Profits Before Patients? Rethinking the Shareholder Primacy Model of Corporate Governance for Health Care

Concerns about the ballooning cost of health care and medicine are at the heart of perpetual debate about the corporate accountability of health care corporations. This essay critiques the shareholder primacy model of corporate governance for health care enterprise using the American pharmaceutical company Merck as a small sample case study that might be indicative of broader corporate governance issues generally, that deserve further research. In 2009 an Australian Federal Court class action was led by Merck product patient users against Merck’s Australian subsidiary, for allegedly failing to withdraw the drug Vioxx from the market. The patient group claimed that Merck insiders knew Vioxx increased the risk of heart attacks, yet persisted to manufacture and market the drug to secure profits for shareholders. At first instance, the trial judge awarded damages in favor of the original plaintiff claimant, finding that the drug had caused the claimant's alleged heart risk injury. However that decision was overturned on appeal, with further leave to appeal to the High Court of Australia being refused on 11 May 2012. Simultaneously, settlements between the company and other groups of claimants involving the same drug, have been and are continuing to be reached in other jurisdictions around the world in 2013.The case more generally evokes a familiar normative question of to whom a duty of care is and should be owed by health care corporate decision makers: shareholders, patients, or both? This paper briefly answers that question by critically analysing the market impact of the shareholder primacy model of corporate governance, on end user health care patients by transforming them from patients into consumers. The paper then constructs a potential solution in the form of an evolved shareholder primacy model of corporate governance which encompasses a value duty of virtue to shareholders that potentially meets the interests of both shareholders and patients.*Citations of my paper are welcome, as per the SSRN suggested citation below.Email contact - mdsi7688@alumni.sydney.edu.au