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Abstract

Once celebrated as the engine of modern medical innovation, pharmaceutical firms are lambasted for the low productivity of their research, their wasteful marketing and, above all, for the high prices that their products command. The drug companies defend their prices, and their profits, by citing the high cost of making new drugs, more than US$800 million. This infuriates critics, who argue that the firms could easily lower prices and find savings on promotions without touching their precious research and development budgets. To meet this end they propose a new business model for the pharma giants, which will focus on lowering marketing budgets and embracing innovative methods in dealing with high costs of drug making. This case study triggers a debate on the pros and cons of the existing business model and offers scope to discuss the essence of the proposed business model.
Other setting(s):
March 2005

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Abstract

Once celebrated as the engine of modern medical innovation, pharmaceutical firms are lambasted for the low productivity of their research, their wasteful marketing and, above all, for the high prices that their products command. The drug companies defend their prices, and their profits, by citing the high cost of making new drugs, more than US$800 million. This infuriates critics, who argue that the firms could easily lower prices and find savings on promotions without touching their precious research and development budgets. To meet this end they propose a new business model for the pharma giants, which will focus on lowering marketing budgets and embracing innovative methods in dealing with high costs of drug making. This case study triggers a debate on the pros and cons of the existing business model and offers scope to discuss the essence of the proposed business model.

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Other setting(s):
March 2005

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