Datril

This report is Part 1 of assignment for Marketing MBA 565-MBOL1 to Dr. Stephen Baglione

My recommendation to Marvin Koslow is to follow the first approach of pricing Datril at par with Tylenol ($2.85 retail price, $1.69 trade cost), leveraging Bristol-Myers’ brand name, and positioning Datril as an analgesic with similar relief effects to the those of the already successful, aspirin-based Bufferin and Excedin, but more gentle on the stomach, and without the side effects of aspirin. By doing so, Datril will primarily target aspirin users, specifically those from Bufferin’s and Excedin’s current consumer base, who suffer from upset stomach. I explain my rationale below. According to the case, when Datril was introduced to test markets per the strategy I recommended, it failed to achieve the projected sales figures within the

In period five, we introduced the line extension Allright; a 12-Hr muli-symptom relief capsule. We decided this extension would be successful, as the allergy market is very small and had an entrenched competitor. Therefore, while we were aware of potential cannibalization, we believed that the targeted market (retirees, empty nesters, and young singles) would have sufficient demand for our product. We also reasoned that this target was far enough removed from Allround’s to gain additional market share without taking any from Allround. However, this was not the case, as cannibalization was a pressing issue. Market share was gained at the expense of Allround.

The current debate over the Mylan Company’s near monopoly of the epinephrine market through its EpiPen shows what can happen without monopoly regulation. While the cost to produce an Epipen is around $30, the price to the consumer is around $300 each. The economic implications for a family that needs to keep the device on hand to save a life can be excessively high, the emotional results of not having one when you need one are debilitating. This monopoly is further enhanced by state-enforced regulations requiring that schools keep EpiPens in stock and the, so-called, EpiPen law enacted in 2013, which leave little incentive for other pharmaceutical companies to develop their own technology for fast-acting emergency devices. (Bartolone, 2016) Breaking Mylan’s monopoly will not only lead to new product development but lower prices for consumers for a life-saving delivery

During this time the first DTC print advertisement for Merck an “antipneumococcal vaccine, Pneumovax(pneumococcal vaccine polyvalent) was printed in Reader’s Digest (Ventola).” That created a chain effect and shortly later “Boots Pharmaceuticals ran the first DTC broadcast advertisement, which promoted the lower price of its prescription brand of ibuprofen (Rufen), compared with Motrin (Ventola).” Today, the US pharmaceutical industry spends $3.1 billion on advertising prescription drugs directly to consumers.

In 2015, the pharmaceutical industry spent over 27 billion dollars on advertising. The two greatest components of this effort were promotional advertising and free medication sampling, which the pharmaceuticals invested 15.5 and 5.7 billion dollars respectively (“Persuading the Prescribers”). Promotional advertising involves direct contact with health professionals, the most common being extravagant lunch conferences held for physicians and their staff. On the other hand, sampling involves distributing free sample of medications to physicians, who then have a choice of providing these samples to patients. As a result of these methods, the industry has seen revenue around $400 billion with 90% of physicians having a relationship with a drug company (Campbell 2007). Moreover, the prices of prescriptions continue to rise; a copay of a generic drug is $11.72, preferred brand drug is $36.37 and a specialty drug is $58.37 (Coleman and Geneson 2014). Although the profits are immense in the numbers demonstrated above, it is no surprise when pharmaceutical drug companies elevate their prices even more. For instance, recently Turing Pharmaceuticals raised the price of their medication Daraprim from $13.50 to $750. Keep in mind, this medication is used for threatening parasitic infections, aids, and cancer with alternative options currently found to be inefficient (Pollack 2015). Another example of this practice involves cycloserine, a drug used to

The competitors of our product would be Tylenol. The product was developed by McNeil Laboratories. The major ingredient in their medication is acetaminophen. The company was bought by Johnson & Johnson in 1959. They began advertising to many health professionals. They are a company that has many different brands of drugs that serve children up to adults. Their product is said to work by being able to elevate the body’s overall pain threshold so that an individual who takes this medication will feel less pain.

