Pharmaceutical companies reap many benefits of being first-to-market with a new drug for an unmet medical need. For example, Roche’s innovations in developing new treatments resulted in the blockbuster drug Avastin (bevacizumab), initially approved for metastatic colorectal cancer and later expanded to treatment of multiple cancers. In addition to Avastin, Roche’s franchise now includes several additional best-selling cancer drugs with global sales of $23.9 billion. Another drug, Novartis’s Gleevec (imatinib), raked in $4.7 billion for its treatment of chronic myeloid leukemia and certain gastrointestinal tumors. Altogether there were 20 blockbuster cancer drugs with $1 billion or more in sales in 2017. Total global sales for these drugs: $37.6 billion.
You can’t blame pharma for continually striving for similar leadership positioning—and revenues–in their high-value product franchises. But there is also much to be gained by developing second-to-market drugs, and even third-to-market drugs. Just ask outgoing FDA Commissioner Scott Gottlieb, who champions product competition and exhorts pharmaceutical companies to develop, rather than shy away from, second-to-market and even third-to-market drugs.
In a recent interview at the Milken Institute, Commissioner Gottlieb bemoaned the fact that, with pharma companies focusing on first-to-market drugs, “We have lost the palpable public health improvements that come from incremental efficacyfor ordinary conditions.” He noted that even if you could shave 10 hours off the common cold, cumulatively it would have enormous impact on public health as well as improve productivity. He also cited the fact that drugs don’t work the same way for all patients. Consequently, having several different drugs for the same indication broadens physicians’ ability to treat effectively. Since taking office, he has spoken repeatedly on the need for competitive products as a means of lowering the cost of drugs, and has made faster approvals a priority.
The genesis of second-to-market drugs
Researchers from various pharmaceutical companies attend the same meetings. They read the same journals. It’s no surprise that they return to their labs armed with new information about a disease and begin development of a novel drug to treat it. According to an article in Forbes, a competitive race typically ensues, which ends with multiple entries in a drug class eventually reaching the market. The reality is that not everyone can be first to market.
How do second-to-market drugs fare?
Coming to market later can turn out to be the best outcome. Gastric-relief drug Zantac is a classic business schoolcase studyin second-mover advantage. A later entry into the ulcer relief market, Zantac, which had fewer side effects, displaced the pioneer ulcer drug when Glaxo began selling it in the 1980s. In just a few years it became the best-selling prescription drug in the world.
Consulting firm McKinseyanalyzed 492 drug launches in 131 classes over a 27-year period. Their report found that first-in-class players do indeed attain a market-share advantage: ten years after launch, their market share is 40 percent. But second-in-class drugs are not far behind with a 33 percent market share. Even fifth-to-market drugs obtain an 8 percent market share, which can create substantial revenue for drugs that treat common conditions. McKinsey concludes that “It is not meaningfully worse to be fifth than second to market.”
In fact, late movers won the market share race in more than 50 percent of the 131 drug classes studied. A key factor: meaningful differentiation such as that brought by Zantac, which had multiple advantages over the first drug for ulcer relief and was able to focus its marketing on the superiority of its product–the pioneer had already educated the market about ulcer relief.
Being first is less important than being best: achieving meaningful differentiation
Companies that are projecting their therapeutic will be second-to-market and find themselves taking their foot off the gas are shortchanging themselves and patient populations. They are being afforded the opportunity to modify their strategy or technology based on the learnings from first-to-market. They should be examining new or different ways to bring greater value. If the company is expecting to lose the first-in-class race by entering as second or third, it can look to capture greater market share by:
- Exploring More Significant DifferentiationVia Real-World Data or Clinical Results: Determine if more significant, positive differentiations can add greater value to the drug. If market vigilance is showing increasing safety concerns or ideal dosing can’t be achieved, prompt integration of novel delivery technology could result in a significantly more valuable therapy. That, of course, comes with a price tag, but one that could be quickly made up with greater market share. Additionally, infusion of these innovative differentiators can result in new intellectual property (IP), extending patent rights on the market.
- Adding Greater Value to Providers and Patients: Outside of the therapeutic value the drug provides, pharma companies can bring greater value to providers, and therefore patients, through additional means. One approach can be adding integrated “treatment-ecosystems” for doctors and patients. Such a platform can offer centralized dosing information, treatment history, real-time advice or even social portals for patients in a similar situation.
- Winning the Pricing Game:Drug pricing and economic impact of novel therapeutics is a major focus today, especially with pressure coming from the government and public. While companies are beginning to launch efforts to increase transparency of their drugs, this approach isn’t guaranteeing lower prices to patients. However, tapping into the emerging trend of Value-Based drug pricing can create a guaranteed return for the patient.Winning the price game against the first-to-market greatly increases a likelihood of capturing more market share. Capturing revenue via volume is an ideal way of grabbing greater returns in the current climate, while driving more overall value for the patients.
With the FDA asking for more drug competition that can lower drug prices, this is the time for pharmaceutical companies to put aside their dislike to go to market as the second or third in class entrant. There is a need for multiple drugs in a given drug category, and unprecedented opportunities for differentiation that can drive greater healthcare to patients, protect revenue for pharma and extend patent life. And as outgoing FDA commissioner Scott Gottlieb points out, even incremental efficacy can lead to major improvements in public health.
Doug Haddad leads strategy & management for Tabashir Health.
Tabashir Health enhances and enables existing lifesaving technologies. Our breakthrough patented Stimulus-Triggered Therapeutics use heat to control reactions in the body–minimizing adverse drug effects, speeding healing, and improving patient outcomes. For more information,please visit www.tabashirhealth.com