Dewey, Chetum & Howe Law Firm
John, a former researcher at PharmaCARE, is seeking legal advice regarding PharmaCARE’s use of their drug AD23. AD23 is a PharmaCARE top-selling diabetes drug. After PharmaCARE’s research indicated that the diabetes drug might also help slow the progression of Alzheimer’s disease, the company began reformulating the drug in order to maximize its effect. PharmaCARE established a wholly-owned subsidiary, CompCARE, in order to avoid the scrutiny of the Food and Drug Administration. CompCARE was used as compounding pharmacy in order to sell the new formulation to individuals on a prescription basis. CompCARE is located in a suburban office park near PharmaCARE’s headquarters. CompCARE did a quick, low-cost renovation to the office in order to conserve time and money.
After six months of CompCARE’s operations, the demand for AD23 soared, especially among Medicare, Medicaid, and Veterans Affairs patients. Realizing that there was even more room to profit, CompCARE began to advertise the drug directly to consumers, while also marketing directly to hospitals, clinics and physician offices. The company decided to distribute their product in this manner even though they are not permitted to sell drugs in bulk for general use. In order to go around this obstacle, CompCARE encourages doctors to send fax lists of fictional patients. The following discusses the legal and ethical implications
Discussion
Ethical issues
One of the primary ethical concerns of this situation is regarding the marketing and advertising techniques used to drive sales. The majority of the public does not have medical degrees. When an individual is presented with information regarding a pharmaceutical, they are presented with the highlights of the drugs. For example, an advertisement for antidepressants informs the viewer of how the drug combats depression and the positive advantages of the drug. These advertisements subliminally tell the consumer “take me, I will make you feel happy again”. An individual may see this advertisement and seek a health professional in order to try the product. By using this marketing technique, the pharmaceutical industry is able to advertise to a larger amount of people. Thus, encouraging the consumer to consumer their happy pills.
The ethical issue is whether or not a pharmaceutical company should be able to market drugs to the generally public. Pharmaceutical drugs can have powerful addiction abilities. Therefore, by marketing to the generally public, pharmaceutical companies are encouraging the general public to become hooked on their product. Also, there are pharmaceutical drugs that have harmful effects when an individual stops taking them. After consuming a certain drug for a certain amount of time, a doctor may find it could be hazardous for a patient to stop taking the pharmaceutical drug. Thus, it is ethically questionable as to whether or not pharmaceuticals should be able to market these types of drugs to the general public.
Another ethical issue revolves around regulations of product safety and the fact that the company was not authorized to see the formulation in bulk. They were distributing the drug directly to hospitals and physicians. The company was not legally entitled to distribute the formulation in this manner. This crosses both legal and ethical lines. Legally, the company can be helps responsible for illegal distribution of their product. In 1988, President Ronald Reagan created the Prescription Drug Marketing Act of 1987, which set the baseline when it came to wholesale distribution regulations. One of the provisions of this act states that the wholesale distributor of prescription drugs must have licensure.
Direct-to-Consumer (DTC) marketing
Marketing in the pharmaceutical world has drastically changed over the past several decades. Pharmaceutical advertising was originally directed towards physicians and other health care professions. In the past, the way pharmaceutical companies market their products was through free pens and cotton ball holders. However, since the expansion of digital media, pharmaceutical companies have realized they can reach more consumers, thus raising profits, by conducting direct-to-consumer marketing. This has changed the idea behind prescription drugs. Instead of the patient going into the doctor trying to figure out what is wrong with them, patients know go into doctors’ offices with information regarding the latest prescription drug they saw marketed in their magazine. Thus, direct-to-consumer with the use of the Internet is an excellent tool when it comes to marketing pharmaceuticals. However, there are ethical considerations when it comes to marketing prescription drugs to the general public.
