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

Assignment Instructions

You are a new associate at the law firm of Dewey, Chetum, and Howe. John, a former researcher at PharmaCARE, comes to your office. He has concerns about PharmaCARE’s use of AD23, one of the company’s top-selling diabetes drugs. Two (2) years ago, after PharmaCARE’s research indicated that AD23 might also slow the progression of Alzheimer’s disease, John and his team of pharmacists began reformulating the drug to maximize that effect. In order to avoid the Food and Drug Administration’s (FDA) scrutiny, PharmaCARE established a wholly-owned subsidiary, CompCARE, to operate as a compounding pharmacy to sell the new formulation to individuals on a prescription basis. CompCARE established itself in a suburban office park near its parent’s headquarters. To conserve money and time, CompCARE did a quick, low-cost renovation.

CompCARE benefited from PharmaCARE’s reputation, databases, networks, and sales and marketing expertise, and within six (6) months had the medical community buzzing about AD23. Demand soared, particularly among Medicare, Medicaid, and Veterans Affairs patients. Seeing the opportunity to realize even more profit, CompCARE began advertising AD23 directly to consumers and marketing the drug directly to hospitals, clinics, and physician offices, even though compounding pharmacies are not permitted to sell drugs in bulk for general use. To circumvent this technicality, CompCARE encouraged doctors to fax lists of fictitious patient names to CompCARE. PharmaCARE sold CompCARE to WellCo, a large drugstore chain, just weeks before AD23 was publicly linked to over 200 cardiac deaths.

As CompCARE and its new parent company enjoyed record profits and PharmaCARE’s stock price approached $300 per share, reports started surfacing that people who received AD23 seemed to be suffering heart attacks at an alarming rate. The company ignored this data and continued filling large orders and paying huge bonuses to all the executives and managers, including John, whose wife recently died from a heart attack after using AD23.

John has come to you with an internal company memo describing the potential problems with AD23, and information describing the company’s willingness “roll the dice” and continue to market the drug.

Your senior partner has asked you to write a memo outlining the following issues for review by the senior partners.

In preparation for this assignment, use the Internet or Strayer Library to research examples of intellectual property theft that occurred within the past two (2) years.

Write an eight to ten (8-10) page paper in which you:

  1. Research three to five (3-5) ethical issues relating to marketing and advertising, intellectual property, and regulation of product safety and examine whether PharmaCARE violated any of the issues in question.
  2. Argue for or against Direct-to-Consumer (DTC) marketing by drug companies. Provide support for your response.
  3. Determine the parties responsible for regulating compounding pharmacies under the current regulatory scheme, the actions that either these parties or the FDA could / should have taken in this scenario, and whether PharmaCARE could face legal exposure surrounding its practices. Support your response.
  4. Analyze the manner in which PharmaCARE used U.S. law to protect its own intellectual property and if John has any claim to being the true “inventor” of AD23. Suggest at least three (3) ways the company could compensate John for the use of his intellectual property.
  5. Summarize at least one (1) current example (within the past two [2] years) of intellectual property theft, and examine the effect on that company’s brand.
  6. Analyze the potential issue surrounding the death of John’s wife and other potential litigants against PharmaCARE as a result of AD23.
  7. Specify both the major arguments that John can make to claim that he is a whistleblower and the type of protections that he should be afforded. Justify your response.
  8. Use at least three (3) quality resources in this assignment. Note: Wikipedia is not an acceptable reference and proprietary Websites do not qualify as academic resources.

The specific course learning outcomes associated with this assignment are:

  • Analyze and assess legal and ethical restraints on marketing and advertising, relative to both consumers and organizations.
  • Analyze and evaluate laws and regulations relative to product safety and liability.
  • Explore copyright laws and intellectual property rights and assess how well they balance competing interests.
  • Use technology and information resources to research issues in law, ethics, and corporate governance.
  • Write clearly and concisely about law, ethics, and corporate governance using proper writing mechanics.

Legal and Ethical Considerations in Marketing, Product Safety, and Intellectual Property – PharmaCARE’s use of AD23 Scenario

Ethical issues

Ethical practices are deliberate actions that uphold the standards of fair-mindedness, concepts of good and bad morals in an organizations effort to move their goods and services.

In applied ethics, issues of marketing and advertising ethics focus on the regulatory and operational matters that go against moral codes put in place by the industry(Fitzpatrick & Bronstein, 2006). Appropriate marketing and advertising can be defined as that which seeks to adequately meet the consumers need while simultaneously working to develop a long-standing affiliation with them. It has been seen in practice that goals are easily met and more profits generated when a company shows a genuine sense of care for their clientele. This concern for one’s customers is then the ethical thing to do.

