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Market Access Mindset

Pricing Can’t Be Set in a Vacuum

As a follow-on to our blog, “Is Your Access Strategy Aligned?”, we now focus on one of the most critical—but often siloed—elements of BioPharma commercialization: Pricing.

Many companies determine their new medicine’s price by doing a typical analog analysis whereby the price is anchored to the relative perceived value of the new medicine vs other marketed therapies in the same and comparable therapeutic areas.  We covered this topic in a previous blog found here.  In today’s complex healthcare ecosystem, price is not just a number produced by analog analysis.  Price is a strategic lever that must be harmonized with expected contracting terms, channel costs, and government obligations. When price is determined in isolation, even the best market access strategies can become financially unsustainable, operationally inefficient, or inhibit patient access.

WAC:

Wholesale acquisition cost (WAC), or list price, sets the tone for many downstream decisions by anchoring:

  • Provider acquisition economics and site-of-care viability
  • Payer negotiations based on the overall value proposition
  • ASP, 340B, Medicaid and other statutory pricing calculations
  • Channel partner payments and requirements
  • Patient out-of-pocket expenses (e.g., co-payment, co-insurance calculations…)

A misaligned price can create channel friction, undercut contracting leverage, and erode net revenue/provider acquisition economics before the first prescription is filled.

Pricing & Contracting: Two Sides of the Same Coin:

Most rebates, discounts, or administrative payments tied to payer contracts or distribution are calculated using the WAC price. The relationship is typically bidirectional:

  • Too high a price invites pressure to offer excessive concessions & can invite significant public scrutiny
  • Too low a price may limit contracting flexibility, drive poor net revenue based on Government statuary concession requirements, and cause misalignment with the medicine’s overall value story.

Including Channel Costs in Your Pricing Economics:

Channel partners—from 3PLs, wholesalers specialty distributors to specialty pharmacies—require service payments that can often be material. These costs are often price-dependent, and affect:

  • Gross-to-net revenue
  • Government price reporting (ASP, AMP, BP, etc.)
  • Sufficient financial returns across the supply chain

Ignoring these in your pricing assumptions can lead to insufficient provider reimbursement and reduced access for patients.

A Modeled, Mature Approach:

Successful BioPharma companies:

  • Develop pricing in parallel with contracting and channel strategies
  • Use scenario modeling to assess trade-offs across access & net revenue targets
  • Anchor pricing in a defensible value proposition, but adapt to real-world economics

Remember that pricing decisions are typically a one-way door.  Once established, price is difficult to materially adjust without significant financial consequences.

Bottom Line:

Pricing is the keystone of your market access architecture—not a standalone decision. To unlock sustainable optimal access and net revenue, pricing must be deliberately integrated across your commercial strategy.