PSP-One Panel Discusses "Willingness to Pay"

On May 17, 2005, the Private Sector Partnerships-One (PSP-One) sponsored a panel in Washington, DC to discuss tools that can be used to make decisions about increasing or setting prices for health products in developing countries. Representatives from various cooperating agencies of USAID, NGOs and the commercial sector presented their experiences with using pricing tools to make program decisions.

Dr. Barbara Janowitz of PSP-One opened the discussions with an overview of Willingness to Pay (WTP) experiences and introduced keynote speaker Dr. Jim Foreit of the Population Council. Foreit explained what could be learned from WTP surveys in developing countries and issues surrounding their reliability and validity. Of particular concern is the question of validity: is there a good match between responses to questions on WTP and actual behavior. He concluded that the match was good enough so that programs should feel comfortable basing pricing decisions on the data that they collected on WTP.

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The overall theme of Panel 1 was to describe the importance and use of WTP Tools in assessing client behavior among persons purchasing health products in developing countries.

1. Alex Banful, GSMF International, used the WTP tool to make pricing decisions about three brands of condoms. He used the tool to attempt to achieve greater cost recovery without sacrificing condom sales. He did this by using price to differentiate among condom brands targeted to different market segments, thereby repositioning brands in such a way that greater revenues were collected for the higher priced ones. Sales volume fell for the two brands that experienced the greatest price increases; however, sales volume grew for the lowest priced brand which increased far less in price.

2. Dr. Steven Chapman of Populations Services International (PSI) spoke of the dilemma decision-makers encounter when deciding whether to raise prices to increase cost recovery or lower them to increase access. Chapman suggested using a Total Market Approach that segmented populations into homogenous groups according to their needs and attitudes regarding condoms and used this information to determine when it was appropriate to raise prices among various groups purchasing condoms including those from the public, social marketing and commercial sectors.

3. Dr. Karen Foreit of the Futures Group discussed how the willingness to pay tool was used for different purposes in Ecuador, Pakistan, Mali, and Madagascar. These countries used the tool in different types of programs (clinics and social marketing) and collected data either at the population or the clinic level. Although results of the surveys showed that prices could be raised with little negative impact on use, Mali chose not to raise prices and price increases are still under consideration in Madagascar.

This panel focused on the tools used by the commercial sector to make decisions regarding pricing. The panelists consisted of researchers including those from USAID cooperating agencies, business analysts and economists.

1. Sam Woolford, Ph.D. and Nandini Hadker of Abt Associates provided an overview of pricing methodologies used in the commercial sector. Woolford and Hadker introduced three pricing methods that provided increasingly targeted information to set prices. Expectations theory is used to set price boundaries, value assessment and pricing perceptions (Van Westendorp) is designed to understand the perceived price-quality relationship, and the trade-off methodology is used to study the factors affecting choice including price.



2. Avantika Daing from Eyetech Pharmaceuticals talked about her experiences in the private sector with pricing pharmaceuticals. She mentioned several factors to take into account in determining pharma product prices such as the decision maker and influencer, market utilization, how the product is represented, the reimbursement environment, and the competitive framework. Daing talked specifically about two products she had actively been involved in during the Go To Market launch strategy – an oncology product and an ophthalmology product. In the ophthalmology case, the market research indicated that demand was not sensitive to price. The traditional downward slope demand curve was not apparent, not because the market was irrational, but because of the reimbursement environment. The bottom line comes down to justifying value proposition to the payer community (that determines the level of reimbursement) and the patient body by talking about how the drug can improve the quality and/or extending the length of the patient’s life. Daing also talked about how pricing impacts all aspects of the product launch including product positioning, brand image, messaging, packaging, and sales rep detailing. Daing reiterates Woolford and Hadker’s comments about looking carefully at research objectives by focusing on the approach over the methodology. Daing claims that methodologies are too rigid and run the risks of alienating factors for consideration.

3. Reed Ramlow from The Academy for Educational Development showed how the Van Westendorp approach was used to obtain information on price perceptions for “Raid Mosquito Net Kits” in Zambia. It turned out that the original commercial partner backed out of the project after seeing the research results, but another partner was found. The end result was that use of the product increased with those with higher incomes more likely to obtain the nets through a commercial source. At the same time households with lower incomes had equal access but were more likely to use the public sector.

Special guest presenter Dr. Dennis Chao, Research Triangle Institute, introduced a model that could be used to demonstrate the impact of pricing decisions on total and net revenues and on the number of clients. Jim Shelton of USAID wrapped up the panel discussion and provided comments on how WTP tools can achieve program goals.

Materials and presentations from this event are provided below:

Willingness to Pay: A Technique for Helping Programs Balance the Need for Sustainability with Social Mission
and
Introduction to Willingness to Pay Tool
by Jim Foreit, Population Council

also available in audio Powerpoint slideshow

Willingness to Pay: A Practitioner's Perspective
by Alex Banful

also available in audio Powerpoint slideshow

Increasing Prices Without Compromising Access
by Dr. Steve Chapman

also available in audio Powerpoint slideshow

Willingness to Pay for Family Planning: Country Applications
by Dr. Karen Foreit

also available in audio Powerpoint slideshow

Pricing Tools in the U.S. Commercial Market - An Overview
by Dr. Sam Woolford and Nandini Hadker

Pricing: What to Consider in Specialty Care and Biotech Markets?
by Avantika Daing

Pricing Research for Commercial Products
by Reed Ramlow and Camille Saade