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Gabayan, Nikki A.

Management Principles
Gamboa, Mary Pauline U. Prof. Alexander C. Trajano
Lee, Kasian W. March 9, 2018

A CASE ANALYSIS ON WORKING FOR ELI LILLY & COMPANY

SYNTHESIS

Eli Lilly & Company is a major pharmaceutical company who develops and distributes
medication drugs worldwide by using homeless alcoholics to perform short-term work for the
company. As their study shows, volunteers must abstain from vices to prevent compromising
the newly-developed drug. However, Lilly’s had been ignoring the medical practice but still
provided them billion in dollars of sales and profit. Would it be a form of exploitation if the
desperate circumstances of alcoholics and homeless individuals are what the company takes
advantage of to have volunteers who agree to take untested and potentially dangerous drugs for
$85 a day?

POINT OF VIEW

Eli Lilly & Company is facing ethical appropriateness on their initial drug testing, thus the
company must reform their practice and strategize a program that would promote social
responsibility to the public.

STATEMENT OF THE PROBLEM

What does Eli Lilly & Company needs to create to become a socially responsible
organization in finding a better test subject?

STATEMENT OF OBJECTIVES

1. To be able to determine individuals to use as a test subject while achieving


reputation in the industry.
2. To be able to promote a strategic CSR program that foster sustainability to achieve
more meaningful and tangible impacts to the test subjects such as rehabilitation
centers.
3. To be able to create a standard qualification for interested volunteers to be a test
subject.

AREAS FOR CONSIDERATION

INFORMED CONSENT – A volunteer has to sign an informed consent (truly voluntary


and un-coerced decision) before they can be test subjects. For Phase 1, it was said that it is the
most difficult to carry out because most healthy individuals are reluctant to take a new and
untested medication that is not intended to cure them of anything and that may have potentially
crippling or deadly side effect1.

Initial testing of any drug is definitely harmful because side effects of these medications
haven’t been tested. The company is using homeless alcoholic individuals as test subjects and

1 Case study – Working for Eli Lilly & Company


all individuals have signed an informed consent. There are two reasons for this: (a) In need of
shelter, that means, a temporary security, and (b) In need of money, for their vices (alcoholic
drinks, sex, etc.)

These people might not think rational because they are under the influence of alcohol
and their subconscious is looking for ways so they can easily get their vices. The individual’s
informed consent might not be truly voluntary and un-coerced decision, but an irrational one.

$250 PER DAY ADVERTISEMENT VS $85 PER DAY PLUS FREE ROOM AND
BOARD (WORD-OF-MOUTH ADVERTISEMENT) – Any advertisement could cause the
company an enormous amount of expenditure solely to advertisement, especially if the
company is looking for test subjects or volunteers for untested/initial drug testing. Some
companies offers $250 per day payout for volunteers compared to Lilly who offers $85 per day
with free room and board. From this perspective, Lilly saves a lot from advertisement since its
strategy is by word-of-mouth. It doesn’t cost much compared when the company advertises it
commercially.

BILLION DOLLAR COMPANY – Eli Lilly & Company was founded on May 10, 1876
located in Indianapolis, Indiana, USA. The company has approximately 40,000 employees
worldwide and more than 8,000 employees engaged in research and development. Clinical
research is conducted in more than 55 countries with manufacturing plants located in 13
countries. Eli Lilly & Company marketed its products in 120 countries2.

In the Philippines, Eli Lilly (Philippines), Incorporated is involved in the marketing, sales,
and distribution of ethical products. The Philippine affiliate company was established in 1961
located in Ortigas Center, Pasig City and it has two division: (1) Pharmaceutical division, and (2)
Elanco Animal Health division3.

Although the company has a lot of issues regarding the testing of its drugs, the company
has sold $6.8 billion of drugs worldwide with a profit of $2.8 billion. The effectiveness of the drug
has gained customers loyalty and physicians’ favor. From these figures alone, we could
conclude that the product they have been selling helps and cures a lot of people.

