Instructions: Print off this background information sheet and bring to class. Students are asked to read this material before class and refer to this information throughout the exercise, but it does not need to be incorporated into student notes.
BACKGROUND INFORMATION FOR THE VANATIN CASE
Assume that it is August 1969 and that you are a member of the Booth Pharmaceutical Corporation Board of Directors. You have been called to a Special Board Meeting to discuss what should be done with the product known as "Vanatin."
Vanatin is a "fixed-ratio" antibiotic sold by
prescription. That is, it contains a combination of drugs. It has been on the
market for more than 13 years and has been highly successful. It now accounts
for about 18 million dollars per year, which is 12 percent of Booth Company’s gross
income in the
Over the past 20 years there have been numerous medical scientists (e.g., the AMA’s Council on Drugs) objecting to the sale of most fixed-ratio drugs. The argument has been that (1) there is no evidence that these fixed-ratio drugs have improved benefits over single-drugs, and (2) the possibility of detrimental side effects, including death, at least doubled. For example, these scientists have estimated that Vanatin is causing about 30 to 40 unnecessary deaths per year (i.e., deaths that could be prevented if the patients had used a substitute made by a competitor of Booth). Despite these recommendations to remove fixed-ratio drugs from the market, doctors have continued to use them. They offer a shotgun approach for the doctor who is unsure of his or her diagnosis.
Recently a National Academy of Science –
National Research Council panel, a group of impartial scientists, carried out
extensive research studies and recommended unanimously that the Food and Drug
Administration (FDA) ban the sale of Vanatin. One of
the members of the panel, Dr. Peterson of the
The special Board Meeting has arisen out of
an emergency situation. The FDA has told you that it plans to ban Vanatin in the
The Board is meeting to review and make decisions on two issues:
Decisions on each of these issues must be reached at today’s meeting. The Chairman of the Board has sent out this background information, and he also wanted you to give some thought as to which of the following alternatives you would prefer for the domestic market:
A similar decision must also be made for the
foreign market under the assumption that the sale was banned in the