Merck Pharmaceuticals Corporate Social Responsibility Analysis

by Jason Shaw
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CSR

In accordance with ethical values, Wood (1991) defined corporate social responsibility (CSR) as corporate self-regulation and an essential part of the business process. This organisational understanding involves both stakeholders and the wider society, both natural and engineered ecosystems. As defined by Milton Friedman (1984), the stakeholders go beyond shareholders, including owners, management, staff, clients, vendors, the public, and the society to which a company can belong or work.

CSR has become a method of public relations as well as a communications technique that often preempts regulatory agencies in a more recent and common context (Mintzberg, 1983). There are also ways, though, that businesses or corporations implement CSR in their company framework. One of the methods is community-based growth, where an organisation develops a community presence and initiative either in the field of its activity or beyond it in a fixed geographical area. Some of the instances of community-based initiatives involve efforts such as livelihood support for a branded textile supplier, launching a literacy initiative by the distribution of books and learning aids, oversight, appraisal and recommendation for change in a specific school or environment, clean-up of rivers, and other efforts. A common solution has been philanthropy in which organisations supply a non-profit organisation with cash contributions, goods or tangible materials for delivery to undeserved or deserved recipients such as Children International and such NGOs.

Other types of CSR are incorporated in the supply chain framework, such as the implementation of the Fair Trade system that guarantees that livestock are not affected, employers are paid and benefited in a justified way, packaging is ecological, staff are adequately rewarded, environmental conservation steps have been taken over the life of a single or joint prodding operation (International Business Leaders Forum and International Finance Corporation, 2007).

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Merck Pharmaceutical’s CSR Program

The Kind of CSR The Company is Doing:

Merck claims to ensure that CSR is “an integral part of the way we do business… to create shared value and to help solve the tough issues facing business and society today,” (Merck, 2008, p 3).  Their CR principles center on conducting business with high ethical standards; engage in expansion of access to quality care around globally; make positive and sustainable impact on the communities and societies they live and work in; and provide fair and just compensation to employees (Merck, 2008). This is reflected on their claimed CSR programs research on new medicines and vaccines needed, environmental footprint management, improved access to medicines and vaccines, ensure confidence in safety and quality, advocacy and outreach, and executing the basics which pertains to ethical business process standards (Merck, 2008).

CSR has become a very complex process that is involved in various stages of the corporate system, so that a multinational corporation like Merck Pharmaceuticals may be involved in several CSR efforts at one time. The IBLF and IFC (2007) have defined various CSR efforts of which the following are addressed: protection and promotion of the rights of individuals as stakeholders of a company from employees, consumers, suppliers, distributors, to community members. On this manner, Merck has adopted several more popular CSR patient assistance programs in the United States for patients who cannot afford medications (Merck, 2006). This program has started in the 1950s and is active today. There are several CSR programs undertaken by Merck but this paper will focus on seven programs in practice as noted to be more practical to the public: Act Program for Emend, Act Program for Zolinza, Merck Anti-Infective Hotline, Merck Patient Assistance Program, Merck Prescription Discount Program, Merck Vaccine Patient Assistance Program, and Support Program for Crixivan (Merck, 2006). The CSR program has been available in the USA, as well as other parts of the globe where Merck vaccines and drugs are marketed.

It should be noted that the claims for CSR (Merck, 2008) came with the clause “forward-looking statements” based on expectations that involve risks and uncertainties, thereby, not actually a commitment on the part of Merck (2008, p 3).

Analysis of the Company’s CSR Program

Merck Pharmaceutical’s CSR Program 

As mentioned earlier, CSR has been criticized as marketing and public relations strategy, as well as a form to pre-empt regulatory requirements. On the part of Merck, there are many other considerations to include in the evaluation of its CSR, and it is not limited to what their press releases report but more on the evaluation of its totality not only as an employer and manufacturer of drugs globally but as entity within the community and the environment as a whole.

Merck has proven to be successful in its patient assistance programs with the access and distribution of its high costing drugs, but this program may also be attributed to its marketing tactics including tie-up with organizations such as governments to provide bulk discounts for bulk purchases. Company-wise, this is a profitable CSR.

