Pricing Strategy Used in Pharmaceutical Products
STRATEGY USED IN PHARMACEUTICAL PRODUCTS 6
PricingStrategy Used in Pharmaceutical Products
PricingStrategy Used in Pharmaceutical Products
Pricingstrategy is a technique that an organization uses to determine thevalue of its products. Both profit and non-profit pharmaceuticalfirms must decide the value that clients pay for the drugs. Drugsthat are cheap usually raise the concerns of quality. Customers caneasily doubt the quality of the product if it goes far much below theexpected market value. The medicines that are expensive generateconcerns of exploitation of the customers. Therefore, it issignificant to invent mechanisms that can promote active sales ofdrugs to the targeted customers. The value of the health of thepatient is difficult to determine in terms of price. When setting theprice of any product, the enterprise has to consider that the mostimportant element is whether the patient will get relief after usingthe prescribed drugs. This paper, therefore, describes pricingstrategies, which Alpha pharmaceutical firm used to price drugs.Additionally, it explores how costs determine the pricing strategy.The pricing strategy restores confidence on the quality of themedicines that customers buy from the organization.
Thecurrent technology has promoted the rapid development of moderndrugs. Research and development that accompanies the making of newdrugs are expensive. It takes an organization several years to make abreakthrough to develop effective drugs. Again, the human resourcesneeded in the process of manufacturing a brand of medicine is costly(Parker-Lue, Santoro & Koski, 2015). Biotechnologists and otherpersonnel who participate in the industry are in high demandtherefore, a firm has to compensate them adequately. However, ashinted in the preceding discussion, the patients’ health cannot beestimated. Drugs manufacturers have to find alternative ways ofconvincing the patient that the amount one pays for the medicinecorresponds to its benefits (Kaló,Annemans, & Garrison, 2013).Theassurance from the chemist is crucial in the sense that the personpurchasing drug has to feel relieved before even using the medicinepsychologically.
TheAlpha pharmaceutical firm uses various types of pricing strategies soas to attract and maintain customers. The use of temporary discountis one conventional method, which the enterprise utilizes (Klassen,Lisowsky & Mescall, 2017). Unlike other products that can usevarious temporary discounting prices such seasonal reduction optionsand bulk buying discounts, the pharmaceutical organizations have fewdiscounting options (Eonvan der &Bredenkamp, 2013). Forinstance, the patient has to receive the exact prescriptions asindicated by the physician. Once a doctor recommends particulardosage, the chemist has no role to compel the client to purchase moredrugs beyond the recommended prescription. Similarly, individualscannot buy certain medicines for future use or because there is thelikelihood that its price will rise soon.
Therefore,one way of using temporary discount pricing is by providing theclient with additional equipment used with a given drug. Forinstance, liquid oral drugs are sold together with plastic spoons(Kaló,Annemans & Garrison, 2013).Small plastic spoon inserted in the packet containing drugs is freeof sale. However, it makes the client more satisfied since one canjust take medicine without necessarily using a spoon back at home.The other way of using the pricing strategy is through the cent -offsales of certain drugs. The technique is necessary when anorganization has developed expensive drugs that are challenging tosell. For example, a drug that costs $50 can be sold at few centslower to create the impression that it is affordable (Eonvan der &Bredenkamp, 2013). It means that the actual price that the client would pay at thecounter is $50 less some cents. The extra cents can be used to reducethe prices of other medicines that a customer purchases together withthat expensive medication.
Similarly,the penetration pricing strategy is another method that Alphapharmaceutical organization can adopt. Once a brand of a drug hasbeen developed, an organization evaluates the prices of other similarproducts in the market. After that, the firm sets a lower price thatappeal to the customers (Danzon, Mulcahy & Towse, 2015). Sincethe medicine has similar effects in the body, just like othercompetitive brands, the majority of the patients would opt topurchase the drug that is slightly lower in the price. However, it isvital to take precaution so that the reduced price appears far belowother medicines that offer similar relief or cure.
HowCosts would be taken into Account When Formulating the PricingStrategy
Thecost is critical when formulating pricing strategy, especially in thepharmaceutical industry. To begin, there are two categories of drugsthat exist in the market. The two types of medicines, which areavailable are generic and brands. Depending on the target market,either generic or original drug can penetrate based on the purchasingpower of the clients (Eonvan der &Bredenkamp, 2013). For instance, working class and other individuals with a stablesource of income are more likely to buy original medicines. Thebelief that a brand has higher quality than the imitations makesthose with enough money to go for it. However, persons with unstablesources of income or the lower class individuals find it muchaffordable to buy the generic drugs. This is because the genericmedicines nearly work in a similar manner to the original brand.
Again,the cost of drugs relies on other factors such as internationalreference pricing and value-based pricing. When a pharmaceuticalenterprise uses a particular pricing strategy, the standard marketvalue in the globe has to be considered. Within a country, internalreference pricing is used to evaluate the cost of drugs. Therefore,other similar products do not sell at a price that is relativelyhigher or lower than the reference that the government agency creates(Klassen, Lisowsky & Mescall, 2017). At the international level,the external reference pricing plays an important role to ensure thatdrugs imported or exported do not attract reduced or increased pricerelative to similar medicines in other nations. Moreover, value-basedpricing is also an important consideration that determines the actualcost of a given drug and the pricing strategy (Kaló,Annemans & Garrison, 2013). The cost of any compound must reflect the value it has towardsindividual treatment. Valuable medicine will cost more compared tothe drugs that are less significant.
Pricingstrategy is crucial as far as marketing of pharmaceutical products isconcerned. The primary objective of developing medicines and otherpharmaceutical equipment is to promote quality healthcare services.The process of research and development, which is the most expensiveactivity in the pharmaceutical industry, requires massiveinvestments. It is, therefore, important to design a pricing strategythat enables the firm to sell its products. Moreover, there is stiffcompetition in the drug manufacturing sector. Hence, individualcompanies have to strategize on how to market the drugs. Nonetheless,the methods used must portray a positive image of the pharmaceuticalorganization. The primary concern is to achieve high-qualityhealthcare services that improve the health outcomes of the patient.It is, therefore, necessary to approach the market with the goal ofsolving patient’s problems.
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Eonvan der, M. S., &Bredenkamp, J. (2013). “Originator and genericmedicine: Pricing and market share.”International Journal of Pharmaceutical and Healthcare Marketing,7(2),104-119.
Kaló,Z., Annemans, L., & Garrison, L. P. (2013). “Differentialpricing of new pharmaceuticals in lower income European countries.”Expert Review of Pharmacoeconomics& Outcomes Research, 13(6),735-41.
Klassen,K. J., Lisowsky, P., & Mescall, D. (2017). “Transfer pricing:Strategies, practices, and tax minimization.” ContemporaryAccounting Research,34(1),455-493.
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