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What is the value of ‘me-too’ drugs?

Health Care Management Science volume 16, pages 300–313 (2013)Cite this article

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.

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Notes

  1. 1999 was chosen for convenience because the FDA web site does not provide electronic annual approval files before that date.

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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.

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  1. Université de Neuchâtel, Neuchâtel, Switzerland

    Stephane Régnier

  2. Novartis Vaccines & Diagnostics AG, Basel, Switzerland

    Stephane Régnier

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  1. Stephane Régnier
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Correspondence to Stephane Régnier.

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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

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Keywords

  • Follow-on drugs
  • Cost savings
  • Peak share
  • Share of voice
  • First-mover advantage

MSC codes

  • 62J05
  • 62P20
  • 90B50