2. Asthma – Price Elasticity Analysis
Introduction
Asthma is a chronic lung disease that causes episodes of difficult breathing. Asthma is a
chronic inflammation of the bronchial tubes (airways) that causes swelling and narrowing
(constriction) of the airways. The result is difficulty breathing. The bronchial narrowing is
usually either totally or at least partially reversible with treatments.
Bronchial tubes that are chronically inflamed may become overly sensitive to allergens
(specific triggers) or irritants (nonspecific triggers). The airways may become "twitchy" and
remain in a state of heightened sensitivity. This is called "bronchial hyperreactivity" (BHR).
It is likely that there is a spectrum of bronchial hyperreactivity in all individuals. However, it
is clear that asthmatics and allergic individuals (without apparent asthma) have a greater
degree of bronchial hyperreactivity than nonasthmatic and nonallergic people. In sensitive
individuals, the bronchial tubes are more likely to swell and constrict when exposed to
triggers such as allergens, tobacco smoke, or exercise. Amongst asthmatics, some may
have mild BHR and no symptoms while others may have severe BHR and chronic symptoms.
Common symptoms of asthma include wheezing, shortness of breath, chest tightness
and coughing, and use of accessory muscle. Symptoms are often worse at night or in the
early morning, or in response to exercise or cold air. Some people with asthma only rarely
experience symptoms, usually in response to triggers, whereas other may have marked
persistent airflow obstruction.
Asthma is an incurable illness. However, with good treatment and management there is no
reason why a person with asthma cannot live a normal and active life.
Asthma management
Asthma can be alleviated through appropriate asthma management and prevention. The
main approach towards the management of asthma is the use of effective treatments
Asthma – Price Elasticity Analysis | 5/16/2012
(pharmacologic managements), and avoidance of exposure to allergens and other triggers
(non-pharmacologic management). In addition, education of both patients and health
professionals is the key to the success of every asthma management and prevention
efforts. Furthermore, an improved adherence to prescriptions of long-term control
medications (such as inhaled corticosteroids) can lead to reduced morbidity, mortality, and
consumption of health care resources
Economic Burden of Asthma
Globally, the economic costs associated with Asthma exceed those of tuberculosis and
HIV/AIDS combined. The economic cost of Asthma is considerable both in terms of direct
medical costs (such as hospital admissions and cost of pharmaceuticals) and indirect
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3. medical costs (such as time lost from work and premature death). Developed economies
can expect to spend 1 to 2% of their health-care budget on Asthma. Estimates for 1996
indicate that the financial burden on patients with Asthma in different Western countries
ranges from $300 to $1,300 per patient per year. Severe Asthma is associated with
disproportionately high costs in comparison with other degrees of Asthma severity.
Health care costs are under pressure in all countries, and decisions about the use of new
medicines are not only concerned with safety and tolerability assessments, but also value
for money. Hence, it is important for professionals, health economists, and planners to work
as a team to understand the costs of asthma in order to identify where the burden occurs,
to assess the effectiveness of current asthma medications, and to know how to achieve
optimal cost effectiveness.
Asthma Market-REPORT HIGHLIGHTS
Overall sales in the asthma and COPD drugs market were worth $25 billion in 2008, and
increased to an estimated $26 billion in 2009. By 2014, it is projected to increase to $31
billion, for a 5-year compound annual growth rate (CAGR) of 3.3%.
The largest segment asthma drugs market, was valued at approx $15 billion in 2008; this
is expected to increase to $16 billion in 2009, and is projected to reach $17 billion in 2014,
for a 5-year CAGR of 1.2%.
Sales in the COPD drug market amounted to $10 billion in 2008 remained flat in 2009, but
projected to increase to $14 billion in 2014, for a 5-year CAGR of 6.1%.
Asthma – Price Elasticity Analysis | 5/16/2012
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4. Budesonide/formoterol
Budesonide/formoterol is a combination formulation
containing budesonide and formoterol used in the management of asthma and chronic
obstructive pulmonary disease (COPD) in the EU.
Budesonide is an inhaled corticosteroid and thus functions as an anti-inflammatory agent, it
acts by reducing and preventing respiratory tract inflammation
Formoterol works as a long acting beta 2 agonist resulting in bronchodilation, dilates
respiratory tract.
Asthma – Price Elasticity Analysis | 5/16/2012
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5. This combination drug not only act as a maintenance medication but also as-needed
treatment which reduces exacerbations better than as-needed formoterol or as-needed
terbutaline individually.
