This case study outlines how to implement value pricing approaches in the difficult process of pricing a new pharmaceutical product. The process implemented in this project enabled the client to achieve market access in the US and the EU5 (Germany, France, UK, Italy, Spain) for a first-in-class, ultra-orphan oncology therapy. Though specific to the pharmaceutical industry, this case study presents new product pricing strategies that can be implemented by pricers in multiple industries. Kirk Jackisch is the President of Iris Pricing Solutions. He can be reached at kjackisch@pricingsolutions.com.

The Pricing Advisor, December 2020

In the pharmaceutical industry, pricing a new product is one of the most complex decisions to be made given the number of stakeholders involved, as was the case with a multi-national pharmaceutical company that had recently developed a revolutionized cancer treatment but was struggling with communicating its value proposition to the market.

By implementing market and qualitative research studies, the company was able to gather the information it needed to develop strategies for market access and value pricing strategy in the EU5 and USA for their novel, first-in-class, ultra-orphan oncology therapy.

Achieving Market Access Across the US and the EU5

The Challenge

The company had significant experience in developing novel therapies but was struggling with pricing their products according to value and in bringing them to market. Given the initial data from phase I trials, the company had high expectations for their novel therapy. In order to develop a value-based pricing strategy for market entry, the company needed to:

• Review and refine the therapy’s value story and understand how it resonates with stakeholders
• Determine the likely market access and find pathways for the therapy given the [ultra-rare] orphan disease status
• Assess Payer willingness-to-pay for the product and determine a price corridor for the product in each scope market

Building a Pricing Solution That Fits

One major obstacle the company faced when developing a new product pricing strategy was the rarity of the disease that this new treatment addressed. This meant that even experienced stakeholders [Payers] had very low awareness and understanding of what it entailed, its epidemiology and the available treatments for it. To overcome this, they created a 3-step process:

Information Gathering Interviews

The company developed an interview programme involving 24 Payers and Key Opinion Leaders (KOLs) from US and European markets. To ensure an informed and knowledgeable discussion, they held innovative ‘Payer-briefing workshops’ that allowed Payers to get an in-depth, first-hand understanding of the rare condition and the treatment being proposed.

They then conducted interviews with 43 Payers and 12 KOLS across the 6 markets of interest, where they discussed unmet needs, advantages and disadvantages of the new product, strength of the value messages supporting it, its development plan, potential reimbursement and pricing, and funding and access arrangements.

Qualitative Research Study

The company had no initial hypotheses on target prices for their product. In order to establish a price corridor, they utilised a Van Westendorp analysis that allowed them to have an open conversation behind pricing reasoning. In addition, they carried out a short “Discrete Choice” exercise with Payers, which helped to identify key value drivers and their willingness-to-pay. An example of two discrete choice slides, similar to that reviewed by Payers, is shown below.

Chart A – Example of the discrete choice exercises Payers reviewed, to understand their key drivers for pricing decisions.

Final Recommendations

Feedback from the primary research program was collated with their own expertise, and insights from desk research. As part of a detailed final report, the combined research provided:

• Stakeholder perceptions of the therapy, strengths and weaknesses of its trial design, and the extent to which it fulfilled unmet needs,
• An outline of how the product would be assessed and used in each scope market, and
• Key recommendations on shaping phase II trials, how to begin to shape pricing and access expectations, the optimal value story and next steps for market access.

The Result?

The company is now very well positioned to optimise their product’s route to market access across the US and the EU5, and has a clear understanding of how the product will be received by stakeholders. They also better understand the true value of the advantages conferred by their therapy, how these can be reflected in its price and how value can be communicated.

As a result, the company was able to propose price levels that allowed for the desired level of access, which exceeded their initial expectations but were based on robust rationale. This in turn will allow them to begin pricing negotiations with Payers at a higher price point enabling the full value of the drug to be realised.

In this case, the company believed that the innovative approach to briefing Payers on the therapy area and the product was crucial to robust outcomes for this project as with a deeper understanding they could provide more profound feedback. This insight helped them to accurately determine stakeholder’s willingness-to-pay, evaluate treatment’s market value and develop a value-based pricing strategy for a novel treatment.