Price elasticity
How much demand changes when the price changes. In consumer health, in non-reimbursed products and in tender bids, the price really is decided, and it can be measured.
- New ex-factory price-
- Volume per year-
- Revenue per year-
- Gross margin per year-
Demand by price · k unitsPainkiller A · 500 mg · 20 tablets
- Monthly observations
- Fitted curve
- 90% range
- Current price
- New price
Margin by price · €k
Products in the channel
| Product | Elasticity | 90% range | Price variation in the history | Reliability |
|---|---|---|---|---|
| -1.35 | -1.62 to -1.08 | ±14.0% | High | |
| -0.85 | -1.21 to -0.49 | ±9.0% | Medium | |
| -0.55 | -0.94 to -0.16 | ±7.0% | Medium | |
| Probiotic D 30 capsules | Cannot be measured well: too little price variation Proposed test: +6% in 40 pharmacies for 8 weeks, with another 40 as control. | ±1.5% | Low | |
| Product | Elasticity | 90% range | Price variation in the history | Reliability |
|---|---|---|---|---|
| -0.62 | -0.84 to -0.40 | ±12.0% | High | |
| -1.90 | -2.35 to -1.45 | ±8.0% | Medium | |
| Product G eye drops · 10 ml | Cannot be measured well: too little price variation Proposed test: +6% in 40 pharmacies for 8 weeks, with another 40 as control. | ±2.0% | Low | |
- Discount offered-
- Chance of winning-
- Margin if won-
- Expected value-
Chance of winning by discount46 awarded and published lots, 2023-2026
- Lot won
- Lot lost
- Fitted curve
Expected value by discount · €
Example lot: Product H 40 mg120,000 units · base budget €0.92/unit · cost €0.58/unit
Latest awards for the same active ingredient
| Buyer | Lot | Awarded to | Discount | Price |
|---|---|---|---|---|
| Health service A | Lot 14 | Competitor 1 | 21.5% | €0.72 |
| Hospital B | Lot 3 | Us | 17.0% | €0.76 |
| Health service C | Lot 8 | Competitor 2 | 24.0% | €0.70 |
| Purchasing centre D | Lot 2 | Us | 19.5% | €0.74 |
| Hospital E | Lot 11 | Competitor 1 | 15.0% | €0.78 |
The maximum price of reimbursed medicines is set by the Administration: this screen only covers channels with free pricing and tender bids.
Move the price and see what happens to volume and margin in each channel, and to the chances of winning a tender lot.Example with fictional data.
The problem
For reimbursed medicines the maximum price is set by the Administration, but a good part of the portfolio doesn't work that way: consumer health, non-reimbursed products and discounts in tenders and the hospital channel. There the price is decided, often by eye or by copying the competitor.
Cutting a price that didn't need cutting is lost margin. Raising it where the buyer is price-sensitive is lost volume.
What's left running
- Price, promotion and sales history by product and channel.
- An elasticity model by product and channel, with its margin of uncertainty.
- For tenders, the relationship between bid price and lots won, based on public award data.
- A simulator: change the price and see what happens to volume and margin.
- Price tests designed to measure, wherever they can be run.
What it moves
Margin by product and channel, and lots won against lots bid. We set the number that matters with you, in writing, before we start.
Tell us how you do it today. Before we start you have in writing what we'd do, which number it will move and what it costs.
Contact meFrequently asked questions
Does it work for reimbursed medicines?
Not for their maximum price, because the Administration sets it. It does for tender discounts and for the part of the portfolio with free pricing.
What if the price has barely changed in the history?
Then elasticity can't be measured properly, and we tell you. In that case we design tests to measure it.
Who decides the price?
Your team. The simulator shows the consequences; the decision is yours.