Harvard Case - Burroughs Wellcome and AZT (A)
"Burroughs Wellcome and AZT (A)" Harvard business case study is written by Willis M. Emmons, Ashok Nimgade. It deals with the challenges in the field of Business & Government Relations. The case study is 20 page(s) long and it was first published on : Sep 9, 1991
At Fern Fort University, we recommend that Burroughs Wellcome (BW) adopt a multifaceted strategy to address the complex challenges surrounding AZT, the first effective treatment for HIV/AIDS. This strategy should prioritize patient access, responsible pricing, and sustainable business practices while navigating the intricate landscape of government policy and regulation, globalization, and corporate social responsibility.
2. Background
Burroughs Wellcome, a pharmaceutical giant, faced an ethical dilemma in 1987. They had developed AZT, a groundbreaking treatment for HIV/AIDS, but the drug's high price made it inaccessible to many patients, particularly in developing countries. This case study explores the company's struggle to balance its financial interests with its social responsibility, navigating the complex interplay of business and government relations, economics, and international business.
The main protagonists are:
- Burroughs Wellcome: A pharmaceutical company with a strong financial position and a desire to maximize profits.
- Patients with HIV/AIDS: A growing population, particularly in developing countries, facing a life-threatening disease with limited access to treatment.
- Governments: Facing pressure to address the AIDS epidemic and regulate drug pricing, particularly in developing countries.
- Non-profit organizations: Advocating for patient access and affordable treatment.
3. Analysis of the Case Study
This case study can be analyzed through the lens of competitive strategy, corporate social responsibility, and international business.
Competitive Strategy:
- First-mover advantage: BW held a monopoly on AZT, giving them significant market power.
- Pricing strategy: The high price of AZT was a strategic decision to maximize profits and recoup development costs.
- Competition: The potential for generic drug manufacturers entering the market posed a threat to BW's profits.
Corporate Social Responsibility:
- Ethical dilemma: Balancing profit maximization with the need to provide affordable access to life-saving medication.
- Public image: BW's pricing strategy faced significant public criticism, impacting their reputation.
- Stakeholder engagement: BW needed to engage with various stakeholders, including patients, governments, and NGOs, to address concerns.
International Business:
- Globalization: The AIDS epidemic was a global issue, requiring a global response.
- Developing countries: The need for affordable treatment was particularly acute in developing countries with limited healthcare resources.
- Trade and regulation: International trade agreements and regulations influenced drug pricing and access.
4. Recommendations
BW should implement a multi-pronged strategy to address the challenges surrounding AZT:
1. Patient Access:
- Price reduction: Offer tiered pricing based on income levels and geographic location, with significant discounts for developing countries.
- Partnerships: Collaborate with NGOs and governments to establish programs providing free or subsidized treatment.
- Generics: Consider licensing the production of generic AZT to qualified manufacturers in developing countries to increase access.
2. Responsible Pricing:
- Transparency: Publicly disclose the cost of developing and manufacturing AZT to enhance transparency and build trust.
- Profit sharing: Consider sharing a portion of AZT profits with organizations dedicated to fighting AIDS.
- Government negotiation: Engage in constructive dialogue with governments to establish fair pricing mechanisms.
3. Sustainable Business Practices:
- Research and development: Invest in research and development to create more affordable and effective treatments for HIV/AIDS.
- Long-term strategy: Develop a long-term strategy for the HIV/AIDS market, considering the potential for generic competition and the need for sustainable business practices.
- Corporate social responsibility: Integrate corporate social responsibility into the company's core values and business practices.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: BW's core competency is drug development, and these recommendations align with the company's mission to improve human health.
- External customers and internal clients: The recommendations prioritize the needs of patients while also considering the interests of shareholders and employees.
- Competitors: The recommendations acknowledge the potential for generic competition and aim to create a sustainable business model.
- Attractiveness: The recommendations are likely to improve BW's long-term profitability by expanding market share and building a positive reputation.
- Assumptions: These recommendations assume that BW is committed to ethical business practices and is willing to adapt its strategy to address the evolving needs of the HIV/AIDS market.
6. Conclusion
Burroughs Wellcome faced a complex ethical dilemma in 1987. By adopting a strategy that prioritizes patient access, responsible pricing, and sustainable business practices, BW can navigate the challenges of the HIV/AIDS market while upholding its commitment to corporate social responsibility. This approach can create a win-win situation for the company, patients, and society as a whole.
7. Discussion
Other alternatives not selected include:
- Maintaining high prices: This would have maximized profits in the short term but would have led to widespread criticism and limited access to treatment.
- Donating AZT: While this would have addressed the access issue, it would have been unsustainable for BW in the long term.
Key risks and assumptions:
- Government regulation: Governments could impose price controls or other regulations that would impact BW's profitability.
- Generic competition: Generic manufacturers could enter the market and undercut BW's prices, leading to a loss of market share.
- Public perception: BW's reputation could be further damaged if it is perceived as prioritizing profits over patient access.
8. Next Steps
- Develop a detailed implementation plan: This should include timelines, resource allocation, and key performance indicators.
- Engage with stakeholders: BW should engage in open and transparent dialogue with patients, governments, NGOs, and other stakeholders.
- Monitor progress and adapt: BW should continuously monitor the effectiveness of its strategy and make adjustments as needed.
By taking these steps, BW can create a more equitable and sustainable approach to addressing the HIV/AIDS epidemic while demonstrating its commitment to corporate social responsibility and ethical business practices.
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Case Description
Burroughs Wellcome Co., developer of AZT, the first drug approved by the U.S. Food and Drug Administration for the treatment of Acquired Immune Deficiency Syndrome (AIDS), finds itself under siege in September 1989 by AIDS activists and various segments of the U.S. government. In spite of repeated demands over the previous two years to lower the price of AZT (trademarked Retrovie), Burroughs Wellcome and its parent company, London-based Wellcome PLC, have refused, claiming that the $6,300 annual (wholesale) cost of the drug per person is justified, based on high research, development, production, and other costs associated with the drug. The firm's opponents accuse it of using an existing chemical compound, ample government research assistance, and a cooperative regulatory system to gain a monopoly on the only approved treatment available for people with AIDS. The case gives students the opportunity to explore the economics and regulation of the pharmaceutical industry, wrestle with the ethics of drug pricing, and analyze the formulation of public relations strategies on the part of both private companies and activist groups in the age of AIDS.
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