Running Head: VIOXX SCANDAL CASE STUDY Diaz 1

Vioxx Scandal Case Study

Lebanon Valley College
Hector Diaz

Abstract
This case analysis will discuss about the recall of Vioxx pills and what important

factors should have been taken from the executive of Merck. The recall of Vioxx showed the
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importance of Merck’s customers and how the business should have made better decisions.

This paper will demonstrate different analytical tools that were used to determine the best

alternative of the executive of Merck. The research paper also describes the powers, interest,

and coalitions of stakeholders that are affected. The moral responsibility matrix explains the

responsibilities that Merck has for their stakeholders. The diagnostic typology tool is used to

describe the type of strategy that should have been use for Merck’s stakeholders. Three

objectives are stated to propose the situations that occurred in 2000 after the VIGOR report.

The consequence/decision matrix will help determine the best alternative to achieve the

objectives of the company. Lastly, the suggestive alternative is given and compare to the

actual alternative.
Keywords: Merck, Vioxx, ethics, customers, pharmaceutical, health, medicines

Vioxx Scandal Case Study

Merck was considered to be one of the most successful pharmaceutical companies of

the world. The company was also known to be ethical and socially responsible. On the other

hand, the Vioxx scandal had damaged the reputation of the company at the time. Vioxx was a

non-steroidal anti-inflammatory drug and a prescription painkiller (Vioxx Recall

Information). Merck had mislead doctors and patients to buying Vioxx, in order to increase

their revenue. Vioxx was considered to be the blockbuster drug, which meant that Merck was

gaining large amounts of revenue annually by marketing it successfully to doctors and

consumers. Direct-to-Consumer Advertising had increased the sales of Vioxx since it allowed
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the company to effectively advertise directly to the consumers. The great advertisements of

Vioxx attracted many consumers and doctors to buy the products.

The scandal that Merck faced was that Vioxx caused deadly heart attacks and strokes

to many consumers. Even before the drug was approved, there were some evidence that cast

doubt on the safety of Vioxx. The VIGOR study proved that Vioxx had caused five times as

many heart attacks compared to naproxen. The decision is now left to the executive of Merck

and the Food and Drug Administration (FDA). This paper will demonstrate the objectives

and alternatives that the executive of Merck should have developed after the results of the

VIGOR report.
Problem and Ethical Dilemma
The ethical issues that Merck faced in the Vioxx scandal was that they did not

communicate the health risks of the pills carefully and effectively to their consumers, but they

instead advertised to gain more revenue. This caused even more consumers to be at risk for

dangerous cardiovascular issues. Merck only advertised that Vioxx did well to the stomach

compared to naproxen. Merck was focused on trying to continue the increase of their revenue

because they were doing so well. They had financial fears that their sales would have

decreased if they had announced that Vioxx caused major health issues. They also feared for

their image restoration and legal fears for the company if they would have announced the

risks to the public.

The ethical issue of the company was that the company was only thinking about

themselves. The company did not demonstrate utilitarianism ethics, which was to focus on

providing the greatest good for the greatest amount of people (Stanwick & Stanwick, 2014,

p.7). There are three questions that Merck should have developed to solving the ethical

problems. The following questions should have been:

 What can we do to protect or prevent all of our customers who took Vioxx?
 How can we reduce the risk of heart attacks and strokes of all of our Vioxx
patients?
 How can we effectively communicate to our stakeholders about the health
risks of Vioxx?
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These questions should help Merck to make ethical decisions to prevent any issues

with their stakeholders and any financial debts that can occur if the executive makes the

wrong decision. The lack of transparency and honesty created unethical issues to the

stakeholders of the company. The ethical dilemma that Merck had was that they were greedy

and did not emphasize the dignity of their stakeholders. They should keep in mind that their

business can be greatly affected in the long-run. If the company fails to provide important

information of the activities that are happening within the business, then it will cost huge

amounts of money from lawsuits and many other expenses.

