Conduct research to determine how different pharmaceutical companies price their
ID: 370765 • Letter: C
Question
Conduct research to determine how different pharmaceutical companies price their prescription drugs. Be sure to study and to understand the process and costs of developing new drugs. Discuss why their prices and output can vary from market to market and how the prices might change over time. (Some of these companies include Johnson & Johnson, Pfizer, Roche, and GlaxoSmithKline, among others, and visiting their company websites will prove useful.)
Now assume that your drug company is in the final stages of developing three new drugs. One of these helps to reduce cholesterol, one is a treatment for an extremely rare disease, and the third is a treatment for cancer. Create a pricing and output plan for these drugs that is in line with the expected development costs, market demand, production costs, and the competition that you will face in the market for your drug. Be sure to defend your answer.
Explanation / Answer
As per the research on pharmaceutical companies pricing on the prescription drugs, the companies develop new drugs and sells on shortages, monopoly, perfect competition, and exploring new market opportunities by cost reduction strategies. Whenever it comes to product differentiation, the companies that have competitive advantage charge substantially high. For common diseases, the drugs are available from higher prices to lower prices based on the brand image of the company. If there is no competition or its monopoly, then prices are flexible, but the companies are scrutinized to ease the access of common people. Johnson & Johnson, Pfizer, Roche and GSK charge comparatively high for the same drug composition. Sun Pharmaceuticals, Dr Reddy charge comparatively less than these companies. Ranbaxy charges too high so its target group is private hospitals and reputed doctors.
If our drug company is in the final stages of developing three new drugs. One to reduce cholesterol, one is a treatment for an extremely rare disease, and the third is a treatment for cancer. Then based on discussion with the stakeholders, production team, marketing and sales team, multiple rounds of discussion would give an idea about the pricing on the cost of production, advertisements cost, extensive utility, and competition. As cholesterol is a common problem, so lower prices can be useful and again there is competition, so to expand the customer base, the prices should be lower. For an extremely rare disease, the medicine could be charged high and it should be available in the market and competition is also less. For cancer treatment, the medicine is targeted to a niche market and again the number of cancer patients have increased exponentially, the prices can be reasonable. Having low-profit margin initially can help the company grow quickly.