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The Successful Launch and Diffusion of New Therapies

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Innovation and Marketing in the Pharmaceutical Industry

Part of the book series: International Series in Quantitative Marketing ((ISQM,volume 20))

Abstract

For many large pharmaceutical firms that sell branded drugs, the successful launch of new therapies remains the key to profitable growth. New therapies are essential in enabling pharmaceutical companies to overcome the challenge of generic substitution—the replacement of branded drugs with generic alternatives, at the initiative of either physicians or pharmacists—as the patents of older drugs in their portfolios expire. Generic drugs enter the market at much lower prices compared with the original branded drugs that they replace, as generic drugs do not need to go through the risky, costly, and lengthy process of new drug development. Grabowski and Vernon (1992) show that an original brand typically loses half of its market share 1 year after patent expiration. Generic substitution is ever increasing in scope and speed, given government regulations in many countries that promote generic dispensing at the pharmacy, in an attempt to control drug spending. Granted, there are multiple ways in which pharmaceutical firms that produce brand-name drugs can fight the trend of generic substitution. Some companies (e.g., Pfizer) own their own generic subsidiaries, others (e.g., Bayer, Merck Serono) offer diagnostics and other types of services in addition to their drugs or try to convince patients or physicians to be brand loyal, for instance, through social media (e.g., Johnson & Johnson). Nevertheless, the successful launch of new branded drugs remains crucial to the survival of such pharmaceutical companies and continues to be their primary means of differentiation.

Abstract

The successful launch and diffusion of new drugs is an essential factor of survival for many pharmaceutical firms. Sophisticated managers in this industry are in need for decision support tools that they can implement to increase the success of a new and approved pharmaceutical drug. In this chapter we present a review of such strategic and analytical tools. The review is based on significant contributions by marketing scientists, and is organized according to the components of a launch and diffusion decision chain we define. This chain represents the sequence of decisions managers must make with regard to the launch and diffusion of new drugs. The first element of the chain includes decisions regarding the specific methods by which pharmaceutical firms can gauge the commercial potential of a new treatment over time. Second, as pricing and promotion are prime instruments for pharmaceutical firms to extract maximum value, we review the means by which a manager can decide to extract the new treatment’s commercial potential and generate value for the firm either by stimulating unit sales or through per-unit pricing. Third, pharmaceutical firms often operate in multiple markets. We therefore present an overview of the strategies that can be used to leverage the new treatment’s potential across countries taking into account the different regulations, spending power for healthcare, prescription practice, among other factors, of different geographic markets. We conclude by reviewing possible directions for future advances in methods across the three chain elements.

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Authors and Affiliations

  1. Leon Recanati School of Business Administration, Tel-Aviv University, Tel-Aviv, Israel

    Vardit Landsman

  2. Erasmus School of Economics, Erasmus University, Burg. Oudlaan 50, 3062, Rotterdam, Netherlands

    Vardit Landsman, Isabel Verniers & Stefan Stremersch

  3. University of Ghent, Ghent, Belgium

    Isabel Verniers

  4. IESE Business School, Barcelona, Spain

    Stefan Stremersch

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  1. Vardit Landsman
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  2. Isabel Verniers
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Correspondence to Vardit Landsman .

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Editors and Affiliations

  1. Smeal College of Business, The Pennsylvania State University, University Park, Pennsylvania, USA

    Min Ding

  2. The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania, USA

    Jehoshua Eliashberg

  3. Department of Business Economics, Erasmus School of Economics, Erasmus University Rotterdam, Rotterdam, The Netherlands

    Stefan Stremersch

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© 2014 Springer Science+Business Media New York

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Landsman, V., Verniers, I., Stremersch, S. (2014). The Successful Launch and Diffusion of New Therapies. In: Ding, M., Eliashberg, J., Stremersch, S. (eds) Innovation and Marketing in the Pharmaceutical Industry. International Series in Quantitative Marketing, vol 20. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7801-0_7

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