On September $30,2004,$ Merck & Co$.$ announced the withdrawal of Vioxx, its highly profitable pain reliever for arthritis sufferers, from the market. This announcement came only seven days after company researchers found in a clinical trial that subjects who used Vioxx more than $18$ months had a substantially higher incidence of heart attacks. Merck chairman and CEO Raymond V$.$ Gilmartin described the action as "the responsible thing to do$."$ He explained, "It's built into the principles of the company to think in this fashion. That's why the management team came to such an easy conclusion."$2$ In the lawsuits that followed, however, damaging documents emerged casting doubt on Merck's claim that it had acted responsibly by taking appropriate precautions in the development and marketing of the drug.Development of VioxxFor decades, Merck's stellar reputation rested on the company's emphasis on science$-$driven research and development. Merck employed some of the world's most talented and best$-$paid researchers and led other pharmaceutical firms in the publication of scientific articles and the discovery of new medicines for the treatment of serious conditions that lacked satisfactory therapies. For seven consecutive years in the $1980$s$,$ Merck was ranked by Fortune magazine as America's most respected company. Merck received widespread accolades in particular for the decision, made in $1978,$ to proceed with research on a drug for preventing river blindness $($onchocerciasis$),$ which is a debilitatng parasite infection that afflicts many in Africa, even though the drug was unlikely to pay for itself. Eventually, Merck decided to give away the drug, called Mectizan, for as long as necessary at a cost of tens of millions of dollars per year. This kind of principled decision making was inspired by the words of George W$.$ Merck, the son of the company's founder: $"$We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it$,$ the larger they have been."Vioxx is an example of Merck's innovative research. Developed as a treatment for the pain of arthritis, the drug acts as an anti$-$inflammant by suppressing an enzyme responsible for arthritis pain. Other drugs in the class of nonsteroidal anti$-$inflammatory drugs $($NSAIDs$)$ inhibit the production of two enzymes COX$-1$ and COX$-2.$ However, COX$-1$ is important for protecting the stomach lining, and so ulcers and stomach bleeding are potential side effects of these drugs. The distinctive benefit of Vioxx over other NSAID pain relievers, such as ibuprofen $($Advil$)$ and naproxen $($Aleve$),$ is that it inhibits the production of only the COX$-2$ enzyme, and not COX$-1.$ After approval by the Food and Drug Administration $($FDA$)$ in May $1999,$ Vioxx quickly became a popular best seller. More than $20$ million people took Vioxx between $1999$ and $2004,$ and at the time of the withdrawal, with $2$ million users, Merck was earning $$2\mathrm{.}5$ billion annually or $11$ percent of the company's total revenues from the sale of the drug.Competitive EnvironmentThe success of Vioxx came at a critical time for Merck. Not only were the patents on several profitable drugs due to expire, opening the way for generic competition, but also the competitive environment of the entire pharmaceutical industry was undergoing rapid change. Competition from generic drugs increased dramatically due to federal legislation and also due to the rise of large, powerful managed care organizations, which sought to cut the cost of drug treatments through the use of formularies that restricted the drugs doctors could prescribe. The development of new drugs was increasingly shifting to small entrepreneurial research companies focused on specific technologies, which reduced the competitive advantage of the traditional large pharmaceutical firms. Merck's competitors responded to changes in the competitive environment by acquiring small companies, developing new products that duplicated ones already on the market $($so called $"$me$-$too" drugs$),$ entering the generics market, seeking extensions of patents after making only slight improvements, and engaging in aggressive marketing, including the use of controversial direct$-$to$-$consumer $($DTC$)$ advertising.The first four strategies$-$growth by acquisition, the development of $"$me$-$too" drugs, the production of generics, and making improvements merely to extend patents$-$conflicted with Merck's culture and values. However, under the previous CEO, Roy Vagelos $($who guided Merck through the development of Mectizan for river blindness$),$ the company greatly increased its emphasis on marketing. This increase in emphasis was considered necessary given the short time available to sell