Special Sessions with Ray Gilmartin, CEO of Merck

Mr. Ray Gilmartin engages AMP students after class on committed customer service.


Mr. Ray Gilmartin and Merck & Co.

Mr. Raymond Gilmartin, former CEO of Merck, would probably rank as one of the most talked about and criticized CEO of modern times. Not only did he preside over the most expensive product recall in history, the Vioxx recall, but he also lowered the company's profit guidance while keeping it's R&D budget much to the consternation of fund managers. Needless to say, Mr. Gilmartin received serious flack from the investment community and even influential business journalists asked for his head.

From the very start, Vioxx was a wonder drug. It was an effective painkiller that treated osteoarthritis, acute pain conditions and dysmenorrhoea. What's even better is that unlike traditional pain medication, Vioxx did not cause debilitating peptic ulcers due to its clinically proven ability to inhibit the COX-2 enzyme. Vioxx brought in revenues of about USD2.5 billion annually to Merck & Co.

However, after a second round of clinical trials, the drug caused an increased risk of heart attacks and strokes from prolonged use. Faced with the choice of increased profits or potential harm to its customers, Mr. Gilmartin and his board decided to pull out Vioxx from the market. Almost immediately, the stocks of Vioxx fell sharply and to complicate matters loyal Vioxx users questioned its withdrawal.

Faced with declining revenues and profits caused by the Vioxx withdrawal, Merck was faced with expiring patents and low R&D success rates. Not only was its current business in peril but so was its future growth and profitability.

Confronted with this dilemma, Mr. Gilmartin, his management team and his board did the unthinkable. Instead of reducing its R&D budget alongside reductions in its expenses, Mr. Gilmartin chose to lower profit guidance. As expected, this whipped up a maelstrom of criticism with many even questioning Mr. Gilmartin's competence.

Fast forward to 2012, Mr. Gilmartin has retired from Merck and is now a professor at Harvard Business School. Merck & Co., is once again highly regarded for its R&D strength, its revenues and profit growth even stronger. And as a final act of his vindication, the most vociferous of his media critics, are now attributing Merck's present success to the bold moves planted by Mr. Gilmartin himself, during his stint as CEO.


"It's Not About You, It's About The Company"

He shared with the class the logic behind his decisions. As regards the Vioxx withdrawal, he said that the decision was fairly simple - it was the right thing to do. Merck's culture always put customer safety as its primary concern. In fact, earlier on in his stint as CEO he reiterated the corporate mantra of taking care of your customers and the profits will follow. And his entire management team all agreed that it was indeed the right thing to do.

On his decision to sustain investments in R&D and lower profit guidance. His explanation was straightforward. R&D is the lifeblood of any pharmaceutical company. Any weakness in this activity may severely compromise the long-term viability of the organization.

In the end, Professor Gilmartin was vindicated. So impressed was the class with his sharing that a number of us huddled and asked him follow up questions. I asked what was in the mind of several of my classmates - "How did you deal with the personal attacks that you received?". His response was not only impressive but very humbling.

"It's not about me, it's about the company"
When pressed further, he offered, " I just have a single minded focus on what I believe to be good for the corporation."

The profoundness of his responses floored all of us. I suppose that's what separates an exceptional leader from the rest of the pack. It radiates an incredible amount of self-awareness to be able to distinguish one persona from another.

Professor Gilmartin, AMP Class 182 salutes you!


The class and Professor Gilmartin in a post-class huddle.