Stakeholder Analysis
The stakeholder analysis displays the stakeholders who were impacted, whether they

are market or non-market, their power, expectation, and coalition. By looking at these

aspects will help determine how important stakeholders are, what their abilities are, and how

the company can achieve or exceed their stakeholder’s expectations. This analysis will give a

good idea of concerns from the stakeholders and gather information about them to be able to

solve the unethical issues that are affecting them.

The stakeholders affected by the unethical behaviors made by Merck are the

shareholders, customers, and the government. The executive of Merck should have taken a

closer look of his or her stakeholders that were impacted by the company’s decisions.

Looking over the interests and powers would help the company to recognize and solve the

unethical actions that was done. Furthermore, understanding the coalitions of the stakeholders

will help to be more familiar with the consequences of decisions.

Stakehold Market Power Expectati Coalition

ers or on
Non-
Market
Shareholder Market Voting power- ability to For Merck If unethical behaviors
s stakeholde vote on major decisions to have an continue, the
rs for Merck. increase in shareholders and
ROI and customers will
enhance discontinue their
the involvement and lose
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reputation interest with the

of Merck. company.

Customers Market  Economic power-they For Merck If unethical behaviors

stakeholde provide the revenues to provide continue, the
rs of the company. prescription shareholders and
 Legal power- ability to drugs that customers will
bring suits for harmful will help discontinue their
prescription drugs. customer’s involvement and lose
 Informational power- certain interest with the
ability to provide health company.
feedback of the issues.
company, which can
be threatening of they
are not satisfied with
the products of Merck.
Government Non- Legal power- the ability For Merck The customers and
Market to enact and enforce to follow shareholders can
stakeholde laws and regulations and comply form a coalition with
r about the products that with the the government,
Merck sells. laws and which can cause the
regulations. government to enact
or regulate new laws
and regulations.
Figure 1.1- Merck’s Stakeholder Analysis
The shareholders are considered to be one of the most important stakeholders of any

public company. The interest of the shareholders is to receive dividends and capital

appreciation. By increasing the return of investment, this will make shareholders satisfy and

continue to buy shares of the company. The shareholders have voting powers that influence

the pharmaceutical company of Merck. The voting power of the shareholders is that they

have the ability to vote on major decisions such as acquisitions or problems that may occur

within the company.

The customers have economic, legal, and informational powers. Economic powers of

the customers are that they provide the revenues to the company. The legal power of

customers is the right to bring suit against Merck if the company continue to provide

medicines that cause health issues. Informational powers of customers are the ability to

provide feedback of the company, which can be threatening if they are not satisfied with the

medicines of Merck. Merck can potentially lose more customers, and sales will decline. The

company’s core values was to remember that medicines were for the people and not for the
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profits (Lawrence, 2016, p.475). Their values demonstrated that customers were very

important stakeholders. It is significant to note that customers were supposed to be their first

priority. However, the company did not have integrity as to put actions to what they were

saying.
The government is a non-market stakeholder that has legal power. They have the

ability to enact and enforce laws and regulations to pharmaceutical companies. The Food and

Drug Administration (FDA) enforced that drug companies should get their products approved

before going out to the market. The drugs must be examined and researched to be able to

provide efficient information and warnings about them. The government is a big player for

Merck since they have the ability to control and maintain certain actions about

pharmaceutical products. If the Merck Company does not comply with the FDA, their

business can collapse from unlawful and unethical activities.

Certain decisions that is made from Merck can form coalitions between all the

stakeholders. For example, if the company continues to ignore the problem of not effectively

communicating the risks of Vioxx, then it can later attract the media and influence the

behaviors of the stakeholders. Shareholders and the customers will form coalition and can

discontinue their involvement within the company. They can also create coalitions with the

government, which then can enforce or enact laws and regulations that will impact the

business. These decision impact all the stakeholders since shareholders will stop buying

stocks, customers will no longer buy from Merck, and the government can change the way

the company operates.

