#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)
April 28, 2019 @ 6:43 am
This was a very interesting and refreshing read. After reading the title I had anticipated a very different article since pharmaceutical companies haven’t had the best reputation as of late. That being said, the makers of Xarelto took their time to get to know the American culture and the values of American people and formulated their drug to meet these values. I think this is just super cool!! I really appreciate businesses who take their time to carefully research people and potential consumers. It may seem like such a basic task but knowing the target market is so important and often not done well enough… and companies wonder when they fail 🙂
April 28, 2019 @ 6:27 pm
I am not well-versed in the pharmaceutical industry, so I found it interesting to read how a company from Belgium successfully launched the #1 anticoagulant drug in the United States. While founded in Belgium, Janssen Pharmaceuticals became a subsidiary of Johnson & Johnson as a result of an acquisition in the early 1960s. Johnson & Johnson in based in the U.S. and invests heavily in research and development, which are two factors that may have contributed to the success of Janssen’s Xarelto in the United States. The case outlined in this post also underscores the importance of analyzing competitors and identifying a unique selling proposition, which are keys to any successful marketing launch. As a result of the market research conducted leading up to the product launch, Janssen was able to understand how existing consumers felt about the drugs on the market and where there were opportunities for product innovation.
December 11, 2021 @ 3:39 am
I think this case was a great example of how important it is to understand your target market. Xarelto wasn’t the best product but it was the best option. Another example I can think of that is similar to this case are gaming consoles. A gaming console like Xbox or Playstation are great ways to play video but a well built gaming PC can be proven to be substantially better. But because the consoles don’t require so much money or effort like it is to custom build a PC, many people buy and prefer them.Xarelto understood that the United States market likes things to be easy and where able to thrive off that. The ability to really research and get to know who the product is for is just as important as the product and can really help a company succeed against their competitors.
January 11, 2022 @ 7:01 pm
It seems that Xarelto was able to figure out how to enter the American market. Americans like having choices and they like convenience. It is interesting to me that this wouldn’t be marketed more towards doctors to recommend to patients because of its ease of use. In America, the consumer has to have the choice. This case shows the importance of researching the types of people who will be consuming the products. Demographics play a large role in the success of a business. In other countries, people might not care so much about their freedom to choose the medication they are using as long as it works for them. The company was also able to research and understand how consumers felt about other medications on the market before entering the American market.
April 10, 2022 @ 4:53 pm
Pharmaceutical launches really follow a special dynamics. While efficacy and safety are the main differentiators between medicinal products, as soon as the market becomes more crowded, other factors, like dosing regimen convenience (in case of Xarelto), availability of long-term clinical data and real-world evidence, come into play. One point that needs special consideration for first-in market launches is the awareness and acceptance of a new mode of action (MoA) by the customers. For successfully launching drugs that are based on a new MoA, like gene or cell therapies, years of disease and MoA awareness work is necessary. For this, medical associates of pharmaceutical companies engage with physicians already years before the product launch to prepare for full understanding of the product, its MoA, as well as its clinical profile at the time of the launch. This market preparation necessity can be leveraged by competitor companies that come second to market with similar products. They benefit from the awareness that has already been created and can invest their energy otherwise, i.e. in the differentiation from the competitor product. Thus, it is not an uncommon observation that second-to-market launches of pharmaceuticals are more successful as the product entering the market first.
March 18, 2023 @ 11:52 am
To me, it is interesting that the number of doses taken by a patient influences the patients / customers behaviour in product acceptance and therefore product sales, despite its higher pricing compared to competitors.
This shows that knowing the customers’ needs and requirements and the fulfilment of those make the difference in winning the competition between two similar products / companies. For that, the performance of a well based market research study on the customers needs should always be performed during the development of a pharmaceutical, especially when there are competitive products available. Due to the cost intensive research and development and high failure rates customer acceptance should be known and taken into consideration if pharmaceuticals should be brought to market or not – just for profitability reasons.
Lesson learned: Knowing customers requirements and product acceptance in the market environment could prevent companies to loose money due to low competitiveness resulting in unprofitability. Therefore, before product launch, a robust market analysis should be carried out.