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 is the economic value or value-in-use of Angiomax to a hospital? Be specific in your analysis and assumptions. Elaborate on all the steps in your analysis.

Answer 1

The Challenges

1)To convince hospitals that Angiomax is a better alternative to Heparin

2)To price Angiomax at a mutually beneficial cost

3) To correctly analyze the initial sales condition when breaking into the market

4)To formulate an effective marketing strategy that differentiates Angiomax from Heparin and to facilitate adoption in hospitals

5)To persuade hospital administrators to acquire Angiomax in a hospital

6)To segment and target most influential and profitable hospitals

7)To instill confidence in investors

8)To develop strategies to acquire a productive drug pipeline

Recommendations

1)Emphasize the advantages of the drug first before publicizing the price

2)Price a dose of Angiomax at $42

3)Correctly predict initial sales by utilizing information about the market and statistics

4)Develop a unique selling proposition: position Angiomax as the modern, no-immune-reaction anticoagulant lowering the risk of heart attack, major bleeding and death

5)Break into the market by initially targeting doctors

6)Target large and medium hospitals

7)Provide specific information to investors that show hospitals will acquire their drugs

8)Include a more sophisticated screening process

Angiomax’s Unique Selling Proposition

Position Angiomax as the modern, no-side-effect anticoagulant lowering the risk of heart attack/major bleeding/death

Heparin

Less Effective: takes 2 or 3 hours to assure successful drug administration

Possibility of Immune Reaction

Risk of Patient Death/Heart Attack/Need for Repeated Angioplasty/Major Bleeding

Unpredictability(requires close monitoring when administering

High Risk of Bleeding

Angiomax

More Effective: only takes 30 minutes for it to take effect

No Immune Reaction(Side Effects)

Lower risk of Patient Death/Heart Attack/Need for Repeated Angioplasty/Major Bleeding

Predictable(requires little monitoring when administering Angiomax)

Low Risk of Bleeding

Business Model Total Addressable Market (TAM): -

700K patients who go through the Balloon Angioplasty

-1.1M heart attack patients who may be approved to use this drug

Pricing Strategy/Total Economic Value (TEV) for Angiomax:

TEV = Price of Next-Best Alternative + Value of Performance Differential →

Cost of Heparin + Savings on Insurance = Total Economic Value of Angiomax to Hospitals

Assumptions: -Doses → Weighted Average: 0.7(1 dose) + 0.3(2.5 doses) = 1.45 doses on average

-”Quinn focuses on 700 Centers that facilitate 92% of all angioplasty procedures”

-Balloon Angioplasty Procedures per Year: ~700K patients

-Additional Cost to Hospitals per Patient using Heparin: $8K for complications

-Percentage of Patients with Complications Post-Procedure for both drugs that were equally tested (High-Risk + Very High-Risk) → Herpain: 37.9% - Angiomax: 17.3% → 20.6% decrease in patients with complications post-procedure → 700K * 92% * 50% receiving drug * 20.6% differential in complications = 83,720 ppl w/o complications