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The Story of Merck and the

Recall of Vioxx

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

Ethical

Case

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Alternatives RecommendationsEthics

Business Ethics

VIOXX CaseCompany

Overview Problems

ethics /ks/1. a system of moral principles

2. 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 abusiness environment.

conduct of individuals and business organizations as a whole

pressure from consumers

formulating codes of conduct and operating principles

translate into action

Utilitarianism Kantian EgoismVirtue

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Alternatives RecommendationsEthics

Utilitarianism Kantian EgoismVirtue

VIOXX CaseCompany

Overview Problems

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 Aristotleancient Greek philosopher

Business Ethics

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Alternatives RecommendationsEthics VIOXX CaseCompany

Overview Problems

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 likelyconsequences 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 in18thcentury

Utilitarianism Kantian EgoismVirtueBusiness Ethics

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Overview Problems

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 determiningwhat is ethical

a moral action is not based upon feelings or pity. Nor is it is not basedon the possibility of reward. Instead, a moral action is one based on a

sense of good-in-itself

Immanuel Kant(17241804)


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Overview Problems

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 andwell-being of others when making moral deliberation


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Company

Overview

About Merck Stakeholders

Ethics Alternatives RecommendationsVIOXX Case Problems

What

happened?

Sixth-largest pharmaceutical firm in the US

Gold standard of pharmaceutical industryand blue-chip company

Concentrate on developing blockbuster drugs

100 Best Corporate Citizens for the fifthconsecutive year

Develop core competence in

drug research

Do very thorough clinical

studies

Seek to gain speedy regulation

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Company

Overview


CEO BODHead of

ResearchPersonnel


Within the firm

Edward Scolnick

Member of BOD

Retired in 2003

Peter KimTook over after

Scolnick

Ray Gilmartin

Responsibility to

align the company

with the strategic

vision

Oversight of theprocess of regula-

tory approval

59,000 employeesin 2004

Code of conduct

Our values and

standards

Sales people

Commision?Research personnel

High competence

Well-respected

Oversee theactivities of the

firm

Represent the

shareholders

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Company

Overview


Shareholders Customers Creditors FDA The Society


Outside the firm

80 millionpeople

estimated to

have taken

Vioxx

105 million

US

prescriptionsWish for safe

and efficient

medicines

4.4 billion inlong-term

debt

Independentoversight &

protect public

interest

User fees

from drug

companies

Financialinterests in

the drug

DevelopingCountries

Low-income

Medicare

beneficiaries

Expiringpatents and

cancelations

new drugs

trial affect

stock price

negatively

Experiencedgreat loss in

Market Cap

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Ethics Alternatives RecommendationsCompany Overview Problems

What happened? Key Decisions Ethical Dilemmas

Discoveredin lab in

1994

Study firstindicated

risk of CV in1997

Applicationin Nov. 1998

andapproved in

May. 1999

In 2000another study

showedsimilar results,informed FDA

and began

APPROVestudy

In Apr. 2002instructedby the FDAto amend

the label

Summer2004 FDA-sponsored

studyshowed

similar result,

Merckdisagreed

In Sep. 2004accepted

similarresult of

APPROVe

7 days later,Vioxx

recalled

Timeline of information about Vioxx

Vioxx Case

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Vioxx Case

1 First findings of Vioxx higher-than-average risk of cardiovascular events and strokes

Stakeholders What is done What should have been doneResearch Head:

Edward M. Scolnick Conducted the trial to stresson the benefits of nostomach bleedings

Avoided presenting the

increasing risk

Report the increased risk to

CEO

Directly report to BOD ifignored

Conduct another larger trials

to confirm the result

Kill the drug if there is higher

riskPersonnel in R&D Discussed and wrote e-mails

and memos regarding the risk No further report to the

higher level of management

Report the increased risk to

CEO Directly report to BOD if

ignored

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Vioxx Case

2 FDA Approval of Vioxx

Research Head:

Edward M. Scolnick Presented Vioxx as thepainkillers drug with nostomach bleeding

Not mentioned the higherrisk

Won FDA Approval

Conducted 8,000-person

clinical trial

Delay the application

Conduct another larger trials

to confirm the result

Kill the drug if there is higherrisk

CEO Not confirmed the researchresult Investigate the drug beforethe approval

FDA Approved Vioxx in 6 months Review the documents morethoroughly

Consider the effect of the

drug in every perspective, not

only its submitted properties

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Vioxx Case

3 Before the Vioxx Recall

Research Head:

Edward M. Scolnick

(resigned in 2003)

