Pricing Strategy Analysis & Market Simulations

Copenhagen Economics has in more than 10 projects across multiple countries developed simulation tools in many different disease areas and markets using applied game theory, advanced patient modelling, as well as scenario impact evaluation. These tools and models have helped market access teams to make informed decisions on pricing strategies in public tenders.

Pharmaceutical companies frequently face public tenders for their medicines. In Denmark, for example, the lowest bidder in the tender becomes the favoured medicine for new patients in public treatment programs for a one-year period. In other countries, such as in Sweden, pharmaceutical companies renegotiate prices with regulators. For such renegotiations, a pricing strategy needs to strike the correct balance between retaining market share and maintaining revenue streams. In all cases, the results of tenders or renegotiations thus heavily impact revenues.

We have assisted multiple clients with understanding the relationship between pricing strategy and market outcomes, as well as competitor incentives both for existing medicines and newly introduced ones. In various projects, we have custom-built simulation tools for the market and treatments in question, incorporating existing patient bases, doctor behaviour based on public guidelines or preferences, different patient types, survival functions, and more.

Using the simulation tools, we explore the revenue and market share impact of various pricing strategies. By analysing the competitors’ incentives using game theory, we also provide insight into competitor pricing behaviour. Furthermore, we incorporate potential market developments and disruptions to assess the future viability of various strategies.

On the basis of these aspects, we have often hosted workshops with the client to explore incentives using ‘war games’, and developed a specific pricing strategy analysis/recommendation.

On the basis of our analysis, our clients were able to make an informed decision regarding pricing strategies, balancing the various trade-offs. The use of war games lets the clients experiment with different possible strategies to give them a better insight into the competitive dynamics of the market. Our strategy analysis is often used by market access teams in internal communications.