• Chemicals
• Discovery / R&D
• Generics
• Market Trends
• Pharma Industry Trends
• Pricing & Reimbursement
• Regulatory
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• Therapeutic

M&A in pharma

Explores the merits of mega-deal in contrast to a more measured portfolio growth strategy

Pharmaceutical Pricing - Global Perspectives is a strategic report, that analyses all aspects of pharmaceutical pricing and reimbursement strategies through extensive use of case studies.

The pricing of new pharmaceutical products is crucial and must not be left to luck. If the price is set too high, the product may fail to gain reimbursement or be excluded from formularies. If the price is too low, profitability will be reduced. Thus, it is essential for pharmaceutical companies to fully understand the principles governing pricing and the market environment in which they are operating.

The report's text is complimented with key case studies of how pharmaceutical companies have managed the prices of their key products, to ensure continued profitability in the light of competition and patent expiry, including:

• Merck's single European pricing scheme for Crixivan
• Eli Lilly's proactive strategy for patent expiry
• The life-cycle of Genzyme?s Ceredase and Cerezyme
• Upjohn?s sale of Dalacin in Denmark
• Biogeneric competition to Epogen

In almost every country there is ongoing discussion about pharmaceutical pricing. This report examines the major regional issues including;

Europe
- How parallel trade ('grey market') within the EU affects ethical manufacturer?s profitability.
- Why inter-country reference pricing has grown in importance in Europe?
- Is a European-wide pricing assessment body a realistic prospect?

North America
- Will US follow the rest of the world and move away from free pricing and implement some controls.
- Are the high prices achieved sustainable in the longer term and how are lower prices in Canada affecting the US political arena?

Rest of World
- How the economic downturn and cost containment in Japan has hit the pharmaceutical industry hard.
- Why the pharmaceutical industry has come under attack from countries where AIDS is prevalent.
- How Brazil exploited international patent rules to produce its own generic medicines.

Five reasons why your organisation should invest in this report
- Stay up-to-date with the latest trends in global pharmaceutical pricing & reimbursement
- Learn common jargon and terminology used in the pricing & reimbursement fields
- Gain insight into growing role of pharmacoeconomics in demonstrating the financial value of drugs
- Forecast how governments will implement drug spending cost containment measures
- Understand the increasing pressure from less developed countries to access drugs at lower prices

The text also contains detailed descriptions for issues and terms connected with pricing, which can be used as an encyclopaedia of terminology.

Executive Summary

View the Executive Summary (pdf)

Chapter 1: Pricing and the Pharmaceutical Market

The definition of price
The functions of price
The marketing mix
The product
Case study: Lilly's proactive strategy for patent expiry The place
The rise of the Internet as a sales channel 8
The price Promotion The effect of price on the other elements of the marketing mix: the product
Therapeutic efficacy
Therapeutic enhancements
Case study: drug delivery system strategies
The brand
Pricing objectives
Target return on investment
Market share
Meeting competition
Profit maximisation
Stabilisation of prices
Pricing strategies to meet objectives
Skimming
Prestige pricing
Penetration pricing
Extinction pricing
Case study: Losec price reduction in Denmark
List prices and contract prices
Case study: US states launch innovative pooled drug purchasing programme
Pricing freedom
Pricing and external issues
Pricing and government policy shifts
Case study: changes to Russian taxation system impact on pharmaceutical industry profits
Case study: Philippines government pharmaceutical policy affects industr
revenues
Currency fluctuations
Case study: Indian pharmaceutical companies deal with falls in the US dollar
The EU
EU expansion and the pharmaceutical market
The euro
The euro and the pharmaceutical industry
The rise of the euro
Parallel importation
The euro and parallel trade
Case study: a single European pricing scheme for Crixivan
EU expansion and pharmaceutical pricing
The European Economic Area (EEA)
EU enlargement and the EEA
Pricing issues in the US
Pricing issues in Europe and Japan
Pharmacoeconomics
The rise of pharmacoeconomics and health economics
Case study: treatments for congestive heart failure
Case study: Neoral and Sandimmun
Case study: cheaper diagnostic test for HIV
The economic costs of disease
Case study: the impact of ageing on healthcare resource allocation
Case study: pharmacoeconomics and drug prescribing for children in Italy
Case study: the financial consequences of inappropriate antibiotic prescribing
Case study: rising drug costs restrict uptake of malaria therapies in developing countries

Chapter 2: Pricing through the Pharmaceutical Product Life Cycle

The life cycle of a pharmaceutical
The classical pharmaceutical life cycle
Changes to the classic pharmaceutical product life cycle
Case study: Viagra
Case study: Levitra
Case study: Cialis
Brand development
Rx-to-OTC switching
Case study: the UK's smoking cessation market Time to market
Cost of R&D
Global roll-out
New product pricing
Customers
The company
Competitors
Case study: Biogen's Avonex
The decline of exclusivity for ?pioneer? pharmaceutical products
Manufacturing costs of a product
Case study: Genzyme's Ceredase and Cerezyme

