To succeed in this dynamic healthcare industry, price-volume strategies require a concerted effort from all parts of the business and close alignment with the overall strategy. Learn more about the strategies from some successful case studies in the Asia-Pacific region.

1. Price-volume strategies and differential pricing
Strategic levers for driving growth in Asia
By Anthony Morton-Small, Senior Principal IMSCG and Derek Dieu, Senior Consultant IMSCG

2. The most pressing question facing pharmaceutical manufacturers in Asia
is not whether there is growth potential, but rather how to capture growth
opportunities. More specifically, how can pharmaceutical companies best
leverage their portfolio and capabilities to benefit from Asia’s strong
growth trajectory? As we have seen in a previous article, “Understanding
the paradox of Asia’s pharma market to ensure success,” grasping a
market’s awareness, accessibility, and affordability levels while also
identifying the respective drivers and barriers are critical first steps.
STRATEGIES FOR SPECIFIC MARKETS/ POINTS DURING THE PATIENT JOURNEY
Awareness
Origination
Steps in the Patient Journey
However, the ability to link these market
factors to patient behaviors and tendencies
is an important next step in building
strategies that proactively respond to key
market trends (Figure 1). For example,
programs that work toward increasing
awareness and accessibility are most
often employed in markets who struggle
with high levels of under-presenting and
under-diagnosed populations. For these
markets, the top priority for any strategic
plan is to open doors to treatments
that have historically been closed or
non-existent.
Awareness/Presentation
Diagnosis
Referral
Treatment
Accessibility
Affordability
Strategies to
increase
awareness
Strategies
to expand
accessibility
Strategies to
increase
affordability
Fulfillment
Of particular interest for many MNCs
(e.g. pricein Asia, however, is the need to
volume strategies)
Adherence
address opportunities and barriers related
to affordability, often resulting in to
under-treatment and under-compliance
GRAPH 1 Source: IMSCG Analysis
among patient groups. Clearly, there are
significant volume, value and market
share gains that can be realized when a full understanding of the challenges across the patient journey is used to drive the ultimate
strategy.
Of course, given the heterogeneity of Asia’s pharmaceutical markets, the rapidly evolving nature of its healthcare systems, as well
as the self-medicating and self-pay tendencies of Asian patient populations, choosing an optimal strategy to address affordability
is anything but straight-forward.
“Pharmaceutical markets in Asia are difficult to understand, let alone operate in,” says Anthony Morton-Small, Senior Principal at
IMS Consulting Group. “For example, despite pockets of reimbursement, Asia is still predominantly self-pay by definition. When
you factor in issues such as lower levels of GDP per capita, widespread income inequality/Gini coefficient, and the fact that many
households rely on pooled finances to pay for a family member’s healthcare, building an optimal pricing strategy becomes a
complicated project.”
Indeed, a recent Reuters report noted that many leading MNCs, including Bayer, Abbott, Roche, and Johnson & Johnson, have cited
tiered or differential pricing as a key factor behind their current success in emerging markets. In that same report, Roche CFO Alan
Hippe notes that that the Swiss company “expects strong growth in emerging markets over the coming years… largely because of
the company’s successful use of tiered pricing and innovative drug access models.” 1
According to Morton-Small, strategies that effectively address the affordability barriers of a market are often referred to as
‘price-volume strategies.’ “Price-volume strategies involve optimizing pricing to match the affordability levels and price
1
http://newsandinsight.thomsonreuters.com/Legal/News/2013/01_January/Analysis__Big_pharma_emerging_mkts_tactics_shift_as_growth_slows/

3. elasticity of a target market,” explains
Morton-Small. “The goal is revenue
optimization, or yielding a disproportionate
gain in sales volume by taking advantage
of peaks in demand among patients
otherwise unable or unwilling to pay for
treatment, and pricing accordingly.”
