Reference no: EM131011369
1. After going through the Virgin Galactic website, and watching the amazing videos, I have no doubt that the pricing of $250,000 is effective in building the Virgin Galactic brand and a clear positioning, especially when there is no competition ( I guest). It is the price of an unmatched innovation and audacity. I can even say that a trip to space is priceless. Yes I would sign up if I could afford it. I love to travel and I won't hesitate a second to try something unique like this because, like says Richard Branson, the founder, this quarter million dollars ticket buys you " a memory of lifetime".
2, Marketers at the pharmaceutical companies in the past few years have taken some real hits relative to the pricing of their drugs. When AZT hit the market (1986), this was the first medication to come about that had a marked effect on the HIV virus -- although it did not cure those who had AIDS, the drug did help to control the symptoms, thus prolonging life of the HIV patient.
What did Burroughs-Wellcome, the manufacturer, charge? The drug ran $8,700 a year in 1987...lowered from $10,000 per year a year or so earlier!
Was the price fair?
No emotion, please -- look at this strictly from a marketing pricing perspective. Would your pricing strategy have been one that would have priced it differently and, if so, why?
When you post, it will be important to me that I learn your critical thinking. Please project your decision that demonstrates your understanding of our chapters on pricing and your ability to apply them to our AZT scenario!
Read this article to answer the question above
The AZT Pricing Decision
In 1986, Burroughs-Wellcome Company introduced the first major breakthrough against acquired immune deficiency syndrome (AIDS). It was the life-prolonging drug AZT. The product has turned out to be very successful for the company and, largely because of AZT's success, Wellcome's profits have doubled in the three years ending in 1988. The Food and Drug Administration (FDA) plans to expand the authorization for the drug's usage to those who are infected with the AIDS virus, but not yet showing signs of serious illness. The estimate of the size of this market is hundreds of thousands rather than the tens of thousands who are currently ill with AIDS.
The controversy over the drug centers on its price. AZT costs about $8,000 for a year's supply for each patient (lowered from $10,000 in 1987). Critics in the gay, medical, and legal communities contended that Wellcome executives are "corporate extortionists." Some believe that the company has already made too much money at the expense of the sick. The price is so far out of reach of indigent and moderate-income people that the federal government had to step in with subsidies of millions of dollars.
Burroughs-Wellcome defends it pricing practices by stating that its profit margins (in the 50-70 percent range) are in line with those companies introducing new drugs. They contend these high returns are necessary to finance research and recoup the millions of dollars invested in developing the drug. They initially gave the drug free-of-charge to as many as 5,000 AIDS patients and spent $80 million on a new plant.
Additional criticism revolves around the actual development of the drug. The Wall Street Journal stated, "But Wellcome's moral position is undercut by its relatively minor role in the creation of AZT." Researchers at the Michigan Cancer Foundation, from West Germany, and at the National Cancer Institute are credited with the major discoveries that led to AZT. Nevertheless, Wellcome performed toxicology, pharmacology, and animal studies before AZT was given to the first human volunteer. It also financed the big clinical trial and bankrolled the give-away to the patients in the initial experiment.
Wellcome is under pressure to cut its price. The government is attempting to institute a "reasonable price" clause where an unduly high price could trigger a government order for a company to open its books. Any company found in violation could be sued for breach of contract. Congress is also studying AZT and one Congressman wrote the company contending that the original price rationale (achieving a decent return on investment during a short product life) no longer exists as the drug has been on the market for three years and the market is growing for the product.
As a prologue, AZT in the 21st century is no longer considered a frontline drug in the battle against HIV. Newer, more efficacious drugs have since arrived on the scene that have relegated AZT to the back burner. The patent for the drug ran out about 2006 and generic AZT is now available. Still, no cure for HIV has been found, as of January 2015.
Source: Condensed from Marilyn Chase, "Burroughs Wellcome Reaps Profits, Outrage from Its AIDS Drug," The Wall Street Journal (September 15, 1989).
1, Marketers at the pharmaceutical companies in the past few years have taken some real hits relative to the pricing of their drugs. When AZT hit the market (1986), this was the first medication to come about that had a marked effect on the HIV virus -- although it did not cure those who had AIDS, the drug did help to control the symptoms, thus prolonging life of the HIV patient.
What did Burroughs-Wellcome, the manufacturer, charge? The drug ran $8,700 a year in 1987...lowered from $10,000 per year a year or so earlier!
Was the price fair?
No emotion, please -- look at this strictly from a marketing pricing perspective. Would your pricing strategy have been one that would have priced it differently and, if so, why?
When you post, it will be important to me that I learn your critical thinking. Please project your decision that demonstrates your understanding of our chapters on pricing and your ability to apply them to our AZT scenario!