Recent research indicates that most of the value created in the pharmaceutical industry comes from marketing compounds that improve on the effectiveness of an established drug, have fewer or less intense side effects, or can be used against a broader range of diseases. But which of these follow-on strategies works best? In many therapeutic classes, the latter two can drive commercial success more often than the former, according to a McKinsey study.

Our study also confirmed the idea that the first drugs to treat an ailment often fail to create more value than their later-to-market competitors do. We found that fast- followers—drugs marketed 2 to 5 years after their first-in-class predecessors—typically produce significantly more revenue. Products that reflect a strategy of differentiation and are launched 5 to 15 years after the original drug, and latecomers that reach market more than 15 years later, have generated present-value sales as high as those of their first-in-class rivals (Exhibit 1).

Moreover, being first isn't essential to achieve blockbuster status (defined as sales greater than $1 billion a year). Of the 32 such drugs introduced over the past decade, only...