Strategic Movements: October 2017


Tim J. Smith, PhD
Founder and CEO, Wiglaf Pricing

Published October 18, 2017

Hurrah to AbbVie.  For the U.S. Citizen, not so much.

AbbVie was facing a fiscal cliff with the expiring patent on Humira, potentially eliminating $16 billion out of $27 billion total revenue.  What do you do when competition threatens to end your monopoly power?  Create bigger barriers to entry to keep them out.  Amgen received FDA approval for a biosimilar treatment as the basic Humira patent expired.  But AbbVie was preparing for this day. They had created more than 100 more patents covering how the drug is prepped. Fortunately for AbbVie, the lawyers did the trick.  After taking Amgen to court, AbbVie settled.  Result: no competition anticipated till 2023.  Another six years of $57,000/year prescriptions.  Good job Richard A. Gonzalez, CEO of AbbVie, and lawyers.  Good for AbbVie employees and Chicago overall.  But perhaps not so good for the U.S. economy where healthcare costs 18% of our GDP, or roughly $10,000 on average for every man, woman and child.  No wonder health costs and insurance are such hot topics.

GoPro is Acting Maturing

Nick Woodman, CEO of GoPro, is launching the GoPro 6 Black at $499.  Compared to last year’s price, this is reasonable.  No more forced errors of trying to use low prices to capture market share unprofitably. And, as it matures, it is facing the reality that smartphones can do the basics but fail for active sports recording.  Adding the Fusion to its product lineup, a 360-degree spherical camera, GoPro is aiming to be a strong, if niche, business.


That’s right H&M, Low Prices are Insufficient to Drive Demand

H&M profit declined 20% as discounted prices failed to generate many shoppers. In fact, store traffic declined.  When will executives get it? (Perhaps advertising an empty store isn’t a good idea – just a thought.)

Sonos Joins what it can’t Beat

Sonos Inc. felt the heat of Amazon’s Alexa in the in-home wireless sound movement.  What to do?  If you can’t beat them, join them.  Working with Amazon, Alphabet, and Apple, Sonos is planning to make smart speakers for all of them.  Smart move Sonos for the increasing Smart Home.  Strange question: Do we really want a company snooping on every sound you make?  If it was the government, we would quickly say no.  But Amazon, Alphabet, and Apple? Apparently, we are ok with them.

Pfizer Tries Again

Mylotarg, a drug treating a form of acute myeloid leukemia, is back on the market. Earlier experience showed that Mylotarg wasn’t effective. Rather than walk away, Pfizer did more studies.  After new clinical trials demonstrating efficacy and economic benefits, it has been returned to the market. Old 2000 price tag:  $15,522.  New 2017 price tag: $24,600.  How to explain the difference:  inflation and evidence of efficacy.  Perhaps this time it will stick.

About The Author

Tim J. Smith, PhD, is the founder and CEO of Wiglaf Pricing, an Adjunct Professor of Marketing and Economics at DePaul University, and the author of Pricing Done Right (Wiley 2016) and Pricing Strategy (Cengage 2012). At Wiglaf Pricing, Tim leads client engagements. Smith’s popular business book, Pricing Done Right: The Pricing Framework Proven Successful by the World’s Most Profitable Companies, was noted by Dennis Stone, CEO of Overhead Door Corp, as "Essential reading… While many books cover the concepts of pricing, Pricing Done Right goes the additional step of applying the concepts in the real world." Tim’s textbook, Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures, has been described by independent reviewers as “the most comprehensive pricing strategy book” on the market. As well as serving as the Academic Advisor to the Professional Pricing Society’s Certified Pricing Professional program, Tim is a member of the American Marketing Association and American Physical Society. He holds a BS in Physics and Chemistry from Southern Methodist University, a BA in Mathematics from Southern Methodist University, a PhD in Physical Chemistry from the University of Chicago, and an MBA with high honors in Strategy and Marketing from the University of Chicago GSB.