Areas of Africa and South America

Company Invested millions of dollars to develop a treatment for river blindness, a disease of the developing world that has Infected 18 million people and that deposit larvae of a parasite under the skin of their victims. When the larvae mature into adult worms, the adults reproduce millions of the immature forms of the parasites that migrate throughout the tissues of the body causing severe and never- ending itching and lesions in the skin.

These parasites eventually reach the eyes causing an inflammatory reaction that slowly destroys the eye tissue.

We Will Write a Custom Case Study Specifically
For You For Only $13.90/page!

order now

Victims of the disease are unable to be productive. The disease is especially prevalent in areas of Africa and South America. In Cameroon, for instance, 95% of the children between the ages of 5 and 7 who were examined carried the parasite. Because of the devastation the disease causes, Merck decided to produce It even though it would not financially profit from doing so. When no government or aid organization stepped forward to buy the drug, Merck pledged to supply the drug free forever.

When Merck agonized that no effective mechanism existed to distribute the drug, they went far beyond Industry practice and organized a committee to oversee distribution. Hailed as one of the best managed U. S.

Companies, Merck believes such decisions serve its own long-run interests. It takes $200 million in research and 12 years to bring the average drug to market; the decision to pursue research is a complex one. Since resources are finite, dollars and time have to go to projects that hold the most promise, in terms of both making money so a company can continue to exist and alleviating human suffering.

This is an especially delicate issue when it comes to rare diseases, when a drug company’s investment could probably never be recouped because the number of people who would buy the drug Is so small. The problem with developing a drug to combat river blindness was the flip side of the ‘orphan’ drug dilemma.

There were certainly enough people suffering from the disease to Justify the research, but since It was a disease afflicting people In some of the poorest parts of the world, those suffering from the disease could not pay for the medication.

In 1978, Merck was testing vermilion, a drug for animals, to see if it could effectively kill parasites and worms. During this clinical testing, Merck discovered that the drug killed a parasite in horses that was very similar to the worm that caused river blindness in humans. This, therefore, was Mercer’s dilemma: Company scientists were encouraging the firm to invest in further research to determine if the drug could be adapted for safe use with humans, but Merck knew it would likely never be a profitable product.

A.What are the potential costs and benefits of Investing In the development of the drug for the treatment of river blindness?


If a safe and effective drug could be developed, the prospect of Mercer’s recouping Its Investment was almost zero. Could a Merck Justly sun an Investment to shareholders and the financial community? What criteria would be needed to help them make such a decision?

C. If Merck decided not to conduct further research, how would it Justify such a decision to its scientists? How might the decision to develop the drug, or not to develop the drug, affect employee loyalty?