Case Analysis & Report
Subject: Ethics & Stakeholder Management
Centennial College School of Business2
TABLE OF CONTENTS PREFACE
Executive Summary 3
Background 5
Stakeholders
Problem Identification 7
Prob
...
Case Analysis & Report
Subject: Ethics & Stakeholder Management
Centennial College School of Business2
TABLE OF CONTENTS PREFACE
Executive Summary 3
Background 5
Stakeholders
Problem Identification 7
Problem Statement
Problem Analysis 11
Fishbone Diagram & Analysis
SWOT Analysis 13
Evaluation of Alternatives 14
Pro’s & Con’s of Alternatives
Recommended Course of Action 16
Developing Action Plan 18
Implementation 19
Conclusion 21
References 22
Executive Summary3
This case elicits a classic example of unethical pricing of drugs by pharma giants.
It involves the intervention of top management to dominate the price of generic
drugs. The most vital character involved in the case is the founder and former CEO
of Turing Pharmaceuticals, Martin Shkreli.
Turing Pharmaceuticals came into light when it sored its drugs’ price (Daraprim)
from $13.50 per pill to $750 per pill in the charge of Martin Shkreli. This decision
was made shortly after the acquisition of manufacturing and commercialization
rights of Daraprim from Impax Laboratory. Daraprim is a lifesaving drug which is
famous in the USA treating toxoplasmosis, this drug comes under the essential list
of medicines of World Health Organization and is often used for people with
compromised immune systems, including AIDS patients, as well as cancer
patients. The immediate increase in price of Daraprim affected the patient as it was
very difficult for them to afford at a time the insurance company increased the
premium to their members, this sudden increase also affected the insurance
companies but as they increased their premiums ultimately the final user i.e.
customer was highly affected. This sudden increase in the price of life saving drug
had an adverse effect on the reputation of Turing. The company can make good
profit by increasing the price behaving unethically in short run, in a long run
company’s goodwill is adversely affected continuing such unethical practices for
making huge profits in short run Turing may fail in long run. Reputation/goodwill
is the most valuable asset of the company. Turing was criticized for its unethical
practices. Just because of its high rates it even became difficult for the government
to supply it to the lower class. So, patients were highly affected with such increases
making it difficult for them to afford and may likely lead to death for many who
cannot afford. Unethical decision was made by the management of the company
which also includes the CEO like sudden hike in the price of product, boost in the
salary and financial discrepancy due to making improper decision and practicing
unfair. If such unethical practices continue after such scandal of Daraprim then
the company will fail.4
Turing also chose a tighter distribution model for Daraprim which restricted the
entry of its competitors allowing it to take monopolistic advantage this made the
drug costly. A 5000% increase in price led to a public outcry and discussions
between congress members which demanded an explanation for the same from the
company. To clear out the elevated issue of price rise, Martin Shkreli voiced the
reason for such increase. He mentioned that the companies were incurring losses
from the particular product segment. Moreover, he needed funds for research and
development of Daraprim to improve its efficacy and reduce its ill effects.
Some employees opposed the hike in price fearing criticism by media while some
supported it by providing further explanation of such price rise. Many medical
institutions warned Turing of advising patients to use XYZ in place of Daraprim
indicating the oppose of the hike in price. This all had a negative impact on the
valuable reputation of the companies. Turing can reduce the price with help of
government grants and sponsorships which can help to save the reputation of the
company.
Although a price rise for the given reasons is supported but the sudden spike in
prices are never a valid reason in case of price of medications as it is a product
which can save lives whose worth cannot be determined in monetary terms.
Background5
In 2015, Turing Pharmaceuticals came in limelight to increasing the price for one of its
important drugs Daraprim(pyrithiamine) to 5000% hike as $13.50 to $750 per pill which
comes under essential drugs as this fight to help diseases like AIDS and Cancer. And all
this change made by one person Mr. Martin Shkreli the founder and former Chief
executive officer of Turing, all media and news channels blamed Mr. Martin in their
headlines and news, media started sharing all the stories related to Turing and this drug
and they also telecasted the emotional stories of patients.
This case created lots of criticism for Health care system of the United States. Mr.
Shkreli influenced the distribution model of Daraprim, he controlled the distribution
change with lots of imitations and defended his decision with pointless arguments.
Shkreli claimed that this decision will help Turing to increase their revenue which can
help Turing to fund a research and development model to modernize and invent new
highly effective drugs.
Martin Shkreli, a school dropout and highly interested teenager in stocks and money,
started his career as an intern with Cramer, Berkowitz & Co. But he feels like education
is important for his field and he completed his education and earned a business degree
from New York’s Baruch college. And he started as a founder of a hedge fund but due to
massive loss he closed his firm a year later. Then he tried his luck in a biotech firm
named Retrophin Ltd. but was removed from the post after he was caught handling
management improperly. And after that again he collaborated with another biotech
company Turing.
The senior officers of Turing were upset with Shkreli’s decision of price hike in Daraprim
and they were more concerned about Turing’s image. The US government demanded to
explain the price hike decision in a report with a valid reason. In one interview in New
York Shkreli explained that all the extra money of profit they invested in the company's
research and development. But then it was a burden on insurance companies as they
have to pay for claimed medication for the customers so they hike the premium rates
and some companies even removed these drugs from their claim list.
A per price watch report of the US government that claimed that from 2006 to 2015 the
drugs price increased every year with a remarkable hike according to analysis. Horizon
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