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1. What should HeatherBreschdo? Why? What risks do you see with this plan of action?
Heather Bresch, the CEO of Mylan, is faced with a public backlash over the rising cost of EpiPens produced by Mylan. Public reports have shown that while EpiPens are cheaply produced at $1 per unit, they currently retail for about a few hundred dollars (depending on market), with prices having risen by 400% in recent years following Mylan’s takeover. Bresch should lower the EpiPen price by a limited degree of 20%. This is the right course of action for several reasons. Foremost, maintaining present EpiPen prices is no longer tenable, given the public backlash and fall in Mylan’s stock price in recent times. Issuing discounts would also not work, as the price of EpiPen is far above cost of production, and because giving discounts would simply make it seem as if Mylan were using stopgap measures to address the issue. Furthermore, Bresch need not drastically lower the price, and should only lower the price by a limited degree to maintain cost leadership while not sacrificing profitability. This is because the EpiPen product is a necessity for many of its customers, as it is price inelastic in demand. Therefore, a limited price reduction of 20% would appease public anger over high EpiPen prices, while still ensuring that profitability is not affected too much. Furthermore, EpiPen should lower prices by a decisive 20% while the level of competition is still low and while Mylan’s public relations and public reputation is still salvageable. Without such a price drop, Mylan would continue to face intensifying public backlash and harsh media criticism, which would further damage its stock prices. The price drop would also help to spur a rebound in share price as public confidence in Mylan rises. Finally, Mylan should do so as its income statement shows healthy positive net earnings over 2014 to 2015. Given the price inelastic nature of EpiPens and the healthy profit margin that Mylan currently enjoys, Bresch can clearly take an executive decision to lower the price of EpiPens by a limited margin without hurting profitability too much.
XXXXX are XXX XXX XXXXX associated with XXXX XXXX XX XXXXXX. XXXXXXXX, there XX XXX risk that XXX move XXX XXXXX lead to a media XXXXXX XXXX XXX degree of XXXXX XXXXXXXXX. This is because critics may regard the XXXXX XXXXXXXXX XX XXXXXXXXX and insufficient, XXX might continue XX protest EpiPen’s XXXX prices. Furthermore, there is XXX XXXX XXXX the XXXXXXXXX in EpiPen XXXXXX XXXXX XXXX XX a XXXXXXXXXXX revolt XX shareholders see XXXXXX as XXXXXXXXXXXX XX XXXXX pressure to lower EpiPen XXXXXX. XXXXXX XXX XXXXXXXX XXXXX XXX risks XX XXXXXXXX XXXXXXXXXXXXXX with XXX media XXX shareholders carefully, so XX to XXXXXXX XXXXX concerns.
X. XXXXXXXXXXXXXXXX in prices XXXXXX countries seem reasonable? What wouldhappen XXXXXXX XXXX forced XX make XXX prices XXXX consistent?
According to the case, a study by XXXXX Lichtenberg found that drug prices varied across XXXXXXXXX, XXXXX XX the case XXX EpiPen, as it can be purchased in two-pack XXXX XXX $XX in XXXXXX XXX $131 in Canada. XXXXXXX, Bresch XXX XXXXX XXXX XXXX reasonable XXXXXXX XXX XXXXXXX XXXX XXXXXX XXXXXX XXXXXXXXX. XXXXXXXX, labor XXXXX, XXXXXXXXXX XXXXX XXX XXXXXX XXXXX XXXXX XXX vary XXXXXX XXXXXXXXX. This may XX a result of XXXXX politics, factor abundance XXX supply chain XXXXXXXXXXXX. As a XXXXXX, XXXXX XXX be XXXXXXXXXX in these XXXX items which may affect the XXXXXXX XXXX XX producing XXX distributing XX a XXXX XXXX as XXXXXX in different XXXXXXXXX, XXXXX XXXXXXXXX XXXXXXXXX different XXXXXX in different XXXXXXXXX. XXXXXXXXXXX, as Bresch XXXXXXXXX, Mylan is ‘XXXXXXXXXXX the rest XX the XXXXX’ XX XXXXXXX XXXXXXX higher in XXX X.S., XXXXX disposable XXXXXXX XXX XXXXXXXXX XXXXXX, and XXXXX in the rest XX XXX world, where XXXXXXXXXX incomes XXX generally lower.
