...Merck Case Study Questions Instructions: We will discuss the Merck case in class on Thursday, February 20, 2014. In preparing for our class discussion, please focus on the following questions. 1. How has Merck been able to achieve substantial returns to capital given the large costs and lengthy time to develop drugs? - New product process: Merck is real fast in marketing drugs, as it develops cross-functional teams and starts marketing early in the development process only - through the new process development Merck is able to stand out in the crowd of pharma company, as its giving a specialized and patented medicine which a patient ccant get from any other pharma company. Besides this, the company manufactures certain hightly critical patented drugs. This helps it to capture the untapped market od such drugs. - Through the late 80's to early 90's, Merck was able to boast profits and sales through biochemistry drugs that were seen as breakthrough drugs in this new market. With this sudden boom competitors started to take notice and emulate Merck's business model. This success also brought up a number of questions within Merck as a company; mainly how was Merck going to keep up with its numbers and keep pumping new drugs into the market. By assessing some strengths, weaknesses, opportunities and threats (SWOT Analysis) of the firm itself and offering some recommendations of how Merck may be able to conquer this challenge, you will be able to conclude that the success...
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...Types of Corporate Responsibility A. Economic Responsibilities B. Legal Responsibilities C. Ethical Responsibilities D. Philanthropic Responsibilities IV. Triple Bottom Line and Environmental Sustainability V. Is Socially Responsible Business Good Business? A. The Benefit of a Good Reputation B. Socially Responsible Investors Reward Social Responsibility C. The Cost of Illegal Conduct D. The Cost of Government Regulations E. What the Research Says about Social Responsibility and Firm Performance F. Being Socially Responsible Because It is the Right Thing to Do VI. Conclusion VII. Discussion Questions VIII. Case: Merck and River Blindness IX. Short Case Teaching Notes - Discussion Questions 1. Do you think corporate social responsibility (CSR) is important? Why or why not? Depending upon the audience, many students will see the importance of social responsibility. Generally, they are conscious of some kinds of environmental concerns and have some understanding of the relationship between business and the community. But with some business school audiences, you may find resistance to the idea that corporations owe anything to society, beyond making a profit and obeying the law. So, be prepared for a debate on this one. The chapter is designed to provide students with lots of reasons to think that CSR is...
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...MERCK AND RIVER BLINDNESS 1. Think about the definition of stakeholders — any parties with a stake in the organization’s actions or performance. Who are the stakeholders in this situation? How many can you list? On what basis would you rank them in importance? People suffering from the disease or those who potentially may be infected – would directly benefit from the cure Merck employees at all levels – profitability and the economic health of the company affects current employees Merck shareholders – inability to profit from the drug might have a negative effect on shareholder’s value, but taking the stand on “doing the right thing” might have a favorable effect on company’s reputation and increase the value of the stock Various healthcare organizations – Merck is one of the leaders in the industry whose actions or inactions may affect the state of the industry as a whole One way to rank stakeholders in importance is by their level of benefit from the drug putting people suffering from the disease in the first place as they would benefit the most from the invent of the cure. Then, employees and shareholders would share the second place, provided that the company would most likely not be able to recover funds invested in the long and expensive process of developing the drug which in turn would affect company’s profitability. Finally, various healthcare organizations would rank third; the effect on them would depend on the level of their involvement in the process...
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...Applying the Potter Box to Merck’s Actions Regarding the Painkiller Vioxx Rod Carveth, Marywood University Claire Ferraris, Western Oregon University Nick Backus, Western Oregon University Abstract In this paper we demonstrate how to focus an empirical application in reaching an ethical decision by working with the Potter Box, a model created by Ralph Potter as an analytical tool assessing the ethics of corporate decision-making, The facts emerging in news accounts regarding lawsuits against the pharmaceutical company Merck and its painkiller Vioxx are analyzed for ethical consideration. Utilizing the Potter Box model, the case against Merck can be interpreted and studied in light of ethical considerations. The results demonstrate not only how a decision is argued, but what is missing in the overall consideration for the decision. Introduction The mythos of freedom and responsibility in the United States is premised on the ethical actions of members of the society, particularly those in positions of power. And ethics in communication takes a place of preeminence since the words spoken by authorities are often all a public relies upon to pass judgment. How is the citizen or the communication analyst to evaluate the ethics of the utterances of others? And how does the communicator determine the ethical appropriateness of a planned message? This paper is an introduction to an accessible method of ethical decision-making in communication. The Potter Box allows both student and scholar...
