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GlaxoSmithKline’s mission statement and decision to limit supply of its drugs to Canada
The GlaxoSmithKline’s mission statement is: “Our mission is to improve the quality of human life by enabling people to do more, feel better and live longer.” The decision by GlaxoSmithKline’ to limit the supply of drugs in Canada was against its mission of ensure improved quality of human life. The first reason is that, holding of the drugs decreased the accessibility of the drugs to Canadians and Americans. A great percentage of Americans and Canadians rely on GlaxoSmithKline’s medicines. So when the company withheld its supply in Canada, the cost of the drugs increased hence increasing the cost of health care.
As a result, the drugs become unaffordable to the common citizen. Another reason as to why the decision was against its mission statement is that, people were not able to do more and feel better as the mission statement states. A great number of citizens, especially senior Americans spent more time travelling to get drugs. The time spent in travelling could have been utilized in other investments. The final reason is that, withholding drugs increased the burden on healthcare. The Americans were looking for a relief from high costs of healthcare. Withholding drugs and increasing their prices increased the cost of healthcare. As a result, the burden on common man is more than that of senior citizens.
Effects of GSK’s decision to limit supply of its drugs to Canada on its primary and secondary stakeholders
The GSK’s key or primary stakeholders include stockholders, customers, suppliers, employees and creditors in Canada. These groups of persons were greatly affected by GSK’s decision of limiting the supply of drugs in Canada. Due to high demand and low supply, the prices of the medicines were high. It was difficult for the common citizen to access and afford quality medicine. Limiting supply of drugs meant that stockholders held to their stock longer than expected.
The main is that the price of drugs was high and not all suppliers were willing to buy at high prices. The impact on consumers was increased burden of healthcare, decreased affordability and accessibility to GSK’s drugs. Increase in prices was the main cause of such scenario to consumers. The impact on suppliers was decreased profits and fewer sales. The prices were not consumer friendly. Employees of the company were also affected by this decision. Reduced activity and wages are the main impacts they might have faced.
Limiting supply of drugs in Canada also had effects on secondary stakeholders. Mostly, secondary stakeholders include general public, activist groups, media, business support groups and communities. General public had a negative perspective concerning GSK. It perceived GSK as greedy, mean and insensitive which in turn can have effect on sales of the company. Activist groups were also affected by GSK’s decision. They were not pleased to see their fellow citizens’ struggle with healthcare costs. Activists preferred tobacco companies because GSK had acted in an insensitive manner. Business support groups experienced loses due to reduced activity in the markets (Thomas, 2008).
Was it ethical for GSK to limit supply of its drugs to Canada? Evaluate the decision from the utilitarian perspective, the individual rights perspective the justice perspective and give your overall opinion on the decision given your analysis.
The utilitarian perspective focuses on outcomes or consequences an action or policy has on ones well- being. Its main principle is that, ethical actions produce more good than harm. In this perspective, it was unethical for GSK to limit the supply of drugs in Canada. The effects of withholding drugs had more negative impacts as compared to positive ones. First, limiting dugs increased the burden of healthcare, decreased common man’s affordability and accessibility to drugs. According to utilitarianism, GSK should have asked this question before limiting the drugs: what effect will limiting of drugs in Canada have on general balance of good over evil? Utilitarianism, gives a few exceptions to drug scarcity.
If the cost of distributing drugs evenly is high, then cost is an acceptable reason. Another exception occurs when the medical service is not lifesaving. Considering the case of GSK, the drugs were essential and limiting their supply is unethical. Utilitarian perspective values human life and human dignity. Despite the cost of producing drugs that GSK incurred, it should have acquired another alternative to deal with Americans. Withholding drugs from the Canadian market was not the best solution to sustain the sales. Limiting the supply of drugs in Canada had negative impacts on the image of the company. On another note, GSK’s action was somehow ethical because it led to establishment of a medical cover which made healthcare services accessible and affordable to Americans.
The individual rights perspective states that every human being is entitled to quality healthcare. Every individual has a right to access drugs at an affordable price. The decision by GSK in this perspective was unethical. The reason is that, all ethical decisions including those in healthcare should satisfy all aspects of a human being. That is, biological, social, psychological and spiritual. The GSK’s decision was unethical because it failed to meet all the cultural aspects of human being. Ethical decisions in healthcare should meet the needs of a human health and satisfy physical and psychological well being. The decision by GSK failed to meet these needs.