Moral Responsibility Matrix
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Figure 1.2- Moral Responsibility Matrix

The moral responsibility Matrix demonstrates the economic, legal, ethical, and

voluntary/discretionary responsibilities that Merck has for their stakeholders. The

stakeholders focused were on the shareholders, customers, and the government. The

objectives that come from the moral responsibility matrix are to increase profits, to decrease

the risks of health issues from their products, and attract more customers. These objectives

were developed based on the moral responsibilities that Merck has for their shareholders,

customers, and government. These objectives should be achieved to satisfy all the

stakeholders that are examined from the moral responsibility matrix.

Diagnostic Typology Tool
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Figure 1.3- Diagnostic Typology Tool of Merck’s Stakeholders

According to the Diagnostic typology tool, Merck’s customers and the government are

a mixed blessing (type 4). The executive must use a collaborating strategy to solve issues that

relate to these stakeholders. The customers and government are a high threat and have a high

cooperation with the organization. For the shareholders of Merck, they represent as being

supportive stakeholders (type 1). An involving strategy should be used to solve any problems

that relate to the shareholders. The shareholders are a low threat to the company, but have a

high cooperation with the organization. The executive should develop both a collaborate type

and involve type of alternatives. This tool proves that with those types of alternatives can

save the company from becoming unethical or immoral. The alternatives developed were to

remove Vioxx from the market, reformulate Vioxx, and replace Vioxx with a new drug.
Recommended Objectives
The three objectives that the executive of Merck should use are to increase the

company’s profit, reduce the risks of cardiovascular problems, and attract more customers.

These objectives should be achieved by enhancing the integrity and transparency of the
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company. This was created from the moral responsibility matrix. Understanding the

responsibilities will help the firm make better decisions in order to achieve their objectives.
The first objective is to increase the profit of the firm to at least ten percent. The goal

of the company is to become profitable, however it should be done the right way. Merck was

so driven into making so much sales of Vioxx that they did not even want to exclusively

deliver the bad news about the drug. The company continued to sell and market the product

knowing that research proved it was causing cardiovascular problems. Merck compared it to

naxproxen, but made it seemed as if Vioxx should be concentrated on only the benefits of

arthritis sufferers who were at risk for ulcers. The FDA approved the drug for rheumatoid

arthritis. As a result, the company was able to generate billions in sales. In contrast, Merck

should make sure that they are gaining it the ethical way by selling safer drugs and being

moral (through integrity and honesty) to the stakeholders.

The second objective was to reduce the cardiovascular risks that Vioxx caused. This is

essential as it prevents to further the health problems of the patients who take Vioxx. All of

the stakeholders are impacted by the problem of giving patients cardiovascular issues. For

example, if the firm finds a way to reduce the risks then the company will be in good hands

and the shareholders will be satisfied. In addition, the government would not have to take any

legal actions to the firm either. This is a very important objective since this was the issue that

led to the ethical dilemma of the firm.

The third objective was to attract more customers. Merck’s purpose of the business is

to provide medicine to the people. By attracting more customers, the organization has the

opportunity to maximize profits, maintain a good image, and develop innovative products.

Bringing in more consumers to the business means more responsibilities to be careful for the

health risks caused by the medicines. When the firm attracts more customers, they should

always try to keep a positive image. Making the right decisions and following up with

feedback should always be implemented to gain competitive advantage and deliver the best

products for the customers.

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Appropriate Alternative Solutions

The executive must analyze the objectives and alternatives to be able to determine

what is best for the company in the long run. The following alternatives proposed in this case

was that the company should remove Vioxx entirely from the market, reformulate Vioxx by

adding an agent to prevent blood clots, and replace Vioxx with a new drug (after extensive

research and approval). In the following consequence/decision matrix, Figure 1.4 shows the

objectives and alternatives along with the impact scores and expected consequences.
Taking responsibility, being truthful, and fulfilling commitments are examples of

reaching a high transparency and integrity for the company. Transparency ensures that all

accurate and truthful information of the warnings for any health and safety issues of the

products should be told to all stakeholders of the firm (Stanwick & Stanwick, 2014, p.15).

