Pricing in the pharmaceutical industry

Published on January 28, 2009   41 min

A selection of talks on Pharmaceutical Sciences

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Hello, my name is Mick Kolassa, I'm CEO and Managing Partner of Medical Marketing Economics. And I'm here to talk about pricing in the pharmaceutical industry.
The objectives for this session are, first to understand how prices are currently set in the global pharmaceutical industry. Second, to consider the importance of developing a pricing strategy, this is as opposed to just simply setting a price. We'll move on then to talk about the elements of pharmaceutical pricing, the factors that must be considered when taking any pricing actions. And finally, to understand the implications of specific pricing decisions.
Because we're talking about pricing in the global pharmaceutical industry, we need to talk about there's some global differences. The two largest markets, the U.S. and the E.U., are really quite different. The U.S. is a free market, with multiple competing health care plans, competing payers, and different formularies. Product reimbursement can vary considerably, by individual payer, a PBM, Pharmaceutical Benefit Manufacturer, will tend to have a more generous benefit than will an HMO. But it can also vary within the payer. An individual PBM may have several different formularies, several different ways to treat the same product, depending upon the plan sponsor. Plan sponsor becomes key. When we look at state Medicaid plans, which are the health plans for the indigent, we have 50 different plans in the U.S. and 50 different benefit structures, so one drug could be treated very differently from state to state. Similarly, different employers, would ask for different plans. Now when we turn to Europe, in each of the nations there's going to be a single monopsonistic national payer, with generally, a single national formulary, relatively uniform reimbursement status for a product within an individual country. There are some countries, such as Italy and Germany, that will have some levels of regional autonomy, but the differences aren't as great as they are in the U.S. And most importantly, patients can't switch from one plan or one payer to another, whereas in the U.S. that's very common.