However, with specific regard to XXXXXX, the XXXXXXXXX in XXXXXX XXXXXX countries is XXX XXXXXXXXXX if XXXXX XXXXXXX XXX considered. XXXXXXXX, it XX worth noting XXXX XXXXXX is grossly overpriced, XXXXX retailed at a few XXXXXXX dollars for a cost XXXXX XX $1, XXX XXXXXX had prices XXXX XXX% XXXX XXX past XXX years. This XXXXXXXXXXXX that Mylan XXX a huge XXXXXXXXXXXXX XXXXXX with sufficient manoeuvring XXXX XX standardise XXXXXX XX XXXXXXXX. XXXXXXXXXXX, XXXXX XXX XXXXXXXXXX economies of scale XXXXXXXX to standardise XXX XXXXX at an XXXXXXXXXX XXXXX, XXXXX XXX volumes XX XXXXXX XXXX. XXX variation in prices XX also not XXXXXXXXXX XX the possibility of product XXXXXXXXX is XXXXXXXXXX, XXXXX XXXXX XXXXXXX XXXXXXXXXXXXXX XXXXXX the XXXXXX in XXX country XXX XXXXXXXXX it XXX XXXX XX the other country. XXXXXXX, XXXX XXXXX XXXXXXXXXXXXXX XX likely XXX profit XXXXXXXXXXXX XXXXXXX, XXXXX XXXXX’s corporate XXXXXXX.
XX XXXXX were XX truly XXXX XXX XXXXXX consistent across the XXXXX, Mylan XXXXX XXXXXX XXXX XX accept either a XXXXX profit XXXXXX or XXXXX prices across XXX board. XXXX XX because XX XXXXX XXXX XX XXXXX XXX prices across XXX board to a standardised level, XXX XXXXXX would drop. XXXXXXXXXX, XX it were XX raise its prices across the board, that XXX XXXXXXX a public XXXXXX, XXXXXXXXXX in XXXXXXXXX XXXXX the EpiPen XXXXXX XXXX XXXX XXXXXX to XXX standardised level. Regardless, if XXXXX were forced XX XXXX its prices XXXX XXXXXXXXXX, XXXX XXXXX XXXXXXXXXXXX XXXXX XXXXXXXX XXXX the XXXXX discrimination XXXX Mylan currently exercises XXX its XXXXXXXX XXXXXX XXX world.
3. XXXX XXXXXXX, XX XXX, would you make toMylan'XXXXXXXX policy? Is XXXXX a better XXX to structure XXX XXXXXXXXX?
XXX XXXX notes XXXX EpiPen XXXXXXX XXX grown from $XXX XXXXXXX to more XXXX $X billion, XXXX XXXXX increases XXXX the past five XXXXX raised EpiPen prices by XXXX 3.X times, XXXX $XXX to $610 over XXXX-XXXX. Conversely, adrenaline (EpiPen’s XXX XXXXXXXXXX) was XXXXXXX XXXXXXXX at $1 XXX dose, XXXX manufacturing costs estimated at XXXXX $1 XX XXXX. This XXXXXXXXX XXXX XXXXX clearly has much XXXXXXXXXXX room XX lower prices XXXXXXX significantly XXXXXXXXXXX XXXXX XXXXXXXXXXXXX, as XXXXX XXX an extremely XXXXX profit margin XXX XXX XXXXXX XXXXXXX.
XXXXX, XXXXX XXXXXX XXXXX XXX price of XXX EpiPens by 20% across the board, XXXXX XXXXX XXXX a clear XXXX of Mylan’s commitment to XXXX affordability to the general public. Furthermore, XXXX XXXXXX XX discounts, discounts XXXXXX XX given XX long-XXXX users, bulk XXXXXXXXXX XXX XXXXXXXXXXXXX XXXXXX such as hospitals. This is XXXXXXX XXXXX XXX the users XXX are able to XXXX XXX XXXX-XXXX XXXXXXXXXX of Mylan XXXXXXX their purchasing power. XX a XXXXXX XX XXXXX XXXXXXXX purchasing XXXXXXXXX, XXXXX can therefore XXXXXX XX reduce the price XXXXXXXXXX in order to XXXXXXXXX such XXXXXXXXXXXXX XXXXXX and long-term XXXXXXXXXX XX buy more EpiPens XXX the long term. XXXX would allow XXXXX to sustain its profitability through a scale-XX in volume, even as it XXXXXXX EpiPen prices.
Mylan could also XXXXX XXXXXXXXXX XXXXXXXXX, beyond XXX 20% discount XXXXXX XXX board, for customer XXXXXXXX XXXXX XXX XXXXXXXXX affected by XXXX EpiPen XXXXXX. These include XXXXXXXX XXXX health plans XXXX XXXX higher out-of-XXXXXX costs, which XXXXX XXXXX XXXXXXX with a XXXXXXX card for $XXX, XX XXXX XX increased patient XXXXXXXXXX plan discounts XXX a XXXXXXXXXX XXXXXX XXXXXX program to provide discounted or free XXXXXXX XX schools and their students. This XXXXX XXXXX Mylan XX continue its XXXXX discrimination, XXX in a XXX that takes XXXX of the needs XX Mylan’s XXXX vulnerable XXXXXXXX segments, XXXX XX XXXXXXXX and XXXXXXXX XXXXXX XXXX out of XXXXXX costs, thereby shielding Mylan XXXX XXXXXXX XXXXXX XXXXXXXX.
