Genzyme - Where to from Here?
Case Analysis: Genzyme’s CSR Dilemma: How to Play its HAND. Background
Considered a leader in the biotechnology industry, Genzyme has come a long way since its inception as a supplier of basic chemicals and reagents in 1981. As a leader in the development of orphan drugs, Genzyme realized revenues of almost $4B in 2007. Greater than 30% of its revenue in 2007 is attributed to the sales of drugs that target orphan diseases, such as Cerezyme, a novel Genzyme drug used to treat Gaucher disease. Due to the lack of previous research on orphan diseases, the development of drugs in this area is costly, requiring Genzyme to charge outrageous sums of money for treatment. For example, Cerezyme costs $50-200K per year per patient, an amount of money that is often well beyond the reach of patients suffering from Gaucher. To bridge the gap between the cost of Cerezyme and the patient’s ability to pay, Genzyme has to rely on government agencies to shoulder the cost for its citizens. Understanding that government subsidies are crucial to realizing any profit with their orphan disease drugs, Genzyme has developed strong relationships with NGO’s and government health-care agencies to create a culture of caring at Genzyme that they leverage to convince governments around the world to pay for patient medication. With such a large piece of their revenue being generated by these drugs, Genzyme has vested interest in ensuring this extremely profitable side of their business is positioned strongly in the global market. Thus, Genzyme has been able to generate revenue by increasing the willingness of their customers, mainly government agencies, to pay.
Jim Gerahty, senior VP at Genzyme realizes that in the long term, government agencies are not comfortable engaging with Genzyme on a basis of cold commerce alone. For example, in Brazil, which accounts for 10% of its Cerezyme revenue ($108M), of which the government subsidized 92% of the cost ($100M), lobbyists are insisting that this
Considered a leader in the biotechnology industry, Genzyme has come a long way since its inception as a supplier of basic chemicals and reagents in 1981. As a leader in the development of orphan drugs, Genzyme realized revenues of almost $4B in 2007. Greater than 30% of its revenue in 2007 is attributed to the sales of drugs that target orphan diseases, such as Cerezyme, a novel Genzyme drug used to treat Gaucher disease. Due to the lack of previous research on orphan diseases, the development of drugs in this area is costly, requiring Genzyme to charge outrageous sums of money for treatment. For example, Cerezyme costs $50-200K per year per patient, an amount of money that is often well beyond the reach of patients suffering from Gaucher. To bridge the gap between the cost of Cerezyme and the patient’s ability to pay, Genzyme has to rely on government agencies to shoulder the cost for its citizens. Understanding that government subsidies are crucial to realizing any profit with their orphan disease drugs, Genzyme has developed strong relationships with NGO’s and government health-care agencies to create a culture of caring at Genzyme that they leverage to convince governments around the world to pay for patient medication. With such a large piece of their revenue being generated by these drugs, Genzyme has vested interest in ensuring this extremely profitable side of their business is positioned strongly in the global market. Thus, Genzyme has been able to generate revenue by increasing the willingness of their customers, mainly government agencies, to pay.
Jim Gerahty, senior VP at Genzyme realizes that in the long term, government agencies are not comfortable engaging with Genzyme on a basis of cold commerce alone. For example, in Brazil, which accounts for 10% of its Cerezyme revenue ($108M), of which the government subsidized 92% of the cost ($100M), lobbyists are insisting that this