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PharmacoEconomics

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01-10-2004 | Original Research Article

The economics of follow-on drug research and development

Trends in entry rates and the timing of development

Authors: Joseph A. DiMasi, Ph.D., Cherie Paquette

Published in: PharmacoEconomics | Special Issue 2/2004

Abstract

Objectives: The development of so-called ‘me-too’, or ‘follow-on’, drugs by the pharmaceutical industry has been viewed by some as duplicative and wasteful, while others have argued that these drugs often provide needed therapeutic options and inject some price competition into the marketplace. This study examines data on the trends in the speed with which competitive entry has occurred in the pharmaceutical marketplace and the competitive nature of the industry’s development of these drugs.

Data and methods: We examined data on the entry rates of drugs in a large number of therapeutic classes over time, as well as detailed survey information on the relative timing of the development of drugs in the classes. Classes were defined according to chemical structure or pharmacologic mode of action and similarity of clinical use. We determined average times to initial and subsequent entry in drug classes by period and examined the timing of development milestones achieved by what have turned out to be follow-on drugs in relation to the development and approval of the first drug in a class to be approved.

Results: We found that the period of marketing exclusivity that the breakthrough drug in a new class enjoys has fallen dramatically over time (a median of 10.2 years in the 1970s to 1.2 years for the late 1990s). Approximately one-third of follow-on new drugs received a priority rating from the US FDA. The vast majority of the follow-on drugs for drug classes that were created in the last decade were in clinical development prior to the approval of the class breakthrough drug.

Conclusions: The data suggest that entry barriers have fallen over time for new drug introductions. The increased competitiveness of the pharmaceutical marketplace was likely fueled by changes over time on both the supply and demand sides. The development histories of entrants to new drug classes suggest that development races better characterise new drug development than does a model of post hoc imitation. Thus, the usual distinctions drawn between breakthrough and ‘me-too’ drugs may not be very meaningful.

Excluded from analysis here are new diagnostic drugs and new salts, esters or formulations of existing drugs.

We excluded a small number of classes where the same sponsor marketed all entrants. There was no trend in the data in the number of such classes.

Forty-eight of the first-in-class compounds were approved after the US orphan drug legislation was enacted (4 January 1983). Prior to this legislation, very few drugs were developed for rare diseases and conditions. We include Protropin® as one of the seven drugs. Protropin® did not technically have orphan drug status at the time of regulatory approval. However, the manufacturer had applied for orphan drug designation prior to approval, which it received shortly after approval.

The 1970s values increase to 10.5 years for the mean and the median if two outlier classes (selective estrogen receptor modulators [SERMS] and rifamycin antibiotics) are included in the analysis. The time to a first follow-on entrant for these classes were 19.4 and 21.6 years, respectively.

Tradenames are used for identification purposes only and do not imply product endorsement.

We also examined double logarithmic, semi-logarithmic and polynomial specifications. The linear regression performed as well as some of these forms, and much better than others.

The rating system is a management tool for the US FDA that is intended to help it better allocate its resources. It is thus not based on a set of standards that necessarily remains fixed over time. If, suddenly, the submissions from industry were all rated priority or all rated standard, then the rating system would cease to be a useful management tool. It is likely then that to some degree, the rating system is endogenous. It is also the case that some drugs prove to be more useful than originally thought after they have been in widespread use for some time.

Censoring could potentially be an issue here for the more recent periods. However, there is likely even less reason to suspect that it would be a material issue here than it is for time to first entry. Not only has a significant amount of time already elapsed, but also in these cases not just one but multiple competitors are already on the market, thereby further reducing the incentive to develop and market additional entrants to the class.

The IND results for the 1960s may be somewhat skewed since the US IND process was not initiated until 1963 after the 1962 Amendments to the US Federal Food, Drug, and Cosmetic Act of 1938 were enacted. INDs were filed in 1963 for drugs that had already been in clinical testing in the US in prior years. Otherwise, though, the results are conservative since we do not have complete information on the development histories of the drugs.

In light of growing cost containment pressures, industry managers have suggested to us that firms are increasingly pursuing a best-in-class strategy, in which winning the race is not as important as developing a drug with a particularly attractive clinical or economic profile.

For example, Relman and Angell[25] state: “FDA regulations should be changed to require that new drug applications include evidence not only of the safety and the efficacy of a new drug, but also of the drug’s effectiveness in relation to existing products of the same type. Approval should depend in part on whether the new drug adds something useful in terms of greater effectiveness, greater safety, fewer side effects, or substantially greater convenience…That policy change alone would dramatically improve the medical value of new prescription drugs, since drug companies would have no incentive to turn out me-too drugs and would have to shift their R&D emphasis to finding more innovative ones.”

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Title: The economics of follow-on drug research and development
Trends in entry rates and the timing of development
Authors: Joseph A. DiMasi, Ph.D.
Cherie Paquette
Publication date: 01-10-2004
Publisher: Springer International Publishing
Published in: PharmacoEconomics / Issue Special Issue 2/2004
Print ISSN: 1170-7690
Electronic ISSN: 1179-2027
DOI: https://doi.org/10.2165/00019053-200422002-00002

Keynote webinar | Spotlight on medication adherence

Springer Medicine

The economics of follow-on drug research and development

Trends in entry rates and the timing of development

Abstract

Keynote webinar | Spotlight on medication adherence

Springer Medicine

Abstract

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