A small specialty pharma company had a category-leading product that it had acquired several years earlier but which had limited profitability. Importantly, to expand use, the company would need to make large investments in plant capacity, manufacturing, and R&D. The existing product pricing did not provide a significant margin, considering the costs to produce the complex product, to support needed investments in manufacturing.
The Vice President of Sales and Marketing engaged BMI to assess re-pricing the product.
BMI Approach
BMI came to the project with a breadth of experience in pricing research and pricing implementation, market access (which informs pricing) and previous experience in the key markets of relevance to our client’s project. This allowed us to be a highly valued thought partner throughout the process and to drive change in an otherwise risk-averse organization.
BMI conducted a multi-step project, helping our client to successfully realize a new price:
Step 1: Assess Customer Price Sensitivity and Elasticity
BMI sought to answer the following questions for the client’s product:
- The level of price awareness (current price)
- The perception of current price and product value (at that price)
- The impact of potential price increases on product perception, value, and use (among different customer segments)
- Payer receptivity to pricing changes, including risks (in the form of suboptimal formulary placement and/or prior authorization criteria)
- The financial impact of pricing changes on different customer segments, patients and payers
- The impact of any pricing change on existing GPO and managed care contracts, Medicaid rebates and 340B price
To assess the above, BMI conducted extensive primary (qualitative and quantitative) and secondary research including:
- In-depth interviews and surveys with prescribing audiences (clinicians using the product in different settings) and influencers of prescribing (hospital administrators, hospital pharmacy directors)
- Interviews with a range of decision-makers at managed care organizations, including pharmacy directors with P&T responsibility and policy-making roles
- Evaluation of “comps”, including similar situations where a product was “re-priced”
Based on the research, BMI created a model analyzing the impact of different price increases, by customer segment, including setting (e.g., outpatient, inpatient, long-term care), which allowed the client to understand optimal pricing and potential impacts on specific segments.
Step 2: Implementing the New Price
Based on BMI’s assessment and recommendations, the client decided to re-price the product. BMI and the client introduced the research and rationale for the increase internally and developed talking points for the field force and for the corporation. An education session was held with the company’s sales and marketing team introducing the new price and the strong research supporting the effort.
BMI conducted a payer advisory board for insights on how to position the price increase to managed care organizations, as well as how to mitigate any negative consequences on payers and providers.
Step 3: Monitoring Reaction and Responding to Concerns
BMI worked with the client to set up a process to evaluate the market reaction to the new price and to respond to any concerns with the new pricing.
Results
The re-pricing was extremely successful. BMI’s research was key to understanding the impact of the price increase and BMI played an important role in getting internal buy-in to the new price and implementing the increase in the field with limited customer impact or changes in managed care coverage. Importantly, the client, with greater profitability, was able to make further needed investments in the brand.
