Assessing the Impact of Global Price Interdependencies in a Global Pricing Strategy

Designing a global pricing strategy for a new pharmaceutical product has become increasingly difficult as geographic reference pricing and parallel trade have introduced global price interdependencies between different nations. What may have been an optimal pricing strategy in a single country may no longer be optimal when considering the international ramifications of this price. The prices set by the pharmaceutical company will affect whether a pharmaceutical prescription product is accepted in each country, whether each country will participate in parallel trade (either as an importer or an exporter), and the prices charged in other countries. It may even affect the desirability of launching a product in a country. After examining lessons learned from a hypothetical case study, the general model formulation is presented. Optimization techniques from the decision sciences can be used to assist pharmaceutical companies with their strategic pricing decisions.