Harvard Case - Pricing the EpiPen: This is Going to Sting
"Pricing the EpiPen: This is Going to Sting" Harvard business case study is written by Thomas Steenburgh. It deals with the challenges in the field of Marketing. The case study is 9 page(s) long and it was first published on : Sep 2, 2016
At Fern Fort University, we recommend a multi-pronged approach for Mylan to address the EpiPen pricing controversy and regain public trust. This includes implementing a transparent pricing strategy, focusing on patient affordability, enhancing product innovation, and engaging in strategic brand management to rebuild the EpiPen's reputation.
2. Background
This case study focuses on Mylan, a pharmaceutical company facing intense public scrutiny for its pricing strategy for the EpiPen, an emergency epinephrine auto-injector used to treat life-threatening allergic reactions. The EpiPen's price had increased dramatically, raising concerns about affordability and accessibility for patients with severe allergies. This sparked public outrage, congressional investigations, and a wave of negative media attention, significantly impacting Mylan's brand image and financial performance.
The main protagonists are Mylan's CEO Heather Bresch and the company's leadership team, who need to navigate this crisis and find a solution to regain public trust and protect the company's future.
3. Analysis of the Case Study
This case study presents a complex scenario where ethical considerations, public perception, and financial performance are intertwined. To analyze the situation, we can utilize a framework combining SWOT analysis to understand Mylan's internal strengths and weaknesses, and PESTEL analysis to assess the external environment:
SWOT Analysis:
Strengths:
- Market dominance: Mylan holds a dominant market share in the epinephrine auto-injector market.
- Brand recognition: The EpiPen is a well-established and recognized brand among patients and healthcare providers.
- Innovation: Mylan has a history of developing innovative products in the pharmaceutical industry.
Weaknesses:
- Pricing strategy: The dramatic price increase of the EpiPen has generated significant public backlash and eroded trust.
- Transparency: Mylan's lack of transparency regarding pricing decisions has fueled public anger and scrutiny.
- Reputation damage: The negative publicity surrounding the EpiPen pricing has negatively impacted Mylan's brand image.
Opportunities:
- Product innovation: Mylan can develop new and improved versions of the EpiPen, potentially with features that address affordability concerns.
- Strategic partnerships: Collaborating with other healthcare organizations or advocacy groups can help Mylan regain public trust and improve access to its products.
- Marketing and communication: Mylan can leverage marketing and communication strategies to highlight its commitment to patient affordability and access to essential medications.
Threats:
- Increased competition: New entrants and generic drug manufacturers pose a threat to Mylan's market share.
- Government regulations: Regulatory scrutiny and potential price controls could impact Mylan's pricing strategy.
- Public pressure: Continued public pressure and negative media attention could further damage Mylan's reputation.
PESTEL Analysis:
- Political: Congressional investigations and potential legislation regarding drug pricing can significantly impact Mylan's operations.
- Economic: Economic factors like inflation and healthcare costs can influence patient affordability and demand for the EpiPen.
- Social: Growing public awareness of drug pricing issues and patient advocacy groups can create pressure for Mylan to address affordability concerns.
- Technological: Advancements in drug delivery systems and alternative treatment options could pose a threat to the EpiPen's market position.
- Environmental: Environmental concerns related to manufacturing and disposal of pharmaceutical products could impact Mylan's operations.
- Legal: Regulatory changes and potential lawsuits related to pricing practices can create legal challenges for Mylan.
4. Recommendations
To address the EpiPen pricing controversy and regain public trust, Mylan should implement the following recommendations:
1. Transparent Pricing Strategy:
- Adopt a cost-plus pricing model: This model involves setting prices based on the actual cost of producing and distributing the EpiPen, plus a reasonable profit margin.
- Publish detailed pricing information: Mylan should transparently disclose the cost breakdown of the EpiPen, including manufacturing, research and development, marketing, and distribution expenses.
- Offer tiered pricing: Mylan could offer different price points based on patient income or insurance coverage, ensuring affordability for all.
2. Focus on Patient Affordability:
- Develop a patient assistance program: Mylan should create a comprehensive program to provide financial assistance to low-income patients who cannot afford the EpiPen.
