Subjects - Business

When a product is first launched into a market a firm will have to decide what price to charge.

Penetration pricing This strategy uses a very low price to enter the market and gain market share. It ma

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

kes sense if there are cost advantages to producing on a large scale. It can also be beneficial if the market is price sensitive, so that a lower price generates significantly higher sales.

Price skimm

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

ing This strategy uses a high price to enter the market. Even though the price is high, some people may still be eager to try a new product. Once sales from this group of people have been exhausted, th

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

e price can be dropped to attract a new segment. When this segment is exhausted the price can be cut again. A price skimming strategy is appropriate if the firm can protect its idea or invention so that

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

competitors cannot enter with a cheaper version. It may be protected using a trademark (which protects the firm logo) or a patent (which protects a new invention). Price skimming also makes sense if th

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

e market is particularly price sensitive, so that a price cut would not generate a large increase in sales. This strategy is often used with new technology: the latest computer or computer accessory ent

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

ers the market with a high price which then falls quite rapidly a year or so later.

Competitive Pricing Some firms set their price at the same level as their competitors. This makes sense if the market

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

is highly competitive and consumers can easily compare the offerings of different firms. Competitive pricing is common when consumers can make a direct comparison between different products. Many retail

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

ers offer to refund the difference if you can find a similar product cheaper in another local store.

Pricing strategies for existing products

For firms already competing in markets, pricing strategies

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

may include:

Price leadership This tends to occur when a firm dominates a market and others follow its lead. When leading petrol companies (such as BPAmoco) drop the price of their petrol, many compe

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

titors follow suit.

Price taking Price takers are firms that accept the price which dominated in the market. A small independent garage, for example, may have to accept the price set by the major sell

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

ers. Independent bookshops may have to follow the prices of major bookstores, such as Waterstones.

Predator pricing this occurs when a firm sets out to destroy (or at least weaken) the competition thr

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

ough low prices. This usually occurs if the firm has more financial resources than the competition and son can sustain lower profits for longer.

Cost Plus pricing This method of pricing considers the

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

total cost per unit and then adds on a percentage to arrive at the final price. For example if the cost of producing a single unit of output is ?100 and the firm has a 20% profit margin, the selling pri

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

e would be ?100 20% = ?100 ?5 = ?105. This method is simple to operate but does not consider the situation in the market. It ignores competitors prices and what consumers might be willing to pay. Nevert

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

heless, it is a simple method of pricing and is common in sectors such as retailing, where firms buy products in at a certain price and add on a percentage before selling it on.

Contribution Pricing

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

The contribution of a product is the difference between the selling price and the variable cost per unit (such as cost of materials). If the firm can cover the variable costs any remainder can be used t

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

o put towards its fixed costs (E.G. rent). This pricing method is often used when firms consider accepting a special order. Imagine a business received as large order forma new customer; however, the pr

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

ice is offered is below the normal selling price. Assuming the firm has sufficient capacity, it may accept the deal as long as the price covers the extra (or variable) costs involved in making the produ

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

ct. This special order decision can ignore costs such as the rent of the factory, the managers salaries and interest payments on loans, because these are paid regardless of whether the order is accepted

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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