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Article: Patients’ willingness to pay

Pei Li Teh, July 2018

Patients’willingness to payWhen launching a new product, it’s critical that pharma chooses the right pricing strategy to achieve the optimal balance between sales volume and unit cost.

In emerging markets, pricing is made more sensitive by the fact that frequently a high proportion of healthcare costs are paid for out-of-pocket by consumers and their families, making them key decisionmakers. In the past, pricing models in emerging markets were often developed using patient affordability assumptions.

Our approach to informing the right pricing strategy involves uncovering the value patients or healthcare consumers believe a product or service can provide to them as well as understanding what proportion of their disposable income they are willing to spend. While it is related to affordability and personal income (‘ability to pay’), it is not the same. In fact, the World Health Organisation (WHO) has shown that there is no correlation between an individual’s income and willingness to pay for healthcare products.

Once we have established what proportion of the population can afford the product and what they can realistically pay for the healthcare product or service in question, we seek to understand what proportion of the affordable cohort is willing to pay. This starts with an understanding of the underlying factors that will motivate patients to pay. For example, symptom severity, impact on quality of life, importance placed on specific product or service attributes coupled with social-demographic factors such as age, gender and family situation, can all influence patients’ acceptance of a product price.

In many emerging markets the physician is the primary source of trustworthy product information for patients. However, because they are often time-poor, consultation times can be limited, which can have direct implications on patients’‘willingness to pay’.

A lack of knowledge about the worth of the product may give rise to objections about cost. Added to this, the patient themselves may come with a further layer of considerations familiar to the consumer world - such as brand loyalty, belief inefficacy from their own online research,or perceptions regarding the brand or themanufacturer.

As gatekeepers, the views physicians or other healthcare practitioners recommending the product have certainly are important – they transfer their beliefs about the product on to the patients. However, the pharma company should factor in the patient perspective when developing any pricing strategy. To be successful, pharma needs to begin with an understanding of the target patients’ willingness to pay for their product, whether it is a drug, device, vaccine or supplement.

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