Business Proposal
Substance Abuse in the United States has a detrimental impact on society. Some estimates reported by NIDA (National Institute on Drug Abuse) state that the total overall cost in 2012 of substance abuse in the U.S, including productivity, health related costs, and crime related costs are upwards of $600 billion each year (NIDA, 2012). Illicit substances alone exceed $193 billion annually (NIDA, 2012). Illicit substance abuse carries with it significant destruction for the economy and society, including; unemployment, divorce, foster care for children in homes of addicted individuals, domestic abuse, child abuse, overcrowding of prison systems, and the list goes on and on (NIDA, 2012). This business proposal presents a new medication called Probuphine created to assist individuals fighting the battle against opioid addiction. The market structure and elasticity of the product is discussed throughout the proposal, with a specialized focus on the rationale for pricing related to the elasticity or non-elasticity of the product. Marginal cost and marginal revenue are analyzed as the proposal progresses and non-pricing strategies are evaluated to choose which strategy is the optimal choice for the success of the business. Last, the fixed and variable costs associated with the production of the medication are determined and discussed.
Many people believe that addiction is something that can be controlled by will power or choices, but in fact, research shows that addiction is a complex disease, much like bipolar, schizophrenia, or even diabetes (NIDA, 2012).When considering other chronic, relapsing diseases, such as; asthma or heart disease, similarly, addiction can be managed successfully. When relapse occurs, which will most likely happen in the initial phase of treatment, it does not indicate treatment failure, it indicates that treatment must be reinstated or adjusted (NIDA, 2012). Drugs alter the brain in a way that makes it sometimes impossible for an individual to quit using them without the help of a medication (Titan Pharmaceuticals, 2013). The new medication Probuphine is designed to assist the opioid addicted individual in abstaining from the use of opiates and begin to become a productive member of society (Titan Pharmaceuticals, 2013). Probuphine is intended for use in combination with cognitive behavioral therapy in order for it to be most effective (Titan Pharmaceuticals, 2013).
When considering the elasticity of the medication Probuphine, it is important to evaluate the amount of cash paying and insurance consumers that exist in this industry. Drug addicted individuals rarely have employment, indicating that the majority of consumers will be insurance – most likely medical assistance or government funded insurance. So lowering the price of the product will not make it more marketable, but identifying what government insurance is willing to pay for individuals addicted to opiates to be on the medication is the more relevant question. When the insurance companies are presented with the results of this medication and the potential impact of positive change it could have on society, it is anticipated that a fair pricing amount can be compromised upon. This product is considered an inelastic product because small parameters of change in the economy would not catapult an increase or decrease in the use of the medication.
Given that profit equals total revenue minus total cost, the goal is to continue producing more output until marginal revenue equals marginal cost, because this is the point that profits are maximized (Economics: Principles, Problems, and Policies, 2004). The medication Probuphine should be looked upon favorably in the eyes of society as a way to improve economic conditions. With the increased desirability of this medication in mind the output or quantity supplied of the product will be increased, thereby increasing the marginal cost and revenue (Economics: Principles, Problems, and Policies, 2004). Depending on the price that the U.S government and U.S insurance companies are willing to pay for this medication is the indicator of marginal cost and revenue. Profit-maximization is an important focus when determining the success of this new product. Profit-maximization is defined as the process that a firm determines the price and output level that returns the greatest profit (Economics: Principles, Problems, and Policies, 2004).
The production of the medication Probuphine is considered an oligopoly marketing structure, meaning that pricing won’t have a significant impact on the sale of the product. Non-pricing strategies for the product Probuphine will include a focus on marketing and advertising. Two strategies are an option for non-pricing strategies; market leader strategy and niche strategy. The market leader strategy has its basis in being the best quality or the best service. The niche strategy deals with having a product that fits the need of a small segment of the population and meeting that need. For the purposes of marketing this medication the niche strategy has already been utilized and now the focus can be afforded to the Market leader strategy. Exceptional advertising and offering a quality product will bring success to this business. Research has shown the Probuphine is among the leading medications to assist opiate addicted individuals down the path to recovery (Titan Pharmaceuticals, 2013.) Probuphine is considered a “breakthrough” in the field of addiction medicine (Titan Pharmaceuticals, 2013). The medication’s effectiveness was studied using a placebo group and the actual medication group and results were favorable, revealing that Probuphine patients were significantly more successful in reducing their usage of illicit opioids as compared with the placebo (Titan Pharmaceuticals, 2013).
Any costs that the organization incurs by the production and output of Probuphine is classed into two groups: fixed costs and variable costs. Fixed costs include, maintaining equipment, financing/renting/leasing costs, employee wages, and general upkeep of the business (Economics: Principles, Problems, and Policies, 2004). Fixed costs are incurred at any level of output (Economics: Principles, Problems, and Policies, 2004). Variable costs include, any materials used in the production of Probuphine and can sometimes include employee wages, when considering short term temporary or contractual workers (Economics: Principles, Problems, and Policies, 2004). Variable costs are incurred and increased as more of the product is generated (Economics: Principles, Problems, and Policies, 2004).When combining fixed costs and variable costs the result equals total cost (Economics: Principles, Problems, and Policies, 2004).
Once Probuphine is purchased by Pharmaceutical companies across the U.S, it will be presented by pharmaceutical representatives to various addiction treatment centers and doctor’s offices throughout the U.S in anticipation of the product being introduced for use by consumers in need of such a medication. In consideration of this, no cost will be incurred for financing, leasing or renting a building for the production of the medication. The medication has already been approved by the FDA for use due to the success rate with the research that has been conducted. Employee wages are the majority of the fixed costs that are going to be paid out in the production of the product, as well as advertising and marketing the medication. Variable costs incurred will include all the materials needed to create the medication.
In conclusion, as you can see substance abuse has become a major problem in societies across the nation and the medication Probuphine has the capability of improving things. Probuphine will assist the U.S in becoming a more productive and rewarding place for the citizens of society as evidenced by the numerous research studies conducted. The benefits of this medication go far beyond what can be imagined and if given the chance will exceed expectations. The economic analysis of this product proves that success will be established if the opportunity is afforded.

References
Economics; principles, problems, and policies, 16th ed. (2004). Reference and Research Book News, 19(2) Retrieved from http://search.proquest.com/docview/199635224?accountid=458
National Institute of Drug Abuse – NIDA. (2012). The Science of Drug Abuse and Addiction. www.drugabuse.gov
Titan Pharmaceuticals, Inc. (2013). Products and Technologies. www.titanpharm.com