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Pricing Gardasil

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Submitted By zhandimo
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Pricing Gardasil
According to the article, I think Allison Watkins should make the price of Gardasil much higher. A price of $500 or more per treatment would be acceptable. The following are my reasons.

First of all, Merck needs a large amount of revenue increasing. This is the most effective way for Merck to get its stock price up, to encourage staffs’ morale, and to increase its share of market. In fact, having two preconditions, Merck can really increase its revenue by pricing the Gardasil higher.

One precondition is about to be the price maker. Merck was going to have a first-mover advantage if Gardasil’s approval process ran smoothly. The first-mover advantage means that Merck can occupy the market for a short period of time. Under monopoly, without competitor, Merck will be the only price maker in its area.

The other one is about the demand of customers. Generally speaking, the higher the price is made, the smaller the demand will be. In this case, Gardasil is necessary to a specific group of customers. Without options (surrogate products), customers have to buy Gardasil even its price is every high. That means the elastic of Gardasil’s price is low. Large demand will always be there no matter what the price is. Merck just need to supply and make the most use of it.

Second, Merck will lose the opportunity to earn more revenue in the future. The first-mover advantage was of great importance in this case than with most medicines because vaccines were one-time—as opposed to ongoing—treatments. A customer will no longer be a customer after consume three doses of treatment. In the long run, demand will decreases to a low and stable level. What’s more, competitor will break into the market. At that time, Merck will lose the power to be a price maker.

Third, high pricing will not hurt Merck’s reputation. We can see that Merck’s success and failure are

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