FM-BINUS-AA-FPU-78/V2R0

BINUS University

Academic Career: Class Program:

Undergraduate / Master / Doctoral *) International/Regular/Smart Program/Global Class*)

√ Mid Exam  Final Exam Term : Odd/Even/Short *)

 Short Term Exam  Others Exam :

√ Kemanggisan √ Alam Sutera √ Bekasi Academic Year :

 Senayan  Bandung  Malang 2019 / 2020

Faculty / Dept. : Faculty of Economics and Deadline Day / Date : Senin / 20 April 2020
Communication & School of Information Time : 13:00:00 WIB
Systems / Accounting - Accounting
Technology – Finance - Accounting &
Information Systems
Code - Course : BUSS6131 / ACCT7076 – Ethics and Class : LA53, LB53, LC53,
Corporate Governance LD53, LE53, LF53,
LA55, LB55, LA90,
LB90
Lecturer : Tim Dosen Exam Type : Online

) Strikethrough the unnecessary items
The penalty for CHEATING is DROP OUT!!!

Name : Ikhsan Uiandra

Class : LB53
NIM : 2301896803

Case 1 (Weight 50)

Just because a business practice is legal doesn’t mean it’s ethical. But does that mean it’s OK for
CEOs to maximize profits by following perfectly legal business practices that cross the line into
unethical waters? Some business executives would say, “yes.” Their stance is that a CEO’s main
responsibility is to maximize profits and shareholder value within legal parameters—even if that
means having low ethical standards. Others would argue that CEOs have a social responsibility to
conduct business in an ethical manner even if that means securing a slightly lower return on investment.
Who’s right? Does it depend on the industry?
One of the most controversial business decisions in recent years was when Martin Shkreli, former
CEO of Turing Pharmaceuticals, raised the price of the drug Daraprim by 5,000%. This move
increased the price from $13.50 per pill to $750 per pill overnight. Daraprim is used to treat
toxoplasmosis, which can affect pregnant women, people with HIV and others with weakened immune
systems. Shkreli’s argument was that by raising the price of the drug, Turing would be able to put
money into developing better treatments for toxoplasmosis. The FDA approved Daraprim in 1953.

Ezekiel J Emanuel, MD, PhD, chair of the department of medical ethics and health policy for the
University of Pennsylvania, agrees that what Shkreli did was no different than what other
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Bambang Leo Handoko (D5271) and sent to Department on MAR 22, 2020
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 FM-BINUS-AA-FPU-78/V2R0
pharmaceutical companies have done for years. For example, Valeant Pharmaceuticals International Inc.
acquired cardiac drugs Isuprel and Nitropress and quickly raised the prices by 525% and 212%,
respectively. Shkreli raising the price of Daraprim by 5,000% may be considered more brash. It was
also perfectly legal. And unethical, says Emanuel. Was it wrong, though?
The public certainly thought it was wrong. Shkreli, who was arrested for securities fraud in
December 2015 from his tenure at Retrophin, another biopharmaceutical company, was immediately
vilified. Even former Valeant CEO Michael Pearson had a change of heart regarding his own business
decisions. He recently testified to a Senate committee hearing that he regretted pursuing acquisitions
where the rationale for the deal rested mostly on increasing the prices of the medicines. But Shkreli
stands by his decision. During a healthcare summit hosted by Forbes, Shkreli was asked what he’d
do differently if he could go back in time prior to his decision to raise the price of the drug. He replied
that he should have raised prices higher. “I could have raised it higher and made more profits for our
shareholders. Which is my primary duty."
Kenneth L. Davis, MD, president and CEO of the Mount Sinai Health System, says the issue
of drug prices boils down to a values issue of management that has to weigh the widespread
availability and profitability of a drug. “I am well aware of how much drug companies have to spend on
failed drugs before they have one that is a success. I am more than willing to say that that has to be
accounted for when one contemplates a fair return on investment,” he says. “But that fair return on
investment has to keep in mind that we are still in a business of healthcare and curing disease, which
can’t be restricted to only some people who can afford it. There is a social responsibility there too.”
Question:
Should the healthcare industry have a different set of ethical standards to follow than other industries
because lives are at stake? Or should ethics drive business decisions more than profitability regardless of
the industry? Briefly explain your thoughts and view!

