Burroughs Wellcome Company

Topics: HIV, AIDS, Drug discovery Pages: 10 (2069 words) Published: June 1, 2014
Burroughs Wellcome Company, Case 6
In 1982, the Center for Disease Control and Prevention (CDCP) labeled the acquired immune deficiency syndrome (AIDS) and began to warn the public of the disease. In 1983 and 1984, the virus that causes AIDS was isolated and in 1988 it was named the human immunodeficiency virus (HIV).

Burroughs Wellcome Company is a subsidiary of Wellcome PLC. Wellcome PLC is a pharmaceutical firm that employs 20,000 people in 18 countries. Wellcome PLC produces both ethical and over the counter medication. Zovirax, which treats herpes infections, accounted for $492 million in sales in 1989 (Kerin & Peterson, 2013). Retrovir, an AIDS treatment, was the second largest seller with $225 million in sales (Kerin & Peterson, 2013). Wellcome PLC also produces over-the-counter Actifed and Sudafed with $253 million in sales in 1989 (Kerin & Peterson, 2013). In 1981, there were 305 reported cases of AIDS, and by 1989 there were 35,198 reported cases of AIDS with numbers expected to continue to rise, although at a much slower rate (Kerin & Peterson, 2013). The majority of victims, almost 90%, were gay men or intravenous drug users, and almost one half of reported cases were in major metropolitan areas, such as San Francisco, Los Angeles, Houston, and New York. Not enough was known about the disease in the early 80’s to create a reliable way to predict its’ rate of growth.

Economically, treating AIDS patients was proving to be very expensive, averaging between $70,000 and $141,000 per patient according to a 1987 study by the RAND Corporation (Kerin & Peterson, 2013). Treating some forms of cancer averaged less than half of that cost. Since the income level of many AIDS patients was low, Medicaid covered treatment costs for approximately 40% of the patients, resulting in an

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Burroughs Wellcome Company, Case 6
estimated annual cost to the Medicaid system of between $700 and $750 million in 1988 (Kerin & Peterson, 2013).
Several pharmaceutical companies, including Burroughs Wellcome, were in the race to produce an effective drug to combat HIV and AIDS. Burroughs Wellcome began research in 1984, developed Retrovir and began clinical trials on humans in 1985 (Kerin & Peterson, 2013). The FDA cleared Burroughs to market Retrovir in 1987, as the first and only authorized treatment for AIDS. Bristol Myers developed a drug called DDI, which appeared to slow the progress of the AIDS virus and lessen the damage it causes (Kerin & Peterson, 2013). Hoffman-LaRoche developed a similar drug called DDC that began clinical trials in 1989 (Kerin & Peterson, 2013).

As soon as Burroughs Wellcome was given the authority to market Retrovir in March of 1987, public protests began regarding the perceived high price of the drug. Wholesale price for Retrovir was set at $188 for one hundred 100-mg capsules. The recommended dosage was twelve 100-milligram capsules per day. The average annual treatment for an AIDS patients on Retrovir averaged approximately $8,528-$9,745 (Kerin & Peterson, 2013). The public, media, and advocacy groups compared the price of Retrovir to the cancer drug Interferon. The annual cost to a patient taking Interferon was only $5,000. In December of 1987, due to increased pressure, Burroughs Wellcome, reduced the price of Retrovir by 20%, and again by 20% in September of 1989 (Kerin & Peterson, 2013). The first price reduction was due to a cost savings in the production of synthetically manufactured thymidine while the second was due to an increase in potential patients. By 1989 sales had increased from $24.8 million in 1987 to $225.1 million (Kerin & Peterson, 2013).

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Burroughs Wellcome Company, Case 6
As postulated by industry analysts, the direct cost of research and development (R&D) for Retrovir was estimated at $50 million. Burroughs Wellcome spent an additional $30-50 million in indirect costs to establish a new plant and equipment to produce Retrovir (Kerin & Peterson, 2013). They also...

References: Kerin, R.A & Peterson, R.A. (2003)
Strategic Marketing Problems: Cases and Comments
England: Pearson Education Limited
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