Dr. Spring found your presentation of the proposed strategy to be compelling and has asked you to move forward with the plan. She expressed ACME has an excellent reputation with patients, healthcare providers, payors, and Wall Street, and feels confident the wholesalers will cooperate during negotiations.

The DSAs with the Top 3 have been terminated. Each of the Top 3 has been presented with a new proposed DSA that eliminates the product purchase discount but preserves all other terms of the original DSA. Each of the Top 3 has been given 90 days to decide.

Unexpectedly, the Top 3 refuse to negotiate. Approaching the 90-day mark, inventory levels of the Company's drugs have become concerningly low. In turn, pharmacies have begun to run out of inventory. Over the course of 6 weeks following the 90-day mark, wholesalers and pharmacies completely run out of inventory of ACME drugs. Patients have been unable to fill their prescriptions. Pharmacies have told patients and physicians that wholesalers were saying that ACME's drugs are discontinued. Angry patients and physicians began calling the Company complaining, because many of ACME's drugs treated serious chronic illnesses and worked really well. Some patients were not able to switch to other medicines or if they did switch, medical complications began arising. Many hospitalizations began to occur. Patient organizations began calling the Company seeking answers. The legal department wondered if patients would sue ACME to cover the cost of their medical expenses. The Company's reputation was taking a beating. And then the investor community got word of the distribution disruption and reputational hit; the Company's stock price had not been impacted yet, but you wondered how long that might last.

You and your team were not prepared for this turn of events. You and the consultant made no contingency plans for what seemed like a highly unlikely scenario where the wholesalers chose to stop purchasing ACME's drugs. Although the Company had ample inventory to ship, the wholesalers were not buying to put pressure on the Company, and ACME had no real way of shipping directly to thousands of retail pharmacies or patients around the country to counter the wholesalers move.

The large retail pharmacy chains across the US began to complain to the wholesalers to get the deal done. They were losing business and were also under tremendous pressure from patients, patient organizations, and physicians.

Two camps emerged in the company:

1. Those who want to save the company money and believe that holding out longer against the wholesalers would eventually prevail. Everyone believed the wholesalers could not hold out much longer under the pressure. It has also become clear within ACME that due to recent changes in federal government policy and spending that inflation is impairing the industry's ability to innovate in R&D. Thus, the importance of the savings is that much more important to R&D funding.
2. Those who are concerned about the patients. They are upset that patients are not receiving the ACME drugs their physicians prescribed, and that the company's reputation is being harmed irreversibly in the medical community.
3. Both camps are nervous the stock price would fall very soon which could further put negative pressure on R&D and the company's reputation unless something was done to rectify the issue.

The CEO has let you handle the crisis to date, but has called an executive leadership meeting to choose a recommendation to solve the problem.

Part III Assignment

Decide which camp you are in and write a memo presenting your recommendation on how to resolve the issue. Dr. Spring wants to see your recommendation in advance of the executive leadership meeting. Your memo should include the following:

• In two sentences or less, a statement of the issue confronting ACME.
• In two sentences or less, a statement of your recommended solution
• Detailed rationale for this recommendation (which includes the laws your recommendation needs to comply with and why).
• Risks associated with your approach, including any legal, regulatory, reputational, operational, and/or business risks.
• How you propose to mitigate these risks..
• A proposed contingency plan.

Answer rating: 100% (QA)

Memo To Dr Spring CEO ACME Pharmaceuticals From Your Name Your Position Date Date Subject Recommendation to Resolve Distribution Disruption Crisis Iss... View the full answer