a drug before the patent expired. In particular, evidence was needed not only to prove a product's safety and effectiveness in order to gainFDA approval but also to persuade physicians to prescribe it instead of the competitors' medications. Since much of the information that could persuade doctors was part of a drug's label, marketers needed to be involved in the development of a product from the earliest research stages in order to prepare a persuasive label. The label could be improved further by conducting tests, which were not scientifically necessary but which generated clinically proven results that could be useful in persuading physicians. Under Gilmartin, the company's formally stated strategy became: "Turning cutting$-$edge science into novel medicines that are true advances in patient care with proven clinical outcomes."Decision to WithdrawIn announcing the withdrawal of Vioxx, Gilmartin described the evidence of increased risk of heart attacks as "unexpected." In the first lawsuits against Merck that came to trial, evidence was presented to show that company scientists had considered the potential heart problems with Vioxx as early as $1997.$ The first hint of trouble came in that year as Merck scientists noticed that Vioxx appeared to suppress the production of a substance in the body that acted naturally to reduce the incidence of heart attacks. Although the significance of this discovery was recognized, no follow$-$up investigations were undertaken.More significant evidence that Vioxx might contribute to heart attacks was produced by a study concluded in $2000$ that was designed to compare the gastrointestinal effects of Vioxx and naproxen in order to improve the label of the Merck product by proving that Vioxx was less harmful to the stomach lining. Although the study, called VIGOR $($for Vioxx Gastrointestinal Outcomes Research$),$ showed that Vioxx users had heart attacks at a rate four to five times that of the naproxen group, researchers were uncertain whether the difference was due to an adverse effect of Vioxx in causing heart attacks or a beneficial effectof naproxen in preventing them. The heart attacks in the trial occurred mainly in the Vioxx subjects who were already at greatest risk of heart attacks, and all subjects were prohibited from taking aspirin $($which is known to prevent heart attacks$)$ in order to gain reliable results from the study since aspirin affects the stomach. When the results of the VIGOR study were published in the November $2000$ issue of the prestigious New England Journal of Medicine, the beneficial effects of naproxen were emphasized in a way that implied that Vioxx was safe for people without the risk factors for heart attacks. After initially resisting pressure by the FDA to include a warning on the Vioxx label, Merck finally agreed in April $2002$ to add the evidence of an increased incidence of heart attacks. However, the language on the label emphasized, again, the uncertainty of the cause and recommended that people at risk of heart attacks continue to use an anti$-$inflammant for protection.In the meantime, Merck continued its aggressive marketing campaign. Between $1999$ and $2004,$ Merck spent more than $$500$ million on DTC television and print advertising. This expenditure was intended to keep pace with the heavy spending by Pfizer for its competing COX$-2$ inhibiter Celebrex. Merck also maintained a $3,000-$person sales force to meet with doc tors for face$-$to$-$face conversations about Vioxx. To support this effort, Merck developed materials that provided salespeople with responses to questions from skeptical physicians$\mathrm{.}3$ One document, called an "obstacle handling guide," advised that questions about the risk of heart attacks be answered with the evasive explanations that Vioxx "would not be expected to demonstrate reductions" in heart attacks and was "not a substitute for aspirin." Another document titled "Dodge Ball Vioxx" concluded with four pages that were blank except for the word "DODGE!" in capital letters on each page. Company documents also describe an effort to "neutralize" skeptical doctors by enlisting their support or at least defusing their opposition by offers of research support or engagements as consultants.The timeline below outlines key events in the development, approval, and marketing of Vioxx and the outcome for Merck.The History of VioxxThe Food and Drug Administration $($FDA$)$ has a multi$-$phase approval process to evaluate the testing, safety, and labeling of all new prescription drugs to be sold in the United States. The FDA also monitors the "post$-$marketing" safety of approved drugs, to ensure that the public is informed of any new health risks that are