#152 How to win the race when you’re second
Launches of pharmaceuticals are tricky. Companies often have to face the fact that after a decade or more of expensive development, an initially promising new drug falls short of expectations in terms of sales. Bain & company estimated that about 50% of all pharmaceutical launches underperform and that more than 25% of all launches do not even reach 50% of the forecasted revenue (Natanek et al., 2017). What makes these product launches so challenging? First, pharmaceutical pricing is very delicate and the consumers’ price sensitivity is difficult to predict upfront as it depends on, e.g., the type of disease, its symptoms and the actual location of treatment (hospital versus home-based). Second, product launches are often accompanied by (sometimes unanticipated) competitive counter-launches. Third, improved efficacy and safety do not always translate into a higher rate of prescriptions. An example that illustrates these challenges is Janssen’s anticoagulant drug Xarelto. Janssen Pharmaceuticals, part of Johnson & Johnson, licensed Xarelto (Rivaroxaban) from Bayer as a blood thinner that treats and prevents blood clots. Among others, Bayer, Johnson & Johnson and Boehringer Ingelheim all raced to capture market share from the leading drug in this space, Warfarin. Initially, Xarelto was only second to market after Boehringer Ingelheim’s rival drug Pradaxa (Dabigatran). More importantly, many stakeholders considered Pradaxa as their medication of choice. However, Janssen managed to turn the game and became first in class after all. Their 2018 Xarelto sales totaled $2.47B and also Bayer reported a revenue of $4.07B from the drug (Dyer, 2019). How did Janssen accomplish this Herculean task? In addition to other factors, Janssen differentiated Xarelto from Pradaxa through its simpler treatment regimen. Whereas Boehringer Ingelheim’s competing drug has to be taken twice a day, Janssen’s drug follows a once-per-day dosing. This simple product adaptation significantly influenced consumers’ perceptions. Janssen had understood the American culture of convenience that reaches across all product categories. In the U.S., an alarmingly 50% of the medications for chronic diseases are not taken as prescribed, in part non-compliance by patients (e.g., Viswanathan et al., 2012). American patients have even been shown to be willing to pay more each month for a medication with a lower number of pills (Stewart et al., 2016). Reducing the number of doses, therefore was appealing to patients in the US. Besides, the US is also a culture that values choice, which often results in low brand loyalty and the willingness to with to a product with a better value proposition. In the end, Janssen was able to successfully launch a drug that neither represented a major clinical breakthrough nor was superior to the competing drugs. By a deep understanding of the market, a simple adaptation of the product and effective launch marketing Xarelto became the novel No. 1 oral anticoagulant in the U.S.
(This blog post was co-written with Thomas H., graduate student at California Lutheran University)