Competitive Pricing Strategy for New Entrant to Market
In a race to release a new product to the market before a major competitor, Analysis Group was retained by a major pharmaceutical company to determine a pricing strategy that would be most effective in generating long-term value for its brand. At issue was an innovative drug class being pursued by these two competitors that was unique compared to other products within its class, but similar with respect to one another. Working with an academic affiliate, an Analysis Group team, led by Vice President Anjali Oza, developed a game theory model to determine if the first entrant in the market could set a price such that subsequent entrants would follow suit and set similar prices, instead of waging a pricing war by dramatically undercutting the first entrant's price. In developing a game theoretical framework, the team examined how historical performance differs under various competitive situations, as well as factors that might lead to a pricing war or price stability. The team built separate models for both the US and EU markets in order to account for differences in the payer approval and reimbursement process. In its report, Analysis Group identified the implications that different pricing strategies would have for the client's go-to-market performance.