The Problem: The Case of the Porous Borders As the sales from your products grow, you are exploring international markets.

The Problem: The Case of the Porous Borders

As the sales from your products grow, you are exploring international markets. Because of the structure of paying for pharmaceuticals and bio-tech products in the United States, you are able to command top dollar for the sale of your products. Americans tend to value the free market and seem to respect the need of a company to recoup the cost of research.

However, you know that many are concerned in the United States that the price of your products is very high, especially for the poor and those on fixed incomes. As your products may not directly be impacted by the debate, you aren't too worried. However, if your products are going to be marketed outside of the country to those in Canada and Mexico, the question of pricing is an issue. In Canada the price of drugs and supplements is heavily regulated and so you could not sell the sports enhancing products for the same price as in America. Given the income level of folks in Mexico, you would not be able to make any sales at all because of an inability to pay.

The concern is that people on the United States borders will cross the borders to purchase the products at a lower cost, cutting into your profit. Even more chilling is the possibility that companies will set up Internet sales of the drugs from Mexico or Canada and sell to local customers with the different price scheme. Congress is considering legislation that would prohibit the importing of pharmaceuticals and other genetically modified products from foreign countries into the US, even if those products are marketed under the same brand name and manufactured by US companies.

You will be attending a national meeting of bio-tech executives. The call has been put out to join forces with other companies to support this legislation. Your company has to decide:

• What its position will be vis-a-vis the proposed legislation;
• Whether G-BioSport will contribute $5,000 to the lobbying fund for the trade organization to assure a strong presence on "the Hill" and make sure the measure gets to the floor;
• Whether G-BioSport will contribute $10,000 to an advertising campaign which would "educate" the public about the dangers of importing pharmaceuticals and health care supplements across the borders.

From telephone conversations with your friends, you know that part of the conversation will be how to mask actual revenues so you don't draw attention to the 20% - 40% returns which are common in the industry and thus draw fire for excessive profits. Also, you know that conversations will be happening in the hall to discuss policies and salaries for hiring workers from India and other technology rich countries.

This problem highlights the current question about differential pricing for multi-national communities. Traditionally, pricing has been based on what customers are willing to pay. With the advent of the Internet and increased information about pricing and with permeability of the borders allowing products to move across market segments, the issue of the company's right to price goods and consumer access becomes more contentious.

Be Reasonable

After brainstorming with the leadership team, you have identified five options: