"We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been."—George W. Merck, 1950
Onchocerciasis, also known as river blindness, is a parasitic infection characterized by insatiable itching and blindness. In 1978, Dr. William Campbell, a scientist at Merck Research Laboratories, recognized the potential of Ivermectin, a medicine used to treat parasitic infection in animals, to also treat river blindness. Dr. Campbell asked Dr. Roy Vagelos, the CEO of Merck & Co. at the time, for permission to study the effectiveness of ivermectin in humans. Dr. Vagelos approved the project and Dr. Campbell proceeded with his investigation. Dr. Campbell found that ivermectin was successful in curing river blindness. Ivermectin was then sent to Merck's marketing department where Charles Fettig was tasked with marketing ivermectin for human use. This was a difficult task as the patients who needed ivermectin could only afford it at a price of less than $1; however, Merck normally would charge $3 a dose for ivermectin. When reflecting on this dilemma, Charles Fettige notes "Honestly, we couldn't find a way to price it, there's no way [river blindness patients] can afford it."
At this same time, Dr. Mohammed Aziz was in the middle east performing clinical trials for the use of ivermectin in humans. Dr. Aziz was so astonished by ivermectin's success at curing river blindness and discouraged by the marketing challenge that he proposed the idea of a donation program. Merck was hesitant to approve a donation program because it had never been done before and Merck's leadership was concerned about their shareholders' and other pharmaceutical companies' response. He was concerned that Merck's shareholders would view a donation program as a violation of fiduciary responsibility. He was also concerned that other pharmaceutical companies would be discouraged from investing in research for medicine to treat diseases found predominately in the third world because they would feel obligated to donate it since Merck donated ivermectin. Instead, Dr. Vagelos went to organizations such as the World Health Organization, the United States Agency for International Development, the United States Department of State, and the governments of the countries where the medicine would be donated looking for help in covering the cost of developing, purchasing, and distributing ivermectin. All of these parties refused.
Dr. Aziz and others at Merck were unsatisfied with this answer and continued to push for a donation program. Merck's engineers and scientists viewed themselves, not as businessmen, but as moral agents responsible for helping the world be well, as was encouraged by Merck Corporate culture in research labs and manufacturing facilities. Inspired by George W. Merck's statement in 1950, Aziz and others pushed to ensure that Merck's duty lied first with its patients and then with its shareholders. Dr. Vagelos ultimately came to this same conclusion and in 1984, he announced that Merck would distribute ivermectin under the name Mectizan for free "to all who need it, for as long as it's needed." Thus the Mectizan Donation Program was founded.
Business Ethics TheoryEdit
Reflecting on the decision to move forward with the Mectizan Donation Program, Vagelos stated: “Some argue that corporations should not be in the business of making donations, contending that their first obligation is to reward stockholders with higher dividends and not squander company resources on gifts. I disagree.” Vagelos’s rejection of corporate norms is defined in business ethics as choosing stakeholder theory over shareholder theory.
Shareholder theory defines a business’s responsibility solely as seeking profits for its shareholders within legal bounds. This means that businesses have no social responsibility and no consideration for consequences of their actions beyond the profits. This profit-seeking mentality was defined by Milton Friedman in the 1970’s and is how businesses are typically viewed.
Stakeholder theory was documented in 1984 by Edward Freeman as a broader perspective on a business’s responsibility. Freeman asserts that a business must account for the consequence of its action on all stakeholders, where stakeholders are defined as anyone that can benefit from or be harmed by a company’s action. Thus, stakeholders include shareholders, company management, employees, local community, suppliers, and, in this case, recipients of potential pharmaceutical donations. This theory puts more responsibility on a company to accurately analyze the consequences of its actions, but opens the door for a business to act against profits.
While Vagelos understood and acknowledged shareholder theory as the guiding doctrine of many companies, he saw beyond profits to the influence on other stakeholders as he pledged Merck’s commitment to the Mectizan Donation Program.
