PRICING STRATEGY

M. Pharm + MBA Semester V

7th October 2023
Meaning of Pricing
• Pricing is a process of fixing the value that a manufacturer
will receive in the exchange of services and goods.

• Pricing method is exercised to adjust the cost of the

producer’s offerings suitable to both the manufacturer and
the customer.

• The pricing depends on the company’s average prices,

and the buyer’s perceived value of an item, as compared
to the perceived value of competitors product.
Meaning of Pricing
• Every businessperson starts a business with a motive and
intention of earning profits. This ambition can be acquired by
the pricing method of a firm. While fixing the cost of a product
and services the following point should be considered:

• The identity of the goods and services

• The cost of similar goods and services in the market
• The target audience for whom the goods and services are
produces
• The total cost of production (raw material, labour cost,
machinery cost, transit, inventory cost etc).
• External elements like government rules and regulations,
policies, economy, etc.,
Basic Pricing Principles
• Customers are induced when the value of the product is clearly
communicated and they understand what it is they are buying.

• The customers can be induced to accept any price, but they will
accept price that can be supported through appropriate
communication and demonstration of value

• Some customers can be price sensitive, even when customers

understand value of a product, they are likely to seek a lower price

• Failing to understand and establish the value of product is perhaps

the single most serious marketing mistake.
Basic Pricing Principles
• When the value of a product is clearly understood and established by
both the customer and marketer, price is seldom a problem

• If the value of the product is not clear to the customer, the price will
always be perceived as too high

• Every sales representative know that when a customer says, “Your

price is too high” the real message is, “I don’t understand value of
your product”

• Lowering the price of a product for which the customer doesn't

understand the value will not guarantee more sales-it just generates
lower price
Basic Pricing Principles
• The fundamental objectives of business strategy is to offer customers
enhanced value so that prices can be raised substantially above
costs

• Customers select suppliers that offer superior value

• Value is a combination of price and the relative functional and

psychological advantages that supplier’s brand offers.

• Companies seek to provide superior offers through innovation, high

quality, speed and timely delivery and service and other product
enhancements, so that they can be a preferred suppliers, rather than
having to compete on low prices and margin erosion
 Developing Price Strategies & Programs-Nine Price Quality Strategy
Competition Between price quality segment

• PRICE P
1. Premium Strategy 2. High Value Strategy 3. Super-value R
O
High Strategy
D
U
4. Overcharging 5. Medium Value 6. Good value C
Strategy Strategy Strategy T
Medium
Q
U
7. Rip Off Strategy 8. False Economy 9.Economy Strategy A
L
Low Strategy I
T
Y
Price Should Align with Value

The firm has to consider many factors in setting price policy

Price should align with value
1. Price must be set in relation to the value delivered and
perceived by the customers

2. If the price is higher than value received, the company

will miss potential profits

3. If the price is lower than the value received, the

company will fail to harvest potential profits
Setting Pricing Policy
1. Selecting the pricing objective

2.. Determining Demand

3. Estimate Costs

4. Analyzing Competitors’ costs, prices,

& offers

5. Selecting a pricing method

6. Selecting the final price

1. Selecting the Price Objective
1. Company decides where it wants to position market
offering?
2. Higher market share
3. High price
4. High profit
5. Medium price medium profit
6. Brand image
7. Quick & High growth
8. Differentiated product, high price
Selecting the Price Objective
• The company first has to decide what it wants to
accomplish with the particular product.

• The company has to ensure:

 Right selection of target markets

 Market positioning carefully
 Marketing mix strategy, including price will be straight
forward
Smart Business Strategy-Pricing & Value Perspective
• Glaxo introduced Zantac to attack market incumbent Tagamet.
The conventional wisdom was as the ‘second one in”, Glaxo
should price Zentac 10% below Tagamet.

• CEO of Glaxo knew that Zantac was superior to Tagamet in

terms of fewer drug interactions and side effects and more
convenient dosage.