“Direct-to-consumer (DTC) advertising of prescription drugs in traditional media has been shown to help educate consumers and enable them to take a more active role in interacting with health professionals (Carter, Prill & Morton, 2015, p. 1350). The Internet encourages direct-to-consumer advertising. With the significant amount of information an individual can find on the Internet, the Web may empower individuals to seek drugs or treatments they see on the Internet. Pharmaceutical companies allocate significant resources in order to establish and maintain their Web presence in order to promote prescriptions drugs directly to the customer.
The pharmaceutical industry consists of businesses. Just like other businesses, companies in the pharmaceutical world should be able to take advantage of marketing ability the Internet produces. The Internet has been known to make large corporation’s profit margins skyrocket by applying traditional marketing techniques to the online world. Pharmaceutical companies should be able to market their products to the general public using the same marketing platforms as other companies.
However, there are ethical considerations regarding Direct-to-Consumer marketing in the pharmaceutical industry. Pharmaceutical companies have been known to spend millions of dollars on marketing campaigns in order to convince the generally public to take prescription drugs. It is believed that this cost is then pushed on to the consumer through drug prices. Encouraging consumers to try a product does not cross any ethical lines. However, encouraging consumers to possibly become physically or mentally addicted to a drug that does not have FDA approval does cross certain ethical lines.
The individuals who are for the use of drug advertising say that the advertisements serve as an important part of awareness. They serve the purpose of informing consumers on ways to improve their health. In other words, drug advertisements send sick patients to doctor’s offices. Overall, Direct-to-Consumer marketing when it comes to pharmaceuticals should be highly regulated and limited as to the audience they can reach. For example,
Regulating compounding pharmacies
Compounding pharmacies
Compounding pharmacies refer to “any physical pharmacy that is licensed to mix or “compound” chemical ingredients into a finished medication ready to use by an individual patient, based on a prescription ordered by a physician or other legally authorized prescriber” (National Conference of State Legislature , 2014). For example, a patient may utilize a compound pharmacy if their child needs a liquid dose of a drug that is only made in tablet form for adults. In this case, a compounding pharmacy is able to make the dosage the child needs according to the child’s age and size.
Regulating compounding pharmacies
Currently, three government agencies have the responsibility of regulating compounding pharmacies: 1) state boards of pharmacy, 2) the federal Food and Drug Administration (FDA), and 3) the Drug Enforcement Administration (DEA). The FDA does have a responsibility when it comes to the regulation of commercial pharmaceutical manufacturing, however, they are limited when it comes to how much control they have. In 1997, the Supreme Court struck down the FDA’s authority over compounding pharmacies. In 2002, the FDA stated that they could regulate compound pharmacies under certain circumstances. These circumstances include: 1) making drugs before a doctor has written a prescription, 2) making drugs with commercial-scale manufacturing, 3) making drugs for resale to individual patients, and 4) making drugs commercially available throughout the market. However, these guidelines were issued by the FDA themselves and does not have legal backing (National Conference of State Legislature , 2014).
The state is the one that has the responsible to regulate the pharmacy in this situation. “Every state has laws and regulations guiding pharmacy standards and requirements, addressing issues such as required licenses for each facility and for the credentialed pharmacists and other employees who work there” (National Conference of State Legislature , 2014).
FDA
According to the FDA guidelines, the FDA does have the ability to regulate PharmaCARE under these circumstances. They were doing two different things that allows FDA regulation when it comes to compounding pharmacies. First, they were making drugs to resale them to individual patients. They also were making drugs commercially available throughout the market. Thus, the FDA should have regulated PharmaCARE and CompCARE.
Legal issues
PharmaCARE is conducting what is called intercompany transfers in order to get around the fact they are not licensed to distribute these drugs in bulk amounts. Intercompany transfers happen when “Companies disguise their transactions as transfers between related companies under common ownership and control by a corporate entity when they are, in fact, no” (National Association of Boards of Pharmacy, 2013, p. 5). PharmaCARE was conducting intercompany transfers by having doctors fax list of fictional patient’s names in order to receive their orders. This not only has legal implications, it is also highly unethical.
