I'd bet that they had a clue on the insurance landscape. They also announced a soft launch. It is more likely than not IMO that they intentionally priced a bit higher to both give them some negotiation room, and fully knowing that there will be limited initial patient demand corresponding to limited patient / Dr. awareness, keep the demand more closely matched to the limited nascent ability to supply. More preferential pricing at the getgo is NOT going to markedly impact demand before physician training or consumer DTC- does not make sense; I would think that they would not want demand to outstrip supply even if they could generate the patient demand through a lower price and more ins coverage.
Since we're not talking face to face it would be easy to take my response as aggressive.
>>>Naaaa, not taken that way- it's all good, no worries mate :-)
However, it's not. In the context of discussing this subject, think of having a beer (or soda) hanging out in my back yard while enjoying some good food! Having said that, what you're suggesting leans toward SNY planning for failure?? That is, they had a clue about cost but priced it higher so they could reduce it later?
>>> I'm approaching this from SNY knowing Physician acceptance would gate script counts, leave extra margin in the low volume price and have something to offer when negotiating their place on formularies, AND keep in mind ultimately superiority would provide some leverage; but why fight to raise vs lower the price less...
(keep reading pls, I know the theory of negotiations and how it works). We're not buying something here on ebay or responding to a newspaper ad to buy a couch..... My overall point on negotiations is this - If SNY knew they had to price it at or lower than existing treatments to gain tier 2 status, I don't see the negotiation part of that equation - there is no negotiation.
>>>From what I gather, it appears virtually NO drug comes out of the gate with better than tier 3, Ins Co.s wait, observe, then at 6-9 months the game begins (SNY vs INS Cos)
Either they lower the price or it sits in tier 3 status regardless of how well it works. Same happened to advair in the last year or two (http://www.fool.com/investing/general/2013/12/30/payor-trouble-for-advair-glaxosmithkline-drugs-in.aspx) - amazing drug, works really well for most, hardly any side affects, and blows away the competition. But when glaxo continued to raise their price many large insurance companies reduced their tier status or simply removed it.
>>>OK but maybe that is an example of them using superiority to justify as high a price as they could get away with...Advair replaces similar drugs delivered using similar methods- they are not in the shadow of Exubera, facing a training and adoption hurdle that SNY had to engineer a plan and solution for
Glaxo had to "renegotiate" their price - meaning, lowered it. My thought process is driving at this - it's not a negotiation when they say "no" and remove your drug or reduce tier status. Either you reduce the price or go away. Kinda like what I do when I buy a car - I don't negotiate, I tell them what I'm willing to pay. Period. (and yes, I DO buy new cars and yes, this approach works - eventually). And, seriously, you're going back to the demand outstripping supply part? Lines 2 and 3 are ready to roll but aren't and line 1 isn't being maxed out at this time. As an investor I'd much rather be hearing about production challenges due to demand than pricing negotiations, tier 3 placement, and lack of exposure to our market (both patients and docs).