Thoughtleader: Thomas Nagle, Monitor Group - Pharmaceutical Executive

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Thoughtleader: Thomas Nagle, Monitor Group

Pharmaceutical Executive


Because clinicians design Phase III trials, all they pick up is clinical data. They don't expand the trials to collect data that would help their case commercially. Sanofi-Aventis might have worked with trial participants' health insurers to track how much the cost of heathcare went down for patients taking Acomplia compared with patients taking a placebo. They'd be able to say: People who took Acomplia had this many fewer heart attacks or used this many fewer cholesterol-lowering drugs, etc. And now you're able to tell an economic story.

How far off are we from being able to do this?

It's being done. But it's done four years after a drug is launched, based on the data of people taking it. Then a company realizes, "Wow, this drug's really phenomenally valuable." And at that point, they can't go back and say, "OK, now we know we're really valuable. We want to be paid 20 percent more." And the payers say, "Right."

It's so easy in the United States to underestimate the importance of value-driven R&D because companies haven't had to deal with it as much. But you're seeing it in Europe, as well as the importance of access negotiation, which needs to be part of the pricing strategy.

As soon as a new drug is approved in Europe, companies begin negotiations on whether or not they're going to be reimbursed. The five big European countries have managed to cut their projected budgets by 11 percent just by negotiating.

Government officials will talk about evidence-based medicine and introducing cost-effective drugs. They want that, but they also want just lower prices. And they're going to use all kinds of very aggressive techniques to get those lower prices. And if pharma doesn't understand how to negotiate with them, they risk payers taking advantage of them.

Tom Nagle founded the Strategic Pricing Group in 1987, the year he published the first edition of The Strategy and Tactics of Pricing (Prentice Hall Business Publishing). He previously worked as a professor of marketing and strategy at the University of Chicago and at Boston University. Nagle is a graduate of Penn State University; he received his PhD from UCLA. He is now a partner in the Cambridge, MA office of Monitor Group.


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