Corporate Behavior

Organizations are expected to distinguish corporate behavior, public policy and social involvement in all their activities. However, in today's highly competitive business world, most organizations are working in an extremely demanding environment. In an attempt to remain competitive and to avoid losing market share, some organizations end up involving in unethical conduct. At the executive level, managers may also be under extreme pressure to perform or to conform to the organizational requirements, some of which might be extremely challenging. This composition explores the role of business ethics with regards to consumer protection, government regulations, and corporate social responsibility. In these times of distress, a competitive market can encourage a high degree of aggression for businesses striving for success.

Contents

Overview of Merck 4

Question 1 5

Question 2 8

Question 3 9

Pharmaceutical Companies 9

Government Regulation 9

Policymakers 10

Patients and their physicians 10

The Court System 11

Question 4 12

Conclusion 13

Overview of Merck, the FDA, and the Vioxx Recall

Whilst business regulations are often perceived decisively as attempts to reduce legal liabilities and further good public relations, business ethics are good modes for understanding how moral principles can be articulated and applied in the practice of business. The practical reward for this approach is that it directly stipulates the principles of certain actions in business, and without having to be involved in litigation. The moral responsibility of a business is to respect the natural rights of its stakeholders, consumers, and society as a whole. Today's companies are operating in a very competitive business environment, thus, encouraging a high degree of aggression for businesses striving for success. The ability to defend against competition has become a game of strategy for most organizations, and business leaders are engaged with major decision-making.

Theoretically, businesses are perceived to act in a respectable manner, and avoid actions that may be detrimental to the image of the business. In the case Merck, the FDA, and the Vioxx Recall, a pharmaceutical company was charged with over 6,000 lawsuits for having introduced Vioxx, a painkiller prescribed for arthritis patients that increased the chances of heart attacks and stroke with an incidence of five times more cases compared to other drugs. The drug, having been in the market for five years since 1999, was estimated to have caused strokes and/or heart attacks to 139,000 patients, 55,000 of whom were already dead by the time it was being recalled from the market in 2004. Vioxx was a major source of revenue for Merck contributing to slightly above ten percent of the total revenue to the firm. It was considered a blockbuster drug a term that referred to drugs that due to their ability to serve a large portion of the population have the potential to produce large profits for pharmaceutical companies. The ideal drug would be one that can be used to manage chronic disease.

This case study illustrates how Merck, the government regulations, political influence, advertising agencies, physicians, and consumers contributed to the extensive use of Vioxx, though harmful to patients, resulting in cardiovascular related problems to patients.

More often than not, greed distorts the ability of individuals to make sound decisions. Interestingly, some organizations will put money before ethics or the safety of others. Business leaders have a special role in ensuring that their organizations conform to government regulations, public policy, and social norms for the sake of promoting moral corporate behavior.

Question 1

Merck's act of recalling the Vioxx from the market after realizing the unacceptable risk it exposed patients consuming the drug can be seen as an ethical act and that of social responsibility (Lawrence & Weber, 2010), especially considering that it was a high revenue- generating drug for the company. However, the truth is that Merck did not act socially responsible and ethical with regard to Vioxx. Vioxx was to be consumed for long-term medical conditions namely arthritis to manage pain. Within the first eighteen months of consumption, patients were more likely to have a stroke or heart attack, compared to those consuming other drugs for the same medical conditions. It is evident that Merck's scientists were aware of the risk of the drug causing fatal heart problems before the release; however, the drug was introduced to the market without further research (Lawrence & Weber, 2010).

There are also various other actions that show a focus on revenue on the part of the pharmaceutical industry versus consumer safety such as the expedition of clearance of new drugs through the Federal Drug Administration (FDA) approval process. Through the enactment of the Prescription Drug User Fee Act (PDUFA) in 1992, pharmaceutical companies were able to pay the FDA to review new drugs and this money enabled the FDA to acquire the necessary resources to expedite the review process. The data shows that this lessened approval time was associated with an increase in number of recalls following approval which indicates that the quality of the review might have been undermined by the pressure to approve medicines quicker. The pharmaceutical industry also maintained a strong presence at the capital through lobbying activity and political contributions with Merck specifically being quoted as having spent $40.7 million dollars in lobbying between 1998-2004 (Lawrence & Weber, 2010).

There was also a great marketing push in the 1990s with an estimated $422 million spent to promote Vioxx directly to physicians and hospitals through sales representatives, events for continuing education or reimbursements to physicians for consulting opportunities in clinical trials. The FDA in 1997 allowed direct-to-consumer advertising and this opportunity was seized by the pharmaceutical industry which then went aggressively seeking consumers' attention and business through ads on television, magazines and newspapers.

After conducting the VIGOR research, one year