A RANGE OF OPTIONS. A MULTITUDE OF
OPPORTUNITIES
Price-volume strategies may take a number
of forms, with the primary distinction
being selective price adjustments, which
are available to specific market segments,
and non-selective or “across-the-board”
adjustments, which are available to the
entire market (Figures 2 & 3). While
across-the-board strategies (such as
GlaxoSmithKline’s blanket price cuts to
products in Indonesia, the Philippines,
and Vietnam) may be the easiest to
implement, list price reductions are
irreversible and referenceable, and often
require global approval. More subtle
options, though, do exist, says
Dr. Srikanth Rajagopal, Principal at IMS
Consulting Group.
“We’ve seen pharmaceutical companies
succeed through innovative measures
such as patient discount cards, patient
access programs, and differential
pricing that takes into account the
affordability levels of target populations,”
he explains. “We’ve also seen companies
launch cheaper, alternative forms of their
product, offer ‘buy-one-get-one-free’
discounts to encourage patient compliance,
or discount a smaller pack of the product
to lower the entry barrier. Finally, we’ve
seen companies target multiple segments
of the population by launching a second
brand ahead of imminent loss of exclusivity,
while maintaining the price of the
originator. In short, lowering price may
not be the only, the most effective, lever
in addressing the affordability barriers of
Asia’s individual markets.“
EXAMPLE OF PRICE-VOLUME STRATEGIES
Price-Volume Strategies
Non-selective
pricing
1
Blanket price cut/discount
Examples
a
Upfront price discount
b First-dollar patient discount program
By product
distinction
By perceived value
Payer-specific discount
Discount in exchange for favorable reimbursement
3
Income-based patient discount
(Patient Assistance Program)
Patient assistance programs for high cost biologics
4
Volume-based patient discount
Patient discount program with graduated discount
Form-specific discount
Launch of an alternative form
(e.g. metered dose inhaler) at a discount
6
Strength-specific discount
Discounting maintenance strength to encourage adherence
7
By identifiable
patient segment
2
5
Selective
pricing
Pack specific discount
Discounting smaller pack to reduce entry barrier
8
Second brand
Launch second brand pre-LoE
FIGURE 2 Source: IMSCG Analysis
CASE STUDY OF GSK’S SERETIDE AND NOVARTIS’ GLIVEC
Company
GSK
Novartis
Country
Indonesia
Thailand
Product
Seretide
Glivec
Therapy Area
Asthma/COPD
Oncology
Price-Volume Strategy
Blanket Price Cuts &
Strength-Specific Discount
Patient Assistance Program
Selective /
Non-Selective
Non-Selective
Selective
Proactive/ Re-active
Proactive
Reactive
(compulsory license pressure)
Target Population
All
UC
Description of
Price Adjustment
30-60% discount (larger
discounts for higher dose
products)
Glivec provided free for all
patients under Thailand’s
Univeral Coverage plan (UC)
FIGURE 3 Source: IMSCG Analysis
Companies wanting to make the best use of existing tools will no doubt recognize that some strategies—being the first to lower
a price in cash, self-pay markets, for example—are inherently proactive, whereas others, such as dropping a price in reaction
to a competitor’s price cut or governmental mandate, are reactive. While proactive and reactive price cuts both improve market
accessibility to low/middle income segments, proactive price cuts provide manufacturers with a first-to-act advantage, as well as
greater control over the discounted amount.