An Example FollowedEdit
The Mectizan Donation Program set the standard in the pharmaceutical industry to give beyond their shareholder’s interest. Around 2000, other companies began donating medications abroad. In 1998, Pfizer helped establish the International Trachoma Initiative, which uses azithromycin to eliminate trachoma, the leading cause of preventable blindness. Since 2000, Pfizer has also donated diflucan for treating two fungal infections associated with HIV. In 2000, Novartis began donations of multidrug therapy medicines to treat leprosy. In 2001, GlaxoSmithKline established the African Malaria Partnership to prevent and treat malaria in sub-Saharan Africa. They are currently researching a malaria vaccine. GlaxoSmithKline also donates albendazole which fights the parasite that causes lymphatic filariasis, a disease which causes enlarged limbs. Since at least 2008, Eli Lilly has donated insulin to the International Diabetes Federation’s Life for a Child to treat type 1 diabetes in children abroad.
As evidenced by pharmaceutical companies following Merck's example of the Mectizan Donation Program by donating medicine to those who can't afford it, perhaps an additional characteristic of a definition 4 professional is someone who steps out on a limb and leads in such a way that others cannot help but follow.
Mectizan to VioxxEdit
The establishment of the Mectizan Donation Program is an example of Merck’s confirmation that its duty lies with its patients and its adoption of the stakeholder theory. However, Merck has not always been on par with its own high standards. Many people familiar with the company may wonder: How did Merck go from Mectizan to Vioxx?
An analysis of some of the significant events that occurred between Mectizan and Vioxx shed light on how Merck resorted to adoption of the shareholder theory with Vioxx.
Timeline from 1986 to 2005Edit
|1986||Mectizan Donation Program established.|
|1994||Raymond Gilmartin replaced Dr. Roy Vagelos as CEO of Merck.|
|1997||The Food and Drug Administration (FDA) approved direct-to-consumer advertising.|
|1999-2004||Merck marketed Vioxx.|
|2005||Gilmartin resigned from Merck.|
When Merck committed to donating Mectizan for the control of onchocerciasis, it set the standard for high-quality research for other pharmaceutical companies. The Mectizan Donation Program displayed Merck's support of the stakeholder theory and that its duty lied with its patients.
Raymond Gilmartin is a 1968 alumnus of the Harvard Business School and an American businessman that served as the CEO of Merck starting in 1994. In contrast to Dr. Roy Vagelos's research-oriented approach to Merck, Gilmartin was focused on the company's growth and profit. As CEO, Gilmartin adopted the shareholder theory and believed that his duty lied with Merck's shareholders.
The FDA's approval of direct-to-consumer advertising allowed pharmaceutical companies to market their medications to all consumers, not just healthcare providers. This loose regulation made it easier for pharmaceutical companies to steer away from the research-focused platform to the profit-focused platform. Direct-to-consumer advertising financially benefited most pharmaceutical companies because more consumers were influenced to purchase or ask for prescriptions for medications marketed in various media.
The controversial Vioxx was marketed to consumers. Gilmartin fought to keep Vioxx on the market because it financially benefited Merck. He insisted that Vioxx was safe for and valuable to consumers.
Shortly after Merck removed Vioxx from the market, Gilmartin left Merck. At a press conference in 2004, Gilmartin stated: "We are taking this action, because we believe it best serves the interests of patients. Although we believe it would have been possible to continue to market Vioxx with labeling that would incorporate these new data, given the availability of alternative therapies and the questions raised by the data, we concluded that a voluntary withrawal is the responsible course to take."
Vioxx Scandal ConclusionsEdit
From these events, it is evident that the Vioxx Scandal can be attributed to a combination of a change in Merck's leadership, more relaxed FDA regulation, and pressure from pharmaceutical competitors. Under Gilmartin's leadership, Merck became more concerned with growth and less concerned with the welfare of its patients. When the FDA approved direct-to-consumer advertising, more pharmaceutical companies could feasibly adopt the shareholder theory, which fostered a competitive environment that further pressured Merck's leadership. This combination of factors led to Merck losing sight of its founder's vision and ultimately misplacing its duty, which harmed patients.
From the Mectizan Donation Program and Vioxx scandal, Merck demonstrates the importance of identifying and remembering where duty lies. When duty is in the wrong place and not regularly considered, poor decisions are made and may ultimately harm others. When duty is in the right place and frequently considered, good decisions are made that benefit those directly and indirectly involved.
- Quote from George W. Merck Talk at the Medical College of Virginia, 1 December 1950, courtesy of Merck & Co. Archives
- Collins, K. L. (2004). Profitable Gifts: A History of the Merck Mectizan Donation Program and its implications for international health. Perspectives in Biology and Medicine, 47(1), 100-109.