Data-Driven Pricing Decision in Pharmaceutical Industry: An Interpretive Structural Modeling Approach

Pricing is an important decision making aspect for a manufactured product. Based on the price of a product and the required profit margin, the production of the product needs to be designed in such a way that the production cost is lesser than the selling price. Thus, the pricing of a product has a great role to play in the production process. This research aims to examine the relationship between all the factors and their related variables that are involved in a pricing decision for a pharmaceutical company based on the plethora of available data. The variables and their relationships were determined based on telephonic interviews with managers and executives from pharmaceutical manufacturing companies. Based on their input, Interpretive Structural Modeling was done alone with MICMAC (Matrice des Impacts Croises Multiplication Appliquee a unClassement) analysis. The research findings give a holistic picture of all the variables that go into deciding for setting the price of a pharmaceutical drug, along with which variables to concentrate on primarily. Market share of generic medicines, the cost of an active ingredient, and the regulations of a country have been found greatly influence the pricing strategy for a pharmaceutical drug.