The Purpose of the Corporation 101

The Purpose of the Corporation 101
CASE 3. Merck and River Blindness
Merck & Co., Inc. is one of the world’s largest
pharmaceutical products and services companies. Headquartered in Whitehouse Station,
New Jersey, Merck has over 70,000 employees
a n d sells products an d services in approximately 150 countries. Merck had revenues of
$47,715,700,000 in 2001, ranked 24th on the
2002 Fortune 500 list of America’s largest companies, 62nd on the Global 500 list of the
World’s Largest Corporations, and 82nd on
the Fortune 100 list of the Best Companies to
Work For.
In the late 1970s Merck research scientists
discovered a potential cure for a severely debilitating human disease known as river blindness
(onchocerciasis). The disease is caused by a parasite that enters the body through the bite of
black flies that breed on the rivers of Africa and
Latin America. The parasite causes severe itching, disfiguring skin infections, and, finally, total
and permanent blindness. In order to demonstrate that it was safe and effective, the drug
needed to undergo expensive clinical trials. Executives were concerned because they knew that
those who would benefit from using it could not
afford to pay for the drug, even if it was sold at
cost. However, Merck research scientists argued
that the drug was far too promising from a medical standpoint to abandon. Executives relented
and a seven-year clinical trial proved the drug
both efficacious and safe. A single annual dose
of Mectizan, the name Merck gave to the drug,
kills the parasites inside the body as well as the
flies that carry the parasite.
Onc e Mectizan was approved for huma n
use, Merck executives explored third-party paymen t options with the World Health Organization, the U.S. Agency for Internationa l
Development, an d the U.S. Departmen t of
State without success. Four United States Senators went so far as to introduce legislation to
provide U.S. funding for the worldwide distribution of Mectizan. However, their efforts
were unsuccessful, n o legislation was passed
and, and n o U.S. government funding was
made available. Finally, Merck executives decided to manufacture and distribute the drug
for free.
Since 1987, Merck has manufactured and
distributed over 700 million tablets of Mectizan at no charge. The company’s decision was
grounded in its core values:
1. Our business is preserving and improving
human life.
2. We are committed to the highest standards of
ethics and integrity.
3. We are dedicated to the highest level of scientific excellence and commit our research to
improving human and animal health and the
quality of life.
4. We expect profits, but only from work that
satisfies customer needs and benefits
humanity.
5. We recognize that the ability to excel—to most
competitively meet society’s and customers’
needs—depends on the integrity, knowledge,
imagination, skill, diversity, and teamwork of
employees, and we value these qualities most
highly.
This case was prepared by Denis G. Arnold and is based on Erik Eckholm, “River Blindness; Conquering an Ancient
Scourge,” The New York Times, January 8, 1989; David Pilling, “Public Private Health Deal Aims to End Elephantiasis,”
The Financial Times (London), January 21, 2000; Karen Lowry Miller, “The Pill Machine,” Newsweek, November 19,
2001; “The Merck Mectizan Donation Program,” www.merck.com/about/cr/policies_performance/social/mectizan_donation.html (03 October 2002); “The Story of Mectizan,” www.merck.com/about/cr/mectizan/ (03 October
2002); “MERCKAnnual Report 2001” http://www.anrpt2001.com/index.html (03 October 2002); “About Merck: Mission Statement,” www.merck.com/about/mission.html (03 October 2002); “The 2002 Fortune 500,” www.fortune.com/
lists/F500/index.html (03 October 2002); “The 2002 Global 500,” www.fortune.com/lists/G500/index.html (03 October
2002); and “Best Companies to Work For,” http://www.fortune.com/lists/bestcompanies/index.html www.fortune.
com/lists/F500/index.html (03 October 2002). © Denis G. Arnold 2003, 2008.
102 The Purpose of the Corporation
George W. Merck, the company’s president
from 1925 to 1950, summarized these values
when he wrote, “medicine is for the people.
It is not for the profits. The profits follow, and
if we have remembered that, they have never
failed to appear. The better we have remembered that, the larger they have been.”
Today, the Merck Mectizan Donation Program includes partnerships with numerous
nongovernmental organizations, governmental organizations, private foundations,
the World Health Organization, The World
Bank, UNICEF, and the United Nations Development Program. In 1998, Merck expanded the Mectizan Donation Program to
include the prevention of elephantiasis (lymphatic filariasis) in African countries where
the disease coexists with river blindness. In
total, approximately 30 million people in 32
countries are now treated annually with Mectizan. Merck reports that it has no idea how
much the entire program has cost, but estimates
that each pill is worth $1.50. The United
Nations reports that river blindness may soon
be eradicated.
Questions
1. Given the fact that Merck is spending corporate resources to manufacture and distribute Mectizan, is the Merck Mectizan
Donation Program morallyjustifiable? Explain.
2. Would Friedman approve of the Merck
Mectizan Donation Program? Explain.
3. Should the fact that Merck’s values are
clearly stated in corporate publications that
are widely available to investors make a difference to someone who accepts Friedman’s position? Explain.
4. Should the Merck Mectizan Donation Program serve as a model for other pharmaceutical companies who are in a unique
position to facilitate the eradication of
other diseases in the developing nations?
Explain.