Case Problem 2.1

As the Chief Executive Officer (CEO) of Mylan, I would defend the price in terms of the cost the company incurs. The company must invest in research and development (R&D) if it is to remain capable of producing life-changing medications, such as EpiPen. Nevertheless, it is worthwhile for the public to know that the R&D process is expensive; hence, the need to raise drug prices to cater to such expenses (Emanuel, 2019). Additionally, the regulatory regime in the U.S. is strict and bureaucratic. For instance, before the Food and Drug Administration (FDA) approves a drug, it must go through extra trials that are not a must in many other parts of the globe. Such bureaucracies increase the cost of developing and producing drugs; hence, the price increase.

Mylan’s conduct in raising the prices is both unethical and a bad business practice. It is a bad business practice because the pharmaceutical company did not factor in the anticipated reaction from its competitors. For instance, following the price hike, CVS announced that it would begin the sale of a generic version of the drug at a price six times lower than Mylan’s generic brand. Despite Mylan lowering the cost of its generic version to $300, such a price was still below the competitors’ offering and unaffordable to many persons. Consequently, Mylan’s move implies that it would push individuals towards consuming generic versions of the drug because they can acquire it cheaply from the firm’s competitors.

Moreover, the practice is also unethical. From a utilitarian perspective, the action is ethical only if it leads to the highest good for the greatest number of people (Mandal, Ponnambath, & Parija, 2016). The action of the company would only benefit a few individuals — those that stand to benefit from the company’s higher profits — at the expense of most of the population that consumes the drug. The firm’s management may counter this argument with the view that it is offering 800,000 EpiPens to patients for free. However, such a move is merely an act of tokenism because the proportion of the population that will access the medication for free is small compared to the number of patients that need the drug.

Additionally, the action is unethical even from a deontological perspective. Deontological ethics implies that an action is morally correct if it is consistent with applicable rules and norms (Mandal et al., 2016). In this case, it is the norm that society should not profit unduly from persons with the sickness; instead, pharmaceutical companies should make adopt pricing strategies that create a balance between profits and patient welfare.

Nevertheless, Mylan’s action of offering 800,000 free EpiPens serves as an excellent public relations and marketing strategy. As the company’s CEO, it is essential to direct that the free EpiPens be given to only those patients that come from a poor background. The move would create the perception that the company is empathetic to those in the low-income category, an outcome that may endear the firm to the masses, despite its act of raising the price of the drug substantially.

The excessive price has led to calls for the government to regulate the prices of pharmaceutical drugs in the country. Such a call has numerous justifications. Firstly, in the U.S., the government, through the Medicare and Medicaid healthcare insurance programs, is the largest payer to pharmaceutical companies (whether directly or indirectly). Therefore, even purely from an economic perspective, the state has adequate economies of scale to negotiate for lower drug prices. Secondly, the primary role of the government is to safeguard the welfare of its citizenry, an outcome that high drug prices restrict. Therefore, if the government is to live up to its mandate, it must regulate drug prices, and any increases thereof, to ensure that it is reasonable.

Case Problem 2.2

In many societies, disasters serve as a means of uniting the community to achieve a common goal — reconstruction and rehabilitation. In the process, individuals and businesses may engage in practices that may be considered improper depending on whether one is a victim or a shareholder of the benefitting company. As a victim, some of the activities that create the impression of a lack of ethics include, “Arrang(ing) for workers to arrive at a victim’s door explaining they “just happen to have” materials left over from another job that they can conveniently use for the victim’s repairs.” Other acts are charging only cash for repair jobs and charging double the ordinary rate for the same volume of work.  Arranging to have employees that they “just happen to have” some material left is indicative of false advertising and marketing. Such an action is usually wrong, even in situations where no disaster has occurred. Furthermore, it is meant to take advantage of the victim’s perceived hopelessness because they most likely need such a service.

Additionally, charging only cash illustrates a lack of empathy on the part of the company and its employees. Often, in times of a disaster, such as a hurricane, individuals are unlikely to have a stable source of income, especially those in the low-income category. Consequently, accessing cash may be a challenge. Therefore, a firm may access services or goods in-kind in place of money. For instance, an affected person may provide their labor in exchange for the company offering a service. Such a scenario is beneficial for both parties because the firm gains in terms of lowering its labor costs, while the victim obtains a needed service. Charging double may also be insensitive to the victims of a hurricane. The justification for such a view is that in most instances, such disasters curtail individuals’ access to their usual sources of finance; hence, charging a double rate is inconsiderate. Another unfair business practice that a shareholder may consider unethical is pressuring victims on making immediate decisions regarding hiring. While such a decision may lead to a lowering of labor costs, it would create apathy on the part of the employee; thus, they may not be highly productive in the workplace. Such an outcome is not beneficial for the shareholder.