• Glaxo introduced Zantac at a significant price premium over

Tagamet and still gained the market leadership
2. Determining Demand

Price Sensitivity

Estimating
Demand Curves

Price Elasticity
of Demand
Factors affecting Price Sensitivity
Buyers are less price sensitive when:

1. Unique value factor: when product is more unique

2. Substitute awareness effect: when they are less aware of
substitute
3. Total expenditure effect: lower the expenditure is a ratio to their
income
4. Difficult expenditure effect: when they cannot easily compare the
quality of substitute
5. End to benefit effect: the less the expenditure is to the total cost of
the end product
Factors affecting Price Sensitivity
Buyers are less price sensitive when:

6. Shared cost effect: when part of the cost is borne by another party

7. Sunk investment effect: when the product is used in conjunction with

assets previously bought

8. Price quality effect: when the product is assumed to have more

quality, prestige or exclusiveness.

9. Inventory effect: when they cannot store the product

Determining Demand- Price Elasticity Demand

Each price will lead to a different level of demand thus have a

different impact on marketing objectives of the firm.
Estimating Demand Curves
Most companies make some attempt to measure their demand curves.
The options available are:
 Statistically analyzing past prices, quantities sold, and other
factors to estimate their relationships.
 Conduct price experiments.
 Ask buyers how many units they would buy at different
proposed prices
In measuring the price-demand relationship, the market researcher
must control for various factors that will influence demand like
The competitor's response
Changes in other marketing-mix factors besides price
Price Elasticity Of Demand

If demand hardly changes with a small change in price, we say

the demand is inelastic.

If demand changes considerably, demand is elastic.

Demand is likely to be less elastic under the following conditions:

 There are few or no substitutes or competitors;
 Buyers do not readily notice the higher price;
 Buyers are slow to change their buying habits;
 Buyers think the higher prices are justified.
Types of Cost and Production
 Fixed costs or overheads
 Variable costs
 Total costs
 Average cost
 Cost at different levels of
production
3. Estimating Costs

Types of Costs

Accumulated
Production

Activity-Based
Cost Accounting

Target Costing
Cost per Unit as a Function of Accumulated
Production
Cost behavior as a function of accumulated production

• The workers learn shortcuts

• The flow of material is improved
• Procurement costs are cut
• The result is that average cost tends to fall with
accumulated production experience
How you can drive competitors out of market?
• Firms compete in industry ARE T1, A & B
• T1 is lowest cost producer @ $ 8/unit having produced 400,000 units
• If all three competitors sell the calculator for $10/unit
• T1 makes $ 2 profit per unit
• A makes $ 1 profit per unit
• B breaks even

STRATEGY TO DRIVE COMPETITORS OUT

 T1 lowers price to $9/unit
 This will drive B out of market
 Even A may consider leaving the market
Experience Curve Pricing
Disadvantages:

 Aggressive pricing might give the product a cheap image.

 The strategy also assumes that the competitors are weak.
 Finally, the strategy leads the company into building more plants to
meet demand while a competitor innovates a lower-cost technology
and obtains lower costs than the market-leader company, which is
now stuck with the old technology.
 Most experience curve pricing focuses on manufacturing costs, while
all costs can be improved.
Assessing Price Competitiveness
• Developing a pricing strategy starts with the assessment of price
competitiveness and formulation of pricing objectives

• Which competitors in the market are seen by customers as offering

the best value.

• Value is a combination of price and perceived value

• Value is a combination of price and perceived quality

• Assessing value therefore requires research into how consumers

quality and alternative offers
Assessing Price Competitiveness
1. Identify the dimension of quality: Find out what product and service
attributes customers are looking for when they choose suppliers

2. Weight quality dimensions: Determine which of the attributes are

regarded as the most important by customers.

3. Measure competitors along dimensions: customers are the asked

to rate competitors’ offers along the dimensions of quality that have
been identified

4. Discover price/quality preferences: what are the combinations of

price and quality most preferred by customers
 ASSESSING PRICE & VALUE COMPETITIVENESS
COMPETIRTORS
Importan
ce
weight % Quality dimensions A B C X

35 Precision 6 5 4 6
25 Relaibility 6 6 3 4
15 Durability 5 3 2 5
20 Service 5 3 5 1
5 Delivery 2 5 5 5
Weighted Score 5.5 4.6 3.7 4.3
Actual price BP 29,000 21,000 15,000 22,000
Market share % 27 45 20 8
 VALUE MAP: ASSESSING PRICING COMPETITIVENESS

