Pharmaceutical Pricing in the US and Europe

Analysis of Resources, Strategy and Structure

Publication Date	November 2005
Publisher	Cutting Edge Information
Product Type	Report
Pages	155
ISBN Number	not applicable
Product Code	CUT00026

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Summary

The pricing function is more important than ever. Price controlling agencies, such as governments and payors, are becoming even more stringent on companies to prove products' value. The high price of pharmaceuticals is an almost daily topic on political talk shows as many leaders have chosen drug pricing as their top initiative. New laws, such as Medicare Part D, are also changing the pricing environment.

Cutting Edge Information has developed this study to research pharmaceutical companies' pricing functions - and what makes them successful. Pharmaceutical Pricing in the US and Europe: Analysis of Resources, Strategy and Structure examines the inner workings of pharmaceutical pricing functions. From budget allotments and control to departmental and individual project staffing levels, this report details the strategies of some of the industry's top pricing departments and resources.

This report analyzes the practices of some of the industry's top pricing departments to provide the steps pricing managers must take to make their functions more integral pieces of the development puzzle. The report provides pricing leaders the tools to improve their pricing departments by comparing their spending, staffing, structure and strategies to those of top pharmaceutical companies.

The report makes its case with metrics and techniques for managing pricing functions:

Staffing and Structure - Whole department and per-project staffing along with optimal pricing department reporting structures
Budgets, Activities and Employee Compensation - Arming departments with the resources to perform key activities that help shape better product development
Strategy, Communication & Coordination and Vendor Management - Analysis of the current pricing landscape in the US and Europe. Includes discussion of companies' communication links between different levels of pricing departments with each other and outside contract

Content

Executive Summary
- Figure E.1: Average Pricing Department Budgets
Table E.1: Departments That Fund Pricing Activities
Pricing Department Staffing and Structure
- Figure 1.1: Percentage of Companies with Dedicated Pricing Departments
Industry-Wide Trends and Analysis in Pricing Structure
- Figure 1.2: Pricing Department Centralization vs. Decentralization
- Figure 1.3: Official Name of Department Responsible for Pricing
- Figure 1.4: Where Pricing Departments Report
- Figure 1.5: Level of Executives that Lead Pricing Departments
Pricing Department Headcounts
- Figure 1.6: US Pricing Department Staffing Levels
- Figure 1.7: Global Pricing Department Staffing Levels
- Figure 1.8: European Major Market Pricing Staffing Levels
per-Brand Staffing Levels by Development Phase in The US and Europe
- Figure 1.9: US Blockbuster Brands Staffing
Table 1.1: US Blockbuster Brands Staffing
- Figure 1.10: US Mid-Level Brands Staffing
Table 1.2: US Mid-Level Brands Staffing
Table 1.3: US Niche Brands Staffing
- Figure 1.11: US Niche Brands Staffing
- Figure 1.12: European Blockbuster Brands Staffing
Table 1.4: European Blockbuster Brands Staffing
- Figure 1.13: European Mid-Level Brands Staffing
Table 1.5: European Mid-Level Brands Staffing
- Figure 1.14: European Mid-Level Brands Staffing
Table 1.6: European Niche Brands Staffing
Models of Pricing Department Organizational Structures
- Figure 1.15: High Workload-Dedicated Resources Model
- Figure 1.16: Company K's Global Pricing Department Structure
- Figure 1.17, Company R's Global Matrix Market Support Organizational Structure
- Figure 1.18: Company L's Global Pricing Department Structure
- Figure 1.19: Company K's European Pricing Department Structures
- Figure 1.20: Company A's Global Pricing Department Structure
- Figure 1.21, Company A's US Pricing Department Structure
- Figure 1.22, Moderate Workload-Shared Resources Model
- Figure 1.23, Low Workload-Outsourced Resources Model
Budgets, Pricing Activities and Employee Compensation
Pricing Department Budgets
- Figure 2.1: Average Pricing Department Budgets
Table 2.1: Departments That Fund Pricing Activities
- Figure 2.2: Pricing Department Budget Allocation
Pricing Studies
- Figure 2.3: Average Cost per Pricing Study (US)
- Figure 2.4: Average Cost per Pricing Study (Europe)
- Figure 2.5: Percentage of Pricing Work Outsourced
Table 2.2: Number of Pricing Studies Conducted per Phase
- Figure 2.6 - Average Duration of Pricing Study (US)
- Figure 2.7 - Average Duration of Pricing Study (Europe)
- Figure 2.8: Typical Gabor-Granger Pricing Study Results
- Figure 2.9: When Pricing Activities Begin for US Pricing Department
Phase by Phase Pricing Activities and Spending in The US
- Figure 2.10: US Pricing Spend by Phase for Blockbuster Brands
- Figure 2.11: US Pricing Spend by Phase for Mid-Level Brands
- Figure 2.12:- US Pricing Spend by Phase for Niche Brands
- Figure 2.13: Pre-Clinical Spending for US Brands
- Figure 2.14: Phase I Spending for US Brands
- Figure 2.15: Phase III Spending for US Brands
- Figure 2.16: Phase II Spending for US Brands
- Figure 2.17: Registration and Launch Spending for US Brands
- Figure 2.18: Registration and Launch Spending for Blockbuster Brands in the US
- Figure 2.19: 12-18 Months Post Launch Spending in the US
- Figure 2.20 - When Pricing Activities Begin for European Pricing Departments
Phase by Phase Pricing Activities and Spending in Europe
- Figure 2.21: European Pricing Spend by Phase for Blockbuster Brands
- Figure 2.22: European Pricing Spend by Phase for Mid-Level Brands
- Figure 2.23: European Pricing Spend by Phase for Niche Brands
- Figure 2.24: Pre-Clinical Spending for European Brands
- Figure 2.25: Phase I Spending for European Brands
- Figure 2.26: Phase II Spending for European Brands
- Figure 2.27: Phase III Spending for European Brands
- Figure 2.28: Registration and Launch Spending for European Brands
- Figure 2.29: 12-18 Months Post Launch Spending for European Brands
- Figure 2.30: Average Senior Management Compensation for US Pricing Departments
Employee Compensation
- Figure 2.31 - Average Senior Management Compensation for Europe Pricing
Departments
- Figure 2.32 - Average Line Management Compensation for US Pricing Departments
- Figure 2.33 - Average Line Management Compensation for European Pricing
Departments
- Figure 2.34: Average Line Worker Compensation for European Pricing Departments
- Figure 2.35: Average Line Worker Compensation for European Pricing Departments
- Figure 2.36: European Pricing FTEs Compensation as a % of US Counterparts
Compensation
Strategy, Coordination and Vendor Management
US and European Pricing Environments and Influential Factors
- Figure 3.1: Importance of Criteria that Affect Product Pricing
- Figure 3.2, Company A's Global and US Pricing Committees
- Figure 3.3: Planning for Strategic Pricing Begins at the Global Level
- Figure 3.4: Inverse Relationship between Price and Market Share at Patent Expiry
- Figure 3.5: Planning for Strategic Pricing Begins at the Affiliate Level
Pricing Strategy Communication and Coordination
- Figure 3.6: Company T's Pricing Project Coordination
- Figure 3.7: The Internal Client/External Vendor Interface
Pricing Analysis Vendor Management
- Figure 3.8: Vet the Vendor: Top Selection Factors