Angiomax Case Summary
The healthcare industry is extremely different than any other industry in the business world. This, along with the benefits and pricing issues, make this case, on Angiomax, an interesting one to analyze. In determining pricing, positioning, and target markets, it is important to not only understand the product but also look at competition and the chain of users, or the buyers, decision makers, and users, as all are very different in this case, as opposed to many industries when all three of these roles may be portrayed by the same individual(s). Before pricing can be looked at, it is important to determine who the product should be targeted towards. There were a number of studies done by Biogen (the company that created Angiomax) of angioplasty
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It is difficult to price this drug because of its high R&D costs, long development cycle, short period of patent protection, and low FDA approval rate. Furthermore, in order for Angiomax to be successful it must steal market share from the current drug on the market- Heparin, which is priced at $2 per dose versus Angiomax’s $40 per dose. However, Angiomax must educate the buyers and doctors on the enormous value that will be derived from using Angiomax over its competitor. Some rough numbers can be shown to these doctors or managers to show that the cost of complications for Heparin users if $110,252,800 versus Angiomax users at $40,185,600 resulting in savings of $70,067200, which, upon dividing by the 700 major health centers results in $100,096 savings per year. Based on this and a breakeven analysis, in which you analyze the cost of complications + number of patients in the centers and the cost of Heparin, it can be determine that at the price of $835.4, hospitals can breakeven. Therefore, the price cap is $835.40, but I think that Angiomax should be priced much lower, at about $400 in order to much more efficiently gain market share since the patent protection is relatively low. Furthermore, the drug can be charged at a premium due to the lack of price sensitivity from price sharing (due to patients with health insurance not having to pay the full
It is difficult to price this drug because of its high R&D costs, long development cycle, short period of patent protection, and low FDA approval rate. Furthermore, in order for Angiomax to be successful it must steal market share from the current drug on the market- Heparin, which is priced at $2 per dose versus Angiomax’s $40 per dose. However, Angiomax must educate the buyers and doctors on the enormous value that will be derived from using Angiomax over its competitor. Some rough numbers can be shown to these doctors or managers to show that the cost of complications for Heparin users if $110,252,800 versus Angiomax users at $40,185,600 resulting in savings of $70,067200, which, upon dividing by the 700 major health centers results in $100,096 savings per year. Based on this and a breakeven analysis, in which you analyze the cost of complications + number of patients in the centers and the cost of Heparin, it can be determine that at the price of $835.4, hospitals can breakeven. Therefore, the price cap is $835.40, but I think that Angiomax should be priced much lower, at about $400 in order to much more efficiently gain market share since the patent protection is relatively low. Furthermore, the drug can be charged at a premium due to the lack of price sensitivity from price sharing (due to patients with health insurance not having to pay the full