HIGH
R
E +30 Poor value Premium segment
L
A +20
A
T +10
I
V 100 Quality for price line
B
E Average
P -10
C
R -20
I
C -30
E Economy segment Good value
LOW
-30 -20 -10 100 +10 +20 +30
Inferior Superior

Relative Quality
Customers are influenced by
Supplier’s reputation for service, quality & reliability
Effectiveness of sales people, publicity, and advertising
Convey differential advantages the brand or company
possesses
SELECTING PRICING METHODS
Selecting Pricing methods
1. Cost based pricing or mark up pricing
2. Target Return Pricing/RoI
3. Bear even pricing
4. Competitive pricing
5. Value based pricing
6. Penetration pricing
7. Skimming pricing
8. Psychological pricing
9. Transfer pricing
10. Bench mark pricing
11. Ceiling price
12. Prices & marketing mix model
Selecting Pricing methods
13. Price discount & allowances
14. Pricing for new products
15. Pricing for patented products
16. Drug prices in Us
17. Prices for biologic/biosimilar products
18. NPPA/DPCO pricing policy
19. Promotional pricing
20. Discriminatory pricing
21. Product mix pricing
22. Initiating & responding to price changes
23. Responding to competitors’ price change
COST BASED PRICING
STRATEGY
What is Cost Based Price (Markup pricing)

• Cost-plus pricing is a strategy that adds a markup to a

product's unit cost to find the final selling price. It's one of
the oldest pricing strategies in the book and is calculated
based on just two things:

1. Cost of production
2. Desired profit margin
How to use the cost-plus pricing formula
• Calculate your total costs, including direct labor costs,
manufacturing, Distribution, logistics and shipping (Take fully
absorbed costs)

• Add the desired profit percentage to the total cost.

• This will give you the single unit price using the cost-plus
pricing method.
Cost/Mark up pricing?
• Variable cost per unit $ 10
• Fixed cost $ 300,000
• Expected unit sales 50,000

• Manufacturer’s unit cost is given by:

Fixed cost 300,000

• Unit cost = variable cost + -------------- = $ 10 + ------- = $16
Unit sales 50,000
Cost/Mark up pricing
• Manufacturer wants to earn a 20% mark up on sales. The
manufacturer’s mark up is given by:

• Unit cost
Mark up price = --------------------------------- = -$ 16/ 1-0.2 = $ 20
• (1- desired return on sales)
Cost Based Pricing
• Cost-plus pricing is a common pricing strategy used in the
pharmaceutical industry, where companies add a markup to the cost
of producing a drug to set the final price. Pharmaceutical companies
invest a significant amount of money in research and development,
clinical trials, and regulatory approval processes. As a result, the cost
of producing a drug is relatively high.

• For example, the development of a new drug can cost between $2.6
billion to $3 billion. The cost of producing a drug, including raw
materials, manufacturing, and distribution, can range from $0.10 to $5
per tablet/capsule. Pharmaceutical companies add a markup to the
production cost, which can range from 50% to 500%, to set the drug's
price.
Cost Based Pricing
• Retail price is Rs 100
• Less Retailer's margin @15% = Rs 15
• Distributor price: Rs 85
• Less Distributor’s margin@ 10%= Rs 8.50
• Ex factory price: Rs 76.50

• This type of pricing is done for old molecules where market is

very crowded & higher price can not fetch the required market
share
Advantages of cost-plus pricing

• There are a number of benefits to the cost-plus pricing

model if you’re working in the right market:

1. Cost-plus pricing strategy takes few resources.

• Cost plus pricing doesn't require a lot of additional market
research. Business owners are familiar with production
costs by adding up different invoices, labor costs and
overheads.

• can add a margin on top of these costs. This margin

should reflect what the market will accept.
Advantages of cost-plus pricing
2. Cost plus pricing model provides full cost coverage and a consistent
rate of return.

• Cost plus pricing ensures the full cost of creating a product or fulfilling
a service is covered. This is achieved so long as the business is
correctly adding up the costs per user or item. This allows the markup
to ensure a positive rate of return.

