The Story of Merck and the Recall of Vioxx

Ethical Case
Emma S. 5202930151, Lalipat F. 4902640194, Natthathida T. 4902640715

Ethics

Company Overview

VIOXX Case

Problems

Alternatives

Recommendations

Business Ethics
ethics /ks/
1. 2.

Virtue

Utilitarianism

Kantian

Egoism

a system of moral principles the rules of conduct recognized in respect to a particular class of human actions or a particular group, culture, etc.

Business ethics
examines ethical principles or ethical problems that arise in a business environment. conduct of individuals and business organizations as a whole pressure from consumers formulating codes of conduct and operating principles translate into action

Ethics

Company Overview

VIOXX Case

Problems

Alternatives

Recommendations

Business Ethics

Virtue

Utilitarianism

Kantian

Egoism

Virtue Theory
the foundation of morality is the development of good character traits or virtues, rather than follow rules or focus on consequences

Typical virtues include courage, temperance, justice, prudence, fortitude, liberality, and truthfulness

A person with a certain character can be relied upon to act consistently over a time

Aristotle
ancient Greek philosopher

Ethics

Company Overview

VIOXX Case

Problems

Alternatives

Recommendations

Business Ethics

Virtue

Utilitarianism

Kantian

Egoism

Act Utilitarianism
the right act is the one which produces "the greatest good for the

greatest number of people"

"the greatest happiness principle", or the principle of utility when faced with a choice, we must first consider the likely consequences of potential actions and, from that, choose to do what we believe will generate most pleasure to the society as a whole.

Jeremy Bentham
an English philosopher in 18th century

Ethics

Company Overview

VIOXX Case

Problems

Alternatives

Recommendations

Business Ethics

Virtue

Utilitarianism

Kantian

Egoism

Kantian Ethic
a moral action is one that is performed out of a sense of duty

the concept of motive is the most important factor in determining what is ethical a moral action is not based upon feelings or pity. Nor is it is not based on the possibility of reward. Instead, a moral action is one based on a sense of good-in-itself

Immanuel Kant
(17241804)

Ethics

Company Overview

VIOXX Case

Problems

Alternatives

Recommendations

Business Ethics

Virtue

Utilitarianism

Kantian

Egoism

Ethical Egoism
moral agents ought to do what is in their own self-interest

Ethical egoism does not require moral agents to harm the interests and well-being of others when making moral deliberation

Ethics

Company Overview

VIOXX Case

Problems

Alternatives

Recommendations

About Merck

Stakeholders

Sixth-largest pharmaceutical firm in the US

Gold standard of pharmaceutical industry and blue-chip company

Develop core competence in drug research Do very thorough clinical studies Seek to gain speedy regulation

Concentrate on developing blockbuster drugs

What happened?

100 Best Corporate Citizens for the fifth consecutive year

Ethics

Company Overview

VIOXX Case

Problems

Alternatives

Recommendations

About Merck Within the firm CEO

Ray Gilmartin Responsibility to align the company with the strategic vision

Stakeholders

BOD
Oversee the activities of the firm Represent the shareholders

Head of Research
Oversight of the process of regulatory approval Edward Scolnick Member of BOD Retired in 2003 Peter Kim Took over after Scolnick

Personnel
59,000 employees in 2004 Code of conduct Our values and standards Sales people Commision? Research personnel High competence Well-respected

Ethics

Company Overview

VIOXX Case

Problems

Alternatives

Recommendations

About Merck Outside the firm Shareholders

Expiring patents and cancelations new drugs trial affect stock price negatively Experienced great loss in Market Cap

Stakeholders

Customers
80 million people estimated to have taken Vioxx 105 million US prescriptions Wish for safe and efficient medicines

Creditors
4.4 billion in long-term debt

FDA
Independent oversight & protect public interest User fees from drug companies Financial interests in the drug

The Society
Developing Countries Low-income Medicare beneficiaries

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

Abouthappened? What Merck

Stakeholders Key Decisions

Ethical Dilemmas

Timeline of information about Vioxx

Discovered in lab in 1994

Study first indicated risk of CV in 1997

Application in Nov. 1998 and approved in May. 1999

In 2000 another study showed similar results, informed FDA and began APPROVe study

In Apr. 2002 instructed by the FDA to amend the label

Summer 2004 FDAsponsored study showed similar result, Merck disagreed

In Sep. 2004 accepted similar result of APPROVe

7 days later, Vioxx recalled

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

Abouthappened? What Merck

StakeholdersKey Decisions

Ethical Dilemmas

1 First findings of Vioxx higher-than-average risk of cardiovascular events and strokes Stakeholders Research Head: Edward M. Scolnick What is done Conducted the trial to stress on the benefits of no stomach bleedings Avoided presenting the increasing risk What should have been done Report the increased risk to CEO Directly report to BOD if ignored Conduct another larger trials to confirm the result Kill the drug if there is higher risk Report the increased risk to CEO Directly report to BOD if ignored

Personnel in R&D

Discussed and wrote e-mails and memos regarding the risk No further report to the higher level of management

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

Abouthappened? What Merck

StakeholdersKey Decisions

Ethical Dilemmas

2 FDA Approval of Vioxx Research Head: Edward M. Scolnick CEO FDA Presented Vioxx as the painkillers drug with no stomach bleeding Not mentioned the higher risk Won FDA Approval Conducted 8,000-person clinical trial Not confirmed the research result Approved Vioxx in 6 months Delay the application Conduct another larger trials to confirm the result Kill the drug if there is higher risk

Investigate the drug before the approval Review the documents more thoroughly Consider the effect of the drug in every perspective, not only its submitted properties

