Calling the bluff

Dick Bird, the iconic CEO of Getwell Inc, was facing the biggest crisis of his career. The gathering storm could completely undo every good thing that he had done in the last twenty years. One of the company's best selling products, Aarthu, used by arthritis patients, was creating serious side effects among patients. Fresh media reports were suggesting that those who consumed the drug on a long-term basis were prone to increased incidence of heart attacks and strokes.

Last winter, Getwell had celebrated its platinum jubilee. The company practiced business ethics as a credo. Customer first was its mantra. It wore social responsibility on its sleeve. Getwell had donated large sums of money to fight infectious diseases in developing countries. In surveys carried out by the media, it always figured amongst the most admired companies. In industry circles it was known for its high quality research that had led to the manufacture of innovative drugs to cure a wide range of ailments including hypertension, osteoporosis and high cholesterol. There was this rumor that it had even cracked AIDS. The company's top management was a class apart. CEO after CEO had led the company with great vision. To many an investor, Getwell was the ultimate blue chip stock.

The arthritis drug had been developed during the tenure of Rob Walters, one of the most respected R&D chiefs the company ever had. Walters, a medical doctor by training, was a stickler for perfection. He never took anything for granted and had trained his scientists to provide detailed, meticulously prepared supporting documents to regulatory authorities, whenever Getwell came up with a new drug. Consequently, Getwell's drugs were approved normally within six months, as against the two years for Getwell's closest competitors.

The arthritis drug had been discovered in Getwell's lab in 1998. During trials, it had been a big success. It received approval for open marketing in 2001. The company had spent over $500 million on ad campaigns that highlighted its benefits. Till September 2004, some 20 million patients had consumed the drug, accounting for more than 10% of the company's sales. Walters had recently retired. And the crisis erupted soon thereafter. His successor, Michael Yang, a reputed scientist from the John Hopkins College, one of the most admired medical institutions in the world, was left holding the baby.

In early November 2004, Bird and Yang were deliberating on the course of action the company should take. The company's legal chief, Mathew Martin, joined them.

Bird: How bad is the situation?

Yang: There are reports that people who have been taking the medicine for more than two years have twice the risk of heart attacks than those who do not take this medicine.

Bird: How does the legal situation look like?

Martin: We do not know how many lawsuits have been filed. But the number will be very large. We know that at least 20 million people have used the drug. I have reports that many lawyers are setting up toll free numbers to solicit potential clients among patients who have consumed the drug. If these become class action lawsuits, the company might face huge liabilities.

Bird swept the growing beads of perspiration from his head. He didn't like it one bit. As he picked up the cup to sip in his fourth cup of coffee he knew he was licked.

Yang: What is a class action suit?

Martin: A judge in a court might decide that all complaints in their jurisdiction may be considered as one petition viz one class. Once this happens, history tells us that the defendant could get into a big hole because of the large-scale publicity and heavy pressure from the public. The lawsuits can force us into bankruptcy.

Bird: We have been quite transparent. In 2002, we even updated the label and mentioned clearly that there was a higher possibility of cardiovascular risk.

Martin: Sure. We have done more than any company would. But let us not underestimate the lawyers. Millions of patients have consumed the drug and thousands have suffered heart attacks. After all, heart attacks are one of the most common causes of death. So the judges will look for casual connection. You can bet your shirt that some lawyers will find some doctors to testify in their favor.

Yang: Shit. I should have done better PR with the Director of Alpha Clinic. He had prepared a detailed analysis and wanted to meet me. I cold-shouldered him because he has always been critical of us. He has now gone on record in a national TV channel saying: "Had Getwell not valued sales over safety, a test could have been initiated at a fraction of the cost of the marketing campaign used to popularize the drug." That could be used as evidence in the court.

Bird swore under his breath. "Stupid Yang." "Why could he have not been more careful?" his subconscious self told him.

Bird: What else do we have?

Yang: A leading doctor has been quoted as saying we should have tested the drug specifically on heart patients. That would have revealed the cardiovascular risks much earlier. I had discussed this with Walters a few months before he retired, but he was not keen.

Bird: We have held the high moral ground for the past several decades. I am relinquishing office next year. And I do not want to do anything which will damage our reputation.

Martin: Are you thinking of a product recall? Please don't. It would be the surest sign that we are admitting guilt.

Yang: If only Walters had not been that overconfident, we would have done the extra test and accumulated clinching evidence in our favor.

As the meeting ended inconclusively, Bird wondered what he must do. He had talented people like Martin and Yang, whom he could consult. But the buck ultimately stopped with him.

A week later, Bird recalled the drug. The pink dailies carried banner headlines. Sharp editorials were written. The following day the company's stock price plunged on Wall Street. Hundreds of employees, Bird included, who held options in the company, saw their investment plummet. There were reports of courts being flooded with petitions.