On the other hand, there had been several instances that Merck failed. For instance, in acting unethically with its distributors and doctors who have not been supportive of their efforts to market their failed product Vioxx (rofecoxib), a medicine for arthritis. In a lawsuit, it has been established that Merck sought out doctors critical of Vioxx and tried to discredit or destroy their reputation in the communities where these doctors practice or live (Rout, 2009). It was soon found out that indeed, Vioxx was contributing to heart attack or strokes as some 50 complainants filed a case against Merck for use of Vioxx. A settlement of $4.85 billion which Merck had to pay to pending lawsuits has been agreed upon but prevailed cases were seen to be paid relatively small amounts (Berenson, 2008). In addition to the said case of Vioxx, 30 states split the amount of $58 million settlement for deceptive marketing tactics to promote. It has been considered the largest multi-state settlement against a pharmaceutical company and the FDA mandated that Merck’s new television advertisements for pain relievers must be examined prior to release until 2018 (Associated Press, 2008).

Another controversy involving Merck Pharmaceuticals is its Kelco venture, a kelp processing plant in San Diego, California. It has been established that Kelco was source of about one third of the total smog-causing volatile organic compound (VOC) air emissions translated to 680,000 pounds per year. This release is equivalent to VOCs from about 10,000 cars. Merck which sold Kelco to Monsanto Co. by the time of the litigation also agreed to pay penalties amounting to $1,857,395 to settle the allegations that Kelco exceeded air pollution limits during its several years of operations (Glenn and Florman, 1996).

There is no limit to claims and settlements of irresponsibility on the part of Merck Medicinal. The US Department of Justice in February 2008 forced Merck to refund more than $650 million to Medicaid and other federal health care agencies/programs for false price reporting and kickbacks. Merck charged illegal remuneration to health insurance professionals, which caused them to recommend Merck’s drugs, refusing the same lower prescription rates to government health care services. The charges were brought under the False Claims Act in two different proceedings. This was deemed one of the Justice Department’s biggest health fraud agreements in conjunction with the sale of Merck’s Zocor and Vioxxx products (USDOJ, 2008). 

Is it Worth the Cost? 

CSR programs as public relations campaigns help diversify negative publicity for irresponsibility and other damages to stakeholders. It is a smoke-screen to rectify past, ongoing, or possible negligence of one company within a given sphere (Vlad, 2006). For the part of Merck, the cost of its publicity or public relations campaigns disguised as CSR programs may be all worth the effort. It should be reminded that Merck Pharmaceuticals is one of the biggest global pharmaceuticals and profitability could be staggering to ordinary people. In consideration of its profits and revenues (see Appendix A), CSR efforts are worth the cost. Below Table indicates the contribution of Merck on CSR efforts:

Source, Merck, 2008, p 9.

What are the Advantages of the CSR Program? 

There are many advantages of a CSR program or any CSR program for that matter. Aside from promoting equitable and sustainable practices, CSR programs become a benchmark or basis for competing pharmaceutical companies to ante their business and work systems, as well as embrace ethical practices not only for profitability’s sake but also to streamline goals and focus (Stiglitz, 2008). For Merck Pharmaceuticals, its seven patient assistance programs provide an option for marginalized patients or those who may not afford the actual costs of medications. Many pharmaceutical companies compare and adjust their medicine costs to their competing brands or companies in order to capture a targeted market share or edge over a competition. These practices, as well as the introduction of generic drugs, expiration of licenses and other causes have helped drive costs of medicines at affordable prices. On the part of Merck, this CSR program bound with their marketing strategy have helped in the distribution of medicine products to supposedly un-served areas as well as under-served populations. Merck markets its vaccines through governmental agencies in order to mass produce and mass market them in a more efficient manner. Guised or presented as a CSR program (Vlad, 2006), it helps create an illusion of “savings” on the part of recipient or buyer, as well as a benchmark for other pharmaceuticals to follow suit.

On the part of the recipient-patients, access to costly medicines and vaccines becomes possible. Many lives are saved by vaccines as studies and actual statistics already pointed out (Stern and Markel, 2005). Positive outcomes have resulted in this CSR program of Merck Pharmaceuticals.

What are the Disadvantages?

The disadvantages of the CSR program are its conflicting message towards consumers and stakeholders (aside from investors, suppliers, management, employees and distributors) in the global community against their actual practices. As mentioned earlier, CSR cannot be separated with the business process. Where a company embraces CSR, it should do so in a totalitarian manner to make it become sincere and credible. Where marketing strategy and profitability are the only concerns for embracing CSR, it remains as a smoke-screen to distract attention on more pressing or serious issues such as compromising the reputation of professionals (such as the doctors already mentioned), endangering and causing lives of consumer-patients, endangering lives of communities where Merck Pharmaceuticals operate, defrauding the public through false information dissemination, as well as destruction of the natural environment.

