Legal and Ethical Considerations in Marketing, Product Safety, and Intellectual Property

Three Ethical Issues
When looking at PharmaCARE’s relationship with the Colberians, you see that the company’s treatment of the indigenous population is unethical. In terms of intellectual property, the scenario in Assignment 2 highlights the exploitation of the Colberians. While the indigenous population freely shares their information about their cures, the company exploits them by not compensating them for their shared knowledge. According to labor laws, companies should work ethically and treat all of their employees fair -- not equal, but fair. Some employees, based on their position and level of responsibility, should be paid more and should receive better perks than others. However, the company is earning millions of dollars from the knowledge being shared by the healers, and its executives live in luxury with swimming pools, tennis courts, and a golf course, while the Colberians continue to live in huts without electricity or running water. If the company compensated the healers for their intellectual property, the Colberians could improve their living conditions. PharmaCARE is taking advantage of this group of stakeholders because the healers are uneducated, ignorant to intellectual property laws, and do not know the true value of the information they are sharing with PharmaCARE.
According to authors S.C. Jain and R. Bird, the Trade-Related Aspect of Intellectual Property Rights (TRIPS) is considered the most relevant intellectual property treaty, and nations that have signed on must treat foreign intellectual property rights holders the same as domestic ones (2008, p. 7). Yet, PharmaCARE failed to compensate the healers of Africa in the manner required by U.S. laws. Next, let us look at the relationship between the executives and the rank-and-file workers. Under CompCARE, demand and profits soared thanks to AD23, but when Allen informed the Director of Operations of concerns his employees brought to his attention, we see in Assignment 2 that he was told not only to fire the employees who complained, but to also keep his mouth shut about bogus prescriptions. In terms of employee relations, this is ethically wrong. In Tom’s case, labor laws give him the right to inform Allen of poor air quality in the lab without the threat of losing his job. It is Allen’s responsibility to notify the executives, who in turn are responsible for correcting the problem.
In Donna’s case, her illness and absences are caused by chronic bronchial problems associated with poor air quality in the lab, and labor laws give her the right to request worker’s compensation. In Ayesha’s case, although she is a long-serving employee who is said to be a very good worker, she has not been promoted to supervisor and feels she is being denied the promotion because she is a Muslim. She has the right to file an EEOC complaint without fear of retaliation because labor laws do not allow for any form of discrimination. Not only will the EEOC investigation determine if she is being discriminated against, but it could also reveal the necessary actions or training needed by Ayesha to be promoted to the supervisory position. Before any employee is fired, a manager must clearly identify the reason why an employee should be fired and should review company policy on releasing employees to ensure compliance. Not only has Tom failed to do this, but he also failed to issue first and second warnings to the employees. Additionally, the fact that the Director of Operations ordered Tom to fire these workers and keep his mouth shut in order to maintain his employment is also against the law. In a law suit, if an employer forces an employee to participate in breaking the law in order to maintain his job, courts will rule this as a violation of public policy, triggering the tort of wrongful discharge (Halbert, 2012, p 51).
Finally, in terms of regulation of product safety, PharmaCARE threw all ethics out the window by working around a number of safety requirements and putting consumers’ lives at risk. The organization used its reputation as a caring, ethical and well-run company to pull the wool over the eyes of many. After reformulating a diabetes drug to treat those suffering from Alzheimer’s disease, PharmaCARE was required to seek FDA approval for distributing the new drug in mass quantities. Instead, it created a subsidiary that acted as a compounding pharmacy to distribute the drug directly to consumers on a prescription basis. Although pharmacy compounding, a practice where licensed pharmacists reformulate drugs to create a medication more suitable to treat a patient’s individual need, PharmaCARE, through CompCARE, went on to sell the product in bulk to hospitals, clinics, and doctor offices, an action not permitted by pharmacies. Pharmacy compounding, when done properly, meets a vital public health need when a patient is unable to be treated with a medication approved by the U.S. Food and Drug Administration (FDA), but compounding was never intended to provide unapproved treatment to the masses. This is illegal and unethical.
One of the primary roles of the FDA is to regulate prescription drugs to ensure safety of the public, but motivated solely by profit, PharmaCARE took the compound route to avoid the lengthy and costly process of obtaining FDA approval. PharmaCARE then decided to operate business-as-usual after reports revealed that its reformulated drug caused heart attacks with users at disturbing rates. The organization fails to conduct its business with high morals, legal and ethical standards, and compromises safety in an unscrupulous manner. Just like PharmaCARE values profit over its employees, it values profit over safety.
Direct-to-Consumer (DTC) Marketing by Drug Companies
Direct-to-Consumer (DTC) marketing of prescription drugs is banned in all countries except the United States and New Zealand. I have always been against DTC marketing by drug companies, and Assignment 2 only solidified my negative opinion of this practice. Although DTC has created a generation of consumers who appear to be more aware of the medications available to them, it has also created consumers who attempt to self-diagnose their medical conditions. With DTC, drug companies use advertisements to sell their products directly to desperate consumers by persuading patients to ask their doctors for expensive brand-name drugs sold by these companies.
