Business Ethics and Public Policy
Essay II
First read the article below carefully. Then answer all 11 questions below the article completely and thoroughly. Essays are worth 100 points: 90 for content and 10 for grammar. Essays should be type-written, with 12-point font, 1.5 spacing between lines, and standard margins. Essays are due by the beginning of class on Friday April 19th. You may submit a paper copy in class OR email your essay to my csun email address (as a pdf or Word document download) but I must receive, be able to open and print, your complete essay by the deadline in real time, or you receive the late penalty which is 10 points each 3 days it is late, no exceptions. Once I open and print your essay, I will respond to let you know I printed it. You should use NO outside research. All your answers must come from the article below and your own thinking and reasoning skills.
The Inordinate Power of Big Pharma by Leslie Sekerka,
Debra Comer, and Lauren Benishek
from Business Ethics, 2ndedition, by Denis Collins (2019)
If you live in the United States, you have probably seen a commercial that describes how a pill can easily remedy chronic depression. The advertisement displays a collage of pleasant scenes: families playing football in the park, couples kissing, and friends enjoying outdoor adventures. The message, accompanied by a crescendo of uplifting music, is that this productdespite its many potentially problematic side effectscan give depressed people meaningful lives. This sort of direct-to-consumer advertising of prescription drugs and medical devices has been legal since 1997. In 2015, the American Medical Association (AMA) voted that the federal government should ban these advertisements. Yet, these ads continue to appear with disturbing regularity, and the United States remains just one of three countries that allow them, the other two being New Zealand and Brazil. In 2011, the average American household watched 111 televised prescription drug advertisements per month. The Nielson Company estimates that there are, on average, 80 drug ads every hour of every day on American television. Considering that viewers watch about 5 hours of television daily, this exposure to drug ads by far exceeds the amount of time most people spend with the physician annually (typically 13-15 minutes per visit, four times a year). Television is not the only means of reaching consumers. The U.S. Food and Drug Administration (FDA), the agency responsible for pharmaceutical regulation, has done little to address the AMAs (American Medical Association) concern that these ads prompt consumers to believe there is a pill for every ill and to seek drugs even for conditions that would respond well to changes in diet and exercise. Firms that sell prescription drugs claim their ads merely educate patients, encourage doctor-patient dialogue, and move people to take more responsibility for their healthcare. It should be noted that the pharmaceutical industry (Big Pharma) contributes heavily to the FDAs annual budget. Big Pharma is one of the few multi-billion-dollar profit industries in the world.
Big Pharma is the name of the consortium of the worlds largest drug companies. Drug companies such as Merck, Eli Lilly, and Roche and chemical companies such as Bayer, ICI, Pfizer, and Sandoz have been in business for more than 100 years, going back to when most medicines were sold without prescriptions and were compounded by local pharmacists. During the 1970s, 1980s, and 1990s, drug development was largely in the hands of multinationals, prompting the creation of blockbuster drugschemical compounds designed to become consumer staples as treatments for common chronic ailments. For example, the ulcer medication Tagamet quickly reached $1 billion in sales, followed by other blockbusters such as Eli Lillys Prozac (the first serotonin reuptake inhibitor) and Astras Omeprazole (the first proton pump inhibitor). Pfizers cholesterol drug Lipitor became the best-selling drug of all time, with $125 billion in sales over 15 years.
Prescription drugs are a massive market: Americans spent $329 billion on them in 2013. That works out to about $1,000 per person in the United States. By 2014, the global market for pharmaceuticals exceeded $1 trillion in sales, with the worlds largest drug companies generating $429 billion of that revenue. Big Pharma spends hundreds of millions of dollars annually to market its products. It is currently the seventh largest ad category in the U.S., with an investment of $6.4 billion in 2016, an increase of 64% since 2012. This includes direct-to-consumer marketing and paying for sales people to directly approach doctors. Pharmaceutical firms strategically promote products they expect to become the most profitable. For instance, Boehringer Ingelheim spent $464 million in 2011 advertising its blood thinner Pradaxa. The investment appears to have paid off: The drug passed the $1 billion sales mark the following year.
Government regulation can help ensure that pharmaceutical companies serve the public as well as their shareholders. Yet, since the antibiotic era of the late 1940s, the discovery and development of pharmaceutical products have become an expensive, time-consuming, cumbersome, and bureaucratic process. In 1961, the discovery that giving thalidomide to pregnant women caused serious birth defects triggered a government reassessment of state controls. New regulations in the United States to ensure efficacy, purity, and safety greatly increased research and development (R&D) costs, particularly in the area of clinical testing.
