Useful Advices - Business

Where you sit in the distribution chain and how long that chain is often influences how your pricing strategy is set.

There are probably just three ways you can price:

1. Cost plus: this is

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

where you decide how much profit you want to make from a given product and you apply the margin to the cost.

2. Competitive pricing: this is where you check out your competitors and price aga

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

inst them, or just below.

3. Value pricing: this is where you look at your total proposition and charge a fair price for the service you provide.

Of course, you will probably say that you us

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

a combination of 1 and 2. You calculate your margin to arrive at a price, then you sanity-check it against the competition and tweak it as necessary.

If you use a combination of all three,

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

you can stop reading now and go back to counting your money, which must be a full time job for you. For those of you still with me, here are the strengths and weaknesses of each.

Cost Plus:

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

If you just use this system you will be flying blind in the market. You may well be successful, or even very successful, but you will never know if you could have made more profit, or if you

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

could have sold more product. On the plus side you will definitely make your budgeted gross margin on your sales. Whether you will make and net profit will depend on your total sales value a

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

d your overheads.

Competitive:

If you use this system you will certainly know a lot about your customers and competitors, that is, assuming that your market intelligence is accurate. You wi

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

ll of course be aware of what a full-time job it is just to keep up with constantly changing pricing in the market. Your competitors continually discover your pricing structure, match or bett

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

r it and you are back to square one, re-pricing again.

The up side is that you will often be competitive and will probably make good sales numbers, what a pity that the monthly accounts don’t

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

look so healthy and the gross margin is down again and you’ll have to look at cutting costs to keep in front.

Value Pricing:

This pricing system takes account of both competition and cost,

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

then applies it your business proposition. It takes account of all the advantages your business has over the competition and charges a premium, however modest, for this. Because it is carefu

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

ly applied, it is justifiable, more than that, it’s a sales proposition that can be marketed to your customers as an advantage to them. The downside to this is that it requires some careful p

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

lanning and enough conviction to make it work; other than that, it’s all positive, more sales at higher margins.

How does it work?

For example, lets assume that you are a wholesaler and you

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

it between the manufacturer and the retailer. The retailer could buy directly from the manufacturer, so why wouldn’t he?

- Space restriction for minimum order value - Tight cash flow - Lac

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

k of category knowledge - Multiple suppliers needed to cover the category

A wholesaler can consolidate from different suppliers and supply little and often. To the retailer that means:

- Re

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

uced inventory
- Improved cash flow
- Less administration (one account)
- Less sales people to see
- More time to spend with customers

Why wouldn’t he pay a premium for al

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

l that?

If you’re really good, you could provide category management for the customer, recommending which products to stock, how to display them and of course, how to price them! To do this

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

roperly, you have to be truly independent, know what you’re talking about and recommend what will sell, rather than what you make the most profit on.

The principles of value pricing can be ap

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

plied to any business, but the key is to properly analyse your business and fully understand what your proposition really is. If you don’t have a clear proposition, it’s probably time you did

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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Useful Advices - 3 Ways of Pricing – Why Value Pricing is the Best

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