2
https://www.lilly.com/key-facts
3 https://www.lilly.com.ph/en/about-us/lilly-philippines/index.aspx
ALTERNATIVE COURSES OF ACTIONS

OPPORTUNITIES THREATS

 Merging with other drug  Generic drug market


manufacturing companies  Current and new entrant
 Merging with other competitor
pharmaceutical  Government issues (e.g.
companies US FDA)
 Focus on animal health  External issue (e.g. using
division alcoholics as test
subjects)
COURSES OF ACTION STRATEGIES
STRENGTHS 1. Provide healthy living programs for volunteers and
interested individuals.
 Strong branding 2. Set qualification standards for the interested applicants and
 Product excellence and volunteers to be the test subjects.
Innovation
 Pioneer in Oncology
medicine
 Manufacturing capacity
 Distribution capacity
WEAKNESSES

 Financial issues
 Lapsing patents
 Test subjects
 Weak CSR program

To monitor and to be fully committed to its engagement in implementing foster


sustainability to achieve more meaningful and tangible impacts to the test subjects such as
rehabilitation centers. Below are the guidelines to be considered.

Strategy Description Goal Timeline Measurement of


Success
To improve and Rehabilitation 3-6 weeks5 Aside from word of
enhance strong social Program4 mouth, we may have
brand images by brand visibility to cater
implementing a larger number of
programs beneficial to volunteers.
the alcoholic
and homeless
volunteers.

4 http://scientifist.com/timeline-pharmaceutical-drug-development-idea-market/
5 https://www.healthline.com/health/total-knee-replacement-surgery/rehabilitation-timeline
To implement an IEC Campaign 30 - 40days prior and Campaign information
effective CSR Program after testing5 awareness where the
program that will help Eli Lilly & Company
maintain and secure Campaign operates.
public acceptance of (Information-
existing and potential Education-
drug volunteers. Communication; a
campaign program
that we may also use
in the selection
process of drug
volunteers)

Below are the detailed alternative courses of action discussed by the group:

1. Provide healthy living program for volunteers and interested individuals

ADVANTAGES DISADVANTAGES
 Helps the volunteers to be more  Expenses that the program will incur
responsive to the drug testing procedure  Competition from the market
 Positive image from the market  Additional programs needed to set-up
 Strengthen its core values thru CSR
 Open doors for more volunteers and can
develop new medications that could also
help alcoholic volunteers
 Reformed volunteers can provide
company recognition for their practice
 “Guinea Pig Get Paid (GPGP) practice will
be less attractive to opportunists

Eli Lilly & Company’s core values are integrity, excellence, and respect for people. As
defined, respect for people: “We maintain an environment built on mutual respect, openness
and individual integrity. Respect for people includes our concern for all people who touch or are
touched by our company: customers, employees, shareholders, partners, suppliers and
communities.6” Doing their practice using homeless alcoholics as test subjects violates their
core values and they are just doing this for the sake of business. In addition to that, test subjects
must abstain from alcohol which could cause a chemical reaction to the drugs they are testing.
More so, some people are volunteering as test subjects because it is an easy money career
path. In one study, not only homeless alcoholics are willing to be test subjects but also
desperate people who want instant money as “lab rats”7.

With this strategy, not only would the company get better laboratory results for their
products, but they can also help volunteer test subjects to become healthier and socially
responsible individuals. Another program is rehabilitation. When a volunteer becomes a test
subject, multiple clinical attempts might lead to hospitalizations, trauma and suffered permanent
damage to their immune systems and internal organs7. Rehabilitation is an intensive form of
addiction treatment 8 . Aside from being alcoholics, the test subjects are also suffering from

6 https://www.lilly.com/who-we-are
7 https://www.wired.com/2007/04/feat-drugtest/
8 https://www.recovery.org/topics/what-happens-in-rehab/
trauma caused by physical ailments in the result of drug testing procedure. Rehabilitation is one
strategy that the company can adapt since majority of its test subjects are alcoholics.

The healthy living (rehabilitation) program has three stages. First is the length of the
rehabilitation program. Second is the intake and detox where they assess the test subjects
during and/or after the drug testing procedures. Third is the typical day and rewards for the test
subjects to provide them whether they still want to be a test subject or find a different career
path8.

Step Procedure Description8


 Test subjects can stay in the program while doing the drug testing
procedure.