• Yet, many additional costs often can’t be accounted for, which results
in reduced margins. Fortunately, businesses can create a buffer
against surprise costs and fluctuations in demand by increasing the
arbitrary margin. Another advantage is that because your prices
remain inert, you can easily estimate revenue for a given month. You
can do this based on conversion history, marketing spend, etc.
Advantages of cost-plus pricing

3. Cost plus pricing hedges against incomplete knowledge.

Cost plus pricing can be beneficial when there is limited

knowledge of a customer's budget and no competitors in
the market. Essentially, the only data you have to guide
your pricing decision is the calculation or estimation of your
costs.

This allows you to push forward at least a starting price to

work from as the market and customer develop. It helps to
determine a set price that covers costs and provides a
reasonable profit.
Dis-advantages of cost-plus pricing

1. Cost-plus pricing strategy can be horribly inefficient.

The guarantee of a target rate of return creates little incentive for

cutting costs or increasing profitability. As the market and customers
continue to change, stakeholders easily become passive towards
pricing, creating laziness and atrophy of profits.
Dis-advantages of cost-plus pricing

. 2. Cost-plus pricing method creates a culture of profit

losing isolationism.

• This inward-facing approach discourages market

research. Although watching competitor prices isn’t the be
all and end all, it is a pretty important element of pricing.

• You should know how much the competing good costs

because it can affect your marketing and pricing
strategies. With no research, you have little to no data on
your customer's perceived product value (more in the last
point).
Dis-advantages of cost-plus pricing

3. Cost-plus pricing doesn’t take consumers into account.

Perhaps the biggest downfall of a cost-plus pricing model is that it
completely disregards the customer’s willingness to pay.

To make money, a customer must be involved. Customers are

essential to selling anything. Therefore, any pricing strategy that
ignores customer value is detrimental to the business's profitability.
This creates a vacuum that drains away all of the profit.

In summary, customers don't care about how much something costs

you to make. They understand there are costs associated with doing
business, but consumers care more about how much value you’re
providing
TARGET RETURN PRICING
Target Return Price
• Assumptions:

 Unit Cost $16

 Desired return on investment @20%
 Unit sale: 50,000

What is the formulae for ROI?

Target Return Pricing

Desired return x invested capital

--------------------------------
Target return pricing = Unit cost + Unit sales

0.20 x $ 1,000,000
= $16 + --------------------------------- = $ 20
50,000
Breakeven Volume
• Assumptions

Fixed Cost: $ 300,000

Product price: $ 20/unit
Variable cost: $10

How to calculate breakeven volume?

Break even Volume

• Fixed cost
Break even volume =-------------------------------
(price- variable cost)

$ 300,000
= ---------------------- = 30,000
$20- $10
Break-Even Pricing
1. Government tenders
2. Institutional business
3. The concern is not profit, but get volume
4. Get into large hospitals, pharmacies so positive impact
may come from out of hospitals
5. This type of pricing policies are not adopted for
research based products
COMPETITIVE PRICING
What is competitive pricing?
Competitive pricing means setting your prices at the same
(equivalent/parity pricing), slightly higher or slightly lower
than your competitors. Your pricing team will set an initial
item price by examining a competitor’s or group of
competitors’ prices. This process is known as competition-
based pricing.

• Competition-based pricing focuses solely on public

information about competitors’ prices, not customer value.
What Is Competitive Pricing?

• Competitive pricing is the process of selecting strategic price points to

best take advantage of a product or service based market relative to
competition.

• This pricing method is used more often by businesses selling similar

products since services can vary from business to business, while the
attributes of a product remain similar.

