Medicines Co Case

HKUST MBA
Microeconomics
Case 1: Medicines Company Case

Question 1. For drug administrators, their incentive for using the drug is that the drug’s got to make economic sense. Data showed that for more than 4,300 patients, Angiomax was a more superior alternative to Heparin. Also shown in tables b and c that it effectively reduced the incidences of death by 30% , heart attack by 26%, need for a repeat angioplasty by 14% and major bleeding by 65% (sum of weighted average between high risk and very high risk). Given the average cost per death, heart attack, repeat angioplasty and major bleeding is $8,000 to the hospital, a drug administrator should consider this drug as a cost saver. Product also works much faster, instead of 2-3 hours, it took 30minutes, that might save nurse cost.
Question 2.
A. For High Risk: Each dosage of Anglomax adds $560 value without taking into account dosage and $218 taking into account dosage. Unit Cost
Heparin
Anglomax
Heparin
Anglomax
Variance
Anglomax*
Variance*

%
%
Expected
Additional Costs
Expected
Additional Costs Expected
Additional Costs Death
8,000
0.20%
0.20%
16
16
0
23
(7)
Heart Attack
8,000
4.20%
3.30%
336
264
72
383
(47)
Need for a Repeat Angloplasty
8,000
2.80%
2.50%
224
200
24
290
(66)
Experienced Major Bleeding
8,000
9.30%
3.50%
744
280
464
406
338
Total

16,5%
9%
1,320
760
560
1,102
218

*Accounting for the additional dosage required for Anglomax. (70% 1 dose, 30% 2-3 dose = 2.5 dose, thus an average persion would require an expected dosage of 0.7*1 + 0.3*2.5 = 1.45 dose). This is assuming that the cost of 1 dose anglomax = cost of 1 dose heparin. There is no information of cost per dose of heparin.
B. For Very High Risk: Each dosage of Anglomax adds $1,088 value, taking into account dosage, it adds $807 value. Unit
Cost
Heparin
Anglomax
Heparin
Anglomax
Variance
Anglomax*
Variance*

%