How Pharmaceutical Companies Price Their Drugs

How Pharmaceutical Companies Price Their Drugs

How Pharmaceutical Companies Price Their Drugs- Pricing on drug is not easy task especially in India because state wise government involve in pricing the drug whereas drug manufacturer itself mark some pricing on their pharmaceutical’s products. That creates confusion among the customers (patients) and healthcare agencies which is why we are right this article to make you understand How Pharmaceutical Companies Price Their Drugs.

The drug pricing is also various with generic medicine to non-generic medicine. Generic medicine is normally cheaper than non-generic medicine. It is because drug compositions are circulated throughout pharmaceutical manufacturing companies in case of generic medicine whereas in case of non-generic company the main composition is only know to that company who develop that drug’s formulation. In this article we see every aspect of How Pharmaceutical Companies Price Their Drugs and factors that influence drug’s pricing.

Importance of Drug’s Pricing in India

India is the second most populated country in this world and this population is going to increase more which mean this country surely will impact the pharmaceutical industry in one or other way. India pharmaceutical industry worth in billons and this market is growing at the rate of 12% every year.

India pharmaceutical market is the third largest market in the field of pharmaceutical industries which has great contribution in global pharmaceutical market. India is the country where the people are divided into three class 1. High Class 2. Middle Class 3. Poor Class. By leaving high class most of the middle-class people and poor class of India does not know about health insurance even if they know they can not afford to have it because they have to look over their family which is why drug’s pricing or pharmaceutical products pricing becomes more important in India. So that everyone can gain right treatment that they need. If you want to know why Indian pharmaceutical market is important then you can understand from this statement.

“India has spent over 11 billion (Dollars) in 2016 which is more than all these three countries combine together United States, Japan, and China”

Factor impact for Setting the Drug Pricing in India

Indian pharmaceutical market is a growing marking and this market is growing more which is why pricing on pharmaceutical product become more important because variation in drug pricing can create confusion. Normally, there are many factors involve while setting the drug price and these factors mentioned below.

Raw Material Rarity- There are some pharmaceutical products that are manufacture use using some of the very rare raw material, the raw material already so expensive and their extracted API is more expensive. For example, there is fungus found in Himalya name Caterpillar fungus which actually is very rare and it is quite expensive too and medicine manufacture by using such compound already become expensive.

Transportation- There is transportation cost is you have to take transport material from far away long distance it well requires some addition cost on the medicine.

Central Govt and State Tax- There is different tax which is impose by the government on the pharmaceutical products and state wise the tax may vary.

Patent Rights and Pharmaceutical Product’s Pricing

Sometimes pharma company develop new drug formulation for that they have to invest large amount of money and time. After the drug development they applies for patent right on the drug where they have to mentioned the uses of the medicine and main composition that they have develop. If the company is able to get the patent rights on the new formulation, then they can launch the product in the market which is known as non-generic which mean only that company can sell that new formulation for approx. 20 years until then they have monopoly rights on the new formulation. After 20-year other company can copy that formulation and sell that medicine of same composition and such medicine is known as generic medicine.

Method for Setting the Drug’s Price

Based on different factors different companies MRP on their pharmaceutical products. These are some of the methods that generally used by these companies that is mentioned below.

Average Price- In this method the pharmaceutical company take average price on the different pharmaceutical products which is already lunch in the market.

Monopoly Price- If the drug is newly formulated and company has patent rights on the new formulation the company can marked any price that it likes.

Drug’s cost and Market- In developing a drug there is cost involve and lunching in marketing need marketing cost considering these factors the pharmaceutical company market price on their pharmaceutical products.


India pharmaceutical market is very huge market and this country is the second most populated in the world and pricing the pharmaceutical product special in the country is very headache process because these is different type in drug pricing one is decided by the government other is decided by the product manufacturer which is why we write this article How Pharmaceutical Companies Price Their Drugs and tries to cover every aspect related to this topic. Still if you have some questions related to this topic you can ask us here,

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