1 Length The rehabilitation can commence before or while the test subject is under
drug testing procedure. Since test subjects in Eli Lilly & Company are
provided with food and shelter, the rehabilitation program can initiate
immediately.
 The company has the medical records of the test subject which is the
basis of patient assessment.
IntakeƗ
Lilly has the medical records of the test subjects that make it easier to
provide the test subjects the appropriate medical care.
 Test subjects are prone to induce a lot of chemicals while doing drug
test procedure.
2  Medical doctors and nurses administer medications to ease withdrawal
symptoms.
DetoxƗƗ
Under the drug testing procedure, test subjects suffered from excruciating
pain, unconsciousness, nausea, vomiting, permanent damaged in the
immune systems and worst, dying. For this procedure, Lilly will attempt to
extract all chemicals that they injected to the test subjects, and medical care
and assistance should be provided.
 This is same with the test subjects who come and go to the facilities.
Interact with different people to examine their physical, behavioral,
mental, and psychological condition.

To become as test subjects, all volunteers must be physically fit and must
Typical day
abstain from all vices to improve the drug efficacy. In this procedure,
medical doctors evaluate and have a session with the test subjects
informing them to be healthy and physically fit. Encouraging their test
subjects that they will not only help other people for their cause but they will
3
also help themselves to have a better life.
 Aside from the money they will get from being test subjects, they will
also have an improved physical health and they will have the discretion
to continue being a test subject or choose a different career path.
Reward
Aside from the fee that the test subjects will get after the drug testing
procedure, the test subjects are also physically, mentally, behaviorally, and
psychologically improved because the company gave them proper
medication and assistance during the program. Once the program is done,
the test subject has a choice if they still want to be volunteers or choose a
different path.
Ɨ
Intake – assess if the patient is appropriate fit for the program
ƗƗ
Detox – withdrawing substances such as alcohol, sedatives, opioids and stimulants. Minimize discomfort during withdrawal and
prevent serious and potentially fatal side effects, such as seizures.

The normal rehabilitation could cause a total of $20,000 to $60,000 9 , this includes
rehabilitation centers, treatments, medication, and therapy session. For regular test subjects
they can earn $30,000 to $80,0007. The cost in location, treatments, medication, and therapy
session can be balanced off since test subject has free food and board, they’re working for a
pharmaceutical company who develops medications, and has doctors who can provide medical
care and assistance to them. Lilly could spend 60% of the overall cost for the program given
that more of its assistance could be found at the facilities.

In pharmaceutical research studies, they are looking for new ways to test new develop
studies to be a medication drug and test subjects are mandatory for this to measure a drug's
ability to treat the medical condition, monitor the drug's safety, and possible side effects. For
Phase 1 study, usually 20-100 test subjects are needed, and this is where Lilly gets homeless
and alcoholic volunteers. Approximately 70% of new drugs will pass this phase. For Phase 2,
the new drugs are tested in patients with the disease or disorder to determine the safety and
effectiveness of the new drug. Hundreds of patients are usually needed to participate in this
phase. For Phase 3, they will need several hundred to several thousand of test subjects to gain
more thorough understanding of the effectiveness, benefits and side effects of the study drug10.

On the other hand, if Lilly uses this strategy it will not only promote and/or promise a
good healthy living for all its test subjects but also strengthen its corporate social responsibility
(CSR). As of today, there are still unethical medical practices11 of drug testing in the developing
countries12 like India13, Africa, Asia and the Caribbean. Although there are no evidence that
other pharmaceutical companies do this strategy – because of the cost, underground medical
practices, or new laws and regulation in conducting research studies, this is will be the first time
that a pharmaceutical company conducts medical assistance for its test subjects. Lilly is already
a strong brand in the industry and with this strategy, it will strengthen Lilly’s core values of
integrity, excellence, and respect for people and it will improve their brand recognition and
physician, partners and other interested parties will be more trusting to providing investment for
the company.

9 https://www.addictioncenter.com/rehab-questions/cost-of-drug-and-alcohol-treatment/
10 https://www.med.unc.edu/ibs/research/understanding-pharmaceutical-research-studies
11 https://www.sciencedirect.com/science/article/pii/S2451865415300673
12 https://www.huffingtonpost.com/michael-carome-md/unethical-clinical-trials_b_5927660.html
13 http://www.spiegel.de/international/world/drug-companies-perform-medical-tests-in-developing-countries-a-899798.html
2. Set qualification standards for the interest applicants and volunteers to be the test
subjects of drugs.

