Expert answer:Case Analysis: Organization ethic an Social respon

Answer & Explanation:CASEMERCK AND RIVER BLINDNESSHeadquartered in New Jersey, Merck & Co. is one of the largest pharmaceuticalcompanies in the world. In 1978, Merck was about to lose patent protection on its twobest-selling prescription drugs. These medications had provided a significant part ofMerck’s $2 billion in annual sales. Because of imminent loss, Merck decided to pourmillions into research to develop new medications. During just three years in the1970s, the company invested over $1 billion in research and was rewarded with thediscovery of four powerful medications. Profits, however, were never all that Merckcared about. In 1950, George W. Merck, then chairman of the company his fatherfounded, said, “We try never to forget that medicine is for people. It is not for theprofits. The profits follow, and if we have remembered that, they have never failed toappear. The better we have remembered that, the larger they have been.” Thisphilosophy was at the core of Merck & Co.’s value system.RIVER BLINDNESSThe disease onchocerciasis, known as river blindness, is caused by parasitic worms thatlive in the small black flies that breed in and about fast-moving rivers in developingcountries in the Middle East, Africa, and Latin America. When a person is bitten by a fly(and some people are bitten thousands of times a day), the larvae of the worm can enterthe person’s body. Theworms can grow to almost two feet long and can cause grotesquegrowths on an infected person. The real trouble comes, however, when theworms beginto reproduce and release millions of microscopic baby worms into a person’s system.The itching is so intense that some infected persons have committed suicide. As timepasses, the larvae continue to cause severe problems, including blindness.In 1978, the World Health Organization estimated that more than 300,000 peoplewere blind because of the disease, and another 18 million were infected. In 1978, thedisease had no safe cure. Only two drugs could kill the parasite, but both had serious,even fatal, side effects. The only measure being taken to combat river blindness was thespraying of infected rivers with insecticides in the hope of killing the flies. However,even this wasn’t effective since the flies had built up immunity to the chemicals.MERCK’S ETHICAL QUANDARYSince it takes $200 million in research and 12 years to bring the average drug tomarket, the decision to pursue research is a complex one. Resources are finite, sodollars and time have to go to projects that hold the most promise in terms of makingmoney to ensure the company continues to exist as well as of alleviating humansuffering. This is an especially delicate issue when it comes to rare diseases, when adrug company’s investment could probably never be recouped because the number ofpeople who would buy the drug is so small. The problem with developing a drug tocombat river blindness was the flip side of the “orphan” drug dilemma. There werecertainly enough people suffering from the disease to justify the research, but since itwas a disease afflicting people in some of the poorest parts of the world, thosesuffering from the disease could not pay for the medication.In 1978, Merck was testing ivermectin, a drug for animals, to see if it could effectivelykill parasites and worms. During this clinical testing, Merck discovered that the drug killeda parasite in horses that was very similar to the worm that caused river blindness in humans.This, therefore, was Merck’s dilemma: company scientists were encouraging the firm toinvest in further research to determine whether the drug could be adapted for safe use withhumans, but Merck knew it would likely never be a profitable product.Source: D. Bollier, Merck & Company (Stanford, CA: The Business Enterprise Trust, 1991).Case Questions1. Think about the definition of stakeholders—any parties with a stake in theorganization’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?2. What are the potential costs and benefits of such an investment?3. If a safe and effective drug could be developed, the prospect of Merck’srecouping its investment was almost zero. Could Merck justify such an investmentto shareholders and the financial community? What criteria would beneeded to help them make such a decision?4. If Merck decided not to conduct further research, how would it justify such adecision to its scientists? How might the decision to develop the drug, or not todevelop the drug, affect employee loyalty?5. How would the media treat a decision to develop the drug? Not to develop thedrug? How might either decision affect Merck’s reputation?6. Think about the decision in terms of the CSR pyramid. Did Merck have anethical obligation to proceed with development of the drug? Would it matter ifthe drug had only a small chance to cure river blindness? Does it depend on howclose the company was to achieving a cure, or how sure they were that they couldachieve it? Or does this decision become a question of philanthropy only?7. How does Merck’s value system fit into this decision?8. If you were the senior executive of Merck, what would you do?about 600-700 words

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