Question

The Medicines Company was founded in 1996 for the purpose of acquiring or “rescuing” drugs abandoned by other drug companies, completing their development, and bringing them to market. Its first acquisition, in early 1997, was “Angiomax”-a blood-thinning drug used in angioplasty procedures. In December 2000, it received FDA approval for Angiomax. Now it must bring it to market. Complicating this task is the fact that Angiomax is designed to replace heparin, the most widely used blood-thinning drug in coronary medicine. But heparin sells for about $2 per dose while the cost to make Angiomax is $40 per dose.

1. What price would you recommend the company charge for Angiomax at launch?

Answer 1

Since Angiomax is a substitute for Heparine, price to be considered is key for the successful sake of Angiomax. The price of substitute is only $2. In this case if Angiomax continues at $40, it will be difficult to sell.

Hence the launch price should be highly competitive when compared to Heparin, a widely used blood thinner. If the cost calculations permit, the selling price at launch should be less tha $2. The price strategy to be used by Angiomax should be "Penetrating Price Strategy". In this strategy, the price should be taken to the lowest possible level so that all kinds of customers could purchase the drug.

The problem mentions that the cost of production is high for Angiomax. This means the only way to sell Angiomax is to market the drug far and wide so that consumer acceptance can be increased. By utilizing marketing methods, one can ensure that the Elasticity of demand can be decreased. In other words, the consumer price sensitivity should be lowered so that a high price is accepted.