Sovaldi: Pricing of New Products and Consequences
Yunwei Gai and Lidija Polutnik
Babson College, USA
Volume 14: 2019, pp. 327-342; ABSTRACT
This case provides students with a specific example of a new product introduction, hepatitis C treatment, Sofosbuvir (brand name Sovaldi), introduced by Gilead to market in 2013, at a price of $1,000 per pill. The 12-week course of treatment amounted to the total cost of $84,000 and captured a lot of public and regulatory attention. Most of public criticism directed at Gilead was focused on lack of fairness in pricing as well as lack of transparency. As a result of this public attention, the U.S. Senate conducted public hearings in 2015, resulting in the company’s internal confidential documentation becoming publicly available. This case relies on these disclosed documents and the Senate Hearing Report. It provides students with an example of how prices in prescription drug markets are shaped in the context of the prescription drug industry, its various forces, stakeholders, and regulations. It further shows arguments and dynamics weighted by Gilead’s management in deciding to proceed with a premium pricing strategy. This case can be used alone or in combination with a reading, “A Lecture on the Pharmaceutical Industry in the United States”.
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