“All of these are viable solutions, but none can be implemented without a thorough understanding of the prevailing market
conditions,” affirms Su Yong Chung, Senior Principal at IMS Consulting Group. “It all comes down to adopting the most appropriate

4. •
Sources of Growth Potential
Significant affordability
barrier in self-pay market
Limited cheaper alternatives
•
Low affordability barrier
or reimbursed market
•
Market expansion
is the primary
source of
value growth
High potential for
market expansion
and share gain
from competition
Neither expands
market access
nor gain
competitor share
High
•
Low
Little opportunity
for market expansion;
success depends
on share gain
Cheaper alternatives available
Low
High
Ability to gain competitor share
•
Low price sensitivity
•
High price sensitivity
•
Significant product
differentiation
in clinical benefits
•
Competition based price
not clinical benefits
FIGURE 4 Source: IMSCG Analysis
IMPACT OF SELECTIVE AND NON-SELECTIVE PRICE CUTS
Non-Selective Price Strategy
$0.8
$0.7
$0.6
$0.5
$0.4
$0.3
Price Cut
6.0
5.0
4.0
3.0
2.0
USD, Millions
$0.9
Seretide (GSK) and Symbicort (AZ)
in Indonesia
Selective Price Strategy
$14.0
Standard Units, Millions
$1.0
USD, Millions
“Simply put,” says Dr. Rajagopal, “the
ultimate success of a price-volume
strategy depends on its ability to
expand the market and/or gain competitor
market share. Of course, a strategy only
generates profit if the subsequent gain in
sales volume offsets the loss in value due
to the reduced price.”
$12.0
$10.0
$8.0
Glivec (Novartis) in Thailand
400
350
PAP for UC
300
250
200
$6.0
Standard Units, Thousands
MOVING FROM THEORY TO ACTION
Price-volume strategies drive growth by
helping manufacturers expand the market,
gain competitor share, or a combination
of the two (Figure 4). Volume growth via
market expansion occurs when, through
a price adjustment, a product is made
available to customers who previously
could not afford it, or were historically
unwilling to pay. Price adjustments
may also be used to either increase or
defend market share (price-volume
strategies are often used to limit the
decline in market share of a mature
product or product facing loss of
exclusivity).
PRICE-VOLUME RETURN ON INVESTMENT (ROI) FRAMEWORK
Ability to expand market
strategy to increase affordability—a
process that must bridge the gap
between market understanding and the
available strategic options while
considering the manufacturer’s specific
portfolio and internal capabilities. For
instance, in specialty care areas such
as oncology, strategies that provide
sources of funding for patients may be more
effective than simply lowering the price.”
150
$4.0
100
$0.2
While sacrificing value sales initially to
1.0
$2.0
$0.1
generate volume is a risk, an expanded
50
$0.0
0.0
patient and physician base can be a
$0.0
0
2010
2011
2012
worthwhile reward and long-term
2007 2008 2009 2010 2011
Seretide (Volume)
Symbicort (Volume)
investment. Consider Novartis’s approach
Gilvec (Value)
Gilvec (Volume)
Seretide (Value)
Symbicort (Value)
to the Glivec® International Patient
Assistance Program (GIPAP) that was FIGURE 5 Source: IMS MIDAS, Q1’07-Q2’12- Standard Units; USD value at constant exchange rate
launched in Thailand in 2003 for patients
with chronic myeloid leukemia. Faced
with the threat of compulsory licensure
from the Thai government, Novartis reached a compromise by adjusting GIPAP to cover all patients under Thailand’s Universal
Coverage program (over 70% of the population). As a result, Novartis generated good will and strengthened its relationships with
physicians, ultimately expanding accessibility without lowering the list price (Figure 5).
Whereas the GIPAP in Thailand addressed affordability barriers without adjusting price, GlaxoSmithKline (GSK) took a different
approach to managing Augmentin®, a mature antibiotic, in Indonesia and the Philippines. In response to generic competition,
impending government price cuts, and decreased sales in the Philippines, GSK cut the price for the Augmentin range by up to 50%
in 2008. Early results were promising; within a year, Augmentin revenue had rebounded to pre-price cut levels. By the third year,
GSK had expanded the overall amoxicillin market, while continuing to see an increase in Augmentin’s value share.

5. General Risks
Price Related Risks
Price Referencing
Risks from Pricing LOW
Parallel Trade
These include formal / informal
referencing & legal vs. illegal parallel trade
Counterfeiting
Indirect Risks from Pricing HIGH
Patent Protection
Public Relations
These may be partly motivated by
pricing differentials but other factors
may also be at play
FIGURE 6 Source: IMSCG Analysis IMS MIDAS
EXAMPLES OF SUCCESS VARIABLES IN ASIA
Success Variables*
Acute/Chronic
Market Specific
Differential pricing, or pricing based on
the affordability levels of a market, is
another often-utilized price-volume
strategy in Asia. Sanofi Aventis’
management of Altace®/ramipril (a blood
pressure medication) is a prime example.
