The term ‘blockbuster’ regarding pharmaceutical drugs has been in use since the mid-1980s, describing medicines produced usually by the sector’s major players that generate over US$1bn in annual revenues.
Examples in recent years include Lipitor, a treatment for high cholesterol made by US giant Pfizer Inc (NYSE:PFE), and Advair, an inhaler made by GlaxoSmithKline PLC (LON:GSK).
However, three and a half decades of inflation since then means a billion doesn’t go as far as it used to, rendering the standard measure used to evaluate the success of pharmaceutical products extremely outdated.
Using US consumer inflation data, it can be calculated that the modern day equivalent of U$1bn in 1985 is around US$2.4bn, an increase of nearly 140%.
This means it is now over 50% easier for a pharmaceutical firm to achieve ‘blockbuster’ status for a treatment than it was 35 years ago, given that the price of the drugs themselves will also have increased in line with inflation.
With this in mind, it may be time for analysts to start citing a figure closure to US$2.5bn in annual revenues for a drug to achieve ‘blockbuster’ status.
However, even with this higher target, the world’s most popular pharmaceuticals would still smash past the ‘blockbuster’ threshold, with arthritis medication Humira, manufactured by US biopharma AbbVie Inc (NYSE:ABBV), the best-selling drug of 2018, raking in US$19.9bn in sales for that year alone.
Do ‘blockbusters’ matter?
However, it could be argued, with the rise of more ‘personalised’ forms of medicine and the limitations placed on ‘blockbuster’ drugs by patent time limits, whether counting how many US$1bn+ products a pharma firm produces is the best way of measuring its value.
Adam Barker, an analyst at Shore Capital, told Proactive that in the future many pharma companies will move away from ‘blockbuster’-type drugs covering large numbers of patients and instead shift toward more effective, specialised medicines that are priced higher but also target more specific patient niches.
“Over time pharma companies might end up with fewer ‘blockbuster’ drugs as personalised medicine comes to the fore”, Barker says.
He thinks that this shift will bring new requirements for more effective treatments to justify higher drug prices needed to maintain revenues among smaller groups of patients.
“It’s not just about a mass marketing campaign any more, it’s about the data and [getting approval from] the key opinion leaders in the field”, he says, with products such as orphan drugs, treatments for very rare diseases, at the forefront of this shift as their effectiveness and limited market justify higher prices.
“Gone are the days of offering tiny incremental benefits, buyers want to see superior clinical advantages,” Barker concluded.