RUNNING HEAD: PHARMACARE CASE STUDY

PHARMACARE CASE STUDY NAME: INSTITUTION: COURSE: PROFESSOR: DATE:

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Ethical issues pertaining to marketing, regulation of product safety and intellectual property. There are many ethical issues that arise during the marketing and advertising of a product by manufacturers. Some manufacturers use selective marketing to discourage demand from the so called undesirable market sectors or to alienate them altogether. Such markets include the gay and ethnic minority groups. Most advertisers also fail to tell the whole truth about their products (Majtn, 2008). In the case of pharmaceutical companies, they often do not advertise the sided effects of their new drugs. A good example is the case of PharmaCARE who did not publicize the side effects of their new drug. When pharmaceutical companies formulate a new drug, the law requires them to perform extensive tests on the drug to ensure its safety for consumer use. If they want to avoid FDA scrutiny, they usually form compounding pharmacies that receive far less attention from the state agencies. It is ethical to compensate the owners of intellectual property to encourage them to continue their inventiveness (Menell, 2007). However, one can use intellectual property without paying if the owner is unaware of their intellectual property rights. It is also unethical to use intellectual property given for free to make a profit. Direct to consumer marketing. Direct to consumer drug marketing is a marketing strategy employed by pharmaceutical companies to promote their prescription products directly to consumers. The FDA regulates DCTM but, most people feel that the laws are too lax. Ken Johnson, the senior vice-president of PhRMA, claims that it informs potentially infected patients of treatment options. However, critics such as Dr. Dee Mangin claim that direct to consumer marketing is used to drive choice rather than to inform it. Over the years, there have been calls for the banning of direct to consumer marketing but the right of a manufacturer to market its products limits possible FDA

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actions. Restriction of commercial advertisements violates the First Amendment protections of freedom of speech (Schuchman, 2007). I personally believe that DTC marketing should be banned for the following reasons. 1. It misinforms patients by omitting important information, namely, the side effects of the advertised product (Almasi et al, 2006) (Frosch, 2007). In most cases, DTCPA suggests that health improvement comes from the use of medication and not lifestyle modification. Most patients also do not have the necessary expertise to assess detailed medical data even if it is available. 2. The advertisements of this to overemphasize the drug benefits over risks (Frosch DL, Grande D, Tarn DM & Kravitz RL., 2010). During the presentation of risk information, advertisements usually do not sync between the verbal and visual messages presented. 3. The direct to consumer marketing approach promotes new drugs before the manufacturers fully analyze their safety profiles. It is common for new drugs to be associated with severe side effects after they have been in the market for a while. 4. Past data shows that manufacturers may use these advertisements to promote copycat drugs that have no increased advantage over older medication. This increases costs to the consumer since these new drugs usually retail at a higher price than the older ones. They also increase health care costs because of increased visits to healthcare physicians prompted by the advertisements resulting in a loss of time and money. 5. It stresses the relationship between consumers and health care providers. The adverts play a role in reducing the patients trust in their physicians clinical decisions. The patients may challenge the healthcare providers decisions using a piece of evidence obtained from an advertisement (Delbaere M, Smith MC, 2006).

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Who regulates compounding pharmacies? The state boards of pharmacy usually regulate the compounding by pharmacies but, the federal government also plays a role. The support for federal involvement arises from the assumption that they would prevent occurrences of consumer threatening incidents in a way that oversight agencies could not. The Food and Drug Administration Modernization Act was enacted on November 21, 1997. It revised the Federal Food, Drug, and Cosmetic Act in relation to the control of food and biological merchandises. FDAMA exempted individualized compounded drug products from the rigid federal current goods-manufacturing practices. Under federal law, drugs not manufactured in conformity with federal current goods-manufacturing practices become "adulterated" and subject to governmental sanction. Under FDAMA, this sanction is not applicable to a pharmaceutical product compounded by a licensed pharmacist who has a license and is fulfilling a prescription order for an individual patient -- or in limited quantities before receipt of the valid prescription order. Federal law also prohibits compounding of drugs previously withdrawn from the market because they, or 1 or more components, are unsafe or not effective. The law also prohibits compounding drug products that are reproductions of a commercially available pharmaceutical product. For such a high profile drug, the FDA should have tested it extensively to determine its advantages and disadvantages. Despite the active federal role in regulating compounding pharmacies, there are calls or increased federal regulation. The FDA should take a more active role in the regulation of pharmaceutical and compounding pharmacies to prevent such cases of consumer deception. According to utilitarianism, authors and inventors of creative works should receive compensation for their efforts to encourage their continued inventing. This applies as long as the intellectual property in question adds more happiness compared to the harm caused to the

