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A shift from traditional product launches?

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As per DiMasi (as cited in Nyhuus, 2014) on an average it takes about 11.9 years to develop a new drug which leads to about 8 years of effective time under market monopoly since patents are granted for 20 years. In such a scenario, the time to market becomes one of the most decisive factors for the survival and performance of the pharmaceutical company. It is observed in recent times that due to increasing budgetary constraints on coverage of expensive medical treatments by governments across the EU and the US, the process of negotiating reimbursements for different drugs has become lengthier and more cumbersome.
This means that despite the drug being approved by the FDA or the EMA, the pharmaceutical  companies can still not effectively sell for profits unless they receive authorization from local health providers and even municipalities, insurance agencies etc. is obtained. For instance, in Germany, where this secondary authorization process was automated and products were launched on average within one day until 2012, this process has been replaced by a negotiation process which now takes up to 6 months. As for the blockbuster drugs or any innovator product, every sales day lost under monopoly amounts to a loss of revenues of millions of euros and dollars respectively. It has now become inevitable for pharmaceutical companies to align the clinical efficiency of their products with the relative cost advantages offered compared to their generic counterparts. This has called for a strategic shift from product launches where the pharmaceutical companies were primarily targeting the prescribers – namely the doctors/clinicians etc. to payer-centric product launches.
The primary reason for it is the infusion of generics for the common therapeutic areas has created an environment where innovator products offering incrementally higher functionality are completely sidestepped due to their relatively higher costs.

References:

  • Mcclearn, C., & Croisier, T. (2013). Big pharma ’ s market access mission – Deloitte University Press.
  • Nyhuus, K. R. (2014). New Product Introduction in the Pharmaceutical Industry New Product Introduction in the Pharmaceutical Industry by Klaus Reinholdt Nyhuus Hansen PhD thesis , Technical University of Denmark DTU Management Engineering