Merck Sharpe & Dohme Case Summary

1.Provide brief Background and Context

In 1996 Merc Sharp & Dohme (MSD), one of the top tier pharmaceutical firms in Argentina was undergoing fundamental changes in both its organizational structure as well as managerial philosophy. For over a year the company was under a new managing director who was leading the transformation of the company. The main goals at the time were to change the old hierarchical management system into a flatter and highly integrated structure where information could flow freely and individual managers would be able to make decisions on their own and be held accountable for them.

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However as Argentina had only recently transformed its nationalist economy into a free market based one, the changes described above were not an easy task. The country was still facing a widespread corruption problem and many business still relied on personal connections and favors.

2.Who are the key players involved in the case?

Silvia Ring – Manager of Training and Development
Antonio Mosquera – Managing Director
Cristina Quinteiro – Human Resources Director
Martin Rodriguez Hunter – Director of Sales

3.What are the main issues/allegations?

In order to attract prospective future leaders, MSD was running a highly selective internship program for final year college students. The selection process was in its final stage, when Manager of Training and Development had to pick 15 best performing students out of a group of 30.

Before the final decision the manager was contacted by a colleague in MSD and made aware of the fact that one of the students in the selection group is a son of a high ranking official within a government’s national retirees’ health care program and it would provide MSD with an opportunity to get all its product into the national health care formulary if the student is successfully picked for the internship. However, the student in question was number 16 in the list, just below the entry point. The new managing director called a meeting between the sales director, human resources director and the manager of training and development in order to come up with a decision for the situation at hand.

Human Resources Director Cristina Quinteiro had argued that MSD cannot hire the candidate in question as it would violate the company policy that was set forth and explained publically and also be unfair to other candidates that were better than him.

The Director of Sales Martin Rodriguez Hunter had a different view based on a sales perspective. He argued that sales would be increased by arround 5$ million annually if MSD products were to be introduced into the government formulary.

Silvia Ring the Manager of Training and Development was in doubt on how to proceed with the hiring process, however the case study did not provide further sequence of events.

The critical decision was whether to offer the son of a high-ranking official in the government’s national health-care program a place in the company’s highly competitive internship program even though the candidate did not meet the entry requirements.

4.What is/are the ethical issues?

The main ethical issue is whether or not a company should infringe ethical standards that were set forth in the chase for larger profits.

5.What else happened in the case that is relevant?

The competitive environment inside Argentina’s pharmaceutical industry is very important in this case. As detailed by the sales manager, no laws on drug patents are set in place in Argentina, thus widespread drug copying is in motion. Using pirated copies and not having research and development costs allows other companies to enjoy a huge price difference (30%-50%) between their and MSD‘s products.

6.How do you feel about what happened? What are your reflections? What would you do and why as relates specifically to the 16th candidate?

Although two confronting views are presented in the case and the final decision is not known, my personal opinion is that the situation is not that ambiguous. Even though at that time MSD was struggling to compete with companies in Argentina that were not so strict about their ethical behavior, this alone could not justify a decision to step over the ethical standards that were provided in the company’s mission statement.

This argument becomes even stronger when you consider the fact that the acceptance of the 16th candidate does not guarantee anything for MSD in terms of product acceptance to the government health formulary. Even though the candidate is a son of a high official in the government, this not necessarily guarantees that MSD products will be accepted to the formulary as no evidence suggesting otherwise is given in the case. Thus it is only a possibility and in my view MSD would be taking a wild bet by accepting the candidate.

The downside of not accepting the 16th candidate is passing on what is only a probability of 5$ million of extra sales while preserving high ethical standards and not giving an impression of double standards for the staff.

The upside is accepting the same probability of 5$ million of extra sales while discrediting everything that was being worked for during the previous year at MSD. Furthermore, by accepting the candidate after the middle manager, who relayed the information about its connections, was informed that the candidate is below the cut line, many relationships within the company would get distorted. The middle manager and the candidate would get a sense that old unethical practices are still valid at MSD and can be exploited successfully. And even if MSD can get the extra sales, this would create future problems as the 16th candidate would surely feel obliged to some sort of compensation for the favor.

By comparing the two outcomes, it is obvious that the payouts in each case are far from equal and MSD is risking more than it stands to win. Thus it is my opinion that the decision should be not in favor of the 16th candidate as it would definitely bring negative effects to MSD and only hopes of increased sales revenue.

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