Vioxx

Case Study Analysis 1: Vioxx and Celebrex

My name is Ray Gilmartin, and I am the CEO of one of the world's largest pharmaceutical manufactures, Merck. Through the 1990's my company developed a new pain relief drug known as Vioxx. Similar drugs were available at the time, but these alternatives caused serious damage to the user's stomach lining. Vioxx was designed to treat the user's pain, without having the negative impact that drugs such as Tylenol have. After Vioxx was approved by the Food and Drug Association (FDA) in 1999, the product was released onto the market. In 2003 Vioxx was able to sell US $2.5 billion world-wide, which represented 11% of Merck's revenue. After funding a study of long-term side effects of Vioxx, I have learned that after 18 months of use there is a substantial increase in the risk of a heart attack or stroke. The study has shown that Vioxx has caused up to 140, 000 additional cases of heart disease in the U.S. alone, of which 44% were fatal. My company has a direct rival in Pfizer, and is in competition with their version of the drug, known as Celebrex. It is very likely that Celebrex has the same side effects, but it is unknown what their course of action will be. I now must decide whether or not to remove the product from the market.

There are a number of stakeholder groups that will be impacted by my decision regarding this case. Firstly, as I am the CEO of Merck, my job security will be significantly impacted by a large scale decision such as this. If I decide to leave Vioxx on the market, and it is discovered that it is potentially fatal, then it is very likely that I will lose my job. As CEO, my decision will also directly impact both the employees and stockholders of Merck. If I remove Vioxx from the market, then the company will lose a great deal of revenue. The financial loss incurred as a result of this decision will most likely lead to downsizing in the company, and therefore a great number of employees will lose their jobs. A loss of revenue of this magnitude would also adversely affect stock prices, which would mean less profit for stockholders. The group that will be impacted most by my decision will be the consumers of Vioxx. If I allow consumption of this potentially fatal drug to continue, then I will be risking the lives of the individuals who use the product.

Pfizer and the FDA represent two other groups that have a secondary interest in my decision. Pfizer's drug Celebrex is in direct competition with Vioxx, and therefore the decision of whether or not to remove Vioxx will impact the sales of their drug. However, if it is revealed that Vioxx has negative long term side effects, it may also be discovered that Celebrex does as well. Both of these scenarios impact the sales of Pfizer and will influence the share price of the company. If I were to remove Vioxx from the market, then Celebrex would become the drug of choice for many consumers. This increase in sales will increase Pfizer's share price and positively benefit the shareholders of Pfizer. The FDA will be closely scrutinized if information regarding the harmful side effects of Vioxx is revealed. Their organization is in charge of determining whether or not products on the market will be detrimental to consumers, and this oversight will be looked upon poorly.

The moral problem in this case can be defined as: is it permissible for a company's executive to sacrifice consumer safety in order to maximize the company's profits and appease shareholders. This is an ethical issue because it infringes upon the right of consumers to not have harm done to them by another. The ethical issue of whether it is unjust for a company to make profits a higher priority then the consumer's welfare also arises with this scenario. There are two primary alternatives for myself in this situation. The first alternative adheres to the strategic approach to management, which is having management's primary orientation be toward the economic interests of shareholders. In this scenario I would choose to leave Vioxx on the market in order to keep sales stable and prevent a decrease in share price. The second alternative would follow the pluralistic approach to management, which is recognizing the responsibility of management to optimize profits, but not at the expense of stakeholders. In this situation I would remove Vioxx from the market, meaning that I would be sacrificing sales in order to protect the welfare of the consumer.

If I were to choose the alternative in which I left Vioxx on the market, I would be putting at risk the safety of Vioxx's vast consumer base. There are hundreds of thousands of people who use this product, and I would be sacrificing their welfare in order to ensure profit for my company. Assuming that the harmful nature of Vioxx was not discovered then this situation would result in job security for myself, as well as a stable income for the company. This continued prosperity for the company would protect the jobs of the employees at Merck and also ensure the livelihood of the investors in the company. However, if I were to remove Vioxx from the market, I would be protecting the safety of the consumer but at the same time place the financial welfare of the company at risk. Because Vioxx represents such as a substantial amount of Merck's profits, it would be devastating to the company if production of the drug were to be halted. This loss of revenue for the company would reflect poorly on my leadership abilities and could very well lead to the loss of my job. The job security of many other individuals at the company would also be at risk, as a decrease in profits of that degree would result in downsizing within the organization. The financial impact would also unfavourably affect the shareholders of Merck, as the removal of Vioxx would decrease the worth of their stocks.

Because my decision in this case affects such a large number of people, I am going to employ a utilitarian approach. This analysis will take into consideration only the amount of happiness or unhappiness that is caused, and not value anyone's happiness more then anyone's others. As CEO of Merck, I have a great degree of interest in how this situation is resolved and therefore I should choose an ethical theory that does not allow any of my bias to influence the outcome. In the fall of 1982 James Burke, the CEO of Johnson and Johnson was in a situation very similar to this. The issue facing Mr. Burke was that seven people had died as a result of cyanide being injected into Extra Strength Tylenol capsules. In this situation, Mr. Burke decided to spend the $100 million that it would cost to recall the product in order to protect the welfare of the consumers. His decision