1. Title of the Case: ABBOTT LABORATORIES: DRUG PRICING CHUTZPAH
2. Statement of the Problem:
* Is the increase of the anti-AIDS drug Norvir by Abbott justifiable?
3. Statement of Relevant Facts from the Case
i. The company (Abbott) raised its anti-AIDS drug Norvir by 400 percent unless the product is used in conjunction with other Abbott products where there will be no price increase. ii. Norvir is generally too toxic for safe use as a protease inhibitor however works well as a booster to increase the efficacy of other protease inhibitors however the price increase of Norivr does not apply when the product is used as a booster with another of Abbot’s protease inhibitor product Kaletra. iii. Price increase applies to private insurers and to uninsured individuals. iv. The drug was invented on a grant from the U.S. federal government.
4. Statement of Alternative Courses of Actions
a. Lower the increase of the price without any conditions (like there will be no increase in the price if used with other Abbott’s products) b. NIH should review the price of the drug as based on the Bayh-Dole Act
5. Evaluation of the Strengths and Weaknesses of each Alternatives (3 each) Strength of Action a.
i. Lowering the price increase by at least 200% would give the company lower profit however, by having no condition there will be a lot more demand for the product. ii. Product and company loyalty will increase.
iii. Reducing the complaints about the spike increase of the drug.
Weakness of Action a.
i. This will decrease the profit of the company as its other products will have its demand reduced. ii. As its profit will decrease, it will also lead to decrease in the medicinal development of the company. iii. The company will have to increase its supply of Norvir as it will increase the demand in turn will increase the production cost of Norvir but will decrease the budget for other drug productions.
Strength of Action b.
i. The government will be given a positive view for reviewing the drug price increase. ii. There will be lesser complaints about eh price of the drug. iii. This will in turn give healthy competition regarding the selling of the drug. iv. This will give a warning to other drug developing companies about their actions.
Weakness of Action b.
i. By having the government interfere, the image of the company would be negative. ii. It will contradict the statement of NIH about them not having authority to consider the price. iii. The company will complaint about the actions of the government.
6. Selection and Justification of Chosen Alternative (3 each) Selection and Justification of Action a.
i. This action more or less gives the customers a fair pricing compared to the 400% increase. ii. It is ethical that the price of a drug should be as they said reasonable in order as it is a life-or-death AIDS drug as mentioned by Representative Brown. iii. As a company dealing with products related to health, profit should be less taken into consideration as well as rivalry. iv. This action won’t make the government interfere in which case would be a more negative impact for the company.
Selection and Justification of Action b.
i. In times where the customers are aggravated, government should interfere. ii. The action of Abbott is similar to monopolistic actions as they want that their products to be the only one that will be bought and it will lead to unhealthy competition in the market in which case the government should interfere. iii. Bayh-Dole Act says government-funded inventions should be made “available to the public on reasonable terms” in which case, the drug which is a government-funded development is not in its reasonable price.
7. Significant Financial and Business issues and implication of the case (5) v. As a company which is for...
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