Intellectual property
The General Agreement on Tariffs and Trade (GATT) and the North American Free Trade Agreement (NAFTA) have set specific standards when it comes to intellectual property protection throughout the pharmaceutical industry. Patent protection is more important in the pharmaceutical industry than other industries. It is estimated that 65 percent of pharmaceuticals would not have been developed in the absence of adequate patent protection (Carter, Prill & Morton, 2015, p. 1350). Due to the fact that pharmaceuticals have an effect when it comes to the economy and public health, government officials have made the protection of intellectual property, such as pharmaceutical patents, a main priority (National Association of Boards of Pharmacy, 2013).
PharmaCARE used the United States law in order to protect its own intellectual property. By creating a patent, the organization is owning all rights to the product, regardless of who is the actual “creator”. Intellectual property is something that is taken seriously throughout the pharmaceutical company. This is due to the fact intellectual property is easy to steal, especially in the pharmaceutical drug industry. However, without John’s name on the patent, John has no legal rights to the development and manufacturing of the drug (Oppenheimer, 2015, p. 505).
There are several ways in which PharmaCARE could compensate John for the use of his intellectual property. They could pay him for the services he completed for the company. They could also use his name in references to the drug, giving him some research credibility. Lastly, they could give him a percentage of the sales that are generated from the drug. All of these are ways the company could properly compensate John for his time working on the drug. However, John has no legal entitlement when it comes to the AD23 drug (Oppenheimer, 2015, p. 505).
Potential litigation
Companies that have defective products that cause a consumers death or other injuries, are typically required to provide the victim compensation through civil ligation. In order to make an informed decision on whether or not to use the product, PharmaCARE customers need to know and understand that potential harm that product may cause. When it comes to liability of a pharmaceutical company, damage has three different categories. These categories are: design defect, failure to warn, and manufacturing defect. Given the fact these companies work with health care professionals who have the ability to prescribe the drug, pharmaceutical companies have a legal obligation to maintain legal and ethical standards (Oppenheimer, 2015, p. 505).
The company may be guilty of all three categories of liability, depending on when they discovered the drug causes heart attacks. PharmaCARE may be legally obligated to compensate the families of the individuals who lost their lives to AD23, including John. John may not have known all the aspects of the drug. He may not have known that the drug caused harm for other people. His main argument is that a husband would not allow their wife to take a drug if he knew there would be fatal consequences (Oppenheimer, 2015, p. 505).
Whistleblower
Whistleblowers are protected by law, however, it is questionable whether or not John qualifies as a whistleblower. John’s argument may be that he was not responsible for the death of his wife and others because he was not aware of PharmaCARE’s intentions. John may have been working with other pharmacists as well and may not have been fully aware of all aspects of the drugs. There could be several pharmacists who worked on the drug after John. In this case, John may not have had access to any information regarding what was going on with the drug when he was not present. One of his biggest arguments could John could use is the fact that the drug killed his wife. A husband, under normal circumstances, would not allow their wives to take something that they knew could have negative consequences. John was a pharmacist and would not give one of his loved ones something that he knew would result in their death. The fact that John’s wife died is his biggest argument. However, given the fact that John is a pharmacist, he was more than likely knowledgeable of the drug that killed his wife.
References
Carter, T., Prill, l. & Morton, T. (2015). Developments in intellectual property. Indiana Law Review, 48(4), 1349-1375.
National Association of Boards of Pharmacy (2013). Wholesale drug distribution: protecting the integrity of the nation’s prescription drug supply. http://www.nabp.net/system/rich/rich_files/rich_files/000/000/064/original/wholesale drug-distribution-protecting-the-integrity-of-the-nations-prescription-drug-supply.pdf
National Conference of State Legislature (2014). State regulation of compounding pharmacies. http://www.ncsl.org/research/health/regulating-compounding-pharmacies.aspx
Oppenheimer, M. (2015). A framework for understanding ethical and efficiency issues in pharmaceutical intellectual property litigation. Journal of Business Ethics, 132(3), 505 524.
