Introduction

New York Times (22 Oct, 1987) reported that Merck Company was distributing a new drug that cures river
blindness without charges. According to the report, any country that requested for the drug would receive
the drugs in coordination with the World Health Organization. At that time, river blindness was estimated
to “affect 18 million people in Africa, Middle East, and South America” (para. 2).

A generic version of the drug (ivermectin) was made to make it affordable. According to Dr. Vagelos (New
York Times, 1987), it was necessary because “those who needed it the most could not afford to pay for it”
(para. 6). By the year 2006, “more than 68 million people were being treated annually” (The Merck
MECTIZAN Donation Program – River Blindness, 2007, p. 2). It is estimated that 37 million people are
infected annually. Those at risk may add up to 100 million people.

The cure for river blindness came as a result of a research work for animal treatment. The scientist
realized that the drug used to treat animals could cure river blindness. The worm that causes river
blindness may grow up to 2 feet in length. It distorts the texture of the skin and causes blindness when it
reaches the eye (Murray, Poole & Jones, 2006).

The cost of developing the drug for the “purpose of treating river blindness was estimated at US$100
million” (Murray, Poole & Jones, 2006, p. 200). The company faced an additional challenge of putting at
risk the animal treatment market. The market value for the animal treatment was estimated at about
US$300 million. The risk would develop if the drug had side effects that bring negative publicity. Mectizan
was the first version of the drug. The company stayed for seven years without finding a sustainable
market for the drug. Merck offered to issue the drug free of charge but it lacked distributors.

Niles (2011) discusses that stakeholders are “interested entities that participate in an industry” (p. 24).
Consumers, shareholders, employees, competitors, and the government are the main stakeholders. In
the pharmaceutical industry, they may also include business partners such as health care providers, and
insurance companies. By providing the drug free of charge, competitors cannot develop a substitute for
the drug because it would lack a market.

Merck & River Blindness – Ethical Dilemma

Merck’s dilemma can be described as one in which a firm is supposed to make a right decision without
legal requirements. Robinson (n.d) discusses that an ethical dilemma requires managers to weigh the
outcome of different decisions. Legal obligations may arise in case the drug has side effects. There are
additional costs associated with approving the safety of using the drug. The drug is not marketable
because the disease affects regions with low purchasing power.

Jennings (2012) discusses that business ethical decisions require managers to examine whether there
are legal obligations. They also check whether a decision is balanced and how they would feel after
implementing the decision. To balance options, one takes the perspective of those in need. When
checking the legality of a decision, a manager examines if there are sections of the law that can be used
to sue the firm.

The manager thinks of the kind of description he/she would get from a newspaper’s analysis. Jennings
(2012) discusses that how a person would feel is expressed in many ways. The Wall Street Journal Model
requires that managers evaluate the “contribution of their decisions to shareholders, employees,
community, and customers” (p. 44). Favorable headlines may be beneficial to the company and
shareholders. Banerjee (2009) argues that big pharmaceutical companies spend at least twice as much
on marketing their products than on research and development (R&D). Some companies choose
philanthropy for marketing their brands. Profits may decrease or increase as a result of charitable
activities. There may be long-term social benefits such as elimination of river blindness.
Banerjee (2009) discusses that pharmaceutical companies receive generous tax deductions as a result of
engaging in R&D that creates a new drug. Most companies in the American pharmaceutical industry
prefer to keep the real cost of R&D confidential.

Merck’s competitor, Pfizer, operates a free drug program in some African states for the treatment of
trachoma (Banerjee, 2009). The benefits to the company include building a good reputation, increased
customer satisfaction, better relations with communities, and motivation to employees. The cost is
considered negligible compared to the benefits. Merck reduces cost by developing generic drugs.

World Trade Organization (WTO) has been debating over the effectiveness of patent protection that
prevents the development of life-saving drugs for poor countries. Pharmaceutical companies receive
great criticism over the “protection of intellectual property and patent rights for life-saving drugs”
(Banerjee, 2009, p. 56). South Africa was once sued by 39 pharmaceuticals over the production of
affordable generic life-saving drugs against WTO patent conventions. By developing ‘ivermectin’, Merck
achieved to set corporate social responsibility standards for pharmaceutical companies.

Situational Analysis

Merck’s dilemma was that it was the only company with the drug to cure river blindness disease before it
reaches an advanced stage. When the disease reaches the blindness stage, it is impossible to restore
sight. Those at risk are unlikely to afford the full cost of the drug. It was a global problem. Donaldson &
Dunfee (1999) discuss that “philanthropy is not mandatory, and firms may decide to give nothing at all to
charity” (p. 254). There was need to develop a generic version to increase affordability.

Some of the factors that hinder managers from making good decisions as discussed by Jennings (2012)
include the consideration of what other firms practice. Firms consider the possibility of someone else
taking full responsibility for the cost. The tradition of the industry also has an influence. Donaldson &
Dunfee (1999) discuss that it was unlikely that “Merck would generate investment returns comparable to
its typical marketplace drugs” (p. 254). Merck could have considered that all firms produce drugs for
profitability. It is the industry’s tradition.

