I don't think it's a matter of propecia losing its effectiveness as a drug in the sense that it stops inhibiting DHT production. I think it's more related to the fact that even though propecia inhibits DHT production, it doesn't inhibit all of it. This means that the processes that actually cause male pattern baldness continue unchecked, but at a slower rate and really not all that noticeable to the person taking the drug.
So, the process continues and you continue to go through sheds until after a particular shed the hair simply can not grow in that area anymore as the downstream responses to DHT have finally caught up with you.
Thus, you lose that hair that you might have regrown and you see a decrease in propecia effectiveness as the inevitable catches up to you and your scalp continues to have the perifollicular fibrosis and collagen deposition that many hair loss researchers claim is the final cause of hair loss.
That's just a thought, however, and it hasn't been proven.