Lower Prices, Rather Than Deep Rebates, Preferred For New Drugs – Hassan

When launching new products, manufacturers should set lower prices rather than offer deep rebates, Schering-Plough CEO Fred Hassan said in an interview with "The Pink Sheet."

"Generally with newer products one does not look to give very high rebates, so you come up with a price point which is a realistic price and the rebates are not large," Hassan said.

"If one is going to give very large rebates early in the product's lifecycle, why not just have a lower price point - so that is the strategy," he explained.

Hassan used Schering's combination cholesterol lowering agent Vytorin , which the firm markets through a joint venture with Merck, as an example, attributing the agent's quick penetration to appropriate price selection.

With Vytorin (simvastatin/ezetimibe), "we were sensible with our pricing decision," he said. "We did not look for a high price point. We looked for a sensible price point and then backed it up with good scientific information. That allowed us to get very good penetration."

While Schering reported flat sequential sales for Vytorin in the first quarter - which the firm attributed to inventory workdowns - the product has steadily grown share in the cholesterol market since launch.

The need for manufacturers to price new products at discounts to existing therapies is indicative of the success of managed care at controlling prices, Hassan indicated.

Vytorin is another example of "the power of the marketplace - that managed care has the ability to get newer products to often come in at lower prices than for previous products," Hassan said.

"If you look at the prices out there, Vytorin is lower-priced than [Pfizer's] Lipitor , Lipitor was lower-priced than [Merck's] Zocor , and [AstraZeneca's] Crestor is also lower-priced. Even though they are more effective than the previous drugs, the prices are lower," he said.

The exec noted that the implementation of the Medicare Part D drug benefit has enhanced managed care's ability to negotiate lower prices.