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The Truth About the Drug Companies

The Truth About the Drug Companies


In her article "The Truth About the Drug Companies" Marcia Angell discusses a very important topic which touches every American (2004). Health is the most valuable a person can have, and drug companies play critical role in health care. It seems obvious these companies are obligated to socially responsible but in fact they are not really as responsible as one might think. In the article Angell discloses the real face of this business.

Pharmaceutical business brings more profits than any other in US. I even won't be surprised if someone told me that it's more profitable than illegal trade of weapons or drug traffic. The reason drug companies have such enormous rates of profit is this a giant powerful industry with rather small number of players in the market. Here we deal with oligopoly. These companies have greater level of support than any other industry in the government which creates favorable legal conditions. They also have huge amount of influence over doctors who prescribe products of these companies. All this allows companies steadily increase prices which boosts revenues and, in turn, boosts profits. Rivers of cash inflow make companies even more powerful.

To justify huge profit margins companies claim that they spend a lot on R&D. But such justification is not valid for two reasons. First is given by Angell. She highlights that companies spend only about 11% of sales on R&D while profit margin varies between 18.5% and 14.3% (Angel, 2004, p. 55). And even those 11% are seldom the reason for really innovative drugs to occur on the market. Huge pharmaceutical corporations usually use results of research work of small companies and scientific laboratories. As a second reason I can put the fact that in computing profit rate R&D expenditures are already included in expenses, thus 18.5% of $200 billion sales are the net income of companies. This figure hardly fits the definition of fair profit. For example commercial banks have maximum 13.5% margin (Angel, 2004, p. 55).

Since the ultimate source of such enormous profits is the pocket of average citizen, public began to resist when truth began to come out. Due to this and some other factors, such as top-selling drugs going off patent in upcoming several years, the top drug companies face big problems. It's obvious they'll fight for they profit and this struggle won't bring any good for the society. So, Angell claims that a deep reform of the industry is needed (2004, p. 57).

This article argues mainly about economic and social sides of the problem. But what about the moral side? I think here a question of business ethics should be raised. How can we classify actions of the companies from ethical perspective? First, is right on the surface. Companies engage in gentlemen agreements (either explicit or tacit). It violates fair competition. They also use price discrimination. Both practices are considered unethical. But we can go even further in ethical considerations.

Marketing methods used by the companies, in my opinion, are manipulative. This indicates that companies threat people as means and not as ends. So, their activity doesn't stand the second formulation of Kant's categorical imperative. On the other hand, we can treat their activity from utilitarian point of view. The main principle of utilitarianism is to strive for the greatest good for the greatest number of people. If we compare number of people that benefit from the actions to number of people that suffer from them, we'll see that these actions don't stand utilitarian criteria as well. So, I can definitely call these actions of drug companies unethical.

Moreover, drug companies simply lie to public. It's not the first case in history that huge corporations forget about the stakeholders' rights, behave unethically, and engage in lie. A bright example is the case of Enron which "will influence discussions and decisions in corporate boardrooms for years to come" (Rosen, 2006). And, as practice showed, to lie and to be unethical is very expensive in the long-run nowadays. I believe that drug companies will have to pay for their unethical actions sooner or later.






References

Angell Marcia (2004). The Truth About the Drug Companies. New York Review, July 15
52-58.
Rosen Cheryl (2006). Ethics After Enron. Business Ethics Magazine, 20 (2). Retrieved
February 6, 2007 from http://www.business-ethics.com/whats_new/Vol_20_No_2_Ethics_After_Enron.html
9354

Posted by: Sancha Haysbert

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