Faculty of Business and Social Sciences

M.A. International Business and Management, Sem. 3

Heroin and Contergan:

Crisis Management at Bayer and Grünenthal

Written assignment for International Markets

Winter Semester 2006/07

By

: Russeva Margarita

Date of submission

: 5th November, 2007

Table of Contents

1

Introduction 1

2

Crisis Management at pharmaceutical companies Bay 2

3

Bayer and the Heroin Crisis 2

3.1

Brief history of heroin, the new wonder drug 2

3.2

Advertising and Marketing of Heroin 3

3.3

Banning Heroin from the Market 4

3.4

Bayer′s Response to the Crisis 5

4

Chemie Grünenthal and the Thalidomide Crisis 7

4.1

Brief History of Grünenthal′s thalidomide 7

4.2

Research, development, testing and marketing of thalidomide 7

4.3

The thalidomide tragedy 9

4.4

Chemie Grunenthal′s actions after the tragedy 10

4.5

How victims were treated 11

5

Conclusion 12

6

References 14

1 Introduction

In the modern medicine the use of pharmaceutical products for treatment of wide

spectrum of diseases is indispensable and of common practice. Hence, the responsibility

of the pharmaceutical companies to guarantee the safety of their drugs for human

consumption is enormous. Unfortunately, there are cases from the history proving that

due to improper testing and human negligence drugs caused more harm than good. Even

in the present day, these tragedies are worth an examination in order to remember and

learn from past mistakes and to prevent their recurrence.

Many people believe that street drugs are "an entirely different class than prescription

drugs, and they believe that pharmaceutical companies would never manufacture or sell

street drugs".1 Actually the well-known pharmaceutical giant, Bayer AG, is responsible

for the most addictive and feared drug nowadays ­ heroin.

Exactly 50 years ago, on 1. October 1957, another big pharmaceutical producer,

Grünenthal, introduced the substance thalidomide. It was perscribed mainly as a

sedative and for treatment of morning sickness during pregnancy, before it was

discovered that the drug caused severe birth defects.

In this assignment I will investigate the consequences caused by both drugs, as well the

role of the producing company in the tragedy. By providing a brief history of the

development of heroin and thalidomide, as well as a detailed research of the testing and

marketing strategies, I am interested in the crisis management measures that Bayer AG

and Chemie Grünenthal applied to handle the catastrophes. Since heroin and Contergan

were distributed all over the world, their negative effects caused harm globally. In the

conclusion of the assignment, I will give a short analysis of the corporation′s efforts to

prevent further damage and to reverse existing problems, bearing in mind the social

responsibilities of the pharmaceutical sector.

1 Adams, Mike (2007): The secret history of Big Pharma′s role in creating and marketing heroin, LSD,

meth, Ecstasy and speed:

1

2 Crisis Management at pharmaceutical companies Bay

In the first place it is necessary to give a definition for a crisis. The following one is

provided by the Institute for Crisis Management2 (ICM):

"...a significant business disruption that stimulates extensive news media coverage. The

resulting public scrutiny will affect the organization′s normal operations and also could

have a political, legal, financial and governmental impact on its business."

The reasons for a crisis could be due to external factors, e.g. natural disasters, war,

terrorism and are applicable to any industry. On the other hand, errors in the medicine

development, improper testing, insufficient research about the side effects, are internal

to the pharmaceutical industry. A crisis in the pharmaceutical sector could cause not

only regulatory and legal problems, loss of resources, operational control or licences but

might be extremely dangerous and could lead to serious damages to the population′s

health.3

Developing and marketing a medicine has always been a very profitable business for

many companies. Still, the pharmaceutical producers should bear in mind the social

responsibility that they have towards the humanity. In the next chapters, I will analyse if

the measures that Bayer AG and Grünenthal took after the crisis that they caused were

appropriate and effective.

3 Bayer and the Heroin Crisis

3.1 Brief history of heroin, the new wonder drug

In the 1890es Bayer AG was one of the leading research-intensive European dyes

manufacturers. Its chemists routinely tested all new chemicals for medicinal effects.4

Just before the turn of the century, in 1897, one of the company′s young chemists, Felix

2 The Instutute for Crisis Management is a research-based crisis communications consulting firm with

clients in the U.S. and abroad. It develops communications in order to minimize the crisis′s consequences

of a crisis event so the client′s business can be returned to normal, profitable operations in the shortest

possible time.

3 See Vora, Hemant (2006) ,,Crisis Management in Pharmaceutical Outsourcing"

4 ACS publications: The pharmaceutical century. 10 decades of drug discovery

2