Stakeholder Analysis
According to the Stakeholder Dialogue (2011), Merck’s stakeholders include “business associates,
employees, the Merck family, investors, government authorities, associations, neighbors on their sites,
NGOs among others” (para. 1). The method of balancing stakeholders’ interests is mentioned as the drive
towards solving ethical dilemmas for the company.
Gilmartin (2011) discusses that Pfizer Company is Merck’s stakeholders for being the main competitor.
Patients are stakeholders for being either beneficiaries or at risk of side effects as a result of using
Merck’s products. The number of employees globally in 2010 was 95,000 (Looking Ahead, 2010).
Employees are at risk of losing their jobs if the company engages in risky activities.
Donaldson & Dunfee (1999) discuss that other companies did not respond to the dreaded river blindness
illness with a search for a cure. Merck could have chosen to ignore the product. Donaldson & Dunfee
(1999) argue that Merck’s customers “may claim as stakeholders that Merck should invest all of its
research efforts toward resolving health problems in their market base” (p. 257).
Customers may have considered that heart disease and cancer were the main threat in countries that
Merck served. Donaldson & Dunfee (1999) discuss that sometimes stakeholders may raise claims that
“violate fundamental and universal principles of human behavior” (p. 256). River blindness was a global
problem that ought to have been of concern to all pharmaceutical firms that operate globally.
Merck and River Blindness – Ethical Theories
Donaldson & Dunfee (1999) discuss that a firm may engage in charitable activities at free will. There were
no legal obligations that bound Merck to fund research on river blindness treatment. Cultural relativism is
the logic of considering that all norms that are developed by society are equally valid (Cultural Relativism:
All Truth is Local, 2013). They may vary across cultures. Merck’s decision under cultural relativism may
prove acceptable in many societies. Business societies may disapprove the decision to develop a drug
targeting a market that is unlikely to afford it. Other firms with a global market do not consider developing
a drug without potential for profits.
Merck’s teleological approach is made stronger by the fact that developing a cure could lead to
elimination of the disease. If the disease was eliminated, the cost of producing the drug would decline.
Fernando (2009) discusses that teleological approach is results-oriented. Robinson (n.d) discusses that
“utilitarianism concerns the greatest good for the greatest number” (p. 2). A cure that may result in
elimination of the disease would reduce future costs.
Merck’s action may be disapproved from a deontological perspective. Merck is supposed to add value to
stakeholders. The stakeholders may benefit from positive media coverage, and reputation of the brand.
Merck is supposed to invest in research activities that improve the well being of its customers. The River
blindness drug was developed for a market segment outside its positioning. Research incurs costs that
reduce shareholder earnings. According to Robinson (n.d), deontology requires the “absolute necessity of
duty irrespective of rewards or punishment” (p. 3). Following this view, Merck ought to have sought
profitability and drugs that add value to customers within its market positioning.
Merck has the responsibility to develop drugs that add value to its market base customers. Research
costs are generated from deductions that would have been shared as dividends. Shareholders expect
investment and growth that involves increased future earnings. According to utilitarianism, the good of
developing a cure for river blindness exceeds all other benefits. Neglecting to develop such a cure has
negative impact such as irreversible blindness, skin deformation, and reduction of land under cultivation.
Merck’s overall responsibility to society is to develop drugs that help improve human health.
Conclusion

Merck Company followed the right ethical procedures to develop the right drug. Fernando (2009) argues
that Merck developed the drug for sale before developing generic drugs to be distributed free of charge.
Pharmaceutical companies are under a legal obligation to ensure that drugs they develop do not harm
patients. The generic drug was developed after the original version which must have been adequately
tested before being marketed. Some drugs have mild side effects such headache or exhaustion. Mild side
effects are labeled on drugs and are acceptable to society.

Merck developed a generic version of the drug to reduce the cost of philanthropy. Philanthropy is
conducted out of free will. The management followed the right procedure to reduce the cost of developing
the drug meant for philanthropy. By developing generic drugs, the drug is made available to a larger
group of people. Reducing the cost of developing the drug protects the interest of shareholders. The
company’s objective is to increase share earnings of shareholders and ensure delivery of high quality
products.

Research and development of the drug involve a high cost which lowers share earnings. The drug had no
potential market and could only be developed for charity. The drug was not the main target of the
research. According to utilitarianism, it would be great evil to ignore a discovery of great importance to
humanity because it lacks profitability. Merck was obliged under the corporate social responsibility to
develop the drug. The impact of the disease to patients was overwhelming that it led to suicide and
blindness. It would be inhumane to neglect the discovery because it lacked a potential market.

Merck considered that developing the drug for human beings could put at risk its animal drug market.
Animals’ bodies such as cattle are strong. They can withstand powerful medicine. On the other hand,
human beings are sensitive. Treated patients may report negative side effects that are not observable in
animals. Such reports may lower the marketability of the drug. Merck followed the right procedure by first
developing the drug for sale. It was acceptable in the interest of stakeholders.

The drug failed to be marketable. Merck offered it for distribution to avoid an additional cost of distribution.
The company lacked distributors so it decided to distribute the drug itself. Its corporate social
responsibility would not have been effective had the company stopped because of lack of distributors. It
would have incurred a cost without benefit.

Recommendations

Governments should make it mandatory for pharmaceuticals to disclose all beneficial discoveries even if
they lack potential for profitability.

Pharmaceutical companies should partner with philanthropic organizations in case of such development
to share the cost of the program.

Merck almost failed to take the drug where it was mostly needed because of lack of distributors.
Pharmaceutical companies’ responsibility should be to hand over the drugs to the government of
countries that are at risk. From that point, the authorities can conduct the distribution process themselves.

Pharmaceutical companies can partner with each other in case of such discovery to develop the drug at
shared costs.

Pharmaceutical companies are under strict legal restrictions to distribute only drugs that have been
approved as safe for human use. They should comply with this regulation even if a new drug has great
potential for profits.

In such a discovery, pharmaceutical companies can first develop the drug for sale. In case of charity, it
can look for philanthropic companies to incur a partial cost.

When corporate social responsibility involves a conflict of interest with stakeholders, managers should
balance the benefits. The cost of philanthropy should not result in losses for shareholders or failing to
meet consumer standards. In most cases, philanthropy is associated with increased profitability.