Characterizing Markets for Biopharmaceutical Innovations: Do Biologics Differ from Small Molecules?

Forum for Health Economics & Policy, Vol. 13: Issue 1

American Society of Health Economists (ASHEcon) Paper

45 Pages Posted: 7 Jul 2011 Last revised: 27 Oct 2011

See all articles by Mark R. Trusheim

Mark R. Trusheim

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Murray Aitken

IMS Institute for Healthcare Informatics

Ernst R. Berndt

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Date Written: June 1, 2010

Abstract

While much has been written about the distinctions between biologics and small molecules in terms of their scientific, manufacturing and regulatory experiences, relatively little has been published comparing their clinical and commercial experiences. Employing a data base encompassing all 96 biologics and 212 small molecules newly launched in the U.S. between 1998Q1 and 2008Q4, we compare their downstream clinical and commercial characteristics. Substantial heterogeneity occurs across therapeutic classes. Biologics are more concentrated than small molecules in their therapeutic class composition, but have obtained FDA indication approvals in 13 of 15 classes. While average delays between FDA approval and first observed sales revenues are similar, biologics are twice as likely as small molecules to be Orphan Drugs, are slightly more likely to be designated FDA priority rather than standard review status, and gain slightly more supplemental indication approvals. Although 9.4% of new small molecules permanently exited the market for a variety of reasons, 7.3% of new biologics exited, but 26% of biologics had black box warnings compared to 20% of small molecules. Both biologics and small molecules take 21-22 quarters from launch to reach $100 million in real revenues. Small molecules have an initially more rapid uptake, but thereafter biologics’ mean revenues tend to be slightly greater than for small molecules. While launch prices for biologics are commonly perceived as being greater than for small molecules, price growth per standard unit is generally greater for small molecules than biologics, with rates of price growth increasing for small molecules in the first five years since launch, and decreasing thereafter. We conclude that the market dynamics of biologics differ substantially from those of small molecules, although therapeutic class composition plays a major role.

Keywords: biologic, pharmaceutical, price

Suggested Citation

Trusheim, Mark R. and Aitken, Murray and Berndt, Ernst R., Characterizing Markets for Biopharmaceutical Innovations: Do Biologics Differ from Small Molecules? (June 1, 2010). Forum for Health Economics & Policy, Vol. 13: Issue 1, American Society of Health Economists (ASHEcon) Paper, Available at SSRN: https://ssrn.com/abstract=1880601 or http://dx.doi.org/10.2139/ssrn.1880601

Mark R. Trusheim (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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Murray Aitken

IMS Institute for Healthcare Informatics ( email )

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Ernst R. Berndt

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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