As the first to launch the drug in that
country, Sanofi chose to sacrifice initial
value gain by adopting a price point
close to 10% of its U.S. price. The result?
Sanofi ultimately captured an impressive
40% in value share for the highly
genericized molecule.
PRICE-VOLUME RISK CONSIDERATIONS
Specialty/Primary
Competitive Intensity
Strategy Specific
Similar results were achieved in Indonesia
in 2010 for Seretide®, GSK’s asthma
and chronic obstructive pulmonary
disease (COPD) inhaled medication
(Figure 5). Prior to across-the-board
price cuts, which ranged from 30-60%
(reducing the range of price points for
different Seretide packs to a single,
everyday low price), the value sales of
Seretide and AstraZeneca’s Symbicort®, a
similar product, were tracking identically.
The price cuts for Seretide initially saw
its value sales drop and Symbicort’s
increase. However, over the course of the
next two years, Seretide enjoyed over
50% volume growth, generating enough
ofa profit to offset the initial value loss.
In fact, by the second year, Seretide
overtook Symbicort in value share and
continues to lead in terms of both value
and volume sales. Interestingly, the
Seretide price adjustment appears to
have expanded the entire market for
combination inhalers in Indonesia.
Selective/
Non-Selective
Proactive / Reactive
Description
Is the product for an acute symptom
or for a chronic condition?
Is the product a’ specialty care
(high cost) or primary care
(low cost) product?
Is the product in a highly
competitive TA?
Is the pricing strategy targeted
for a particular segment across
all segments?
Is the pricing strategy a result
of pricing pressure, a proactive
means of increasing access?
Nonetheless, pharmaceutical companies
hoping to expand accessibility in FIGURE 7 Source: IMSCG Analysis
emerging markets will not always be able
to achieve their goal solely by adjusting
price. This was the case with Xeloda®, an oral chemotherapy treatment marketed by Roche in the Chinese market. “Even at
treatment costs that were less than half of those in the US, Xeloda was still priced above the reach of most of the middle-income
segment in China,” observes Amkidit Afable, IMSCG’s Pricing and Market Access expert in Asia.
Clearly, says Afable, a one-size-fits-all approach does not work in Asia. “Price-volume strategies provide the opportunity to align
a product with each market’s specific affordability levels, and to subsequently drive accessibility and improve market share,” he
says. “It’s a careful balancing act. And it can be risky, resulting in companies either adopting conservative strategies or actively
managing the risks associated with innovative strategies during the deployment stage.”
If the relative price of a product is too low, manufacturers run the risk of international reference pricing (IRP), both formal and
informal, as well as legal and illegal parallel trade. If a product is priced too high, manufacturers may be exposed to counterfeiting,
government-led patent disputes (compulsory licensing), or negative public perceptions (Figure 6). Given both the risks and the potential
upside associated with each price-volume strategy, the next question is: what strategy provides the highest potential for success?
*Note: Representative, not exhaustive

6. CHOOSING THE RIGHT STRATEGY
FRAMEWORK FOR IDENTIFYING THE OPTIMAL PRICE-VOLUME STRATEGY
The challenge facing pharmaceutical
manufacturers is a familiar conundrum:
Country 4
Country 3
while the optimal strategy can often only
Country 2
Country 1
be identified in hindsight, proactively
Strategic Options:
Situation 1
Situation 2
Situation 3
Situation 4
Situation 5
matching a strategy to prevailing market
conditions is not as straightforward.
