Case Analysis

IDH 3034 Dynamic Tensions Fall 2019

Case Analysis #1 DUE September 25, 2019 by 11:59 pm (Canvas upload) 4-page maximum (double-spaced) 100 points (10%) Instructions: Please read and analyze the following case, A Pharmaceutical Executive’s Dilemma: Balancing Competing Demands of People and Profits using the case analysis outline we have been working with. Be sure to link/discuss relevant concepts from our discussions/readings and consider/address the following questions within your case analysis:

1. Beyond the estimated development costs, are there other costs to WittPharm if you choose to pursue the drug? If yes, what are they? Are there costs of not pursuing the drug? If yes, what are they?

2. Are there any potential benefits to WittPharm of pursuing the drug? If so, what are they?

How easy or difficult would it be to quantify any of those potential benefits?

3. What would your mission and values suggest that you do?

4. The final decision rests in your hands as WittPharm’s CEO. Based on the previous questions, do you pursue the drug? Why or why not?

5. Who are the winners and losers as a result of your decision?

CASE

A Pharmaceutical Executive’s Dilemma: Balancing Competing Demands of People and Profits

Introduction You are the chief executive officer (CEO) of WittPharm, a global, research-driven, publically [sic] traded drug manufacturer. WittPharm has a history of creating breakthrough drugs that improve lives. Obviously, as CEO you would like to see this continue. However, what you would not like to see is WittPharm’s share price continuing to lag behind its competitors and broad market indices, as it has done recently. Over the past three years, your stock is down about 12%, while the market overall is up about 30%. As CEO, this is very troubling, since one of your key tasks is to increase shareholder wealth. One morning, your chief scientist, Dr. Joe Robertson, comes to you claiming to have possibly (and accidentally) found a cure for a horrible disease affecting tens of millions of people, with tens of millions more people at risk of contracting it. The disease ultimately leads to serious impairment or even death. It is very painful and renders the afflicted individual helpless. It is truly one of the

IDH 3034 Dynamic Tensions Fall 2019

world’s most dreaded diseases. Dr. Robertson believes that a cure is near, but finding out for certain will cost a significant portion of your research and development (R&D) budget. Normally, you would consider this to be business-as-usual, because firms in your industry frequently take such risks. However, this time things are different. Those suffering from the disease (and those who are at risk of contracting it) are among the world’s poorest people, and they cannot pay WittPharm anything at all for the drug. You contact the health ministers of the governments in the countries where the disease is most prevalent, and you ask for help with a portion of the development costs. You make it clear that you genuinely believe a successful drug will result from the R&D. All of them reject your plea. The same thing happens when you contact non-governmental organizations, other pharmaceutical companies with whom you wished to partner, and major foundations. You are told “no” at every turn. You know it will cost somewhere between $200 million and $500 million to do this alone, and “alone” is your only choice. This is a very significant part of your discretionary budget, so this is a critical decision. The decision is made more difficult by the recent problems with WittPharm’s share price. You are completely certain that you will never see any direct revenue from this program. You call Dr. Robertson to your office for another meeting about this challenge. Also in attendance are additional members of WittPharm’s top management team: Chief Financial Officer (CFO); Chief Operating Officer (COO); Executive Vice President for Global Health; and General Counsel. WittPharm has historically made decisions that are clearly in-line with the company’s mission and core values, and you believe these should be the foundation of your decision in this case. As a result, at the beginning of the meeting, you present each of the attendees with copies of WittPharm’s mission and core values, which read:

The mission of WittPharm is to develop and manufacture pharmaceutical products that improve quality of life for our customers, to provide our team members with meaningful roles and advancement opportunities, and ensure that our shareholders receive outstanding returns.

Our core values are: (1) improving life for humankind; (2) behaving ethically; (3) pursuing and achieving scientific breakthroughs; and (4) being profitable.

You hoped that referring back to the mission and core values of WittPharm would help facilitate a decision, because you have individually spoken with each of your top executives, getting different responses from each. Your CFO is concerned with shareholder reactions to a decision to pursue a money-losing drug. Your General Counsel is concerned about legal liability and issues of precedent. Your COO is concerned with the effects of developing this drug on the development of drugs already in your research pipeline that are potentially profitable. Thus, each of these individuals is leaning toward not pursuing the drug. On the contrary, your Executive VP for Global Health is concerned that a failure to pursue the drug will lead to millions more preventable deaths. Finally, Dr. Robertson is concerned about not being able to allow his researchers to pursue the drug that they have stumbled upon for the sole reason that it is not profitable.

IDH 3034 Dynamic Tensions Fall 2019

The meeting begins with each person stating his or her case, and then things turn rather ugly. The top management team is in a heated argument about the pros and cons of pursuing the drug, as well as how the drug fits with the mission and values of the firm. You find yourself uncertain as well. You want to help humankind, but you also have thousands of shareholders and employees to consider. Author: K. Matthew Gilley Online Pub Date: May 08, 2017 | Original Pub. Date: 2017 Publisher: SAGE Publications: SAGE Business Cases Originals Online ISBN: 9781526429377 Copyright: © K. Matthew Gilley 2018