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Can you answer this marketing question?


I received the following question in an IMC course. What are your thoughts?

You are working at Johnson & Johnson and one of your responsibilities is to set prices for new drugs. The firm has invented a cure for Aids and is protected by patent. The cost for the one time injection that cures the disease is $100 and includes amortization of the development cost (The $1 billion cost to develop the product is included in the $100) and the cost raw materials. Assume that insurance companies currently spend $200,000 to treat an Aids patient. Assume 20% of the world population is covered by insurance or socialized medicine.

Part 1: What price do you charge for the treatment? Don't try to quantify it. Just come up with a price you think would be fair. Defend your answer. Consider all your stakeholders. (Including your stock holders)

Part2: How would you maximize the positive or minimize the negative publicity.

you charge between $1 and $2k to give your company 90-95% gross margins on the product. One must keep in mind that for everyone of these that makes it to market, the company has hundreds that fail, causing $billions in R&D that never result in a single penny of revenue. To encourage the company to continue to look for innovative, life-saving solutions, they must be profitable across the sum of all their efforts. The insurance companies would have no problem with this amount, and theere would be no bad publicity.

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