revealed by widespread use and additional studies.TimelineDecember $1994$Merck seeks FDA approval to begiis Vioxx clinical trials based d on the success of animal testing fon human subjects$)$Merck scientists discover the problems signs that Vioxx may cardiovascularMerck applies for FDA approval to market Vios for the treatment of acute pain, dysmenorrhea $($menstrual cramps$),$ and osteoarthritis. The application includes the results of about $60$ studies, none of which points to potential cardiovascular risksJanuary $1999$May $1999$Merck begins the Vioxx Gastrointestinal Outcomes Research study $($VIGOR$)$ to determine whether Vioxx is sader for the digestive system than naproxen, an older painkiller. This later becomes selling point for the drugOctober $1999-$December $1999$After a six$-$month review, the FDA approves Vicocx for the three in its application Merck speciThe data and safety monitoring board for Merck's VIGOR shady meets several to discuss its findings. Although Vios appears to increase the risk of heart problems in test subjects, the board ing Vioxx to the public. continue the study and keep marketNovember $2000$April $2002$Merck's VIGOR study is published in the New England Journal of Medicine, but Merck does not include candiovascular observed instances of heart attacks and downplays theThe FDA publishes the foll VIGOR study results and additional studies conducted by independent parties also indicate that there is a real risk of cardiovascular problems. In September, the FDA wams Merck that the Vioxx marketing cam paign and label do not adequatelyMerck changes the drug's label to better reflect the dangers and necessary precau thons for prescribing doctors and users, based on the VIGOR study. The FDA also approves Vioxx for an additional the treatment of rheumatoid arthritisSeptember $2004$January $2005$Merck's APPROW $($Adenomatous Polyp Prevention on Viosos$)$ study conclusively shows that Vinox increases the risk of heart attacks and strokes after $18$ months of treatment. Merck then voluntarily stopsA British medical journal publishes a study that estimates Vious caused heart at tacks in $88,000-140,000$ Americans and fatal heart attacks in $38,000.$ Study author David Grahami FDA scientist who als affirmed the correlation betwee attacks in his earlier testimony to CongressAfter facing multiple lawsuits, Merck agrees to pay $$4\mathrm{.}85$ billion to settle about $47,000$ personal injury claims fromNovember $2007$Menck pleads guilty to promoting Vioxx as a treatment for theumatoid arthritis before it received FDA approval for this settlement. $2002.$ The company agrees to payDecember $2011$April $2012$AUS district orders Merck to pay an additional $$322$ million as a criminal penalty misleading promotion and marketing of VioxxServer of Events with VICCX Sinor Opening of IND US FDA Advisory CommingApel $2005$ Merck Sharp & Dohme Sentemondin $2012$Criticisms and DefensesThe study that conclusively established that Vioxx increased the risk of heart attacks was called APPROVE $($Adenomatous Polyp Prevention on Vioxx$),$ which, according to critics, had only a marketing and not a legitimate scientific purpose$\mathrm{.}5$ Although the company could have delayed the withdrawal until ordered to do so by the FDA, Merck acted voluntarily. Gilmartin said that the company "was really putting patient safety first."However, one critic replied, $"$If Merck were truly acting in the interest of the public, of course, they should have done more studies on Vioxx's safety when doubts about it first surfaced."$7$ Another critic observed that such studies could have been conducted for a fraction of the cost of the $$500$ million spent on advertisingAn editorial in the New York Times declared that "companies must jump at the first hint of risk and warn patients and doctors of any dangers as clearly and quickly as possible. They should not be stonewalling regulators, soft$-$pedaling risk to doctors or promoting drugs to millions of people who don't need them."A $179-$page report commissioned by the Merck board concluded, by contrast, that executives and researchers acted with integrity in addressing incomplete and conflicting evidence and that "their conclusions were reached in good faith and were reasonable under the circumstances."$10$ The report closed with the observation that the quick response after the APPROVe study $"$is not consistent with the view that Merck's corporate culture put profits over patient safety."Questions:Q$1-$ Who were the stakeholders outside of the firm?Q$2-$What happened with the company?Q$3-$ What are the problems with the company?Q$4-$What are the alternatives of the problems?Q$5-$ What are your recommendations for the company