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Medium Profitability Pricing Revenue Maximization

Breast Cancer Surgery

#Life Science #MedTech #Healthcare
ProHub Comment

This is a classic pricing optimization case requiring market sizing and willingness-to-pay analysis. The key insight is recognizing that revenue maximization does not always equal profit maximization—at $600/unit with 50% adoption, the device generates $30M revenue, outperforming both lower and higher price points despite lower adoption rates.

Estimated Time 27 minutes
Difficulty Medium
Source Chicago Booth
22 / 100
Our client is a large medical device corporation. They have developed a new medical device to assist surgeons in breast conservation surgeries (BCS). They’ve approached us to determine a revenue maximizing pricing strategy for the device. A breast conservation surgery is the partial removal of breast tissue found to be cancerous. This is in contrast to a mastectomy, which removes the entire breast. While hopefully this device will be adopted worldwide, at the moment, the client would like us to determine the pricing strategy for the product in the United States only.

Clarifying Information

  1. There are around 100,000 breast conservation surgeries per year.
  2. The device is applicable across a wide range of procedures: it can be used in every breast conservation surgery.
  3. The device is disposable, so every surgery needs a new device.
  4. The device is FDA approved.
  5. There are no concerns related to quality from R&D.
  6. The success rate of the device is 100%.
  7. Currently there are no competitors, and the device would be the only product of this kind available on the market.
Mock Interview
Interviewer

Our client is a large medical device corporation. They have developed a new medical device to assist surgeons in breast conservation surgeries (BCS). They've approached us to determine a revenue maximizing pricing strategy for the device. A breast conservation surgery is the partial removal of breast tissue found to be cancerous. This is in contrast to a mastectomy, which removes the entire breast. While hopefully this device will be adopted worldwide, at the moment, the client would like us to determine the pricing strategy for the product in the United States only.

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

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A medical device company needs to determine the optimal pricing strategy for a new breast conservation surgery device. With a market of 100,000 surgeries annually and adoption data across price points ($0, $300, $600, $1,000), the candidate must calculate revenue potential and recommend $600/unit pricing to maximize revenues at $30M.

Key Insights:

  1. Market sizing is essential: 100,000 BCS procedures annually establishes the addressable market for a disposable device
  2. Revenue optimization requires balancing price against adoption rates—higher prices don’t always yield lower revenues if adoption drops significantly
  3. Distinction between revenue and profit maximization: the $600 price maximizes revenue but may not optimize margins once production costs are considered
  4. Competitive positioning: currently monopolistic market status justifies focus on revenue over aggressive cost-cutting to maintain profitability margins