As a shareholder of a benefiting firm, offering discounts to individuals that recommend other consumers may be termed unscrupulous. This situation reduces the business’s opportunity to profit from the disaster because it keeps the overall prices of goods and services low. While such a practice may appear unethical, according to MacDonald (2011), it is not entirely wrong for a shareholder to want to maintain high prices. He argues that the high prices serve as an incentive for others to produce the needed goods or required services; hence, making them more available — an essential outcome in a disaster zone, where scarcity of basic services and commodities is prevalent. Secondly, the high prices ensure that individuals use the limited resources they have sparingly. Consequently, in a scenario where no discounts are offered, both the shareholders and victims may end up benefitting.

Another reason for not offering discounts from a shareholder’s perspective is that it would ensure that only individuals that have the greatest need for a commodity can access it. If prices were to be reduced because of a disaster, individuals would engage in the impulse buying of emergency supplies that they may not need, while persons in severe need of the items end up missing them. Therefore, MacDonald (2011) asserts that high prices may be beneficial in matching demand and supply.

Case Problem 2.6

Confidentiality agreements have become a convenient means through which conflicting parties resolve their differences. Such settlements mandate both parties to maintain secrecy, such that the contents of the settlement may not be known to parties outside of the agreement. Additionally, such contracts are legally binding because courts supervise the process and sanction the deals.

Nevertheless, as a manager in charge of litigation, it is vital to ensure that redlines exist as to where such agreements should apply. Essentially, it is necessary to make sure that a balance exists between safeguarding the publicity of the organization and advancing the welfare and interests of the victims. Consequently, in circumstances where a confidentiality agreement might cause harm to both the employees and the public, then as a manager, one should agree to such a covenant. For instance, if a confidentiality agreement would lead to an organization not disclosing that its products are harmful to human health, then such a pact should not be admissible. Secondly, if the agreement would cause death, it should be acceptable. As noted by Liptak (2002), some confidentiality agreements may cause an organization not to disclose unlawful or unethical behavior, such as sexually abusing children, as was the case with the Catholic church. In such a scenario, the manager should not agree to have such a covenant. Additionally, if a confidentiality agreement enables a company to circumvent an existing law, then it should not be allowed.

In the short run, allowing such flawed agreements to proceed may appear to make business sense because they protect an organization’s publicity. Nevertheless, it is worth noting that most arrangements have a time limit. Once the limit is over, the affected parties may choose to make the information public, an outcome that can have devastating consequences for the concerned organization. Therefore, maintaining flawed or unethical confidentiality agreements only serves as a means of postponing a problem, rather than providing a solution for the same.

However, even in rejecting some confidentiality agreements, a manager must make several considerations. Most critically, he should weigh the need to protect the victim’s welfare and publicity. In some situations, even where it may appear progressive to expose wrongdoings, making a settlement public may reveal the identity of the victim. In some scenarios, such as sexual abuse, revealing the identity of the affected persons may have life long negative consequences. Furthermore, in situations where the behavior leading to the unlawful or unethical act is not systematic within an organization, then denying the conflicting parties an opportunity to make their agreement private may not be an effective solution. In such a case, the manager should implore the organization’s management to change its internal systems to reflect progressive ideals. However, if the behavior under consideration is structural, then it may be necessary to waive confidentiality. Failure to do so may cause more harm or even death to a firm’s stakeholders.

Moreover, if terms of settlement contain sensitive information, then it may be essential to insist on a confidentiality agreement. For instance, if publicizing the deal would lead to the exposure of a trade secret or affect the personal privacy of an individual. It may be necessary to insist on a confidential agreement. From a policy perspective, failure to consider confidentiality agreements may also clog the judicial system — in often cases, the arrangements speed up the justice dispensation process. Evidently, the concerned manager should consider various factors before deciding on whether to support a confidential agreement or not.

References

Emanuel, E. (2019). Big Pharma’s Go-To Defense of Soaring Drug Prices Doesn’t Add Up. The Atlantic. Retrieved from https://www.theatlantic.com/health/archive/2019/03/drug-prices-high-cost-research-and-development/585253/

Liptak, A. (2002). Judges Seek to Ban Secret Settlements In South Carolina. The New York Times. Retrieved from https://www.nytimes.com/2002/09/02/us/judges-seek-to-ban-secret-settlements-in-south-carolina.html

MacDonald, C. (2011). Post-Hurricane-Irene Business Ethics Roundup. Business Ethics. Retrieved from https://businessethicsblog.com/2011/08/29/post-hurricane-irene-business-ethics-roundup/

Mandal, J., Ponnambath, D., & Parija, S. (2016). Utilitarian and deontological ethics in medicine. Tropical Parasitology, 6(1), 5-7. doi: 10.4103/2229-5070.175024