The difference was driven mainly by increased prescribing rather than a clear rise in average cost per prescription.
The findings suggest that the U.S. pharmaceutical market became more commercially favorable to pharmacologically novel drugs during the period studied. However, the researchers did not examine whether these medicines produced better health outcomes than less novel treatments.
What researchers meant by “novel”
The study, published in Health Affairs, examined 20 years of data covering about 600 newly approved small-molecule drugs in the United States.
Rather than relying on general descriptions such as “breakthrough” or “innovative,” the researchers created measures of pharmacological novelty across three areas:
- how different a drug’s molecular structure was from earlier medicines;
- how unusual its biological target was; and
- how distinct its delivery and absorption characteristics were.
A biological target is the molecule or process in the body that a drug is designed to affect. Delivery and absorption refer to how the medicine enters the body, reaches its intended destination, and becomes available to produce an effect.
The researchers used information from ChEMBL, a public database of bioactive molecules, together with drug approval records from the U.S. Food and Drug Administration.
They then connected this information with prescribing and spending data from the Medical Expenditure Panel Survey and rebate-adjusted revenue estimates from SSR Health.
Each drug was placed into a low-, medium-, or high-novelty group for each of the three measures.
A clear change around 2013
Before the early 2010s, revenues for highly novel drugs and less novel products followed more similar patterns.
That began to change around 2013.
From 2013 through 2019, average gross and net revenues grew substantially faster for drugs in the high-novelty groups. The difference remained even after the researchers estimated the rebates and discounts that manufacturers provided to health plans and pharmacy benefit managers.
One of the clearest examples involved biological targets. According to the USC Schaeffer Center, average gross revenue for drugs with highly unusual therapeutic targets rose from about $400 million to $1.6 billion by the end of the decade.
Across the different novelty measures, highly novel drugs generally gained revenue much faster than medicines rated as having medium or low novelty.
Greater use was the main driver
The researchers also examined whether the growing revenue gap came from higher prices or increased use.
They found that prescriptions for highly novel drugs increased substantially. Prescribing of less novel medicines generally remained flat or declined.
This suggests that the revenue growth was mainly connected to greater utilization. In other words, highly novel drugs were being prescribed more often.
The study did not find that a faster rise in average cost per prescription was the main reason these medicines earned more revenue.
That does not mean drug prices were unchanged or unimportant. It means that the widening revenue difference between the novelty groups was explained mainly by prescribing volume rather than a separate surge in average cost per prescription.
The data measured prescriptions, not the number of individual patients. It would therefore be too strong to conclude that the higher revenue necessarily came from a corresponding increase in the number of people receiving each drug.
Why might the market have changed?
The study did not establish exactly why highly novel drugs began gaining revenue faster. However, the researchers identified a possible explanation involving pharmacy benefit managers, commonly known as PBMs.
PBMs help manage prescription drug coverage for insurers and employers. They negotiate rebates with manufacturers and influence which drugs are included on insurance formularies.
When several medicines offer similar treatment options, a PBM may exclude some of them from a preferred formulary while negotiating discounts from competing manufacturers.
Highly novel drugs may have fewer close substitutes. This could make them less likely to be excluded and may have contributed to their increased use.
The timing supports this possibility because the revenue shift occurred as restrictive formulary policies became more common. However, the study did not prove that PBM decisions caused the change.
Other developments in medical research, regulation, insurance coverage, prescribing practices, or the types of drugs entering the market may also have played a role.
Novelty is not the same as better medicine
An important limitation is that the study measured pharmacological novelty, not clinical value.
A drug can use a completely new biological mechanism while providing only a modest improvement for patients. At the same time, a medicine that closely resembles an existing treatment may still offer meaningful benefits.
For example, a follow-on drug may:
- cause fewer side effects;
- work better for a particular group of patients;
- be easier to take;
- require fewer daily doses; or
- provide another option when an existing medicine is not tolerated.
The researchers did not compare survival, symptom improvement, quality of life, safety, or other clinical outcomes across the novelty groups.