I believe DTC marketing is biased, and I base this on the fact that the materials do not tell the whole story about the medication being advertised, but instead plays on the emotions of the consumer. Physicians attempt to promote healthy behaviors, screen for early stages of illnesses, and treat patients based on their individual needs, but DTC ads undermine those efforts, and like PharmaCARE, most drug companies are only concerned about profits. In addition to them encouraging consumers to ask for brand-name drugs, they are exploiting patients by convincing them to ask for drugs that may not meet their need.
In all, both the drug companies and consumers are overlooking the fact that any type of medication can be fatal if administered incorrectly. Therefore, medications should only be prescribed to patients by a physician after a thorough evaluation and should not be prescribed based on a marketing and advertisement campaign.
Regulating Compounding Pharmacies
Unlike prescription medications that fall under federal law and are subject to FDA approval, compounding pharmacies are licensed and regulated by state boards. Compounding pharmacies operate under the national guidelines established by the Pharmacy Compounding Accreditation Board, but accreditation is not mandatory and inspections are only performed every three years.
The FDA cannot regulate compounding pharmacies because, when they operate under the national guidelines established for them, they do not manufacture new drugs. In the 2002 Supreme Court decision of Thompson V. Western States Medical Center (535 U.S. 357, 2002), the ruling included a statute that exempted compounding pharmacies from FDA’s oversight for this reason (Thompson, 2009). In the case of PharmaCARE and CompCARE, the company did not reformulate a drug strictly to meet the individual needs of patients, but reformulated a drug and sold it to the masses without clinical trials that would have been required to obtain FDA approval. CompCARE was created solely as a front for PharmaCARE, a manufacturer of drugs, and the bogus list of patients’ names provided to CompCARE by doctors was used to cover up PharmaCARE’s and CompCARE’s unethical practices. The FDA should have shut down CompCARE, and severely fined PharmaCARE for manufacturing a drug under the false pretense of compounding and halted the production of Alzheimer’s drug AD23. Since some compounding pharmacies are acting like drug manufacturers, FDA oversight is needed. Currently, these pharmacies are regulated by weak guidelines that were developed for pharmacies that reformulate custom prescriptions for individual patients, but now that they act like small drug companies by distributing large volumes of drugs to the masses, more FDA authority is needed.
Utilitarianism
Utilitarian’s believe that an action is ethical if the consequences of the action benefit the most affected party. For example, if a person steals from the rich to give to the poor, utilitarians feel this is ethically the right thing to do. Based on the PharmaCARE scenario, utilitarians would not consider the company’s use Colberian intellectual property as ethical because the act does not help the Colberians. PharmaCARE is exploiting the poor living conditions in Colberia for their personal gain. Healers in Colberia freely share information about indigenous cures and do not benefit from PharmaCARE’s record profits. Although it is clear that most of them are free to share information about the indigenous cures, the company is expected to reciprocate by paying them for their intellectual property and by paying the indigenous workers appropriate wages. As stated earlier, it is obvious that PharmaCARE takes advantage of the healers in Colberia because of their ignorance and because they do not understand the value of the information they are giving to the company. Deontology Deontologians take an ethical position that judges the morality of an action based on the action’s adherence to an existing rule. What makes a choice ethically right is its conformity to the law. Deontologians would not consider PharmaCARE’s use of Colberian intellectual property as ethical because laws do not allow one party to take advantage of the ignorance of the other party. Virtue Ethics Virtue ethics are more concerned about the actor rather than the nature of the action. They consider the role and character of the actor rather than the action itself. According to virtue ethics, it is apparent that Colberians are willing to freely share information. This means that they accept whatever comes. Virtue ethics may consider PharmaCARE’s use of Colberian intellectual property as ethical. Ethics of Care Ethics of care, on the other hand, aims at ensuring that both parties involved benefit from a given action. Ethics of care would consider PharmaCARE’s use of Colberian intellectual property as unethical because the Colberians do not benefit from the exchange of information. Your Own Moral/Ethical Compass Based on my personal moral/ethical compass, PharmaCARE’s use of Colberian intellectual property is ethically wrong because the company failed to compensate the Colberians based on the value of the information they received. If covered by the intellectual property laws in the U.S., the Colberian healers could be living like the executives of PharmaCARE because exclusive rights allow owners of intellectual property to benefit from their property through financial incentives, investments, and patents. I believe PharmaCARE’s use of Colberian intellectual property is unethical and self-serving. How PharmaCARE uses U.S. law to protect its own intellectual property On the surface, PharmaCARE appears to follow U.S. laws, but in actuality, it breaks U.S. laws. The company uses deception to earn record-breaking profits. For example, the company gave the appearance that it cares about environmental issues by implementing an environmental campaign, while at the same time, its lobbyists were fighting against environmental laws and regulations. In a similar fashion, the company offered free and discounted drugs to low- income consumers, while only paying the indigenous workers $1.00 a day and not compensating the healers for their intellectual property. PharmaCARE uses the positive appearance of following U.S. laws as an attempt to cover up its law-breaking acts. Three ways the company could compensate the people and nation of Colberia One way PharmaCARE can compensate the people and nation of Colberia for the use