With huge profits and thousands of paid lobbyists, Big Pharma today often gains an advantage in how legislation is crafted or abandoned. From 1998 to 2014, Big Pharma spent nearly $3 billion on lobbying, drowning out the voices of consumers and the interest groups that represent them. According to reports by the nonprofit MapLight, drug companies poured more than $70 million into fighting Californias Proposition 61, intended to limit the prices state agencies pay for prescription drugs. The industry backs legislators who favor their shareholder-driven profit approach. The trade group PhRMA has a reputation for hiring former government employees, who have connections to those in political office. Using these relationships to pursue industry goals, Big Pharma maintains a significant advantage it can use to override customer interests. U.S. citizens pay more for their pharmaceuticals than do citizens of any other country.
Aiming to improve American-owned business in global markets, Congress enacted a series of laws to speed up tax-supported research on new products. One of these laws, the Bayh-Dole Act of 1980, enabled universities and small businesses to patent or license any discoveries from their tax-funded medical research sponsored by the National Institutes of Health (NIH). Before the Bayh-Dole Act, taxpayer-financed discoveries belonged to the public domain (i.e., new drugs were available to any company that wanted them). Because of this act, universities that carried out NIH-sponsored work could charge royalties, providing income for nonprofit institutions. Legislation also allowed the NIH to enter into deals with drug companies, transferring NIH discoveries directly to industry.
The cost of bringing a drug to market is vague and often unverifiable. Developing a new prescription medicine that gains marketing approval can take longer than a decade and cost as much as $2.6 million, according to a study by the Tufts Center for the Study of Drug Development. To encourage drug development in the United States, laws permit pharmaceutical firms to set their own pricing and provide protections that are tantamount to limiting free-market competition. Other countries set a limit on what companies can charge, based on the benefit of each drug. Arguably, drug companies could cut prices dramatically without threatening future investments in R&D or eroding profits. For every dollar spent on R&D, 19 dollars go to marketing.
Given its mega-profits, the industry has become known for its ability to wield political power and social influence over the federal government and its agencies, health care systems, insurance firms, medical practitioners and administrators, hospitals, and consumers. Big Pharma has become one of the most profitable industries in the U.S., rivaled only by mining, crude oil production, and commercial banking. It has so much power that it has actually shaped how Western consumers think about their health and well-being.
A leaked email in 2015 from Martin Shkreli, former chief executive officer (CEO) of Turing Pharmaceuticals, maker of Daraprim said: $1bn here we come. I think it will be huge. We raised the price from $1,700 per bottle to $75,000. So 5,000 paying bottles at the new price is $375,000,000 almost all of it is profit and I think we will get 3 years of that or more. Should be a very handsome investment for all of us. Lets cross our fingers that the estimates are accurate. After purchasing two heart medications in early 2015, Valeant Pharmaceuticals hiked the price of one by 525 percent and the price of the other by 212 percent. In one year, Valeant garnered $351 million in profit from these two products.
Why isnt this just smart, free market capitalism? If you have a product people want, you charge and make money? Isnt this just American business and the American Dream? Getting rich by having a product or service people want? Industry professionals argue that the market for medicine is unique. Drugs are nondiscretionary (people arent buying them because they want to, but because they have to). Exclusivity (closed distribution) also creates a barrier and pricing power. Both Turing and Valeant are examples of drug companies that trade in drugs that treat rare diseases/disorders. Because few patients need these drugs, there is little incentive for others to produce them and little or no competition. Big Pharma is also well known for fraudulent behavior, and drug companies have settled numerous billion-dollar lawsuits. Three major settlements by drug companies: GlaxoSmithKline paid $3 billion to settle lawsuits involving its drugs Paxil and Wellbutin; Pfizer paid $2.3 billion to settle a lawsuit against its drug Bextra; Elli Lilly paid $1.4 billion to settle a lawsuit against its drug Zyprexa. Big Pharma paid over $13 billion between 2009 and 2014 to settle lawsuits it feared would go to court. Cases involved misbranding and off-label marketing, giving kickbacks to physicians for prescribing or recommending drugs, and strategically aligning with generic companies as a means to keep the overall cost of drugs higher than their justified benefits. There are charges that the government itself has become complicit in the illicit behavior. Pharmaceutical companies are undeterred by fines, legal fees, and settlement payouts, which they see as the cost of doing trillions of dollars of business. Cost increases, it should be noted, have contributed to higher insurance premiums and deductibles and to lower coverage for most Americans. The U.S. remains the only country with an unregulated pharmaceutical pricing market.
