Want to win on pricing? Take a closer look at the numbers

Print 10 November 2015
Emily Wasserman / FiercePharmaMarketing

Controversy surrounding drug pricing has reached an all-time high. Lawmakers and payers are pushing back at sky-high prices for new meds, and companies have been forced to discount their products to keep their market share. Increasing competition from generics and biosimilars only adds to the drama.

So what's a drugmaker to do? Take a hard look at the data, Andrew Hanhauser, manager of global pricing and market access at consulting firm Alliance Life Sciences, told FiercePharmaMarketing.

Obviously, astronomical price hikes are a bad strategy these days, and not just because they're politically incorrect. Higher prices often attract lower-cost competitors and eliminate the short-term price increase benefit. And as recent examples show, public backlash to price hikes can trigger executive firings and other actions that impact the market.

"While price hikes often represent both the recouping of historical investments and funding investments in new research to develop better treatments, companies should not descend into opportunistic 'price gouging," Hanhauser said. "Arbitrary large price hikes can be an all-around bad business policy beyond just politics."

Leveraging pricing data can make a big difference in helping drugmakers stay abreast of the competition, especially for companies with off-patent products, Hanhauser said. Companies can use pricing data to gauge threats from generics or biosimilars, and identify trends in therapeutic areas or even specific indications. They can borrow from rivals' price-negotiation strategies to make the best case for their own meds. "If companies are able to actively and effectively analyze the trends and see how the market reacts, they'll be in a lot better position moving forward," Hanhauser said.

The data also help companies understand pressures from global markets in light of rising drug costs. Hanhauser mentioned the example of two companies with "cancer drugs that cost $150,000" a year, and a potential price war between the pair to protect their profits and market share. As more companies--particularly in the oncology and hep C spheres--engage in pricing wars, understanding the numbers can help drugmakers weigh different pricing points to gain a market advantage. "We've seen a lot of shift in pharma companies looking for greater analysis around cost of treatment. Utilizing competitor pricing data and tools, they can make smarter decisions," Hanhauser said.

Plus, having data on hand makes it easier for companies to make a case for their product when facing pricing pushback. Drugmakers "can and should provide evidence to payers" about cost-effectiveness, and show that their product is superior to a competitor that raised its price, Hanhauser said. Cost-effectiveness assessments comparing their product to a similar drug that costs more. And drugmakers can also use competitors' negotiation tactics to respond to pricing pressures, he added.

Big Pharma companies are already crunching lots of pricing data, but some more than others. For smaller companies looking for a competitive edge, data could help build cases for why their drugs should be approved or priced a certain way. Many different factors go into finding the cost of treatment, Hanhauser pointed out, and having the most up-to-date and accurate information provides a good benchmark for companies searching for their competitive edge.

"Every company can participate in global pricing and reimbursement. So it's important for every company, whether you're a top 10 pharma or a startup, to utilize competitive pricing intelligence to maximize revenues," Hanhauser said.

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