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8/4/2019 Merc Krishna
http://slidepdf.com/reader/full/merc-krishna 1/2
MERCK & CO CASE SOLUTION
Krishna Chaitanya A | 123 | PGDM Finance
Merck must go ahead with the commercial development and distribution of the drug
Mectizan. Merck as a company believed in making medicines for the people. ³It is not for the profits. The profits follow´ is what was said by the son of the company¶s founder, George
W.Merck.
River blindness, formally known as onchocerciasis, was a disease labelled by WHO as a public health and socioeconomic problem of considerable magnitude in over 35 developing
countries throughout the Third World. There were millions of people at risk in Africa, MiddleEast etc. But the problem was that the people affected by this disease are so poor that they
have very limited ability to pay even a small amount for drugs or treatment.
If in case, Merck goes ahead to produce and distribute this drug, then the company needs to
simple give the drug away, since most of the people doesn¶t have the purchasing capacity.This move by the company can be projected as a major Corporate Social Responsibility
(CSR) activity. This could be justified by a number of ways that mostly come under valuechain social impact±
Value Chain Social Impact ±
1. The value chain of a pharmaceuticals company consist of clinical trials in some stage.
In this the company has to conduct serious trials to prove or to check the suitability of the compound. There could be cases where the trials could go completely unexpected
and produce drastic results. In the case of Merck, there were two drugs, DEC and
Suramin which were useful in killing he parasite. But both these drugs had severe side
effects in infected individuals and even cases deaths. So, if we analyse this example,there were some serious damages done to the community during the process of
Research. These damages could be part of developing drugs. So, Merck could use this
initiative of distributing their drug, Mectizan, for nothing among the needy in third
world countries to show their social responsibility.
2. Looking Inside Out ±
I. Dr. Vagelos believed that the company should process because the project
would further Merck¶s knowledge of parasitology. It shows that there would
be a significant addition to the knowledge levels and hence, enhances the
human resource of the company. There would be an up gradation in terms of
the technology too for the company. Also, there would be a better credibility interms of utilizing people for trials. There would be more willingness and less
resistance as Merck has delivered a medicine to the third world for a diseasethat is plaguing millions.
II. WHO was unwilling to partner with Merck and also there were someresistance from the scientists at WHO for Mectizan. But with successful
implementation and distributing the drugs for nothing to millions across theglobe would help build a great positive relationship with WHO. With such a
social responsibility shown by Merck now, there would be greater support
from WHO to the future initiatives of Merck and also could bring in greater
funding in the years to come.
8/4/2019 Merc Krishna
http://slidepdf.com/reader/full/merc-krishna 2/2
III. Merck may not earn tangible benefits from this distribution of Mectizan. But itwill certainly earn a huge goodwill among the various stakeholders. Merck has
very less revenues from third world countries. But with the success of Mectizan, there would be greater support from the governments of third world
countries and this could prove very effective in future for the company. There
could be support and funding from these governments.
3. Good Citizenship- As discussed earlier in clinical trials, the company can mitigate
the harmful activities in its value chain. Giving back to the society is a good thing
particularly when there are harmful activities involved in clinical trials on human
beings.
4. R esponsive CSR ± Transforming value chain activities to benefit society. Again in
this too the CSR activities are required for the company. In this, the company can
show this activity as CSR and at the same time get benefit in its value chain activities.
Also the activities of Merck can also be justified by looking at the explanation given by
Michael Porter as ³Four prevailing justifications for CSR´.
A. The Moral Obligation - Merck is world leader in drug discovery and has earned
huge profits from the society. Merck should achieve commercial success in ways that
honour ethical values and respect people communities, and the natural environment.
Also, in line with its philosophy that the company believes in making drugs for
people.
B. Sustainability ± This single act can give the company as great long term competitive
advantage in terms of the goodwill it will gain. It would also give the ability to make
entry into various third world markets and increase the percentage share of revenues
from these areas in the long run.
C. Licence to Operate ± By showing such a CSR, the company can leverage on this act
for many more future endeavours. Hence this could become a great licence to operate,especially in third world markets. D. R eputation - Developing a positive reputation with the stakeholders always comes
handy in the long term. Merck can market any product at a premium price, if thecustomer holds Merck¶s positive image in his mind. The disease is mostly spread in
developing countries which will be big markets for Merck in future. Hencedeveloping brand equity in consumer¶s mind will give a competitive advantage.