Developing a pricing model for brand-generic medicines

Articles in Press

Document Type : Article

Authors

Faculty of Industrial & Systems Engineering, Tarbiat Modares University, Tehran, Iran

10.24200/sci.2024.63217.8293

Abstract

The pharmaceutical sector's pricing impacts healthcare costs and services significantly. Improper medicine pricing profoundly affects public health and healthcare services. Pricing is a key factor in the profitability of the pharmaceutical supply chain. The optimal supply chain maximizes satisfaction and aligns with economic and social goals. The main challenge for the pharmaceutical supply chain is balancing pricing with drug quality and innovation. Stakeholder satisfaction in pricing negotiations has declined in recent years. Pharmaceutical manufacturers face pressure due to inappropriate pricing, competition, and legal restrictions. Unilateral stress on one component affects the entire chain's performance and industry development.IRIran's pharmaceutical industry has embraced branding to support manufacturers and industry growth. This paper provides a model of Iran's pharmaceutical supply chain, focusing on domestic brand generics. Using game theory, optimal wholesale and retail prices were calculated in a competitive market setting to achieve maximum profit under three scenarios. The optimal price of the brand-generic product is about 300% higher than the price of the generic product. The positive impact of brand-generic supply chain coordination on customer surplus and social welfare is 10% and 45%. Subsidies impact the optimal prices by 3-5% reduction, customer surplus improves 3%, and social welfare significantly increases by 43%.

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Main Subjects

Scientia Iranica

Articles in Press, Accepted Manuscript
Available Online from 13 October 2024

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History

  • Receive Date: 07 October 2023
  • Revise Date: 17 June 2024
  • Accept Date: 13 October 2024

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