This case study scenario is designed to help students and younger engineers build business problem-solving skills through engineering scenarios. While created to mimic real-life situations, this scenario is hypothetical and for educational purposes only.
Our client is one of the world's largest pharmaceutical companies. Based in the US, the client has a wide range of successful products on the markets that include various drugs for erectile dysfunction, lowering blood cholesterol, anxiety disorders, anti-inflammatory drugs, antidepressants, etc. Currently, the client has only one product on the market for cancer treatment generating roughly $500M in annual sales. In the next 6-12 months, the client is planning on introducing a new cancer drug on the market. This particular drug, RFC-9000, will also be for cancer patients, and its target audience is oncologists. In this space, there is one major competitor for the client's current cancer drug. RFC-9000 has already completed clinical trials and is currently awaiting approval from the FDA (the client is expecting FDA approval based upon the trial results). If this new drug is introduced this year, there will be no competition for at least one year. The current sales force includes 750 sales representatives who support the company's cancer drug that is already on the market. To successfully introduce the new drug to the oncology market, the client will need to invest in expanding its sales division.
Figure 1: Flow Diagram Illustrating Process of Introducing Pharmaceutical Products to the Customer
The client's intelligence has also suggested that a competitor might introduce a different drug that targets the same cancer within the next 3.5 years.
Your job, as an external consultant, is to help the client think through this problem:
Should the client invest money in expanding its sales force?
Key Points and Assumptions
- The term of patent for a new drug is 20 years but most of that time period is spent in the FDA approval processes. Because of the patent, no generic versions of the drug are expected on the market.
- Being first to market is extremely important to the new product's success.
- Cancer drugs are generally expensive but most of the "out-of-pocket" costs are covered by health insurance companies.
- To sell cancer drugs to oncologists, experienced sales personnel with technical backgrounds will be required with ~6 months to recruit and train new employees.
- FDA approval is not guaranteed; depending on this approval time, new employees might be on overhead until FDA approval is received.