MERCK & CO CASE SOLUTION

Krishna Chaitanya A | 123 | PGDM Finance

Merck must go ahead with the commercial development and distribution of the drug Mectizan. Merck as a company believed in making medicines for the people. It is not for the profits. The profits follow is what was said by the son of the companys founder, George W.Merck. River blindness, formally known as onchocerciasis, was a disease labelled by WHO as a public health and socioeconomic problem of considerable magnitude in over 35 developing countries throughout the Third World. There were millions of people at risk in Africa, Middle East etc. But the problem was that the people affected by this disease are so poor that they have very limited ability to pay even a small amount for drugs or treatment. If in case, Merck goes ahead to produce and distribute this drug, then the company needs to simple give the drug away, since most of the people doesnt have the purchasing capacity. This move by the company can be projected as a major Corporate Social Responsibility (CSR) activity. This could be justified by a number of ways that mostly come under value chain social impact Value Chain Social Impact 1. The value chain of a pharmaceuticals company consist of clinical trials in some stage. In this the company has to conduct serious trials to prove or to check the suitability of the compound. There could be cases where the trials could go completely unexpected and produce drastic results. In the case of Merck, there were two drugs, DEC and Suramin which were useful in killing he parasite. But both these drugs had severe side effects in infected individuals and even cases deaths. So, if we analyse this example, there were some serious damages done to the community during the process of Research. These damages could be part of developing drugs. So, Merck could use this initiative of distributing their drug, Mectizan, for nothing among the needy in third world countries to show their social responsibility. 2. Looking Inside Out I. Dr. Vagelos believed that the company should process because the project would further Mercks knowledge of parasitology. It shows that there would be a significant addition to the knowledge levels and hence, enhances the human resource of the company. There would be an up gradation in terms of the technology too for the company. Also, there would be a better credibility in terms of utilizing people for trials. There would be more willingness and less resistance as Merck has delivered a medicine to the third world for a disease that is plaguing millions. II. WHO was unwilling to partner with Merck and also there were some resistance from the scientists at WHO for Mectizan. But with successful implementation and distributing the drugs for nothing to millions across the globe would help build a great positive relationship with WHO. With such a social responsibility shown by Merck now, there would be greater support from WHO to the future initiatives of Merck and also could bring in greater funding in the years to come.

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Merck may not earn tangible benefits from this distribution of Mectizan. But it will certainly earn a huge goodwill among the various stakeholders. Merck has very less revenues from third world countries. But with the success of Mectizan, there would be greater support from the governments of third world countries and this could prove very effective in future for the company. There could be support and funding from these governments.

3. Good Citizenship- As discussed earlier in clinical trials, the company can mitigate the harmful activities in its value chain. Giving back to the society is a good thing particularly when there are harmful activities involved in clinical trials on human beings. 4. Responsive CSR Transforming value chain activities to benefit society. Again in this too the CSR activities are required for the company. In this, the company can show this activity as CSR and at the same time get benefit in its value chain activities.

Also the activities of Merck can also be justified by looking at the explanation given by Michael Porter as Four prevailing justifications for CSR. A. The Moral Obligation - Merck is world leader in drug discovery and has earned huge profits from the society. Merck should achieve commercial success in ways that honour ethical values and respect people communities, and the natural environment. Also, in line with its philosophy that the company believes in making drugs for people. B. Sustainability This single act can give the company as great long term competitive advantage in terms of the goodwill it will gain. It would also give the ability to make entry into various third world markets and increase the percentage share of revenues from these areas in the long run. C. Licence to Operate By showing such a CSR, the company can leverage on this act for many more future endeavours. Hence this could become a great licence to operate, especially in third world markets. D. Reputation - Developing a positive reputation with the stakeholders always comes handy in the long term. Merck can market any product at a premium price, if the customer holds Mercks positive image in his mind. The disease is mostly spread in developing countries which will be big markets for Merck in future. Hence developing brand equity in consumers mind will give a competitive advantage.