Harvard Case - Turing Pharmaceuticals: The Ethics of Drug Pricing
"Turing Pharmaceuticals: The Ethics of Drug Pricing" Harvard business case study is written by Shernaz Bodhanwala, Aakash Bothra. It deals with the challenges in the field of General Management. The case study is 9 page(s) long and it was first published on : Nov 8, 2017
At Fern Fort University, we recommend that Turing Pharmaceuticals implement a comprehensive strategy that prioritizes ethical drug pricing practices while balancing the need for profitability and innovation. This strategy should involve a multi-pronged approach focused on transparent pricing, stakeholder engagement, and a commitment to responsible business practices.
2. Background
The case study focuses on Turing Pharmaceuticals, a company founded by Martin Shkreli, who acquired the rights to Daraprim, a drug used to treat toxoplasmosis, a parasitic infection that can be life-threatening for individuals with weakened immune systems. Shkreli infamously increased the price of Daraprim by 5,000%, leading to widespread public outcry and accusations of price gouging. This decision triggered a national debate on the ethics of drug pricing and the role of pharmaceutical companies in providing essential medications.
The main protagonists of the case study are Martin Shkreli, the controversial CEO of Turing Pharmaceuticals, and the patients and healthcare providers who rely on Daraprim for treatment. The case study also highlights the role of government agencies, the media, and the public in shaping the ethical landscape of drug pricing.
3. Analysis of the Case Study
The case study can be analyzed through the lens of several frameworks, including:
- Business Ethics: Turing Pharmaceuticals' decision to increase Daraprim's price by 5,000% raises significant ethical concerns. The company's actions were perceived as prioritizing profit over patient welfare, leading to accusations of price gouging and exploitation.
- Stakeholder Management: The case study highlights the importance of considering the interests of all stakeholders, including patients, healthcare providers, investors, and the public. Turing Pharmaceuticals failed to adequately address the concerns of these stakeholders, leading to a backlash that damaged the company's reputation.
- Corporate Social Responsibility: The case study underscores the importance of corporate social responsibility in the pharmaceutical industry. Turing Pharmaceuticals' actions were seen as a violation of ethical business practices and a disregard for the social impact of their pricing decisions.
- Competitive Strategy: The case study raises questions about the sustainability of a business model based on price gouging. Turing Pharmaceuticals' actions may have generated short-term profits but ultimately damaged the company's long-term prospects by alienating key stakeholders.
4. Recommendations
To address the ethical concerns surrounding Turing Pharmaceuticals' pricing practices, we recommend the following:
- Implement Transparent Pricing Policies: Turing Pharmaceuticals should adopt a transparent pricing policy that clearly explains the rationale behind its pricing decisions. This policy should be communicated to all stakeholders, including patients, healthcare providers, and the public.
- Engage with Stakeholders: Turing Pharmaceuticals should actively engage with stakeholders to understand their concerns and perspectives on drug pricing. This engagement should be ongoing and involve open dialogue and collaboration.
- Develop a Patient Assistance Program: Turing Pharmaceuticals should establish a patient assistance program to ensure that patients with financial hardship can access Daraprim. This program should be designed to provide affordable access to the drug without compromising the company's financial viability.
- Invest in Research and Development: Turing Pharmaceuticals should invest in research and development to develop innovative treatments for toxoplasmosis and other neglected diseases. This commitment to innovation will help the company create value for patients and stakeholders.
- Adopt a Code of Ethics: Turing Pharmaceuticals should develop and implement a code of ethics that outlines its commitment to ethical business practices. This code should be communicated to all employees and serve as a guiding principle for decision-making.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations align with the core competencies of pharmaceutical companies, which include developing and manufacturing innovative drugs, ensuring patient access to essential medications, and operating ethically.
- External Customers and Internal Clients: The recommendations address the needs of external customers (patients and healthcare providers) and internal clients (employees). By implementing transparent pricing policies, engaging with stakeholders, and developing a patient assistance program, Turing Pharmaceuticals can build trust and goodwill with its customers and employees.
- Competitors: The recommendations consider the competitive landscape of the pharmaceutical industry. By focusing on innovation, ethical pricing, and patient access, Turing Pharmaceuticals can differentiate itself from competitors and establish a strong reputation in the market.
- Attractiveness ' Quantitative Measures: The recommendations are attractive from a financial perspective. By implementing transparent pricing policies, engaging with stakeholders, and developing a patient assistance program, Turing Pharmaceuticals can potentially mitigate the risk of regulatory scrutiny and public backlash, leading to long-term financial stability.
6. Conclusion
Turing Pharmaceuticals' decision to increase Daraprim's price by 5,000% was a significant ethical lapse that damaged the company's reputation and sparked a national debate on drug pricing. The company must prioritize ethical business practices, transparent pricing, and stakeholder engagement to restore its credibility and ensure long-term sustainability. By implementing the recommendations outlined above, Turing Pharmaceuticals can create a more ethical and sustainable business model that benefits patients, healthcare providers, and the company itself.
7. Discussion
Other alternatives to the recommendations include:
- Maintaining the current pricing strategy: This option would likely result in continued public backlash and regulatory scrutiny, potentially leading to legal challenges and financial instability.
- Selling the rights to Daraprim: This option would remove Turing Pharmaceuticals from the center of the controversy but could result in a loss of revenue and potentially lead to a similar pricing strategy by the new owner.
The recommendations outlined in this case study solution are based on the assumption that Turing Pharmaceuticals is committed to ethical business practices and is willing to make the necessary changes to restore its reputation. However, there is a risk that the company may resist these recommendations, leading to further ethical dilemmas and financial instability.
8. Next Steps
To implement the recommendations, Turing Pharmaceuticals should take the following steps:
- Form a task force: The company should form a task force to develop and implement the recommendations, including representatives from various departments, such as finance, marketing, and legal.
- Communicate with stakeholders: The task force should communicate the recommendations to all stakeholders, including patients, healthcare providers, investors, and the public.
- Develop a timeline: The task force should develop a timeline for implementing the recommendations, including specific milestones and deadlines.
- Monitor progress: The task force should monitor the progress of implementation and make adjustments as needed.
By taking these steps, Turing Pharmaceuticals can begin to address the ethical concerns surrounding its pricing practices and build a more sustainable and ethical business model.
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Case Description
In 2015 there was a public outcry over the price increase in Daraprim (pyrimethamine) by Turing Pharmaceuticals AG (Turing). Daraprim was a drug that was widely used by a small population of U.S. patients to treat toxoplasmosis. Soon after Turing acquired its commercialization rights in August 2015, the company increased the list price of the drug by over 5,000 per cent. The increase led to consumer protests in the United States, and the media vehemently condemned Turing's action of raising the price for the decades-old drug that had gone off-patent in 1970. Later, the U.S. Congress stepped in, demanding that Turing's officials clarify how they could justify the high price of Daraprim. How should Turing respond to the public outcry? Should Turing stand by the increased price for Daraprim? How could it handle the outcry from the patient groups that needed Daraprim?
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