Case Type: new product; pricing & valuation; industry analysis.
Consulting Firm: IMS Health Consulting Group second round job interview.
Industry Coverage: healthcare: pharmaceutical, biotech, life sciences; insurance: life & health.
Case Interview Question #00193: The client Genentech, Inc. (Genetic Engineering Technology, Inc.) is a biotechnology and pharmaceutical corporation headquartered in San Francisco, California, USA. Genentech has hired your consulting team because its research department has just invented a preventative medicine for heart attacks that took two years to develop and that will be ready to market in six months. The drug is a tablet with no side effects and it significantly reduces the chances of a heart attack.
The marketing department of Genentech has decided to price the new drug at $300 per year. What is likely to happen to the healthcare industry if the new drug is sold at this price?
- The tablet must be taken every day.
- The drug has already been approved by FDA.
- Assume that Genentech has unlimited manufacturing capacity for this product.
- The drug will be prescribed through cardiologists.
- Potential customers are Americans aged 50+ that are high risk for heart attacks.
- Of Americans aged 50+, 40 percent are considered high-risk.
- Of high-risk Americans, 25 percent will have a heart attack by age 70.
- 40 million Americans are over 50. (Ask candidate to estimate this figure)
- It costs a health insurance company $50,000 to cover every heart attack.
- There are no viable substitutes for this new drug product.