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society. If an intellectual property right would limit public happiness too severely, it should be abolished. In PharmaCAREs case, the Corbelians have the knowledge about how to make indigenous cures. PharmaCARE operated unethically since they obtained the information for free and used it to make supernormal profits. Deontology judges whether an action is ethical based on whether the action is necessary, prohibited or permitted by a moral rule (Alexander, 2012). Taking into account that PharmaCARE is a US based corporation located in New Jersey, they should conform to the US constitution regarding the usage and compensation of intellectual property. They, therefore, acted unethically since they offered no compensation to the Corbelians. The ethics of care theory stipulated that all individuals are interdependent on each other (Held, 2006). It follows that we should consider others when making decisions and those vulnerable to these decisions deserve extra consideration. It talks of interdependence and maintaining an association that is beneficial to everyone involved. Therefore, Ethic of Care states that when dealing with a community that is vulnerable to your decision, due care should be taken when making these decisions to ensure that everyone benefits (Holmes, 2010). In the context of this theory, PharmaCARE was unethical in their actions since they orchestrated massive environmental damage to the Corbelian environment without offering any compensation. Their decisions were inconsiderate of the Corbelian people who were not in a position to sue for the environmental damage done. Virtue ethics emphasizes the virtues, or moral character in evaluating moral behavior (Cafaro, 2010). PharmaCAREs actions were malevolent since they intended to make profits from the information given by the Corbelians without proper compensation. Using my own ethical compass, I consider PharmaCAREs actions to be highly unethical. They were only interested in maximizing profits regardless of the damage

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done. They used the Corbelian resources, namely the intellectual knowledge of how to make indigenous cures and environmental resources, without giving the Corbelians any compensation. The U.S. intellectual property law comes from federal patent, trademark and copyright laws and state trade secret laws. It states that the authors of creative works or inventors should have a patent or copyright claim to the product for a particular duration. This prevents copying of the product and encourages the creator to continue inventing. PharmaCARE patented its revolutionary drug AD23 to gain a competitive edge over its rivals and maintain a monopoly on the drug. This patenting shows that they were aware of the intellectual property rights stated in the constitution yet chose not to follow them when dealing with the Corbelians. From the background information above, it is clear that PharmaCARE took the Corbelian native knowledge about indigenous cures and used it to make a profit. According to the U.S. federal law, they should have given some form of compensation to the owners of the intellectual property (Menell, 2007). They could have paid the Corbelian healers in monetary terms by giving them a percentage of the profits earned from the use of the information. They should also initiate an environmental campaign to restore the Corbelian environment which would safeguard the interests of future generations of Corbelians. They could have also improved the living conditions of their Corbelian workers who lived in primitive huts with no electricity or running water. PharmaCAREs actions in skirting legal technicalities are comparable to those of Merck & Co, the manufacturers of a drug known as Vioxx. Merck marketed as the choice drug in treating acute pain conditions such as arthritis and dysmenorrhea from 1999 to 2004 (Horton, 2004). In their rush to make profits, Merck & Co. used the direct to consumer advertising

