This is a group written case study for International Business (MGT 4810) subject.

1. KULIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES
INTERNATIONAL BUSINESS
(MGT 4810)
GROUP CASE STUDY (WRITTEN)
“TREATING AIDS: THE GLOBAL ETHICAL DILEMMA”
LECTURER’S NAME:
DR. AZURA OMAR
SESSION:
SEMESTER 2, 2015/2016
GROUP 4
MEMBER’S NAME:
NAME MATRIC NO. SECTION
MUHAMMAD KHALILI BIN HAMZAH 1212413 1
MD HOSSAIN NAYON 1220367 1
RAHIMAH BINTI RAMLAN 1212448 1
AFIFAH NABILAH BT MOHAMAD SAFEI 1321976 1
ZAILA KULLANG 1133094 1
NURUL SYAZWANI BINTI HASSAN NUDIN 1329606 1
SUBMISSION DATE:
28th
MARCH 2016

2. INTRODUCTION
AIDS or Acquired Immune Deficiency Syndrome is an illness of immune system which is
transmitted through blood products especially through sexual intercourse or contaminated needles.
This disease can cause a fatal impact to the patient and usually it will lead to death. Cost of treating
this disease is very costly which leads the argument to lower the price of drugs treating this disease by
many parties towards the drug company. Patients of this disease usually come from third world
countries particularly in Africa continent, Asia and Latin America. The feud and dilemma faced by the
drug companies, governments and world health organizations to ensure that the drugs is accessible at a
lower price but the cost of making it is incomparable to sell it at a lower price. Drug companies are
faced with the concerns of empathy for people who can be treated with their drugs and pressure from
health organization around the globe.
Another concern is the pharmaceutical industry is fighting to protect intellectual-property
rights. For drug companies, an intellectual property right is the gold ticket for them to manufacture the
drugs and prohibits other companies from copying them. Research and development (R&D) costs for
pharmaceutical companies can cost a fortune and to recover the cost, the intellectual-property rights is
a tool for drug companies to earn and make profit. Some countries had a different approach to
overcome the problems with the pharmaceutical companies. The South African government imposed a
law in 1997 which allowing the government to secure cheaper drugs for its people by allowing the
imitation of patented drugs by small local companies. India on another hand had a different approach
by not enforcing patent rights. Multinational drug companies operated in South Africa had problems
with the law regulated by the government. Many humanitarian groups continue to put on pressure to
the drug companies with regards the price of drugs sold at the poor countries.
India for example trying to be innovative despite the situation of Western drug companies by
providing generic version of the triple-combination therapy at a lower cost. Law imposed in India
enables local firms to manufacture drugs without regard to whether the drugs are patented in other
countries. Some companies strike back by starting price war between them and the trend is followed
by other drug companies. Cipla’s chairman opinionated that patents should be between countries
which are equals in terms of technology.
However the feud in South Africa between the government and world pharmaceutical industry
is extended to be handled by law. The lawsuit is filed because of the South Africa law permitting
generic drugs to be imported without the permission of the patent holders which is against the patent
rights. The lawsuit did ruin the image of the pharmaceutical companies as the world is against them
which define their action as insensitive to the plight of poor people. The lawsuit is dropped with a
condition which the South Africa government should comply with the WTO rules in implementing the

3. disputed medicines law. As the feud goes on and on, the number of patients infected by AIDS keeps
increasing and this is such a worrisome situation even for the South Africa government. The South
Africa Department of Health claimed that about 25% of the country’s adult is infected by the deadly
virus, HIV.
United Nations (UN) had established a board to oversee the Global Fund for HIV, tuberculosis
and malaria. Dilemma faced by the pharmaceutical industry regarding patents and profit making for
the companies are the concern which might an understatement. This pharmaceutical industry might be
seen as making profit from diseases but the research and development (R&D) done by these
companies is often hindered by the capitalist image. The government had to do what it takes to secure
it people and contain this disease from spreading and usually it might lack of monetary resources as
the cost of treatment is very expensive. Global intervention is what currently being done by the United
Nations (UN), the World Bank, and The Global Fund to Fight AIDS, Tuberculosis and Malaria and
former President Bill Clinton which focusing on enabling generic AIDS drugs to be distributed in poor
countries.