Instead it caused the Americans time while travelling to acquire drugs for themselves. Limiting the supply of the drugs also led to the limitation of accessibility and affordability. Lack of essential drugs is against individual rights. Those affected lacked intellectual freedom because they were thinking on how to get drugs. When GSK limited supply of its drugs in Canada, the prices of the drugs increased. Considering the low purchasing power of the majority of the citizens, the vulnerable and common men were unable to purchase drugs. Such a scenario caused psychological problems to the Canadians. Individual rights value human dignity which in turn advocates for fulfillment of basic human rights. Medical care is a basic human right that was violated by GSK through limiting of drug supply in Canada (Thomas, 2008)
Justice perspective is another moral virtue which encourages the society to be willing to grant the other person what he or she is entitled to. Healthcare is a basic need. Accessibility and affordability of drugs constitute good healthcare services. The decision by GSK to limit supply of drugs was against the ethical values of health care. Society is obliged to ensure equitable and adequate access of healthcare services without overburdening the patient. Considering this statement, it was unethical for GSK to limit the supply of drugs in Canada. The reason is that, many citizens had excessive burdens while trying to get the medication they needed.
Healthcare is a basic need that ensures human health flourishes. This perspective states that, it’s everyone’s responsibility to ensure healthcare for common good. If healthcare its common good, then the decision by GSK was unethical because it was based on selfish grounds. GSK held its drugs to cause an artificial demand which led to increased prices of drugs. Unequal provision of drugs by GSK was unethical. The reason is that, the same drugs were sold at different prices, within the same country but different states.
In my opinion, withholding drugs was unethical. The consequences of the act comprised of negatives than positives. Accessibility to affordable healthcare is a basic need to every individual. Good state of mind and body constitutes well being of a person. Limitation of drugs deprived off people their well being. One needs to be awarded as per their needs and efforts, lack of adequate drug supply acts against these two principles. Individuals were denied their rights. Withholding drug is against social justice. Healthcare services should be equitable and affordable. Decisions made in this sector should ensure common good of the citizens. The decision by GSK was selfish and violated rights in social justice sector (Thomas, 2008).
Corporate governance mechanisms to help GSK prevent similar incidents
Corporate governance mechanisms refers to the procedures and policies implemented by a company in order to protect and control the interests of stakeholders in business; both internal and external. Large organizations like GSK need corporate governance mechanisms assist in management of business because they are large and complex. In the past, GSK limited supply of drugs in Canada in order to prevent senior American citizens from buying in Canada. In order to prevent such a scenario from repeating itself, GSK needs to put in place corporate governance mechanisms to protect its stakeholders.
The first mechanism is board of directors. Board of Directors is used in protection of interests of shareholders in the company. Board of Directors bridges the gap between shareholders and the managers. Board members are elected by shareholders during annual general meeting of the company. To ensure that the same case does not re-occur, GSK needs to put in place a Board of Directors. The shareholders will use the directors to communicate to managers on their behalf.
For instance, if the shareholders have an issue with pricing of drugs in their state, the board member will communicate the issue to the managers and a viable solution will be concluded. Also shareholders should be allowed to elect a member of their own choice to represent them in the board. GSK being a multinational company, it should ensure that CEO’s of its branches are indigenous and not foreign. Such moves will reduce protect the interests of shareholders and create a sense of belonging. It will also enhance communication between the shareholders and the managers.
Shareholders should be allowed to own a given percentage of shares in the company. The Board of Directors should come up with a compensation plan which suits the shareholders they represent. These steps will reduce shareholder conflicts and create a sense of belonging. If GSK had such structures in place, communication would have been effective. The company would have used a different strategy to deal with senior Americans. The members in the Board communicate the situation in their countries to managers hence facilitating changes needed.
The second corporate governance mechanism is audits. Audits refer to financial reviews of a company which are done independently. Audits ensure that organizations follow nationally stipulated accounting regulations, standards and other guidelines. In order to assess an organization objectively, shareholders rely on this information. Audits would address the scenario in GSK. It would constraint the American suppliers to follow the right channel to get drugs. Audits would have avoided limiting of drug supply. Audits have a good tracking record which could have been used to track the activities in Canada.
Once anomalies have been detected then, the situation will be corrected early enough. Use of audits also would have applied external accounting standards to traders in Canada and protect the common man from lack of drugs. Audits would have helped GSK to form a partnership with pharmacies in America to supply drugs at a considerable price. With such structures in place, GSK would not have limited the supply of drugs in Canada. In conclusion the stakeholders would have a clear picture of the financial situation of the company and prevent any possible conflict.
Audits can be used to oversee any form of risk to the company and come up with solutions. Using audits, GSK could have noticed that prices in America are double those in Canada. The company would have come up with a criterion to address this situation. Audits will help GSK to look at the dark side of its exposure. As result it would come up with consumer friendly prices in America. Audits act as monitoring tools. Audits would help GSK shareholders to ask the questions they have and challenge some of the decisions the company makes. Audits also ensure that the members in the Board of Directors discharge their duties diligently. The member needs to challenge the external auditor and financial officer.
Reference
Thomas, W. and David H. (2008). Strategic Management and Business Policy. Eleventh Edition. New York: Pearson-Prentice Hall.
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