...drug, Imbruvica, is utilized to treat mantle cell lymphoma, which is a rare cancer of the blood that affects only 2,900-4,000 new patients yearly (Staton, 2013). This drug is considered an orphan drug due to the fact that it afflicts so few people each year. The result of the rarity of this disease is that the pharmaceutical company that the developed this drug have to raise prices to extreme levels to cover the immense costs that come along with developing, testing and marketing the drug, while still turning a massive profit for investors. In order to treat prolong or save their lives, the drug will cost roughly $130,000 each year (Staton, 2013). One would think that this price would decrease the demand, but that is not the case for high priced drugs in today’s market. Yervoy, a drug that treats melanoma, was introduced with a $120,000 price and sales skyrocketed upon release (Staton, 2013). This is a crippling number for anyone who is suffering from the disease, but Pharmacyclic has formulated a program that not only benefits themselves, but also the consumer. Every corporation and business has primary goal of maximizing profits for their company and for a pharmaceutical company this is especially important. The company that has founded this cancer treating drug has a patent, which is a right granted by the government making them the exclusive seller of the drug for a limited period of time, that runs through 2026 (Guell, 2014; Generic Imbruvica Availability, 2013). This gives...
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...CHAPTER 23: TRANSFER PRICING Chapter Contents: - Definition and Overview - Transfer Pricing Options - Market-based Transfer Prices - Cost-based Transfer Prices - Negotiated Transfer Prices - Survey of Practice - External Reporting - Dual Transfer Pricing - Transfer Pricing and Multinational Income Taxes - Other Regulatory Issues Definition and Overview: A transfer price is what one part of a company charges another part of the same company for goods or services. In the excerpt from Casablanca, Rick apparently loaned Ferrari 100 cartons of cigarettes for which he was never repaid. Now that Ferrari owns both the Blue Parrot and Rick’s Café, he jokes about the fact that what was previously a debt that he owed to Rick, is now a “debt” from one nightclub that he owns to another nightclub that he owns. If Ferrari continues to transfer cartons of cigarettes between the two clubs, he might wish to establish a “transfer price” for cigarettes, but knowing Ferrari, he won’t bother. We will restrict attention to transfers that involve a tangible product, and we will refer to the two corporate entities engaged in the transfer as divisions. Hence, the transfer price is the price that the “selling” division charges the “buying” division for the product. Because objects that float usually flow downstream, the selling division is called the upstream division and the buying division is called the downstream division...
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...The Medicines Company, founded in July 1996 by Clive Meanwell, acquired, developed, and commercialized pharmaceutical products in late stages of development. The first product bought by Medicines was Angiomax, an anticoagulant in Phase III trials, from Biogen. This drug is a superior substitute as compared to heparin, the industry standard, because the effects of a dose are predictable, the product works better among patients at risk for bleeding, it works faster than heparin, and the drug has no immune response. Marketing was set and a sales force was assembled for Angiomax. The company also bought IS-159, a nasal spray to treat acute migranes, but more money and time was needed to change the content of the drug or prove the safety of an additive. Medicines also bought CTV-05, designed to treat bacterial vaginosis (BV), but this drug was only in Phase I clinical trials and not proven to work yet. There are three key issues facing Medicines currently. First, Medicines must decide how much above heparin Angiomax should be priced. Secondly, a product portfolio must be developed, since the company's success depends on the development of a drug pipeline. With FDA approval for Angiomax but problems with the second acquisition, it was questioned whether there was a need for a drug pipeline. Third, the Medicines faces the reality of the stock market as stocks fell when they were expected to sharply increase. This caused people to question the company's core business strategy. ...
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...in the firm they have been hired to manage are inherently selfish. They will divert firm resources away from investments that create the most firm value towards those that bring the most value to the individual, such as perks, notoriety and empire-building. Jensen and Meckling proposed that the solution to this problem is to make the managers into owners by giving them equity and ultimately suggested that “the best way out of America’s corporatestructural rut was through leveraged LBOs”1. While this is certainly a powerful argument, it is flawed for several reasons. First, due to market imperfections and volatility, it is often difficult for managers to understand the linkages between their actions and changes in the firm’s share price. Recent history has reinforced this limitation, as managers have manipulated short term earnings to meet “Wall Street...