It is new once-a-day combination products that are longer acting than drugs current on the
market. The new drugs would be more convenient for patients because they only need to be
taken once a day, rather than several times a day with current drugs.
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6. Elasticity Of Demand
The elasticity of demand for a commodity is the rate at which quantity changes as the price
changes.
Price elasticity is found to be relatively elastic. This means if there is small change in price
lead to the big change in quantity demanded.
In this case the elasticity for demand is said to more than one(Ed > 1).
Y
P’
P
Q Q’ X
Demand Of Substitutes
From the figure we can see when the price of xxxxxx was p,the quantity demand was Q,
when the price increases to P’ then the quantity demanded to Q’. Therefore we can say that
Asthma – Price Elasticity Analysis | 5/16/2012
xxxxx is elastic in nature and its elasticity for demand is more than 1.(Ed>1)
DETERMINANTS OF DEMAND ELASTICITY
Availability of substitute:
In the case of xxxxxxx substitutes are easily available in the market.
Example: Lupin, Dr. Reddy’s Lab, Cipla, Merck etc. (Table Below)
So if there is a increase in the price of xxxx, the consumers will shift their brand from
xxxxxx to other products because of easy availability of related substitutes.
In case of XXXXXXX anti-asthmatic drug (combination of Formoterl +Budesonide) there are
number of substitute brand available in the market as shown in table below, we have Lupin,
Dr. Reddy’s Lab, Cipla, Merck etc. now if the price of XXXXXXX ranges from Rs 450 to Rs
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7. 600 whereas the price of other substitute drugs remain the same then the demand for
XXXXXXX will fall down.
Brand Name (Indian Composition Company Packing MRP
Market)
Rs.
BUDAMATE inhaler Budesonide 100mcg, formoterol LUPIN 200 md 190
fumarate 6mcg/dose
BUDAMATE inhaler Budesonide 200mcg, formoterol LUPIN 200 md 250
fumarate 6mcg/dose
BUDAMATE inhaler Budesonide 400mcg, formoterol LUPIN 200 md 299
fumarate 6mcg/dose
BUDAMATE Budesonide 100mcg, formoterol LUPIN 30 89
TRANSCAPS cap fumarate 6mcg/dose
BUDAMATE Budesonide 200mcg, formoterol LUPIN 30 120
TRANSCAPS cap fumarate 6mcg/dose
BUDAMATE Budesonide 400mcg, formoterol LUPIN 30 142
TRANSCAPS cap fumarate 6mcg/dose
COMBIHALE-FB inhaler Formoterol 6mcg, budesonide DR. REDDY'S 120 MD N.A.
100mcg LABS
COMBIHALE-FB inhaler Formoterol 6mcg, budesonide DR. REDDY'S 120 MD N.A.
200mcg LABS
COMBIHALE-FB inhaler Formoterol 6mcg, budesonide DR. REDDY'S 120 MD N.A.
400mcg LABS
COMBIHALE-FBredicaps Formoterol 6mcg, budesonide DR. REDDY'S 30 N.A.
Asthma – Price Elasticity Analysis | 5/16/2012
100mcg LABS
COMBIHALE-FBredicaps Formoterol 6mcg, budesonide DR. REDDY'S 30 N.A.
200mcg LABS
COMBIHALE-FBredicaps Formoterol 6mcg, budesonide DR. REDDY'S 30 N.A.
400mcg LABS
FORACORT autohaler Budesonide 400mcg, formoterol CIPLA 300 md 985
6mcg
VENT FB EASCAPScap Budesonide 400mcg, formoterol MERCK 30 63
6mcg
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8. *MD (Meter Dose)
*** The biggest selling inhalable drugs for the treatment of asthma and/or COPD by value,
are GlaxoSmithKline’s Seretide/Advair (fluticasone+salmeterol) with sales of £4,977 million
(US$7,794 million) in 2009, Boehringer Ingelheim’s Spiriva (tiotropium) with sales of EUR
2,070 million (US$3,046 million) in 2008, and AstraZeneca’s Symbicort
(budesonide+formoterol) with sales of US$2,294 million in 2009.
TIME & PREFERANCE:
The demand for xxxxx is always related to a time & preference factor. This implies that
elasticity of demand varies with the length of time period & choice (preference). In case of
long run elasticity of demand is elastic (because the period is long enough for the people to
shift their taste and preference) and in case of the short run the demand remain inelastic.
