Pharmaceutical Pricing Compendium

Pricing and reimbursement is one of the most complicated and important business issues that the pharmaceuticals industry has to deal with.

Setting the right price and ensuring that the product is adequately reimbursed is vital for a company's profitability. The Pharmaceutical Pricing Compendium - A practical guide to the pricing and reimbursement of medicines provides the essential insight into the business, economic, legal, political and strategic issues that companies must consider when pricing a product.

This unique publication brings together articles, by some of the most qualified and distinguished commentators on pharmaceutical pricing, that deliver clear information on the practical business issues that surround the subject. Issues covered include:

• Global pricing strategies for product launched
• An assessment of modelling and forecasting tools
• The impact of the AIDS crisis on drug prices
• The effect of drug prices on the US economy
• Differential pricing and parallel trade in Europe

• 1: The art of pricing in the pharmaceutical industry
  • Article Summary
  • There are many elements that pharmaceutical companies must consider when pricing their products. Recouping the large investment in research and development (R&D) is a key driver but others such as product lifecycle, patent protection, innovativeness, competition, government controls, and corporate philosophy all have an influence in the pricing decision thus making pricing one of the most complex economic decisions.
  • The Author
  • Mario R Nacinovich Jr, executive director, strategic planning, Fission Communications (US) is responsible for strategic and tactical development and plays a leading role in all business development activities within Fission Communications which benefits from being part of one of the top 50 healthcare advertising agencies, Regan Campbell Ward, an independently branded and managed part of McCann-Erickson Healthcare Worldwide, the second largest global healthcare agency. Mr Nacinovich received his Bachelor of Science degree in Managerial Science, with minors in Psychology and Economics from Manhattan College in Riverdale, New York. He also received a certificate in Political Journalism from Georgetown University in Washington, D.C. on a Bodman-Achelis Foundation Scholarship. He is an active member of the American Management Association and the Association for Research and Vision in Ophthalmology.
  • The Business of Pricing
• 2: Global pricing strategies for pharmaceutical product launches
  • Article Summary
  • This article provides a brief strategic overview of the types of constraints that manufacturers must overcome in order to implement a successful global product launch and determine the optimum price.
  • The Authors
  • Peter J. Rankin PhD, is a Senior Associate in the Pharmaceuticals Practice at Charles River Associates
  • Gregory K. Bell PhD, MBA, is a Vice President and the Pharmaceuticals Practice Leader
  • Tim Wilsdon MSc, is a Principal specialising in Finance
  • The Pharmaceuticals Practice at Charles River Associates provides consulting services to leading firms in the pharmaceutical, biotechnology, and medial device industries across North America, Western Europe, Japan, and Australia. Our emphasis is new product launch strategy, product pricing and contracting, and strategic responses to new market entrants. We specialise in the economics of business strategy, and our recommendations are based on quantitative analyses using game theory, marketing science, finance, and econometrics.
• 3: Integrating pricing and reimbursement needs into drug development
  • Article Summary
  • There is increasing need for drug development teams to take into account the cost effectiveness of new products. Pricing and reimbursement needs can be integrated into the development programme allowing companies to demonstrate to purchasers that products represent good value.
  • The Author
  • Cecil Nick BSc (Hons.) FBIRA, is a Senior Consultant Worldwide Regulatory Affairs at PAREXEL International (UK). Cecil Nick has over 20 years experience in pharmaceutical regulatory affairs. He has extensive experience in the development and EU registration of products of biotechnology, other biological medicines and new chemical entities. He is a Fellow of the British Institute of Regulatory Affairs and has published many articles on clinical regulation.
  • Marketing issues
• 4: Assessing the pharmaceutical price modelling tools
  • Article Summary
  • Most pharmaceutical companies rely on surveys to set prices but survey techniques have unavoidable biases. Also, there are some key customers - particularly payers - that it is difficult or impossible to survey. This paper explains why you should consider simple econometric techniques to give you powerful guidance here and how these techniques can boost the accuracy of your price predictions even where you can do surveys. Lastly, The author explains why health economics are best reserved for price advocacy rather than price setting.
  • The Author
  • Gary Johnson, managing director, Inpharmation Ltd (UK). Gary Johnson has provided price modelling and consulting to most of the world's leading pharmaceutical companies. Prior to founding Inpharmation he held senior positions - including General Manager and Head of Global Product Marketing - for major pharmaceutical companies. He is the recipient of a number of prominent awards for market research and business writing.
• 5: Managing price throughout the lifecycle of a pharmaceutical product: tools, timing and strategies
  • Article Summary
  • This article discusses the management of a product's price throughout its lifecycle in the context of the complex global environment. An overview of key analytical tools is provided, along with a discussion of when they should be used. Material is divided into three lifecycle phases: research and development, pre-launch and post-launch.
  • The Authors