Doctors, scientists, research organizations, medical journals, teaching hospitals, and medical schools all accept money from the pharmaceutical industry. Medical researchers sometimes coauthor articles in concert with Big Pharma or receive funds for ghostwriting information that may ultimately appear in medical journals. In 1967 the sugar industry paid Harvard scientists to obscure a link between sugar and heart disease. The misleading information led to decades to research on the role of saturated fatrather than sugar. The Journal of the American Medical Associationbenefits from Big Pharmas advertising dollars. Drug companies sponsor clinical trials that researchers receive compensation to administer. Drug companies manage drug trials, showing the outcomes that put their products in the best light.
Risk of cardiovascular disease had been analyzed by the Framingham Heart Study project, which began in 1948. In a landmark 1961 paper the key risk factors were identified as high blood pressure, diabetes, and cholesterol. But what level of cholesterol constitutes risk? There is no scientific proof of any specific level, only statistical breakdowns of thousands of people, who had heart attacks or didnt (and what age they were), and what levels of cholesterol they had (in addition to other factors in life). If a disease or condition existed bigger than cancer, bigger than heart disease, and everyone had it, endless profit could be assured forever. In 1987 Merck launched Mevacor, a statin for cholesterolwhich everyonehas (everyone has cholesterol). The only issue is: How much do you have? All that had to be established was what was a risky level. In 1995 the NIH (the National Institutes of Health) said 13 million people in the U.S. were at risk from high cholesterol. Of sixteen publications between 2000 and 2013, ten proposed changes widening the definition for cholesterol level risk (75% of the researchers had ties to Big Pharma). May 16, 2001 then became the jumping off point. Dr. Claude Lenfant of the National Heart, Lung and Blood Institute said that we can now say with certainty that lowering a high blood cholesterol dramatically reduces a persons risk. So lower is better, BUT at what level does risk begin? NIH guidelines had previously stated that 200 milligrams per deciliter of total cholesterol was the desirable level, and 240 mgs was too high. In 2001, the NIH halved the cutoff point risk point: 100 mgs was not desirable, 130 to 159 mgs was now borderline high, 160 mgs was high and 190 mgs was very high. So, in light of these changes in cut-off points, in 2001 the number of Americans with high cholesterol went up to 36 million (and in 2004 the number went up again to over 40 million). Risk is an old medical concept, but how to correctly draw the line on what constitutes risk has not been established, since no one has shown how to determine what number or percentage of people who had attacks is the cut off point for fixing the level that is dangerous (vs. other factors such as fat, drugs, age). (The Deals that Made the World, by Jacques Peretti, 2018).
Doctors in the U.S. are usually required to complete accredited continuing medical education (CME) coursework. The pharmaceutical industry provides a substantial portion of the annual costs of CME, using this platform to market their products. Drug company representatives educate doctors about their new prescription drugs. Big Pharma representatives at these events push the newest and most expensive products. There is one pharmaceutical sales representative for every 2.5 office-based physicians in the United States. Physicians often welcome sales reps, who provide free samples doctors can then use for their patients. Big Pharma claims this practice of giving samples improves patient care, fosters appropriate medication use, and helps millions of financially struggling patients. Scholars counter, however, that sampling does not improve drug access for the poor, does not promote rational drug use, and raises the cost of care.
Also troubling is that heath care professionals are encouraged to resolve patients concerns by prescribing medications. Given the pressure to see more patients in less time, the system pushes physicians to provide quick prescription-driven remedies. Pharmaceutical companies also sponsor symposia and medical conventions, offering medical practitioners opportunities to extend their education. These events include free travel and other benefits, favorably inclining recipients toward the sponsoring firms that subsidize them. Big Pharma has become a marketing machine, selling drugs that generate the most profit. The goal is to have you take a pill for every trouble you encounter. But mislabeling minor problems as illnesses has toxic implications for individuals and society, including unknown consequences of taking drugs for years when they are not required for you; draining family finances, and masking the true causes of some problems. Despite all of this, Big Pharma claims it is trying to help people become healthy.
