In 2001, Medicines Co. received the approval of the FDA allowing the company to market Angiomax, an alternative medicine for Heparin. The company is faced with the challenge of pricing Angiomax. Although it believes that it can sell this drug at a higher cost than Heparin, still, how much higher can the company go as to pricing?
John T. Gourville
Harvard Business Review (502006-PDF-ENG)
July 03, 2001
Case questions answered:
Case study questions answered in the first solution:
- What are the value drivers for Angiomax?
- What are the segments the company should target?
- What is the price recommendation?
- What are the projected revenues and profits?
Case study questions answered in the second solution:
- What are the constraints the Medicines Co. is facing?
- What would be the right price for Angiomax?
- What are your recommendations to communicate the value proposition?
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Case answers for Medicines Co.
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1. Background – Medicines Co. Case Study: Context
Company: The Medicines Co.
The company was founded with the idea of acquiring, developing, and commercializing drugs in the late stage of development. Sometimes, drugs fail to meet the initial expectations of the developer. The companies stock price had been declining despite FDA approval for Angiomax (Fig 1).
Fig 1: Stock Performance – Medicines Company1
Product: Angiomax Drug
- Angiomax, an anti-coagulant was one such drug that the initial developer Biogen had abandoned.
- The Medicines Co. acquired it for $2 Million, and contracted investment of $28 Million.
- Biogen would get royalties from the sale of the drugs (initially 6%, rising to 20% of revenues as sales rise)
- Herapin was also an anti-coagulant with a wide variety of uses (Fig 2)
Fig 2: Heparin Uses across treatments2
- The drug was sold at $2 per vial.
- There were 3 key trends in the US drug market: Aging Population, Increased Price Pressure, and Growth in generics.
- Coronary heart diseases were the leading cause of death in the United States. Some 1.4 Million US citizens were affected by these.
2. Value Drivers for Angiomax
While Heparin was a widely used drug, there were some fundamental issues with the drug. Based on a survey, only…