of its intellectual property and the damage to its environment is to increase the salaries of the workers. With a fair salary, the workers can acquire the three basic human needs of food/water, shelter and clothing. This also gives PharmaCARE the opportunity to teach the workers the value of money. Another way PharmaCARE can compensate the people of Colberia is to regularly pay the healers a percentage of the profits the company earns. PharmaCARE is well aware of the living conditions affecting the healers, but is not willing to compensate or help them. Yet, the healers are the backbone of the company. Lastly, PharmaCARE can lead the way in the development of the African nation, and to begin this effort, PharmaCARE must first stop its actions that are destroying the habitat and endangered species of Colberia. The company’s actions in Colberia are no different than companies in the U.S. who feel it is acceptable to locate landfills near the homes of low income communities. Just like these companies, PharmaCARE does not value the lives of those affected by its actions that are killing the environment, and in turn, will kill the people who depend on that environment for survival. Comparing PharmaCARE to Wal-Mart Wal-Mart is committed to providing unbeatable prices, quality products, and easy shopping for its customers – all this with a smile. According to its corporate communications, Wal-Mart’s reason for being is to save people money so they can live better. Like PharmaCARE, the company portrays an outward image of caring, but employees tell a different story. In 2008, Wal-Mart paid nearly $640 million to settle 63 lawsuits filed against the company in 42 states for cheating hourly workers by forcing them to work through breaks and not paying them for overtime. This came only months after the company agreed to settle a $54.3 million wage and hour class action lawsuit in Minnesota where the judge found Wal-Mart guilty of violating wage and hour laws more than 2 million times. In the Minnesota case, Wal-Mart failed to pay employees according to the requirements of federal labor laws. Some of those instances included hourly employees who were required to work off-the-clock during training sessions and were denied full rest and meal breaks. Around the county, Wal-Mart employees report having their overtime reported the following week to avoid being paid overtime, being forced to work off-the-clock before and after their scheduled shift, having to eat lunch while working, and in some cases, working without a lunch or rest break. In recent years, Wal-Mart has increased its presence overseas, and many point to its decline in U.S. sales as the reason for the expansion, but well-operated companies know they cannot expect employees to provide great customer service, with a smile, if employees are being mistreated. So whether Wal-Mart is in Europe, Asia, South America, or Africa, if it mistreats its employees by cheating them of pay, they can expect to see sales decline in those markets as well. Determining PharmaCARE’s and WellCo’s Success PharmaCARE and WellCo shareholders would have little ground to stand on if employees file a suit against the company for not maintaining the air quality according to OSHA standards. The companies and shareholders would be held liable because the employees brought the situation to their attention in an attempt to have the problem solved before their illness progressed and before filing the suit. If the Colberians file a law suit against the company because they were not compensated for intellectual property rights, the companies and shareholders will have an upper hand because the healers freely provided the information. Does PharmaCARE live up to its brand? Brand refers not just to the name of a company, but more so to the way we think of that company, and organizations manage their brands carefully to maximize shareholder value. While the company offers free and discounted drugs to low-income consumer and sponsors educational programs and scholarships, its employees work in an unhealthy environment that causes illnesses and absences, and employees are overlooked for promotions. While the company pledges to protect the environment through recycling and green initiatives, it lobbies against environmental laws and regulations, and destroys the habitat in Colberia. A caring, ethical and well-run company that produces high-quality products that saves lives would compensate the healers for their intellectual property rights and would appropriately pay the indigenous workers; would have taken the legal route to get AD23 safely on the market; and would not break the law to mass produce and distribute an untested product, putting the lives of so many in danger. As if that was not enough, PharmaCARE did not live up to its brand when it chose to ignore reports of consumers experiencing heart attacks as a result of taking AD23. Changes PharmaCARE should make One change PharmaCARE can make to be more ethical going forward is to adhere to all existing laws.To ensure compliance of all laws, PharmaCARE should set formal policy and regulations, expectations, values and norms, and offer incentives to guide the behaviors of all employees. This includes implementing a strong whistleblower policy that encourages employees to report fraud and wrongdoing, and receiving protection provided by the Sarbanes-Oxley act. Another change PharmaCARE can make is to pay the indigenous workers of Colberia a fair salary and compensate the healers for their intellectual property. Without this change, PharmaCARE is sending the message that the people of Colberia are not part of the team, but are only commodities to be used up and discarded. Lastly, PharmaCARE can improve employee relations between rank-and-file workers and executives. This is needed to establish and maintain a healthy employer-employee relationship. Without a good relationship, employees are unlikely to buy into the organization’s strategic plan.

References
Halbert, T., & Ingulli, E. (2012). Law and Ethics in the Business Environment (7th ed.). Mason, OH: Cengage.
Jain, S. C., & Bird, R. (2008). The Global Challenge of Intellectual Property Rights. Cheltenham, UK: Edward Elgar.
Thompson, Secretary of Health and Human Services, et al. v. Western States Medical Center et al.: certiorari to the United States court of appeals for the ninth circuit. (2009). Supreme Court Cases: The Twenty-first Century (2000 - Present). (Retrieved June 7, 2014, from EBSCOhost)