• This type of pricing strategy is generally used once a price for a

product or service has reached a level of equilibrium, which occurs
when a product has been on the market for a long time and there are
many substitutes for the product.
Competitive pricing advantages

• 1. It’s fairly simple

• If you’re in an industry with even one or two direct

competitors, you can implement a reasonable competitor-
based pricing strategy. In most industries, marketing and
product managers will have to do relatively little research
to find a competitive price. It is also possible to make
adjustments in prices by following tweaks made by
competitors.
Competitive pricing advantages

2. It’s low risk:

• If you have a fairly solid grasp on your product’s quality,

target audience and cost of production, this method will
most likely never lead to bankruptcy. It’s kept your
competitors afloat, so similarly, it should do the same for
you.
Competitive pricing advantages

3. It can be accurate:

In saturated industries like retail, competitive pricing can be

fairly accurate. After all, for most consumer products, there
are millions of customers and enough data to move pricing
closer towards a methodology based on market price and
market share.
Disadvantages of competitive pricing
1. It leads to missed opportunities
• The most common ways businesses raise their profits is
to increase sales, decrease production costs, or lower
overheads.

• Simply copying your market’s prices could lead to lost

profits if you sell your product short. The goal of your
business should be to maximize revenue and profits, even
if it does take a little bit of extra work on the pricing front.
Disadvantages of competitive pricing
2. Many companies copy

If a large portion of companies prices their product based

purely on price comparisons, then with time the entire
industry loses touch with demand.

You could keep the same price forever because competitor

A hasn’t changed her price, or raise and lower prices in
response to trigger-happy competition.
Disadvantages of competitive pricing
3. Short-term thinking

• Maintaining a lower price than your competitors isn’t always

the best way to attract consumers.

• Competitive pricing exacerbates that idea by simplifying price

as a barrier that constantly must be lowered.

• Lowering prices (in most industries) leads to doubts about

product or service quality and lower revenue from tiny profit
margins, even though customers would be willing to pay more.

Your competitors may be pricing their products incorrectly

How to build a competition-based pricing strategy

• A strong competition-based pricing strategy is built on

research. When you understand how the top competitors
in your market are pricing their products and how that
pricing might impact customers’ expectations, you have a
foundation for setting your new product’s or service’s
rates.
How to build a competition-based pricing strategy

1. Identify the competitors in your market

• The first step to competitor-based pricing is determining

who your competitors are?
• Which companies are selling similar products or services?
This is fairly standard market research you should be
performing already.

• Then, group them by specific characteristics. Pick out the

companies that most closely match your own brand’s
profile—these are your top competitors.
How to build a competition-based pricing strategy

2. Research their pricing and positioning strategies

Once you know the competitors that make up your market, perform a
competitive pricing analysis to dig into their pricing models and
positioning strategies to build a map of current trends.

Make sure to look at not only their pricing but also the way it’s
packaged, the types of tiers they use, and the features they
differentiate on.

This research will help you understand what pricing and positioning
customers expect in the market so that you can choose the best price
for your product or service.
How to build a competition-based pricing strategy

3. Average the price of all competitors

Creating a pricing map will help you understand what all of

your different competitors are doing individually, but it’s also
important to look at all of this pricing data in aggregate as
well.

To get the latter view, calculate the average price of your

product type across competitors. Knowing this average,
you’ll have a benchmark price to compare your own
product’s rates to
How to build a competition-based pricing strategy

4. Choose higher, lower, or matched prices

After researching competitors’ pricing, you’re ready to determine where
your product or service fits into the market.

1. Higher-than-average price: When you want the premium price to

signal luxury to potential customers

2. Lower-than-average price: When you’re trying to undercut the

competition with a low price and acquire customers quickly,
competitive pricing examples of this include loss leaders

3. Matched price: When your pricing strategy will be in line with your
competitors
How to build a competition-based pricing strategy

Whether you’re just entering the market or working to

solidify your current standing, the price you choose will
inform you of the customers' perceived value of your
brand..
What are the three types of competitive pricing?

• Low price - When you set the prices lower than your
competitors

• High price - When you set the prices higher than your
competitors

• Matched price - When you align your prices with your

competitors
Drawbacks of competitive pricing

• Lower prices may prevent you from covering costs

• Match your products to competitor prices, especially if

they’re not exact matches

• Your competitors may be pricing their products incorrectly

Why do businesses choose competition-based pricing?

• Many businesses, especially startups and small

businesses, may choose a competitor-based pricing
strategy for several reasons.

When launching a new product or service, they want to

appeal to target customers by offering the price that
people are already accustomed to.

Competition-based pricing may also help prevent

customers from turning to competitors in the search for a
low-cost product/service
Do we recommend competitor-based pricing?

