GlaxoSmithKline and AIDS drugs policy
The case talks about GlaxoSmithKline (GSK), its merger with Burroughs Wellcome, its commitment to developing countries, the pricing controversy and pricing pressures from multiple directions. GSK had to determine how to address the AIDS crisis in Africa while maintaining business viability in developing countries in the midst of all the pressures. In Africa, GSK confronted the reality of the AIDS crisis every day, and its decisions impacted thousands. Everyone--governments, nongovernmental organizations, the media, shareholders, and others--had an opinion, but there was no real answer to the question. GSK had to determine how to address the crisis while maintaining business viability in developing countries in the midst of all the pressures. The first pharmaceutical company to discover the anti-retroviral drug for the treatment of the HIV virus was Burroughs Wellcome. The company thought that there is a small market for this drug and a short life cycle so they priced the treatment at about $10,000 a year. They received a lot of criticism for this. Critics argued that the research and development process was funded by government grants and therefore should begin generic productions immediately. After fighting in court to protect its patent, the company prevailed. The research and development process was risky and expensive for pharmaceutical companies, so in the 1990s mergers and acquisitions started to occur. In 1995 GSK acquired Burroughs Wellcome, making the company Glaxo Wellcome, also making it a leader in AIDS therapy. In 2001 GlaxoSmithKline was formed by the merger of Glaxo Wellcome and SmithKline Beecham, becoming the world’s second largest pharmaceutical company. GSK continued its commitment to developing countries by offering vaccines at preferential prices. As a corporate policy, though, GSK did not sell its drugs below production costs. Even though there was no known cure for AIDS, the introduction of ARVs...
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