4. Question 1: Why is this dilemma? Explain by using a stakeholder analysis on this global
situation. Be sure to name the various parties involved, the goals of each party and the short-
term and long-term implications of the situation each party faces.
In general, treating AIDS is a dilemma because it concerns an illness that is not only fatal and
infectious, but also affecting quite a number of people in specific places. For an illness as serious as
AIDS, providing treatments or cure should not be a question but in this era, it still is. Firstly, the
people who are most affected by this illness are the ones who cannot afford the drug to treat it and the
cost that goes into researching and developing this drug is not at all cheap. Thus, a clash of the ability
to satisfy the demand exists. Besides that, it is also a dilemma because it touches the issue of social
responsibility. The concerns of compassion, external and internal pressure of maintaining not only
sufficient revenue to develop cure, but also a benevolent image is causing a cognitive dissonance
amongst parties involved. In addition, some parties also had to fight to protect their intellectual
property rights due to differing trade policies among nations, which led to infringements.
Drug companies, governments and world health organization are facing dilemma because the
issues of AIDS drugs that need to be distributed to poor countries. The first parties that involved in
this issue are drug companies. The aim of these companies is focusing on the protection on their
intellectual property rights in other words, to protect the companies from generic copies. The reason to
protect the property rights is to make the business survive and keep on generating revenue. If countries
could copy the patented drugs, drug companies would not be able to continue the business. Due to
these circumstances, it brings a short term and long term implications for drugs companies. In the
short term, they are having a global competition between multinational pharmaceutical companies and
small local drug companies. It happened because South Africa government is allowing local company
to copy patented drugs so there is a price war. Furthermore, the implication in the long term for drug
companies is to maintain sufficient revenue. The purpose of making good revenue is to develop a cure
for AIDS and other diseases in the future.
The second party that involved is South Africa. It is about 25 percent of the country’s adults
are infected with HIV, so the main objective of the government is to produce cheap drugs for its
people who are infected by the virus. To produce the cheap drugs the government allow the local firm
to copy patented drugs. However this condition leads to a long term implication which brings world
pharmaceutical industry dropped its lawsuit against the South Africa. World pharmaceutical industry
dropped the lawsuit because they consider that the government infringing their property rights. They
also believed that their image was being tarnished by general opinion on the world due to the price
war. In related concern, the short term implication for South Africa is the pressure that they get from
various groups. For instance, problems with MSF Doctor, they ignore the patent law and asked the
government to import drugs from Brazil or India. Another issue with TAC, the government refuse to

5. pay for the drugs that have been used by MSF and another problem is South Africa regulatory
approval has not yet been granted for drugs that they want to produce with Glaxo.
In the same situation as South Africa, India also allows the local firm to manufacture drugs
whether it is patented or not. According to the situation, Indian company called Cipla, announced to
provide a triple combination therapy at a lower cost. The purpose of this company is to reduce the
number of Indians that are infected with the AIDS virus. The battle of price between Cipla and
western drug companies like GlaxoSmithKline and Merck are started. However, there is a short term
problem. Indian company could not produce enough drugs for themselves so they let western drugs
companies to compete with them as long as it brings a good trend and impact. Meanwhile, in the long
term, if India wants to be allowed to join the WTO they need to adjust its patent law. This may cause
many of its drugs illegal and this process will take many years.
Moreover, Brazil also involved in this issue. It is obvious that every country wants to decrease
the number of people that infected chronic disease or in the worst case disease that bring to a death
sentence. Thus, the goal of Brazilian government in this matter is to cut down those numbers. The way
that the government apply to face up the condition is by providing anti-retroviral drugs and giving it
free to patients. Nevertheless, this situation gives a short term implication to the local pharmaceutical
firms. They are having a rough time because patients would get free drugs so there would be less
people buy from the local drug firms. In the meantime, the positive long term implication for Brazil
due to the government action AIDS deaths has significantly dropped by 50 percent since 1994. Not
only that, Brazil would trade with poor countries that is needing the generic AIDS drugs by exporting
the drugs without running fouled of trade laws protecting patent rights.

