Abstract
Introduction
In 2007, we are approaching a tipping point in the standoff between drug
customers/payers and drug producers, each striving to achieve an advantage in
the struggle between drug cost versus drug price. The solution to this
struggle between closely aligned yet combative industry forces lies in the
creation of win-win solutions that benefi t not only payers and industry but,
more importantly, society as a whole.
Questions Answered in This Spectrum Report
- In today' s complex pharmaceutical marketplace and prescription
decision-making process, monetary issues now reign supreme. How has the
cost/price issue infl uenced the decision-making process of drug customers and
health care providers? Of drug manufacturers?
- A paradox has evolved in today' s health care industry: treatment is
growing more expensive, but more and more people are demanding to be treated.
How is the desire for universal health care coverage confl icting with the
reality of the market? What sort of middle ground will emerge with regard to
coverage that will satisfy both parties?
- The advent of knowledgeable and fi nancially motivated customers has
irrevocably changed the way in which buyers perceive drug price. What is the
perception of drug price in the context of health care costs? How can the
pharmaceutical industry infl uence or alter this perception?
- The path to success in the dynamic between the health care customer and
pharmaceutical industry is not through a decisive victory of one side over the
other. What changes in the customer/industry relationship will ensure future
success for pharmaceutical companies? What new stratagems could be adopted to
yield winning solutions for both parties?
Scope
- Drug cost/price criticisms: critics' emotional and economic positions
against perceived high drug costs.
- The battle lines: entrenched customer positions about health care costs
and pharmaceutical industry positions on price.
- Current cost/price stratagems: strategies used by customers and the
industry to manage costs and prices.
- Value/price concessions: select industry pricing strategies that refl ect
a more value-based approach to pricing.
- Market outlook: methods for creating a win-win pricing environment and our
forecast for future customer/industry dynamics.
Table of Contents
- Executive Summary
- Strategic Considerations
- Stakeholder Implications
- Today' s Drug Cost/Price Battlefi eld
- Price Criticism in a Nutshell
- Entrenched Customer Cost Positions
- Factors Driving Health Care Costs
- Original Expectations
- Inescapable Paradox
- Health Care Demographics
- Health Care Services Defy Centralization
- Intractable Ineffi ciencies
- Temporary Relief from Expenditure Controls
- Economy Fluctuations
- Impact of Demand-Side Controls
- Factors Driving Drug Costs
- Price and Profi t Controls
- Value-for-Money Emphasis
- Evidence-Based Medicine
- Entrenched Industry Price Positions
- Impact of Customer Activism
- Need for Product Differentiation
- Current Cost/Price Stratagems
- Customers as Active Managers of Health Care Cost
- Reference Pricing
- Drug Legislation and Regulation
- Rationing as a Way of Life
- Health Technology Assessment
- Supplier Price Stratagems
- What Price Will the Market Bear?
- Pricing Orphan Drugs
- Increasing Prices
- Thwarting Parallel Imports
- Staving Off Generics
- Promoting Directly to the Customer
- Value-Price Concessions
- Value Proposition Pricing
- The Value of Time
- Purchaser/Supplier Risk Sharing
- Johnson & Johnson' s Velcade
- Pfi zer' s Sutent
- GlaxoSmithKline' s Phase IV Proposal
- Key Guiding Principles for Creating Win-Win Solutions
- Future Dynamics Between Health Care Customer and Pharmaceutical Industries
Figures
- 1. Share of U.S. Prescription Drug Cost by Payer, 1990-2006
- 2. Factors Driving Health Care and Drug Costs and Customer Concerns over
Ability to Pay
- 3. Complex Prescribing Decision-Making Process-The New Primacy of Monetary
Issues
- 4. Setting Prices in a Complex and Multilevel Environment
- 5. Using Regulatory Hurdles to Force Pharma Companies to Respond to
Customer Concerns
- 6. Thousands Denied Sight-Saving Drugs in England
- 7. The New Value Proposition Equation
Sidebars
- National Institute for Health and Clinical Excellence--A History of
Criticism and Controversy
Tables
- 1. Pharmaceutical Cost-Containment Measures: Demand-Side Controls
- 2. Pharmaceutical Cost-Containment Measures: Supply-Side Controls on
Manufacturers
- 3. Projected Impact of Key Brand Patent Expiry on Leading Big Pharma
Companies
- 4. Drugs Approved by the Scottish Medicines Consortium