Getting a drug launch right is critical for its overall success. And many factors that contribute to lower-than-expected sales at launch can be mitigated through planning and disciplined execution.
WITH the growing costs of developing new drugs, increasing competition, and shortening times to peak sales, the importance of getting a drug launch right has never been greater. As payer influence grows and new therapies target smaller patient populations with complex needs, developing and executing a winning launch strategy becomes increasingly difficult. We analyzed actual and forecast sales for novel drugs approved in the United States between 2012 and 2017, and found wide variability in launch performance. In their first year, more than a third of all drugs (36 percent) failed to meet market expectations. At the same time, a sizeable proportion (26 percent) far exceeded expectations. More detailed findings include:
While pharma companies may not be able to control every single element at launch, many factors that contribute to missing expectations can be mitigated with thorough planning and disciplined execution. Some of these approaches include:
Even though the number of drugs approved by the FDA has increased from an average of 23 per year between 2000 and 2010 to 38 per year between 2011 and 2018, the average revenue per drug has declined significantly. 1 The latter trend is expected to continue: Average peak sales forecasts for late-stage pipeline assets have declined by more than 50 percent since 2010.2 The declining average peak sales and intense competition limit the opportunity to maximize returns from new launches.
While the industry needs to improve its overall launch performance, the job of commercial teams has only gotten harder due to the rising influence of payers, declining access to physicians, intense competition, and a shift away from primary care drugs toward specialty therapy areas.
Our analysis paints a mixed picture—with many manufacturers in recent years missing launch expectations for a large portion of their products.
The Deloitte Center for Health Solutions analyzed 149 new drugs (new indications for both small molecules and biologics) launched in the United States between 2012 and 2017 to determine if they met market expectations for each of the three years after launch. For our analysis, we considered analyst forecasts to be a general reflection of market expectations for new products and used consensus forecasts, as identified by EvaluatePharma, available at the time of FDA approval.
We applied the following criteria and definitions:
Performance against analyst expectations:
Company size based on annual revenue at the time of each product launch:
For additional details about the methodology, please refer to the appendix.
Most of the new drugs launched in the United States between 2012 and 2017 were specialty drugs (65 percent); a large number received priority review (60 percent), while a sizeable portion were for treatment of orphan diseases (40 percent). Three in 10 (30 percent) products were approved for rare diseases (figures 6 and 7 in the appendix).
While more than one-third (36 percent) of the drugs underperformed in the first year following launch, about half (48 percent) beat analyst expectations. Notably, one in four (26 percent) of all drugs far exceeded expectations, generating more than twice the expected sales (figure 1). The smallest proportion of drugs (16 percent) fell in the middle: meeting expectations within a 20 percent margin.
Our analysis of the impact of the launch year on future performance revealed that:
These results are consistent with prior studies that found that if a product fails to meet launch year expectations, its probability of recovering revenue in subsequent years declines sharply.3 Given that the average time frame from launch to peak sales is about five years and continues to shrink, the importance of the launch year for the overall product life cycle will continue to grow.4
Our analysis identified three product characteristics that have statistically significant associations with the likelihood of meeting or beating analyst sales forecasts: products receiving priority review by the FDA, specialty drugs, and orphan drugs. Two other product features have a positive but not statistically significant relationship with product performance at launch: first-in-class and biologics (figure 3).
Priority review: Three in four (74 percent) priority review drugs and less than half (47 percent) standard review drugs met or beat expectations in year 1. The priority review designation from the FDA not only allows a shorter regulatory review cycle but also communicates to the market an expectation for significant advancement over existing therapies for a serious condition. In our study, most of the drugs receiving priority review (79 percent) were also specialty products.
Specialty: Seventy-two percent of specialty drugs and 48 percent of nonspecialty drugs met or beat expectations at launch. Specialty drugs are typically prescribed by specialists and have distinct handling, administration, and monitoring requirements. They often garner higher prices than nonspecialty medicines and many use a limited distribution model. In our study, the average three-year revenue from a specialty drug was in excess of US$1 billion, more than double the revenue from a nonspecialty product. This makes specialty an attractive area for pharma companies and accounts for a growing share of industry revenues and pipeline assets.5
Orphan: A higher proportion of orphan drugs (73 percent) compared to nonorphan drugs (57 percent) met or beat analyst forecasts for year 1. Again, there is considerable overlap between orphan and specialty products: Eighty-seven percent of orphan drugs happen to be specialty products. The Orphan Drug Act provides tax incentives and extended market exclusivity for pharma companies that develop medicines to treat small patient populations. 6 Research shows that manufacturers are able to charge premium prices for orphan drugs: In 2018, the average price for orphan drugs was 4.5 times higher than nonorphan drugs.7 Moreover, given small patient populations, payers tend to be less inclined to limit market access. The higher profitability and a longer exclusivity period8 have attracted commercial interest from pharma companies and resulted in a significant growth in the number of orphan drug approvals in recent years.9
We found that drugs launched by large companies underperform compared to those launched by small and medium-sized companies, even when controlling for product characteristics.
