There are four major basis of pricing in pharmaceutical marketing are as:
1. Cost based pricing:
The name itself indicated that, the total cost of production of the product, overheads and surpluses related to product and profit margin. The summation gives selling price of the product. It suggests the minimum levels of price. But in same cases this cost based pricing fails due to fluctuations in unit cost of production, competitors move towards to price and D.P.C.O. Guidelines regarding price.
The best example of above is “price of low dose Aspirin; previously, companies were selling at high price of Rs. 3/- per tab but when low dose Aspirin comes under D.P.C.O. 1969 suddenly companies have to slashed their prices up to Rs. 0.30 to 0. 40 per tab.” Under such circumstances cost based price pulls profit margin down and gets immediately fluctuated up to drastic level.
2. Demand based pricing:
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Demand based pricing fluctuated with respect changes in demand. It is based on market realities and is successful in price sensitive and demand elastic market. This method is rarely used because of its own limitations as price sensitivity and demand elasticity has been seldom fallen in same places.
3. Market based pricing:
Market based pricing is an analytical method based on performance quality of service rendering into the market. Under pricing or over pricing of product depends on market information gathered and decision made to achieve company objectives.
Image Source: rpaycompany.com
4. Competition based pricing:
This is a widely used method by all pharmaceutical companies in India. The price either is low, high or at par with other depends on the market situation.
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The best example of this is of Ranbaxy that had launched Ciprofloxacin, a broad-spectrum antibiotic effectively used in enteric fever way back in 1992 at a price of Rs. 80 per tablet of their brand Cifran 500 mg.
After that many players were entered into the market and all had slashed their prices up to Rs 8 per tablet. But Zoxan 500 mg the brand of F.D.C Ltd entered into the market with a high price difference of Rs 2.9 per tablet and within a short period acquired 3rd position as per ORG report in highly competitive and price sensitive market of Ciprofloxacin.