ADVANTAGES DISADVANTAGES
 Helps the company to have reliable results  Not everyone can be selected due to
of drug tests from recruiting the most qualifications
applicable volunteers and interest
individuals for the job
 Wider selection of individuals and
volunteers from the market

Creating standard qualifications needed as a test subjects for Eli Lilly & Company will
help them choose the better volunteers and applicants without compromising the result of the
drug efficacy.

Standard qualifications for test subject are consists of: (1) weight, (2) lifestyle, and (3)
age.

 Weight – The applicant and/or the volunteers should be in the range of the set
Weight to be a test subject. Overweight and underweight individuals will not be
entertained as it may have an effect with the product result.
 Lifestyle – The interested individual or volunteers must have a healthy lifestyle, they
should have no vices. Individuals who drink, smoke or take drugs will not be
entertained to be a test subject as it may have an effect with the product result.
 Age – The applicant and/or the volunteers should be in the range of the set age to be
a test subject. Must be 18 years old and above. Individuals that are not in this range
will not be entertained as it may have an effect with the product result.

As cited in the case, Lilly’s just hired an alcoholic individual to become a test subject, this
might create a problem with them and might affect their reputation since being a test subject is
not just by getting a random people to do the job. Right now, there is a market to choose from to
become a test subject because it can give them a higher pay than by doing the job they are into
right now. They are called “guinea piggers”, and they are in thousand; they do this as their real
job and follow a strict diet regimen. If Lilly’s will just hire a random individuals like an alcoholic
one, the alcohol or any other drugs might create a reaction with any mysterious chemical they
are ingesting next14.

By creating a standard qualification will help Eli and Lilly’s to choose the right individual
for a drug they need to test. It will have a series of screening 15 to do, like registration,
examination, interview and testing to determine the right individual to become a test subject.

ACTIVITY DESCRIPTION ATTACHMENTS


Registration The volunteers must register to become a Demographics Result
test subjects. Lifestyle Result (Health
Certificate, Drug / Alcohol
Test Result)
Examination In this stage, all volunteers will be required Result of Psychological
to have an examination to determine their Examination Result

14 http://www.cracked.com/article_19809_the-5-scariest-things-about-life-as-human-test-subject.html
15 https.www.fda.gov/RegulatoryInformation/Guidances/ucm126430.html
Psychological capacity to do this kind of
job and to determine their commitment to
be a test subject
Job Offer The hired volunteers needs to be informed Signed Informed Consent
of the test he will undergo, know the salary and Job Offer
he will have and other benefits from being
a test subjects like having a free lodging
and food, then he must also sign an
informed consent before initiation of any
clinical procedures
Testing In this stage, all hired volunteers must be Test Result
tested with a drug to determine if they are
really fit to be a test subject
Start of the Procedure of Drug Testing

If Lilly will hire a right test subject for the job, following the cited standards and procedure
we listed above, the result of the drug testing will be effective and safe for the other individuals
who will use it once they give it out to the market. The core values of Lilly’s is maintained to be
an honorable company, has a respect to their people and their customers and being a socially
responsible company since they did what they must do and that is to choose the right individual
for the job.

CONCLUSION AND RECOMMENDATIONS

To have a concrete and sound decision, the group decided to use a forced decision
matrix to determine which the better alternative course of action is to be implemented.

Criteria for decision-making of our alternative courses of actions are: cost efficiency,
manpower cost, reputation image of the company, impact on drug efficacy.

COST EFFICIENCY – This criterion will manage how much the company will spend on
the chosen strategy. Eli Lilly & Company is known for their oncology medication drug, as per
JAMA Internal Medicine, the average cost for developing new cancer drug is $600 million. The
authors add in another $100 million or so to account for income those companies could have
had if that money had been invested in the stock market instead of in new products.
Pharmaceutical companies often spend hundreds of millions of dollars on potential drugs only to
discover that they don't work or aren't safe. It's a risky business, so the winners have to pay for
the many losers that companies spend money on along the way16. With each strategy, it must
present which strategy is cost efficient. It could provide a lower cost but the potential drugs
aren’t safe, or the company could spend a higher cost and the potential drugs are effective.

MANPOWER COST – This criterion will manage how much the company will spend on
the test subjects. As said, a test subject could earn from $30,000 to $80,000 annually7. During
the drug testing procedure, the company will need approximately several thousand of test
subjects for all phases. With each strategy, it is imperative that the manpower cost would benefit
the result of the new drug – its effectiveness, benefits, and side effects.

