Harvard Case - EpiPen Pricing
"EpiPen Pricing" Harvard business case study is written by Michael Moffett. It deals with the challenges in the field of Strategy. The case study is 15 page(s) long and it was first published on : May 1, 2017
At Fern Fort University, we recommend Mylan implement a multi-pronged strategy to address the EpiPen pricing controversy, focusing on restoring public trust, enhancing value proposition, and fostering long-term sustainable growth. This strategy involves a combination of pricing adjustments, transparency initiatives, and strategic partnerships to ensure affordability and accessibility of this life-saving medication.
2. Background
The case study focuses on Mylan, a pharmaceutical company facing public backlash for the significant price increase of its EpiPen, an auto-injector for treating severe allergic reactions. The price hike, from $100 in 2007 to $600 in 2016, sparked public outrage, congressional investigations, and legal challenges. This situation highlights the ethical and strategic challenges faced by pharmaceutical companies when balancing profit maximization with social responsibility.
The main protagonists are Mylan CEO Heather Bresch, who faced intense scrutiny for her role in the price increase, and the public, who felt betrayed by the company's actions.
3. Analysis of the Case Study
Strategic Analysis:
- Porter's Five Forces: The pharmaceutical industry is characterized by high barriers to entry (extensive research and development, regulatory hurdles), moderate supplier power (limited raw materials suppliers), moderate buyer power (limited substitutes, price sensitivity influenced by urgency), and high threat of substitutes (alternative treatments, generic competition).
- SWOT Analysis:
- Strengths: Strong brand recognition, established distribution network, market leader in epinephrine auto-injectors.
- Weaknesses: Negative public perception, price sensitivity of customers, vulnerability to generic competition.
- Opportunities: Expanding into emerging markets, developing innovative delivery systems, leveraging digital technology for patient engagement.
- Threats: Increased regulatory scrutiny, generic competition, potential for disruptive innovation.
- Value Chain Analysis: Mylan's value chain includes research and development, manufacturing, marketing and sales, and distribution. The price increase impacted the perceived value proposition, leading to customer dissatisfaction and reputational damage.
- Business Model Innovation: Mylan needs to explore alternative business models, such as tiered pricing, value-based pricing, or subscription models, to ensure affordability and accessibility while maintaining profitability.
Financial Analysis:
- Pricing Strategy: The price increase was driven by profit maximization, but it failed to consider the long-term implications on brand reputation and market share.
- Financial Performance: While the price increase boosted revenue, it also led to negative publicity and potential legal challenges, impacting overall financial stability.
Marketing Analysis:
- Brand Management: The EpiPen brand suffered significant damage due to the price increase, leading to a decline in consumer trust and loyalty.
- Market Segmentation: Mylan needs to consider different market segments (patients, healthcare providers, insurers) and tailor pricing and communication strategies accordingly.
Operational Analysis:
- Manufacturing Processes: Mylan needs to optimize manufacturing processes to ensure cost-efficiency and maintain consistent quality.
- Supply Chain Management: A robust supply chain is crucial for ensuring timely availability of EpiPens, especially during emergencies.
Ethical Considerations:
- Corporate Social Responsibility: Mylan needs to prioritize ethical considerations and demonstrate a commitment to social responsibility, particularly in the healthcare sector.
- Transparency and Communication: Mylan should be transparent about pricing decisions and communicate effectively with stakeholders to build trust and address concerns.
4. Recommendations
- Price Adjustment: Implement a tiered pricing strategy based on patient income, insurance coverage, and geographic location. This ensures affordability for all while maintaining profitability.
- Transparency Initiative: Publish a detailed explanation of EpiPen pricing factors, including research and development costs, manufacturing expenses, and profit margins. This fosters transparency and builds trust with stakeholders.
- Strategic Partnerships: Collaborate with non-profit organizations, patient advocacy groups, and government agencies to provide financial assistance and access to EpiPens for underprivileged individuals and communities.
- Product Development: Invest in innovation and develop next-generation auto-injectors with improved features, such as longer shelf life, easier administration, and personalized dosage options. This strengthens the value proposition and enhances competitive advantage.
- Digital Transformation: Leverage digital technology to improve patient engagement, provide educational resources, and facilitate online ordering and delivery of EpiPens. This enhances accessibility and convenience for customers.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: Mylan's core competencies include research and development, manufacturing, and distribution. The recommendations align with these competencies while emphasizing ethical considerations and social responsibility, consistent with Mylan's mission.
- External Customers and Internal Clients: The recommendations address the needs of external customers (patients, healthcare providers, insurers) by ensuring affordability and accessibility, while also considering the needs of internal clients (employees, investors) by maintaining profitability and long-term sustainability.
- Competitors: The recommendations aim to strengthen Mylan's competitive position by fostering innovation, enhancing value proposition, and building a strong brand reputation.
- Attractiveness: The recommendations are expected to improve financial performance through increased market share, reduced legal risks, and enhanced brand value.
6. Conclusion
Mylan faces a critical juncture in its journey. By implementing these recommendations, the company can regain public trust, strengthen its competitive position, and ensure the long-term availability of this life-saving medication. This strategy emphasizes a balanced approach to profitability, social responsibility, and ethical business practices.
7. Discussion
Alternatives:
- Maintaining current pricing: This option risks further damaging brand reputation and losing market share to competitors.
- Aggressive price cuts: This could negatively impact profitability and limit investment in innovation.
Risks and Key Assumptions:
- Regulatory changes: New regulations could impact pricing and distribution of EpiPens.
- Generic competition: Increased generic competition could erode market share and profitability.
- Public perception: Public perception may not change immediately despite efforts to improve transparency and affordability.
8. Next Steps
- Develop a detailed implementation plan: Outline specific actions, timelines, and responsible parties for each recommendation.
- Engage with stakeholders: Communicate the new pricing strategy and transparency initiatives to patients, healthcare providers, insurers, and government agencies.
- Monitor progress and adapt: Regularly assess the impact of the implemented strategy and make necessary adjustments based on market response and feedback.
By taking these steps, Mylan can navigate the current crisis and emerge as a leader in the pharmaceutical industry, committed to both profitability and social responsibility.
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Case Description
Mylan and it's CEO, Heather Bresch, were under attack for a multitude of large price increases in their life saving pharmaceutical, the EpiPen. The U.S. Congress, the Federal Drug Administration (FDA), and millions of people considered at risk and in need of access to EpiPen injectors, wanted to know why and how those price increases had happened.
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