Presented by: Group

1
Vioxx

• Presented by Group 9
• Jeff Scheuring
• Micky Pesanka
• Jonathan Ross
• Grant Scheuring
• Matt Sutphen

2
Introduction

• Latest drug recall
• Increased risk of heart attack and stroke
• FDA approved for kids
• 2.5 billion product
• Prescribed for pain arthritis

3
Resources

• Physical capital
• Human capital

4
Opportunity Cost

• Time
• Money

5
Substitution Effect

• Number of substitutes
• Tylenol
• Celebrex
• How close are the substitutes

6
Supply Demand

• Ceteris Paribus Factors for Change in Demand
• I
• Number of consumers
• E
• P
• Tastes
• (INEPT)

7
Demand Curve
D1
D2
8
Long-run vs. Short-run
9
Short-run

• 700-750 million loss
• Write-offs of inventory
• Customer returns
• Other costs

10
Long-run

• Maintain market status
• Reputation
• Creditability

11
Production Costs

• Merck is a corporation
• Merck incurred sunk costs
• Irrelevant
• Diversification in production
• FOSAMAX
• SINGULAIR

12
Production Costs

• Explicit Costs
• Research
• Production
• Distribution
• 750 million loss

• Implicit Costs
• Bad reputation
• time

13
Market Structure

• Contains characteristics of
• Oligopoly
• Monopolistic competition

14
Monopolistic Competition

• Generic drug industry
• Many buyers sellers
• Sellers offer a differentiated product
• Vertical/horizontal integration

15
Oligopoly

• Small of strategically interdependent firms
• Barriers to entry
• Market domination

16
Efficient Markets

• Definition
• Efficient
• Fundamental
• Technical

17
Market Failure

• Definition
• CEO in trouble

18

• Principles of microeconomics
• Analysis of Mercks situation
• Best course of action