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A second and equally well established line of commercial supply comes from hormones, the complex chemical substances that regulate reproduction. As described in chapter 1, hormones were an early breakthrough in the quest to conceive and an early contributor to the fertility trade. They remain critical, used on their own in some cases of infertility, and together with IVF or IUI (intrauterine insemination) in others. The current world leader in the market is Ares-Serono, a Swiss company that marketed the first hormonal treatment for infertility in the 1960s and ramped up its revenues to $420 million by 1988. [22] By 2004, Ares-Serono had achieved worldwide revenues of $2.5 billion and a net income of nearly $500 million, making it the third-largest biotech company in the world. Fertility treatments accounted for 32 percent of the company’s sales.
Unlike sperm banks, which frequently market their product to the final consumer (the woman or couple who are choosing the sperm), hormone suppliers sell almost exclusively to the doctors and clinics that operate along the market’s second tier. Would-be parents seldom choose “their” fertility drug, or even a particular drug regime. Instead, they tend to take, and purchase, whatever the doctor prescribes.
Commercially, then, fertility drugs behave very much like other prescription pharmaceuticals. Companies like Ares-Serono concentrate their marketing resources on the doctors and clinics that channel their product to the end consumer. They spend a great deal of money on research and development ($468 million for Ares-Serono in 2003) and protect this investment through a combination of patents, brands, and powerful entry barriers. [23] They don’t need to worry about price, because most of their customers are willing to pay—again and again—even if the drugs don’t lead to the desired outcome. In the United States, a single unit of follicle-stimulating hormone (FSH) costs between $50 and $80. Patients generally use three to seven units per day for seven to ten days, depending on their age and how well they respond to the hormones. The total cost of hormones for each cycle, therefore, ranges from $1,050 to $5,600, and many women undergo three or four cycles before turning to higher-tech means.
In 1995, a shift in Ares-Serono’s product portfolio shed light on its commercial prowess. Late in 1994, the company had decided to move its manufacturing focus from Pergonal to Metrodin, a related hormonal compound that reportedly produced fewer side effects. In the course of this shift, however, available stocks of both Pergonal and Metrodin declined, causing fertility centers and drugstores to run short. Patients undergoing hormone therapy at the time were squeezed. Many panicked, scouring mail-order pharmacies for any overlooked stocks and often paying higher than normal prices. [24] Fertility centers turned away new patients, and some enterprising doctors managed to import the drugs from abroad. [25]
This content is authorized for use only in the HarvardX course "Bioethics: The Law, Medicine, and Ethics of Reproductive Technologies and Genetics," September/October 2016. Copyright 2016 by the President and Fellows of Harvard College. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means without the permission of Harvard Business School.