease rapidly after the first entrant becomes generic and only amount to $450 million over the me-too drug’s lifecycle. With a price discount less than 10 %, cumulative savings are negative over the life of the me-too drug. Therefore, me-too drugs may be cost saving in the short term, but can represent a cost in the longer term. From a societal perspective, me-too drugs always decrease the economic surplus if they do not grow the market. If me-too drugs grow the market by 20 %, they augment, on average, the economic surplus only if the variable costs (including promotional investment) do not increase by more than $300 million per year.
Similar content being viewed by others
Notes
1999 was chosen for convenience because the FDA web site does not provide electronic annual approval files before that date.
References
US Food and Drug Administration (2009) NDA approvals by therapeutic potential and chemical type. Available from URL: http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/DrugandBiologicApprovalReports/NDAApprovalsbyTherapeuticPotentialandChemicalType/default.htm. Accessed 14 December 2011
DiMasi JA, Hansen RW, Grabowski HG (2003) The price of innovation: new estimates of drug development costs. J Health Econ 22(2):151–185
Berenson A (14 November 2005) Big drug makers see sales decline with their image. New York Times. Available from URL: http://www.nytimes.com/2005/11/14/business/14pharma.html
Hollis A (13 December 2004) Me-too drugs: is there a problem? Submission to the WHO Commission on Intellectual Property and Public Health. Available from URL: http://www.who.int/intellectualproperty/topics/ip/Me-tooDrugs_Hollis1.pdf
US Congress Office of Technology Assessment (1993) Pharmaceutical R&D: costs, risks and rewards. Available from URL: http://www.fas.org/ota/reports/9336.pdf
Stange KC (2007) Time to ban direct-to-consumer prescription drug marketing. Ann Fam Med 5(2):101–104
Aitken M, Berndt ER, Cutler DM (2009) Prescription drug spending trends in the United States: looking beyond the turning point. Health Aff (Millwood) 28(1):w151–w160
Morgan SG, Bassett KL, Wright JM, Evans RG, Barer ML, Caetano PA, Black CD (2005) “Breakthrough” drugs and growth in expenditure on prescription drugs in Canada. BMJ 331:815–816
Angell M (2004) The truth about the drug companies: how they deceive us and what to do about it. Random House, New York
Azoulay P (2002) Do pharmaceutical sales respond to scientific evidence? J Econ Manag Strateg 11(4):551–594
Simon G (2001) Choosing a first-line antidepressant: equal on average does not mean equal for everyone. JAMA 286(23):3003–3004
Lu ZJ, Comanor WS (1998) Strategic pricing of new pharmaceuticals. Rev Econ Stat 80(1):108–118
Lexchin J (2006) Do manufacturers of brand-name drugs engage in price competition? An analysis of introductory prices. CMAJ 174(8):1120–1121
Health Strategies Group (2010) Best practices in health plan marketing. Category management and review no. 1: Asthma agents. Health Strategies Group, Lambertville
DiMasi JA, Paquette C (2004) The economics of follow-on drug research and development: trends in entry rates and the timing of development. PharmacoEconomics 22(2 Suppl 2):1–14
Huskamp HA (2006) Prices, profits, and innovation: examining criticisms of new psychotropic drugs’ value. Health Aff (Millwood) 25(3):635–646
Kalyanaram G, Urban GL (1992) Dynamic effects of order-of-entry on market share, trial penetration, and repeat purchases for frequently purchased consumer goods. Mark Sci 11(3):235–250
Robinson WT, Fornell C (1985) Sources of market pioneer advantages in consumer goods industries. J Mark Res 22(3):305–317
Fischer M, Leeflang PSH, Verhoef PC (2010) Drivers of peak sales for pharmaceutical brands. Quant Mark Econ 8:429–460
Prins R, Verhoef PC (2007) Marketing communication drivers of adoption timing of a new EService among existing customers. J Mark 71(2):169–183
Fischer M, Albers S (2010) Patient- or physician-oriented marketing: what drives primary demand for prescription drugs? J Mark Res 47(1):103–121
Haute Autorité de la Santé (2009) Commission de la transparence: les avis sur les médicaments. Available from URL: http://www.has-sante.fr/portail/jcms/c_5268/medicaments?cid=c_5268. Accessed 14 December 2011
IMS Health (2009) Available from URL: http://www.imshealth.com/portal/site/ims. Accessed December 2009
SDI Health (2009) Available from URL: http://www.sdihealth.com/. Accessed December 2009
First DataBank (2009) AnalySource Online. http://www.firstdatabank.com/Products/analysource.aspx. Accessed 14 December 2011
US Food and Drug Administration. NME drug and new biologic approvals. Available from URL: http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/DrugandBiologicApprovalReports/ucm121136.htm. Accessed 14 December 2012
Lebas M, Certain BM (1992) Médicalisation du remboursement: une solution à la maîtrise des dépenses de santé ? J econ med 10(7–8):451–470
Corstjens M, Demeire E, Horowitz I (2005) New product success in the pharmaceutical industry: how many bites at the cherry? Econ Innov New Technol 14(4):319–331
Lichtenberg FR, Duflos G (2009) The effect of patent expiration on U.S. drug prices, marketing, and utilization by the public. Center for Medical Progress at the Manhattan Institute. Available from URL: http://www.manhattan-institute.org/html/mpr_11.htm. Accessed 10 February 2013
Greuel JM (2008) Pharma and biotech: is it possible to keep growing? Pharma Focus Asia (Issue 6):6–9
Walters D (2002) Operations strategy. Palgrave Macmillan, Basingstoke
Kaufman M (1 July, 2005) FDA was told of Viagra-blindness link months ago. Washington Post. Available from URL: http://pqasb.pqarchiver.com/washingtonpost/access/861469911.html?FMT=ABS&FMTS=ABS:FT&date=Jul+1%2C+2005&author=Marc+Kaufman&pub=The+Washington+Post&edition=&startpage=A.02
Katz DM (28 October 2005) Drug discount peddlers. CFO.com. Available from URL: http://www.cfo.com/printable/article.cfm/5079733. Accessed 14 December 2011
Donohue JM, Berndt ER, Rosenthal M, Epstein AM, Frank RG (2004) Effects of pharmaceutical promotion on adherence to the treatment guidelines for depression. Med Care 42(12):1176–1185
Kravitz RL, Epstein RM, Feldman MD et al (2005) Influence of patients’ requests for direct-to-consumer advertised antidepressants: a randomized controlled trial. JAMA 293(16):1995–2002
Acknowledgments
The author would like to thank Professor Claude Jeanrenaud, Institut de recherches économiques, Université de Neuchâtel, for helpful advice. Editorial assistance was provided by Dr Duncan Porter of Anthemis Consulting Ltd, funded by Novartis Vaccines & Diagnostics AG. Novartis also provided access to proprietary databases.
Funding
The study reported in this paper was conducted as part of the author’s research at the University of Neuchâtel. Novartis Vaccines & Diagnostics AG provided funding for editorial assistance in the writing of this article. The author is an employee of Novartis Vaccines & Diagnostics AG. This paper represents the view of the author and should not be considered as representative of the view of Novartis AG.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Régnier, S. What is the value of ‘me-too’ drugs?. Health Care Manag Sci 16, 300–313 (2013). https://doi.org/10.1007/s10729-013-9225-3
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10729-013-9225-3