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...Problem Definition Should Rich Kender recommend licensing Davanrik, making Merck & Company responsible for its manufacture and its marketing? In order to provide Rich Kender with a good and thorough analysis and recommendation on the Davanrik licensing project, we need to answer the following guidance questions: I. How has Merck been able to achieve substantial returns to capital given the large costs and lengthy time to develop drugs? II. How much should they pay? III. What is the expected value of the licensing arrangement to LAB? IV. How would our analysis change if the costs of launching Davanrik for weight loss were $225 million instead of $100 million? In our analysis we will build a decision tree that shows the cash flows and probabilities at all stages of the FDA approval process. We will assume a royalty fee of 5% on the cash flows that Merck receives from Davanrik after successful launch. Analysis Merck is in the business of developing compounds for pharmaceutical compounds. The required research and development efforts preceding the launch of a successful blockbuster drug is extensive and lengthy process and is therefore a very expensive one. Nevertheless, Merck has proven perfectly capable to achieve high returns on capital. This is a result of numerous factors. First of all, Merck has been able to generate tremendous amounts of sales. Since 1995, Merck has launched 15 new products, resulting in 1999 sales of $32.7 billion, which includes $15.2 billion...
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...Name: Anila B. Merck is a very large pharmaceutical company. One of the scientists at Merck realized that Merck’s new drug for de-worming animals from parasites could also help fighting against river blindness, which is a disease that has hit places of most poverty. River blindness is a skin disease, which is transmitted by the bite of blackflies. This parasite can migrate into the eye and cause blindness. Unfortunately those who get the disease do not have the money to pay for this drug. The countries will not be able to pay for it either. So now, the ethical dilemma is whether Merck should invest in research and risk losing money, or go for profit instead. Merck believed that medicine is for the people, not for the profits. This statements, is one of the many reasons why Merck had a responsibility to develop the drug. Eliminating human suffering and curing human disease is one of the main goals for Merck. They are committed to the highest standards of ethics and integrity. Merck wants to preserve and improve human life and its quality. Coming from this it is really important to consider the ethical decision making questions. Are there other alternatives? Who will be affected? Who will benefit and who will be harmed? Let’s start with saying that yes, there is an alternative. If Merck is afraid of losing money, it should start cooperating with global donators, UNICEF, non-governmental development organizations, international foundations, as well as local communities. People...
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...Case Analysis #1 Tuesday, January 22, 2013 Matt Janes Merck & Company, Inc: The Recall of Vioxx Introduction Geroge W. Merck stated once stated, “We try never to forget that medicine is for the people. It is not for the profits. The profits follow. Initially, Vioxx was the blockbuster drug that Merck needed due to the upcoming Zocor patent cliff in 2006. With an estimated 27,785 heart attacks and sudden cardiac deaths that could have been avoided if Celebrex had been used instead of Vioxx, Merck faces the possibility of not only having to pay enormous civil and criminal penalties, but also losing the trust of patients. Many parties are partially culpable, but Merck faces the severe uphill battle of regaining a reputation that once served as a market differentiator; in the 1980’s, Merck was voted the “Most Admired Company in American Business” for seven consecutive years. A critical issue in this case is to analyze the events listed in the case and propose an alternate course of action that may help prevent future deaths from other pharmaceutical drugs while not prohibitively restricting innovative research that could potentially save lives if tested properly. Critical Points and Issues Merck was relying on the success of Vioxx due to Zocor’s expiring patent and the direct competition Vioxx was engaged in with Celebrex, which had a first mover advantage. While Celebrex was also a Cox-2 inhibitor, Vioxx was the only Cox-2 inhibitor proven to be beneficial...
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...Introduction Merck was established in the U.S. in 1891, but its roots trace back to Friedrich Jacob Merck’s purchase of a German drug store in 1668. Today the company is a top tier global entity, a “research-driven” pharmaceutical company “dedicated to putting patients first.” Merck’s mission is to “provide society with superior products that improve the quality of life and satisfy customer needs, provide employees with meaningful work and investors with a superior rate of return.” As a long time player in the U.S. pharmaceutical industry, Merck has had extensive experience in assigning and dividing complex tasks among its many specialized departments. Specialization allows Merck to operate efficiently and bring new drugs to American patients. On May 20, 1999, the FDA approved Merck’s application to market Vioxx, a new arthritis pain-reliever. The effort to create a successful drug at Merck was no small task, not only did the company need to develop, test, and receive approval for a new product. It also needed to make sure the drug was successfully marketed to the right consumers. By the end of 1999, over 5 million prescriptions had been written for Vioxx and it had been launched in 47 countries. The Vioxx launch went particularly well, and Merck splashed its success across the front page of its Annual Report with the lead, “Vioxx: Our biggest, fastest and best launch ever.” New Vioxx sales came at an important time for Merck. The exclusive patents to four major drugs were...