Read also Why Intellectual Property (IP) Management Is a Vital Part of a Company’s Business Management

There however, arise many ethical issues in many marketing and advertising strategies such as unethical exclusion while selecting a marketing audience and the issues of dishonesty and half-truths in advertising. There is nothing wrong with a company making exclusions of potential customers in their target market(Murphy, Laczniak, & Prothero, 2012). From time immemorial, there has been numerous instances of companies deliberately discouraging unwanted demand from unwelcome market segments; a practice know as selective marketing. There is however a line that mustn’t be crossed, such as; selecting a market audience on the lines weight, ethnicity, age or sexuality. It is unethical when a marketing campaign promotes an unacceptable attitude against people who are obese because they do not possess body shapes considered to be ‘ideal’ by the fashion industry. The fact that children seem to thoroughly enjoy ‘junk food’ and consume it in copious amounts should not be grounds for an organization to excessively market unhealthy foods to this vulnerable group. Just because an individual is old does not necessarily mean they have loads of money to be invested in timeshares or other scams, fraudulent marketing of con programs that leads people to lose their money is without a doubt unethical.

Read also A Labor Markets Moral/ Ethical Hazard That An Organization Might Face

Truth and honesty in the advertising and promotion world is a hotly debated subject especially with ‘puffery’; exaggerated sales statements considered to be subjective, being legal. In the quest to promote ones brand presence, many businesses have been forced to use flattery and falsified information for promotional purposes. This internet era has in one way or another made it possible for falsified “facts” to travel fast and wide. Organizations have been known to post comments and encourage product reviews that are untrue in order to create a following and help move their products thus manipulating buyers into purchasing items that will not match their expectations(Fitzpatrick & Bronstein, 2006). It makes no economic sense in the long-run to cheat your way into gaining a share of the market that is unsustainable a situational that is also guaranteed to ruin your credibility. The most common ways that companies have been known to peddle lies about their products can be broadly categorized into three groups: lies of omission; lies of influence and lies of commission. Deceit on the lines of mission majors on the benefits of a product with little or no mention of the disadvantages. Lies of commission are obvious untruths which might be uncommon because they easily attract lawsuits. Lies of influence; focus on painting the truth as being unfavorable to the consumer of the product.

Intellectual property cover copyrights, patents and trademarks. The use of intellectual property rights without express authority from the owner constitutes the infringement of those intellectual property rights.  When an individual uses or sells; without the owner’s permission, an invention that is patented, it is referred to as Patent infringement. Copyright infringement is otherwise known as ‘piracy’ and occurs when one distributes or reproduces without the holder’s permission, their work(Alfino, 1991). When an individual makes use of a product or service trademark that remarkably resembles another one’s, it is referred to as trademark infringement.

On the sensitive matter of regulation of product safety the issue of disclosure raises ethical questions especially when a product’s seller refuses to disclose risky information about their product so not to affect sales or profits(Alfino, 1991). A company has a responsibility and is expected to inform their clientele of any information considered crucial to the decision-making process that clientele, without misinforming, coercing and taking advantage of their lack of knowledge or their emotions. The buyer of the product; in full disclosure of the risks he is being exposed to, gives consent to the company selling the product.

Direct-to-Consumer Marketing

Direct-to-Consumer marketing has key benefits to a drug company but the disadvantages of this marketing strategy to consumers have over time come to outweigh the equation by raising the overall costs of health care(Stange, 2007). In most instances a patient who has fallen under the influence of a drug advertisement will tend to seek out the drug; which is often excessively priced, overlooking cheaper alternatives and even disregarding their doctor’s recommendations. The patient therefore ends up incurring massive expenses to purchase a brand-name for a drug that is not necessarily best suited for their symptoms.

A new drug straight out of the laboratories becomes a health hazard to the consumers since its effectiveness and side-effects despite being tested have probably not been given enough time in the general population to pick out any anomalies before mass distribution is exercised. Before a drug is introduced to the patients, it helps to allow for a period of time for the doctors in the concerned health field to get acquainted with its usage and prescription.