  • Judith D. Bentkover, PhD, is the President and CEO of Innovative Health Solutions Corp (IHS), a global health care consulting firm. She is a consultant to numerous global biopharmaceutical and medical device firms and to several government agencies. She has more than 20 years of experience in working with global pharmaceutical pricing. Formerly a faculty member at Harvard University, she taught health economics and healthcare policy courses.
  • Marc R. Larochelle, is a Senior Manager at IHS. He is a consultant to biopharmaceutical and medical device firms in Europe and North America. He has designed and implemented several pricing studies on national and international levels. He has also developed a electronic Pricing Decision Support Tool designed to assist the development of global pricing strategies to maintain a premium price and maximize revenue.
  • Patricia M. Russell, MBA, is a Consultant with Innovative Health Solutions.
  • The effect of health economics
• 6: The importance of health economics in successfully achieving a sustainable price for reimbursement
  • Article Summary
  • A pharmaceutical product's success is largely due to its reimbursement price. Companies should use their expertise in health economics to justify to reimbursement authorities the price of a drug. Careful, in-depth assessment of the marketplace, market segments and reimbursement policy is essential if a price that is affordable.
  • The Author
  • Paul C Langley, Ph.D., US and international manager health economics, 3M Pharmaceuticals & Adjunct Professor College of Pharmacy, University of Minnesota (USA). In his position at 3M Pharmaceuticals, Dr Langley has overall and worldwide responsibility for pharmacoeconomic evaluations in the Pharmaceuticals Division. This includes supporting product development through health economics studies, preparing preliminary reimbursement submissions, managing reimbursement applications (e.g., US, UK, France, Italy), pricing evaluations and post-market entry pharmacoeconomics support. These last activities include both evaluations to maintain product reimbursement in the principal markets for 3M products and ongoing research and marketing programs to monitor market share and the appropriate use of products within health care systems.
• 7: Hospital Negotiation - the use of health economics as a support for new product pricing
  • Article Summary
  • Healthcare systems in the western world are under pressure to deliver high quality services to an ever-demanding population. Several factors add to this growing pressure including innovation in medical equipment and pharmaceuticals. This article considers this problem from the perspective of the hospital purchasers and the pharmaceutical budget and the health economics methodologies that are used to assess products.
  • The Author
  • Brian Lovatt spent 25 years in the Pharmaceutical Industry across Research, Development and Marketing departments. In the early 1990s Brian studied Healthcare Economics and became the first International Pharmaceutical Industry Economist, developing Clinical Trial methodology to address the 'new' market challenges. Brian then set up a private practice, Vision Healthcare Consultancy to assist the Pharmaceutical, Nutraceutical, Biotech and other healthcare related industries produce and present health economic data and pricing analyses to the purchasers and providers of care.
  • Ethical vs. economic issues
• 8: The global AIDS crisis and drug pricing controversy
  • Article Summary
  • AIDS is the greatest health crisis of modern times. Although pharmaceutical companies have discovered treatments in a relatively short time, the prices of these drugs are beyond many in developing world. This article reviews the controversial stance of the manufacturers who have argued against price reductions in face of political and public pressure. Some countries have ignored WTO rules and are sourcing AIDS drugs from generic manufacturers. However, things may change with the global fund to fight the epidemic.
  • The Author
  • Dr Faiz Kermani is based in the UK at the contract research organisation, Chiltern International, where his responsibilities include budgets, proposals and marketing. He previously worked in business development for CMR International, an organisation that works closely with pharmaceutical companies on R&D strategies and regulatory issues. He has also worked as a research analyst for Informedica A/S, a Danish healthcare company, where he conducted research into European pharmaceutical industry trends, pricing strategies and parallel importation. Dr Kermani holds a first Class Honours BSc. in Pharmacology with Toxicology from King's College, London and a Ph.D. in Immunopharmacology from St. Thomas' Hospital, London. He has published in various areas of medical research, both in academia and the pharmaceutical industry.
  • Regional Issues in pricing and reimbursement
• 9: Trends in international pharmaceutical pricing and reimbursement
  • Article Summary
  • The use of reference pricing in Europe has been growing in popularity since it was first introduced in Germany in 1989. This paper looks at the advantages and disadvantages of both reference prices and international price comparisons and their impact on final price and industry competitiveness. The author argues that additional co-payments are needed to achieve price competition with reference prices and exchange differentials rates, choice of weights and samples used can bias any inter-country comparisons.
  • The Author
  • Jorge Mestre-Ferrandiz joined the Office of Health Economics (OHE) in October 2001 as an industrial economics researcher. His current research focus is the analysis of European pricing and reimbursement systems. He has contributed to the ABPI / Department of Health Pharmaceutical Price Regulation Scheme competition studies. Prior to joining the OHE, Jorge conducted research for the Economics Advisory Group to provide in-depth understanding of how to introduce new hospital drugs for Multiple Sclerosis and Crohn's Disease into the Spanish market. He completed his doctorate thesis 'Essays on the Pharmaceutical Industry' at Universidad Autonoma de Barcelona.