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...Case #1: Butler Lumber Company Questions 1. Why does Mr. Butler have to borrow so much money to support this profitable business? 2. Do you agree with his estimate of the company’s loan requirements? How much will he need to borrow to finance his expected expansion in sales (assume a 1991 sales volume of $3.6 million)? 3. As Mr. Butler’s financial advisor, would you urge him to go ahead with, or to reconsider, his anticipated expansion and his plans for additional debt financing? As the banker, would you approve Mr. Butler’s loan request, and, if so, what conditions would you put on the loan? 4. Has Butler Lumber Company created value for shareholders? Hint: It might help you to analyze the case if you conduct the following analyses: 1. 2. 3. 4. Construct a common-size (percentage) income statement. Construct a common-size (percentage) B/S Using information from 1&2 to find out the operating efficiency Assuming the same operating efficiency in 1990, forecast cash needs for the target growth Case #2: Ocean Carriers Questions Ocean Carriers uses a 9% discount rate. 1. Do you expect daily spot hire rates to increase or decrease next year? 2. What factors drive daily hire rates? 3. How would you characterize the long-term prospects of the capesize dry bulk industry? 4. Should Ms Linn purchase the $39M capesize? Make 2 different assumptions. First, assume that Ocean Carriers in a U.S. firm subject to 35% taxation. Second, assume that Ocean Carriers is located in Hong Kong, where...
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...Case Analysis – Merck Medco Merck was a pharmaceutical manufacturer while Medco Cost Containment Services was a pharmacy benefit manager (PBM). On November 18th, 1993, Merck purchased Medco for $6.6 billion. Immediately after this merger, Medco operated as a subsidiary of Merck. This acquisition of Medco by Merck is a clear example of Merck expanding its organizational boundaries while adding value to Mercks operations at the same time. The advantages of Merck & Medco combining together are that it would result in the control of the entire drug manufacturing and selling process. Merck can manufacture drugs specific to each patients need with collected information being used to research and develop new drugs for sale. I will not analyze this decision by using the SWOT analysis. Merck is an industry leader in the manufacturing of drugs. Combining two segment leaders in the pharmaceutical industry will give Merck a strong competitive advantage since it will control the entire manufacturing market, as mentioned above. The combined efforts will also get rid of the process of overlaps or excess such as marketing and advertising expenses. The savings from the company will eventually result in lower prices for consumers. This will hopefully drive more quantities being purchased leading to increased profits. On the other hand, one weakness is the integration of these two companies may be difficult because they are operating in two different segments within the same industry. There may...
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...Case Study: Merck and the Vioxx Recall Kelvin Gabel Benedictine University Case Study: Merck and the Vioxx Recall According to Lawrence and Weber (2014), former Merck CEO George W. Merck implied a corporate vision of social responsibility for Merck & Co., Inc. (Merck) when he stated in 1950 that medicine was for the people and that loyalty to that concept would lead to greater profits. On the surface, it appears Merck has historically lived its declared mission of putting people first. This is demonstrated by the company forfeiting patent and profits from the antibiotic streptomycin and the drug Mectizan (Lawrence, 2014). Merck was well rewarded for its people first philosophy. Though it was ranked fifth in asset and market value, it ranked first in profits. Additionally the company had a stellar reputation of being perceived as the most ethical and socially responsible of the major drug companies (Lawrence, 2014). Today Merck Pharmaceutical’s mission statement is “to discover, develop and provide innovative products and services that save and improve lives around the world (Merck, 2015).” Reading Merck’s current mission statement lacks both the compassion of placing people first and the implied social responsibility of Mr. Merck’s statement in 1950. To be contextually correct historically in forming a view of Merck and the Vioxx recall issue, I sought to find a corporate mission statement from the period of the recall which was in 2006. According to Culp...