• To summarize, certain businesses need to use

competitor-based pricing extensively because their
customers price compare and the cost of switching from
buying a product at store X or store Y are exceptionally
low.

.
Sr. No. Company Regulatory Capacity Batch size Polymorph PSD DMF COS/CEP Price (USD)
approval based on
export data
FDA/EU/TGA MT (Kg) #

1
2
3

4
Product Name of Pharmacy
Price in USD/INR/pack Price in Loacl currency/pack
Tab/cap/ Blister/ to to
Brand powder/ strip/alu- Manufact Mfg Marketed Distribute to distributo to distributo
Company name Pack injectable alu urer Country by d by to patient pharmacy r to patient pharmacy r

ABC
VALUE BASED PRICING
What is Value Based Pricing?

• The goal is to figure out how much each of your

customers are willing to pay for your product, so that you
can maximize your revenue by charging each of your
customers the exact amount they are willing to pay.

• At this point, you're at an equilibrium with your customer

base, providing exactly the right amount of value for the
price you're charging. Sounds pretty easy right?
What is Value Based Pricing?

• Value-based pricing is a strategy of setting prices primarily

based on a consumer's perceived value of a product or
service. Value-based pricing is customer-focused,
meaning companies base their pricing on how much the
customer believes a product is worth
What is Value Based Pricing?

• Two types of value-based pricing include

good-value pricing and

 value-added pricing.

• Good-value pricing refers to offering a combination of

goods and services at a fair price.
What is Value Based Pricing?
• Value-added pricing refers to attaching additional features
and services to a business's offering and charging higher
prices.

• Pricing determined by the customer's perceived value is

the primary factor in using a value-based pricing strategy.
Value Based Pricing
• Value-based pricing is a pricing strategy used in the
pharmaceutical industry that sets the price of a drug based on
its perceived value to the patient. The value of a drug is
determined by its efficacy, safety, and the benefits it offers to
the patient.

• For example, a drug that can cure a life-threatening disease has a

higher perceived value than a drug that treats a common ailment.
Pharmaceutical companies use value-based pricing to set the price of
high-value drugs, such as cancer medications. The price of cancer
drugs can range from $10,000 to $30,000 per month, depending on
the perceived value of the drug.
Filgrastim & pegfilgrastim
• What is filgrastim used to treat?
• Neupogen® (filgrastim) is a drug that has been used
successfully for cancer patients to stimulate the growth of
the white blood cells, making patients less vulnerable to
infections, it is expected to help patients who have bone
marrow damage from very high doses of radiation in much
the same way.
Filgrastim & pegfilgrastim
• Due to a longer half-life and slower elimination rate than
filgrastim, pegfilgrastim requires less frequent dosing than
filgrastim. While pegfilgrastim requires only single-dose
chemotherapy per cycle, filgrastim is needed until
neutrophil counts recover, with an average of 6–11 days
per cycle

• Neupogen (filgrastim) is a short-acting medication that's

given over several days, while Neulasta (pegfilgrastim) is
a longer-acting medication that's administered once after
a dose of chemotherapy. They both can increase the
numbers of neutrophils in your body.
Neulasta® Onpro®
• Some patients find it hard to return to their physician
the next day to receive Neulasta®, and missing a
dose of Neulasta® can increase the risk of febrile
neutropenia.

• With Onpro®, patients can receive Neulasta® at

home so they don't have to go back to the doctor on
the day after chemo. Staying at home can also
reduce the risk of coming into contact with viral
infections.
Neulasta® Onpro®
Neulasta® Onpro® may be able to help
with these common challenges
For many patients, there’s no place like home the day after
chemo. There’s no reason to make trips back to the doctor
if you can stay at home instead. Ask your doctor if
Neulasta® Onpro® is right for you.

Neulasta® Onpro® may be right for you if you are an adult,

are comfortable with the patient instructions for use, and
have no allergies to acrylics
Neulasta & Neulasta Onpro

Stay at home with Neulasta® (pegfilgrastim) Onpro® |

Neulasta ...

