Burroughs Wellcome Case Analysis
April 3 2012
Burroughs Wellcome Company: Retrovir
Summary and Recommendation:
As I have read the case it was presented that in January of 1990, Burroughs Wellcome executives were under continued pressure to reduce the price of Retrovir, a drug which had been found to be effective in the treatment of acquired immune deficiency syndrom (AIDS) and human immunodeficiency virus (HIV). After careful review of the data and the case I have come up with the recommendation for the company to maintain the current price of Retrovir.
Burroughs Wellcome Company produced a drug that proved to be the number one treatment of acquired immune deficiency syndrome (AIDS) in 1987. The company has …show more content…
Burroughs Wellcome’s drug for the HIV virus was an orphan drug which under the Orphan Drug Act of 1983 the company can supply this drug to 200,000 or fewer people in the United States which provided clinical trials. The cost of research and development of Retrovir was estimated at $80 million to $100 million and they were able to provide $10 million of the drug free to 4,500 AIDS patients. After doing the calculations in exhibit 2, the company should have expected to receive a return on investment of 52.4%.
Should Burroughs Wellcome reduce the price of Retrovir? 1. Burroughs Wellcome Company should maintain the price of Retrovir at $120 for a hundred 100-milligram capsules to drug wholesalers and $150 for retail price to users. 2. Burroughs Wellcome Company should reduce the price for the third time to increase their sales volume and respond to consumers requests. 3. Modify the dosage to 500 milligrams per day from 1200 milligrams per day for some symptomatic AIDS patients.
Rational: 1. Reducing the price of Retrovir would not do anything for the company as far as sales volume goes. Unit volume for Retrovir in fiscal 1990 is forecasted to be 53%