The Successful Launch and Diffusion of New Therapies - Innovation and Marketing in the Pharmaceutical Industry - page 215

that regulation does not influence launch price but conjecture this not to be true for
prices across the product life cycle. In addition, all studies so far have focused on
the ex-manufacturer drug price (e.g., Verniers et al. 2011 ), which is the price charged
to wholesalers. However, it is crucial to also understand the proportion of the drug
price that is truly paid by the patient. Data on copayment for drugs and reimburse-
ment levels could provide useful insights. In addition, volume and bundle discounts
are increasingly offered to payers. This is another topic that, to our knowledge, has
not been the subject of systematic inquiry.

7.4.3 Future Research on Leveraging the Potential

of a New Treatment Across Countries

To optimize their profits at a global level, pharmaceutical companies need to account
for the extent to which the price of a drug in one country has an effect on the price
of the same drug in other countries. There may be different reasons for such
cross-country spillovers of price, such as the geographical proximity of countries,
the trade relationships between countries, and the extent to which countries enforce
a cross-country reference pricing system. Governments often see price spillover as
a way to reduce or maintain drug prices at justifiable levels. To stimulate such spill-
over, many (European) governments have regulations in place by which they require
companies to submit their products' prices in a predefined set of reference coun-
tries. The prices in this predefined set of reference countries are used to derive a
reference price (often the minimum or average price across all reference countries).
In both cases, the reference price becomes a ceiling price, and a drug's price can
typically not exceed it (Gregson et al. 2005 ). Most reference pricing systems are
asymmetric, in the sense that countries that are included in a specific country's ref-
erence set do not necessarily include that specific country in their own reference set.
Governments and insurers (commonly referred to as “payers”) consequently take
prices in other countries into consideration in their own price negotiations with the
firm. Managers need to account for price spillover, as agreeing to an excessively low
price in one country may “infect” the price levels they obtain in other countries, and
thus impact their global profits. So far, no rigorous model exists to optimize phar-
maceutical managers' decisions on global pricing, even though this issue is the
focus of thriving consulting businesses. Such models would also provide pharma-
ceutical companies with an optimal launch sequence across countries.
The successful launch and diffusion of new drugs remains the life blood of
many pharmaceutical firms. While it is clear from our review that some ques-
tions are answered by past research in marketing science, it is equally clear that
sophisticated managers are short of decision support tools (i.e., marketing mod-
els) that they can implement successfully to make a difference in their respective
markets. We hope the present chapter has provided a stimulus for the develop-
ment of such tools.