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...monopoly on patented pharmaceuticals warranted? What barrier to entry prevents the re-importation into the United States of pharmaceuticals sold at lower prices abroad (say, in Canada)? Pharmaceutical companies try to maintain a monopoly in the early stages of a drug in order to recover R&D investment. During this period of exclusivity they will try to make a fair profit. This is not a monopoly in the true sense of the word because this period is limited in time. It is perhaps better to describe it as a limited warranty. There are also other limitations. Pharmaceutical companies in some countries may not respect intellectual property and may copy or produce generic drugs even before the patent expires. An important criterion of a monopoly is price control. However, in many countries, a governmental agency is responsible for setting the prices of drugs, making the influence of the manufacturers somewhat limited. This puts pressure on the manufacturers to seek overseas markets in order to maximize their chances of recovering R&D costs and to earn a profit within the period covered by the patent. By so doing the market for re-importation and parallel imports is opened. Some of the prices that the pharmaceutical manufacturers end up accepting under these circumstances do not define a true monopoly. There are several barriers to entry that prevents re-importation into the US of drugs sold at lower prices. These include the following: Price difference Regulatory...
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...Communication W2 Linli Qu Assignment 3 November 10, 2015 Background The significant price increases of new drugs assets from Valeant’s recent acquired company, Marathon, has resulted in complaints from customer and sustainability concerns from investors. In addition, low investment and declining return in R&D indicates a potential problem of the business model. My proposal is to develop more products and revenue streams through R&D strategies rather than raise prices at the expense of our customers. Right pricing strategy and efficient R&D will bring remarkable benefits to Valeant. Current Pricing Strategy of Valeant In the article “Things to Know about Valeant Pharmaceuticals” from Wall street Journal, Rockoff (2015) argues that practices of lowering R&D spending and adding high-revenue drug assets through aggressive deal making reduced its tax rate and aroused concerns from investors. According to Citron Research (2015), Valeant increased prices of two main heart drugs: Isuprel and Nitropress by 525% and 212% respectively, which exceeded the U.S healthcare industry standard of 6-8%. Valeant’s extreme price tactic is only to beat Wall Street earning estimation and boost its stock price. The research also points out that CEO’s interpretation of price hikes, “Organic Growth of Valeant”, appears to be unreliable. In pharmaceutical industry, increase in prices is essential. However, Valeant’s strategy exceeds the limits of entire healthcare system. In...
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...Survival Strategies: After Cost Cutting, Companies Turn Toward Price Rises --- They Don't Call Them That, But Some Trim Discounts And Add New Premiums --- Charging Extra for Odd Sizes By Timothy Aeppel 1,783 words 18 September 2002 The Wall Street Journal (Copyright (c) 2002, Dow Jones & Company, Inc.) Inside the walls of American industrial companies, something unusual is going on: an all-out search for new ways to charge more money without raising prices. Goodyear Tire & Rubber Co. has chopped discounts to its biggest distributors, which had been taking advantage of favorable prices to undercut Goodyear elsewhere. Jergens Inc., a Cleveland industrial parts maker, has started charging big premiums for small orders of fasteners that it used to price like larger orders. Union Pacific Corp. has started charging its rail-freight customers as much as 40% extra for faster delivery. Low inflation and fierce global competition are huge barriers to price increases. But in a weak economy, many companies have already jumped through hoops to cut costs and boost productivity. So now they need to find new ways to wring more money from their customers. For many industrial companies, there's some room to maneuver because they haven't looked at pricing this way before. Their businesses have run on bulk rates charged for commodities -- some of them measured by weight -- with big discounts for big volumes. Many are used to seeing prices go down over time, not up. The quest for ways to reverse that...
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...The price variable in the marketing mix is a critical element. Price can, by itself, communicate much about a product or service. For example, what would you think of buying an engagement ring at Bob’s Really Good, But Cheap, Jewelry Store, or for that matter, at a yard sale. Most consumers link price with quality and there are many organizations that carefully reinforce the quality of their product, using price as a surrogate cue (or substitute indicator) for quality. For example, check out the websites of marketers of prestige items and observe how the price variable is used to indicate quality). Check out BMW’s website and watch on of the movies there. (http://www.bmw.com/bmwe/index.shtml). When the pricing decision is made, the organization must consider several factors. These factors are as follows: a. Supply (or cost) b. Demand (or revenue) c. Perceptions in the marketplace d. Competition and Competitors’ pricing strategies e. Government Regulation f. Company’s desired pricing position Supply (or cost) If there is an abundant supply of a product or service, it may not be a candidate for being approached as a product or service for sale. For example, we don’t consider air to breathe as being a commodity we must buy. Of course, that is only because there is a plentiful supply. Of course, in Colorado, many people find that the air supplied by the great outdoors is not sufficient in oxygen, thus, they must buy air that is rich in oxygen by renting...
