GlaxoSmithKline and Pfizer choose to collaborate on HIV drugs
Here is an excellent highly relevant article on cooperative behaviour between oligopolistic giants. Two of the world’s biggest drugs companies GlaxoSmithKline and Pfizer have announced a plan to merge their HIV treatments in a joint venture. ViiV Healthcare is an attempt for both companies to limit the risks of costly races to find new profitable treatments for HIV/aids and give them an opportunity to counter the loss of the revenues as these companies lose patent protection and are open to competition from generic drug makers. It is a strong reminder of the very high fixed costs of research into new drugs; the long lead times between new drug development, testing and finally getting it to the market. And also the impact of the entry of generic drugs into markets once patent protection runs out. The new company has a 19% share of the global drugs market, in comparison to the Californian company Gilead’s 31%.
Drug firms’ collaboration pools HIV treatments (Independent)
IPO of HIV business is ‘up to shareholders’ (Telegraph)
Super cruisers and the law of increased dimensions
Graphically illustrated in this short piece from the Telegraph!
New series of BBC Earth Report - Deforestation and Externalities
BBC World’s Earth Report has just started a new series of reports and the first edition is a powerful programme on deforestation in Indonesia and the impact that this has on carbon emissions. Across south east asia peat swamp forest is being drained to make way for oil palm or pulpwood trees. The destruction of tropical forests causes about 20 percent of global greenhouse gas emissions – more than the world’s entire transport sector – making tropical forest countries such as Indonesia, some of the biggest emitters of greenhouse gases in the world. Which incentives will be most effective in limiting the permanent damage of huge rates of deforestation and the costs of damaging burning trees?
Broadband and economic development
Access to and the speed and reliability of broadband infrastructure is one of the key institutional factors that impact on economic development. The lack of an affordable and cost-effective broadband network can be a huge barrier to economic growth especially in an age where companies in many rich countries are looking to outsource their back office and call centre services to countries where operating costs are lowest. The 2009 UNCTAD Information Economy Report provides a wealth of background information on the global digital divide.
According to the latest report, businesses and consumers are 200 times more likely to have access to broadband in developed countries than in the poorest Least Developed Countries (LDCs). And the monthly cost of broadband access varies to an incredible degree - from over $1,300 a month in Burkina Faso, the Central African Republic to less than $13 in Egypt.
read more...»Gloomy summary
Here is a summary of four reports posted on the Business and Economics sections of the BBC News website over the last few days. Be warned - none of them are particularly hopeful, the green shoots of summer giving way to autumn mists.
Swine flu vaccines and elasticity of supply
The scale of the ordering of swine flu vaccinations by governments across the world is eye-wateringly large! GlaxoSmithKline plc - one of the world’s biggest pharma companies has reported that governments around the world have so far ordered 440 million doses of its pandemic swine-flu vaccine Pandemrix. GlaxoSmithKline has been engaged in a tense race to get new swine flu vaccines onto the market fighting the likes of Sanofi-Aventis, Novartis AG and AstraZeneca to win contracts for public health programmes. For students of the price mechanism it is a fascinating example of many supply and demand concepts at work:
The challenge of scaling up production to meet huge levels of demand - this has involved out-sourcing
The relative importance of fixed and variable costs in developing and manufacturing/distributing a new drug
The elasticity of supply of vaccines to meet short term health requirements
The oligopolistic race to win and protect market share
Economies of scale in production
The balance of power between the major buyers and the multinational drug suppliers
Price discrimination tactics
The Guardian reports that:
“The company makes the vaccine in Dresden and Quebec but the demand is so great – about 60% higher than for usual seasonal vaccines – that it is also outsourcing production to third-party manufacturers.”
According to the Wall Street Journal
“Glaxo hasn’t released information on cost per dose of the vaccine. However, Chief Executive Andrew Witty said in July that Glaxo was charging wealthy nations $10.26 per H1N1 vaccine shot and developing countries less. The drug maker is also donating 50 million doses to the World Health Organization.”
The Independent reports that
“The United States has begun a massive campaign aiming to vaccinate 250 million people against the illness by year’s end.”
And the Times reports that “total booked orders for the drug are worth about £2.2 billion — a significant sales and profit windfall as a result of the swine flu epidemic”
A2 Micro Multiple Choice Quiz
A ten question multiple choice quiz on aspects of introductory theory of the firm can be found here
Launch interactive version of the quiz
Download SCORM-VLE Zip file (import to your VLE)
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Scots may lead the way in setting minimum price for alcohol
The smoking ban first came in north of the border and now we find that the Scottish government has been proactive in trying to curb the economic and social costs of high alcohol consumption and binge drinking. Establishing a minimum price per unit of alcohol seems like an obvious economic approach to the issue and this report by Colin Blane looks at the plan for a minimum price of 40p per unit - making a bottle of wine at least £3.60.If it works the number of hospital admissions could be cut by many thousands per year. Will Scotland become the first country in Europe to go down this path? This short video piece would make a good starter resource for a lesson on intervention options and an evaluation of their potential impacts.
Let a falling pound rebalance the economy
Stephen King has a superb article on the importance of exports and a cheaper currency to prospects of recovery in today’s Independent.
“If consumer spending, government spending and investment spending are going to be weak, the only likely source of growth is exports. One way to boost exports is to adjust the relative price of goods and services produced in Britain, and an obvious way of doing this is to encourage sterling to fall. Unlike the individual eurozone members, the UK still enjoys exchange-rate flexibility.”
But he makes the point that a lower currency on its own provides little more than a quick palliative to the fragily economic situation - the UK needs to reinforce our competitive advantage in many different industries by improving non-price quality, keeping costs under control and investing in productive capacity rather than simply relying on a weaker sterling to boost the profitability of exports.
Managing a global business in turbulent times
Over ten years at my current school I have been hugely fortunate to hear some tremendous speakers on a tremendously wide range of issues. Few have impressed me as much as Simon Henry, CFO of Shell plc in his talk to our Keynes (Economics) and the newly-formed Management Society last night. His talk was beautifully paced and considered; the responses to questions were candid and rooted in a deep understanding of energy industries where volatility has become the norm. Future shareholder value will depend largely on successfully breaking the cycle of volatility.
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