Only Neulasta® Onpro® is designed to automatically

deliver Neulasta® the next day—so you don't have to leave
your home to go back to the doctor's office.
 Neulasta® Onpro®

Exposure to viruses
People with a weakened immune
system may want to stay away
from those with a viral infection.

Struggle to get transportation

For some, getting a ride can be difficult.
Live far away

Driving is part of the

time you spend going
to an appointment.

One less trip back to

the doctor’s office
Neulasta® Onpro® was
designed so you can stay home* to get your dose
 Neulasta® Onpro®

Bad weather
Avoid the elements and
dangerous conditions.

Chemo before
holidays & weekends
Chemo on a day before
next-day office closings.
How the Neulasta® Onpro®

on-body injector works

• Right after your strong chemo treatment, your healthcare

provider will apply the on-body injector to your skin. The
on-body injector is designed to automatically deliver your
Neulasta® dose over 45 minutes, approximately 27 hours
after application. Once your dose is complete, remove the
injector and dispose of it according to the Patient
Neulasta® Onpro®

• Next-day Neulasta® reduced the incidence of FN by 94%

and FN-related hospitalizations by 93%
• A study of 928 patients with breast cancer showed that
when given once every chemotherapy cycle, Neulasta®
helped protect against the risk of infection and reduced
hospitalizations. 17% of patients got infections when not
treated with Neulasta®— while only 1% of patients got
infections when treated with Neulasta®, a 94% reduction.
14% of patients were hospitalized when not treated with
Neulasta®— while only 1% of patients treated with
Neulasta® were hospitalized, a 93% reduction.
Value Based Pricing
This approach is commonly used by MNCs, enchasing their good
rapport with doctors, especially in case of new molecules.

There are countless examples where cost of product has no relevance

whatsoever and company has priced a product as per perceived value
for doctors and their opinion.

Examples:
1. Biologic/Biosimilar products
2. 505 b(2) products
3. New molecules
4. Orphan drugs
5. Pediatric exclusivity drugs
Perceived Value Pricing
Conclusion
• The medical healthcare pricing model has the opportunity to
transform with customers and improve lives. Value based pricing in
healthcare puts the spotlight back on the patient. It posits that every
patient requires a balance between prices and the value provided.

• The proposition and implementation of value based pricing is still in

its infancy. Pricing experts continue to test, learn and apply new
learning's. There’s a long way to go before industry acceptance. But
many can see that value-based pricing has the potential to solve
healthcare issues. Not only in Australia but around the world.
Conclusion
• Many new drugs are under production – including gene therapies and
other life-changing treatments – for conditions previously thought to
be incurable. Having a pricing model that is based on proven results
is one way to ensure that sick people who truly need these drugs get
them and continue to take them, but only if they are effective.

•
Pharma- Perceived Value
• Drug delivery products
• Patches
• Long acting injectables
• Dosage convenience
Q&A
The first step in value add pricing

The first step in value-based pricing is determining the

target group and the price they are willing to pay.

• Second step in value add pricing

• The second step in value-based pricing is competitive

analysis.
Q&A
• How to calculate value based price?

• To calculate value-based pricing, the firm begins by

analyzing the requirements and opinions of value held by
customers. After that, it establishes its target pricing
based on how much value it brings customers.

• How to improve value based price?

• Value based pricing is implemented by keeping in mind
how much a customer thinks that the product is worth.
Example
• Say a coffee shop, Company A, charges twice as much
for a cup of coffee than their competitor, Company B.
Although their prices are double what others charge for
similar products, people are willing to pay more for coffee
from Company A.

• Budget airlines that offer low-cost airfares for those who

want to travel but are willing to skip premium services
from most airlines, like in-flight meals and travel
Saturday, 18th November 2023
Topics Covered so far
1. Basic Pricing Principles
2. Developing Price Strategies
3. Factors influencing pricing decisions
4. Selecting price objectives
5. Determining Demand
6. Factors affecting price sensitivity
7. Price elasticity demand
8. Types of cost and production
9. Accumulated p[reduction
10. Assessing price competitiveness
11. Selecting pricing methods
a) Cost based pricing strategy
b) Target return price
c) Breakeven volume
d) Competitive pricing
e) Value based pricing
f) Penetration pricing (covered in Division B)