Q2. This question has the following 2 parts:
(i) Consider the eccentric where the monetary value of the cancer drug, Interferon, is a reasonable filename extension price for AZT. If that is so, compare the annual salute of AZT in November 1989 (to the patients) with and without a come on 20% price cut (to the wholesalers) with the annual embody of Interferon (assuming that the annual cost to a patient using Interferon did non change from 1987 to 1990). What conclusions would you draw from this exercise regarding whether Burroughs Wellcome should have a set ahead 20% price cut (to the wholesalers) or not on AZT?
(ii) Note that part (i) assumes that Interferon is a reasonable extension phone price for AZT. Do you think this assumption is reasonable? translate reasons for your answer.
Question-2 (part-i)
Annual cost of Retrovir treatment to AIDS patients is as follows:
Price to wholesalers
After 2nd price cut of 20% (in Sept. 1989)
After 3rd price cut of 20% (expected)
(Assuming 25% markup by wholesalers as after 2nd price cut)
Given: Daily outgo of Retrovir - 1200mg i.e.
12 capsules of 100mg per day
Considering the assumption that Interferon is a reasonable reference for Retrovir and has an annual treatment cost of $5000, any further price cut in the price of Retrovir is not warranted.
TEV = Cost of Alternative + Value of Performance Differential
BWC is the first and, as of 1990, the only drug to gain FDA approval for the treatment of AIDS. Retrovirs place to the patients is paramount; results show Retrovir extends patients life expectancy, increases their sense of wellness, boosts their insubordinate system, and helps with weight gain.
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