ResearchWatch

This issue’s review of recently published papers relevant to pharmaceutical and medical technology markets is especially diverse and rich.

We start with a long term historical perspective of one way in which the pharmaceutical industry has shaped society (1). Here, the author argues that marketing decisions, rather than scientific innovations, have guided the development and positioning of contraceptive products in recent years. She reviews what she calls the stalled progress in contraceptive development in the decades following the advent of the Pill in 1960 and then examines the fine-tuning of the market for oral contraceptives in the 1990s and 2000s. She takes a US perspective, where she sees birth control as having been pitched as an individual solution, rather than a public health strategy, and the purpose of oral contraceptives was understood by manufacturers, physicians, and consumers to be the prevention of pregnancy, a basic health care need for women. In the author’s view, since 1990 drug industry's view of the contraception business has shifted and this has been brought about by two factors: first, the industry's move away from research and development in birth control and second, the growth of the class of medications known as lifestyle drugs. This is a challenging paper and will interest anyone who cares about the relationship between society and the pharmaceutical industry.

Our second paper also looks at the pharmaceutical industry’s connection to society, albeit from a different, regulatory perspective (2). This paper investigates how regulation impinged on the launch strategies of international pharmaceutical corporations for new molecules across the main OECD markets between 1960 and 2008. Comprehensive data sets are used to analyze the international diffusion of 845 molecules from 14 different therapeutic categories. The paper focuses on two main regulatory changes that substantially reshaped the barriers to entry: the U.S. Hatch-Waxman Act in 1984, and the establishment of the European Medicines Agency (EMA) in 1995. The authors find that legal transaction costs have a significant impact on timing of launch. For example, stringent market authorization requirements for new pharmaceutical products in the United States after 1962 resulted in a significant U.S. drug lag in the introduction of pharmaceutical innovation vis-+á-vis Europe from 1960 to 1984. However, this was countered by financial incentives stemming from the 1984 Hatch-Waxman Act proved effective in closing this lag. Further, they find that a more streamlined EMA regulatory approval process reduced barriers to entry in Europe, thereby enabling quicker diffusion of pharmaceutical products but a marked pattern of delay in the adoption of innovation is still evident due to local differences in pricing regulations. Finally, they observe that any new molecule launch takes place first in higher-priced European Union (EU) markets as a result of the threat of arbitrage and price dependency across EU Member States. For anyone with an interest in the global strategies of pharmaceutical companies, this is a fascinating paper.

Staying with pharmaceutical strategies, our third paper (3) looks at the way research-based companies defend against generics. This research provides an empirical comparison of the results of three brands' marketing defence strategies used in advance of generic brands entering the market. It uses a data set containing 243 weeks of scanned sales for 21 generic brands to assess the effectiveness of each brand's defence strategies in deterring entry and limiting the market share of these generic brands. The authors find that several marketing mix components were effective in limiting the impact of generic brands but what was critical to each component's success was ensuring that they were implemented before the launch of the generic brands. As the authors point out, this research has the limitation of being confined to a category of pharmaceutical allergy brands, which may limit generalisation of the findings. But even so it has two implications for managers. First, it will encourage managers to move from implementing strategies in reaction to a competitor launch to implementing strategies in advance of their entry. Second, it provides insights into the effectiveness of several strategic options for brands facing the entry of generic brands. For anyone facing generic competition, this is a great paper.

Moving to medical devices and technology, our fourth paper considers the issue of coverage (4). This quantitative analysis of real-world coverage decision-making offers insights into the revealed preferences of appraisal committees. The aim of this review paper was to structure empirical evidence of coverage decisions It uses data from several electronic databases, key journals and decision committees Each study was then categorized by the scope of decision-making. In total, thirty-two studies and seventy-two variables were identified. The authors conclude that research was dominated by analysis of decision outcomes and appraisal criteria and that, although common approaches were identified, the complexity of coverage decision-making will continue to challenge empirical research and medical technology companies. This paper is an essential read for anyone involved in medical technology market access.

Staying with market access, our fifth paper considers payment and delivery systems in and medtech (5). The authors point out that, for decades, medical device and specialty drug makers have produced a steady stream of breakthroughs and incremental improvements, from cancer therapies to orthopaedic joint replacements, drug-eluting stents, and cardiac pacemakers. In their view, these advances were financed by a fragmented health care system that paid for whichever clinical technologies were favoured by physicians without strong concern for cost but now hospitals, health systems, insurers, and policy makers are embracing payment reforms that seek to control costs and foster uniformity in the adoption of new drugs and devices. This article explores payment reforms that will have an impact on the medical technology industry and describes opportunities for the industry to flourish in this new, more financially constrained landscape. Again, this is an important paper for medtech market access people.

Our sixth paper offers a complementary view to our fifth (6). It considers the effect of insurance expansion on the diffusion of new technologies, not currently a well-understood phenomenon. The authors’ view is that an expansion of insurance coverage may provide a motivation for R&D investment in medical technologies and that, although risk pooling through insurance gives rise to greater affordability for existing treatments and becomes a volume driver of new treatments, it may also influence provider reimbursement through a monopsony purchaser effect and related cost control measures. However, the impact that insurance has on technology availability and R&D investment, and more generally on the adoption of new technologies, remains an unexplored empirical question. This paper presents evidence of a link between insurance and technology diffusion using OECD panel data and taking advantage of a dynamic specification structure. Our empirical estimates indicate that higher degrees of private expenditure on health care correlate with higher levels of R&D in health care. This is consistent with the hypothesis forwarded by Weisbrod that increasing insurance coverage boosts technology adoption. However, the findings also suggest that increasing public funding of health care appears to lower technological adoption, which is, of course, consistent with the exercising of monopsony power and an objective of cost containment Along with the preceding two papers, this provides thought-provoking research for innovative and generic companies alike.