Legal and ethical considerations in product safety marketing

Office Memo

Sub: comment on John's claim as a whistle blower against PharmaCARE and the ethical and legal implications of the case

As a member of Dewey, Chetum, and Howe you asked me to find out suitable ethical and legal implications that John's case could bring for the firm and for John himself. Detailed in the report are the issues regarding:

The Ethical issues relating to marketing and advertising, intellectual property, and regulation of product safety in relation to PharmaCARE

Business ethics can be defined as the art, system, method and the discipline that is applied to along with ethical principles to solve complex business issues and dilemmas. It defines the actions that are taken that tries to reach a balance between the organization achieving its business and economic obligations and social obligations (Moon, 2001).

One of the ethics that is applicable in this case is related to the advertisement of harmful products. It is ethical practice to communicate the side effects of drugs while advertising the drugs. In this case, CompCARE did not advertise the caution of possible heart ailment even after there were suspicion of the drug AD23 being linked to heart attacks.

One of the ethical issues that are expected in the realm of product safety is honesty towards the consumers and the society at large. It is expected that companies would speak the truth about the safety of using products. Ethical issues say that in case of products their evaluation and testing, the follow-up services and market surveillance should be done without any compromise. The company in question clearly violated this ethical norm by not adhering to the reports of heart attacks related to the use of the drug AD23.

The ethical issue that is related to the conflict of interest state that the interests of the consumers cannot be compromised in case there is a conflict of interest between the consumers and the company. The company has obvious that the pharmaceutical company violated this ethical norm (Paliwal, 2006). The company seemed to be aware of the heart attack related cases of the drug but choose to continue with the advertisements directly to the consumers and marketing the drug directly to hospitals, clinics and physician offices. The company also resorted to using false list of patients to enable compounding pharmacies to sell the drug in bulk.

2) Direct-to-Consumer (DTC) marketing by drug companies

It is obvious from the statement and documents produced by John that there are a lot the ill effects of direct to consumer marketing of drugs.

The direct to customer of DTC marketing has come in for quite a lot of criticism over the years. Critics argue that the huge money that is spend on the marketing and advertisement expenses of the drugs helps to drive up the price of the drugs. Most of the drugs are priced substantial higher than they would have been if there was no advertisement and marketing campaign were existent. This is because the drug companies focus on spending on the campaigns to maximize their profits (Woloshin, Schwartz, Tremmel & Welch, 2001).

The DTC campaigns often tend to change the patient- doctor relationship. With a bombardment of advertisements and the nature of advertisements, the patients tend to be convinced that a certain drug would do them benefit (Wierda & Visser, 2012). Many patients often tend to pressurize the doctor to prescribe that particular drug. This drastically changes the way doctors and patients had interacted traditionally. This also has the possibility of reducing the confidence on the doctors. Patients often themselves indulge in self-diagnosis without going to the doctor and instead go to the pharmacy for the drug. This phenomena is more prominent in over the counter drugs and non-prescription drugs. Therefore there is the potential that DTC can result in the patients taking the wrong drug or even an over dose of the drug ('little evidence for benefits with direct-to-consumer advertising', 2007).

Many researchers have stressed on the potential risk of biases and public health effects that result from DTC marketing. Research have indicated that DTC might be helpful for those patients who have a medical condition that may be helpful by consuming the drug being advertised but potentially dangerous for those who do not have the medical condition and are yet inclined to use it.

An ethical consideration is that the advertisements and the marketing campaigns are mostly of a persuasive nature and the targeted consumer are unethically attempted to be persuaded (Gilbody, 2005). This is not in conformation to the basic ethics of advertisement. Moreover there are allegations that the harmful side effects of a drug are rarely highlighted in the marketing campaigns and only the good points are stressed. This has the potential to harm consumers who engage in self prescription without effectively evaluating their health conditions to the possible reactions and side effects of using an advertised drug (Bradford et al., 2006).

3) The parties responsible for regulating compounding pharmacies under the current regulatory scheme and the actions that can be taken against PharmaCARE

Typically, the state boards of pharmacy are the bodies that regulate the compounding by pharmacies. But there is a role of the federal legislation in this regulation of the compounding pharmacies also.

In general the definition of compounding is the preparation, mixing, assembling, packaging and labeling of one or more different drugs that are done according to the prescription of a trained professional doctor who is also authorized to make prescriptions for drugs.

However in some cases a compounding pharmacy can also compound in anticipation of orders for drugs that are based on the regular or routine patterns of dispensing of drugs. This would mean the pharmacy compounding the drugs even before the prescription is to arrive (Fda.gov, 2015). However there are laws in many states that prevent compounding pharmacies from selling a compounded drug to another pharmacy or a wholesaler.

Most of the states while, following the federal laws and regulations for compounding pharmacies, the state boards of pharmacy are primarily responsible for the enforcement of the regulations ('Sterile Compounding...How Do We Avoid Another Compounding Debacle?', 2014).

However in 2013, after a spate on health related incidents from suspected faulty compounding by pharmacies, the federal government enacted the Drug Quality and Security Act that empowers the Food and Drug Administration or the FDA to conduct regular inspection of the compounding pharmacies. However the federal government, through the FDA, would only be empowered to inspect those pharmacies who voluntarily register with the body (Ncsl.org, 2014).