16 https://www.npr.org/sections/health-shots/2017/09/11/550135932/r-d-costs-for-cancer-drugs-are-likely-much-less-than-industry-
claims-study-finds
REPUTATION IMAGE OF THE COMPANY – This criterion will manage each strategy
that will benefit the reputation of the company. Many criticize the pharmaceutical industry
because of its practices in conducting research and development. Although some companies
tried other ways to admit volunteers as test subject, there are some who still uses unethical
practice12 that would lead to bad reputation yet it won’t affect their financial status.

IMPACT ON DRUG EFFICACY – This criterion will manage the impact of each strategy
on the drug efficacy if it will pass each phase. Study says that on Phase 1, approximately 70%
of drug will pass and at the end of Phase 3, 70% to 90% drugs successfully complete Phase 3
and if the results show a good effect and safety profile, the company will submit the data and
request FDA approval for marketing the drug10. Each strategy must be evaluated if it can reach
the percentage given above.

RISK LEVEL OF THE COURSE OF ACTION – This criterion will manage the risk
involved in implementing the course of action.

Criteria ACA 1 ACA 2


Cost efficiency 1 2
Manpower cost 1 2
Reputation image of the company 2 1
Impact on drug efficacy 2 1
Risk level of course of action 2 1
TOTAL 8 7

ACA1 got a total of 8 points. Reasons for this are as follows:

 Cost efficiency – In creating a rehabilitation center it would require a greater amount


of expenditure.
 Manpower cost – In creating a rehabilitation center it would require a greater amount
of expenditure.
 Reputation image of the company – The CSR of Lilly in implementing the program
will enhance the image of the company.
 Impact on drug – By following procedure, the result of drug efficacy will be enhanced.
 Risk level of course of action – The effectivity of drugs can be collated and justified
since rehabilitation program requires monitoring activity.

ACA2 got a total of 7 points. Reasons for this are as follows:

 Cost efficiency – Implementing a standard qualification will just incur minimal cost to
the company.
 Manpower cost – In implementing a standard qualification, the company may just
use the current manpower they have.
 Reputation image of the company – It will add a little impact on the image of the
company in the market perspective
 Impact on drug – By following procedure will enhance the result of drug efficacy
 Risk level of course of action – Higher risk since the selection doesn’t require any
monitoring activity.

In summary, the recommended course of action for Eli Lilly & Company is ACA1 which is
“Provide healthy living program for volunteers and interested individuals” because even though
the cost of implementing this strategy is high the result afterwards will benefit not only the
company but also the stakeholders.

IMPLEMENTATION

This course of action must be approved by the Board of Directors and implement by the
President through their human resource department and development.

LEARNING POINTS

For this case analysis on working for Eli Lilly & Company, these are the learning points
that the group arrived:

Pharmaceutical companies are willing to do underground research and development to


save cost for the development of new drugs. These companies go to developing countries, hire
test subjects and conduct a drug testing procedure. Based on the study, there are still unethical
medical trials conducted by some pharmaceutical companies and/or clinical research
organization. In 2008, companies contracted by major pharmaceutical companies planned and
carried out more than 9,000 studies involving around 2 million test subjects in 115 countries.
The sales amounted to some €15.4 billion ($20 billion), according to estimates, equivalent to a
third of all global spending on drug research13.

This kind of practice is hard to abolish not only because of the cost that will incur but the
corruption of the stakeholders15 who will benefit for the newly-developed drug. Although, the
newly-developed drug will help a lot of people once it was approved by the FDA for marketing
the drug, stakeholder – stockholders, clinical research organization, or distributors – will race for
profit, the more quickly each phase of a clinical study can be completed, the sooner the
companies can put profitable new drugs on the market13.

Business is politics, as long as the company is earning profit by producing and marketing
their products to the market the better. The reasons are:

 The companies are providing work for their employees, they giving more work to
people who need it.
 The companies are developing products for the people. In economics, people will not
be satisfied with what they want, that’s the reason why companies are providing
newly develop product to satisfy the wants of the people.
P

QD
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 The companies are also paying taxes to the government which makes them
compliant taxpayer.
 The companies have dividends that the stockholders will received at the close of the
calendar year.
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