Pricing for pharmaceuticals has never been more complex, and establishing optimal pricing across key strategic markets, with different evidentiary requirements, standards of care, comparator prices and assessment processes, poses enormous challenges for the industry. In this article, we examine the major factors influencing pricing, and chart a course for success by highlighting three key components for pricing strategy development.
Weighing multiple factors to determine optimal launch pricing without tipping the scales
The pricing of innovative pharmaceuticals and medical technologies is coming under increasing scrutiny, with payers, prescribers and the public challenging the relationship between incremental clinical benefit and increasing cost.
Even when high-cost therapies deliver significant improvements in health outcomes and may be considered to be cost-effective, payers’ focus will tend to shift to budget impact and financial sustainability.
Ultimately, a complex mix of interrelated factors, including level of unmet need, societal and clinical demand, unit price, the level of clinical benefit, budget impact, the price points of relevant comparators and the potential value of cost-offsets are driving access and uptake.
So determining optimal launch pricing has to take account of these drivers, together with the views and behaviors of payers, physicians and patients.
Never before has there been more pressure on pricing for pharmaceuticals:
- Just one chance to get it right. Once a pricing strategy is in place, course corrections are difficult and sometimes impossible; for example, price increases in ex-US markets. Clearly, leaving money on the table is a major concern, but exceeding what may be considered to be an acceptable price threshold could be as bad, if not worse. A subsequent change in pricing strategy may fail to repair payer and prescriber perceptions and remove access and utilization hurdles.
- More competitive markets. Many indications, even in oncology and specialty care, have become commoditized at one end, and highly competitive at the other – with brands, generics and biosimilars all playing a role. Standing out from the crowd from a value perspective can be challenging. Thus pricing in line with value perception becomes even more important.
- Continuously growing price pressure. As healthcare budgets continue to rise, payers have become increasingly focused on value for money, acquisition costs, budget impact and financial sustainability. One response to such challenges has been to shift the budgetary risk to manufacturers, either through contracting and price-volume and other financial agreements, or linked to outcomes, using a variety of pay-for-performance models. In some markets, such as the US, cost-shifting to patients has created additional access hurdles.
- Prescriber price sensitivity. Beyond payer influences on utilization, prescribers are more aware than ever of drug prices and more likely to chime in on discussions in social media. In the US, value frameworks have become an instrument to convey different perspectives of measuring value, which payers consider when making drug coverage decisions.
With these challenges in mind, we offer three components to consider for ensuring the most robust pricing strategy input:
The overall pricing research approach must be tailored to the strategic objectives for your product
Earlier-stage and a less complex marketplace suggest a streamlined, quick turnaround approach with an essential sample of payers and a concise N sample with physicians, for example 30 by market, with a focus on direct pricing methods.
Launch strategy and/or highly complex/competitive markets require not just larger samples for payers and physicians (ideally 100/market), but also more sophisticated indirect methods; e.g., DCM and complex market models.
Pricing methods adequate for the research objectives
Direct methods, such as Van Westendorp and Gabor Granger, address fundamental price reaction, while indirect methods provide higher precision. For very early development assessments, pure price/value perception can be sufficient, while a more intricate profile requires a multi-method approach. Indirect methods, such as adaptive conjoint, are also the method of choice for a larger number of product concepts to test.
Integrated findings representing all P&R stakeholders
It is critical to have an adequate approach that combines price sensitivity of payer restrictions, physicians’ reacting to restrictions and patient response to out-of-pocket costs to derive a resulting price/volume relationship and identify optimal pricing.
A unique profile to support quantitative pricing research
Through our research, we have developed a tried-and-tested pricing approach addressing objectives customized for a customer’s specific product. Our approach leverages country-level price and market access expertise in all key strategic and emerging markets with an integrated team of experts in healthcare, quantitative methods and primary research. Moreover, our method is direct and efficient in league with the project team. We’ve learned that through our quantitative pricing approach, we can provide the most in-depth understanding of the pricing and reimbursement opportunity of your product.
How can you unravel the complexities of pharmaceutical launch pricing?
Attend our May 16 webinar, “The value of choosing the right approach to pharmaceutical launch pricing,” hosted by market access and pricing experts, Tim Fitzgerald and Michael Kuehn, to join a discussion that includes a fresh perspective on pharmaceutical pricing, supplemented with examples/case studies and an interactive Q&A.