Reformers call for restructuring the industry itself, so that it is grounded in science and motivated to provide safe and effective drugs to the people who need them. One plan for expanding access to drugs has emerged from the medical community. The idea is for the U.S. federal government to buy pharmaceutical firms outright, rather than merely buying the drugs these firms sell. For example, according to the Centers for Disease Control and Prevention, hepatitis C kills more Americans than any other infectious disease and often leads to a need for liver transplants. The virus has infected an estimated 2.7 to 3.3 million people in the United States. Gilead Sciences Inc. makes Sovaldi and Harvoni, the two drugs that can swiftly cure this disease, but sells them at prices so high that few can afford them (a 12-week course is $85,000). If a patient doesnt have the appropriate medical coverage, state programs (such as Medicaid) will restrict their use, telling patients they are not sick enough to justify the cost. (If you go to Canada, its $85. That information may save your life.) Buying the company instead of the drugs would cut the cost of treatment by almost two thirds. The government could then sell off the firm, but sustain the drug rights (and so regulate the profit the firm makes by selling the drug). Others suggest the government simply regulate Big Pharma, as it regulates public water and electricity sales. Others say shorten the patent rights on all the drugs to 1 year (instead of the current 10), so that any company can make the drug after that time, and as long as 2 or more drug companies make the drug, the price should be driven down to an affordable rate.
Write complete and well-developed answers to each of the 11 prompts/questions below.
Essay II: Questions
1. How much do pharmaceutical companies spend to advertise their products? Why do pharmaceutical companies spend so much money marketing their pills? Why not just let the pills sell themselves?
2. How much did Big Pharma spend on lobbying? Why would they do this?
3. Subtract the amount it might cost to develop a new prescription medication and bring it to market (our books quoted price) from the profit generated (after advertising) for Pradaxa. How much did Boehringer Ingelheim make in profit (leaving out the cost of packaging the pills and transporting them to pharmacies)?
4. What is wrong about what Martin Shkrelis email? Re-write his email (changing what needs to be changed) so that it sounds morally right.
5. How much did GlaxoSmithKline, Pfizer, and Elli Lilly each pay to settle lawsuits against them? Why would these companies pay that much instead of going to trial?
6. Doctors in the U.S. are usually required to complete accredited continuing medical education (CME) coursework. The pharmaceutical industry pays for these training events for doctors and uses this platform to market their products. Drug company representatives educate doctors about their new prescription drugs. Why would this work? Describe a hypothetical parallel case: Imagine USC and CSUN both did this to get you to attend. Describe what it would be like (what you would do before you slept in each schools dorms, etc.) and describe what your final attendance decision would be based on, after the experience.
7. Why cant we say with certainty that 200 mgs of cholesterol or 100 mgs of cholesterol is desirable or if 240 mgs is high or 160 mgs is high? Arent these numbers? Arent numbers precise and objective? Whats the problem? 65 is the speed limit, and thats the end of the story. Why cant we fix a number for high cholesterol that is true and accurate (thus proving who needs prescription statin pills and who doesnt)? Explain.
8. Physicians often welcome sales reps, who provide free samples doctors can then use for their patients. Big Pharma claims this practice of giving samples improves patient care, fosters appropriate medication use, and helps millions of financially struggling patients. Scholars counter, however, that sampling does not improve drug access for the poor, does not promote rational drug use, and raises the cost of care. Which side is right? Defend the side that is right with a new (your own) argument.
9. Pharmaceutical companies also sponsor symposia and medical conventions, offering doctors opportunities to extend their education. These events include free travel and other benefits, favorably inclining recipients toward the sponsoring firms that subsidize them. Why would these practices favorably incline doctors toward writing prescriptions for these pills? Give a vivid example in which the doctor does this, and another in which he/she doesnt. Which is more likely and why?
10. According to the Centers for Disease Control and Prevention, hepatitis C kills more Americans than any other infectious disease and often leads to a need for liver transplants. The virus has infected an estimated 2.7 to 3.3 million people in the United States. Gilead Sciences Inc. makes Sovaldi and Harvoni, the two drugs that can swiftly cure this disease, but sells them at prices so high that few can afford them (a 12-week course is $85,000). What is wrong with that? Doesnt Gilead Sciences have the right to make as much money as they can? Can we tell Mercedes not to sell their car for $85,000, that we want it to be $3,500 instead? Explain.
11. Here are two suggestions at the end of the article for how to make things fair for patients who need drugs in the U.S. and for the companies that manufacture these drugs: One suggestion is the government simply regulate Big Pharma, as it regulates public water and electricity sales. Others say shorten the patent rights on all the drugs to 1 year (instead of the current 10), so that any company can make the drug after that time, and as long as 2 or more drug companies make the drug, the price should be driven down to an affordable rate. Explain how each of these solutions would work. Give a positive and a negative for each system. Then explain which of these solutions you favor and why (to make things fair for both seller and buyer).