6. Q2. What ethical philosophy should apply to this situation? Explain the rationale to your answer
and determine what is the implications of your ethical standpoint to the parties you identified in
question 1.
Utilitarian philosophy should apply to this situation whereby utilitarian views suggest that a
company should behave in a way that maximizes good outcome and minimizes bad outcome wherever
it operates. Based on the case study given, AIDS’s patients increase every year. In turn, many
countries are trying their best in order to create and invent new drugs to overcome this situation.
However, the strategy needs huge amount of money to implement the suggestion.
On top of that, several countries include the developed nations and developing countries and
not excluded the poor nations are never stop from making efforts to reduce the rate of death regarding
the AIDS. The countries that involved in this kind of discussion should contribute their own effort to
achieve the best outcome and can give the benefit to the majority. They should consider all things, for
instance the law that binds their countries, the profit and loss that will occur by the decision and so
forth. The relevancy of this ethical philosophy is it can help the majority and benefit them meanwhile
the negative impact can be minor.
On the plus side, all the countries can get the drugs to help their people and reduce the number
of death at once. Even there is no guarantee to prevent them from the AIDS but it help a lot in terms of
continuous in their life and at least it can give new hope to the patients. The countries involved can
work and discuss together to gain the benefit at all even they are forced to reduce the price to
developing and poor nations. For example, five major multinational pharmaceutical companies offered
to sell the AIDS combination therapies in May 2000.
Basically, they are sharing the same aims and objectives which are they want to reduce the
number of death causes of AIDS and also to enable their citizens can live for a longer time even they
are infected by AIDS and the ultimate objective is to ensure all the countries are able to purchase the
drugs. In other words, they are aim for right action which produces the greatest good for the greatest
number. This is the rationale behind the utilitarian view.
However, there are some implications that will affect the parties involved in this case study.
There are three parties that involved directly towards this problem which are Western drug companies,
health organization, pharmaceutical industry and also the government of each country which are
interested towards this problem.
From the perspective of Western drug companies, there is no much issues regarding from the
utilitarian view. They are responsible to create and innovate the drugs become an antidote to the AIDS
patients. Therefore, they are doing their work and they can still get the money even they are forced to

7. receive the money even they have not much profit because they have to sell the drugs to the countries
involve in a cheaper price.
In addition, health organization also will involve in this problem since they will handle several
meetings with the authorities in order to curb this problem. They will engage with the drug companies
and also pharmaceutical companies to give advice and suggestions in order to upgrade or to improve
the quality of the drugs that will create for the AIDS patients.
As it will affect the profit to the shareholder wealth, it will give new problem to the
pharmaceutical companies that they will fight to protect intellectual property rights. Based on the
utilitarian view, pharmaceutical companies will not have the intellectual property rights since it can
make the drugs are complicated to duplicate or other countries cannot produce the drugs. So, the drugs
will be freely moved to other countries and free to produce anywhere without the law binding it.
Finally, there is not so much profit and it will create another problem which is more people will infect
by AIDS viruses since they realize they have the bidder.
Besides that, the governments that involve in this problem will provide the budget to buy the
drugs. In my opinion, when the drugs are freely moved to other countries, it will increase the rate of
AIDS patients in a particular country so that the government need to provide a specific budget in order
to own the drugs as well as can save their citizens.

8. Question 3: What should the managers of the Western pharmaceuticals companies do to resolve
this problem? What should the other parties do? Draw up a plan of action for the MNCs and the
other stakeholders.
Western pharmaceuticals companies are faced with the issues of social responsibility in both
the short - and the long-term as mentioned in the article. This situation creates a dilemma for the drug
companies between the profit/revenues or the social responsibility towards the people who are in need
of their drugs. In addition, the drug companies also fought the intellectual-property right which has
been overlooked in some developing countries in regards to the production of fake and cheap drugs.
To solve these problems, the managers of the Western pharmaceuticals companies should reconstruct
their production strategies. Instead of producing only the high cost medicines which are sold in the
US, they should also producing a lower cost medicines, but still maintains the efficiency of AIDS
treatment, to be distributed the developing countries.
To fulfil this strategy, they may sign a joint venture contract with the drug companies at the
developing countries to produce low cost medicines. In other words, instead of fighting against them
for the intellectual-property right, why don’t the Western pharmaceutical companies enter a joint
contract with them and together produces the low cost medicines? If the Indian and Brazilian
pharmaceutical companies are able to produce and sell the same function medicines at low cost, they
must know how and where to find the low cost resources and processes to produce the medicines. As
a result, the Western pharmaceutical companies can expand their market in the developing countries
without worrying over the Return on Investment (ROI) as well as fulfilling their social responsibility
towards the society.
Off note, a successful Indian entrepreneur once said that it is not the resources that determine
the price but the demand is. The higher the demand means that the higher the quantity that should be
produced, resulting the lower the cost of production. In this case, if the Western companies able to
gain a higher demand in the developing countries, producing the cocktails based on the original
formulas at a lower cost will no longer be impossible. That is why it is important for the companies to
gain the market share and trust among the customers in the developing countries. However, the
Western companies also have the option to abandon the developing countries, in case of maintaining
their credibility and the product’s quality, and left the job of fulfilling the social responsibility to the
local pharmaceutical companies. They may sell the formula or patent of the cocktails to the local
companies to counter the intellectual-property right.
On the other hand, the local pharmaceutical companies such as Brazilian and Indian
companies should propose a joint contract with the Western pharmaceutical companies. To resolve the
issue of the intellectual-property right, the local pharmaceutical companies may legally ask permission

