1. Why was Merck hesitant about developing a human version of Ivermectin? Merck considered this opportunity as a high risk investment. The cost of developing the drug was estimated at $100 million. Even if it was successful to cure river blindness the victims were too poor to afford the drug. There was no way to distribute it in these rural areas were the victims were located. In addition, there was a possibility that people would misuse the drugs, which would cause negative side effects and stimulate bad press for Merck. During this time, healthcare costs were on the rise, Medicare and Medicaid reimbursements were limited for companies developing drugs like Merck. Congress was also about to pass an act that would make it easier for competitors to copy and market generic drugs. All of this opposition made Merck hesitant about developing Ivermectin.
2. What were the benefits and cost of developing a human version of Ivermectin? The case described benefits of the new drug as a low-cost, safe, and simple cure for river blindness. The current residents suffering from this parasite did not have funds to afford alternate treatments like expensive hospital visits or other drug options that are required for a cure. As reported in the reading, the condition is caused by a worm that is passed through the bite of a black fly along the tropical areas of Africa and Latin America. The worm then burrows under the skin and continues to grow up to a length of two feet. As the worm reproduces, it releases millions of offspring that slowly wriggle underneath the skin until invading the eyes, eventually causing blindness. Victims often commit suicide due to the pain and itching that this parasite causes. The development of this drug would relieve victims from immense suffering and potential blindness. It would also lead to a possibility of brand marketing for Merck the area of treatment.
Foreseen costs include a potential $100 million to develop the drug. This cost includes a large amount of time for extensive testing of the drug and its side effects on humans. After testing is completed, Merck would be required to distribute the drug to victims within the affected rural areas. The distribution cost would be high as there are no distributors already established in these rural areas. There was also a risk that there would not be large enough revenue to regain money spent in the research and development of the drug.
3. Why did Dr. P. Roy Vagelos and his team ultimately decide to develop a human version of Ivermectin? The case provided motives why Roy and his team decided to develop the drug. After conducting several earnest meetings with his management team, they eventually decided that the benefits that the drug had concerning its effect on river blindness were too significant. Many managers felt Merck was morally obligated to develop the drug despite the cost and slim chance of economic reward. They decided to move forward with the development of Ivermectin in order to contribute to the welfare and interests of society.
4. How do you think Merck’s Investments in the human version of Ivermectin created value for its stakeholders and corporate goodwill? Upon learning about victims suffering from river blindness, Merck realized that they had a potential cure to the problem. With this knowledge Merck had a corporate social responsibility to develop a drug because they now had an obligation to take action that could possibly contribute to the welfare and interests of society, as well as the organization and its stakeholders.
Each stakeholder (which is any person who has a direct or indirect relationship with the organization) could feel and see the value that this project could provide. As people invest time and money into an organization they want to experience a return of their investment. One of the greatest returns a person can experience is seeing someone’s life change for the better. This investment of each stakeholder’s time and money in a human version of Ivermectin would create a high level of value for the entire organization and the corporate goodwill.