The Medicines Company

Topics: Costs, Dose, Variable cost Pages: 4 (702 words) Published: October 28, 2014
Javikorn Chantanasuksilp
EGRMGMT 510.03
10/19/2014

The Medicines Company held a policy of rescuing abandoned drugs. It believed that there was still value in drugs that failed to meet a developer’s initial expectations. Its first product was Angiomax, a blood thinning drug or “anticoagulant”. The company had to compete with the existing drug named Heparin which it believed that there were lots of disadvantages of using Heparin compared to Angiomax in terms of unpredictability, high risk of bleeding and adverse reaction

Here is the analysis.
Risk of Complication
Type of Drug

Heparin

Angiomax

Difference

Very High Risk (10%)

21.4 %

7.8 %

13.6 %

High Risk
(40%)

16.5 %

9.5 %

7%

Low Risk
(50%)

3.5 %

Hospital will have additional $8,000 if there is any complication or death We can calculate cost saving divided by risk of complication Very High Risk : cost saving = 8000 x 13.6% = 1088
High Risk : cost saving = 8000 x 7% = 560
Low Risk : cost saving = 8000 x 3.5& = 280
If we consider cost of Heparin and Angiomax, we can calculate the value in use for High Risk patients Average Dosage of Heparin for 1 patient = 4 doses
Average Dosage of Angiomax for 1 patient = 0.7 x 1 + 0.3 x 2.5 = 1.45 doses Cost of Heparin per dose = 2
Therefore, average cost saving for changing to Angiomax considering High Risk = 560 + (4 x 2) = 568 With the average of 1.45 doses per patient, the value in use = 568/1.45 = $ 391.72 per dose

We can calculate the break even price
According to the information given, 700,000 angioplasties were performed in 1999 and the company focused on 92% of all angioplasty procedures. Therefore, we consider only 92% of 700,000 angioplasties.

I assume that we can turn cardiologists who scaled 3 -5 points on Heparin into Angiomax Hence, there are 22% of cardiologists that we can sell the drug. Fixed cost

Amount

Quantity = 700,000 x 1.45 x 92% x 22% = 205,436 doses / year

Upfront fee

2 millions...
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