From the book 'Grow the Pie : How great companies deliver both purpose and profits' by Alex Edmans :
" Roy Vagelos urgently needed money.
In 1978, William Campbell, a research scientist at Merck, had made a potentially breakthrough observation. Ivermectin, a drug Merck had developed to treat parasitic infections in livestock, might also cure onchocerciasis in humans.
Onchocerciasis was a cruel disease. It was transmitted by blackflies which bred along river banks – banks where citizens lived, played and worked because the soil was fertile and water was plentiful. A blackfly’s bite injected the onchocerca volvulus larvae, which matured into worms that lived under the skin and grew up to two feet long. Their larva caused itching so severe that it drove some sufferers to suicide.
Once the larva invaded the eyes, it frequently caused blindness – hence the common name for onchocerciasis, river blindness.
River blindness was a serious epidemic. 18 million people were already infected with onchocerca volvulus, with over 100 million more at risk. It would soon become endemic in 34 developing countries, mainly in West Africa, but also in Latin America.
In the most affected villages, the entire population was infected by age 15 and went blind by age 30. Once blind, adults would need to be led by their kids – who, as a result, believed blindness was just a part of growing up. Families who reduced their infection risk by moving away from the fertile river banks instead couldn’t grow enough food. Having to choose between blindness and starvation reduced communities to empty shells, devoid of any real economic development.
William’s hypothesis, therefore, was momentous, and would later see him jointly awarded the 2015 Nobel Prize in Medicine.
But in 1978, it was still only an idea; it needed to be rigorously tested. Anti-parasitic drugs didn’t usually succeed across species. Following William’s lab work, another Merck researcher, Mohammed Aziz, launched the first human clinical trial of ivermectin, in Senegal in 1981. It proved so successful – a single tablet completely cured the disease, without any of the side effects common in anti-parasitic drugs – that the WHO thought the data must have been recorded incorrectly.
But Merck conducted trials in other African countries over the next few years, which found similar success. In 1987, ivermectin was approved for human use under the brand name Mectizan.
But there was one final challenge – money. It would cost Merck $2 million to set up a distribution channel to West Africa and an extra $20 million per year to produce it, even ignoring the millions that Merck had already spent on development.
The West Africans suffering from river blindness were some of the poorest people in the world. They lived in huts caked in mud and wore skirts woven from grass. They couldn’t afford to pay for Mectizan, nor could their debt- ridden governments.
Roy Vagelos, Merck’s CEO at the time, asked the WHO to fund Mectizan, but the answer was no. He pleaded with the US Agency for International Development and the US Department of State. Still no.
That’s why Roy urgently needed money.
Roy then went to one final, and radical, source of funding – Merck itself.
On 21 October 1987, Roy announced that Merck would give Mectizan away for free, ‘as much as needed, for as long as needed’, to anyone anywhere in the world who needed it.
Merck established the Mectizan Donation Program (MDP), which brought together the WHO, the World Bank, UNICEF, dozens of Ministries of Health and over 30 non-governmental organisations to oversee and fund the distribution of Mectizan.
On the face of it, donating a drug was a crazy idea. The MDP would cost millions to Merck’s investors, mostly institutions with responsibilities to their clients – savers. These investors might sell their stock and drive down the stock price, or pressure Merck’s board to fire its CEO.
But this seemingly difficult decision was easy for Roy. He was driven not by profits, but by the desire to use science to serve society. The son of Greek immigrants, Roy grew up peeling potatoes, cleaning tables and washing dishes at Estelle’s Luncheonette, his family’s diner.
Estelle’s main customers were scientists and engineers from the nearby Merck laboratories, and Roy heard them talk excitedly about the drugs they were developing to improve people’s health.
As he recounted:
‘They had great ideas and loved what they were doing. They were passionate about their work, and that infected me. . . they encouraged me to pursue chemistry.
Roy's primary concern wasn’t the millions of dollars the MDP would cost, but the millions of lives it would transform.
The MDP proved wildly successful. It’s currently the longest- running disease-specific drug donation programme of its kind. It’s delivered 3.4 billion treatments to 29 African countries, 6 Latin American countries and Yemen in the Middle East, and now reaches 300 million people per year. Thanks to the MDP, the WHO has certified four Latin American countries (Colombia, Ecuador, Mexico and Guatemala) as having elimin- ated river blindness. It’s no longer a major public health issue in the savannah areas of West Africa.
The decision to donate Mectizan grew the pie. Initially, most of the increase went to West African and Latin American countries, communities and citizens.
But Merck subsequently benefited as well, even though such benefits weren’t the primary reason for Merck’s decision. The MDP boosted Merck’s reputation as a highly responsible enterprise.
In January 1988, Business Week described Merck as one of ‘the best in public service’ and called the MDP ‘an unusual humanitarian gesture’. Fortune named Merck America’s most admired company for seven years in a row between 1987 and 1993, a record never equalled before or since.
This reputation for serving society in turn attracted both investors and stakeholders. Even though investors bear the financial costs of the MDP, many investors care about social as well as financial returns, as I’ll discuss in Chapter 2.
Ten years after launching the MDP, Roy reported that he hadn’t heard any complaints from shareholders – but he did receive numerous letters from colleagues saying they’d joined Merck because of the MDP. They were excited by the potential to solve the world’s most serious health problems through a career at Merck.
Today, thanks in part to this reputation, Merck is one of the largest pharmaceutical companies in the world, worth over $200 billion. It remains an extremely sought-after employer, and it’s still on Fortune’s list of most admired companies. Investors have benefited too.
Since 1978, they’ve enjoyed an average annual return of 13%, nearly one and a half times the 9% delivered by the S&P 500. "
Note : this piece is directly adapted from the book. There was another example on Martin Shkreli who hiked HIV meds 5500% and caused pain points to society to show the contrast diff to Merck's approach. Martin Shkreli ended up in prison.
