management case study

Merck Case Study

Merck Case Study

There are two cases – Merck A and Merck B.  The time is set at the time of the case around 1987, any perspective you take should be taken from that time perspective. Merck part A addresses Merck’s decision on whether or not to develop Ivermectin into a drug that could treat river blindness.  Merck part B addresses the decision on whether to proceed with donation and distribution of the drug.

 The topic to consider is whether Merck should  develop, donate (for free) and  exclusively  distribute Mectizan even if it incurs cost? 

This is a case covers leadership, organizational behavior, corporate strategy, product development, marketing and CSR that will hopefully give you real context for why or why not a company should pursue a particular strategy and what the benefits and costs of doing so are.  Any opinions should be grounded in real numbers and analysis of what a plan would be what and why it will be successful and acknowledge any dangers and risks.

Case Questions:

1. Identify 5 major stakeholders in the case - identify their roles in the case. Outline 5 factors Dr. Vagelos should consider when deciding whether to invest in development and further consider a plan to donate / distribute Mectizan.

2. In considering whether to donate Mectizan - who would be the key partners in a donation strategy. Detail what you believe are the benefits to Merck and the possible dangers of giving Mectizan away for free?

3. Recreate financial income statement in excel until 1990 (from 1967, by year), you will need to make some assumptions – please note these in bullet points. Analyze the strategic decisions related to development, donation, distribution and the strategic options from a financial perspective of the proposed costs for Merck’s plan given Merck’s current financial situation.

4. Outside research: are there any precedents for goodwill, corporate social responsibility on the scale Merck is considering? Cite 1 case that your team believes is relevant for Merck’s management to consider. Do companies such as pharmaceutical companies have moral obligations that differ from other firms? Provide brief support for your stance.

5. Provide reasons that support a perspective of “triple yes” that Merck should agree to develop, donate and exclusively distribute Mectizan even if it incurs cost. Your team can have a plan to collaborate with other partners (be specific), but IF such partners are not willing to collaborate, Merck’s affirmative stance is that they should agree to donate (provide Mectizan for free) and distribute Mectizan. Define the parameters or scope of how you will go about this (with whom, where, when (timeline), and how including costs).

6. Provide reasons that support a negative: Yes to develop, but "no" to either donate or exclusive distribute – or – double no, not donate or exclusively distribute Mectizan on their own. Defend your choice and support it with details.

Yes to develop, but no to donate and distribute

There are several reasons why Merck may choose to develop Ivermectin but choose not to donate or exclusively distribute the drug. Firstly, from a business perspective, Merck may see the development of Ivermectin as a profitable opportunity. Developing a new drug is a costly and time-consuming process. If Merck decides to donate Mectizan for free or exclusively distribute it, it will incur high financial costs without any return on investment. However, the company may be hesitant to donate the drug or exclusively distribute it due to the potential financial losses resulting from such a decision. By not donating or exclusively distributing the medicine, Merck could sell the drug at a profit and recoup some of its costs.

Additionally, from a legal perspective, Merck may be concerned about the potential legal repercussions of donating the drug. For example, Merck may be held liable if the drug is not used correctly or causes harm to patients. By not donating the drug, Merck can avoid this potential legal risk. Furthermore, from a public relations perspective, Merck may be concerned about the potential backlash from not donating the drug. Merck may be perceived as not being socially responsible by not donating the drug, which could harm its reputation.

7. Provide your recommendation for Dr. Vagelos and Merck?

After considering the factors discussed above, I recommend that Dr. Vagelos and Merck take a balanced approach to the development, donation, and distribution of Mectizan. On the one hand, I understand the concerns about financial losses and potential legal repercussions. On the other hand, the benefits of donating and exclusively distributing the drug, including improved public relations and increased social responsibility, outweigh these risks.

To mitigate the potential risks, I recommend that Merck work closely with relevant organizations and stakeholders to ensure that the drug is used correctly and safely. This could include implementing training programs for healthcare providers and monitoring the use of the drug to ensure it is not causing harm. If Merck decides to donate Mectizan, it could potentially harm its reputation if the drug is not well received or is ineffective in treating river blindness. Additionally, Merck could consider partnering with other companies or organizations to share the costs and responsibilities of donating and distributing the drug.

Suppose the company decides to pursue a strategy that involves donating or exclusively distributing Mectizan. In that case, it should do so in a way that minimizes financial and legal risk and protects its reputation. For example, the company could consider partnering with other organizations or governments to distribute the drug, mitigating the financial burden and reducing the risk of legal liability. Ultimately, deciding whether to donate or exclusively distribute Mectizan should be based on carefully considering the financial, legal, and reputational risks and benefits and the company's overall mission and values.

In conclusion, while there are valid concerns about the costs and risks associated with donating and exclusively distributing Mectizan, I believe that the benefits of this approach, including improved public relations and increased social responsibility, outweigh these risks. Merck needs to take a balanced approach and consider all factors before deciding on how to proceed with the development and distribution of the drug.

· Yes to donate, no to distribute

· No market, no organizations willing to distribute

· Donate because development costs already incurred and they’re sunk costs. Only use future variable costs of production when determining future. Since production costs are really cheap and drug is already developed, donating would greatly improve Merck’s reputation (refer to question 4)

· Loss on production expense but increased goodwill and reputation.

· If donate, can use other organizations if they’re willing to subsidize costs.

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