The medicines corporation case

1267 Words Oct 9th, 2013 6 Pages
The Medicines Company Case

1. What is the value of Angiomax to a hospital?
1.1 Angiomax Vs. Heparin
Angiomax is considered as a potential substitute for heparin. It has 3 major advantages when compared with Heparin. First, the effects of Angiomax are more accurate and more predictable. Second, it works better among patients at risk for bleeding, where heparin often proves problematic. Third, the product works faster than heparin and patients do not need to wait for 2 – 3 hours to identify the results. The major disadvantage of Angiomax is its high production cost against Heparin. As Heparin has a very long history dated back in 1916, the price is only $2 per unit while the production cost of Angiomax takes nearly $40 per unit.
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According to Table A, we know that in Balloon Angioplasty treatment, there are 700,000 patients receiving Heparin per year. Assume that Medicine Company can totally replace Heparin with Angiomax, the max sales volume would be 700,000 * 1.45 = 1,015,000 doses. But actually, replacing a widely accepted $2 drug with any drug costing many times more would take a very long time. As the Medicine Company decided to focus on those 700 centers responsible for 92% of all angioplasty procedures and a random survey conducted to assess the overall satisfaction with Heparin among interventional cardiologists, it is indicated that about 9% cardiologists, who marked 3 or 4 points to Heparin effect, can be convinced to push for the Angiomax. Take these factors into account, the potential sales volume could be: Quantity = 700,000 * 1.45 * 92% * 9% = 84,042 doses/Year
By solving the equations, we can get the following:
84,042*(BEP - $40) – 20,200,000 = 0 => BEP = $280.36/dose
Here we get the price range for Angiomax as [$280.36 ~ $391.72].
2.4 Recommended Price
Although we have

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