Pricing at drug @ $9,850 / month

How Pfizer Set the Cost of Its New Drug at $9,850 a Month
by: Jonathan D. Rockoff
Dec 09, 2015
Click here to view the full article on WSJ.com

TOPICS: Pricing

SUMMARY: A look at how Pfizer set a cancer medicine's price at $9,850 a month shows an elaborate process of testing the market and the views of doctors and health plans.

CLASSROOM APPLICATION: Students can evaluate process used by Pfizer to determine the price of one of its cancer drugs, Ibrance. The process includes determining the drugs that are in the same market, the patient benefit from the drug, and the willingness to pay by health plans. "The company wanted a price that would maximize its revenue without deterring health plans or keeping the drug from getting to patients it could help.... Hoping to smooth the drug's way onto health-plan lists of covered medications, Pfizer economists created a dossier containing data on clinical benefits and risks, plus-important to the plans-the likely effect on their budgets. The economists mined electronic health records, drug-prescription tallies and health-insurance claims to estimate the number of prescriptions, costs of treating side effects and monitoring patients for infections, and spending that might be avoided if the drug kept cancer at bay longer.

QUESTIONS: 
1. (Introductory) What factors do physicians consider when prescribing drugs?

2. (Advanced) What factors did Pfizer consider when setting the price of its new cancer drug, Ibrance?

3. (Advanced) What role did Pfizer's economists play in setting the price of the company's new cancer drug, Ibrance?