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MEDIPLAN HEALTH CONSULTING “A”

Charles E. Mossman, University of Manitoba

Robert Harder, Investment Planning Counsel of Canada, University of Manitoba

Case Objectives and Use

This case explores issues related to the growth of a new industry in response to technological change, and the strategies of one company in that Internet pharmacy industry, Mediplan.  Operational and financial questions are discussed, including investment and currency exchange.  However, the most interesting issues are the controversy and ethics involved when the new Internet technology allows entrepreneurial businesses and customers to bypass institutional barriers to trade.  This upsets the existing price discrimination by national market exercised by large international drug manufacturers.  The legal right of these manufacturers for patent protection is confronted by the demand of American consumers to buy drugs at what they consider reasonable prices.  Issues in technology, economics, politics, and ethics are raised.

The teaching note was written for undergraduate or graduate courses in Finance or Small Business and Entrepreneurship.  It is useful for discussions of the impact of technological change on institutional or governmental restrictions and the effect on investment decisions and outcomes.  The case reflects complex issues where many disagreements are possible, and for which there may be no definitive answers.  Due to the issues involved, the case may also be useful in courses in Business Economics, and Public Policy or Strategy.

Case Synopsis

Chantelle Rzepka is the Director of Operations for Mediplan Health Consulting, an Internet pharmacy. The company is based in Minnedosa, a small town in western Manitoba, Canada.  It sells prescription drugs to Americans at lower prices than they can buy them in the United States. The Internet pharmacy industry has experienced phenomenal growth, due to differential Canadian and American drug pricing and the technological innovation of selling on the Internet.  However, the industry is operating in a legal gray area, and is facing considerable regulatory pressures that could eliminate its selling channels. It is profitable, but also very volatile and risky, facing considerable opposition from drug industry regulators, governmental agencies, and drug manufacturers. Uncertainty related to industry survival makes expansion decisions very difficult. Mediplan owners are expecting to reach capacity for current operations at Minnedosa within six months, and Chantelle is examining expansion alternatives.

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This case was prepared by Charles E. Mossman, University of Manitoba, and Robert Harder, Investment Planning Counsel of Canada, University of Manitoba, and is intended to be used for class discussion rather than to illustrate either effective or ineffective handling of the situation.

Presented to and accepted by the North American Case Research Association (NACRA) for its annual meeting, November 2003, Tampa, Florida.  All rights reserved to the authors and NACRA.  © 2003 by Charles E. Mossman and Robert Harder.

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