Thursday, May 31, 2007

Chantix Pricing in China

Well, my little poll was not of much help in guesstimating the price of this product in China (too few & scattered responses - but thanks anyway!). Pharmalyst was initially thinking that the price would be lower due to lower incomes and lower costs of cigarettes in China. Also in markets like China & India one has to look at the fakes that will inevitably enter. If the product were priced at $40 in China, then presumably fewer counterfeiters would be tempted to enter the market.

However after considering the poll and other factors, Pharmalyst believes that Pfizer will price this product at the $300 level in China (at least initially). The Cutler & Gleaser study points out that smoking rates tend to decline with increasing incomes. However this only happens on the upper part of the income scale. On the lower part of the income scale, smoking rates actually rise with increasing incomes given that the product suddenly becomes more affordable. Given GDP and other figures, a majority of China's smokers will presumably fall in this bucket. So the customer segment that is most likely to want to quit is the really high income segment and this segment will probably try Chantix if things like quitting cold turkey fail. And this upper income segment will probably be willing and able to pay the $300 for 12 weeks price tag.

From a counterfeiting standpoint too, the $300 pricing may not be so bad. If the product were priced at say $50, it would make it a mass market product and would still be attractive to counterfeiters given the larger volumes. Finally, pricing the product at the same levels as in Europe & US ensures that incentives for arbitrage/parallel trade/re-importation are minimized.

The US figures show that roughly 10% of smokers are likely to try Chantix over the next couple of years. Given lack of DTC and lower income levels the percentage of people in China who may try this product will be a fraction of the US/Europe figures. Even if only 0.1% of China's smokers were to try this product by say 2010, that works out to roughly $90 million in revenues if this product is priced at $300 (given that China has 300 million smokers!).

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