The transparency and dignity principle should be followed to become more ethical in their

decision making process. This should be done by effectively communicating with the

stakeholders and letting them know about what the results of VIGOR report was. Vioxx was

too dangerous, and Merck should have realized the harm that it was causing to the patients

and how much it will negatively impact the reputation and operations of the company. The

executive should have an ethical responsibility to act in an honest manner to be truthful and

forthright with their decisions. The company should also take the initiative to be loyal to

their stakeholders and avoid the benefits of self-interest. With integrity, the actions of the

business will speak louder than words. Merck is responsible for the health of all the patients

who took Vioxx and now the firm must make significant decisions on how to improve.
Consequence Matrix and Decision Matrix
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Figure 1.4- The consequence/ decision matrix demonstrating the alternatives and objectives.
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Figure 1.5- Actual alternative that Merck.

The consequence decision matrix demonstrates the weighted objectives and

alternatives that were suggested. The alternative with the highest weighted score was to

replace Vioxx with a new drug (after extensive research and approval). The company should

have removed Vioxx from the market and replaced it with a better pill. The problem that

Merck did was that they were researching and studying Vioxx while it was still in the market.

If the company makes another drug that has been researched and successfully passed with

positive results, then they can have a higher chance of achieving the three objectives. In order

to do this alternative, the company should first effectively announce the risks of Vioxx in

complete details and remove it from the market. Then, plan for a new drug and can make it

the new blockbuster drug.

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Compared to the actual alternative that Merck took, it would have been better for

them to make a new drug. Merck did not want to announce about the health issues of their

products since they thought it would have cause a negative effect to the company’s profit.

However, Merck should have realized that in the long run they would be worst off. The

weighted average of the actual alternative was .56, which shows how inadequate their

decision was.
The ethical rationale of developing a new drug and selling it after extensive research

is that the company will demonstrate utilitarianism. Utilitarianism will show that the

company will provide a medicine for the benefit of the greatest number of people. Merck

acted more on pure self-interest to gain profits for the company. By selling a drug that has

been extensively researched and approve will let stakeholders know that Merck is focused on

providing the good for their customers. This will also act in accordance to virtue by being

moral and showing integrity. This alternative will allow the company to reduce the risks of

heart issues that Vioxx caused and increase their profits.

Conclusion
Overall, the most suggestive alternative for the executive of Merck to use is to make a

new drug and sell it in the market after it has been extensively researched and approved from

scientists. The company must take immediate action before the situation gets worse. During

2000, the company still had the opportunity to implement an alternative but they did nothing

about the situation. The company only wanted to continue their profitability. A new drug

could have improved the company in the long-run. The moral responsibility matrix

demonstrated that the objectives of the company should be focused on what the economic,

legal, ethical, and voluntary/discretionary responsibilities of the stakeholders were. The

Diagnostic typology helped develop the strategies to determine how to achieve the objectives.

Merck solely sought to focus on their patients and not the profit. Conversely, they ended up

just fulfilling their self- interest of maintaining a maximum profit in the pharmaceutical

industry. Merck demonstrated to have one of the worst recalls in the pharmaceutical industry.
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References
Holmes, P. (n.d.). Merck's Vioxx Scandal Highlights Pharma Ethics Issues. Retrieved

November 8, 2015, from http://www.holmesreport.com/latest/article/merck's-vioxx-

scandal-highlights-pharma-ethics-issues
Lawrence, A. (2006). Business and Society, Stakeholders, Ethics, Public Policy. (14 Ed.).

McGraw-Hill Irwin.
Saul, S. (2008, April 15). Merck Wrote Drug Studies for Doctors. Retrieved November 6,

2015, from http://www.nytimes.com/2008/04/16/business/16vioxx.html?_r=0

Stanwick, P., & Stanwick, S. (2014). Understanding business ethics (2nd Ed.). Sage.
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Vioxx Recall Information. (n.d.). Retrieved November 8, 2015, from

http://www.drugwatch.com/vioxx/recall/