Fighting The Flu :

TAMIFLU Stockpiling A Pandemic Preparedness Policy

Case no. 2

I.

Background of the Study

Based in Basel, Switzerland, Roche is one of the worlds leading researchedfocused healthcare groups in the fields of pharmaceuticals and diagnostics. This case
study looks into the measures of how Roche has taken to ensure sufficient quantities
of its influenza drug Tamiflu available worldwide to meet the next flu pandemic.
Tamiflu is one of few antiviral drugs effective against the Swine flu that had spread to
Spain, the US, New Zealand, Israel, and is suspected in many other countries as well.
Drawing back in the late 1990s, Roche tried to get various governments
interested in preparing for a flu pandemic. But their efforts fell on deaf ears.
Meanwhile, Tamiflu was launched globally in 1999 as a seasonal influenza drug.
Roche could produce 20 million doses of the drug annually. Despite the lack of
interest by governments, Roche decided to increase its capacity to 55 million doses
from 20 million. Then in 2005 the US government asked Roche about its ability to
supply 200 million doses of Tamiflu. As a result, the company decided to ramp up its
production capacity to 400 million doses by the end of 2006.
Roche didnt have the internal capability to do this so it had to use external
suppliers. It identified suppliers from across the globe and in the end a core group of
18 partner companies in ten countries became part of the Roche network. Roche paid

all set-up costs for the network, including capital investments, technical transfer
activities, qualification registration work, regulatory filings, and so on.
It didnt stop there. Roche also added an extra supplier in each area of the supply
chain and granted sub-licences to three companies in China and India. It also shared
technical know-how with a company in South Africa. In addition, because the flu is
not patent protected, underdeveloped countries could manufacture generic versions of
Tamiflu without violating Roche patents.
In August 2005, Roche agreed to donate a stockpile of three million doses of the
drug to be stored in the US and Switzerland. Studies have shown that such a stockpile
could stop a pandemic at the source. In January 2006, Roche agreed to donate a
further two million doses to be stockpiled in specific regions. . By early 2007, Roche
had received orders from almost 80 countries for 200 million doses of Tamiflu. Roche
also decided to develop a way to prolong the drugs shelf life beyond five years.

II.

Statement of the Problem

As mentioned, Roche is one of the worlds leading researched-focused
healthcare groups in the fields of pharmaceuticals and diagnostics. As the worlds
biggest biotech company and innovator of products and services for the early
detection, prevention, diagnosis and treatment of diseases, the Group contributes on a
broad range of fronts of improving peoples health and quality of life.
Having this kind of mind setting, upto what extent does the company has to give
in order to come across with its social responsibility? How much more does the
company have to do to bump into it?

After achieving the targeted quantity that was called upon by the government, do
they have to continue to pay to maintain the said capacity? Or should the international
community and governments pay for it?
III.

Alternative Courses of Action

Roche could have the option of maintaining their production with their initially
targeted doses, which is 55 million from 20 million.

On the other hand, the pharmaceutical firm could answer the call of the US
government in producing 200 million doses granting that with regards pricing, they
could insist on their own. They could give back the responsibility to the international
community and to the government to cope with the price the company insisted.

Moreover, Roche could have another possible option of responding to the call of the
US government, by trying to integrate external engagement approach, and at the same
time taking charge with the sustenance of Tamiflu, until it is being needed by the
society.

IV.

Analysis of the Alternative Courses of Action

Roche could have the option of limiting the increase of their production with their
initially targeted doses, which is 55 million from 20 million. Giving the other
pharmaceutical firms to do their share in terms of answering the societies call.
Tamiflu was launched globally in 1999 as a seasonal influenza drug. Aside from
Roche, there are also two (2) other pharmaceutical firms who has their own influenza
drug, namely GSK and Novartis. This means that it is not solely Roche who has the
sole capability of producing such drug that would give a solution to the flu pandemic.

Initially, the company is capable to produce 20 million doses annually. But

unfortunately, it turned out that the annual sales of the said drug is only 1 million
doses. This means that it only reflected 0.5 % of the annual production. Does this
figure shows a good indicator of the worthiness of Tamiflus production?
But inspite of this, Roche has settled to increase its production from 20 million doses
to 55 million doses. Why is this so? If this concern is primarily and solely a matter of
extending their social responsibility, then, perhaps they have already served their
purpose. By limiting their production, this could give an opportunity to the other
Pharmaceutical firms, namely GSK and Novartis, to do their share in responding to
the need of the society at large. However, this will just be made possible if the other
two (2) firms have a parallel social responsibility concern alike with Roche.
But on the other hand, if Roche, would give such opportunity to the other two (2),
they may maximize this as a strategy that would bring about marketing advantages to
them. Thus, this may create some threats against Roche.

On the other hand, the pharmaceutical firm could answer the call of the US
government in producing 200 million doses granting that with regards pricing, they
could insist on their own. They could give back the responsibility to the international
community and to the government to cope with the price the company insisted.
Roches main objective is to discover, manufacture, and commercialize innovative
products for unmet needs, at the highest quality and to the benefit of the customers.
The existence of Tamiflu is a concrete example on how the company was able to go
through with the adherence of their objective. Evidently, their campaign about such

pandemic preparedness plans has even fallen into deaf ears by various governments.
But still, the company push through with their drive to produce such drug.
From what was previously known as 55 million doses of Tamiflu produced annually,
the US government demanded 200 million doses. The said decision drawn by the US
government was due to their determination to be as prepared as possible to a certain
pandemic. However, being this figure known to Roche, they were startled on how
will they make this to happen. But fortunately, the company was able to secure the
availability of the drug by utilizing its resources and setting up a manufacturing
network at its own cost. Thus, Roche was successful in answering the demand being
set by the US government.
Thus, in response to the demand of the US government, in a fair agreement they
could in return insist on a pricing system that would also compensate their cost of
producing such drug. But the Roche has to be very careful in carrying with decision
since this could bring about a sort of negative impression to them. The worst thing
that may possibly happen is that the US government may shift their attention to other
pharmaceutical firms that caters a similar type of drug.

