Economic Value to the Customer (EVC) - Pharmalodiagnosticon

Man with out stretched hand holding pills

The scientists at Pharmalodiagnosticon, an up and coming pharmaceutical company, have had a major breakthrough in painkillers and hope to replace frequent use of headache medicine by patients with severe recurring headaches.

The average target consumer spends $50 for an office visit to get an initial prescription from a doctor appointment and $40 a month for the drug and around $5 a month in other medicines to curb side effects. However, Pharmalodiagnosticon offers a single injection of Diacetylin (a dilute, slowly metabolized, derivative of diacetylmorphine) that guarantees no headaches for three months.

Pharmalodiagnosticon plans on making the medication available at $35 per injection (patient price). It will cost the patient $70 to have the process done (i.e., an office visit and required blood test, but not the price of Diacetylin -- treatment typically begins on the first visit) and about $15 a month in other medicine to curb side effects.

  1. What is the EVC for a single patient for 1 year?
  2. Does this suggest that the planned price for the software is too high or low?"

Economic Value to the Customer (EVC) = Competitor's Lifecycle Cost - Our Start-up Cost - Our Post-Purchase Cost + Our Incremental Value

  1. EVC = ($50 + 12 x (40 + 5)) - (0) - (4 x (70) + 12 x (15)) = $590 - $460 = $130 per year (or $32.50 per injection).
  2. The planned price looks high!