Medfields Pharmaceutical Case Study Solution
Recommendation against Reformulation
The ultimate motive of all organizations is to earn profits, however witnessing the intense competition in the pharmaceutical mainly the generic industry, the company’s ability to earn profit have been restricted as there are high chances that some other company might develop the drug for chronic disease sooner than the time Medfield takes to reformulate and launch the drug. This will not only waste the efforts and planning the organization had undertaken but will also result in massive losses due to the failure of the project as the company will not be able to pay back the financers from which it had borrowed loans to fund the project and investment of $65 million.
Substantive Reformulation Approach
The main reason of reformulating the drug is to ensure that a drug is available in the market to cure chronic diseases and at the same time ensuring the company earns enough profits and remain sustainable. Currently, the CEO is in a dilemma whether to reformulate the drug or sell the business however, if reformulation approach was more substantive and the drug was reformulated to decrease the cure time and make it more effective, without any financial evaluation, the CEO would decide to reformulate the drug as its objective is to improve patient’s health. In order to ensure the drug achieves higher sales and organization earns higher profits, the companyshould reformulate the drug considering the factors like fast cure and longer effect which would also provide competitive advantage to the business if their drug works faster and has longer effect as compared to its competitors.
Generating Helpful Products
The organization’s objective has always been to improve its patient’s health and develops drugs which ensures cure of various diseases and makes the patient’s life better. It is likely that the organziation will invest the additional value created from reformulation of Flaximat drug in developing new drugs or establishing campaigns to promote free treatment of diseases. The CEO has also emotional connection with the drug as his nephew suffered from chronic disease and he witnesses the pain the disease cause so it is guaranteed that the value created from reformulating strategy will be invested by the organization in developing new drugs, helpful products and good causes.
Issues faced by Stakeholders
Shareholders of Medfield: The shareholders will be more inclined towards takeover as this would enable the shareholders to sell their shares at a higher price as at the time of takeover the share price is usually high due to the premium offered for acquisition. However, one of the issue the shareholders face is estimating the right value of the company as low amount might be offered and accepted as compared to the true value of the organization. Similarly, the reformulation might be considered riskier by the shareholders as the company has never reformulated a drug before therefore they might sell their shares in the organization due to fear of low profits in the future, creating problems for funding the project using equity sources.
Patients using the drug:In case of takeover, the drug would be discontinued in the market and the patients might suffer in case an alternate of the same drug having the same effectiveness is not available in the market. In case of reformulation, the drug might not be temporarily available in the market as patent expiry is near and reformulation might take more than two years creating issues for patients.
Payees: In case of takeover, the financers will be paid back as the organization will have enough profits as offer price is higher as compared to the value of the organization. In case of reformulation, funding will be required of $65 million and more and it is likely that debt will need to be borrowed from financial institutions and the process will need to be insured in case to secure the investment in case the process gets failed. As the organization is small, has no experience of drug reformulation and the fact that it sells only three drugs creates concerns that organization is facing problems in getting the drugs approved and is facing financial constraints, which might makes the funding and insurance of project difficult as these institutions might consider the process riskier and perceive organization will not be able to pay back the borrowed funds.
Government:The government might stop the takeover as the drug is bestselling and its substitute might not be available in the market creating negative image of the government due to failure of providing adequate medicines to the public. Similarly, in order to eliminate the competition from generics industry the government might not approve the reformulation of drug to protect the original drug development industry.
Employees& Physicians:In case of takeover, the employees will face issue in adopting the working methods of the new management and chief executive officer. In case of Reformulation, the physicians will face issue of using an effective formula of developing an adequate drug. As the organization might face trouble by FDA for developing a harmful drug.
Ethical Issues
As an ethical member of the society, it is the duty of the organization to reformulate the drug for the betterment of its patientsand consider factors like avoiding replicating formulated drugs or deliberately claiming expiry of patent to enter the growing generic industry which AstraZeneca did in order to enjoy the higher prices of non-generic industry. The company eliminated choices of drugs for customers by switching focus from its drug Prilosec to Nexium which had no generic competition and was sued for limiting the choices for customers. Also, it is unfair to charge higher price for drugs from the patients as the main motive of any pharmaceutical company should be the betterment of its patients and not profit. Similarly, it is essential for every pharmaceutical company to ensure the public has access to its medicines, not reformulating the drug will lead to non-access by patients creating difficulty for them and diverting from its ethical values. (Health, 2017)
Recommendation
Susan Johnson should refuse the offer and initiate the reformulation as she follows high ethical values and there is chance that after takeover, the new CEO might not have the same ethical values and takes decisions solely on the basis of financial grounds, ignoring the ethical factors such as betterment of patients and refuses to invest in development of new drugs or invest in good causes which has always been the motive and goal of Susan. On the other hand, the CEO should initiate the reformulation as it will help in treatment of various patients…………..
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