Chapter 2, Problem 19E

Millennium Pharmaceuticals, Inc. (MPI), designs and manufactures a variety of drugs. One new drug, Glaxane, has been in development for seven years. FDA approval has just been received, and MPI is ready to begin production and sales.

Required:

Refer to Exhibit 2.5. Which costs in the value chain would be considered by each of the following managers in their decision regarding Glaxane?

1. 1. Shelly Roberts is plant manager of the New Bern, North Carolina, plant where Glaxane will be produced. Shelly has been assured that Glaxane capsules will use well-understood processes and not require additional training or capital investment.
2. 2. Leslie Bothan is vice president of marketing. Leslie’s job involves pricing and selling Glaxane. Because Glaxane is the first drug in its “drug family” to be commercially produced, there is no experience with potential side effects. Extensive testing did not expose any real problems (aside from occasional heartburn and insomnia), but the company could not be sure that such side effects did not exist.
3. 3. Dante Fiorello is chief of research and development. His charge is to ensure that all research projects, taken as a whole, eventually produce drugs that can support the R&D labs. He is assessing the potential for further work on drugs in the Glaxane family.