Answer Case 1 :

In my view healthcare industry should have ethical standards because a business if it has good ethical
standards then the business can stand in the long term. With the business ethics will have a good image
for customers, gaining the trust of customers, can benefit more maximally, and the company attention
to the interests of togetherness. If it does not have ethical standards in business then businesses can
generate short-term financial gains but also risk damaging their long-term reputations. Things done by
Martin Shkreli raise the price of the drug Daraprim 5000% done by Martin Shkreli It shows low
ethical standards. The task of Martin Shkreli raises the price there is a positive thing, the company's

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 FM-BINUS-AA-FPU-78/V2R0
sustainability increases and the company can provide satisfaction for shareholders, the negative is that
the image of the company becomes less good if the community does not accept with the price increase.
The price of the share is very sensitive can rise or can come down, as the case above the stock of the
company Valeant dropped to 91% due to a very high price increase of the drug.

So companies in the field of health should prioritize business ethics and social responsibility compared
to profit for themselves. Because life or lives cannot be replaced. If the company has decreased profits
there is still another way to fix it. But the man lost his life there was no way to return his life.
Therefore, humanity is more important than the company’s profits.

Verified by,

Bambang Leo Handoko (D5271) and sent to Department on MAR 22, 2020
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Case 2 (Weight 50)
‘We’re in Business of Shareholder Profit, Not Helping The Sick’ Says Turing Pharmaceuticals’ CEO
Big Pharma CEO admits that t hey have no intention of healing sickness. Last July, Turing
Pharmaceuticals’ CEO Martin Shkreli became a lightning rod for growing outrage over soaring
prescription drug prices after he raised the price of a newly-acquired drug from $13.50 to $750. But
Shkreli, who earned the title ‘the most hated man in America,’ is not the only one acquiring drugs
currently on the market to raise their price and, in turn, rapidly drive up their stock price.
J. Michael Pearson, the CEO of Valeant Pharmaceuticals has enraged the internet after
saying in a recent interview with MSNBC that “his company’s responsibility is to its shareholders, not the
customers who rely on his drugs to live.
“My primary responsibility is to Valeant shareholders. We can do anything we want to do. We will
continue to make acquisitions, we will continue to move forward,” Pearson said. He added: “If
products are sort of mispriced and there’s an opportunity, we will act appropriately in terms of doing
what I assume our shareholders would like us to do.”
Already this year, Valeant has increased the price of 56 of the drugs in its portfolio an average
of 66 percent, highlighted by their recent acquisition, Zegerid, which they promptly raised 550 percent.
Not only does this have the unfortunate side effect of placing the price of life-saving drugs out of
reach for even moderately-insured people, but it has now begun to call into question the sustainability
of this rapidly- spreading business model.
In an interview with CNBC, Pearson defended his business practice of acquiring drugs instead
of investing in research and development.
“My primary responsibility is to Valeant shareholders. We can do anything we want to do. We
will continue to make acquisitions, we will continue to move forward.”
Since being named CEO in 2008, Valeant has acquired more than 100 drugs and seen their stock
price rise more than 1,000 percent with Pearson at the helm. But it appears that all of the public
backlash over price gouging of prescription drugs, which has included both Hillary Clinton and Bernie
Sanders taking a stance against the practice as a platform in their respective presidential campaigns,
has placed the practice under tremendous scrutiny.
The House Committee on Oversight and Government Reform is planning to issue a subpoena
for information on recent price increases from both Pearson and Shkreli and that pending investigation has
sent Valeant’s stock price tumbling more than 27 percent in the last month, which may have
 shareholders concerned enough to wonder if Pearson pushed too hard for too long.

Question:
The CEO in above case clearly differentiate between primary and secondary social and nonsocial stakeholders
in a business situation.
1. In your view, was there anything wrong with the Corporate governance of Valeant? How about the
Management of their stakeholders?
2. Briefly explain also your recommendation for the governing bodies of Valeant, in case in future
Valent must confront semiliar situation.

Answer Case 2 :

1. I think there is wrong with the governance of Valeant company, because from the case above the company
raises the price of these drugs can increase the profit for the company, but for the community they
strongly disliked the management of the company Valeant that has raised the price of the Obar. The
industry is more concerned about the benefits compared to customers who have relied on the drug.

2. your recommendation for the governing bodies of Valeant

 The company must demonstrate a good image for its customers

 Companies do not only take advantage of the benefits that can be enjoyed by themselves, but the
company should be more concerned about customers who already have a product that has been
issued by the company.
 Companies should also know what happens if they raise the nutrients of a product
 Company should be able to provide full trust for its customers

☺DO YOUR BEST AND GOOD LUCK ☺

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