- Partner with advocacy groups: Collaborating with allergy advocacy organizations can help Mylan reach underserved populations and ensure access to the EpiPen.
- Offer generic alternatives: Mylan can consider introducing a generic version of the EpiPen at a lower price point to increase affordability.
3. Enhance Product Innovation:
- Develop a next-generation EpiPen: Mylan should invest in research and development to create a more advanced version of the EpiPen with improved features, such as longer shelf life, easier administration, and potentially even reduced cost.
- Explore alternative delivery systems: Mylan could explore alternative drug delivery methods, such as nasal sprays or patches, to provide patients with more convenient and affordable options.
4. Strategic Brand Management:
- Rebuild trust through communication: Mylan should engage in open and transparent communication with the public, addressing concerns about pricing and highlighting its commitment to patient well-being.
- Focus on social responsibility: Mylan can demonstrate its commitment to social responsibility by supporting allergy research and patient education initiatives.
- Leverage digital marketing: Mylan should utilize digital marketing channels, including social media and online advertising, to reach target audiences and rebuild its brand image.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Mylan's core competency lies in developing and delivering essential medications. By focusing on patient affordability and product innovation, Mylan can align its actions with its mission to improve patient health.
- External customers and internal clients: The recommendations address the concerns of both external customers (patients) and internal clients (healthcare providers) by emphasizing affordability, accessibility, and product quality.
- Competitors: By developing innovative products and adopting transparent pricing practices, Mylan can differentiate itself from competitors and maintain its market leadership.
- Attractiveness ' quantitative measures: While it's difficult to quantify the impact of regaining public trust, the proposed strategies have the potential to increase sales, improve profitability, and enhance brand equity.
6. Conclusion
Mylan faces a significant challenge in regaining public trust after the EpiPen pricing controversy. By implementing a transparent pricing strategy, focusing on patient affordability, enhancing product innovation, and engaging in strategic brand management, Mylan can rebuild its reputation and ensure long-term success.
7. Discussion
Other alternatives not selected include:
- Maintaining the current pricing strategy: This option would likely lead to continued public backlash and further damage to Mylan's brand image.
- Lowering prices without addressing underlying issues: This could be perceived as a superficial attempt to appease the public without addressing the root cause of the controversy.
Risks associated with the recommended approach include:
- Resistance from shareholders: Some shareholders might oppose the adoption of a cost-plus pricing model or patient assistance programs due to potential impact on profitability.
- Increased competition: Competitors could capitalize on Mylan's efforts to regain trust by offering similar products at lower prices.
- Unforeseen regulatory changes: Government regulations regarding drug pricing could significantly impact Mylan's operations.
8. Next Steps
To implement these recommendations, Mylan should take the following steps:
- Within 3 months: Develop a detailed plan outlining the implementation of a transparent pricing strategy, patient assistance program, and product innovation initiatives.
- Within 6 months: Launch a public communication campaign to address concerns about pricing and highlight Mylan's commitment to patient affordability.
- Within 12 months: Introduce a new version of the EpiPen with improved features and potentially lower cost.
By taking these steps, Mylan can demonstrate its commitment to ethical business practices, patient well-being, and long-term sustainability.
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Case Description
This case examines the public controversy that erupted over the increasingly high price of EpiPens. Mylan Inc., (Mylan), a generic drug maker, bought the EpiPen product line from Merck in 2007. Since that time, the company both invested in marketing to raise awareness for the drug and dramatically increased the price, lifting it from $100 to $600 per two pack in the U.S. In 2016, simmering consumer anger about the high prices of pharmaceutical drugs finally reached a boiling point and a media firestorm ensued. The case challenges students to think about the role of fairness in pricing. How can Mylan justify the dramatic price increases? How can it justify the variation in prices across countries, as an EpiPen is priced at an equivalent of $85 in France? The case challenges students to think about how they would handle a public controversy. The EpiPen case is well suited for students in MBA, MBA for Executives, and executive education programs. For MBA students, it can be placed in first-year marketing, pricing, or marketing communications courses. For executives, it can serve as a vehicle to discuss both ethical issues of pricing and how to handle a public controversy.
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