This case flyer and the accompanying article1 can be used to introduce the participants/students to the concepts of Law of Demand, Law of Supply and the elusive equilibrium between demand and supply. Presented through an intriguing, yet quite prevalent phenomenon, this case flyer debates on the high price differentials for a Hepatitis-C drug, Sovaldi. Produced by Gilead, while Sovaldi is sold at $84,000 for a 12-week treatment in the US, the same drug is available at $1000 in India. Mylan Pharmaceuticals - one of the five Indian generic drug manufacturers allowed to manufacture and distribute Sovaldi in India - makes it available at $1000. Enamored with huge price differentials, customers like Greg Jefferys from Australia, travel all the way to India for treatment. All at a total cost of $3000 which includes travel, boarding and lodging during the treatment. What explains this spiraling price differential? How can there ever be equilibrium between demand for and supply of Sovaldi? Can there be an equilibrium market clearance price?

1. DEMAND AND SUPPLY DISEQUILIBRIUM OF
GILEAD’S SOVALDI
This case flyer and the accompanying article1
can be used to introduce the participants/students
to the concepts of Law of Demand, Law of Supply and the elusive equilibrium between demand
and supply. Presented through an intriguing, yet quite prevalent phenomenon, this case flyer
debates on the high price differentials for a Hepatitis-C drug, Sovaldi. Produced by Gilead,
while Sovaldi is sold at $84,000 for a 12-week treatment in the US, the same drug is available
at $1000 in India. Mylan Pharmaceuticals – one of the five Indian generic drug manufacturers
allowed to manufacture and distribute Sovaldi in India – makes it available at $1000. Enamored
with huge price differentials, customers like Greg Jefferys from Australia, travel all the way to
India for treatment. All at a total cost of $3000 which includes travel, boarding and lodging
during the treatment. What explains this spiraling price differential? How can there ever be
equilibrium between demand for and supply of Sovaldi? Can there be an equilibrium market
clearance price?
Pedagogical Objectives
• To illustrate the general workings and structure of pharmaceutical industry and discuss on
the economics thereof
• To understand the concepts of Law of Demand, Law of Supply and the Role of Prices in
achieving an equilibrium
• To discuss and debate on the factors influencing the demand for and supply of Sovaldi
drug
Case Positioning and Setting
This Case Flyer can be used for:
• MBA Program in Managerial Economics course to teach the concepts of demand & supply
and the equilibrium thereof
• MDP in Healthcare Economics course to teach the dynamics of pharmaceutical industry
ABSTRACT
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1
Shannon Pettypiece and Ketaki Gokhale, “Americans Want to Pop Made-in-India Drug for 1% the Cost”, The Economic
Times, June 3rd
2015