Chapter 3: Parallel Trade

The view of pharmaceutical manufacturers
The view of parallel traders
Legalities of parallel trade
Case study: Ferring v. Eurim-Pharm
Case study: Leo Pharma v. Orifarm
Repackaging and re-labelling of products
Case study: Upjohn sale of Dalacin in Denmark
International parallel trade
Case study: parallel trade in Kenya
Protection of products from parallel importation
European hospitals and parallel importers
Governments and other purchasers
Competitors
Pricing differentials
Differentials created by price discounts
Price differentials resulting from variations in pricing regulations
Creation of post-patent price differentials
Pricing within a single price band

Chapter 4: Rx-to-OTC Switching and Pricing

The marketing mix for switched drugs
Product
Place
Price
Promotion
Case study: Claritin pricing
The implications of OTC status
Strong branding
Effects of patent expiry

Chapter 5: Generic Drugs

The popularity of generics
Encouraging the use of generics
Wholesalers in the EU
The potential for biogenerics
Obstacles to biogenerics
Facing up to generic competition
Case study: Augmentin loses US patent Case study: Viagra patent legal battle Future patent battles
Case study: biogeneric competition to Epogen
Case study: patent fears overshadow Sanofi-Synth?labo and Aventis tie-up
Strategies to extend effective patent life
Case study: 6-month exclusivity for Diflucan
New formulations

Chapter 6: Company and Customer Interactions

Clinicians
Case study: resistance to OTC Zocor in the UK
Patients
Case study: patient protests at halting of clinical trials for an anti-viral compound
The traditional supplier?customer frameworkClinician pressure
Case study: US doctors prescribe expensive high blood pressure
medications
Case study: poor awareness of drug prices in Canada
Company strategies
Disease management packages
Case study: Novo Nordisk and diabetes treatments
Collaborations with healthcare providers
Case study: the development of new antibiotics
?Bundling? Internet mail order
Case study: Internet trade in the US
Tendering
Case study: cancer trials
Consumer views on pricing
Case study: international consumer survey on pharmaceutical prices
Case study: AIDS drug price increase angers US patient group
Case study: Public Citizen group advocacy in the US
Price fixing
Case study: Lupron price-fixing allegations in the US
Case study: generic antibiotic price fixing in the UK
EU vitamin price-fixing scandal
Case study: generic anti-anxiety drug price fixing in the US
Hospital negotiation of pharmaceutical prices
Price analysis
Case study: parallel importation by Belgian hospitals
Case study: parallel trade of anti-retroviral drugs
Government
Direct price controls
Positive lists
Negative lists
Reference pricing
Reimbursement levels
Dealing with wholesalers and retailers
Government interventions in the pharmaceutical market and the view of the industry
Case study: German pharmaceutical industry resists government cost containment policies
Intellectual property
Patent piracy
Case study: IP and the Chinese pharmaceutical market
Case study: IP and the Latin American pharmaceutical market
Case study: the Indian pharmaceutical industry
Price controls in various countries
Buyers in the US
Pricing/volume agreements
Profit control in the UK

Chapter 7: Pharmaceutical Pricing in North America

The US
The US healthcare system
The US pharmaceutical market
US drug spending
International price comparisons
The reaction of the industry
Determination of drug prices by manufacturers
Average wholesale price and average sales price
Case study: Medicare reform and oncology drug reimbursement
Cost containment
Generics
A move towards pricing control measures?
Canada
The Patented Medicine Prices Review Board
Case study: the FDA and industry resist cross-border trade in pharmaceuticals

Chapter 8: Phamaceutical Pricing in Japan

Cost containment
Drug pricing in Japan

Chapter 9: Pharmaceutical Spending Controls in Europe

The UK
The Pharmaceutical Price Regulation Scheme (PPRS)
The National Institute for Clinical Excellence (NICE)
The prospects for ?Euro-NICE?
France
Healthcare spending
Revisions to the pricing system
Germany
Healthcare reforms
Fixed pricing schemes
Viewpoint of the pharmaceutical industry
Case study: cross-border purchase of pharmaceuticals in Poland
Spain
Pricing
Pharmaceutical demand
Government incentives to industry
Italy
Pricing system
Case study: investigation of price fixing in Italy

Chapter 10: Pharmaceutical Pricing and the Developing World

Case study: adverse UK media coverage of the pharmaceutical industry
The concept of compulsory licensing
The grounds for using a compulsory licence
Case study: compulsory licensing in North America Africa and the AIDS crisis
South Africa and HIV drug pricing
Brazil and HIV drug pricing
The future of compulsory licensing
Case study: diversion of anti-retroviral drugs destined for Africa
Anti-diversion tactics
Funding for AIDS drugs in the developing world
The M?decins Sans Fronti?res campaign for access to essential medicines