The CSR practice appears a plain public relations and marketing campaign that in the end outweighs its actual purpose and result to the actual company performance when it comes to ethical business practices.

Should the Company Even be Doing CSR?  Why or Why Not? 

On the part of Merck Pharmaceuticals, doing CSR has proven its advantages by retaining the operability, as well as profitability of the corporation. However, if the CSR remains a smoke-screen strategy, it better stop practicing the CSR and instead focus on integrating transparency and sustainability in its business process. This way it will no longer be necessary to announce to the world that Merck Pharmaceuticals is conducting or introducing such and such activities for the good of the public, because their actual performances will be validated by the consumers and the global community in an honest way. As mentioned earlier, many CSR programs are criticized as hypocritical (McKibben, 2008), and this provides a more negative view than not adopting CSR at all.

Are there Ways the Company Might More Effectively Meet its CSR Goals?

The more efficient manner that Merck Pharmaceutical could meet its CSR goals is to reevaluate its mission and vision in order to define their goals towards their stakeholders with consideration to all stakeholders and not limit their “stakeholder” definition to sharers of profits. The global business environment has grown to demand public and environmental accountabilities which are not only regulated by government agencies in various levels (Gallego, 2006). It has also encompassed actual performance as perceived by individuals as consumers and their families, by the community where business operates, and the global sphere where the reach of product distribution and consumption is impacted.

With these considerations, Merck Pharmaceuticals should embrace a holistic approach in its business process and operations to encompass environmental and community programs, as well as public accountability.

References;
  • Associated Press (2008). Merck Agrees to Settlement Over Vioxx Ads. New York Times, May 21. Accessed from http://www.nytimes.com/2008/05/21/business/21vioxx.html?_r=1&ref=business&oref=slogin
  • Berenson, A. (2008). Courts Reject Two Major Vioxx Verdicts. New York Times, May 30. Accessed from http://www.nytimes.com/2008/05/30/business/30drug.html?_r=1&partner=rssnyt&emc=rss&oref=slogin
  • Friedman, Milton (1984). “The Social Responsibility of Business is to Increase its Profits,” Accessed from www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html
  • Gallego, I. (2006). The use of economic, social and environmental indicators as a measure of sustainable development in Spain. Corporate Social Responsibility and Environmental Management, May 2006, Vol. 13 Issue: Number 2 p.78-97.
  • Glenn, B. and Florman, C. (1996). U.S. settles $1.8 million pollution case with Merck and Monsanto. September 9. US Department of Justice. Accessed from http://yosemite.epa.gov/opa/admpress.nsf/016bcfb1deb9fecd85256aca005d74df/e96f05f182d3254b852570d8005e1207!OpenDocument
  • International Business Leaders Forum and International Finance Corporation (2007). The Guide to Human Rights Impact Assessment and Management. Accessed from Ethics World, November 2011 at http://www.ethicsworld.org/corporatesocialresponsibility/bestcorporatepractices.php#supplychain
  • McKibben, B. (2008). Hope vs. Hype. Mother Jones, November-December 2006. Accessed from http://www.motherjones.com/news/feature/2006/11/hype_vs_hope.html
  • “A Guide to Corporate Social Responsibility (CSR),” available on our ANGEL Learning Modules tab. (please provide details of this one, I cannot access your library)
  • Merck Pharmaceuticals (2006). Merck to create new patient assistance program for vaccines. Accessed November 2011 from http://www.merck.com/newsroom/news-release-archive/corporate-responsibility/home.html
  • Merck Pharmaceuticals (2008). Advancing the Dialogue Towards A Healthier Future: Corporate Responsibility 2008 Report. 
  • Stern, A.M. and H. Markel (2005). The History of Vaccines and Immunization: Familiar Patterns, New Challenges. Health Affairs 24, no. 3: 611-621.
  • Stiglitz, J. (2008). Regulating multinational corporations: towards principles of cross-border legal frameworks in a globalized world balancing rights with responsibilities. Grotius Lecture. Joseph E. Stiglitz.
  • United States Department of Justice (2008). Merck to Pay More than $650 Million to Resolve Claims of Fraudulent Price Reporting and Kickbacks. Thursday, February 7. Accessed from http://www.justice.gov/opa/pr/2008/February/08_civ_094.html
  • Vlad, I. (2006). Rectification Without Assuming Responsibility: Testing the Transgression Flowchart With the Vioxx Recall. Journal of Public Relations Research 18, 4: 357-379.

Appendix

Merck Pharmaceuticals Corporate Social Responsibility (CSR)

Source: Merck, 2008, p 9

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