There are many places in the world where this kind of marketing is completely prohibited by their regulatory bodies; due to the risk involved, but for places where it is allowable, a total ban on this kind of marketing is seen as counterproductive(Tyler, 2013). In the U.S for example, companies are made to comply witha mandatory waiting period of about two-years between drug launch and massive direct-to-consumer marketing. This is in an effort to balance reduced risk exposure to the consumerand a company’s profitability.

A ban on DTC marketing will help bring down the high cost of prescription drugs and improve health care access for the greater population while maintaining the relevance of publicly provided services in the health sector(FDA, 2013).  Such a ban will protect the consumers from misinformation that tends to bring irreversible health risks due to the swift and extensive exposure before the potential risk factors are known in full. Advocating for this ban will prevent the widespread medicalization of an otherwise normal life; people will move from away from using long-standing drugs for mild conditions that could have been well-managed by a change of diet and lifestyle.

Regulator of Compounding Pharmacies

When the concept of compounding for pharmacies first came about, itwas intended for making a drug on request from a physician to suita particular patient in case the recommended drug was unavailable or an inactive ingredient was to be removed to cater for the patient’s allergy(David & PL, 2013).  These compounding pharmacies have however evolved into miniature manufactures a situation that calls for intensified regulations to ensure they stay in line with their responsibilities and that they do not encroach into tasks that they do not qualify for. Due to these indistinct lines that define responsibility and the overlapping of mandate among the players, government regulators, lawyers in the industry and other relevant participants in the industry have in the recent past put pressure on Congress to spell out which body or bodies has the authority to police this practice.

The U.S Food and Drugs Authority was seen in the past few years,to fight for the authority to oversee compounding processes by pharmaceuticals but their mandate as of now has been limited to overseeing and regulating all commercial drug manufacturers. The states on the other hand have been appointed as the oversight body for pharmacies; be they specialty pharmacies, large chains or in-store pharmacy counters(FDA, 2013).

Every state is now required to develop regulations and laws that address, outline and guide pre-requisites and the operating standards for pharmacies. They are also to deal with the issues of licensing facilities, their employees and qualified pharmacists. Besides the above, the state’s mandate also extends over the issues of authenticity, safety procedures, sterility, protected storage, expiration and labeling. In particular, states have the categorical right and authority to grant approval for mixing medicinal ingredients; under the recommendations of a physician,  into a product that is ready for use by a patient; otherwise known as pharmaceutical compounding. All these regulations by the states are expected to be periodically updated according to their independent Boards of Pharmacy.

The FDA

In reaction to its now limited authority over compounders and compounding pharmacies, the U.S Food and Drugs Authority should have sort to work together with the state towards a better streamlined and regulated environment for compounding; a concept they are cottoning onto and fast(FDA, 2013). This collaboration would mean that drugs produced by the compounding pharmacies would have to be on a doctor’s prescription, limited in quantity and should only be made out of ingredients that are approved by FDA.

Read also FDA Modernization Act of 1997 – Future Regulatory Improvements

In light of the Meningitis outbreak of 2012, the question of whether the FDA should be awarded more power over the compounding pharmacies becomes even more relevant. It paints the picture that a robust centralized authority is needed and is best suited to regulate large-scale compounding pharmacies(David & PL, 2013). This would make sure that production and marketing drug of drugs is verified by a single entity ensuring that only safe and effective drugs meet the consumer. The FDA should be granted more authority over compounding pharmacies but within a framework in which this authority is shared evenhandedly between the state and FDA.

Ethical issues in PharmaCARE’s use of Colberian intellectual property

Utilitarianism theory places the locus of good and evil solely on the results (consequences) of choosing one policy/action over other policies/actions. As such, it advocates for a move beyond one’s own interests tothe point of including and taking into account the interests of others(Abela & Murphy, 2007). In this case PharmaCARE’s use of Colberian intellectual property would be considered unethical in that its venture enjoyed large profits at the expense of suffering and dying consumers. PharmaCARE ignored genuine calls that the drug directly caused what was perceived to be an airborne mold infection that triggered chronic bronchial diseases to its own employees by issuing orders that the complains be kept secret. By and large the drug was linked to over 200 cardiac deaths at the height of PharmaCARE’s profits.

Read also Intellectual Property Theft and Related Jurisdictional Issues

Deontological theory is the ethical doctrine which embraces the notion that, the significance of an action is determined as by its conformity to some mandatory obligation rather than by its results(Alexander & Moore, 2012). PharmaCARE’s use of Colberian intellectual property was unethical having launched a new initiative, We CARE about YOUR world®, pledging its commitment to the environment among other green initiatives. It failed to uphold its commitment by neglecting the environment while exploiting Colberia’s herbal resources and inadequately compensating the ‘healers’ of Colberia paying them a dollar a day.

