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Market Sizing and pricing of a new drug

Anonymous A asked on Apr 23, 2018 - 1 answer

Hi,

If i wanna size the market in US for a speciality drug (still under development) that doesnt come under the umbrella of Insurance companies, how should I do it . (speciality is improving hair growth) .

Also how should I price it ? ( I have the Cost of manufacturing 1 USD/ tablet)

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Andrea
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replied on Apr 24, 2018
Former BCG decision round interviewer with 300+ real interviews in 8 years
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I would start with clarifying whether objective of case is to just maximize revenue or profit or if it is to reach a certain revenue or margin threshold (absolute or %) by within a certain period of time and if so what that is.

Then I would continue by (A) estimating the # of people in US that would benefit from using the drug that is object of the case. In case context I would simply ask this directly, in real life I would use a survey or look if medical research has any data on incidence of the phatology this drug addresses.

Then I would ask (B) what % of said population has the willingness to pay for the drug according to different price points (C) - again in real life I would do that through quantitative research. I would finally ask about posology of the drug (e.g. is this a one time pill the solves the problem for the person forever or is this a pill one needs to take once a day/week/month or multiple times a day?) and translate that into number of pills needed per patient on an yearly basis (D) or your timeframe of choice.

Then I would multiply # of people affected by the disease (A), by different price points (C), by the # of yearly pills needed per patient (D) and by the % of affected that is willing to purchase drug at said price point (B). I would repeat the same calculations to calculate profitability (so instead of multiplying by C, you will multiply by C-1). This will give you different market sizes and profitabilities according to price points and, based on the clarified objectives of above, it will tell what is the launch price the client should choose.

You can get more sophisticated by adjusting stated purchase intent down to actual purchase percentage.

Hope it helps,

Andrea

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