The findings therefore show that more pharmacologically novel drugs became more commercially successful during the period studied. They do not show that every highly novel drug was more effective or more valuable to patients.
What it could mean for pharmaceutical companies
Drug development is expensive, lengthy, and uncertain. Companies must decide whether to pursue new biological mechanisms or develop treatments based more closely on existing approaches.
The study suggests that, from 2013 through 2019, the commercial rewards increasingly favored drugs that differed more substantially in their structure, target, or delivery.
If that pattern continued, it could give manufacturers a stronger financial reason to invest in pharmacologically novel treatments. However, the study did not directly examine company research decisions, development budgets, or executive expectations.
It also cannot show whether the same revenue pattern continued after 2019.
Implications for investors
The findings may also encourage investors to pay closer attention to the scientific novelty of drugs in a company’s development pipeline.
However, novelty alone does not determine whether a drug will be approved, covered by insurers, widely prescribed, or commercially successful.
Clinical trial results, safety, manufacturing costs, competition, patent protection, market size, insurance coverage, and pricing can all affect a drug’s prospects.
The researchers did not study stock performance or test whether pharmacological novelty can be used as a reliable investment strategy.
What the findings mean for drug spending
Public discussion about pharmaceutical spending often focuses on manufacturers raising prices.
The new research presents a more detailed picture. During the period examined, greater use of highly novel drugs was a major contributor to their revenue growth.
This does not reduce concerns about affordability. A drug can become more widely prescribed while still creating large costs for patients, insurers, employers, or public healthcare programs.
Instead, the findings show that pharmaceutical spending can rise for more than one reason. Prices matter, but so do the number of prescriptions written and the types of medicines doctors use.
Follow-on drugs can still be valuable
The study does not conclude that so-called “me-too” drugs have no value.
Similar medicines can expand treatment choices and create competition within a drug class. They may also allow doctors to select a treatment that better suits an individual patient.
Stronger price reductions often occur later, when patent and regulatory protections expire and generic versions enter the market. The FDA has found that greater competition among generic manufacturers is associated with lower generic drug prices.
Pharmacological novelty and patient value should therefore be treated as related but separate questions.
Important limitations
The study has several limitations that affect how its findings should be interpreted.
- It examined branded small-molecule drugs in the United States between 2000 and 2019.
- It did not examine biologic medicines, gene therapies, or cell therapies.
- Its conclusions may not apply to pharmaceutical markets outside the United States.
- It identified an association rather than proving what caused the revenue shift.
- It did not measure whether highly novel drugs produced better clinical outcomes.
- It cannot show whether the trend continued after 2019.
Further research will be needed to determine whether similar patterns appeared after 2019, particularly as biologic drugs, precision medicines, gene therapies, and new drug-discovery technologies became more prominent.
A measured but potentially important shift
Between 2013 and 2019, U.S. revenues grew faster for small-molecule drugs rated as more pharmacologically novel.
The difference was driven mainly by increased prescribing rather than a clearly faster rise in average cost per prescription.
The results provide evidence that the market became more commercially favorable to drugs with unusual molecular structures, biological targets, or delivery methods during the period studied.
They do not prove that these medicines delivered better patient outcomes, that formulary policies caused the change, or that the trend continued beyond 2019.
Even with those qualifications, the study adds useful evidence to the debate over what the pharmaceutical market rewards—and whether companies can earn stronger returns by developing drugs that differ substantially from existing treatments.
Sources
- Jiao, B., Haworth, I. S., and Lakdawalla, D. N. “Highly Novel Drugs Outperformed Less Novel Drugs in Gross and Net Revenues in the US, Driven Primarily by Utilization, 2013–19.” Health Affairs, August 3, 2026.
- USC Schaeffer Center for Health Policy & Economics. “Pharmaceutical Spending Is Shifting Away From ‘Me-Too’ Drugs.” August 3, 2026.
- U.S. Food and Drug Administration. “Generic Competition and Drug Prices.”
