By Andrew Hanhauser, Manager, Global Pricing and Market Access
Pharmaceutical manufacturers are empowered to make the most advantageous business decisions regarding product pricing strategies when they are armed with accurate, detailed information and knowledge about their competitors’ data. While it is often daunting to develop successful approaches for launching new drugs, and concurrently manage the complexities of ongoing pricing and reimbursement changes, there is now reliable, accessible global pricing data and advanced analytics to help pharma companies effectively tackle these challenges.
As a result, manufacturers of every size, including smaller companies, can take advantage of opportunities to harness this competitive data and maximize revenues. With new options to access just the right amount of data that suits the size and scope of an organization and its product portfolio, any pharma company can find a clear path that responds to a competitor’s price change or drug launch.
Pharma companies can utilize advanced global pricing data in a number of ways to optimize their pricing strategies:
- Analyze and benchmark pricing strategies of competitors
- Identify pricing trends around the world based upon specific products, therapies, or indications
- Anticipate potential price reductions through trend analysis
- Understand impacts of international reference pricing
- Quickly view standardized data to enable efficient cross-country comparisons of pricing, reimbursement, and cost of treatment data
- Pattern current business development strategies, and create new product forecasts specifically for capacity planning, manufacturing, logistics, marketing, sales and finance
- Submit price validation certificates to government authorities and use in negotiations with health authorities when, for example, approval is required before a drug can be sold in certain countries
- Gain indirect analysis against other comparators to prove a new product is better for the market
- Use competitive data in negotiations to prevent price leakage
- Implementing a global pricing solution that generates only the most accurate information is critical.
- In its absence, projections are simply based upon prices derived from inaccurate sales reports, resulting in flawed or misaligned price strategies and potentially significant global revenue loss.
Key Challenges in the Current Marketplace
In recent news, political leaders have called on the U.S. Federal Trade Commission (FTC) and U.S. Food and Drug Administration (FDA) to take action against pharma companies that inflate drug prices and keep generics off the market. While price hikes are often linked to investment in new research to develop a better treatment, companies must be careful not to descend into “anti-competitive price gouging,” while grappling with other key challenges, including the entry of biosimilars onto the market, price erosion, international reference pricing and evolving competitive changes.
Generics vs. Biosimilars
When a pharma company launches generic products after the patent expires, they often face the threat of biosimilars concurrently entering the market. Therefore, it is important to have the tools that will allow companies to actively and efficiently analyze trends, and determine how the market will react when these competing products are approved or launched.
As an example, consider the situation when one pharma company launches a generic cancer drug just as two biosimilars are launched by two other companies. To remain competitive in this market, the brand manufacturer will be forced to drop their price, resulting in a loss of sales and market share.
In today’s competitive environment, it’s essential for pharma companies to optimize their pricing strategy based upon an in-depth understanding of how the global markets work. For example, two cancer drugs that cost approximately $150,000 per patient per year resulted in a pricing war because the two companies were competing for profits and market share.
A similar pricing war occurred between two pharma companies producing hepatitis C drugs. This resulted in price drops for one of the companies. Fortunately, in this scenario, competition led to discounting, which gave newly diagnosed cancer patients broader access to the drugs they needed.
Given the complicated international reference pricing environment, it’s essential for companies to map international reference rules and define an optimal launch order when marketing a new medication. Reference pricing is not a form of price regulation, but rather a means for limiting expenditure on the reimbursement of drugs. The application of international reference pricing is expected to influence pricing mechanism across the globe, as evident from its adoption in recent years by countries across Europe and also, Canada, Japan, South Korea, Mexico, New Zealand and other countries.
For example, in Germany, pharma companies can launch at free price through AMNOG, but must negotiate the reimbursed price after one year. Once the prescription-related average doses have been updated, the Central Association of Statutory Health Insurance Funds (SHI) adjusts the reference price. With effect from 1 January 2014 onwards, a seven percent discount on the ex-factory price is granted to SHI. The manufacturer’s rebate applies to patented medicinal products available on prescription only and to which no reference pricing applies.
Because Germany formally references 20 different countries and others informally, manufacturers are deeply concerned about the impact of pricing across Europe and other regions. In the case of a price reduction in Germany, one of the first countries to be impacted would be the Netherlands because it reviews prices every six months, followed by Ireland and Austria. It’s important to note that Austria is impacted directly and indirectly by the price change in Germany because it benchmarks other countries that also reference Germany.
Indication-Based Cost of Treatment Analysis
Smarter, more robust decision-making tools enable pharmacies to gain better insights around treatment costs for prevalent diseases. For example by performing a cost-of-treatment analysis, the most effective treatment approach for the same disease can be more easily identified. Key factors in analysis and forecasts involve unit price, age, weight, patient compliance and treatment duration.
To help pharma companies stay ahead of the ever-changing competitive therapies, innovative solutions on the market can provide a cost-of-treatment module that allows them to instantly draw comparisons at an indication level. Some of these tools also feature a simple way for users to simulate different outcomes by modifying the pre-populated dosing information, and enabling them to compare cost per day, per month, per year, per cycle, as well as by duration of treatment, and the annual cost including wastage.
Finding the Right Solution
The old spreadsheet-style of analysis fails to capture the detail, complexity and accuracy required to meet today’s challenges. Therefore, it is critical that pharma companies find the right solution to gain the power to develop effective pricing strategies for new drugs, and manage ongoing pricing and reimbursement changes to maximize revenue.
Pharma companies should identify and partner with a solution that provides the highest quality, most robust global pricing and reimbursement data on the market, with particular focus on:
Accuracy through expert review
Flexibility in data configurability and integration that can be customized to their exact needs
Freshness, with updates up to five to eight weeks faster than other solution providers
Coverage, ranking high in country coverage when benchmarked against the competition
Quick and easy access to competitor drug-price information across 80+ markets
Collecting and standardizing data is complex, time-consuming and costly. To minimize revenue leakage and compete globally at a sustainable level, pharma companies need to transform un-structured global and market access data to a standardized format comparable across countries. Finding a solution partner that offers the most accurate and timely data on the market is the key to long-term success.
About the Author
Andrew Hanhauser, manager, Global Pricing and Market Access, Alliance Life Sciences, provides ongoing vision and strategy to transform and streamline data standardization through the use of process and technology. He has lent his expertise in operations, technology and business strategy to a number of Fortune 500 corporations. Hanhauser is a graduate of The Pennsylvania State University, and Northeastern University where he earned his MBA.