Pricing as a product differentiator 
Posted by Carlos on Jul 11, 2012

A recent article in Forbes by ex-Pfizer President or R&D John LaMattina asks a provocative question: Will Pricing Be a Key Differentiator For New Drugs?

I recall some 10-15 years ago speaking with a product manager who said “You should be able to get a 5% price increase by rolling out of bed in the morning.” Such was the environment back then when significant annual price increases were the norm.

Later, as biologics started becoming more common, annual drug costs of tens, and now hundreds of thousands of dollars per year are routine.

But, as Mr. LaMattina correctly points out,

“…we’re in a new world when it comes to controlling health care costs.”

Assuming a new drug is proven roughly equivalent to the current standard of care, but priced at a substantial discount, would prescribers be encouraged to go for the cheaper option?

We certainly think so. In fact, we think pricing is an underutilized tool for new products, especially those with marginal benefit over standard of care.

This is also why we think that superiority to standard of care can be, in many cases, an unnecessary hurdle to overcome. Having a new product that is equivalent, but priced below the standard of care, could bring a valuable therapy into the hands of more physicians and patients. Such therapies also provide another option for patients who do not respond to the current standard of care, e.g., sticking with the same pharmacology with another product before abandoning the mechanism of action and moving on to another.

So do we need yet another drug to treat rheumatoid arthritis? Yes, absolutely. Bring them on. Price them competitively, and provide as many options as possible for patients and physicians. Such competition can be a very healthy, natural way to drive health care costs down, while simultaneously providing a reasonable ROI for drug developers.

 

 

 

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