LIST OF FIGURES

Figure 1.1 Breakdown of retail medicine price in Europe 6
Figure 1.2 Internet usage statistics (2004) 9
Figure 1.3 Online Canadian pharmacy cost for Prozac and generic fluoxetine (10 mg ? 100) in 2004
Figure 1.4 Clinical development projects employing drug delivery technologies 12
Figure 1.5 Periods of market exclusivity between the launch of an innovative medicine and competitor products 16
Figure 1.6 Currency fluctuations: monthly exchange rate of Japanese yen to US$1 during 2003 20
Figure 1.7 Currency fluctuation; monthly exchange rate for US$ to ?1 during 2003
Figure 1.8 Composition of international reserves
Figure 1.9 Spend on medicines as a percentage of GDP in various countries 28
Figure 1.10 Neoral costs (1998)
Figure 1.11 Annual economic burden of major diseases in the US
Figure 1.12 European hospital costs for osteoporosis-related hip fracture
Figure 1.13 Population estimates and projections (1990 and 2020): percentage of the population aged 65 years or over
Figure 2.1 Online unit cost for Viagra 100 mg tablets in North American pharmacies (2004)
Figure 2.2 Online US pharmacy cost for Levitra 20 mg (2004)
Figure 2.3 Online US pharmacy cost for Cialis 10 mg (2004)
Figure 3.1 Financial effect on the German pharmaceutical industry of government intervention since 1999
Figure 3.2 UK versus Europe: HIV drug prices (1999) 56
Figure 3.3 Bilateral comparisons of ex-manufacturer prices for France, Spain and Italy versus the UK
Figure 3.4 Bilateral comparisons of ex-manufacturer prices for the US versus the UK (UK = 100%)
Figure 4.1 Online unit cost for Claritin 10 mg tablets in North American pharmacies (2004)
Figure 5.1 Development of the French generics market (by value)
Figure 5.2 Breakdown of sales by distribution channel in France (2002)
Figure 5.3 Sales of Viagra
Figure 5.4 Worldwide sales of Epogen
Figure 5.5 Sales of Diflucan
Figure 6.1 Number of Internet users in Europe (2004)
Figure 6.2 Online unit cost for Celebrex 200 mg in North American pharmacies (2004)
Figure 6.3 Public Citizen cost estimates of a 30-day supply of selected CNS drugs
Figure 6.4 Public Citizen estimates of long-term ?excess costs? for CNS drugs in the US compared with the average cost in other countries
Figure 6.5 Parallel importation: Zerit
Figure 6.6 Parallel importation: Inverase
Figure 7.1 Online unit cost for Prozac 10 mg tablets in US pharmacies (2004)
Figure 7.2 Average country prescription drug prices as a proportion of corresponding US prices
Figure 7.3 Average annual percentage change, patented drug prices (1996?2001)
Figure 8.1 Population projections for 2000 and 2020 ? proportion of the population aged 65 years or over
Figure 8.2 Number of NHI-listed pharmaceuticals in Japan
Figure 9.1 R&D expenditure by pharmaceutical companies in the US and Europe
Figure 9.2 UK family expenditure survey: daily expenditure (2000/01)
Figure 9.3 Estimated UK healthcare savings for selected diseases through reduced use of hospital beds since 1957
Figure 9.4 Estimated UK healthcare savings for selected diseases through reduced use of hospital beds since 1957
Figure 9.5 Sales of pharmaceuticals in France (2002)
Figure 9.6 The financing of statutory health insurance in Germany
Figure 10.1 Global status of the HIV/AIDS epidemic
Figure 10.2 National HIV prevalence rates in Africa (2003)

LIST OF TABLES

Table 1.1 Expansion of the EU
Table 1.2 Some parallel import options offered to European hospitals in 1997
Table 1.3 The core features of a pharmaceutical
Table 1.4 Evaluating the costs of disease
Table 2.1 Summary of pharmaceutical company options to counter parallel importing
Table 4.1 Useful attributes for OTC drugs
Table 4.2 Potential audiences for OTC promotion
Table 10.1 Key points of the TRIPS agreement
Table 10.2 International approaches to compulsory licensing (as of 2004)
Table 10.3 Overview of MSF proposals to improve access to medicines in developing regions

Dr F Kermani holds a BSc in pharmacology with toxicology from King's College London and a PhD in immunopharmacology from St Thomas's Hospital, London. He has previously worked and published in various areas of medical research, both in academia and the pharmaceutical industry. He has worked as a research analyst for Informedica A/S, conducting research into European pricing strategies and parallel importation, and has also worked for CMR International, examining R&D productivity and regulatory issues for major pharmaceutical companies.