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It’s the Planck constant of the pharmaceutical industry: if you’re going to build a commercially successful drug, it needs to be either first- and/or best-in-class. Either one can create incumbent market share leaders – and incumbents in drugs, like incumbents in the legislature, are enormously difficult to dislodge. As a consequence, the first/best-in-class principles are used to justify enormous risk and enormous expenditures. They’ve even created a market for priority review vouchers.

And yet they’re becoming less relevant — or at least relevant for shorter periods of time.

In a world dominated by industrial-style purchasing of health care, pharmaceuticals included, the only viable standard for commercial success will become best value in class, defined in apples-to-apples comparisons of efficacy, safety, usability, and economics. Incumbency – a key advantage of which is to maintain price premiums – is in fact a primary target for payors who recognize its costs and who are now gathering more and more of the tools they need to counter it.

Think about drugs from the insurers’ point of view. Nearly all of the increase in medical spending is due to the increasing spending on specialty drugs. (See Exhibits 1 and 2.) Plans’ traditional customers – the employers –are screaming for solutions. Meanwhile, plans’ fastest growing and most desirable new customer base – relatively healthy consumers joining through health exchanges or Medicare Advantage plans – base their decisions first and foremost on plan price. And specialty drugs are an increasingly important component of the insurance premium – and for plans, the most unpredictable.