This paper analyzes the ethical failures of Express Scripts, a pharmaceutical benefits management company founded in 1986. Despite steady earnings growth, the company became embroiled in several serious ethical controversies, including encouraging physicians to switch patients to generic drugs while billing insurers at brand-name rates, targeting senior citizens with misleading mail-order drug programs, engaging in unauthorized billing practices, and failing to protect millions of customers' personal health records from hackers. The paper argues that a corporate culture focused exclusively on profit — reinforced by lavish executive compensation — allowed these violations to persist, resulting in multi-state legal settlements and widespread consumer harm.
Over the last several years, the issue of ethical business practices has been consistently brought to the forefront. Part of the reason for this is the various loopholes that many corporate executives have exploited to maximize their profits, utilizing a number of questionable tactics to achieve their objectives. A telling example can be found in the case of Express Scripts, a company that wrestled with a number of serious ethical controversies while simultaneously awarding its CEO a compensation increase — from $340 thousand in 2008 to $10.6 million in 2009 — with a total compensation package valued at $34 million (Brin). This is significant because it underscores how, during a period of documented unethical business practices, the company was rewarding its officers with lavish pay packages. Such a standard within the organization effectively incentivized unscrupulous behavior as a means of improving the bottom line.
Examining the business model of Express Scripts and the various ethical issues the company faced provides the clearest insight into how these practices were used to drive profits at the expense of customers and the public interest.
Founded in 1986, Express Scripts is a pharmaceutical benefits management company whose primary objective is to provide consumers with affordable solutions for purchasing prescription drugs. Based in Saint Louis, Missouri, the company achieves this goal through a database service that works in conjunction with pharmacies, healthcare providers, and HMOs. The service provides detailed information on prescription drugs, available generics, cost-saving opportunities, and a wide variety of drug options. This information is available to members of health organizations that maintain an alliance with Express Scripts ("About Us"). The platform is designed to give health organizations an effective way to manage their operations while also supplying consumers with information about prescription and generic drug options.
When examining the company's overall earnings trend, it is clear that revenues rose dramatically between 2004 and 2009 — growing from $0.98 per share in 2004 to $3.58 in 2009 — with analysts at the time estimating earnings of $4.95 for the following year ("Earnings Estimates").
Despite the company's stated dedication to helping clients and consumers, Express Scripts became consumed with increasing its bottom line at all costs. This pattern is evident in four distinct incidents that occurred over a period of several years: billing fraud through drug switching, predatory sales tactics targeting senior citizens, unauthorized billing practices, and improper handling of customer information.
The drug switching controversy is perhaps the most egregious example. Express Scripts encouraged healthcare providers and physicians to intentionally write prescriptions for generic drugs rather than the more expensive, patent-protected brand-name equivalents. The stated purpose was to generate cost savings for plan members. However, the company did not pass these savings on to customers; instead, it recorded the savings as profit and billed clients at the higher rate for the brand-name drugs (Edward). As a result, 28 states sued the company for this ethical and legal violation, and Express Scripts ultimately settled with multiple state attorneys general for $9.5 million.
Washington State Attorney General Rob McKenna commented on the settlement: "Doctors and patients need to be told the truth about how their prescription drug choices will affect their health and their pocketbook. Today's settlement with Express Scripts is part of our ongoing efforts to ensure that pharmacy benefit managers conform to the ethical business standards that all of us deserve and expect" ("Attorney General McKenna Announces Express Scripts to Pay $9.5 Million"). The settlement underscores a troubling pattern: the company had abandoned its focus on providing accurate and cost-effective service in favor of profit maximization. The willingness to settle — rather than contest the charges at trial — strongly suggests the company knew its conduct was indefensible.
"Mail-order program complaints targeting elderly customers"
"Unauthorized charges and billing misconduct examples"
"Hackers breach records; extortion attempt goes undetected"
Express Scripts engaged in a pattern of activities that brought its overall ethics into serious question. The most notable incidents include billing fraud through drug switching, predatory sales tactics aimed at senior citizens, unauthorized billing practices, and the mishandling of customer data. These events are not isolated; their consistency points to a corporate culture in which top executives incentivized unethical conduct as a means of maximizing profit. When caught, the company paid relatively modest fines and returned to business as usual — a dynamic that offered no meaningful deterrent against future violations.
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