Merck, Gilmartin, Vioxx—and Drucker

Under former CEO Raymond Gilmartin, the celebrated company allowed the sale of a harmful drug. How do such breakdowns in integrity occur?

By Rick Wartzman

The management writer Jim Collins once recalled that, in the course of researching the backgrounds of some of America’s greatest companies, he discovered Peter Drucker’s “intellectual fingerprints” everywhere. Among those bearing his mark was the pharmaceutical giant Merck (MRK).

In one sense, then, it was hardly surprising to read the recent article that Raymond Gilmartin, a former Merck chief executive, wrote for Harvard Business Review on how to “renew and restore faith in corporations and capitalism.” On its face, at least, the piece was a wonderful articulation of many of Drucker’s core management principles: maximize value for society, not just shareholders; focus on long-term results, instead of short-term financial measures; provide employees with a sense of purpose, not only monetary rewards; address societal issues as an integral part of corporate strategy; and develop strong internal leaders who maintain an outside perspective.

Still, as simpatico as Drucker would have been with this list of beliefs, I can also see him wishing that Gilmartin had been—as Drucker once said admiringly of another man—”ruthlessly candid, above all with himself.” For had he been, Gilmartin might have seen fit to answer this question: How can someone who advocates all these virtues have presided over the Vioxx mess?

STROKES, HEART ATTACKS

Vioxx, which Gilmartin completely failed to mention in his article (although a bunch of HBR readers were more than happy to point out the elephant in the room in their comments), was the popular painkiller that Merck pulled off the market in 2004 after a study showed that it doubled the risk of heart attacks and strokes. Merck has always maintained that it acted appropriately in its handling of the situation.

But as Shannon Brownlee reported in her book Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer: “The company sold billions of dollars’ worth of Vioxx over the four and a half years the drug was on the market, most of it after worries about the cardiovascular effects first surfaced.” As many as 60,000 people are believed to have died from the drug, which Merck aggressively marketed, in part, by teaching its sales force to get around skeptical doctors with a training document it titled, brazenly, “Dodge Ball.”

Given all this, it would be easy to lambaste Gilmartin for his unwillingness to take responsibility for the affair or to label him a hypocrite for his latest musings. But the more intriguing matter, which I wished he’d tackled, is this: How come good companies do bad things?

PEOPLE OVER PROFIT

Merck certainly has a long history of which it can be proud. In his essay, Gilmartin cited founder George W. Merck’s famous saying: “We try never to forget that medicine is for the people. It is not for the profits. The profits follow ….” This wasn’t some hollow slogan, either. Merck has contributed much to society, and it has done extraordinarily magnanimous deeds at times, including giving away medicine to combat river blindness in Africa.

Yet even the most honorable organization can slip up, sometimes terribly. Why?

In one respect, it’s quite simple: Big companies like Merck, which has about 90,000 employees around the world, are mini-societies, full of actors good and bad. Folks don’t “cease to be human beings when appointed vice president, city manager, or college dean,” Drucker noted in his 1973 classic, Management: Tasks, Responsibilities, Practices. “And there has always been a number of people who cheat, steal, lie, bribe, or take bribes.”

So what’s a company to do? First, it must ensure that it promotes people of strong character and passes over those who lack that quality—no matter how smart they are. “Management should not appoint a man who considers intelligence more important than integrity,” Drucker wrote in the Practice of Management. “In fact, no one should be appointed unless management is willing to have his character serve as a model for all his subordinates.”