Pharmaceutical pricing

Date of publication: June 15, 1991


With the increasing demands on health care expenditure due to a rise in the proportion of people aged 65 or more. Governments are and will continue to explore ways of reducing costs. It is likely that their focus will be towards the drugs bill rather than reducing the number of hospitals, beds or staff levels. Cost benefit studies can be a useful means of demonstrating to Government departments, insurance companies, budget holders and physicians that the higher cost of a product may be justified if other aspects of expenditure are reduced or eliminated. Although cost benefit studies are not necessary for registration purposes they can be of value in persuading insurance organisations to accept the product for reimbursement. Cost benefit studies should not be seen as an "easy option" for success for companies with products which have little if any benefit over competitive products. Companies should also be aware of difficulties associated with such studies and the problems of effectively communicating their results. The results of cost benefit studies should be examined as part of the process for calculating a new product's price. Assessing the price which could be charged for a new product has taken on greater significance. Marketing research can play a vital role in assisting management in its pricing decision, bringing together the physicians perceived value of the product with the product positioning and image strategy. Public opinion will also need to be taken into account in the future as more and more patients become aware of the price of drugs and the possibility of having to contribute directly or indirectly (via insurance) to the cost of new high priced products. Companies will need to take more account of public opinion of the industry and their own specific activities.

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