STRATEGIC PRICING OF NEW PHARMACEUTICALS

This paper provides empirical evidence on the leading factors affectin g the prices of new pharmaceuticals, bath at introduction and after 4, 6, and 8 years. Most important is the extent of therapeutic advance e mbodied in a new product, For drugs which represent important therapeu tic gains, launch prices can be two or three times those of existing d rugs used for the same purposes, while drugs that largely duplicate th e actions of currently available products are typically priced al comp arable levels. In addition, the number of branded substitutes has a su bstantial negative effect on launch prices, which reflects the importa nce of competitive pressures. Duplicate products thereby play an impor tant economic role in pharmaceutical markets.