The Crisis The USA based pharmaceutical giant Merck, introduced the anti arthritis drug 'Vioxx' during early part of 1999. It is a prescriptive drug. Initially, a few cases of deaths by heart attacks were noticed and some doctors and medical scientists suspected it may be due to Vioxx. Unfortunately, like many other crisis's, it was not taken seriously for reasons not known. It takes a billion dollars to carry out R & D and come out with new molecule in the pharmaceuticals industry. However, pharmaceutical companies make huge profits and recover the investment and development costs within a year or two by aggressive marketing. But over a period of 5 years, around 28,000 people died out of the estimated 20 million customers worldwide. The biggest problem in the drug industry is that you will soon have cheaper generic versions and most companies try to maximize their profits before the patents expire. It is this mad rush to beat the clock and the unethical competition in the marketplace that leads to many a wrong doings. Very few companies and countries respect IP, patent and copyright laws. The drug was pulled back from the shelves by Merck in 2004. This recall cost is estimated at US $30 billion. It may appear to be very big, but it is only twice the annual salaries of the people employed by the drug industry in USA. The highly paid and trained medical reps sell the medicines to the Registered Medical Practitioners. Prescriptive and ethical drugs are sold in this manner all over the world as advertising is not permitted.
Merck, already under fire for its Vioxx scandal is now undergoing criminal investigation by the Justice Department. It is also being investigated by the Securities and Exchange Commission. The SEC is wondering whether Merck misled investors by failing to disclose facts concerning the harmful nature of its drug Vioxx. The estimated liability from lawsuits that are now forming against Merck is $20 billion, and yet Merck has only $630 million in insurance coverage for product liability. This also means if the Vioxx lawsuits proceed, Merck is likely to come up at least $9.4 billion short and that of course is going to harm Merck's stakeholders. It leads to the rather startling conclusion that Merck may be facing lawsuits not only from its customers, but also from its shareholders who have not only been financially harmed by an almost 40% drop in the stock price of the company, but who were no doubt shocked to read in the Wall Street Journal that key Merck executives were aware of the heart attack dangers of Vioxx years ago. Merck has also been under fire by the Lancet, a prestigious medical journal in the UK, which published a clinical study analysis on past data revealing that Merck should have been fully aware of the dangers of its Vioxx drug several years ago and should have pulled the drug from the market at that time.
Crisis Management The above is a typical crisis and handled badly. It also involves the question of business ethics. In business, most crisis's start small like forest fires but become big, if not properly handled. As against this Johnson & Johnson handling of the Tylenol crisis is a classic study on excellent crisis management.
Conclusion and parting words It is rather a sad development. The entire medical community has become too money minded, like anyone else. The Hippocrates oath seems to have been forgotten. The medical doctors charge very high fees for consultation and then prescribe drugs of their favorite companies. They ask the patients to undergo all types of laboratory tests and some of them quite unnecessary. It is a fairly well known secret that the pharmacies and labs give kickback to the doctors for the business generated, especially in developing countries. A week ago, the Nigerian Government has filed a 2 billion dollar damage suit against the US drug giant Pfizer for testing its drug 'Trovan' during the Meningitis epidemic in 1996, which led to the death of 11 children and 250 children disabled for life. The scenes of the children affected as shown on Al Jazeera TV was heart wrenching. There is too much of corruption and/or unethical practices in the drug and healthcare industry. It is for the drug and healthcare industry to decide whether making money by experimenting, disabling and killing people is right or wrong.
Added on November 11, 2006 The following headlines from New York Times was received by us which probably settles the matter.
Breaking News Alert The New York Times Friday, November 9, 2007 -- 12:09 AM ET ----1 Merck Settles Vioxx Lawsuits for $4.85 Billion Three years after withdrawing its pain medication Vioxx from the market, Merck has agreed to pay $4.85 billion to settle 45,000 lawsuits by people who claim they or their family members suffered injury or died after taking the drug, according to a person with direct knowledge of the matter.
-------------------------------------- The above is an abridged version of our original article published in March 2006 but revised and updated. Complete analysis of the crisis, its ethical implications and probable actions that could have been taken by all stakeholders has been discussed in the same. Members of Madgopes.com can access it from our article index page.
References:
We have referred to a number of articles on the Internet but the most important points are taken from www.mencola.com maintained by Dr. Robert Mencola, who published a warning in the year the drug was launched. Our grateful acknowledgement to all of them. The New York Times has covered this crisis in its entirety and those interested can search its archives for more details.
Copyright. October 2007. www.madgopes.com . All rights reserved.
To learn more about this author, visit Madhavan T Gopalachary's Website.
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Madhavan T Gopalachary
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Madhavan Gopalachary, nick name "madgopes"
(g pronounced as in go) given by IIT
classmates, is a Mechanical Engineer and
an alumnus of Indian Institute of
Technology, Madras having passed out
specializing in IC Engines &
Thermodynamics.
He has nearly 35 years of experience in
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various organizations and at various
levels before becoming a CEO. His last two
professional assignments were at CEO level
before embarking to start management
consultancy business on January 01, 1998.
He has worked for British, Swedish MNCs as
well as very large Indian business houses.
He has spent a large portion of his time
from June 1998 till date in East African
Countries practicing as an independent
Management Consultant.
More details can be obtained at the
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lting.biz/
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