For the month of May, we are pleased to present a professional interview with Paolo Correale, a Director at Tefen Italy, and the Head of Pricing at global level.
What is pricing, exactly? And what does it mean for life science companies?
Pricing is the value to a product you’re offering. For Life Sciences companies, managing pricing means:
- Setting the price for new products and solutions
- Maintaining the price of existing products over their life cycle
- Making sure that the price is negotiated correctly and consistently, while keeping the customer (and the patient) in mind
What is pricing excellence? What does it entail?
Pricing Excellence means that you can effectively use pricing as a competitive advantage versus your competitors (just like in this case study). Pricing is ultimately an element of the marketing mix, and as such determines a product or brand positioning in a market
While it’s true that pricing directly stems from differential product features (e.g. higher efficacy, better safety profile), it’s also true you can use pricing to prove your product features (e.g. MEAs, price-for-performance models) and create economic benefits (e.g. cost savings for the Healthcare system)
I think that pricing excellence is also one of the keys to ensure the sustainability of Healthcare Systems across the world.
Why do you think pricing is so important for the entire Healthcare system?
On the one hand, you can have more and more innovative treatments being introduced by Life Sciences companies, that have the potential to save people’s lives. And such innovative treatments are (usually) more expensive than the existing ones.
On the other hand, you also have an aging and growing population, meaning the number of individuals that need treatments increases over time. However, the Healthcare budget stays the same, as economies in most developed countries are growing at low rates (if growing at all).
This means that the current Healthcare budgets are not enough to ensure access to innovative treatments for the whole population.
This is why pricing is one of the keys to create an accessible Healthcare system, for everyone. If pricing of innovative treatments is consistent with the economic value (cost saving) they can generate for the Healthcare Systems, then the innovative treatments can become sustainable and be granted access to any patient in need.
Do you have any memorable pricing project, in which you participated?
I remember a global assessment of pricing practices we performed, in a big Pharma-MedTech company. The project was performed at global, regional and country level.
We worked together with our Client’s individuals and saw that the Company had limited standardization for price setting and deal approval processes across two of its major departments (Pharma and MedTech divisions) – in its branches spread around 180 countries. It also didn’t have structured support tools for some of the pricing processes.
Our goal was to consistently improve the Company’s pricing policies, processes, and support tools across geographies.
Key activities were:
- We performed regional workshops with representatives of key countries, to assess current practices and design the future ones
- We compared the Company’s pricing practices with industry best practices, to identify further areas of improvement
- We developed a road map covering the next three years, that would allow the Company the execute the new pricing practices
Results were fantastic: after implementing our suggestions, the Company achieved a revenue upside of about $10M in one year, and about $25M yearly going forward.