The Purpose of the Corporation
101
CASE 3. Merck and River Blindness
Merck & Co., Inc. is o n e of the world's largest
p h a r m a c e u t i c a l p r o d u c t s a n d services companies. Headquartered in Whitehouse Station,
New Jersey, Merck has over 70,000 employees
a n d sells p r o d u c t s a n d services in a p p r o x i mately 150 countries. Merck h a d revenues of
$47,715,700,000 in 2001, r a n k e d 24th o n the
2002 Fortune 500 list of America's largest comp a n i e s , 6 2 n d o n t h e Global 500 list of the
World's Largest Corporations, a n d 8 2 n d o n
the F o r t u n e 100 list of the Best Companies to
Work For.
In the late 1970s Merck research scientists
discovered a potential cure for a severely debilitating h u m a n disease known as river blindness
(onchocerciasis). T h e disease is caused by a parasite that enters the body through the bite of
black flies that breed o n the rivers of Africa and
Latin America. T h e parasite causes severe itching, disfiguring skin infections, and, finally, total
a n d p e r m a n e n t blindness. In order to demonstrate that it was safe a n d effective, the d r u g
n e e d e d 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
a n d a seven-year clinical trial proved the drug
both efficacious and safe. A single annual dose
of Mectizan, the n a m e Merck gave to the drug,
kills the parasites inside the body as well as the
flies that carry the parasite.
O n c e Mectizan was a p p r o v e d for h u m a n
use, Merck executives explored third-party paym e n t options with the World H e a l t h Organization, t h e U.S. Agency for I n t e r n a t i o n a l
D e v e l o p m e n t , a n d t h e U.S. D e p a r t m e n t of
State without success. Four U n i t e d States Senators went so far as to i n t r o d u c e legislation to
provide U.S. f u n d i n g for the worldwide distribution of Mectizan. However, their efforts
were unsuccessful, n o legislation was passed
a n d , a n d n o U.S. g o v e r n m e n t f u n d i n g was
m a d e available. Finally, Merck executives decided to manufacture a n d distribute the d r u g
for free.
Since 1987, Merck has m a n u f a c t u r e d a n d
distributed over 700 million tablets of Mectizan at n o charge. T h e company's decision was
g r o u n d e d 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.
CASE 4. H. B. Fuller in Honduras: Street Children
and Substance Abuse
Kativo Chemical Industries, a wholly owned
foreign subsidiary of H. B. Fuller, sells a solventbased adhesive (glue) in several countries in
Latin America. The brand name of the glue
is Resistol. In 1985 it came to H. B. Fuller's attention that large numbers of street children
in the Central American country of Honduras
were sniffing glue and that Resistol was among
the glues being abused. Indeed all these
children who sniff glue are being referred to
as Resistoleros.
Resistol has a number of industrial uses, although one of its primary uses is in small shoe
repair shops. The glue has properties that are
not possible to attain with a water-based formula. These properties include rapid set,
strong adhesion, and water resistance. Resistol
is similar to airplane glue.
This case is based on a much longer case with the same name authored by Norman E. Bowie and Stefanie Lenway. The
full "H. B. Fuller in Honduras: Street Children and Substance Abuse" was the Case award winner in the Columbia University Graduate School of Business Ethics in Business Program.