Gardasil is a vaccine for the prevention of genital warts and cervical cancer caused by certain types of human papillomar virus (HPV). It was developed as the result of more than twenty-five years of research by various universities and institutes. However, it was Georgetown University medical center that was awarded the dominant patent. In 1995, Merck entered into a licensed agreement and collaboration to hold the rights to market Gardisil in all countries accept Australia and New Zealand.
Merck was invested heavily in Gardasil, spending $1.2 billion in fifteen years before seeking approval from the FDA. After results of all phase trials were impressive, Merck moved for FDA approval. Merck hoped to receive approval before a competitive drug, known as Cervarix was approved. If so, it would guarantee Mercks first mover advantage, which would be critical considering Gardasil is a one-time use vaccine and does not require ongoing treatments. Studies of both drugs reveled they were comparable on efficacy and safety and Cervarix’s only point of differentiation was that it protected solely against certain types of HPV. The competition posed by Cervarix was a bit troublesome for Merck, yet they were confident they would get FDA approval first.
The biggest problem that Merck was confronted with was what price to place on Gardasil. The marketing team had wanted to price it high; considering its value proposition that it was essentially a cancer prevention vaccine. However, that would be risky since reimbursement from insurance companies was the key issue. If Merck placed too high of a price on Gardasil, insurance companies may not see the value in covering the vaccine, since the benefits to them- in the form of healthcare expenditures, wouldn’t be realized until many years later.
Despite the implications of the insurance industry and reimbursements, I would agree with the marketing department and move with an aggressive pricing structure. I would recommend