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

Abouthappened? What Merck

StakeholdersKey Decisions

Ethical Dilemmas

3 Before the Vioxx Recall Research Head: Edward M. Scolnick (resigned in 2003) Received the confirmation of higher risk from the 8,000-person clinical trial Put out press release in 2000 describing Vioxx-Naproxen results Informed FDA regarding the higher risk No further investigation Launched aggressive directto-customers pro-Vioxx campaign Distort the Vioxx risk by advertising that Vioxx lacked cardio-protective property Voluntarily inform doctors using Vioxx Change the labels specifically inform users of the potential risk

Peter Kim Marketing Head

Investigate the Vioxx Advertise the fact not the phrases that mislead consumers Focus on consumers rather than only the bottom line

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

Abouthappened? What Merck

StakeholdersKey Decisions

Ethical Dilemmas

3 Before the Vioxx Recall CEO No follow up of Research action after the risk is confirmed Allow the offensive combat with academic researchers who were questioning the safety of Vioxx Ignore the presentation of the academic researchers regarding the potential risk of Vioxx Publicly communicate with the shareholders and consumers regarding the confirmed risk Investigate the problems raised by academic researchers Cooperate with the academic researchers to get outside review of the Vioxx Open for the critics that help the company improve the product

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

Abouthappened? What Merck

StakeholdersKey Decisions

Ethical Dilemmas

3 Before the Vioxx Recall BOD No follow up of Research action after the risk is confirmed No actions in spite of tons of external warning signs of Vioxx Review or request the action plan from CEO regarding the confirmed risk Publicly communicate with the shareholders and consumers regarding the confirmed risk, if the action is not done by CEO Strengthen the regulations for companies who can advertise to public audience Immediately investigate the Vioxx case Review Vioxx comment by academic researchers

FDA

Loosened regulations on how pharmaceutical companies could advertise to general audience Discuss concerns in 2001 about potential risk of Vioxx 1 year after the notification by Merck

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

Abouthappened? What Merck

StakeholdersKey Decisions

Ethical Dilemmas

4 The Vioxx Recall Head of Research: Peter Kim CEO Informed CEO the result after 4 and a half years study Approve the product recall

1.

2. BOD Approve the product recall

Review other options that would maximize the benefits of the shareholders Immediately inform doctors of the above-average risks of Vioxx Seek FDA approval to amend the warning label on Vioxx Request the CEO to provide the options that would maximize the benefits of the shareholders

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

Abouthappened? What Merck Virtue

StakeholdersKey Decisions Utilitarianism Kantian

Ethical Dilemmas Egoism

Each stakeholder should have acted as good people regardless of the pressure from their superiors
Salesperson - Dodge Ball Vioxx

Each stakeholder should have acted in the way that benefits all stakeholders the most
Research Head - Thorough Vioxx study

Each stakeholder should have performed their duty

Each stakeholder should have acted in the way that serve their own self-interest

BOD - Protect the shareholders

CEO - Maximize the profit

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

Problem Statement

Rationales

How can Merck regain its reputation and stakeholders trust after the Vioxx scandal?

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

Problem Statement

Rationales

How can Merck regain its reputation and stakeholders trust after the Vioxx scandal?
The Shareholders To be able to raise funds in the future and to handle the litigation costs FDA and Government To continue to get speedy approval and to keep regulations down

Customers To prevent sharp sales erosion when the patent expires

The Art of the Industry The importance to have great credibility when producing products affecting human lives

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

Ten Alternatives
Offer internal training for employeesethical guidelines and discussions Advertising campaign focusing on regaining credibility

Sell the company to Pfizer

Operate under new brand name

Hire a trustworthy consulting company to oversee the companys operations

Sue the FDA to share some responsibilities Introduce new code of conducts of the company

Emphasize more on corporate social responsibility Replace management and board Create channels to communicate with Mercks stakeholders regarding the Vioxx scandal

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

Ten Alternatives
Offer internal training for employeesethical guidelines and discussions Advertising campaign focusing on regaining credibility

Sell the company to Pfizer

Operate under new brand name

Hire a trustworthy consulting company to oversee the companys operations

Sue the FDA to share some responsibilities Introduce new code of conducts of the company

Emphasize more on corporate social responsibility Replace management and board Create channels to communicate with Mercks stakeholders regarding the Vioxx scandal

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

First Recommendation

Rationales

Implementation

1
Replace management and board

Management conflicting value with corporate value BOD absence of fiduciary duty Create a new internal ethical environment Communicate the change to the shareholders and the public

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

First Recommendation

Rationales

Implementation

1
1. Fire CEO, Head

Replace management and board

of Research and Board of Directors

2.Replace them

with ethical caring people

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

Second Recommendation

Rationales

Implementation

2
Create channels to communicate with Mercks stakeholders regarding the Vioxx scandal

To clarify the story about Vioxx to stakeholders To reduce an effect of possible misleading interpretation by competitors and media

Merck may incur more creditability loss if it is unreachable for comments and information
To create a feeling of Merck taking responsibility of what it has done

Ethics

Company Overview

Vioxx Case

Problems

Alternatives

Recommendations

Second Recommendation

Rationales

Implementation

2
Create channels to communicate with Mercks stakeholders regarding the Vioxx scandal

Vioxx info site

Updated information FAQs Contact

Scientific and research info Merck statements and responses Lawsuit info

Vioxx info line

Train the staffs on how to handle the questions To make sure of same understanding and updated information

The End or maybe rather to be continued

Thank you dear Board of Directors, Shareholders and Ajarn James Please ask us some tricky questions now
Emma S. 5202930151, Lalipat F. 4902640194, Natthathida T. 4902640715