Glaxosmithkline

GlaxoSmithKline

1. Who are the stakeholders in this case? Which are primary, and which are secondary? What influence do they have?

Stakeholders for GlaxoSmithKline include the following: Employees; stockholders; creditors; suppliers; customers (both prescribing physicians and end users); retailers (domestically and internationally); activist groups (such as the Minnesota Senior Federation, the National Association of the Terminally Ill, the Coalition for Access to Affordable Prescription Drugs, the Massachusetts Senior Action Council, and the American Association for Retired Persons); foreign governments (such as the German Health Ministry and the European Union); federal, state and local governments and regulatory agencies (such as the Food and Drug Administration, Medicare, and the U.S. Congress); the general public; and, the media.

Primary Stakeholders. Primary stakeholders affect the firm's ability to carry out its primary purpose of providing goods and services to society. GSK's primary stakeholders are:

1. Employees;

2. Stockholders;

3. Creditors;

4. Suppliers;

5. Customers;

6. Retailers; and,

7. Health insurance providers.

Employees. Examples of employees include: research scientists, manufacturing personnel, and corporate management. They influence GSK by providing labor, scientific discovery and managerial talents to the firm with an expectation of fair compensation for their efforts.

Stockholders. Examples of stockholders include: institutional investors and private investors. They influence GSK by providing capital to the firm in return for dividends and stock price appreciation.

Creditors. Creditors include banks and other financial institutions. Creditors provide short and long-term loans and are repaid with interest.

Suppliers. Examples of suppliers include chemical companies and packaging companies. These firms provide the inputs for the manufacturing and packaging of the drugs.

Customers. Examples of customers include prescribing physicians and patients. Prescription drugs (78% of GSK's 2002 sales) must be prescribed by a doctor. Physicians are more concerned with drug efficacy and safety than the price of the drug. Patients can only obtain the product if prescribed by a physician.

Retailers. Examples of retailers include online pharmacies and traditional pharmacies. Pharmacies distribute the drugs to the patients as prescribed. Online pharmacies are not bound by physical location and thus serve patients that are geographically distant and/or across international boundaries.

Health Insurance Providers. Insurance providers include firms such as Blue Cross/Blue Shield or Medigap insurers, and government programs such as Medicare, Medicaid. Health insurance providers and government programs establish a set price for payment for drugs. This limits the ability of firms like GSK to create programs to provide lower priced drugs for the poorest individuals.

Secondary Stakeholders. Secondary stakeholders represent people or groups in society that directly or indirectly are impacted by the firm's primary activities and decisions. Secondary stakeholders include:

1. Federal, state and local governments;

2. Foreign governments;

3. Social activists groups;

4. Media; and,

5. General public.

Federal, State and Local Governments. This would include the Food and Drug Administration (FDA), Congress, state legislatures and other governmental entities. The FDA is responsible for ensuring that drug products available in the U.S. were safe and effective. The FDA established the policy on drug importation and determined the level of enforcement for the policy. The FDA shifted its stance on personal importation in reaction to the decision of GSK to limit drug shipments to Canadian pharmacies. Elected officials of Congress actively encouraged elderly to violate the FDA policy prohibiting importation of drugs from Canada by sponsoring bus trips for the express purpose of obtaining cheaper drugs. Congressional officials also introduced bills that would penalize GSK for their actions. Congressman Gil Gutknecht encouraged the Department of Justice to pursue antitrust action against GSK.

Foreign Governments. Examples of foreign governments that influence GSK are the German Health Ministry, the European Union, and the Canadian government. The German government was successful in forcing the major drug companies to create a trust fund to subsidize drug costs paid by the nationalized health system. Many European governments operated nationalized health systems that had the ability to enact governmental price controls for drug products. The European Union also had similar regulatory capabilities as the FDA and could enact policies to ensure drug safety and efficacy. The health system in Canada was nationalized and price controls were responsible for drug price differentials between the U.S. and Canada.

Social Activist Groups. Examples of social activists groups that influence GSK include the Minnesota Senior Federation, National Association of the Terminally Ill, Coalition for Access to Affordable Prescription Drugs, the Massachusetts Senior Action Council, and the American Association for Retired Persons (AARP). Other groups are shown at the bottom of the ad from Figure 1 of the case. These activist groups were primarily interested in providing affordable drugs to the elderly. The groups varied in size and effectiveness, but were considerably more powerful than individual consumers. The groups organized boycotts of GSK (as demonstrated by the ad) and were very vocal in the media. The groups had significant resources at their disposal as evidenced by their use of media advertisements against GSK. The AARP automatically sent magazines to any American over aged fifty, thus providing the organization with the means to easily communicate the organization's stance on the GSK situation.

Media. Examples of media organizations that influence GSK include newspapers such as the Wall Street Journal and the New York Times and television news networks. The media exerts its influence in two ways--through running paid advertisements (such as the one