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Case 4
GLAXOSMITHKLINE’S RETALIATION AGAINST
CROSS-BORDER SALES OF PRESCRIPTION DRUGS

I. TO PROFESSORS:
This case does not fit our normal Instructor’s Manual Format. The case authors’, Sara Smith Shull and Rebecca J. Morris, Ph.D., provided this excellent teaching note.

II. CASE ABSTRACT
GlaxoSmithKline (GSK) in 2003 was the second largest pharmaceutical company in the world withglobal sales of nearly $27 billion in pharmaceuticals. GSK was coping with a new challenge as Americans, especially senior citizens, took increasing advantage of price differentials for prescription drugs in other global markets by ordering their prescriptions online from pharmacies outside the U.S... U.S. Congressmen from states along the Canadian border began hosting bus trips for senior citizensacross the border in order to procure prescription drugs at costs as much as 80% lower than those available in the United States.
The flow of drugs from Canadian pharmacies to American consumers captured the attention of GSK and their concern grew as the practice spread. Late in 2002, GSK attempted to curb the flow of prescription drugs out of Canada into the United States by limiting the drugproduct shipped to Canadian pharmacies. This challenged pharmacies to provide adequate prescription product for their Canadian customers while continuing to ship product to American customers. Additionally, GSK discovered Americans, especially seniors, to be loud, persistent and effective protesters when their access to “affordable” medications was threatened. Boycotts of GSK products werethreatened. The Food and Drug Administration reversed their stance on permitting individuals to import drugs for their personal use and threatened to find any party criminally liable for participating in an import plan for pharmaceuticals from Canada.
GSK’s public image took a beating. A Wall Street Journal poll reported that 84% of respondents felt that regulators should not stop Americans frombuying prescription drugs in Canada. Respondents accused GSK and other firms of price fixing.
The case examines GSK’s decision to limit drug product shipped to Canadian pharmacies and its subsequent impact on their public image. Background information is provided in the case for:

1. The health care crisis in the United States;
2. The political debate on resolutions to the crisis;3. The high cost of pharmaceutical research;
4. The regulatory policies of the Food and Drug Administration in regard to importation of drugs from other countries; and,
5. The global pharmaceutical industry.

This case is suitable for graduate or upper-division undergraduate courses in business and society, business ethics, marketing strategy, or strategy. __________________Copyright © 2004 by Sara Smith Shull and Rebecca J. Morris. Reprinted by our permission for the Tenth Editions of Strategic Management and Business Policy and Cases in Strategic Management.
It is especially useful in modules dealing with stakeholder analysis, issues management, environmental analysis and pricing strategies.

III. LEARNING OBJECTIVES
The learning objectives of this case are:1. To identify the primary and secondary stakeholders of GSK and understand how stakeholders can impact the success of the firm;
2. To understand the forces of change that are reshaping the business environment for pharmaceutical firms in the twenty-first century;
3. To analyze the arguments for and against differential pricing of pharmaceuticals in different markets;4. To analyze the ethics of differential pricing strategies for pharmaceuticals;
5. To evaluate the most likely life cycle of the public issue faced by GSK; and,
6. To develop and evaluate strategies to respond effectively to the public issues faced by GSK.

IV. DISCUSSION QUESTIONS AND ANSWERS

1. Who are the stakeholders in this case? Which are...
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