Bayer AG, Anthrax and Cipro: Case Study Analysis

Subject: Managerial Analysis and Communication (MAC)

Team Name: MacD
Section: D
Date of Submission: 6th August 2018

Team Members:

Names Roll Number

Avi Anuj Jain P39189
Vijay Kumar Suman P39234
Ankit D. Ramteke P39186
M. Suchitra P39203
Manya Gupta P39204
Mrityunjay Panday P39208

Executive Summary
Bayer AG, a German pharmaceuticals company has faced a dilemma in a confrontation with the
United States Government who has been struggling with a Bioterrorism disease ‘Anthrax’ after
2001 World Trade Center Terrorist attack. There have been 22 cases of casualties reported with
the disease while the bigger problem stays with the fear of the disease among the public. This has
led to increased demand for the drug. The diverged option deals with dissolving patent ‘Cipro’
owned by Bayer AG to combat Anthrax in the United States. Dr. Manfred Schneider, Chairmen
and CEO of Bayer AG decided upon two alternatives of either selling the patent to few firms to
meet the demand of the drug in the Bioterrorist disease affected American health sector or to work
in cooperation with the US government to combat the increasing demand. Dr. Schneider finally
pursues the latter by increasing the production of the drug and intervening in the US health sector
through state interventions.
Keywords: State-Market Conflict, Bioterrorism, State Interest, Public Interest, Health
Interventions.

Situation Analysis
The case highlights the situation of conflict between the market-oriented pharmaceutical company
Bayer AG and public-oriented state entity US government who are combating a Bioterrorist
disease ‘Anthrax’. The company is facing a challenge from the state to dissolve the patent ‘Cipro’
which can allow other pharmaceuticals to make generic medicines and help in meeting the
increasing demand of the drug in US Healthcare market. The company has to take a course of
action which can help them retain the patent as it is one of an important source to sustain profits
in the market and ensure that they solve the state-market conflict at the same time.

1
Statement of Objective
The case has been identified with a multi-stakeholder objective. The primary objective of Bayer
AG is to prove that the company can meet the demand of the drug ‘Cipro’ in the American
Healthcare market entrusting government not to pursue any other alternative (dissolving patent
owned by Bayer AG). The auxiliary objective is to solve the state (Government) and market (Bayer
AG) conflict which has arisen from the supply deficit (or increased demand of the drug) of Cipro
in market leading to the high price of the drug due to fear among people in relation to the
Bioterrorist disease Anthrax.

Problem Statement
The problem, in this case, is lucid as the increased demand for the drug ‘Cipro’ as an antidote to
the Bioterrorist disease ‘Anthrax’ has influenced the US government to dissolve the patent for the
drug owned by Bayer AG, a German pharmaceutical company. The government also seeks to
provide the drug at an affordable cost and ensure its availability to all the affected Americans.
Now, there is a state-market conflict between the US government and Bayer AG with the patent
of the drug.

Criteria for Decision Making

The primary focus of Bayer AG is to provide Cipro as an antidote to curb the bioterrorist
disease ‘Anthrax’, as the demand is rising every day with respect to the fear among the public.
They have to meet the rising demand. The decision has to be taken ensuring certain criteria
that meet the interest of all the stakeholders. The case has been identified with four criteria
along with the priority. The first criteria with respect to highest priority are to meet the
increasing demand for the drug in the market. Then comes the second criteria on the priority
list which is to retain the patent (ensuring market interest), as the research done by the
company to introduce the patent would be compensated with the profit they earn through it in
the market. The third criteria on the priority list are to ensure state intervention and interest
as the company would want to ensure good relations with the government to function properly
in the future. The last but not the least criteria on the priority list is to manage the public fear
as the whole problem has arisen from the fear of ‘Anthrax’ among the people.

Alternative Solutions
Solution 1: Optimizing Production and Ensuring State-Market Cooperation along
with a Public Campaign. The issue identified in the case is that of increased demand and
government’s perception of Bayer AG of being incompetent to meet the demand alone.
The solution proposed here is to convince the government that the company will be able to
optimize its production and ensure that the drug is supplied to the market through state
intervention. Here, the government will buy the drug from Bayer AG and sell it to the
market at the subsidized rate. The opportunity here would ensure a stable cooperation
between the state and the market by solving the immediate problem of the increased
demand and the perceived supply deficit. Moreover, a latter part of the solution focuses on
issuing a public campaign by the government combating the public fear and entrusting the
citizens with proper support in the case of emergency.

2
 Solution 2: Sale of Patent to Other Private Companies. Another solution to the problem
is to sell the patent of the drug to a few pharmaceutical companies as the ultimate aim of
the government is to meet the increasing demand for the drug in the market. The solution
functions on the basis of increasing the supply of the drug and ensure a more competitive
royalty for the same drug produced by other pharmaceutical companies as compared to the
patent dissolved by the government.

Evaluation of Alternatives
Solution 1: The solution to cooperate with the state and sell ‘Cipro’ through government
at subsidized rate will ensure that interest of all the stakeholders namely the US government, Bayer
AG and the affected public are met by ensuring proper state-market cooperation. Moreover, the
company will be able to retain their patent guarding their market interest and preserving state
interest of the government at the same time. Moreover optimizing production will ensure a proper
growth to the company in future too.
Solution 2: Sale of the patent of the drug to few other private competitors would definitely
solve the immediate problem of increased demand for the drug in the market but would lead to an
uprise in the state-market conflict hence making it difficult for Bayer AG to further function in the
US healthcare market. Moreover, the solution is feasible to some extent as it takes care of people
and process but fails to pursue consensus on plan and power.

Best Alternative:
Solution 1: The proposition here is to pursue solution one as it stands feasible in long and
short-term ensuring patent retention by the company and helping the government meet the
increasing demand of the market. Moreover, a feasible solution comprises of Plan (Government
and Market Cooperation), Process (Environment and Technology Consideration), People
(Marketing and Socio-Cultural Impact) and Power (Decision Making) which has been finding in
the right equilibrium here. Hence, pursuing solution one of optimizing the production and ensuring
state market cooperation along with pursuing a proper public campaign to combat fear would be
the best alternative to the available problem.
Implementation:
The implementation phase talks about four stages that will be pursued in lieu of our proposed
solution. The CEO and Chairmen of Bayer AG will arrange a meeting of cooperation with the US
government where they will convince the government with the adequate supply of the drug which
will be delivered in the market through the government but would be manufactured solely by Bayer
AG retaining the patent. The next step would be to optimize the production of the drug ‘Cipro’ by
the company ensuring optimal utilization of available resources. The third step in the
implementation phase would be a supply of the drug in the market by Bayer AG through the state
intervention. The step would stabilize the market and ensure that the government meet the
increased demand for the drug in the market. The fourth and the last step in the process would be
to organize an information savvy public campaign which will be run by the government ensuring
the support of media coverage. The step would ensure that the blurry image of Bayer AG would
be restored as the public hero and government as a responsible state entity.
Contingency Plan:

3
In case, the government disagrees on pursuing our solution of entrusting us with the supply and
buying from us then solution two will be pursued as a contingency plan. Here, Bayer AG will sell
the patent to a few private competitors ensuring a competitive royalty for the drug produced and
will achieve the aim of meeting the demand. Since the government’s aim of dissolving the patent
is to meet the increased demand by increasing the supply, it will be met by the company by the
proposed contingency solution. Moreover, the public campaign here would then be pursued by the
company on stabilizing a proper public image for brand benefits in the future.