Assume that GSK (UK) sells Zantac to its subsidiary in Switzerland. Swiss pharma

Question

Assume that GSK (UK) sells Zantac to its subsidiary in Switzerland. Swiss pharmaceutical prices are determined by a governmental agency. The maximum price it allows for a pharmaceutical is based on the average price of the product in a group of reference countries (Germany, UK, Denmark and Netherlands) and the product’s therapeutic and economic value compared to older products of the same therapeutic group. Would you use the dollar-equivalent price to the Swiss entity, adjusted for differences in shipping costs, to transfer Zantac from GSK (U.K.) to GSK (U.S.)? Why?

Explanation / Answer

It wont be a good idea to charge in dollar-equivalent prices this is because dollar is not the home currency for any of the two companies that is neither for UK nor for Swiss. Hence, both the companies would be prone to exchange risk. It would be better to charge it either in sterling pound or in swiss frank as these are home currencies for these entities respectively and only the counter party will be prone to exchange fluctutaion.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.