Calculate their revenue and cost estimates

Reference no: EM133711059

Question: Company Alpha is the industry leader in the HIV drug industry. They have invested $150 million in research to produce the drug. This investment is a fixed cost. There are a few other smaller companies in the market. The company market share is given in the Excel data sheet.

The U.S. government has put a price ceiling on retail price- $1.20 per capsule. Company Alpha sells the drug at a wholesale price at $0.90 per capsule. The variable cost per capsule is $0.73. HIV patients are required to take 5 capsules per day. It is estimated that only 75% of the patients take their medicine regularly. Companies use this usage rate to calculate their revenue and cost estimates.

About 70% of the HIV patients depend on the government to pay for their drugs through Medicare and other subsidy programs. In a way, the government (that means taxpayers) is literally funding the HIV drug industry.

Reference no: EM133711059

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