The medicines corporation case
The Medicines Company Case
1. What is the value of Angiomax to a hospital?
1.1 Angiomax Vs. Heparin
Angiomax is considered as a potential substitute for heparin. It has 3 major advantages when compared with Heparin. First, the effects of Angiomax are more accurate and more predictable. Second, it works better among patients at risk for bleeding, where heparin often proves problematic. Third, the product works faster than heparin and patients do not need to wait for 2 – 3 hours to identify the results. The major disadvantage of Angiomax is its high production cost against Heparin. As Heparin has a very long history dated back in 1916, the price is only $2 per unit while the production cost of Angiomax takes nearly $40 per unit.
1.2 Value to a hospital
Both Heparin and Angiomax can be widely used as an anticoagulant in acute coronary heart treatment, such as unstable angina, heart attack, balloon angioplasty and CABS. Angiomax only get the approval of FDA for angioplasty. Normally speaking, the insurance company will pay $11,500 to a hospital for every angioplasty and the cost will be $9,500. If there is any complication or death, a hospital will incur additional $8,000. As shown in experiment data, Angiomax is effective in reducing the risk of complications and we have summarized the effect as following:
Table 1.1 Risk of Complication – Heparin Vs. Angiomax
Segment
Heparin
Angiomax
Diff.
High Risk
16.5%
9.5%
-7%
Very High Risk
21.4%
7.8%
-13.6%
Low Risk
-3.5%*
Source: Case Material page 8
*estimated by Meanwell, note 7, page 8
So we can estimate the potential cost saving of Angiomax as following:
High Risk: 8,000*7%=560 Very High Risk: 8,000*13.6%=1,088
Low Risk: 8,000*3.5%=280
Here, we ignore the cost of Heparin and Angiomax and we discuss the pricing in detail in the next section.
2. What price should the Medicines Company charge for a dose of Angiomax? Why?
2.1 General Principal of Pricing
In pricing of Angiomax, we
1. What is the value of Angiomax to a hospital?
1.1 Angiomax Vs. Heparin
Angiomax is considered as a potential substitute for heparin. It has 3 major advantages when compared with Heparin. First, the effects of Angiomax are more accurate and more predictable. Second, it works better among patients at risk for bleeding, where heparin often proves problematic. Third, the product works faster than heparin and patients do not need to wait for 2 – 3 hours to identify the results. The major disadvantage of Angiomax is its high production cost against Heparin. As Heparin has a very long history dated back in 1916, the price is only $2 per unit while the production cost of Angiomax takes nearly $40 per unit.
1.2 Value to a hospital
Both Heparin and Angiomax can be widely used as an anticoagulant in acute coronary heart treatment, such as unstable angina, heart attack, balloon angioplasty and CABS. Angiomax only get the approval of FDA for angioplasty. Normally speaking, the insurance company will pay $11,500 to a hospital for every angioplasty and the cost will be $9,500. If there is any complication or death, a hospital will incur additional $8,000. As shown in experiment data, Angiomax is effective in reducing the risk of complications and we have summarized the effect as following:
Table 1.1 Risk of Complication – Heparin Vs. Angiomax
Segment
Heparin
Angiomax
Diff.
High Risk
16.5%
9.5%
-7%
Very High Risk
21.4%
7.8%
-13.6%
Low Risk
-3.5%*
Source: Case Material page 8
*estimated by Meanwell, note 7, page 8
So we can estimate the potential cost saving of Angiomax as following:
High Risk: 8,000*7%=560 Very High Risk: 8,000*13.6%=1,088
Low Risk: 8,000*3.5%=280
Here, we ignore the cost of Heparin and Angiomax and we discuss the pricing in detail in the next section.
2. What price should the Medicines Company charge for a dose of Angiomax? Why?
2.1 General Principal of Pricing
In pricing of Angiomax, we