Pricing paradigm poised for change

Chain Drug Review, Feb 4, 2008

NEW YORK -- In an era of expanding competition from generics, expiring patent protection for many top-selling drugs and a slowdown in new drug discoveries, minimal margin exists for error in drug pricing decisions, according to a Kalorama Information report titled "Drug Pricing and Reimbursement Strategies: Preparing for the Coming Generic Onslaught."

Kalorama claims that pharmaceutical sales reached $643 billion worldwide in 2006, increasing by 6.5% over the preceding year. But Kalorama says companies will be challenged in the future, in part by the onslaught of generics, which have increased their market penetration from 44% to 51.6% in the last couple of years.

"The golden years of monopolistic pricing in the United States are gone," notes the report's author, Joseph Constance. "Medicare Part D initiation, tiered managed care formulary systems and the increasing clout of generic medicines are challenging margins now.

"Companies will have to adapt to survive, and pricing is one of the few levers they can pull."