Moreover, Roche could have another possible option of responding to the call of the
US government, by trying to integrate external engagement approach, and at the
same time taking charge with the sustenance of Tamiflu, until it is being needed by
the society.
Based on the researches that was conducted by Roche on how rapid the virus might
spread coupled with the expected government orders, the company set an ambitious
target of 400 million doses of treatment by the end of 2006. This target has even
doubled the request set by the US government. According to David Lapre, Head of

Roche Global Supply Chain Management, the 400 million does was 15-fold over
their 2004 capacity. Will Roche hit their target?
Having this target being set, it became perceptible to them that the required scale
could not be achieved by expanding their internal asset base. According to Lapre,
they have to set an in- and- out sourcing. Perhaps, it is timely for them to apply the
integrate external engagement approach.
External engagement means the efforts a company makes to manage its relationship
with the external world. This relationship can and should include a wide variety of
activities: not just corporate philanthropy, community programs, and political
lobbying, but also aspects of product design, recruiting policy, and project execution.
This approach is not that easy to commence with. This may involve a lot of
individuals and organizations that has to be tapped. Roche then has to identify key
stakeholders who were involved and has to engaged them with the possible actions
that will be done. In their case, the World Health Organization (WHO) is one of the
best agency that they could tap to help them succeed with their task. In return, the
WHO could coordinate closely to various governments, as they have the authority to
do so. Also, by coordinating with WHO, they can have an access to inform various
governments to different issues, risks, and other possible options Thus, this could
help Roche to have some ease in terms of consuming the production, pricing ,
stockpiling and delivery system of Tamiflu.
To further push through with this approach, Roche could identify possible partner
companies that will help them because ideally this could not be done by Roche

solely. Their partners could be off help them to expand their network and made their
production easier, most especially in terms of supplying their raw materials.
This undertaking could be considered as a gamble in behalf of Roche. Since this
could make or break the name and reputation of their firm. The company was very
bold to dare such demand. Based on the previous alternative, the main objective of
the company is to discover, manufacture and commercialize unmet needs.
Accordingly, if they achieve their objective, they will be in a win-win situation as all
the stakeholders will be happy, patients get the drug, governments ensure that their
citizen lead healthy lives, employees get proud on where they work, and investors
earn good return.
Although, doing this is part of the objective of Roche, but eventually they were able
to come up with a good profit out of this and not just purely out of socially
responsibility. Thus, the issue of sustenance is not a big issue for them. Accordingly,
they pursue sustainability not because of they are driven by charitable objectives but
because it makes a business sense for them. Thus, they are catching two (2) targets
with only one (1) bait. They are achieving financial success by working with
responsibility with business strategy.
V.

Conclusion
As mentioned, Roche is one of the worlds leading researched-focused healthcare
groups in the fields of pharmaceuticals and diagnostics. Having an objective of
discovering, manufacturing, and commercializing innovative products for unmet
needs, at the highest quality and to the benefit of the customers, the creation of
Tamiflu is a concrete example of this. Based on the research conducted, it was found

out the Roche was not solely concern about their concern for social responsibility,
they were actually concern about making some business out of it.
If it is just being viewed on a single perspective, it could be perceived that Roche has
given so much in their behalf just extend their social responsibility. However, if a
careful detailed research will be conducted, and the two-sides of the coin will be
looked at, a new perspective will be discovered. This new discovery has something to
do with the companys potential profit out of their endeavor.
As mentioned, Roche purse on this not because of a charitable objective but rather
due to a business sense out of it, this means that they are getting a good benefit. They
have even set-up their own plants to various areas to secure their target production,
invested on inventories, technical transfers and regulatory filings at their own cost.
Behind these efforts is their desire to gain profit. Thus, they are very much willing to
do and pursue this at any extent, in as much as they wanted to.
In terms of sustenance or continued capacity, it would be better for them to maintain
such since this will bring about a continued benefit and advantages on their part,
particularly in terms of financial, marketing even in CSR aspect. Tapping the right
individual and the right agency or organization contributed their success. Their
coordination with World Health Organization, as well as with various governments, is
a great help for the firm.
In this case, this will bring about a win-win situation for them since all of the agency
and people involved are benefited from the investors, employees, patients,
stakeholders, as well government get what they wanted too.
VI.

Recommendation

Based from the given alternatives, it is recommended that Roche answers the call of
the US government in producing 200 million doses, and they have even actually
produced 400 million doses and continue the sustenance of the Tamiflu. In order to
work with this, it is best for the firm to use the integrate external engagement
approach. This will be done moving a little bit forward with the concept of CSR. This
would be done by utilizing key stakeholders to be involved with the execution of the
plan. On this matter, the World Health Organization (WHO) and various governments
are the key stakeholders. They will allow a better connection to make their plan run
smoothly.

FIGHTING THE FLU TAMIFLU Stockpiling

A Pandemic Preparedness Policy
CASE NO. 2

A Case Analysis

Presented to the Graduate School

HOLY CROSS OF DAVAO COLLEGE

In Partial Fulfilment
of the Requirements for the Subject
Business Ethics

Master in Management
by

JESSIELYN A. PULVERA
January 2014