Virtue ethics lays emphasis on the role of personality and virtue in moral philosophy as opposed to either carrying out one’s obligation or acting in order to lead to good consequences; simply it looks at the ethical character of the one carrying out an action(Larmer, 1996). Based on PharmaCARE’s policies, good reputation, excellent management and high quality products, PharmaCARE was unethical in riding on the public’s trust to produce a substandard product that was linked to over 200 cardiac deaths since its entry in the market. Further, PharmaCARE failed to look after its team of manufacturing specialist, clients, the environment and Colberia’s intellectual property, putting its focus on the growth of the share worth and large profits.

Ethics of Care is a theory that highlights the interdependence of all individuals taking into account the fact that certain populations and people are more vulnerable than others. And that you (as the non-vulnerable inhabitants) should afford extra consideration to the vulnerable community depending on how they are affected by your choices(Mattes, 2010). It also emphasizes that there is no common truth; it considers the contextual facts of a moral situation to promote the specific needs and interests of the vulnerable communities. Hence, Ethics of Care asserts that by interacting with a population that is considered vulnerable, you should uphold a relationship of mutual opportunities and benefits, while bearing in mind the implications of your decisions and if they have the potential to be detrimental to the community. PharmaCARE therefore, is unethical in exploiting and undercompensating its vulnerable Colberian population and habitat.

According to my own ethical compass, PharmaCARE’s use of Colberian intellectual property is in all normative theorems and philosophies unethical. PharmaCARE a world’s most successful pharmaceutical companies, has over the years been known of upholding ethics of care by offering free and discounted drugs to low-income consumers but failed immensely by not offering to raise Colberia’s living standards. PharmaCARE also failed to uphold its fair managerial obligation by ill-treating its specialists, neglecting their working environment and issuing directives to fire its complaining staff members.

Compensation for Colberia

The Comprehensive Environmental Response Compensation and Recovery Act (CERCLA)give an outline of the procedures and processes on compensation for natural resource injury. For as long as the claim is made within the first three years since the losses were discovered(Dower & Scodari, 1987). PharmaCARE in its commitment to keeping the environment healthy should follow the procedures provided by CERCLA to compensate Colberia for the damage caused on their habitat.

PharmaCARE should first and foremost compensate the Colberian workers for medical care and for the days they missed work from injuries sustained at work. They should then work out a plan to pay for overtime and re-evaluate their wages against the country’s minimum wage policies and employ best practices in remunerating their employees(Mattes, 2010). With regards to patent infringement, PharmaCARE should endeavor to remedy the situation by offering monetary for damages for actual damages according to the market value of the patented innovations(Alfino, 1991).

GlaxoSmithKline and its Cidra facility

In the years preceding 2009, GlaxoSmithKline owned and run a manufacturing plant in Cidra, Puerto Rico. This plant was used to manufacture among other others, diabetes (Avandia & Avandamet) and Antidepressant (Paxil & Paxil CR) medication which at the time featured in the top 50 selling drug products(Armstrong & Francis, 2009). After a warning letter by FDA over not meeting certain production requirements, GSK sent their quality control manager in July 2002 to investigate the allegations and report back(McBain & Balassone). While there, she was able to pick out numerous breaches which she duly informed the executives of. The matter, however, culminated in the firing of the quality control manager whose report was swept and the carpet. This set-up fits very well with PharmaCARE’s woes in its facility in Colberia.

It was not until 2009 that GSK; in a lawsuit initiated by the U.S attorney’s office, expressed their regrets in running the Cidra facility against the recommendations of best practices in the manufacturing industry. The manufacturing plant was shut down in 2007.

By the end of the legal suit, GSK had to part with about 3 billion dollars in settlements.

Did PharmaCARE live up to its Brand?

Being a highly recognized organization with a remarkable reputation PharmaCARE disastrously failed to live up to its brand by failing to:- uphold their high quality product standards, uphold their new initiative; we CARE about YOUR world® and we CARE about your health®, endorse their environmental commitment, promote the well-being of its trusting clients, protect its employees, and address the issue brought forward as downsides/side-effects of its drug. Despite upholding its obligation to the shareholder’s (investors) and turning the company revenues into large profits, PharmaCARE failed to live to its brand by turning share returns of a profitable company into absolute losses following the stock price plunge.

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