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Merck and River Blindness Should our For-Profit Public Company Spend the Money to Develop a Drug that is Unlikely to be Profitable, but has a High Probability.

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Presentation on theme: "Merck and River Blindness Should our For-Profit Public Company Spend the Money to Develop a Drug that is Unlikely to be Profitable, but has a High Probability."— Presentation transcript:

1 Merck and River Blindness Should our For-Profit Public Company Spend the Money to Develop a Drug that is Unlikely to be Profitable, but has a High Probability of Curing a Large Population of a Terrible Disease?

2 Facts 18 Million People affected by River Blindness, 300,000 Blind These populations are all poor – live in Africa and South America Merck has a drug that the scientists believe has a high probability of curing River Blindness Merck is a large pharmaceutical company ($2 billion in annual revenue) with promising new drugs, but also with drugs that are losing their patents Typical drug costs $200 million and 12 years to develop Merck spends approximately $333 million on Research and Development per year

3 Ethical Issue Definition Should a for-profit pharmaceutical company spend money developing a promising drug for a disease when it is unlikely to make a profit from it? Should a for-profit company live up to its mission statement and values when this is not likely to lead to profits? What responsibility does a company have to society when it has a unique resource that would be helpful to society?

4 Stakeholders Current and Future Merck Shareholders People with River Blindness and those who will get it in the future Merck Employees Merck Scientists Merck Customers Governments People with other diseases

5 Develop Alternatives Develop the drug yourself Get money from government or foundations Share the data with other pharmaceutical companies or universities, making them as responsible as you Other solutions? Test the drug in the affected areas, making it less expensive Do cause marketing (i.e. Have your current customers pay for it)

6 Utilitarian Reasoning Potential benefits of Developing Drug –Great Improvement in life for 18 million people Probability of success (%), value of the lives helped ___? –PR benefits (typical pharmaceutical company spends approximately 30% of revenue per year on Sales, Marketing, and Advertising – for Merck = $600 million per year) Research shows that 1 page of PR is worth 10 pages of advertising –Employee morale at Merck –Merck’s ability to hire scientists (core competency, and very expensive to find and replace) –Merck lives up to its mission and values, encouraging people who share its values to invest their resources (financial, human, etc.) in the company –Build good relationships with countries where you one day might be able to make money

7 Utilitarian Reasoning Potential Costs of Developing Drug –Shareholders lose up to $200 million of their money –Losing the benefit of other drugs that could have been developed (opportunity cost) Potential cure for something else, probability of success and value of lives improved –If shareholders see companies spending money on charity instead of making profits they will no longer invest in companies, greatly hurting the economic system

8 Justice Is it fair to spend 95% of Merck’s R&D budget on products that will hopefully lead to profit and 5% of Merck’s R&D budget on people who won’t make profit for the company Is it fair to a spend a small amount of shareholders’ money (most of whom are at least moderately wealthy primarily because of where they live), on poor people (primarily because of where they live, but who haven’t contributed anything to the company) who have a horrific disease? Think of Rawl’s original position and the Veil of Ignorance.

9 Rights (see also duties) Shareholders? (legal right to have management try to make money for them and/or moral right to have the company live according to its stated values?) Employees? (moral right to have the company live according to its stated values?) Scientists? (moral right to have the company live according to its stated values?) People with Disease? (moral right to healthcare?) Managers? (what level of discretionary rights do the top managers have?)

10 Duties What duties does management have to its shareholders? (legal and moral duties) –Maximize shareholder wealth –Do what the shareholders would want them to do –Live up to the mission and values it has provided to them What duty does a company have when it has unique scientific knowledge that will help people? (moral duty) –Duty to share that information? –Duty to develop the drug based on that information?

11 Reversibility If you are a shareholder, what would you want the company to do? ?? If you are affected by the disease, what would you want the company to do? Develop the Drug

12 Universalizability (Policy) If a company has a unique ability to help people, they should do so to the extent that the cost is not more than 5% of net income, or their shareholders would agree to do so (potential policy)

13 Disclosure How would society react if they learn 10 years after the decision that our very large profitable company had a potential cure for a vicious disease but chose not to develop it because it would take 5% of our R&D budget and wouldn’t make a profit for the company How would they react if they understood that the development cost would have been equal to 2% of what we spend on sales and advertising

14 Virtue Do I feel like a hero if I go to the shareholders and tell them that we have chosen to spend 1% of our revenue (their money) to try and cure a terrible disease (do they feel like heroes?) Do I feel like the person I aspire to be if I go home and tell my family that I have chosen not to follow our company’s values and spend a small amount of our shareholders’ money to try and cure a disease afflicting many poor people Can I sleep well tonight thinking about the people who want to kill themselves because they are itching so badly and I could have helped them? Can I sleep well tonight knowing that I have spent a small amount of our shareholders’ money on a project that is not likely to lead to a financial return for them?


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