This presents the science and art of pricing pharmacist services and merchandise. It lays out the steps needed to price in community pharmacies.

1. David
Holdford,
RPh, MS, PhD
PRICING PHARMACIST
SERVICES
How to sustain your
business model

2. Slides to Accompany Chapter 13 of “Pricing
Pharmacist Services”
2

3. Learning Objectives
Explain importance of pricing
Discuss relationship to other elements of
marketing mix
Discuss influences on pricing decisions
Calculate the cost of providing a pharmacist
service
Explain the relationships among price, cost, and
demand for a pharmacist service
Describe potential steps for pricing pharmacist
services
3

4. Organization's
Operation - Specific
background about
the organization
where the
product/service will
be provided
Strengths,
Weaknesses - Your
capabilities to serve
targeted customers
Service/Product – Features and details about
your program or service
Secondary
Customers - all
other people you
may serve
Partners - People or
businesses who can
help you serve
customers
Value Proposition - The case you make to
customers
Opportunities,
Threats - Potential
for success or failure
in the market
Competitors –
Alternatives for your
value proposition
Primary Customers - People or businesses you
want to serve
Costs - Financial and nonfinancial inputs
needed to serve customers
Pricing & Reimbursement - Sources of revenue
to sustain your value proposition
Communication Plan - How value
proposition is communicated
Implementation - Details about critical factors for success of business
Source: (adapted) Osterwalder A, Pigneur Y. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Hoboken, NJ.: John Wiley and Sons; 2010.
Business Model Canvas for Pharmacy Services
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9 6
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10 11
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12
13
PROFIT FORMULA

5. 10. COSTS
What are the major costs of the service being
provided?
Startup Costs
Operating Costs
Fixed
Variable

6. 11. PRICING & REIMBURSEMENT
How does the business receive revenue for the
service being provided?
What will be the price for each unit of service
provided?
Who will pay for the service?

7. SCIENCE & ART OF PRICING
Science
Economics, consumer psychology
Art
experience, hunches

8. Pharmacists must walk a
tightrope of:
charging enough….but not too
much

9. Definitions
Price Compensation Reimbursement
A charge A cost Revenue
Non-monetary
costs

10. Segmentation & Pricing
What is a bargain shopper?

11. Types of Bargain Shoppers
Offline deal-seekers. Typically over age 55
and love to find deals in stores. Online and
digital are less important
Deal thrillers. Deal thrillers love getting a
deal but are also loyal to specific brands.
Deal takers. Highly educated and affluent
consumers who do not seek deals but will
accept one if offered.
Deal indifferents. Largest segment of the
population, and they do not respond to
deals. Most only shop when they have a
specific need, and coupons are wasted on
them.
Deal-seeker influentials. Constantly look for
the best online, offline and mobile deals.
Tend to be young, highly educated, socially
active consumers who love shopping but
think paying full price is for suckers.
Deal rejectors. Hate shopping, preferring
convenience over everything. They tend to
be male, older, and willing to pay more for
convenience.
Source: Brooks C. 6 Kinds of Deal Seekers and What They Mean to Your Business. 1-9-2014. Business News Daily.

12. CONSIDERATIONS IN PRICING
• customers/stakeholders
PERSPECTIVE
• B2C, B2B, and/or B2G
MARKET
• non-durable goods, durable goods, services
PRODUCT
• Intensity of competition, ease of market entry, availability of
substitutes
BUYER’S POWER

13. PRICING AND STRATEGY
Pricing is driven by business strategy
Low cost strategies require prices that
undercut competitors
Luxury strategies allow prices above the
competition

14. Reframing the low cost argument
Making a business case to payers (B2B) that
pharmacists add value by:
• improving medication adherence,
• coordinating care,
• promoting health, and
• reducing avoidable emergency department
visits, doctors visits, hospitalizations, and
nursing home admissions

15. PRICE AND BRANDING
A strong brand can yield a higher price.
The brand is a promise that tells buyers that
"if you buy this brand, it will be worth the
extra you pay for it."
Pharmacists can garner higher prices by
communicating a strong story about their
brand and its value.

16. Step 1.
Set price
objectives
Step 2.
Estimate
costs
Step 3.
Estimate
Demand
Step 4.
Set a Price
Step 5.
Change the
Price as
Needed
HOW TO PRICE
PHARMACIST
SERVICES

17. Step 1: Set Price Objectives
Portfolio pricing
Penetration pricing
Loss leader strategy
Freemium strategy
Price skimming
strategy
Competitive pricing
Cost-plus pricing
Variable cost pricing
Value-based pricing

18. Step 2: Estimate Costs
Service costs, product costs, & net profit.
Startup & operating costs
Fixed & variable costs
Direct & indirect costs

19. Step 3: Estimate Demand
Determined by consumers’:
• needs/wants
• perception of the pharmacist and pharmacy
• perceptions of price and value
• availability of competing services
• ability to compare competing services
• price sensitivity (described as elasticity of demand)
• switching costs

20. Step 4: Set a Price
Price as a Signal of Quality

21. Step 5: Change Price PRN
Adapt to dynamics of market

22. Pay for Coordination
Pay for Performance (P4P)
1
2
Episode or Bundled Payments3
NEW PAYMENT MODELS
FOR PHARMACIST SERVICES

23. Building a
Business
Case for
Pharmacy
Services

24. Business Case
Defined as a document or presentation that
justifies an initiative
Typically an economic value proposition
to an audience of decision makers that
makes a case that an initiative will generate
greater benefit than what the initiative costs

25. A return on investment (ROI)
calculation is usually expected by
institutional decision makers to guide
their decisions
Gain from Investment – Cost
Cost
ROI =

26. Conclusions
Pricing is an art & science
It is key to sustainable pharmacist services
Pharmacies with strong brands can set
command higher prices