25 August 2016
Where Is the Line Between Ethical and Legal?
Ethical-Legal-Line-CU-TodayWhen former Turing Pharmaceuticals CEO Martin Shkreli raised the price on the drug Daraprim by 5,000% earlier this year, he also raised the question of whether pharmaceutical should be held to higher ethical standards than companies in other industries.

Forbes explores the issue:

Ezekiel J Emanuel, MD, PhD, chair of the department of medical ethics and health policy for the University of Pennsylvania, agrees that what Shkreli did was no different than what other pharmaceutical companies have done for years. For example, Valeant Pharmaceuticals International Inc. acquired cardiac drugs Isuprel and Nitropress and quickly raised the prices by 525% and 212%, respectively. Shkreli raising the price of Daraprim by 5,000% may be considered more brash. It was also perfectly legal. And unethical, says Emanuel. Was it wrong, though?

The public certainly thought it was wrong. Shkreli, who was arrested for securities fraud in December 2015 from his tenure at Retrophin, another biopharmaceutical company, was immediately vilified. Even former Valeant CEO Michael Pearson had a change of heart regarding his own business decisions. He recently testified to a Senate committee hearing that he regretted pursuing acquisitions where the rationale for the deal rested mostly on increasing the prices of the medicines. But Shkreli stands by his decision. During a healthcare summit hosted by Forbes, Shkreli was asked what he’d do differently if he could go back in time prior to his decision to raise the price of the drug. He replied that he should have raised prices higher. “I could have raised it higher and made more profits for our shareholders. Which is my primary duty.”

Many people believe that pharmaceutical companies (and all businesses, actually) exist to serve the needs of the people who buy their products. Maximizing profits for shareholders should not be the final end, and when it becomes so, the company will actually suffer in the long-term.

Not everyone agrees that a CEO’s primary responsibility is to maximize profits for shareholders. Emanuel says that leadership is being responsible in pricing and having a model that isn’t about maximizing returns. “It is the question of what is a responsible price where we can make a reasonable return. Let’s be fair. Lots of other industries don’t make a 17% to 50% return. Other companies make a 7% to 10% return, and it is perfectly reasonable,” he says. Emanuel also clarifies that shareholders are more than stockholders. Businesses should look at what does the price do for employees, the patients that you are treating and the society in which you operate. These groups are all the shareholders not just investors, he says.

Kenneth L. Davis, MD, president and CEO of the Mount Sinai Health System, says the issue of drug prices boils down to a values issue of management that has to weigh the widespread availability and profitability of a drug. “I am well aware of how much drug companies have to spend on failed drugs before they have one that is a success. I am more than willing to say that that has to be accounted for when one contemplates a fair return on investment,” he says. “But that fair return on investment has to keep in mind that we are still in a business of healthcare and curing disease, which can’t be restricted to only some people who can afford it. There is a social responsibility there too.”

Should the healthcare industry have a different set of ethical standards to follow than other industries because lives are at stake? Or should ethics drive business decisions more than profitability regardless of the industry? Experts contend that businesses with high ethical standards reap more long-term benefits because they will have a better brand image, greater customer loyalty and increased productivity from a loyal staff. Businesses with low ethical standards may yield short-term financial gains but also risk damaging their reputation long term.

CEOs and business owners are urged to wrestle with the question of whether making a profit is worthy of being the sole end goal of their work. All the work we do can, in some way, serve our fellow man, and ultimately, be work done unto the Lord. Pursued in this way, our work will yield a profit greater than just a stock increase.

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By God's Grace, Christian Union develops Christian leaders to transform culture. We resource student organizations at nine of the most strategic university campuses in America, and work in key cities to build networks of Christian leaders.

240 Nassau Street Princeton, NJ 08542
t. 609 688-1700 f. 609 688-1795