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...Chapter 2 Objective of Risk Management I. Multiple Choice 1. The fundamental objective of risk management is: a. diversification b. minimize the cost of risk c. hedging d. loss control Answer: b Type: K 2. If unexpected increases in losses from price risk are not offset by cash inflows from insurance contracts, hedging arrangements or other contractual risk transfers, they will result in: a. an increased stock price b. a reduced stock price c. bankruptcy d. increased diversification Answer: b Type: K 3. Johnson Incorporated, located in California, had a $1 million uninsured loss due to an earthquake in 1997. What impact is this likely to have on the firm’s value? a. It will have no impact. b. The firm value will increase by $1 million. c. The firm value will decrease by $1 million. d. The firm value will probably decrease, but the amount of decline will depend on other factors such as the firm’s level of diversification of risk. Answer: d Type: A 4. The cost of risk may include all of the following except: a. the cost of insurance. b. the cost of raw materials. c. the cost of increased precautions to control losses. d. the cost of investments in information to reduce risk. Answer: b Type: A 5. Maximizing the value of the firm is the same thing as minimizing the cost of risk if: a. the managers are socially responsible. b. the cost of risk is defined to include all risk-related costs from the perspective of...
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...the end of the curve not many jars of baby formula can be made seeing that the opportunity cost for cigarettes for baby formula is much lower. This is the production possibility frontier. Question #2 – Ebay Diamonds In observation through viewing an array of natural diamonds on Ebay, it is evident that Natural Diamonds are not in high demand based on the target market selected by Ebay. There were no competitive prices among the listings, but however it was interesting to examine the level of bids placed on different items listed. The price comparisons seems drastic, seeing that the first stone had a price tag of $3,000.00 and the second stone had the best listed bid of $50.00. In all essence, the stones where not exactly the same as it refers to size, shape and color, however there is a noticeable difference in the pricing for the stones listed deeming them as not being competitively price. Through the continuation of thorough observation, the last two minutes of bidding war for the first stone was examined and the price tag added an easy $2,600.00 with 2 seconds left on the clock. Just like that this natural diamond was swooped off the market for a total of $5,600.00. The market is competitive based on...
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...Chapter 15 Question 11 11. The table below lists gross domestic product (GDP), consumption (C), gross private domestic investment (I), government spending (G), and net exports (X - M). Each computed as a percent of GDP for the 5 years presented with the following equation: C (%) = (C/GDP) x 100% I (%) = (I/GDP) x 100% G (%) = (G/GDP) x 100% X –M (%) = ((X-M)/GDP) x 100% Year GDP C I G X - M C (%) I (%) G (%) X – M (%) 1965 719.1 443.8 118.2 151.5 5.6 61.72 16.44 21.07 0.78 change (1.42%) (-2.39%) (0.76%) (0.19) 1975 1638.3 1034.4 230.2 357.7 16 63.14 14.05 21.83 0.97 change (1.32%) (3.39%) (1.00%) (3.7%) 1985 4220.3 2720.3 736.2 879 -115.2 64.46 17.44 20.83 -2.73 ...
