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The Food and Drug Administration is about to approve NauZero asa safe and effective post- surgical antinausea drug. Your job is tomake a pricing recommendation. The value of antinausea drugs forpost-surgical use is quite high for two reasons. One source ofvalue is clinical – vomiting while the patient is under anesthesiacan cause the patient to choke and have other seriouscomplications. The second source of value is purely economic – thequicker patients’ post-surgical nausea ca be brought under control,the quicker they can be removed from the recovery room. The chargefor use of the recovery room is $150/hour. Without the use of theantinausea drug, time in the recovery room would be approximatelythree hours. With current antinausea drugs, the time in recoverycan be reduced by one-third. NauZero is no more effective in reducing nausea than the currentsubstitutes, the most popular of which is NoBa, which sells for $12per dose. However, because NauZero works through a differentbiological process, it offers advantages to this market that thesubstitutes do not: There is no interaction between NauZero and other drugs that thepatient might be given. Approximately 30% of all surgeries requireother drugs with which NoBa and other antinausea drugs couldinteract, thus precluding their use. Consequently, the patient isat risk of post-surgical nausea and must be kept in the recoveryroom for the full three hours. Because NauZero works through adifferent biological process, it does not interact with other drugsand so can be used in all types of surgery. NoBa needs to be administered before surgery and hourlythereafter. The typical surgery requires three separate doses ofNoBa. NauZero, however, is administered only once (before surgery).Its action continues for at least six hours. This is important forhospitals, since the cost of storing and administering a drug, inaddition to the cost of the drug itself, is approximately$10/dose. While NoBa has a sedative effect, contributing to post-surgicalpatients’ feeling sleepy and disoriented, NauZero has no sedativeeffect. Consequently, controlled studies have confirmed thatpatients receiving NauZero spend an average of 20 minutes less timein the recovery room when compared with patients receiving thecurrent antinausea drugs. Using only the data given above, conduct an Economic ValueAnalysis of the scenario above using all the relevant information.Please briefly explain all your steps in the EVA. What additionalinformation might you need to accurately calculate the economicvalue of NauZero as described above? How would you incorporate itin your EVA? Assuming a variable cost of $2/dose, what is your recommendedprice for NauZero? Explain. Would your recommendation change if variable cost were $80/dose?If so, why? If not, why not? Please make a recommendation for how NauZero might capture evenmore profit in this market. Attached
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