Finally, XXXXX XXXXXX XXXX XXXXX XXXXX XXXXXXX XXXXXX XX stay in line XXXX the XXXXXX XX XXXXX XXXXX XXXXXXXXXXX, XXX XXXXXX strive XX maintain cost leadership as part of XXX strategy. Generally, however, XXXXX XXXX XXX XXXXXX XXX prices too XXXX XX XXX XXXXXX XXX XXXXXXX XX price XXXXXXXXX. XXXX XXXXX allow XXXXX to XXXXXXXX XXXX leadership through XXXXXXXXX, without XXXXXXXXXXX too much XX XXX profitability, in order to XXXXXXX a shareholder XXXXXX.
X. What XX XXX biggest XXXX thatBreschfaces?
The XXXXXXX XXXX XXXX XXXXXX currently faces as XXX of XXXXX XXXXXXX XXX media publicity XXXXXXXXX stories of XXXXXXXXX EpiPen manufactures and patients XXXXX XXX XXXX of EpiPens. XXXX XXXXX XXXXXX include stories XX how Mylan’s high XXXXXX prices remain XXX above its XXXXXXXX XXXX XX XXXXXXXXXX, XX XXXX as human interest stories of how schools, patients XXX at-risk XXXXXXXXXXX are unable XX get XXXXXX XX the much XXXXXX XXXXXX XXXXXX XXXXXXX XXXXXXXXXXX as a XXXXXX XX elevated prices.
This XX XXX XXXX XXXXXXXXXXX XXXX XX it XX the XXXX most likely to have a detrimental XXXXXX XX Mylan’s XXXXXXXXXXXXX through a XXXXXXX of ways. XXXXXXXX, XXXXXXXX media XXXXXXXXX XX the adverse effects on patients XXX XXXXX XXXXXXXXXXXX of high XXXXXX XXXXXX XXXXX XXXX to a XXXXXXXXX boycott XX Mylan products. This XX because consumers may remain angered XXXX higher XXXXXX XXXXXX and turn XX XXXXX’s XXXXX-XXXXXX competitors or XXXXX XXXXXXXX XXXXXXX, XXXXX XXXXX allow XXXX XX gain traction at XXXXX’s expense. XXXXXXXXXXX, XXXXXXX XXXXX XXXXXXXX would lead to a XXXXXX outcry, in a XXX that would XXXXXX government intervention, in the XXXX of Congressional XXXXXXXX XXX XXXXXXXX government regulation XX EpiPen XXXXXX. This would permanently XXXXXX Mylan’s ability XX XXX prices in a XXX that XXXXXXXXX it XXXXXXXXXXXXX, as government regulation on EpiPen XXXXXX would XXXXX the government XX set price caps on the EpiPen product.
Finally, negative XXXXX XXXXXXXXX XXXX the XXXX XXXXXX XXXXXX XXXXX XXXXXXXX to XXXXX investor confidence in XXXXX, as XXXXXXXXX react poorly to negative publicity and XXXX XXXXXXXXXX in a company XXXXX is constantly besieged XX XXX media. XX a result of negative publicity, XXXXX’s stock price XXXXX therefore continue to slide XX more and more XXXXXXXXXXXX either XXXXXXX the XXXXX stock or XXXXX-sell it XX the open market. XXXX XXXXX XXXXXX affect XXXXXX’s standing and XXXXXXXXXX XX XXX XXXXXXXXXX. Hence, Bresch XXXXXX XXXXXXXX open XXX XXXXXXXXXXX XXXXXXXXXXXXXX XXXX the XXXXX, and XXXXXXXXX update them on how Mylan is working to XXXXXXX high EpiPen prices for XXX affected stakeholders, in order to reduce the risk XX negative XXXXX publicity.
1.XX XXXX consumers are XXXXXXXXX to XXX higher XXXXXX for XXXXXXXX’s new XXXXXXX XXXX foods XXXXXXX XXXX XX XXX XXXX XXXXX XXX health benefits XXXX XXXXXXX, how might XXXXXXXXX an XXXXXXXXXXX from XXX XXXXXXXX XXXXXX XXXXXXXXXXX (AHA) help XXXXXXXX’s?
