Medi-Cult Case Study
Group Member: Zishi Lin, Max Yang, Shengbo Pan (Section 1)
- What are the benefits of Medi-Cult’s IVM approach over the existing IVF method for patients, clinics, doctors, and insurance companies? Any negative effects on any party?
Patients: The cycle will be reduced dramatically to 2 days. The cost of IVM is dramatically decreased compared to IVF. It eliminates the hormonal stimulation step from the IVF procedure, the cost of the hormones for patients, therefore, falls by 90%. At the same time, lab work and miscellaneous costs also drop by about 50% since there is less monitoring of patients and fewer complications. With the lower cost, the success rate of IVM is the same as IVF. It is easy for patients to comprehend and easy to participate in. There is no risk of hyper-stimulation from hormones.
Clinics: As long as the clinics sign agreement with Medi-Cult, they may be able to use IVM. Since patients tend to flock to clinics that were on the cutting edge, and there was a certain prestige factor in being one of the first clinics to offer such an innovative technology, clinics may be willing to embrace it. However, some clinics may not be willing to sign the agreement. Thus, other clinics may worry about the consequences as the competitors may seize the technology and producing their own IVM media.
Doctors: As no prescriptions were required, no artificial menstrual cycles were needed, and because their patients would complain less of discomfort, doctors will be more willing to recommend IVM. But they may also worry about the technology may be seized by competitors.
Insurance companies: Usually infertility treatments are not included in health insurance as it is not considered “diseased”. As the launch of IVM with relative low price, insurance companies may find business opportunity here to cover infertility in its policy. However, if the price of IVM is too high, insurance may experience some loss.
- What is the value of a single dosage of IVM medium?
To solve this question, we used the economic value to the customer (EVC) equation. The assumption that we make are the following.
- PA ≤ Pb
If he or she is fully informed about the product’s products benefits and offering then the EVC is equaled to VA – VB
Table Representing Cost for Single Dosage IVF Cycle
Cost of IVF | Cost of Hormones | Cost of Lab Work | Misc. Costs | Total Costs | |
USA Min | $4,000 | $3,000 | $500 | $500 | $8,000 |
USA Max | $6,000 | $3,000 | $500 | $500 | $10,000 |
World Min | $2,000 | $1,500 | $300 | $200 | $4,000 |
World Max | $3,000 | $1,500 | $300 | $200 | $5,000 |
Table Representing Cost for Single Dosage of IVM Cycle
Cost of IVF | Cost of Hormones | Cost of Lab Work | Misc. Costs | Total Costs | |
USA Min | $4,000 | $300 | $250 | $250 | $4,800 |
USA Max | $6,000 | $300 | $250 | $250 | $6,800 |
World Min | $2,000 | $150 | $150 | $100 | $2,400 |
World Max | $3,000 | $150 | $150 | $100 | $3,400 |
Using the above formula, we were able to conclude a cost/value for IVM Medium
Table Representing Cost for Single Dosage of IVM Medium
Total Cost | |
USA Min | $3,200 |
USA Max | $3,200 |
World Min | $1,600 |
World Max | $1,600 |
- How ethical is value pricing? Should Medi-Cult and pharmaceutical companies, in general, price their products at levels so much higher than their variable costs? Please defend your choice.
I believe that value pricing is ethical, since much of the price in the value of good is reflected through intellectual property (IP) and intangible assets in a good/service. IP refers to the cost of research and development, cost of expertise, etc. It would be unfair for pharmaceutical companies to not incorporate the value of their intangible assets into the price of their goods. If Apple INC. can price their products greater than their variable costs, then why should pharmaceutical companies not be able to price their products using that same intuition. Based on this reasoning I believe that value pricing is ethical.