|Client||Small US based company with a single specialty product was concerned that sales had stopped growing. Reports from the field were that the price was too high for new users to adopt the product.|
|Company Objectives||The firm, believing the reports from the field, asked MME to determine the size of the price reduction that would be needed to get sales growing. Because the product was administered in the hospital it was subject to DRG reimbursement and the firm was convinced it was too unprofitable for hospitals to use.|
|Project Description||MME performed a Pricing Strategy Assessment, in which all of the elements that affect pharmaceutical pricing are examined.
Focusing on the elements of reimbursement, the effect of price on decision making, and the value of the product, and conducting a thorough review of internal information along with targeted depth interviews, MME determined that the market was extremely segmented, with one segment finding the product to be extremely valuable and a second segment, nearly equal in size, that so now value whatsoever.
We found that the segment that saw value believed the product was worth much more than the cost, while the other segment would not use the product even if the price were cut in half. We also determined that there was sufficient room within the DRG structure for price flexibility and that the DRG would be changed to reflect cost changes for the procedure.
We recommended that rather than cutting the price, the firm institute a set of aggressive price increases immediately. We also provided the client with a price communications plan to help customers understand the pricing actions.
|Project Outcome||The client firm implemented a series of price increases, using the communications plan to help customers accommodate the new price level. Revenue has increased substantially, along with the client’s understanding of the market and their confidence in the product. Previous non-users have begun to adopt the product as well.|