Contents:

Executive Summary Profiled Companies Methodology and Definitions Strategic Pricing: Five Principles for Success Pricing Departments’ Strategic Role Setting Pricing Strategy Payer Influence on Pricing Strategies Pricing Challenges Processes and Methodology Pricing: A Collaborative Process Pricing Research Methodology Structure and Budgets Pricing Department Structure Pricing as a Cross-Functional Effort Resource Allocation Strategic Pricing Support List of Figures Executive Summary Figure E.1: Key External Stakeholders that Influence Pricing Research Efforts Figure E.2: Phase of Development at which Companies Begin Pricing Research Pricing Departments’ Strategic Role Figure 1.1: Share of Companies that Have a Department Dedicated to Driving Pricing Strategy Figure 1.2: Internal Stakeholders Providing Oversight for Pricing Activities Figure 1.3: Cross-functional Involvement in Strategic Pricing Decisions Setting Pricing Strategy Figure 1.4: Respondent Ratings of Own Company’s Pricing Efforts Figure 1.5: Number of Pricing Studies Conducted by Phase, Innovative versus Me-Too Drugs Figure 1.6: Pricing Support by Phase, Innovative versus Me-Too Drugs Figure 1.7: Pricing Staff Support by Phase of Development, Innovative versus Me-Too Drugs Figure 1.8: Top Criteria for Determining Product Price: Share of Companies that Rated Each as Most Important Figure 1.9: Key External Stakeholders that Influence Pricing Research Efforts Payer Influence on Pricing Strategies Figure 1.10: Share of Companies Whose Revenues Have Been Eroded by Parallel Trade or Re-Importation Figure 1.11: Phase of Development at which Companies Begin Pricing Market Research Processes and Methodology Pricing: A Collaborative Process Figure 2.1: Symbiotic Relationship between Pricing Research and Health Outcomes Efforts Figure 2.2: Marketing Involvement: Lifecycle Entry and Exit Figure 2.3: Brand Team Involvement: Lifecycle Entry and Exit Figure 2.4: Health Economics Involvement: Lifecycle Entry and Exit Figure 2.5: Reimbursement/Managed Markets Involvement: Lifecycle Entry and Exit Figure 2.6: Market Research Involvement: Lifecycle Entry and Exit Figure 2.7: Medical Affairs Involvement: Lifecycle Entry and Exit Figure 2.8: Business Development Involvement: Lifecycle Entry and Exit Figure 2.9: New Product Planning Involvement: Lifecycle Entry and Exit Figure 2.10: Sales Involvement: Lifecycle Entry and Exit Figure 2.11: Clinical Operations Involvement: Lifecycle Entry and Exit Figure 2.12: Top Criteria for Determining Product Price: Share of Companies that Rated Each as Most Important Figure 2.13: Number of Pricing Studies Conducted by Phase, Innovative versus Me-Too Drugs Figure 2.14: Pricing Studies Conducted by Phase, Innovative Drug Figure 2.15: Pricing Studies Conducted by Phase, Me-Too Drug Figure 2.16: Duration of a Typical Pricing Study Pricing Research Methodology Figure 2.17: Phase of Development at which Companies Begin Pricing Research Figure 2.18: Phases of Development During Which Companies Revise Pricing Research Figure 2.19: Capturing Stakeholder Preferences Figure 2.20: Prevalence of Market Studies used in Pricing Analysis Figure 2.21: Effectiveness Rating for Pricing Study Types from 1 to 5 Figure 2.22: Key External Stakeholders that Influence Pricing Research Efforts Figure 2.23: Prevalence of Outsourcing for Pricing Activities Structure and Budgets Figure 3.1: Share of Companies that Have a Department Dedicated to Driving Pricing Strategy Pricing Department Structure Figure 3.2: Share of Large Companies that Have a Department Dedicated to Driving Pricing Strategy Figure 3.3: Share of Small and Mid-Sized Companies that Have a Department Dedicated to Driving Pricing Strategy Figure 3.4: Share of Pricing Departments that are Centralized Figure 3.5: Company 10’s Centralized Department Structure Figure 3.6: Company 12’s Cross-Functional Pricing Committee Figure 3.7: Pricing Department Reporting Lines Figure 3.8: Level of Executive Heading Pricing Department Figure 3.9: 2008 Pricing Department Headcount: Large Companies Figure 3.10: 2008 Pricing Department Headcount: Small and Mid-Sized Companies Figure 3.11: 2008 Headcount Share per Territory: Large Companies Figure 3.12: 2008 Large Company Pricing Headcount by Territory Figure 3.13: Average 2008 Headcount per Territory: Large Companies Figure 3.14: 2008 Headcount Share per Territory: Small and Mid-Sized Companies Figure 3.15: Internal Stakeholders Providing Oversight for Pricing Activities Pricing as a Cross-Functional Effort Figure 3.16: Cross-Functional Involvement in Strategic Pricing Decisions Figure 3.17: Cross-Functional Pricing Headcount by Company Figure 3.18: Groups that Contribute Funding to Pricing for a Typical Brand Resource Allocation Figure 3.19: Global 2008 Pricing Budgets: Large Companies Figure 3.20: Share of Pricing Budget that Goes toward Overhead Expenses: Large Companies Figure 3.21: Global 2008 Pricing Budgets: Mid-Sized Companies Figure 3.22: Global 2008 Pricing Budgets: Small Companies 116 Figure 3.23: Share of Pricing Budget that Goes Toward Overhead Expenses: Small & Mid-Sized Companies Figure 3.24: Budget Breakdown by Region: Large Companies Figure 3.25: Budget Breakdown by Region: Small and Mid-Sized Companies Figure 3.26: Share of Pricing Budget Dedicated to Outsourced Efforts Figure 3.27: Expense Ranges for a Typical Pricing Study Figure 3.28: Expense Ranges for a Typical Pricing Study: Large Companies Figure 3.29: Expense Ranges for a Typical Pricing Study: Small and Mid-Sized Companies Figure 3.30: Pricing Support by Phase, Innovative versus Me-Too Drugs Strategic Pricing Support Figure 3.31: Pricing Staff Support by Phase, Innovative versus Me-Too Drugs

