The Best Price for the Most Revenue

Feb 18, 2014

Life science companies face increasing pressure to manage declining margins while funding R&D and meeting shareholder expectation to generate steady increases in revenue. Achieving optimal pricing across geographies at every stage of the product life cycle is a key component of any sustainable global revenue building platform. But this mission critical goal is made more difficult today due to the increasing complexity of price referencing, often among dozens of countries, each with a commitment to reducing national drugs spend.

Pricing sits precisely at the crossroads of governments' budget constraints and life science company interest in maximizing the revenue stream. Governments are addressing their budget challenges through increased scrutiny of the clinical value a product brings to market, leading to unprecedented pricing and volume pressures on new launches as well as in-market products. Companies are withdrawing products or foregoing a launch in a particular country due to the disparity in how payers/government agencies and companies perceive a product's value. As a result, pricing has been elevated to a senior management challenge with significant political and reputational implications.

The trend prompted us to pose a few questions to a selected number of life science pricing executives:

» How do you know if your price and country launch sequence strategies will deliver the optimal revenue stream?

» What happens when a critical country launch is delayed?

» What is your reaction when a country launches out of sequence, or at a price below your floor?

» What key performance indicators define a successful launch?"

The most frequent response was, "We are familiar with the market landscape; we know what works, we've been launching products in this fast changing environment for years." However, the fundamental question of how do you know if your strategy is the right one in maximizing returns to the business remained largely unaddressed.

The interviews did yield some useful insights, as follows: