Case Detail

Case Summary

Merck: Pricing Gardasil

Case Number: 5-308-505, Year Published: 2009

HBS Number: KEL400

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Authors: Timothy Calkins; Megha Vora

Key Concepts

Pricing, Pharmaceutical Marketing, Pharmaceutical Pricing

Abstract

Allison Watkins, senior director of Merck’s Vaccines Division, needed to decide on the pricing of Gardasil, Merck’s newest vaccine and one of the company’s most important product launches of the year. The outside consulting firm she had hired to recommend a price for Gardasil had suggested a price of $120 per dose (or $360 per person, as each person required three doses over six months to achieve adequate immunity). The Gardasil marketing team disagreed about this recommended price; some thought it was clearly too high, whereas others said it was too low. The latter group argued that Merck would be missing a major opportunity by setting the price at such a low level. Watkins now needed to decide whether to follow the consulting firm’s recommendation or to set a different price.

Learning Objectives

The case highlights the complexity and issues around pricing in the pharmaceutical industry. To decide on the price of Merck’s new vaccine, students will work through product economics and be introduced to the role of economic modeling in determining appropriate prices in the biomedical industry. The case is unique because it gives students an opportunity to calculate a cost per quality adjusted life year (cost per QALY), and in the process discover the power and limitations of such an analysis.

Number of Pages: 10

Extended Case Information

Teaching Areas: Biotechnology, Marketing

Teaching Note Available: Yes

Geographic: United States

Industry: Pharmaceutical

Organization Name: Merck

Organization Department: Marketing

Organization Size: Large

Decision Maker Position: Senior Director

Decision Maker Gender: Female

Year of Case: 2006