List price cut
To hedge against such uncertainty,
Rebate
a diligent review of case studies can
Discount
provide critical benchmarks and strategic
(i.e. Discount cards)
frameworks and uncover unique success
2nd Brand /
variables (Figure 7).
co-marketing
“Assessing
numerous
price-volume
strategy case studies across Asia has
allowed us to test hypotheses and
identify some of the patterns and
variables that affect success,” says
Chung. “For example, blanket price cuts
may work well for acute-care antibiotics
in the Philippines, but not for chronic,
diabetic medication in the same country.
Similarly, highly competitive markets may
be sensitive to blanket price cuts, but
not patient discount cards.” Identifying
these variables through case studies and
primary research is a necessary step in
isolating the situations and market
conditions that respond best to a
particular
price-volume
strategy.
As with the development of all growth
strategies, past learnings are most useful
when paired with a deep understanding
of the current drivers and barriers unique
to a market (Figure 8).
Performance-based
Financial-based
Others
Go
Wait & Watch
GRAPH 8 Source: IMSCG Analysis
DEPLOYMENT CONSIDERATIONS FOR GSK’S PRICE CUT IN INDONESIA
Product
• Augmentin
• Zinnat
• Zantac
• Seretide
• Avodart
• Lamictal
• Actifed
• Tykerb
Patient Journey
Patient Journey
• Treatment
• Fulfillment
• Adherance
• Awareness
• Accessibility
• Affordability
• Geographic Coverage
• Payer-Specific
Discount
• Awareness/
Presentation
• Referral
Deployment Considerations*
• Blanket Price Cut
• Origination
• Diagnosis
P-V Strategy*
• Distribution Network
• Income-based
Patient Discount
• Volume-based
Patient Discount
• Form-Specific
Discount
• Second Brand
• Sales Force Sizing
• Segmentation and Targeting
• Marketing Campaigns
• KPI/Performance Metrics
• Initiative Roll-Out
• Pricing Risks
“The availability of case studies and
current assessments has proven crucial GRAPH 9 Source: IMSCG Analysis and Market Research, IMS MIDAS
to evaluating strategies across market
situations and determining clear go or no-go decisions,” confirms Rajagopal. “Such an approach does not guarantee success,
but it does provide critical and reliable guidance for selecting a strategy and predicting its likely results.”
MAKING IT REAL
Finally, while specific implementation concerns are unique for each strategy, deployment plans should consider industry best
practices, potential capability gaps, and key risks that require mitigation.
“The importance of reviewing deployment considerations early-on in the process cannot be understated,” says Rajagopal. “To succeed,
price-volume strategies require a concerted effort from all parts of the business and a close alignment with the overall brand strategy.
For example, a successful patient discount card program requires data-tracking capabilities, as well as a coherent marketing message,
while blanket price cuts are unlikely to succeed without sufficient sales force coverage to capitalize on higher affordability levels.
These are capabilities that must be in place prior to the launch of an initiative; not doing so limits its real potential.”
The success of GSK’s price cuts in Indonesia is a prime example (Figures 3 & 9). While lowering the price for a number of its products
undoubtedly increased affordability levels, the coordinated augmentation of sales force and distribution capabilities were critical
companion strategies. In fact, in preparation for the price cuts, GSK astutely increased its sales force headcount and geographical coverage
in Indonesia by over 50%.
*Note: Representative, not exhaustive

7. A properly formulated and implemented price-volume strategy can have a significant impact on both the long- and short-term
success of the business. “The right price-volume strategy has the potential to defend against generic entry, reinvigorate a mature
brand, steal competitor share, and expand accessibilityin previously untapped segments of the population,“ says Morton-Small.
“Applying and implementing intelligent strategies should leverage market landscape insights, pilot experience, and analog case
studies that help identify patterns and success variables by geography, situation, and brand/therapy area. Ultimately, success
requires not just an accurate understanding of the market and the right framework, but also a diligent and thoughtful
implementation plan that addresses both current challenges and future opportunities.”
IMS has a strong track record of advising clients on pricing and market access decisions in Asia Pacific.
To learn more, please contact us at the IMS Consulting Group.
apac.info@imshealth.com
www.imshealth.com/viewpoints/apac

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