Receiving an XXXXXXXXXXX from XXX XXXXXXXX Health Association XXXXX help McDonalds to convince consumers XX XXX XXXXXX prices for their new XXXXXXX XXXX foods XX making them more aware XX their accompanying health XXXXXXXX XX (a) XXXXXXXXXX a key XXXXXXX leader’s influence and (b) XXXXXXX XXX XXXXXXXXX XXXXX of XXX XXXXXXX. XXXXXXXX, as a key opinion XXXXXX and expert XXXXXXXXX in the area XX nutritional XXXXXX, an XXXXXXXXXXX by the AHA XXXXX help XXXXXXXXX XX gain more credibility in the benefits XX its XXXXXXXXX of health food. XXXX XXXXX XXXXXX XXX XXXXXXXXXXX XXXXXXXX XXXXXXXXXX that XXXXXXXXX is.a retailer of unhealthy fast food, XXX XXX XXXXXXXXX XX XXX right path of winning XXXXXXXX credibility XXXXXX XXX health food. Secondly, an XXXXXXXXXXX XXXX the XXX would XXXXX XXXXXXXXX XX XXXXX the XXXXXXXXX value of XXX XXXXXX XXXX, as identified by its consumers. XXX perceived value XX XXX product XX XXX value XXXX the consumer (XXXXXXX with imperfect XXXXXXXXXXX or XXXXXXX full XXXXXXXXX of the product’s features or benefits) XXXXX ascribe to a product XXXXXXXX. XX present, McDonalds XXXXXX food XXX a low XXXXXXXXX value in XXX eyes of XXXXXXXXX, as McDonalds XXX an unsavoury XXXXXXXXXX for XXXXXXXXX XXX XXXXXXX highly XXXXXXXXX fast XXXXX. However, an AHA endorsement XXXXX XXXXXX consumer XXXXXXXX by providing consumers XXXX a credible explanation XX XXX XXXXXX benefits XX XXX new McDonalds XXXXXXX offerings, which XXXXX in turn allow them XX XXXX a XXXXXX perceived XXXXX.
X.XXXXXXXX XXX three XXXXXXXX XXXXXX XX XXX XXXXX-pricing XXXXXXXX XXX how XXXX are XXXXXXXX XX XXXXXXXXX XXX XXXXX of a given XXXXXXX XX XXXXXXX.
XXXXX-pricing XXXXXX XX a pricing methodology that XXXXX price XX XXX economic XXXXX of a product delivered XX XXX XXXXXXXX XX XXXX product. XXX XXXXX XXXXXXXX XXXXXX XX a given value XXXXX-XXXXXXX XXXXXXXX XXX the true economic XXXXX, perceived value and XXXX XX goods sold. XXX true economic XXXXX XX XXXXXXXXX XXXXXX XXXX the XXXXXXXXX XXXXX, while XXX XXXXXXXXX XXXXX is in turn higher XXXX the XXXX of goods XXXX.
XXX true economic value refers to the XXXXX XXXX a XXXXX with XXXX information should XXXXXXXXX XX the XXXXXXX, which XXXXX XXXX by consumer XXXX and XXXXXXXXXXX. The true economic XXXXX is comprised XXXXXXXXXXXX XX XXX cost XX the next-best alternative and XXX value XX the performance differential. For XXXXXXX, a XXXX XXXX XX Daikin XXXXX XXXXXXXX the true economic value XX its air conditioning systems XX XXXXXXXXX it XXXX the XXXX-XXXX XXXXXXXXXXX XXXXXXXX by rival consumer electronics XXXX Midea, and then calculating XXX value XX the XXXXXXXXXXX differential XXX adding it on.
XXX perceived XXXXX of the XXXXXXX is XXX value XXXX the consumer (XXXXXXX XXXX imperfect information or without full XXXXXXXXX of the XXXXXXX’s features or benefits) would ascribe XX a XXXXXXX XXXXXXXX. This XXXXXXXX XX also likely to XX XXXXXXXXXX in XXXXX XX needs for XXX product. XXX XXXXXXXXX value is XXXXXXXXX calculated XXXXXXX market XXXXXXXX XXXX XXX XXXXXXXXX or XXXXXXX XXXXX’s XXXXXXXXXXX to XXX XXX a given product.
XXXXXXX, the cost XX XXXXX XXXX is XXX baseline production XXXXX that a firm XXXXX to expend in order XX produce XXX XXXX in XXXXXXXX. This XX generally the XXXXXX XXXXX a firm would XX XXXXXXX to XXXXXX (XXX ‘XXXXX-XXXX’ XXXXX), XXXXXXX as a XXX XX introduce a XXX XXXXXXX XX the market or to spur XXXXXXXX XXXXXXX XXX XXX of cost leadership. The cost of goods sold XX typically XXXXXXXXX from a XXXXXXX’s income statement, XXX XXXXXXXXX XXX XXXXX XXXXXX variable XXXX XX producing the product, which would include a firm’s production costs, supply chain XXXXX, XXXXXXXXX XXXXX and R&X costs.