Case 4-7 : Vioxx Decisions – Were They Ethical? 

*AC 4391 Accounting and Business Ethics

Mohammed Aziz Khan (52429281)Lai Sze Man (52598992)Lam Chung Yin (52601988)Law Ho Wing, Billy (52589909)

*Agenda

*Facts of the Case*Issues to be discussed*Stakeholder Analysis*Rules of Thumb*6 Questions Approach*Conclusion

*Facts

May 20th

1999: Merck

receives approval from FDA for Vioxx

2003: Evidence

from external

and internal sources

show Vioxx had very

harmful side effects

September 30th 2004: Merck

voluntarily withdraws Vioxx from

market

August 19th 2005:

Court finds Merck

liable for death of

Vioxx user

Setting $970

million for lawsuit,

but it may cost more than $20-25 billion

*IssuesWhy was Vioxx given approval by the FDA in 1999? Was it a rash/hasty decision?

In 2003, why a withdrawal not occur when increasing evidence showed Vioxx had terrible side effects?

Why did company wait for a full year before withdrawing the product from the market?

Why did Merck set aside only $970 million for lawsuit, instead of $20-25 billion?

*Stakeholder Analysis

*Main Stakeholders

MerckCustomers

Shareholders

FDA

*Merck*2004 Voluntary withdrawal Reputation (ethical)Loss $$

*Hidden risk of using Vioxx Liable for death of Vioxx userReputation + Loss $$ + Cost for lawsuit

* Underestimated lawsuits ($970M instead of $25B)more $$ for business Liquidation

*Customers (Patients)*Potential customers avoid suffering from Vioxx*Current customers unknown risk of taking Vioxx*18,200 plaintiffs Risk of loss due to compensation

*Shareholders

*Withdrawal share price drop + market-cap loss*Hidden truth between 2000-2004 death case market-cap loss

LOSS of investment >__<

* Food and Drug Administration(FDA)

*Between 2000-2004, Hidden information Liable for the death also Fail to protect the health of the Public

Guilty and liable!!!

*Rules of Thumb

*Rules of ThumbGolden

Rule

Disclosure Rule

The Professional

Ethic

The Utilitarian Principle

The Virtue Principle

*Golden Rule“Do unto others as you would have them do unto you”

“Drug company survey suggests statin side-effects are the most common reason for people stopping their medication” By Dr. John Briffa

NO ONE wants to*Take medicines with fatal side effects*Be cheated by pharmaceutical company

http://www.drbriffa.com/2012/07/13/drug-company-survey-suggests-statin-side-effects-are-common-and-the-most-common-reason-for-people-stopping-their-medication/

*Disclosure Rule“You are comfortable with the action after asking

yourself whether you would mind if people were aware of it”

Put the public at huge riskMaking people suffer without warning

Being dishonest to investors

*Harming people in order for self-interest*Unacceptable to people

*The Professional Ethic“Do only what can be explained before a committee of

your professional peers”

*Understandable justification? *Merck just wants to hide the truth*↑ Profits & fake financial position

*Should have withdrawn once side effects were known

*The Virtue Principle

“Do what demonstrates the virtues expected”

*Expectation of pharmaceutical company?*Full disclosure about the drug*Put the Public’s health 1st *True financial situation

*FAILED to achieve all the virtues

*The Utilitarian Principle“DO the greatest good for the greatest number”

*Profit to the company VS public health*Warning = Sales ↓*Too large compensation = stock price ↓*1st place: The Public

*Too small benefit for large risk as well*Lotronex (Feb 2000 – Dec 2000)*Irritable Bowel Syndrome VS fatal reaction

http://www.citizen.org/congress/article_redirect.cfm?ID=7442

*6-Question analysis

*Is it profitable ?

Sales of Vioxx: 2.5 billion per year By 1999-2004 (approximately 5 Years) Total sales 12.5 billion

Damage due to Vioxx: 30.6 billion market-cap loss Lawsuits cost more than 20-25 billion

Ignoring the reputation loss and the share price due to the Vioxx issue,the net loss should be more than 40 billion

*Is it legal ?Before 2003 ,FDA approved Vioxx to the market

In 2003, Merck found out that there is a increasing risk of cardiac arrest and stroke (including data from their own study)

Until 2004,Merck voluntarily withdraw Vioxx from the market

*FDA liable*Merck liable

*Illegal? Yes, for Merck

Example: Boehringer Ingelheim Pharmaceuticals introduced PradaxaHidden side effect with the approval of FDA2013, 1,936 Pradaxa lawsuits have already been filed and successfully claimed.

*Is it fair ?Merck kept selling Vioxx despite the acknowledge of the side effects.

Unfair to the patient (hidden side effect)

Unfair to their industry (customers will lose their trust)

Unfair to the shareholders (great lost of profit and reputation and huge drops

of the share price)

*Is it right ?Voluntarily withdrew Vioxx from the market

Setting a foundation for the lawsuit compensation

Keep on selling Vioxx with the acknowledge of the increasing risk

* Does it meet the expectation of the stakeholders ?

Consumer

** The right to know about the side effect** The right to live

Is it sustainable

*Hidden side effect*Lead to short term profit*Long term lost*Huge compensation due to the lawsuit*Losing reputation

*Conclusion*Main Stakeholders all suffer in long term, short

term only Merck and FDA benefitted, but all lost in long run

*All of the rules of thumb fail the test

*6 question analysis leads to only short term profitability, but not legal, right, fair, just and does not demonstrate the virtues expected of a large company and is most certainly NOT sustainable