Given the concepts and frameworks as defined by Dolan and Gourville in their accumulated research on pricing, it is clear the Angiomax product will be able to sustain a significantly higher price over time. The overall premise of The Medicines Company is based on taking products that have not succeeded in the market, and re-introducing them, often at a higher price. This strategy works out exceptionally well as it often yields significantly higher gross margins. Heparin was most likely priced to re-cover Research & Development (R&D) expenses in addition to ensuring there was just enough gross margin for the distribution channel to take the product on. This approach to pricing the product ensured it would be seen as a commodity, as the accumulated research of Dolan and Gourville confirm. While there are a multiplicity of factors behind a pharmaceutical drug succeeding or failing, the most potent of all differentiators is price and the message it sends into the market. Based on the need to significantly differentiate Angiomax from Heparin at a quality level, the price will need to be higher. In addition, there are the costs associated with the re-marketing, re-positioning and support of the product's new messaging, which need to be covered with the new pricing model. Yet at the most fundamental level the need exists for Angiomax to occupy a more differentiated and high-value segment of the overall market. It will also be critical to attain a price/value relationship in the product to ensure tis success as well. Due to all of these factors, its price will be higher than Heparin by significant amount.
Angiomax Case Analysis
Will the Angiomax product be a low or a high priced product? Why?
Given the concepts and frameworks as defined by Dolan and Gourville in their accumulated research on pricing, it is clear the Angiomax product will be able to sustain a significantly higher price over time. The overall premise of The Medicines Company is based on taking products that have not succeeded in the market, and re-introducing them, often at a higher price. This strategy works out exceptionally well as it often yields significantly higher gross margins.
Heparin was most likely priced to re-cover Research & Development (R&D) expenses in addition to ensuring there was just enough gross margin for the distribution channel to take the product on. This approach to pricing the product ensured it would be seen as a commodity, as the accumulated research of Dolan and Gourville confirm. While there are a multiplicity of factors behind a pharmaceutical drug succeeding or failing, the most potent of all differentiators is price and the message it sends into the market. Based on the need to significantly differentiate Angiomax from Heparin at a quality level, the price will need to be higher. In addition, there are the costs associated with the re-marketing, re-positioning and support of the product's new messaging, which need to be covered with the new pricing model. Yet at the most fundamental level the need exists for Angiomax to occupy a more differentiated and high-value segment of the overall market. It will also be critical to attain a price/value relationship in the product to ensure tis success as well. Due to all of these factors, its price will be higher than Heparin by significant amount.
2. Can you arrive at a 'value price' or a possible price range for the Angiomax product?
Yes, there are several approaches to defining a value price and price range for the Angiomax product. Using conjoint analysis it would be possible for example to define the optimal set of attributes or product characteristics, and the resulting price points that specific market segments and audiences would pay for them. An effective strategy for using conjoint analysis in pricing also includes a series of several hypotheses that define the various optional market positions of the drug as well. Conjoint analysis could also be completed on each member of the value chain as well, starting with the physicians who will be prescribing the drug, followed by each member of the distribution channel as well. Using this technique, each of these critical influencers' considerations on the products' success could be captured in the form of prioritized requirements. In aggregate this feedback would serve to galvanize the pricing decision at the best possible point, alleviating any potential lost margin opportunities over time.
3. If you were the Medicines Company, what plan would you use to get hospitals to adopt the Angiomax product? Please keep in mind that your plan should be related to the price point/range you have determined earlier (in Q2 above). To complete the plan, please analyze issues surrounding marketing mix elements in general.
My first focus with getting hospitals to adopt the Angiomax product would be to understand how they were evaluating the current drugs in this same subsegment of the pharmaceutical market first, and then look at how all four aspects of the marketing mix for the product could be augmented to capitalize on two factors. These two factors would be their latent, unmet needs that existing, competing drugs were not addressing, and second, seek to capitalize on the weaknesses of competitors as well. I'd visit as many hospitals as possible and complete a comprehensive research study of what blood thinner products used for angioplasties and heart procedures were doing well in terms of delivering value. I'd also look at what areas they were failing at and work to create an entire marketing mix to address those issues. The administering of competing drugs may be difficult for example, which would open up an significant opportunity for Angiomax.
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