Burrough Wellcome Company

Group Case Analysis for Burroughs Wellcome Company

Team Members:

Mengying Cao

Dennis Lee

Duong Nguyen

MKT 682

Strategic Problem and Issue Identification

In 1987, Burroughs Wellcome Company marketed Retrovir, also known as AZT, in the U.S. drug market as a treatment for AIDS. Up to the year 1990, Retrovir was the only drug authorized for this use. It entered the market with a price of $188 for one hundred 100-milligram capsules, leading to widespread criticism of its high cost to patients. Under the critics’ pressure, the company reduced its price by 20 percent in December 1987, and again by 20 percent in September 1989. The issue faced by the company at the end of 1989 is that it had not planned to make another price cut. The company needs to assess their current price and determine if an adjustment is needed for Retrovir based on its cost, profit, market demand, customer satisfaction, and other factors.

Nature of the industry, market, and buyer behavior

HIV is a virus mainly spread by blood and semen. Initially, almost 90 percent of AIDS victims were gay men or intravenous drug users. One half of all reported AIDS cases were in the San Francisco, Miami, New York City, Los Angeles, and Houston metropolitan areas. The incidence of AIDS cases have increased from 305 cases in 1981 to 35,198 cases in 1989. The fatality rate for a person infected with AIDS has declined from 91 percent in 1981 to 46 percent in 1989. The lifetime medical cost for AIDS patients is more expensive than the lifetime cost of other diseases. An estimated 40 percent of persons with AIDS have received care under the Medicaid Program and the spending for AIDS by Medicaid increased to $2.4 billion in 1992. In addition, private insurers paid $250 million annually in AIDS related medical payments.

In the mid-1980s, there were numerous pharmaceutical companies searching for antiviral drugs to combat the AIDS epidemic. In addition to Burroughs Wellcome Company,...