If we think about the pricing strategy in the US, there's really a four, four

really key boxes, I like to put them. And and I'm talking just about the US,

because again, the US is the last free market when it comes to pricing of

pharmaceuticals, even though that's changing.

most of the other countries in Europe, in Asia, even in developing markets have a

healthcare system that say we're not going to pay that much money for this.

So, there's no way, so it's imposed. So, here you look at the demand analysis,

you look at prescribing preferences. So, obviously, you want to create demand.

So how do you create demand? You go and you have your sales force go

talk to the physicians. You start advertising in the newspaper.

You start going online. And we'll talk a bit more about this.

So, it's what I call, you know, you basically want to build the demand.

and you start forecasting your revenue and profits, it's another thing when

you're in new product planning. And you're CFO, and you have to present

to your board and you have to present to your senior manager, they often, they

will ask you. So based on that product profile that you

have as a phase one drug, what's your NPV?

What's your net percent value three years out when the drug is being launched,

knowing that we are going to invest $500 million?

When are you going to reach, break even? But more importantly, when are you going

make money? And very often, those strategies in

pharma, what is being pulled from research, is based on those commercial

strategies. And, I will be honest with you, in a

market where you, where there is already president, i.e., there's already other

therapies that have been treated that are already available, so you are a, let's

say, a better [UNKNOWN] product, okay? It's fairly easy to develop a forecast.

If you are a best in class and you are first in class, it's also fairly

straightforward because you can say, well, we're going to get, nobody treats

those patients, so we should get a pretty decent size of the market.

We're not going to get 100% because that never happens but we should make money.

There is no questions. The issues when you are somewhere in the

middle and you have an average product in a market that's already crowded and you

are scratching your head and you are going like, wow, you know, but that's all

we've got. So, are we going to invest in that or

should we just can it and then should we just send everybody go home and go play

and do something else? So that's where, you know, I mean, that's

where you really have and you get a lot of pressure on you, probably planning on

the side, because you have to put these forecast revenue and profits which, by

the way, I'll tell you another thing, they're always wrong.

Okay. They're always wrong.

segmentation, another thing you have to think about, we talked about this, when

you are thinking on your pricing strategy, private insurance, national

payer. Who is drive- drivers of therapy uptake?

Health outcomes, again, from microeconomics.

what kind of physicians? You know, opinion leaders used to be the

key things to launch a drug. I remember when I used, when I was in big

pharma, this was ages ago. we had to develop really, really strong

opinion leader network. Well, they are still important today, but

they are nowhere near, even though they'd like to think so, as important as they

were. And the reason is, because they are not

the one paying it, okay? And, if there are pharmacy benefit or

they are insurance companies, saying, sorry, you know that new drug, that new

antibiotic that you have to treat basic bronchitis that costs $10,000 a month.

Well, Penicillin is cheap, why do I need that?

So, you have all these issue now that are very important and you need to really

inderstand this when you are doing pricing strategy.

And then the other thing, which is very interesting that, we're not as, as

efficient as they are today, is this whole parallel trade.

And I'm sure you guys, you know, you all are in the internet.

The internet is a fantastic tool as far as I'm concerned.

But it's what I call the great equalizer. Okay?

Everybody can have the knowledge of your physician, whether or not you understand

it or I understand it, is different question.

But you can all go to PubMed and pull up the, the the, the papers are published.

Well, you can do the same thing with pricing if I work for the government, or

if I work for, even better, a private half insurance company, I am going to go

and I'm going to pull price in Portugal, price in France, price in, and I'm

going to find somebody, even if I don't speak Portuguese or I don't speak

Japanese or I don't speak, you know, Thai or what have you.

I'm going to find somebody in my organization who does and tell me what

the price of the drug is, because those drugs are launched internationally as you

have seen. And then, when my you know, great account

manager comes and say, hey, we'd like to get your drug approved on the insurance

on, on the [UNKNOWN] and it's going to cost you, you know, per pill, I'm just

going to make [UNKNOWN] numbers up, $100 a pill.

