Over the years, numbers of people amounting to millions have taken a precaution to avoid being affected by the flu by administering a flu shot. This has been a great caution move as it has seen many people saved from the woes of flu infection. However, the administering of this shots has not been entirely productive as previously anticipated. Thousands of people are still infected with the virus as years go by and by. This has led to the increased need for a pre-administered drug to prevent flu infection. This has seen the invention of Tamiflu. Tamiflu is an anti-viral medication produced by Gilead Sciences Inc. which fights the Influenza A and Influenza B strains.
Market Structure
Competitors and Customers
The antiviral drug market is a monopolistic competition. It is controlled by a few giant pharmaceutic companies who engage in the competition to establish significant market share over their competitors (News Release, 2009-2016). However, there are other smaller pharmaceutical companies worldwide that are looking forward to coming up with an antiviral drug to solve the flu problem. Most of the companies have brought into existence products that threaten the market share of the Tamiflu. Major competing products are Relenza and Rapivab which are both recommended by the Centre for Disease Control (CDC) (Flu Vaccination Coverage, United States, 2014-15 Influenza Season, 2016).
Delegate your assignment to our experts and they will do the rest.
The Tamiflu, however, is purposely made for use from when a person is young. For instance, it starts being administered after a child is two weeks old for treatment of flu and prevention when the child is one-year-old and above (Flu Vaccination Coverage, United States, 2014-15 Influenza Season, 2016). Relenza, on the other hand, is used for treating flu for people who are seven years and older and for prevention from 5 years of age. Rapivab is administered for people who are 18 years and above (Flu Vaccination Coverage, United States, 2014-15 Influenza Season, 2016).
The early usage of the drug makes it easily capable of sustaining itself in the market. Most people are conservative and tend to stick to the same old habits that they picked up in their childhood. This means that the probability of most parents holding to the use of Tamiflu is quite high compared to the likelihood of them changing to Relenza or Rapivab in the future.
Comparative Advantages and International Trade Opportunities
Tamiflu has quite a wide range of benefits as compared to its competitor products. For a start, it is administrable to children from a very tender age. At the second week of birth, a young infant can be treated of flu using the drug. It then consequently comes in as a preventive at quite an early stage of children’s lives. Relenza and Rapivab are only administered later on when a child has grown and cannot be administered to younger children.
Again, contrary to its competitors, Tamiflu reduces cases of people who are likely to develop complications as a result of the flu. Roche, Tamiflu’s maker, says that cases like pneumonia are quite reduced when one administers the drug. This consequently prevents hospitalisation of people due to the infection. Its use additionally reduces the chances of one getting sick.
The side effects associated with Tamiflu are not as gross as those by Relenza and Rapivab. Relenza, for instance, which is inhaled can result in breathing problems for the user. Additionally, both Relenza and Rapivab are slow in offering relief as compared to Tamiflu which responds quite fast to the body system.
The use of Tamiflu is not only going to be in the USA but all over the world. The flu is a global infection. It is experienced by people from all walks of life across the continents be it, Africa or Asia. Most of the countries in this continents are the third world and not fully developed. This means that they do not have the capability of coming up with such a product like Tamiflu. This does not, however, mean that these people do not need preventive care. As a result, this is quite a great market opportunity for the Tamiflu. Expanding its production and market on a global scale will see it become a revolutionary drug.
Supply, Demand, and Prices
Tamiflu has always had a ready market (Danzon, 2006). There is always an impending danger of flu infection. Cases are always raised repeatedly over the years of possible flu infections. As a result, most governments come in search of preventive measures to avoid possible traffic in hospitals which could mean high expenditures by the government in saving their citizens. Again, it was reported in 2006 that flu had killed an estimated number of 50 million people. This is quite a large percentage of the population depleted by a preventable and curable infection. The demand for the antiviral is therefore quite high because of the great danger flu infections pose to the world (Danzon, 2006). Many people are in need of a solution to evading flu virus all over the world.
As a result, there is need for increased production of the drugs to meet the demand. Currently, the suppliers of other antivirals have failed to adequately and efficiently cover the market. This means that need is there to put up more laboratories in various locations around the world to be able to reach out efficiently and effectively to the demands of each consumer. This means a lot of personnel and equipment is needed for the same.
Tamiflu’s prices are however quite high. One dose pack of Tamiflu which consists of 10 capsules goes for $150.61, but the price varies with a dollar or two in different stores (Cold, Flu, & Cough Health Centre, 2005-2016). This prices could inconvenience a lot of people as they are affordable by only the affluent and a smaller portion of the middle class. Lowering the costs of the drug to make it accessible to even the minority in the society could be an excellent way to improve and grow its market share. At the same time, this should be done while still focussing on maintaining the quality of the drug.
