Problem
Demand for a drug called Avonex has declined every year for the past 10. Not a problem for its manufacturer, Biogen. U.S. revenue from the drug has more than doubled in that time, to $2 billion last year. The key: repeated price increases. It is an example of drug companies' unusual ability to boost prices beyond the inflation rate to drive their revenue, even when demand for the drugs doesn't cooperate. How could they have used cost-volume-profit analysis to improve profitability in the past? In the future? If Biogen raises prices in the face of decreased demand, how are the company's variable and fixed costs impacted? How do those factors ultimately affect net income?