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Turing Pharmaceuticals: Fair Profit or Price Gouging in the Drug Industry?

Published 29 May 2017
Reference 6253
Industry Pharmaceuticals
Region North America
Summary

This case examines how a drug price increase by one small company, Turing Pharmaceuticals, became the focal point of a controversy that engulfed the entire drug industry. Turing’s decision to raise the price of its anti-infection drug Daraprim, from $13.50 to $750 per dose, is emblematic of the debate about the responsibilities of pharmaceutical companies and business more generally. The case asks: Do pharmaceutical executives have a responsibility to patients when setting drug prices, or are they beholden only to their shareholders? More broadly, what are the responsibilities of companies to shareholders relative to other stakeholders? And what role should be taken by public policy makers in this domain? While set primarily in the United States, the case raises questions of corporate social responsibility and public policy for the global healthcare industry and business more generally. It provides an opportunity to explore the potentially conflicting demands of shareholders and stakeholders, the limits of industry self-regulation and the need for government-imposed price controls, notably in the context of patent monopolies.

Teaching objectives

1. To explore the nature of corporate social responsibility and its role in business decision-making, especially when the interests of different stakeholders are potentially in conflict. 2. To debate the responsibilities of pharmaceutical companies and other firms providing lifesaving products and services in relation to decisions about price and profitability. 3. How managers can strike a balance between obligations to different stakeholders, applying considerations of profitability, social responsibility, moral obligation, protecting corporate reputation and enlightened self-interest in the context of a life-threatening human need. 4. To identify the limits to corporate social responsibility in answer to the question: How much is enough? 5. To discuss how industries can police themselves, and the role of public policy interventions and industry regulation when they cannot. 6. To highlight the new challenges posed by public dissatisfaction with questionable company practices as expressed via social media, and the implications for business.

Keywords
  • Corporate Social Responsibility (CSR)
  • Stakeholders
  • Shareholder primacy norm
  • Drug prices
  • Fairness in pricing
  • Price gouging
  • Government regulation
  • Industry self-regulation
  • Patent monopolies
  • Industry reputation
  • Social media
  • Pharmaceutical industry
  • Valeant Pharmaceuticals
  • Q31617