BACKGROUND INFORMATION FOR THE VANATIN CASE

Assume that it is January 2013 and that you are a member of the Booth Pharmaceutical Corporation Board of Directors. You have been called to a Special Board Meeting to discuss what should be done with the product known as “Vanatin.”

Vanatin is a “Fixed-ratio” antibiotic sold by prescription. “Fixed-ratio” means that it contains a combination of drugs. It has been on the market for more than 13 years and has been highly successful. It now accounts for about 18 billion dollars per year, which is 12 percent of Booth Company’s gross income in the United States (and a greater percentage of net profits). Profits from foreign markets, where Booth is marketed under a different name, are roughly comparable to that in its home country.

Over the past 20 years, there have been numerous medical scientists (e.g.. the National Council on Drugs) who have objected to the sale of most fixed-ratio drugs. The argument has been that (1) there is no evidence that these fixed-ratio drugs have improved benefits over single-drugs, and (2) the possibility of detrimental side effect, including death, has at least doubled. For example, these scientists have estimated that Vanatin is causing about 30 to 40 unnecessary deaths per year (i.e., deaths that could be prevented if the patients had used a substitute made by a competitor of Booth). Despite the recommendations to remove fixed-ratio drugs from the market, doctors have continued to use them. They offer a shotgun approach for a doctor who is unsure of his or her diagnosis.

Recently a group of impartial scientists appointed by the National Academy of Science and the National Research Council panel, carried out extensive research studies on the drug and recommended unanimously that the Food and Drug Administration (FDA) ban the sale of Vanatin. One of the members of the panel, Dr.