Synopsis: Biotech Channel Pricing Conflict

Our client was the manufacturer of a breakthrough biotechnology drug.  They had just launched this life-savings drug and demand was exploding.  Sales were skyrocketing, and our client’s drug was the fastest growing drug in history at that point in time.  But quickly, things began to unravel in the marketplace.

The client had set up two distribution channels to serve different market segments, large pharmaceutical distributors to serve the hospital market and specialty distributors to serve the niche clinic market that was growing rapidly to serve their customers.  In a very short period of time, the specialty channel was offering lower prices in the market than the larger pharmaceutical distributors.  Channel conflict had erupted.

QDI helped solve this problem by designing a pricing structure and policies that changed the economics enough to eliminate the benefits for the specialty channels to chase the pharmaceutical distributor’s customer.

The lesson here is that pricing structures when going through multiple channels have to be geared to the economic role the channel plays in the marketplace; otherwise the economic incentives will exist for channels to go outside their traditional markets.

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