“Part I: Business Case

Profit as Purpose

Martin Shkreli, age 35 in 2017, the former CEO of a startup Turing Pharmaceuticals, raised the price of an HIV/malaria medication Daraprim overnight from $13.5 to $750 a tablet, bringing the cost of therapy for some patients to hundreds of thousands of dollars. Outside the US, the product is available for less than $1.  Shkreli has argued that such a move was legal, and good for investors…. – but was it?

Turining Pharma has stated that it needs the profits from the drug to fund the research and development of new drugs. The need to generate profit to fund research and development has been a universally accepted business principle. In the case of Turning Pharma however, patients, doctors and the public alike strongly disagreed as to the source of profit and the amount customers were to pay, without being given other therapy options.  The subsequent public backlash and internet shaming of Shkreli was intense as all stakeholders became very vocal in communicating their concerns and moral outrage. In response, Turning Pharma reduced the price by half, and offered a number of programs for patients with financial needs. As a result of the immense public pressure and scrutiny, Martin Shkreli stepped down from his CEO post in 2016.

Although Daraprim is an extreme, 5000% price increase, it is hardly an isolated case.  And yes, such actions are legal and argued in the name of profit. Profit as the purpose.

Champions of unfettered and remorseless capitalism have long argued for profit for profit’s sake:  from economist Milton Freedman to writer/philosopher Ayn Rand, to the business politicians in the current US Trump administration.  In her 1964 interview, Rand contended that “man exists for his own sake, that the pursuit of his own happiness is his highest moral purpose, that he must not sacrifice himself to others, nor sacrifice others to himself,”

Some 50 years after this interview, Rand’s books are still selling well, and her heroes keep influencing entrepreneurs and politicians alike, from Melbourne and Hollywood to Tel Aviv and Washington. Entrepreneurs like Michel Shkreli, the CEO of Turning Pharma; and James Kilts, former CEO of the Gillette Company in the US; Sonja Bernhart, Australian businesswomen;  Selvaraghavan Kasthuri Rajaan, an Indian film director, and Ayelet Shaked, Israel’s Minister of Justice, are but a few of many others who subscribe to Rand’s brand of literal capitalism.  Yet more recently, the appeal of a determined and self-centered strongman type leader oblivious to environment and social realities, is losing its allure and legitimacy in business, although political rhetoric fuels the debate.  Recently, the revelation of Uber’s rampant culture of bullying and sexual harassment was followed by an abrupt departure of Uber’s CEO and Rand-devotee, Travis Kalanick. While on the leave of absence, Kalanick admits to soul-searching and reflection on the role of profit as a sole purpose…”

 

Contributors: Global Sourcing Council
Categories: Industry Articles, SIG U Resource
SRC Type: Sourcing Management, Sustainability