Companies stuck with blockbuster drugs often have a reason to keep developing similar products, according to a study of pharmaceutical innovation. Researchers found that companies with higher sales from an individual drug tended to pursue more development projects in the same narrowly defined therapeutic class.
The findings come from a paper titled Blockbusters, Sequels, and the Nature of Innovation, co-authored by Professor Yoko Shibuya of Duke University’s Fuqua School of Business, Wesley Cohen, Matthew Higgins and William D. Miles. The authors argue that firms may choose drug “sequels” because customers are more likely to stay with familiar products, rather than because new ideas or resources are unavailable.
How Companies Stuck With Blockbusters Pursue Drug Sequels
The researchers examined drug sales in the United States, the United Kingdom, France and Germany from 1998 to 2010. Their dataset covered approximately 60 pharmaceutical firms whose sales accounted for 89% of therapeutic drug market sales across those four countries.
They paired sales information with global drug development pipeline data, including therapeutic classes and development stages. When a company pursued clinical studies or trials in the same narrowly defined class as a blockbuster, co-author Cohen said, that could indicate a strategy to reach the same customer segment with a sequel.
The analysis found that one billion dollars of additional sales for an individual product was associated, on average, with 17% more drug development projects in the same narrowly defined therapeutic class. The researchers also linked one billion dollars of additional sales to 30-80% more projects using technology similar to the original drug.
Those figures describe associations in the study, not a guarantee that any particular blockbuster will produce a sequel. The research focused on whether companies’ development choices were connected to successful products and the customer demand around them.
Patient Loyalty May Reinforce Familiar Technologies
The authors considered whether marketing alone could explain why companies pursue follow-on drugs. They examined adverse side effects as a separate factor that might affect how willing patients and physicians are to switch treatments.
Using the FDA Adverse Event Reporting System, the researchers calculated reported side effects across therapeutic classes. In classes with higher numbers of reported side effects, companies were more likely to pursue sequels to top-selling drugs using similar technologies instead of developing entirely new products.
Shibuya compared the pattern to successive iPhone models that make limited changes while encouraging customers to move to the next product. She said research and development is expensive, and the article notes that a new drug candidate can take between 10 to 15 years to receive FDA approval.
The paper adds demand stickiness to a wider debate about declining returns on research and development investment. Researchers have also cited risk aversion, existing expertise, rising costs and the difficulty of finding new ideas as explanations for incremental innovation.
Blockbuster Success Can Carry Consumer Tradeoffs
For drugmakers, building on a successful product can serve customers who already use treatments in a therapeutic class. But the researchers said concentration of sales among a handful of blockbuster drugs may increase the effect over time.
They also point to a possible consumer cost: chains of branded follow-on drugs could delay market access for cheaper generic alternatives. The article does not quantify that delay, but presents it as a potential consequence of markets dominated by a few brands.
Shibuya said a short-term focus on reliable customers may leave firms investing less in other research with greater potential upside. The researchers’ next implication is for companies to weigh the security of familiar product lines against opportunities that could take longer to develop.
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The paper was reproduced with permission from Duke University’s Fuqua School of Business and originally appeared on Duke Fuqua Insights. Read the source report.