9. and buy from the Western pharmaceutical companies to use their patent for the drugs production.
Instead of fighting each other, both local and Western pharmaceutical companies should work together
to protect both parties’ benefits and rights while fulfilling the social responsibility towards the
societies. As for the World Health Organization (WHO) and World Trade Organization (WTO), both
organization should work together to create effective laws which protect both side’s benefits. WTO
should create a specific law for medical businesses which comply with the WHO’s objectives. Every
patient has the right to be treated regardless of their economic condition.

10. Multinational Companies and Stakeholders Plan of Action
NO ISSUES ACTION PLAN EXPECTED RESULTS WHO ARE INVOLVED
1 Produce low cost anti-AIDS medicines Enter a joint contract with the local
pharmaceutical companies to protect each
other benefits while fulfilling the social
responsibility towards the society.
Both MNC and local
pharmaceutical companies
are able to produce low cost
anti-AIDS medicines. The
poor people who need the
medicines are able to buy
them at an affordable and
low cost.
1) Multinational
pharmaceutical companies
such as GlaxoSmithKline
2) Local pharmaceutical
companies such as Cipla
2 Solve the global patent protection Sell the right to use the patent at a
reasonable price to the local
pharmaceutical companies. Each of the
local companies who buy the patent from
the MNC must comply with rules and
regulations set by MNC.
The intellectual-property
right is protected. The MNCs
protect their market share and
the stakeholder benefits are
protected.
1) MNCs
2) Local pharmaceutical
companies
3 Shortage of fund to execute the new
production strategy
Stakeholders invest money for the new
production strategy at the developing
countries.
MNCs are able to produce
low cost anti-AIDS
medicines based on the
country’s demand. MNCs
gain trust and market share in
the developing countries.
1) Stakeholders
2) MNCs

11. CONCLUSION
This article concerns with the dilemma, ethical issues and challenges that are faced by drug
companies, governments and world organization. The key ethical issue related to Aids treatment is a
complex situation in which it has brought to the question of whether this global ethical dilemma can
be resolved or not. The concerns on how to make the drugs affordable while the cost of researching
and developing the drug is higher, the issue of social responsibility and the issue of protecting
intellectual rights due to different trade policies is the ethical issues that has been highlighted
throughout the article. There are several parties involved with the ethical dilemma. Drug companies
that are focusing on the protection on the intellectual property, South Africa which is to produce cheap
drugs for its people who are infected by the virus and India that allows the local firm to manufacture
drugs whether it is patented or not.
In this report, it is also explained the ethical philosophy that should be applied to this global
situation which is utilitarian philosophy. Utilitarian views suggest that a company should behave in a
way that maximizes good outcome and minimizes bad outcome wherever it operates. Thus, health
organizations are aim for right action which produces the greatest good for the greatest number as its
ultimate objective is to reduce the number death from aids virus.
In conclusion, treating Aids has raised many ethical challenges for public health, researchers
and industry. This complex, global situation continues to find the best solution to the overall problem.
From the global perspective, people living with aids would not be the enemy of global efforts, but in
fact would be the only hope for achieving improvement in the future.