Everywhere you look in biopharma, you see drug duopolies. But why is this such a common structure?

Some thoughts below.

1. As long as they're not tasked with building market awareness from scratch, first movers do have a huge advantage:

• A clear path to capture new prescriptions and begin establishing mindshare amongst providers & patients
• Patients well controlled on your drug are unlikely to switch, even as new entrants come to market
• An opportunity to establish the most comprehensive long-term clinical dataset

It helps that most commercial assets land in the hands of Pharma, who have the experience, relationships and S&M engines to coordinate global launches

2. PBMs generally prefer market incumbents.

Here's how that typically plays out:

• First movers capture the most volume (since there are limited competitors)
• As noted above, once a patient is stable on a drug, it's unlikely they will switch, so that volume tends to be very sticky
• Manufacturers will use that volume as leverage to contractually secure preferred formulary status with different PBMs; Pharma can also leverage the rest of their portfolio via bundled contracting
• These novel products with limited competition can command a premium WAC, which increases the $ rebate that PBMs receive (see math below)
• Even if an equally effective, lower-priced competitor launched, the lack of volume means that the PBM makes more money with the higher priced incumbent

3. As a function of these payor dynamics and other barriers to entry, many late-to-market assets end up targeting more niche patient segments, such as populations refractory to the first movers.

This strategy of differentiation offers an easier path to initial volume, but essentially concedes market leadership to the first movers, who continue to dominate the frontline patient population. However, there are nuances here (i.e. follow-on entrants establishing H2H superiority) which can change things

4. The multiple discovery theory.

Scientific breakthroughs rarely happen in isolation. This "multiple discovery" phenomenon, combined with fast-followers who quickly pivot towards new innovations, explains why we typically see at least two major players emerge in new therapeutic areas, even as subsequent market dynamics tend to limit the total number of successful competitors beyond that

5. Lastly, incumbent innovation.

First movers rarely rest on their advantage - usually running many (sometimes thousands) of follow-on studies to expand into new indications, identify synergistic combinations, innovate around dosing / convenience and so on