Asthma – Price Elasticity Analysis | 5/16/2012
INCOME LEVEL:
The demand for xxxxx is elastic for middle income group. The middle income group is
sensitive to the change in price. Therefore if there is an increase in price of xxxxx, the
demand in the middle income group will decrease.
PROPORTION OF INCOME SPENDS ON THE GOODS:
xxxxxx is that product which is meant for the asthma & COPD patients. In the long run the
demand is relatively inelastic because even in the long run if there is a increase in price of
xxxx even the patient will shift their preference because of the constrain in their pocket
whereas in short run the demand is inelastic.
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9. INCOME ELASTICITY
If the income rises by 20% then the demand will rise by 10% the curve is positively sloped
means that elasticity of Income is >0 and <1.
(When the average income was Rs. 10,000 and demand was 100)
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Income
10
09
08
07
06
100 110 120 130 140 150 160 170
Demand Of Substitutes
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10. CROSS ELASTICITY OF DEMAND
It is ratio of proportionate change in quantity demanded of Y to a given proportionate
change in the price of the relative commodity X.
TYPES OF CROSS ELASTICITTY OF DEMAND:
POSITIVE:
When goods are substitute of each other then the cross elasticity of demand is positive. E.g.
if the price of xxxx increases, this will lead to increase in the demand for substitute drugs.
In the figure given below, the horizontal axis represents demand for substitute drugs
whereas on vertical axis we measure price of xxxxx. If the price of xxxxx increases from Rs
150 to Rs 200 then the demand for substitute drugs will increase from 40 to 50 units.
350
300
250
200
150
Price
100
50
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90 100 110 120 130
Demand
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11. INCOME ELASTICITY OF DEMAND:
It shows the way in which consumers purchase any good as a result of change in his
income.
As there is a positive relationship between incomes of the consumer and quantity demanded
for xxxxx, so we can say that xxxxx is a normal good.
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Income
10
09
08
07
06
100 110 120 130 140 150 160 170
Demand of Substitute
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12. DETERMINANTS OF INCOME ELASTICITY DEMAND
Level of income
If the income of the consumer is more than the quantity demanded for xxxxx will be more
and vice versa.
Time period
Time period take the concept of marginal propensity to consume. If the consumers have
high income they have more propensities to consume, hence the demand for xxxxx
increases and vice versa.
Availability of Close Substitutes
If there are close substitutes, buyers will move away from more expensive items and
demand will be elastic.
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13. Pricing Strategy:
Reflect the value you provide versus your competitors
Consider what the market will truly pay for your offering
Enable you to reach your revenue and market share goals
Maximize your profits
It is best to create your brand strategy and identify your distribution channels before you
develop your pricing strategy. By doing so, you’ll ensure that your pricing reflects your
value proposition and reinforces your brand; you can also minimize pricing conflicts with
any channel partners.
Sale Strategy:
Commit to provide samples of xxxxx product per year through its sales representatives to
physicians. These samples will be available free of charge to patients. These samples will
provide all patients with access to xxxxxx. Since physicians routinely distribute samples to
help the low-income or uninsured patients, these patents will be major beneficiaries of these
Asthma – Price Elasticity Analysis | 5/16/2012
samples.
In addition to samples, public and private patient assistance or discount programs exist.
Insurance coverage for prescription pharmaceuticals.
Voluntary price freeze for xxxxxxx. Prices for all payers should remain stable.
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14. FACTSHEET (India):
Current cost of treatment of asthma (Rs/patient) per year:
Year Chronic Mild Chronic: Moderate & Hospitalization
Severe charges per episode
1996 303 11250 3042
2001 436 16200 4379
2006 569 21,141 5716
2011 702 26,087 7053
2016 835 31,045 8394
Estimated number of chronic cases of asthma (in lakh):
Urban Rural
Year Males Females Total Males Females Total
1996 24.18 22.56 46.73 92.18 83.42 175.60
2001 27.15 24.82 51.97 100.67 94.76 195.43
2006 30.76 28.30 59.05 114.34 108.34 222.68
2011 34.57 32.05 66.62 128.69 122.89 251.58
2016 37.30 35.97 73.27 139.50 137.99 277.49
CONCLUSION:
Asthma – Price Elasticity Analysis | 5/16/2012
Since our product xxxxx is elastic in nature therefore if there is a slight increase in the price
of the product, there is a tremendous change demand of the product because of the number
of the substitutes available in the market.
Vice-versa drop in the price of the product, there is a rise in demand of the product since
the above factsheet says there would be considerable rise in asthmatic cases.
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