Although the range of markups in the pharmaceutical industry for the products described in this business plan is quite large, it is not very flexible at the upper and lower ends, and it does not change often.   In fact, both upper and lower limits have remained within a few percentage points of each other for the big three multinational manufacturers since competition between the three has existed. The entrance of the independent pharmaceutical producers into the market introduced a new, lower pricing tier that, surprisingly, has affected the major companies very little. 

Almost all of the independents tend to stay in the same price ranges for their products, since variable costs such as chemicals and raw materials tend to be consistent the world over.  Those competitors that substantially exceed the lower tier price range or try to undercut it are not able to maintain a competitive position for long. Those who undercut the lower price range set by the market simply cannot sustain such a small profit margin.  Those who exceed the upper end of the range price themselves into the range where they compete with the high-end, name brand products.  As a result sales plummet, because they cannot compete with the market leaders’ advertising and promotions efforts to establish brand loyalty.  

Thus, the Value Drugs pricing policy will be very much in line with the industry standard for the independents.  The following table (Price Comparison) illustrates the company’s markup policy, as well as the markup policies of competitors: