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What is the value of ‘me-too’ drugs?

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  • Stephane Régnier

Abstract

The objective of this article is to estimate the value of ‘follow-on’ or ‘me-too’ drugs from the payer, industry and societal perspectives. Since me-too drugs do not bring additional clinical benefits, they are only valuable to payers if they save costs. An empirical model was constructed to identify the factors affecting whether a me-too drug results in cost savings to the pharmaceutical budgets of payers. These factors included the intensity of promotional spending, price discount and time to entry. Twenty-seven second-entrant products with limited differentiation were identified; their launch dates ranged from 1988 to 2009. On average, me-too drugs launch 2.5 years after the first entrant, with 20 % more promotional investment, and capture 38 % of market share within 4 years. Peak market share is significantly affected by share of voice (p > 0.001) but not price discount (p = 0.77). Launch delay was significant in terms of reducing both market share (p > 0.001) and price (p > 0.05). With a launch price 15 % below the incumbent, cumulative savings from use of a me-too drug peak at over $1000 million, but decrease rapidly after the first entrant becomes generic and only amount to $450 million over the me-too drug’s lifecycle. With a price discount less than 10 %, cumulative savings are negative over the life of the me-too drug. Therefore, me-too drugs may be cost saving in the short term, but can represent a cost in the longer term. From a societal perspective, me-too drugs always decrease the economic surplus if they do not grow the market. If me-too drugs grow the market by 20 %, they augment, on average, the economic surplus only if the variable costs (including promotional investment) do not increase by more than $300 million per year. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Stephane Régnier, 2013. "What is the value of ‘me-too’ drugs?," Health Care Management Science, Springer, vol. 16(4), pages 300-313, December.
    • Handle: RePEc:kap:hcarem:v:16:y:2013:i:4:p:300-313
    DOI: 10.1007/s10729-013-9225-3
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    Cited by:

    1. Leila Agha & Soomi Kim & Danielle Li, 2020. "Insurance Design and Pharmaceutical Innovation," NBER Working Papers 27563, National Bureau of Economic Research, Inc.

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