Factors Affecting Total Revenue
Newcomers into the pharmaceutical business have posed competition to the Tamiflu. Every day, new companies are opening up and are providing products similar to Tamiflu. This has affected the market share of Tamiflu as it reduces slightly from time to time (GILEAD SCIENCES, INC., 2016). Competition from this small companies, though not very significant in impact now, could mean a lot to the company’s future.
Again, the company is forced to keep changing their prices to be able to fit in the marketplace (Roche Holding AG, 2016). Competing products like Relenza and Rapivab are sold at relatively lower prices than Tamiflu. This forces the company to lower its prices to be able to fit in the price gap and maintain its relevance in provision of antivirals.
Price Elasticity of Demand
The price elasticity of demand of Tamiflu is inelastic though not quite perfectly (Danzon, 2006). This means that the price of Tamiflu is least affected by demand. The reason behind this is that people want to cure or prevent infection by any flu. Again, there are no close substitutes for it in the market. This makes the price elasticity of inelastic demand to be smaller than one thereby by having little or no effect on the rate (Danzon, 2006). This impacts positively the total revenue as increased demand means increase net income and consequently increased profits.
Measures of cost
Fixed costs
The fixed costs for the production of Tamiflu are relatively high which result in its high pricing. This includes rents for laboratories and offices or purchased machinery and salaries of full-time employees (Danzon, 2006). For any time that the company does not produce the antiviral, it incurs certain losses. Say for instance, if a manufacturing lab does not operate in a day, the exact amount of rent that is due that day will still add up. This calls for maximising of production and proper use of utilities and resources at hand.
Variable Costs
This is costs that are not continuously incurred and vary from time to time (Danzon, 2006). For instance, some machines hired for use during the production of the drug. Such machines should be utilised quite efficiently to ensure that the cost of production in minimised for the sake of greater profits on sale. Few of the staff in the production should also be paid monthly salaries. Most of them should be paid according to the amount of work done. This will make them perform more to earn more, and this will result in increased productivity.
Marginal costs
At times, due to demand, the company is forced to produce more goods than those of they are used to producing. As a result, it is quite essential to ensure that cost of providing additional products is relatively adding up to the cost of previously produced goods. This is called the marginal cost (Danzon, 2006). If producing two goods is 300 and producing for producing 3 of the same is 600 then this shows that there is a serious problem likely to be incurred. It is, therefore, important to evaluate the marginal costs at all times.
Opportunity Cost
The opportunity cost in production and sale of Tamiflu can be seen in the loss of time and wastage of resources in the company (Danzon, 2006). If an individual lab is not functional for a day, meaning there is no production, an opportunity cost of the amount of sales or productivity experienced in a day is incurred. If a particular machine is not used in production, the purpose which it was purchased for, then an opportunity cost is incurred because its likely use could have led to some form of advantage to the company. It is, therefore, important to lower the opportunity costs at all time for effective productivity.
Tamiflu is, therefore, a product with a promising future in the pharmaceutical market. It has the potential of growing to one of the most successful pharmaceutical products if the right measures and approach are used. Tapping the global market is a fundamental element of its success worldwide. However, this should be done with immediate effect due to the uprising smaller companies that are offering the same product thus threatening the market share. It should also be noticed that most third world countries are developing and it is not known at what time they will have the technology and know-how to produce similar products.
References
Flu Vaccination Coverage, United States, 2014-15 Influenza Season (2016). CDC . Retrieved 11th October 2016 from http://www.cdc.gov/flu/fluvaxview/coverage-1415estimates.htm
Danzon, P. (2006). Economics of the Pharmaceutical Industry. NBER . Retrieved 11th October 2016 from http://www.nber.org/reporter/fall06/danzon.html
News Release (2009-2016). Gilead . Retrieved 11th October 2016 from http://investors.gilead.com/phoenix.zhtml?c=69964&p=irol-newsArticle&ID=783456
Gilead Sciences, INC. (2016). Austin: Dun and Bradstreet, Inc. ProQuest . Retrieved 11th October 2016 from http://search.proquest.com/docview/230541468?accountid=35812
Roche holding AG. (2016). Austin: Dun and Bradstreet, Inc. ProQuest . Retrieved 11th October 2016 from http://search.proquest.com/docview/230633232?accountid=35812
Cold, Flu, & Cough Health Centre (2005-2016). WebMD . Retrieved 11th October 2016 from http://www.webmd.com/cold-and-flu/flu-guide/flu-medications
