Pharmaceutical Switching Harvard Case Solution & Analysis

In an unprecedented move in mid-1998, Blue Cross of California, health units, WellPoint Networks, Inc, a citizen filed a petition with the FDA, to switch Claritin, production of Schering-Plough, and two other second generation antihistamines from prescription only over-the-counter (OTC) status. Prescription drugs like Claritin were covered by insurance programs, while the OTC drugs were not. In the late 1990s, U.S. spending on prescription drugs has increased significantly, partly as a result of direct-to-consumer advertising of prescription drugs, and creates a substantial burden on the insurance companies. Blue Cross argued that the transition will make drugs more affordable for consumers and will benefit consumers, because the second-generation antihistamines had a sedative, in contrast to the 100-antihistamines are sold over the counter. Manufacturers oppose the switch because it would put the second generation antihistamines under significant pricing pressure and disrupt their product planning. In addition, the switch triggered the insurance company may petition for future switches of other prescription drugs. Almost three years later, on May 11, 2001 FDA Advisory Committee by an overwhelming majority, the three second-generation antihistamines can be safely sold in pharmacies. While voting is not mandatory, FDA usually operated in accordance with the decisions of its advisory committees. Pharmaceutical companies strongly objected to the committee vote and faced the challenge of developing a strategy to combat the threat. "Hide
by David P. Baron Source: Stanford Graduate School of Business 12 pages. Publication Date: August 27, 2001. Prod. #: P38-PDF-ENG

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