Peter Kim

Received the confirmation of

higher risk from the 8,000-person

clinical trial

Put out press release in 2000describing Vioxx-Naproxen

results

Informed FDA regarding the

higher risk

No further investigation

Voluntarily inform doctors

using Vioxx

Change the labels specifically

inform users of the potentialrisk

Investigate the VioxxMarketing Head Launched aggressive direct-

to-customers pro-Vioxx

campaign

Distort the Vioxx risk by

advertising that Vioxx lacked

cardio-protective property

Advertise the fact not the

phrases that mislead

consumers

Focus on consumers rather

than only the bottom line

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Vioxx Case


CEO No follow up of Researchaction after the risk is

confirmed

Allow the offensive combatwith 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

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Vioxx Case


BOD No follow up of Researchaction after the risk is

confirmed

No actions in spite of tons ofexternal warning signs of

Vioxx

Review or request the action

plan from CEO regarding the

confirmed risk

Publicly communicate withthe shareholders and

consumers regarding the

confirmed risk, if the action is

not done by CEOFDA 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

Strengthen the regulations

for companies who can

advertise to public audience

Immediately investigate the

Vioxx case

Review Vioxx comment by

academic researchers

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Vioxx Case

4 The Vioxx Recall

Head of Research:

Peter Kim Informed CEO the result after4 and a half years studyCEO Approve the product recall Review other options that

would maximize the benefitsof the shareholders

1. Immediately inform doctors

of the above-average risks of

Vioxx

2. Seek FDA approval to amend

the warning label on VioxxBOD Approve the product recall Request the CEO to provide

the options that wouldmaximize the benefits of the

shareholders

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Vioxx Case

Utilitarianism

Each stakeholder

should have acted

in the way thatbenefits all

stakeholders the

most

Kantian

Each stakeholder

should have

performed theirduty

Egoism

Each stakeholder

should have acted

in the way thatserve their own

self-interest

Virtue

Each stakeholder

should have acted

as good peopleregardless of the

pressure from their

superiors

Salesperson

- Dodge Ball Vioxx

Research Head

- Thorough Vioxxstudy

BOD

- Protect theshareholders

CEO

- Maximize theprofit

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Ethics Alternatives RecommendationsCompany Overview Vioxx Case

Problem Statement Rationales

How can Merck regain its reputation and

stakeholders trust after the Vioxxscandal?

Problems

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Ethics Alternatives RecommendationsCompany Overview Vioxx CaseProblems

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

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Ethics Problems RecommendationsCompany Overview Vioxx Case

Ten Alternatives

Offer internal training for employees-ethical guidelines and discussions

Advertising campaign focusing on regaining

credibility

Hire a trustworthy consulting company tooversee the companys operations

Sue the FDA to share some responsibilities

Introduce new code of conducts of thecompany

Sell the company to Pfizer

Operate under new brand name

Emphasize more on corporate socialresponsibility

Replace management and board

Create channels to communicate withMercks stakeholders regarding the Vioxx

scandal

Alternatives

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Ethics Problems RecommendationsCompany Overview Vioxx Case

Ten Alternatives

Alternatives

Offer internal training for employees-ethical guidelines and discussions

Advertising campaign focusing on regaining

credibility

Hire a trustworthy consulting company tooversee the companys operations

Sue the FDA to share some responsibilities

Introduce new code of conducts of thecompany

Sell the company to Pfizer

Operate under new brand name

Emphasize more on corporate socialresponsibility

Replace management and board

Create channels to communicate withMercks stakeholders regarding the Vioxx

scandal

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Ethics Problems AlternativesCompany Overview Vioxx Case

ImplementationFirst Recommendation Rationales

Recommen-

dations

Replace

management

and board

1 Management conflicting value with corporatevalue

BOD absence of fiduciary duty

Create a new internal ethical environment

Communicate the change to the shareholders

and the public

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ImplementationFirst Recommendation Rationales

Recommen-

dations

Replace

management

and board

11. Fire CEO, Head

of Research andBoard of Directors

2.Replace themwith ethical caring

people

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ImplementationSecond Recommendation Rationales

Recommen-

dations

Create

channels tocommunicate

with Mercks

stakeholders

regarding the

Vioxx scandal

2 To clarify the story about Vioxx tostakeholders

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

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ImplementationSecond Recommendation Rationales

Recommen-

dations

Create

channels tocommunicate

with Mercks

stakeholders

regarding the

Vioxx scandal

2 Vioxx info site Updated information

FAQs Contact

Vioxx info line

Train the staffs on how to handle the questions

To make sure of same understanding and updatedinformation

Scientific and

research info

Merck statements

and responses

Lawsuit info

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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

The End or maybe rather to

be continued

BA401 Merck

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