Pricing Strategy

Price is an inherent foundation of many key challenges faced by any innovative product or technology at introduction stage. Although Price has been accepted as the most important profit-driver by many companies, majority of them have not critically analyzed and used it in practice or have not been able to, mainly due to the focus on short-term success leading to cause short-sightedness to the management.

What is Price?
It is difficult to define Price because Price is “value” and value is a “perception”, which is largely driven by individual experience. In case of medical devices and technologies, Price is a value perception of various stakeholders but mainly payers, providers, policy makers and patients.
We believe that in order to assess the true value perception of a medical device, companies should conduct an in-depth quantitative and qualitative analysis. A systematic analysis of the key drivers and influencing parameters that are responsible for the formation of the value perception should be systematically and extensively analyzed and tackled.

In order to establish the right price for your product several different pricing techniques must be applied to ensure a secure a robust outcome while impact of dynamic and static factors should be considered as well. Pricing strategy should be customized based on the profile of your product- innovative, incremental or me too. Targeting the highest Price is not always the right strategy but targeting the right Price always is. A right Price is a reflection of true value of its clinical utility for the benefitted patient but for the remaining but powerful stakeholders true value varies from clinical to clinical & economical to pure economical utility. This could differ from market to market, region to region and even hospital to hospital. Therefore, it is extremely crucial to conduct your pricing analysis focusing on each stakeholder that is involved in influencing the decision making process.

New Challenges for Financing Healthcare
Today, when healthcare costs are rising over the heads in every market, it is almost impossible for decision makers to do justice to all the innovative technologies even if they are benefiting the patients. The recent financial crisis has raised many new challenges for every healthcare system and is deeply the traditional methodologies and processes to finance healthcare in different markets. Some of the key challenges payers face today is: what is the right value of the benefits of a new or existing technology? Is there a comparable economical technology? Does the price increase reflect the enough increase in clinical outcome as well? Is there enough money for a clinical area vs. others?

With the advent of HTAs and their global emergence it is an imperative to develop a sound Reimbursement & Pricing Strategy to create highest impact to establish and justify the value of your product and expected price.

Impact of Reimbursement Coding
Another key driver to consider while developing your pricing strategy is to evaluate the impact of reimbursement coding on the price of your product in an Activity-Based (AB) payment system. In an AB system one has to analyze the cost-structure of a DRG code in order to establish a clear ground for knowing the reimbursement tariff levels for your device. Although established DRG codes that cover certain procedures have a fixed reimbursement tariff levels they are capable of accommodating and adjusting to include a certain level of premium over time, however, length of time to achieve that can differ from market to market. Nonetheless, the key in a reimbursement system lies in the strategic introduction of the product over period.