Bayer Case

January 2, 2018 General Studies

Drug makers are now fast realizing the ‘one-size-fits-all’ concept does not work anymore and have started to look at differential pricing as the key for growth, especially in developing markets with varied income groups. They are looking to create multiple brands for the same drug at different price points. Demand for healthcare high. Experts also add that differential pricing allows drug companies to signal that their pricing policies are socially responsible as it aims to provide medicines to all sections f the society and is also an effort to shield the company from provisions like compulsory licensing and other policy measures.

Differential pricing allows pharmaceutical companies to signal that their pricing policies are socially responsible and consistent with their obligations to society and not Just geared towards maximizing profits. In addition, differential pricing on select drugs opens opportunities to serve low and middle-income markets and creates economies of scope for pharmaceutical companies. Social welfare is enhanced when differential pricing opens new markets for pharmaceutical companies in countries where the affordability for the drug is significantly lower than the prevailing price in existing markets.

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Whether the benefits of differential pricing accrue more to the pharmaceutical company or to the patient/payer depends on the elasticity of demand and the market structure. CONS: Can be difficult to: “This supposes that you are able to keep different chains – Different branding, different channels of distribution and other ways of keeping these markets different. ” could potentially be a very effective way to improve access to medicines for people living in low and middle-income countries. A well- implemented differential pricing system could also lead to increase in sales for pharmaceutical manufacturers. Preferential pricing could erode profit margins in lucrative high and middle-income markets and high distribution channel markups in low income countries could dilute much of the benefits of differential pricing to poor end-patients. It is important to note that differential pricing is not a panacea to ensuring access. For patients with affordability levels lower than the marginal cost of manufacturing, donor subsidies and government support will continue to be required.

Mr. Shah, a former Pfizer executive, says most western companies have failed to understand “the emotive issue that affordable healthcare has become for Indians”. He says that western dressmakers are making strategic mistakes by selling lifesaving medicines at prices only the richest Indians can afford. “It’s like saying: You are too poor but maybe in 10 or 15 years when you become rich, you can take these products. ” b, Is the idea of regulatory actions such as CLC Justified? Have a definition of CLC! Is it just for Pharmacy or any other brands as well. PROS Firstly, patents, especially on pharmaceuticals, are harmful to developing and


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