As figure 4 shows, the observed differences are greatest for orphan drugs. Small and medium-sized companies outperform large companies for orphan drug launches: Ninety-two percent of orphan drugs launched by small companies and 79 percent launched by medium-sized companies met or beat expectations, compared to only about half (53 percent) of orphan drugs launched by large companies.
A possible explanation for the relatively better performance of smaller companies is that they may have a clearer focus and deeper expertise in a specific disease area, which contributes to a keen understanding of the market and credibility with the clinician and patient community. Although large companies have more resources and access to talent, multiple launch teams compete for these resources, cross-functional coordination is often lacking, and not all launches receive the same amount of attention. This phenomenon may be even more pronounced in companies with a diverse product portfolio spread across multiple therapeutic areas. Recognizing this challenge, many large pharma companies are reorganizing themselves around a smaller set of specific therapy areas to develop greater depth as opposed to breadth.10
The product and company characteristics from the previous four findings are not the only ones or even the most important determinants of success. To understand what stands in the way of a successful launch, we reviewed analyst reports that discussed the launch performance of 50 (out of 54 total) drugs that missed expectations and for which information was available. Based on the frequency of mentions, the typical reasons for missing expectations fell into six broad categories outlined in figure 5, and for most drugs, multiple reasons were mentioned.
Deloitte’s client experience suggests that large companies might be more prone to these mistakes. In addition to having deep functional silos, it may be easy for them to fall into the following pitfalls: believing that they already understand the market from adjacent products, employing a one-size-fits-all approach to launch or replaying what worked before, or presuming that the learning curve is short for existing staff to build expertise in a new disease, therapy area, or market.
The case study (see sidebar, “Clinical superiority alone does not guarantee success”) illustrates the interplay among different reasons for missing expectations and articulates a few principles for a successful launch.
Product X was a first-in-class agent from a large pharmaceutical company in a crowded cardiology market. The initial expectations for Product X were high due to its impressive clinical trial data, improved efficacy over the standard of care, and significant reduction in indication-associated acute events. However, early commercial results were disappointing, registering only one-tenth of industry analysts’ revenue forecasts. The product stumbled on multiple fronts.
This case example demonstrates that in the current landscape, a robust clinical profile is not enough; a sophisticated economic value proposition is a critical requirement to bring the payer community on board. Real-world data is essential for gaining a place in treatment guidelines and influencing physician practice. And an impactful marketing plan to educate physicians and consumers about the new drug is necessary to overcome inertia and facilitate adoption of the new standard of care.
In our view, many factors contributing to missing expectations can be mitigated with meticulous planning, innovative approaches to market intelligence and customer engagement, and disciplined execution. Here’s what can be done:
The increasing diversity of product types and the market segments they serve calls for comprehensive disease area expertise, deep relationships with the clinician and patient community, a thorough understanding of the value drivers for key stakeholders (especially payers), and a nimble launch execution. Companies with these capabilities will be well-positioned to improve their overall launch performance.
The study included all new drugs approved in the United States between 2012 and 2017 for which data was available in EvaluatePharma. Drugs with low actual sales (less than US$50 million over the first three years), diagnostic agents, and biosimilars were excluded from the project scope.
For this analysis, we considered analyst forecasts to be a general reflection of market expectations for new products and used historical consensus forecasts, as identified by EvaluatePharma, issued at the time of FDA approval. Later revisions to the original forecasts based on actual sales were not considered.
Actual sales and analyst projections for the United States were captured for three years. Year 1 (launch year) is considered from the first year when sales data was reported by the company. For products approved and launched in the last quarter of any calendar year, we treated the following calendar year as year 1 (or launch year): For example, for products approved and launched in the fourth quarter of 2012, 2013 is year 1 in our analysis.
In case of product transfer or company acquisition, actual sales data is captured from both the originator and the acquiring company, while company characteristics are from the company responsible for product launch.
We used the chi-square test to measure statistical significance between comparison groups.
To identify the reasons for missing analyst expectations, we used analyst reports from Thomson One and news reports from Vantage (EvaluatePharma). The information in the reports was available for 50 out of 54 drugs that missed expectations.
Performance against analyst expectations:
Company size based on annual revenue at the time of each product launch:
New drugs: New molecular drug entities (NMEs), including New Drug Applications (NDAs) and Original Biologics License Applications (BLAs) approved by the FDA between 2012–17
Specialty drugs: Drugs classified as specialty by major payers14
Orphan drugs: Drugs whose initial indications received orphan designation from the FDA
Rare disease: Diseases with extremely low prevalence (fewer than 6.37 in 10,000 people)15
Figure 6 details product characteristics for the drugs included in our study and figure 7 shows launch performance by therapy area and the size of the therapy area as a share of all new drugs.
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Biopharma companies face significant challenges in the development of successful market access strategies in an increasingly complex, constrained landscape. Deloitte Consulting LLP's Market Access Excellence (MAx) framework is a codified framework of 10 strategic choices which help cross-functional brand teams to: generate insights and make key strategic choices targeting payor stakeholders; align teams on brand access potential; improve analytical rigor in market access decision-making; and assess whether the financial and gross-to-net analysis is consistent with brand characteristics and market realities.