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Portfolio Pricing Research
Frank RENOctober 10, 2012
Page. 2
from Novartis
from XJP
& the forthcoming Jaqinus from Pfizer
& the forthcoming and TDM1 from Roche
Heptodin, Hespera & Viread from GSK
and Insulin pipelines from NovoNordisk and Eli Lilly & Glucometer brands from JNJ, Roche
and Bayer, etc.
Tribute to
Page. 3
Price Methodology Overview
Direct Techniques Gabor Granger
van Westendorp Price Sensitivity Meter (PSM)
BPTO (Brand Price Trade Off)
Indirect Techniques Price Scenario Testing
Conjoint (Adaptive, Choice-based, etc.)
Discrete Choice Modeling
Page. 4
Yet challenges to the above mentioned “pure” research methodologies...
Has the agency taken the product positioning into account? Is it a “revolutionary”, “evolutionary”
or a “me-too” product? Is it a “premium”, “mainstream” or a “PPP”? Is it a 1st line, 2nd line or 3
line product?
The positioning initiative will determine which reference price we should use and whether we
need to build the pricing scenario from the lower end or ceiling end...
Does ACA (Adaptive Conjoint Analysis)/DCM (Discrete choice modeling) really make sense?
Given the fact that Rx products are almost established with fix product feathers, the utilization
of ACA and DCM is limited. Rigid multiple-choice questionnaires of trade-off techniques also
limit the responses
How to deal with the potential scenarios listed below?
Competitors’ reaction: especially for evolutionary products, competitor price-cut?
Life cycle strategy: balance the early adopters and latecomers?
Indication approval sequence: high release price and planned reductions as well?
Dosage & Formula: impact on hospital listing?
RDL & Sponsorship Impact, etc.
Page. 5
Portfolio pricing strategy development is part of a business case rather
than a research case - Below several key issues need to be addressed
Is there any specific requirement for each individual brand on either “top-line” or “bottom line”, or
both?
If top-line is the core parameter, in order to boost the top-line achievement, is there any plan to
increase more spending on PFME/PTE/MOGE?
If bottom-line is the core parameter, in order to secure more EBIT, have you prepared to cut the
spending in marketing and sales, loose the capita, or you have an opportunity to save the COGS?
If there is a trade-off for both “top-line” and “bottom-line”, have you set any “Golden rules”?
Portfolio Cost Composition (%)
Page. 6
Various portfolio business development strategies - Initial pricing
guidance!
Portfolio/Product fits different customer segments
Case Study: JNJ Glucometer portfolio
PPP
Mainstream
Mainstream Plus
Premium
Case Study: NESCAFE portfolio
PPP
Mainstream
Mainstream Plus
Premium
Page. 7
Risperdal Consta
Invega Sustenna
Risperdal Oral
Solution
Invega
Risperdal tablet
Trade-up for bottom-line
outcome with sufficient
PFME
Trade-down for top-line
outcome with broad
coverage and
distribution
Case Study: XJP antipsychotic portfolio
Various portfolio business development strategies - Initial pricing
guidance!
Portfolio/Product fits different commercial models
Exforge
Diovan
Lotensin
Trade-up for bottom-line
outcome with sufficient
PFME
Trade-down for top-line
outcome with broad
coverage and
distribution
Case Study: Novartis HTN Franchise
Page. 8
Case Study: Roche HER2+ Franchise
Various portfolio business development strategies - Initial pricing
guidance!
Portfolio/Product fits different clinic roles
1st line:
2nd line: ? TDM1?
Much uncertainty depends on the clinic
outcome of EMILIA, MARIANNE, etc.
Case Study: Novartis Afinitor indications
1st approval: TSC SEGA
2nd approval: 2nd line mRCC
3rd approval: 2nd line HER2+ aBC
4th approval: TSC AML
5th approval: ER/PR+ aBC
Possible further indications: pNET, TSC Seizure, etc
Page. 9
Portfolio NeedstatesMarket size & potential
Unmet needs
Targeting & positioning for each product
Customer Segments
Competitive Repertoire
Commercial Models
Clinic Roles
Perceived product value
Decision tree
Price elasticity
PTE & PFME
MOGE
Trade margin
Top line/Bottom line
Competitive evolution
Analogue regression modeling
Possible competitor's reaction
Indication launch sequence
Clinic paradigm
Money flow & Co-pay
model possibility
Research approach should hence be customized to fit the portfolio strategy!