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method to market without the full safety profile of the drug. They also withheld the information about potential side effects of the drug. Merck withdrew VIOXX from the market on September 30th 2004 after increasing evidence that it increased risk of heart attacks (Horton, 2004). Merck had made $2.5 billion from the sales of Vioxx in the previous year. After withdrawal of the drug, Merck faced numerous lawsuits from consumers which cost the manufacturer more than $5.8 billion in settlements. It also faced lawsuits from government regulators for making false statements about its cardiovascular safety (Horton, 2004). Its share price plummeted from $45.07 a share on September 30 to $33 the next day and plunged 40% in the following weeks. This withdrawal also caused a loss of consumer confidence in the company and the product pipeline (Horton 2004). The main responsibility of any company is to enhance shareholder value. Taking into account the case of Vioxx above, the shareholders could sue PharmaCARE over whether it provided enough information about the drugs risks before withdrawal from the market (Thomas, 2012). The Supreme Court allows class action securities lawsuits by shareholders who have lost their value due to poor management decisions. For a high chance of success, they would have to do so within the two year period for shareholder suits granted under federal law (Thomas, 2012). However, previous cases against Merck & Co and other pharmaceutical companies suggest that they might also lose. PharmaCAREs brand, We CARE about YOUR health is ironical in hindsight. Their activities seem to be geared towards profit maximization at all costs. For example, they destroyed the Corbelian environment extensively yet the Corbelians shared their indigenous knowledge about cures for free. They also paid them substandard wages to do manual labor that involved travelling long distances and carrying heavy loads for a dollar a day. Their actions with

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their American employees also dispute their brand. They were working in unhealthy conditions contrary to federal law, which states that employers should provide a safe working environment for their employees that is free from any known hazards. The processing facility for AD23 had mold in the air vents which caused severe health complications among the employees. The management was aware of this health hazard but chose to ignore it and even threatened to fire Allen if he complained to OSHA. PharmaCARE released its revolutionary new drug AD23 for public use even though its side effects were not fully known. It did this by creating a wholly owned compounding pharmacy to avoid FDA scrutiny. This ensured that the drug would reach the market faster. The reason for this is that state agencies regulate compounding pharmacies, and they do not have the necessary level, of jurisdiction and resources to test every new drug before it goes to the market. All these unethical decisions and actions refute PharmaCAREs claim, We CARE about YOUR health. The significant change would have to be changing the corporate governance. They were responsible for the poor decisions that eventually led to the collapse of PharmaCARE. They were greedy and sought to maximize profits regardless of the externalities. Great managers increase the shareholder value while still considering the social costs incurred by their decisions. Internal committees to address potential safety issues with its products should be established. The members of these committees should be independent of the management to ensure their impartiality. In the future, they should register clinical trials with the government and avoid skirting legal technicalities in the pursuit of profits. These trials would ensure that the drugs that finally got to the market were safe for human use to prevent another fallout such as the one caused by AD23. The background information does not provide evidence of a chief medical officer within the corporation. They should fill this position with a highly qualified professional

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who has extensive experience in the medical industry to assess the viability of new drugs before dispatching the drugs for consumer use. Finally, they should amend their code of conduct to restore the trust between the management and the shareholders and consumers. As such, all people acting on behalf of PharmaCARE would perform their activities in an ethical way and in accordance with laws and regulations set by the company and the government.

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Works cited: Alexander, Larry and Moore, Michael, "Deontological Ethics", The Stanford Encyclopedia of Philosophy (Winter 2012 Edition), Edward N. Zalta (ed.), URL = <http://plato. Stanford.edu/archives/win2012/entries/ethics-deontological/>. Cafaro, Philip and Ronald D. Sandler (eds.), 2010, Virtue Ethics and the Environment, Dordrecht; New York: Springer. Held, V. (2006). The ethics of care: Personal, political, and global. Oxford University Press. Holmes, A. (2012). The ethics of care. The New Zealand Medical Journal, 125(1350), 105. Horton, R. (2004). Vioxx, the implosion of Merck, and aftershocks at the FDA. The Lancet, 364(9450), 1995-1996. Ludwig, J. (2010). Merck & Co. v. Reynolds: Sarbanes-Oxley's Perplexing Statute of Limitations. Loy. LAL Rev., 44, 1133. Majtn, ., & Dubcov, G. (2008). The Ethics in the Product Marketing. Ekonomika a Management, 2008(2). Menell, P. S., & Scotchmer, S. (2007). Intellectual property law. Handbook of Law and Economics, 2, 1473-1570. Thomas, R., & Thompson, R. (2012). A Theory of Representative Shareholder Suits and its Application to Multi-Jurisdictional Litigation. Northwestern University Law Review, Forthcoming, 12-7.

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Zanglein, J., & Lenihan, M. (2009). Is a Showing of Intent to Deceive Necessary to Trigger the Statute of Limitations in Securities Fraud Suits. Preview US Sup. Ct. Cas., 37, 145.