Merck and River Blindness case

Headquartered in New Jersey, Merck & Co. is one of the largest pharmaceutical companies in the world. In 1978, Merck was about to lose patent protection on its two best-selling prescription drugs. These medications had provided a significant part of Merck's $2 billion in annual sales. Because of imminent loss, Merck decided to pour millions into research to develop new medications. During just three years in the 1970s, the company invested over $1 billion in research and was rewarded with the discovery of four powerful medications. Profits, however, were never all that Merck cared about. In 1950, George W. Merck, then chairman of the company his father founded, said, "We try never to forget that medicine is for 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 that, the larger they have been." This philosophy was at the core of Merck & Co.'s value system.

Review the questions, then answer question 8 referring to your thoughts about the other 7 questions.

1. Think about the definition of stakeholders-any parties with a stake in the organization'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's recouping its investment was almost zero. Could Merck justify such an investment to shareholders and the financial community? What criteria would be needed to help them make such a decision?

4. If Merck decided not to conduct further research, how would it justify such a decision to its scientists? How might the decision to develop the drug, or not to develop the drug, affect employee loyalty?

5. How would the media treat a decision to develop the drug? Not to develop the drug? How might either decision affect Merck's reputation?

6. Think about the decision in terms of the CSR pyramid. Did Merck have an ethical obligation to proceed with development of the drug? Would it matter if the drug had only a small chance to cure river blindness? Does it depend on how close the company was to achieving a cure, or how sure they were that they could achieve 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?