Portfolio Pricing
Choice-Based Modeling
Scenario-Based Modeling
Page. 10
Build business mindset before adopting any methodological technique
Confirm the “top down” pricing policy &
the rationale
No change to all established brands?
Maintain the mainstream brand?
Fixed pricing gap for different brands?
Define the expected research outcome &
the action standard
Price range recommendation?
Scenario-based forecast?
P & L simulation?
Set the research scope & checkpoints of
different stages
Secondary data modeling?
Primary: geographic coverage,
customer target, modules, statistic
tools, etc.
Page. 11
Case Study: Glucometer Portfolio Pricing Study
Objective: develop full set of pricing options for a glucometer portfolio
Step 1: Consumer needstate study, competitive landscape & price elasticity exploration
Step 2: Different pricing exercises to achieve the ultimate business objectives
Consumer SegmentEconomic-fit Psycho-fit Gifting
EM Key EM Key int ext
Core needstate “Basic for use” “As in hospital” “Show care” “Show face”
Willing to pay ~200-300 ~400-500 ~400-500 ~600-800 ~400-500 ~1000
Own brands Brand A (900), Brand B (800), Brand C (450)
Competitive brands Wide range from 250 to 1200
Brand D Brand C Brand C’ Brand B Brand C’ Brand A
Strategy PPP Portfolio Centric Premium
Action points Innovation Renovation Renovation Re-positioning
Key issues COGS/Trade margin Proper “Sandwich” approach to maximize the coverage Communication
Research Implication CA/DCM BPTO or scenario-based forecast No price test but a concept test
Page. 12
Case Study: Antipsychotic Portfolio Pricing Study
Objective: Pricing the line-extension brand & new launching brand to optimize the portfolio
performance
Step 1: Internal P & L scenario analysis (maintaining current key brand as portfolio centric, using the
line-extension brand as portfolio centric, or using the new launching brand as portfolio centric, etc.)
Step 2: Scenario-based test & modeling in different cities/hospitals (fit different business models)
Current Brand A (20)
Yearly Revenue (m) 420
COGS (22%) 22%
PFME (15%) 15%
PTE (10%) 10%
MOGE (14%) 14%
Others (11%) 11%
EBITA (28%) 28%
Option 1 (2017) Brand A (16) Brand A’ (24) Brand B (35)
Yearly Revenue (m) 380 510 250
COGS (21%) 20% 21% 22%
PFME (13%) 8% 15% 15%
PTE (13%) 20% 10% 10%
MOGE (13%) 8% 15% 15%
Others (11%) 11% 11% 11%
EBITA (29%) 33% 28% 27%
Option 2
Option 3
Option 4
Option 5
...
Option 1 Option 2 Option 3 Option 4 Option 5
Brand A Y N N Y Y
Brand A’ Y Y N Y N
Brand B Y Y N Y Y
Total Portfolio Y - N Y -
Page. 13
Case Study: Pricing Across Various Indications
Objective: develop a competitive pricing strategy for a brand and build a sustainable and
profitable business foundation across various indications
Step 1: Demand & value proposition study for various indication (Biz workshop + epidemiology
data)
Step 2: Key stakeholders’ Scenario-based Test in regards of the brand
Indication A (half dose) Indication B Indication C Indication D
Yearly Target patients 9,500 4,000 1,300 30,000
Treatment rate ~30% ~80% ~90% ~90%
Treatment days 360 90 300 180
Possibility to win (competitiveness) ~90% ~ 30% ~20% ~50%
Potential Treatment Days 461,700 86,400 70,200 2,430,000
Indication A (half dose) Indication B Indication C Indication D
Feasible Price Range from SBT (Monthly) 4500-5500 15000-20000 15000-20000 8000-12000
Page. 14
Case Study: Pricing Across Various Indications
Step 3: Analogue calibration, Internal P & L review and analysis
Step 4: Launch sequence modeling & forecasting
Page. 15
Think beyond pure pricing research methodologies and consider more about business
Take positioning status and the possible moves of individual brands into account
Pre-study task should cover various scenarios with more financial parameters
Multiple approaches (analogue modeling, secondary data mining, direct/indirect
research) to cross validate the final outcome
In summary…
Thank you for your attention!
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