Azt Pricing Decision Essay Example for Free

Azt Pricing Decision EssayIn 1986, Burroughs-Wellcome Company introduced the first major(ip) breakthrough against acquired immune deficiency syndrome (AIDS). It was the life-prolonging drug AZT. The product has turned let on to be very successful for the company and, largely because of AZTs success,Burroughs-Wellcomes profits fork up doubled in the three twelvemonths ending in 1988. The Food and Drug Administration (FDA) plans to increase the authorization for the drugs usage to those who are infected with the AIDS virus, but not only showing signs of serious illness. The estimate of the size of this market is hundreds of thousands rather than the tens of thousand who are currently cronk with AIDS (1988).The controversy over the drug centers on its price. AZT costs about $8,600 for a years supply for each patient (lowered from $10,000 in 1987). Critics in the gay, medical, and legal communities contend that Burroughs-Wellcome executives are collective extortionists. Some believe that the company has already made too much money at the write off of the sick. The price is so far out of reach of indigent and moderate-income people that the federal government had to meter in with subsidies of millions of dollars.Burroughs-Wellcome defends it pricing practices by stating that its profit margins (in the 50-70 percent range) are in line with those companies introducing sunrise(prenominal) drugs. They contend these high returns are necessary to finance research and recoup the millions of dollars invested in developing the drug. They initially gave the drug free-of-charge to as many as 5,000 AIDS patients and spent $80 million on a new plant.Additional criticism revolves around the actual development of the drug. The Wall Street Journal stated, But Wellcomes moral position is undercut by its relatively minor role in the creation of AZT. Researchers at the Michigan Cancer Foundation, from West Germany, and at the National Cancer Institute are credited with the major discoveries that led to AZT.Nevertheless, Wellcome performed toxicology, pharmacology, and animal studies before AZT was given to the first human volunteer. It also financed the big clinical trial and bankrolled the give-away to the patients in the initial experiment.Wellcome is under pressure to cut its price. The government is attempting to institute a sound price clause where an unduly high price could trigger a government order for a company to open its books. Any company found in violation could be sued for breach of contract. carnal knowledge is also studying AZT and one Congressman wrote the company contending that the original price rationale (achieving a decent return on investment during a short product life) no longer exists as the drug has been on the market for three years and the market is growing for the product.