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...WE PROVIDE NMIMS – NARSEE MONJEE - PGDSCM, PGDMM, PGDFM, DGM, DSCM, DMM, DITM, DHRM, DFM, DBM, DBFM, ASSIGNMENT ANSWERS, ASSIGNMENT SOLUTIONS aravind.banakar@gmail.com http://www.mbacasestudyanswers.com ARAVIND - 09901366442 – 09902787224 SALES MANAGEMENT 1. Suppose you are Sales Manager (priority banking) in a Bank which deals with key account holders explain how you will? a. Recruit sales force b. Prepare the Job Description and Specification c. Design training program for them. (Marks 15) 2. Suppose you are Sales Manager in life insurance Company, managing team of fifteen sales executives. How you will use sales force automation to improve efficiency and effectiveness of sales operation? (Marks 15) Corporate Finance 1. Suppose, a prospective client who wants to invest certain amount of money comes to you but does not know anything about ‘Time Value of Money’. So, please explain to the person the concept of ‘Time Value of Money’ in detail. 2. A limited company is considering investing a project requiring a capital outlay of Rs. 2, 00,000. Forecast for annual income after depreciation but before tax is as follows : Year | Rs. | 1 | 1,00,000 | 2 | 1,00,000 | 3 | 80,000 | 4 | 80,000 | 5 | 40,000 | Depreciation may be taken as 20% on original cost taxation at 50% of net income. You are required to evaluate the project according to each of the following methods: a) Pay back method b) Rate of return on original investment method ...
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...Chapter 2 Objective of Risk Management I. Multiple Choice 1. The fundamental objective of risk management is: a. diversification b. minimize the cost of risk c. hedging d. loss control Answer: b Type: K 2. If unexpected increases in losses from price risk are not offset by cash inflows from insurance contracts, hedging arrangements or other contractual risk transfers, they will result in: a. an increased stock price b. a reduced stock price c. bankruptcy d. increased diversification Answer: b Type: K 3. Johnson Incorporated, located in California, had a $1 million uninsured loss due to an earthquake in 1997. What impact is this likely to have on the firm’s value? a. It will have no impact. b. The firm value will increase by $1 million. c. The firm value will decrease by $1 million. d. The firm value will probably decrease, but the amount of decline will depend on other factors such as the firm’s level of diversification of risk. Answer: d Type: A 4. The cost of risk may include all of the following except: a. the cost of insurance. b. the cost of raw materials. c. the cost of increased precautions to control losses. d. the cost of investments in information to reduce risk. Answer: b Type: A 5. Maximizing the value of the firm is the same thing as minimizing the cost of risk if: a. the managers are socially responsible. b. the cost of risk is defined to include all risk-related costs from the perspective of...
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...Differential pricing of pharmaceuticals: the HIV / AIDS Crisis 1) Is the monopoly on patented pharmaceuticals warranted? What barrier to entry prevents the re-importation into the United States of pharmaceuticals sold at lower prices abroad (say, in Canada)? The monopoly on patented pharmaceuticals is an improper term, and represents only a limited warranty. * First, it is limited in time. The company needs to recover its R&D investment and make a fair profit during the period of exclusivity. * Second, it is limited geographically – as some countries will not respect intellectual property and allow their own pharmaceutical companies to copy innovations, making generic drugs even before the original patent expires. * Third, it lacks the most important element of a monopoly: price control. In most countries, the prices of drugs are set by a governmental agency. The manufacturers are merely consulted; their influence is very limited. In the end, once the price is set, they can only decide if they are willing to sell at that price or not. Take it or leave it. * The combinations of the factors above will put pressure on the pharmaceutical companies to expand geographically as quickly as possible, in order to maximize their chances of recovering their R&D costs and making a fair profit within the time period covered by patent protection. In order to do that, they will accept in some countries prices that are far from ideal – prices they would never accept...
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...2) History/Overview of the Industry page 3 3) Economic Characteristics page 4 a) Structure b) Costs c) Demand d) Competition- The Rise of the Generics e) Market Failure, Government Intervention and Price 4) Performance page 7 5) Impact of the Global Economic Downturn page 9 6) Summary page 10 7) Conclusion page 11 Bibliography page 12 8) 1. Introduction This paper briefly examines the current state of the pharmaceutical industry, as well as the economic characteristics, performance, and the impact of the global recession. The industry is made up of several enterprises engaging in the research, development, manufacture and marketing of medicines, vaccines, medical devices, and nutritional products for humans and animals. Though, this multi-billion dollar industry includes large ethical drug multi-nationals (often referred to as Big Pharma), mid-sized specialty pharmaceutical companies, manufacturers of generics, small biotechnology and biopharmaceutical firms, and service companies, 1 for the purpose of this paper, the emphasis will be mainly on drug makers. 2. History/Overview of the Industry The pharmaceutical industry of today is a far cry from its humble beginnings in the nineteenth century of physicians mainly prescribing plant extracts to being technology intensive, dominated by a few large companies with significant research and development (R&D)...
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