• 10: The future of parallel trade in pharmaceuticals in Europe
  • Article Summary
  • Parallel imported pharmaceuticals make up the fastest-growing sector of the pharmaceutical market. European courts have repeatedly ruled in favour of parallel traders, who are generally free to export drugs from one country to another, to repackage products and to make direct or indirect use of trademarks. This article reviews the pharmaceutical industry defences against parallel importing and the future of the business.
  • The Author
  • Dr Klaus Hilleke is a senior partner at Simon Kucher & Partners, a globally operating strategy and marketing consultancy. He is the global co-leader of the company's life science division. He has been with the company since 1988. From 1996 to 1999 he was the founding partner and managing director of the company's U.S. office in Cambridge, Massachusetts.
  • Europe
• 11: Pricing considerations for new products in Europe
  • Article Summary
  • Achieving the best price for a product requires the manager to take a top-down view of factors influencing the overall profitability. This article summaries those elements that a pharmaceutical company should consider when setting prices for the European market.
  • The Author
  • Dr Roland Pfeiffer, European integration manager, Altana Pharma AG
• 12: Schering's policy of pharmaceutical price harmonisation in Europe
  • Article Summary
  • The control of pharmaceutical prices in the European market by national authorities pressurises company margins, encourages parallel trade and may be contributing to the decline of the local pharmaceutical industry in comparison to the USA. German company Schering AG has adopted a centralised approach to price setting with overall European profits more important than country-level turnover. By launching new products in careful sequence and keeping prices within a narrow corridor all under head office control, Schering aims to reduce losses through exchange rate fluctuations and parallel imports.
  • The Author
  • Michael Bohn is head of price policy & controlling Europe, Schering AG. Past posts include Finance and Controlling, Project leader Asia for corporate Controlling & Reporting, Head of Planning & Controlling and Head of Pricing Policy in Region Europe/Marketing and Business Development. Mr Bohn graduated in Economics.
  • United States
• 13: Bio-pharmaceutical prices and the effects on the U.S. economy
  • Article Summary
  • TIAX studied the impact of market-based pricing patterns in the United States on bio-pharmaceutical innovation and related economic contributions. The study concluded that the sector contributes greatly to the economy and argues that pharmaceutical prices should remain high to support continued investment in research and development.
  • The Authors
  • Roger A. Edwards, Sc.D. Director, Life Sciences, TIAX LLC. His prior work includes over two decades of experience in industry, academia, and government in the diffusion of medical innovations. Dr. Edwards holds an A.B. in Human Biology and an M.S. from Stanford University along with an Sc.D. from the Harvard School of Public Health. He is co-inventor on one patent, co-author of eleven journal articles and three book chapters, and has made over sixty professional presentations in the health, medical, and technology fields.
  • Haleh Armian-Hawley, M.S. Senior Manager, Life Sciences, TIAX LLC. Ms. Armian-Hawley is Senior Manager in the Life Sciences group and has worked on a wide range of biomedical/life sciences projects during the past decade. Her interests are in strategic planning, market and technology assessments, and policy for the bio-pharmaceutical and medical device/supplies industries. Ms Armian-Hawley received a B.S. in Marketing and Finance from the Boston College School of Management and holds an M.S. in Health Policy and Management from the Harvard School of Public Health.
  • Louise Firth, M.S. Director, Life Sciences, TIAX LLC. Ms. Firth is a Director in TIAX LLC's Life Science business. She has over twenty years experience working with companies, government agencies and trade associations on commercialisation of pharmaceuticals, diagnostics, medical devices and healthcare services. Ms. Firth holds an MS in Business Administration and an MA in microeconomics, both from Northeastern University. Her publications include articles in journals, the trade press, monographs and a book chapter. She has presented the results of her work before the public, trade groups, government agencies, arbitrators and courts.
  • National and international law and pharma pricing
• 14: Differential pricing in the EU: the significance of the decision in the GlaxoSmithKline case
  • Article Summary
  • In 2001, GlaxoSmithKline were ordered by the European Commission to stop their dual pricing system for Spanish wholesalers which contravened the free market philosophy that underlies the EU. The case attracted a great deal of attention because it was the first time a pharmaceutical company tried to justify differential pricing because of economic distortions in the market resulting from the differences in national pharmaceutical pricing and reimbursement regimes. This article reviews Glaxo's defence and the Commission's opinion.
  • The Author
  • Lorna Brazell is a partner in the intellectual property department at Bird & Bird whose work focuses on advising clients on suitable and effective strategies for the protection of their intellectual property. She studied competition law at Kings College London as part of her LLM degree in 1993 and advises on the impact of competition issues in all forms of intellectual property agreement. With a technical background in the physical sciences, she has also worked on the enforcement of rights through litigation across a range of industries including chemicals, electronics and biotechnology. Her reported cases include Oxford Gene Technology Ltd v Affymetrix Inc.
• 15: Additional information about pharmaceutical pricing and reimbursement
  • Terminology