When drugmakers look to milk their existing cash cows just a little more, what’s the best strategy? Although pediatric exclusivity can certainly boost cash flow, tinkering with a drug’s underlying science may actually yield more long-term value, according to a report by Cutting Edge Information, which queried 28 drugmakers as part of its study.

What the industry likes to call life cycle management can be pursued through different means, of course. And this includes pediatric exclusivity, new indications, new formulations, patent retention, next generation versions, authorized generics or a form of strategic pricing. But each approach comes with a price. For instance, four of the strategies require clinical trials.

As the chart indicates, pediatric exclusivity is the most profitable - earning $130 for each $1 spent - and requires relatively small trials for an additional six months of market exclusivity. For the biggest sellers, of course, those six months can be worth huge amounts of money. One exec confessed his company once gained pediatric exclusivity with just 10 days left before the patent expired, but that was worth an an extra $550 million in sales.

Nonetheless, drugmakers often lack the time to complete such trials. And when trials yield unanticipated shortcomings, brand teams may have less time to come up with back-up plans. One the other hand, new indications, different formulations and next-generation versions take longer to execute than pediatric exclusivity.

Yet while their return on income is not as high as pediatric exclusivity, the increase in net revenue can exceed other options. Moreover, new formulations or next-generation products can presumably offer financial gains that last longer than pediatric exclusivity. For those cannot see the chart, the return for new indications was $29.92 for each $1 spent, while new formulations generated $26.20 for every $1 spent. At the other end of the spectrum, authorized generics yielded $10.80 and pricing offered a $10 return for each $1 spent. A next-generation med returned $11.33.

cow thx to jelleS on flickr