Prescription drug prices are on the rise in the United States. Currently, the United States does not implement a price control on prescription drugs. Every day the supply and demand for prescription drugs fluctuates. Pharmaceutical companies produce drugs that are necessary for survival. Therefore, it is necessary for research and development to continue in the United States. Those suffering the effects of exorbitant prices must do so until a generic form of a prescription drug is produced. Once approved by the FDA, new drugs will make their appearance on the market and patients will no longer suffer financially. Until then, it is necessary for pharmaceutical companies to price their drugs based on the idea of supply and demand. This produces the profit used to fund research. Price controls discourage innovation. If a price control were set in place, of course the price of prescription drugs would decrease. However, the development of new drugs decreases with it. Today’s generation would benefit from lower prices, while future generations would suffer from the loss of drug innovation.

Recently, there had been a controversy over the rise in pharmaceutical costs involving the EpiPen in the United States. The EpiPen, also known as adrenaline/epinephrine, is a widely used injection that is used to treat allergic reactions. This generic drug has been available for many years. The EpiPen controversy is a prime example of how monopoly

Marvin Koslow, vice president for marketing services at Bristol-Myers is going to choose a positioning strategy for Datril, an acetaminophen based analgesic, in order to solidify Bristol-Myers’ position in the analgesics market and gain share in the rapidly growing acetaminophen market. There are two possible options: ‘Pricing at par with Tylenol and it as a Tylenol substitute, featuring Bristol-Myers product’ and ‘low Priced alternative to Tylenol’. I strongly recommend that Bristol-Myers choose the former option with a modification.

This happened on two occasions, the first in 1982 and the second in 1986. These episodes could have been devastating to the McNeil company by drastic decrease in consumption of the Tylenol products. The McNeil company rallied to the situation to counter this possible decrease in consumption. According to "Laurels: The National Business Hall of Fame", Tylenol's share in the one billion dollar analgesic market commanded thirty-five percent of the market before the 1982 incident. At the time of these episodes, consumer trust was damaged and market share decreased to seven percent. By February 1983, Tylenol had regained a twenty-four percent share of the market(Diary of an Amazing Comeback). In the 1990's, Tylenol again reached its thirty-five percent of the market which at this time accounted for a two billion dollar market(Laurels: The National Business Hall of Fame, Fortune). By regaining their share of the market, this demonstrated that the consumers had faith in the McNeil company's ability to produce safe and trustworthy products, i.e. Tylenol, for their comfort and happiness.

A week after the poisonings, Tylenol’s market share fell from 34 percent to 4 percent (Marketing Fact Book, n.d., as cited in Raeburn, 1982). Sales were sharply declining. Although the company had emergency plans for incidents such as plant fires, Johnson and Johnson had no specific crisis communication plan. Nothing like this had ever happened to Johnson and Johnson or any other company. Johnson and Johnson would need to react quickly in order to preserve the company’s reputation and maintain Tylenol’s market share. This paper will show how Johnson and Johnson responded to the tampering crisis and what other companies can learn from their actions.

Bristol-Myers decided to promote its Datril by differentiating it from Tylenol in some tactful manner. It was also a challenging task for the company as Tylenol did not have any potential weakness that could be highlighted to promote Datril. Thus, the problem statement for Bristol-Myers is to position and price the new aspirin drug brand in the presence of a strong market leader.

This case study focuses Burroughs Wellcome and their drug Retrovir. Retrovir is a drug that treats AIDS and AID-related complications. In 1987, Burroughs Wellcome obtained approval from the FDA to market azidothymidine (AZT), also known as Retrovir, as a treatment for AIDS. Retrovir was the only kind of drug on the market. Because of this, many critics accused Burroughs Wellcome of price-gouging, as the price of Retrovir was $188 for a hundred 100mg capsules sold to wholesalers. The president of Burroughs Wellcome, T.E Haigler, defended the high price, stating it was due to uncertainty in the market, the possibility of new drug therapies, and profit margins created by new drugs. Even though Retrovir’s price was dropped 20 percent in December 1987, and 20 percent more in September 1989, due to the House of Representatives launching an investigation, there was still pressure to lower the price. The big question faced in this case is what is Burroughs Wellcome’s next move regarding pricing?

* Competitive Pricing – Merck is sometimes forced to lower prices of products, either ones that have gone off patent to maintain market share in the product, as well as for products that are still on patent in order to compete with rival products for the same treatment that are marketed by competitors