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...3. Should Merck bid to license Davanrik? How much should they pay? Our team will recommend Merck bid to license Davanrik given the following reasons: 1. One of the major advantage of the company is its patents of new drugs. According to the case, we know that four drugs will expire by 2002 and those drugs are regarded as the so-called star-products of the company. According to the company’s financial statement, we learn that Merck’s net income margin has declined from 19.52% to 18% and the research and development cost has been decreased in terms of percentage of sales. So we believe that Merck should increase its expenditure on research. On the expiration of the drugs, the sales will decreased dramatically as competition emerges. So in order to maintain its competition edge, the company need to develop new drugs. 2. Even though the company used to develop new compounds primarily through internal research, we believe that working with LAB Pharmaceuticals will give Merck a synergy effect to obtain a better result. Given LAB Pharmaceuticals’ performance in the past, we believe that Merck’s plentiful experience will sure to make to most of the pre-clinical development of Davanrik. 3. According to the balance sheet, we can learn that Merck has sufficient cash to support the licensing process and we believe the company has the ability to absorb the potential loss on failure. So the risk is tolerable for Merck. So we will suggest Merck bid to license Davanrik. As for the bid...
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...Do you believe that Merck acted in a socially responsible and ethical manner with regard to Vioxx? Why or why not? In your answer, please address the company’s drug development and testing, marketing and advertising, relationships with government regulators and policymakers, and handling of the recall. No, Merck didn’t act in a corporate social responsibility in regards to Vioxx. Corporate social responsibility means that a corporation should act in a way that enhances society and its inhabitants and be held accountable for any of its actions that affect people, their communities, and their environment. Over a five year period from 1999 to 2004 over 139,000 people in the United States has had a heart attack or stroke as a result of taking Vioxx about 55,000 of them died. When a business is ranked on being highly successful they are mostly being ranked on profit not the amount of people they helped or cured. The pharmaceutical giant Merck that manufactured Vioxx was ranked number three of the world’s top pharmaceutical companies with sales of $30.78 billion dollars and profits of $7.8 billion. In the eight-page letter, the FDA says Merck engaged "in a promotional campaign for Vioxx that minimizes the potentially serious cardiovascular findings that were observed" in a clinical trial comparing Vioxx to naproxen, a less-expensive painkiller. "Your promotional campaign discounts the fact" that in the trial, "patients on Vioxx were observed to have a four to five-fold increase"...
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...Propecia marketing effort for the drug maker Merck & Co. The case was discussed by audience members at the 5th Annual Alumni Healthcare Conference on November 6, 2004; HBS assistant professor Marta Wosinska led the conversation. The Propecia launch came at a time of regulatory change, which made advertising of prescription drugs to consumers more feasible. But Casola had to consider three limitations on such advertising: A "product claim" ad could mention both the brand name of the drug and the problem it could correct, but would also have to include a list of major side effects. Trying to put side effects into context in a 30-second TV spot was next to impossible. "Reminder" ads could mention the brand of the drug, but not mention what the drug was for. "Help-seeking" ads allowed for un-branded ads that would encourage men to seek a doctor's advice if they were concerned about hair loss. In addition to marketing directly to consumers, Casola would also consider strategies for Merck's more traditional marketing channel of selling direct to physicians, using the company's army of field representatives. The problem of so-called "detailing" to physicians was that the sales reps have literally a few minutes or even seconds to pitch directly to the doctor, and are selling three Merck drugs at a time. Direct To Consumers Given the Food and Drug Administration's advertising restrictions, what kind of advertising should Merck pursue, Wosinska asked the...
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...Merck & Company Project Selection Decision Introduction As Merck & Company’s lead project manager I have to decide whether to invest its resources in one of two projects. One project is to pursue a cure for river blindness, a disease that has plagued third world countries for a number of years now and the second project is to re-package a very popular and profitable anti-depression drug for the Western market. In this concise report I plan to look at both options through SWOT analysis. I will be drawing on other relevant project selection strategy and making an informed decision from the analysis conducted. Merck & Company was founded on “medicine for the people”. This statement from George W. Merck, the company founder’s son and former chairman has not always sat comfortably with all senior executives within the business. He had a strong sense of morality within business and that philosophy has seen the company to where it is today. Discussion The case to pursue with the project to cure river blindness raises a number of questions. When comparing the two I am going to look at what decision is best for the company to align its business strategy with the project selection. | River Blindness Project | | Anti-Depression Repackaging Project | Investment | $2,000,000 | | $500,000 | Annual Savings | $50,000 | | $500,000 | | | | | Payback Period | 40 years | | 1 year | Looking at Financial models, in this case it is clear that repackaging...
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