A History of “time to market” thinking in Pharma

(For those looking for the core ideas vs. a narrative, page down to the “BOTTOM LINE”)
Once, as head of New Product Planning & Project Management, I was responsible for balancing many threads of activities.  We had a huge product approval coming up and I challenged our team(s) to consider new ways to speed up introduction into the market on approval.  This was always considered a worthy goal, but actual market entry was subject to “meandering agendas” (mid-1990’s.)

With our company’s history of entry six to eight weeks post-approval (appalling from today’s enlightened hindsight), we reinvented our approach and had the product in wholesaler warehouses within a few days of approval.   I was proud of our team and filed for a “President’s Award”, to get them recognition.   Capturing how we did this, and making sure we continued to improve as best practice was all new to the company (this program was only in its second year.)  Also new to folks in R&D was to define and quantify the projects’ financial impact.

Some assumptions were needed to estimate the extra sales we would reap ahead of generic competition, but the calculations of the net present value were straightforward.  However the response from the financial directors evaluating projects was a shock.  We were told “acceleration just cannot have this large an impact – go back and recalculate”.   But every way of rationally estimating the value of fifty days of acceleration came up with similar values – about $50 million.  Even confirming opinions from finance professors at the Wharton school could not sway those gatekeepers.  They were looking at the business from a budgetary perspective, where historically, benefits always came from reducing costs.   Despite being in a business with much, much higher margins than other industries.

While the financial gatekeepers reduced the submission to a fraction of the true value to the firm (and the team did win the award), the resulting dialog was even more important than an individual product launch.  Through it, we recognized that time to market in pharmaceuticals was a far more powerful driver of value than previously understood at the firm.   In the years following most firms adopted their own version of “a day sooner is worth a million dollars”.

THE BOTTOM LINE

Some can argue the assumptions (some noted at bottom), but increasing competition and economics forced Pharma’s  to change how they approached R&D in the 1990’s.  Simple spreadsheets can be used to value individual product parameters, while more complex models can address sequence of entry effects.   Still, the graphs below show the fundamental concepts still in practice.

Charting sales vs. time provides a visual metaphor for the value of the product (more correctly expressed as the net present value of the profits from the sales.)  For synthetic small molecules, generic competitors were increasingly getting better at diverting sales on patent expiry.  The graph on the right reflects the usual sales expected in 1994, and the scale of acceleration my team created (dark green area; acceleration of about 50 days.)   Note that visually the impact is not that large.

This next image reflects actual sales patterns seen in the period of 1985 to 2002 for the top 25 products

that launched in that time.   Here, the light green area is reduced as “fast follower” competitors that launched similar products ate into the innovator’s market.  Interestingly, the same amount of acceleration becomes a greater proportion of product value.   This impact of fast followers and the increasing importance of time to market was a novel concept I introduced to clients in 2001—2002. The financial impact of “a day sooner is worth a million dollars” began to evolve.  Some in the industry now value acceleration as being four times as much (e.g., $4M/day)

Pharma’s often drive acceleration via “six-sigma” teams (which address re-engineering of processes, not because they aspire to reducing error frequency…)  Others view it as part of good project management practices.   How does your firm view or address it now?

Tradeoffs:
Some firms (and consultants) then went overboard on acceleration.  However the goal is launching sooner without compromising how society values the drug. As noted above, the sequence of entry, the unique market need, competing prior therapies (including surgery,etc.), getting on formularies, reimbursements, … all compete with the compromises that mere acceleration can create.   Waiting for proof of a trial for added indications upon launch is a consideration.   Positioning the claims to meet what I simplistically call the market “sweet spot” must also be factored in.  At the beginning of 2000, one firm had a “secret” strategy to be second into target markets, but to hit that sweet spot by tracking market and regulators response to the innovator.

2011 Update:  Derek Loew has a nice posting calling attention to Dimasi & Faden’s 2011 article on follow-on drug success and patterns.  See:
   http://pipeline.corante.com/archives/2011/01/26/those_metoo_drugs.php,
   and the original Nature Reviews article:  http://www.nature.com/nrd/journal/v10/n1/abs/nrd3296.html

Assumptions:
Other factors beyond the simple graphic or spreadsheet model are cited in the tradeoffs above.   Specific simple assumptions include:

  • The size of peak sales will vary greatly
  • The shape of sales will depend on timing of competitors’ entry
  • The angle of the sales curve varies according to situations and specific markets (the curves above are the normalized average for industry at the time).  Therefore impact of acceleration will vary
  • Sales are limited by availability of product; some argue contingent sales already occur ahead of approval/availability
  • Generic erosion will occur in various ways or may be delayed  by “house generics”, or patent extension strategies, etc. (Actually generic erosion for any worthwhile market happens very quickly)
  • Acceleration on a small-scale will not affect the sales curve
  • While earlier introduction may create more “durable” market share, that is not captured here

 

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