SOURCE: Cutting Edge Information

Cutting Edge Information

August 04, 2011 10:19 ET

Pricing Activities Approach $1 Million Budget to Support Innovative Pharmaceutical Products

New Research Finds Pharma Pricing Teams Gaining Strategic Importance and Higher Resources

RESEARCH TRIANGLE PARK, NC--(Marketwire - Aug 4, 2011) - The cost to set a price on an innovative drug is nearly $1 million, according to a new study by Cutting Edge Information. Compared to follow-on products, which spend an average $660,000 on pricing activities, companies' investments in innovative drugs are significantly higher.

According to "Pharmaceutical Pricing Strategy," the average cost for pricing activities supporting innovative drugs is $974,000 from Phase I through a brand's second year on the market. To better understand the growing resource allocation for pricing efforts and teams, Cutting Edge Information's new study examines the trends driving pharmaceutical pricing strategies. The project also sought to identify the most effective metrics for performance improvement.

The study found that while few companies engage in pricing activities during Phase I and Phase II development, every drug manufacturer is concerned with brand pricing by Phase III.

"By Phase III, brand teams are gearing up for launch and focused on their market access and reimbursement packages," said Shaylyn Pike, senior analyst at Cutting Edge Information. "In recent years, pricing has become a strategic focal point for many drug and device companies."

On average, brand teams spend $504,000 in Phase III to support an innovative drug's pricing activities, higher than any other development phase. Like new blockbuster drugs of past years, the next generation of innovative drugs has the potential to determine the outlook for many pharmaceutical and biotechnology companies. But now developers must often target a more specific market niche, such as an orphan disease or specialty therapeutic area.

The pricing team's elevated role in the drug lifecycle reflects the growing importance of a sound and well-planned pricing strategy. "Pharmaceutical Pricing Strategy: Maximize Revenue in an Evolving Economic Climate," available at, explores benchmarks for pricing departments' team structure, staffing and budgets and gives a detailed view of key trends including:

  • Growing company and payer experience with risk-sharing agreements
  • Government-specific price cuts
  • The United Kingdom's move away from NICE's veto authority and toward value-based pricing
  • Increasing focus on comparative effectiveness
  • Parallel trade/re-importation in both developed and emerging markets

For more information about pricing, reimbursement and market access management, contact Elio Evangelista at +1 919-403-6583.

Contact Information

  • Contact
    Elio Evangelista