And here I have my data, and I have a big smile on my face, and I go, oh, by the

way, the average price in all developed countries is $5 a pill.

Our neighbors in Canada is 4, our neighbors in Mexico is 3, and you want to

charge me how much again? 100 bucks a pill?

I don't think so. All right?

So, I mean, that's one of the things that you have to think about, and one other

thing that's happening, that pharma is really upset about is a lot of parallel

importing, which is very dangerous. And the FDA is very worried about this.

Where people buy, basically, over in che-, over in countries where the drugs

are cheaper the drug and then sell it here.

And that's a really, really big issues especially for drugs that sometimes are

physician-controlled. Because if I'm a physician, I have a

practice, I have a business, and I can get an oncology drug, for example, that I

can get ten time cheaper coming from China that supposedly is the same thing

that I have, that I would buy here locally.

Well, I'm going to make more profit because I'm still going to charge the

same amount. So that's some of things and it's not

just for, you know, physician tool but it's also for anything.

Pharmacy as well, if you have a unique phar-, I mean if you have your own

pharmacy. Well, I'm going to be better off if I

can, if I can, if I can have a 10% profit, 10% margin profit versus a 100%

profit margin. So, that's some of the things also that's

becoming very, very important actually, and a number of both pharma and

government organization are looking at that parallel trade.

Another thing that's very important in pricing especially when you have a new

drug is which country are you going to launch first.

And this is a great graph because it really gives you a sense as to, you know,

percentage of where you know companies should launch first, first.

You are really not going to launch first in Portugal or in France.

And I know this for a fact because, you know I, as I said I'm very familiar with

the pricing in Europe which is Portugal I believe now from the of the developed

countries has the lowest pricing in the world.

Well, if you have a new drug and you first launch in Portugal and you get set

at a very low, basically, what I call the floor.

Good luck to you first of all to get pricing increases in Europe.

because the European [UNKNOWN] and the governments are all talking to each other

a lot more. But also even in the US, it's going to be

more difficult. And in any other countries.

So what usually you want to do, you want to first launch in the US, because that's

where you can get the best price. And then, you can justify, and go to the

French, and say, or the Portuguese, and say, hey, you know.

Look, it's a hundred bucks a pill. And you want to give me what?

A dollar? Come on.

They, most of the time, don't care. I can tell you that, I mean, because why?

Because they are paying for it, okay? but it's, it's one of the things that you

really have to be cognizant as to where you are going to launch when you

establish your pricing strategy. Interestingly, in Japan, for example,

they look at prices in the US, Germany, France, and the UK.

And you adjust the pricing either up or down based on what the pricing is in

these countries, which is kind of interesting.

Japan also has a very peculiar pricing strategy, which is that every year the

prices go down and every two years it go down, I think it's more like 25 or 30%.

It might be even higher than that. So it's systematic, so you really have to

think about your life cycles strategic plan in, in Japan.

Elasticity that's another thing I want to talk about briefly is, I have shown you

that in the biologics market and especially in orphan drugs market, the

prices are in the stratosphere, as far as I'm concerned.

You know, it means, charging of a 200 grand for a treatment per year.

I don't know too many people who can afford this.

Okay? When you think that the average American

family of four makes about $40,000 a year.

you know, just think about it. So that is one of the issue, what I think

pharma is going to have to think very, very hard, as to what their business

model is going through, because now, everybody is going after this.

and, really, to be honest, I'm not sure that it's sustainable, as a market.

Now the market is going very fast. It's a good news for the orphan drug

diseases, because nobody up until now were looking at them.

But the question is, you know, pricing is going to have to come down to Earth,

especially because the rationale of: well, it costs $3 billion to develop a

drug, really does not apply here when you have 1,000 patients,

>> [COUGH] >> okay?

So pharma is going to have to be a lot more efficient and yes, I agree that the

$3 billion encompasses all their failures but that means as, you know [UNKNOWN] was

mentioning in earlier, we need to be more efficient.

We need to be, we need to have, to have better clinical trials and really have

basically less failure in our clinical development.

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