Summary:

Report Metrics Outcomes-Based Pharmaceutical Pricing's three chapters contain process, structure and resource data collected from 30 pharmaceutical and biotechnology companies. Key metrics include the following: - Share of companies that have a dedicated department dedicated to driving pricing strategy — also broken down by company size - Internal stakeholders that influence pricing efforts - Cross-functional involvement in strategic pricing decisions - Number of pricing studies conducted by phase, innovative versus me-too drugs - Pricing staff support by phase of development, innovative versus me-too drugs - Top criteria for determining product price: share of companies that rated each as most important - Share of companies whose revenues have been eroded by parallel trade and re-importation - Phase of development at which companies begin pricing research - Effectiveness rating for pricing study types from 1 to 5 - Lifecycle entry and exit points for various functions involved in pricing - Budget breakdown, by region and by company size - 2008 pricing department headcount, by company size - 2008 average headcount, by territory - Global 2008 pricing budgets, by company size - Groups that contribute funding to pricing - Share of pricing budget that goes toward overhead expenses - Expense ranges for a typical pricing study, by company size

Companies Mentioned

- ApoPharma - Astellas Pharmaceuticals - Aveo Pharmaceuticals - Bausch & Lomb - Baxter - Bayer HealthCare - Biogen Idec - Carter/Sigma-Tau - Celgene - CellPoint Diagnostics - CV Therapeutics - Daiichi Sankyo - Exelixis - Genentech - Industria Biotecnologica Von Meiding - Johnson & Johnson - Leo Pharma - MediCepts - MedImmune - Medtronic - Merck & Co. - Myriad Pharmaceuticals - NovaDel Pharma - Novartis Pharmaceuticals - Pamlab - Pfizer - PharmaDerm - ViroPharma - Wyeth Pharmaceuticals - Xanodyne Pharmaceuticals - Several pricing consultants also contributed to this research