Pharmaceutical companies’ product pricing and entry mode strategies for emerging markets : a case study

Abstract

The purpose of this study is to understand multinational pharmaceutical product pricing and its influence on entry mode strategies for emerging markets (EM), in particular South Africa. The study explored pricing and entry elements such as cost complexity, market attractiveness, entry mode approaches, value-based pricing, reference pricing, and generating a social license to operate, using a case study approach. Findings revealed that, for improved entry, multinational pharmaceutical companies seeking to explore opportunities in EM need to develop pricing strategies that look beyond the margin and profit computations but rather consider strategies that are more responsive to the socioeconomic needs of the EM. Furthermore, the findings reveal the value of strategic partnerships with local governments in EM and medical aid funders to address the access and affordability challenge related to innovate pharmaceutical products. A qualitative research methodology was used to gather the data. Twelve interviews were conducted to gain the insights of global and local participants knowledgeable about pricing and market access strategies. Participants included key executives and managers involved in the pricing and market access strategy formulation and participants from the department of health to provide context from the public sector perspective. The key outcome of the research is a recommendation to expand on the elements considered during the pricing process. The recommendation is that factors that address social impact as well as market specific disease burdens should be the core of pricing strategies. Further that pharmaceutical product pricing should be a shared responsibility between pharmaceutical MNCs, governments and medical aid funders to agree on pricing frameworks that are suitable for the EM.