PharmaCare would definitely face the legal consequences from the ensuing breach of ethics where the company ignored direct indications of instance so heart attacks related tp the drug AD23. Even after PharmaCare sold off CompCARE to another company, the responsibility of the dangerous side effects would rest with the company that prepared the formula for the drug. The present company could also be legally pulled up for ignoring the indicated heart attack deaths related to the drug and continuing to sell and market the drugs for profits. The internal memo about this can be ample proof for bringing the company to books.

4) PharmaCARE's claim to its own intellectual property and if John has any claim to being the true "inventor" of AD23

The patent law of U.S. would ensure that PharmaCARE can protect the new drug for intellectual property. The patent law would provide the company that no one else can claim rights for inventing the drug as well as prevent o the drug manufacturing companies from duplicating the drug. This means that the company would have complete monopoly rights for the idea and the invention of the drug AD23.

The idea of granting monopoly rights have been adopted and recognized in the U.S. since the adoption of the United States constitution. Section 8 of Article 1 of the constitution elaborates this concept. The section states that the U.S. Congress would have the right to grant authors and inventors the exclusive rights to the writings they produce or the invention thy make.

Drawing evidence from the above mentioned section, the system of patents in the U.S. is governed by the Patent Act (35 U.S. Code). The act also established the United States Patent and Trademark Office or the USPTO (Macedo, 2011).

The patent right that is granted in the U.S. is not in the sense of owner of the patent to make their own invention. It is rather intended to prevent others from copying the same intervention and exclude others from using, selling, or importing the invention. The right of the owner of the patent depends on what right other people already have under whatever general laws might be applicable in the U.S. And at the point in time. In the case of pharmaceutical companies, there can be antitrust laws by the FDA that can prevent granting of patents (Macedo, 2011).

According to the U.S. patent law when an employee is engaged in a company and if it is not otherwise mentioned in the employment contract, the inventions and the discoveries that the employee makes while at work and by suing the facilities granted by the employer, the rights to the invention would rest with the employer.

However in contrast to the copyright laws of the country there are no specific federal laws that detail the compensation to be paid to the employees engaged in the invention. Therefore it is obvious John does not have any legal rights to compensation for the invention. However the employer can compensate John by a cash reward and recognition for the invention. John can also be compensated by granting him apart of the revenue earned or a royalty for the invention. The third way that John can be compensated for the invention is by granting him special status or joint recognition for the invention (Marx, 2013).

5) Summary of a current case of intellectual property theft

The recent case between Oculus VR and its founder Palmer Luckey vs. ZeniMax Media is a classic case of allegations of theft of intellectual property rights. The case is related to the infringement upon the intellectual property in the development of the Rift virtual reality headset that the suing company claimed to be their property (Gamasutra.com, 2015).

Game maker Id Software that had produced games like Doom is owned by ZeniMax Media. The company also owns other game companies like the Bethesda Game Studios, the makers of The Elder Scrolls.

The case came to light in 2014 after a law suit was filed in court.

The allegations were hat the one time co-founder of Id Software, John Carmack, was instrumental in the development of the Rift headset even while he was still employed at the ZeniMax. Carmack was hired by Oculus CTO for the project but he had not quit ZeniMax while he assisted in the development of the headset (Gamasutra.com, 2015).

The allegation in the 46 lawsuit, filed in the U.S. District Court for the Northern District of Texas was that until the arrival of Carmack, the development of the headset was in a primitive stage and very nonprofessional. It is claimed in the lawsuit that Carmack helped to change the Rift headset from a mere idea and a primitive type of a machine into the final product that it is today. This Carmack did while he was still employed at the ZeniMax.

The actual allegation in the law suit is that Oculus VR and its founder Palmer Luckey had stolen and utilized the secrets relating to virtual reality technology that was owned by ZeniMax and is considered to be the trade secrets of the company. This has the effect of infringing on the copyrights and trademarks of ZeniMax.bthe suit alleges that Carmack persuaded some of the employees of ZeniMax that helped develop the Rift by adding physical hardware components and by the development of some specialized software to make the headset operation in the way it is today (Gamasutra.com, 2015).

Oculus VR was eventually acquired by Facebook in March 2014 for an estimated deal of approximately $2 billion that comprised of handing over of 23.1 million shares in Facebook common stock along with and $400 million in cash. Therefore this is now a high profile case where the Facebook in involved after having taken over the company.

The allegations are that intellectual property for the fundamental technology that drove the Oculus Rift headset since its beginning was provided by ZeniMax and this was done in a clandestine manner without the approval of the company and thus infringed on the copyright of the technology (Sarkar, 2014).

It is obvious that the image of Oculuc VR had taken a beating following the law suit. The company had been ahcrged with treason and hence it had lost its credibility. It was driven to at extreme position so much so that it had to finally yield in to Facebook and sell the company. On the other hand Facebook is on a much stronger ground in terms of the financial capability to settle the matter out of the court as well as in terms of a very strong brand image to mitigate the threats from the lawsuit and the ensuing criticisms.

6) The potential issues surrounding the death of John's wife and other potential litigants against PharmaCARE as a result of AD23.

The case of the death of John's wife is a case where the drug manufacturing company can be dragged to court for suppressing the harmful side effects that are associated with the drug AD23. John and the many other cases like that can take PharmaCARE to the fcourt for not mentioning the possible harmful effects that the drug would have on a patient. The harmful effect in this case was detrimental as more than 200, including John's wife, died of heart attacks after using the drug (Accessdata.fda.gov, 2015).