Case

REVIEWS

PRICING MEDICINES: THEORY AND PRACTICE, CHALLENGES AND OPPORTUNITIES

Nigel Gregson*, Keiron Sparrowhawk‡, Josephine Mauskopf § and John Paul§

Abstract | The pricing of medicines has become one of the most hotly debated topics of recent times, with the pharmaceutical industry seemingly being attacked from all quarters. From a company perspective, determining the price for each new product is more crucial than ever, given the present dearth of new drug introductions. But how are pricing strategies developed in practice? What is value-based pricing and how are financial models of return on investment constructed? What are the challenges faced in setting the price for a particular product, and how will scientific and environmental trends provide future pricing challenges or opportunities?

A G U I D E TO D R U G D I S C O V E R Y

NEW MOLECULAR ENTITY

A medication containing an active ingredient that has not been previously approved for marketing in any form.

“There is no other country on earth that allows the pharmaceutical industry to leverage these extraordinary extortionate prices for lifesaving drugs out of their citizens.” 1

*PriceSpective LLC, 640 Sentry Parkway, Suite 305, Blue Bell, Pennsylvania 19422, USA. ‡ PriceSpective Ltd, Layston House, Buntingford, Hertfordshire SG9 9ET, UK. § RTI Health Solutions, PO Box 12194, Research Triangle Park, North Carolina 27709-2194, USA. Correspondence to N.G. e-mail: ngregson@pricespective.com

doi:10.1038/nrd1633

As exemplified by the above statement made in the United States House of Representatives on 6 May 2004, the prices of pharmaceutical products are being constantly criticised in the United States, and they are also subject to increasing challenges throughout the rest of the world. There is growing support in the United States for the legal importation of drugs from Canada and other countries in which prices are typically lower. These lower prices generally result from strict controls,...