International Legal and Ethical Issues in Business - Research Paper Example

Abstract Drug manufacturers who enjoy an edge in popularity and who have substantial investments in advertising want to stymie generic competition because it can drive down their profit. Barriers are put up to prevent the entry of imported drugs and one such barrier is the requirement for generic branding. One ethical dilemma that can be involved in the requirement to use generic labels is that medical professionals may honestly believe that Prozac is more than any other fluoxetine. Law may compel a medical professional to prescribe fluoxetine when his or her professional opinion dictates otherwise. Background Federal antitrust enforcers are investigating whether a multinational pharmaceutical company has attempted to minimize the impact of generic competition to one of its most profitable prescription drugs. This anti-depressant drug is the company's best seller, with sales last year of $2.11 billion, representing a 22% increase from the year before. The Federal Trade Commission (FTC) is conducting an investigation to determine whether the company has engaged in activities to prevent generic alternatives to the prescription drug from entering the market. Specifically, the FTC is challenging a practice among brand name and generic-drug manufacturers to agree to delay the introduction of the lower priced generic drugs to the market. 1. Why would drug makers want to stymie generic competition? Explain Drug makers want to stymie generic competition for several reasons. One can immediately identify three. One reason is the need to maintain the profitability of business operations. Generic and non-generic drugs usually refer to same drug compound. The main or relevant ingredients are the same for branded and generic drugs. The branded drugs usually rely on the brand reputation that that the drug company has built up for several years. The brand may be associated with quality, reliability, and even good business ethics. Because of the association, some brand even succeeded to become a by-word in the households and certain brands can be equated to the product itself. Thus, emphasizing brands rather than the generic names of drugs will be to the advantage of certain brands. For example, Prozac has been on the American market for at least two decades and having been so, it is one of the most popular anti-depressant in the US market. Generic competition will benefit firms other than Prozac (Tanton, 2009, p. ii). Another reason why some drug companies want to stymie generic competition is that some of they have made substantial investments in building up their brand names. It takes ample investments in advertising for households to become familiar with certain drugs. It also takes significant investment for a drug company to differentiate its products from a competitor---whether the differentiation is real, imagined, concocted, or non-existent. Some drug companies may perceive it as unfair that new drug companies are able to free-ride on the tremendous investments they have made in earlier years for the public to be familiar with their products. Some drug companies are distressed as well that with generic competition, they will be placed at equal par with other drug companies even when they made investments in goodwill or in succeeding in establishing their products as familiar names or brands in the household. Finally, a third reason why some drug firms will stymie generic competition is that they may believe that their brands have real differences with drugs of the same generic names because certain other drugs were added to the main drugs. For example, drugs may have the same basic ingredients but they may differ in tastes or appeal to users and, thus, the differentiation may be real even if they have the same basic or active ingredients. Drugs of the same generic names may have the same active ingredients or main drug but some of the brands may contain certain minute amounts of additives such that drugs of the same generic name may differ in taste, appeal, and speed of absorption by the body. Even the physical appeal of the drug may count and, thus, generic branding can be similar to having all chairs or tables be branded as “chairs” or “tables” when in fact “chairs” or “tables” may be designed differently even if they serve the same functions. The three reasons identified do not exhaust the list but are probably the most important reasons why drug makers would want to stymie generic competition. Among flouxetine generics, for example, Prozac enjoys the edge of being the most popular fluoxetine in American households. 2. What types of legal barriers to market entry exist? The legal barriers to entry confronted by Prozac are the same for other types of goods in the international market. In general, at least three types of legal barriers to market entry exist in the trade of pharmaceuticals. One type of legal barrier to market entry can involve tariff barriers inspite of the existence of the World Trade Organization (Pharmaceutical Services Negotiating Committee, 2010). Another type of legal barrier to entry can be in the form of technical, administrative, and other regulations to entry of drugs (Brenton et al., 2000, p. 26). The legal requirement in some countries for drug companies to brand their drugs based on generic names can be taken as a legal barrier to entry of a drug because manufacturers may be convinced that their drug is different even if the main ingredient is the same. For instance, in our tables and chairs analogy, the chairs may have the same make-up but some of the chairs may be more polished, painted well, or may have been designed better for comfort. Yet, with generic branding, the chairs will be branded as the same because they serve the same function. In effect, generic branding can become a barrier for the entry of better drugs under the same generic name. Finally, the third legal barrier to entry, which is also applied in other products, is that governments may subsidize certain drugs (Public Citizen’s Congress Watch, 2001, p. 7). Thus, generic branding would work against firms who do not enjoy the same subsidy from governments. Especially in Europe, developed nations are not known to have abandoned subsidies. The list of legal barriers to entry is not exhaustive but the three enumerated are probably the main barriers to the legal entry of pharmaceuticals. In the case of Prozac, the most likely barrier to entry imposed is the requirement of some countries for generic labels. 3. What are the possible ethical dilemmas present in this example? There are at least two dilemmas that can be associated with the requirement for generic competition. This applies for Prozac as well as other pharmaceuticals. One type of ethical dilemma that can arise is that physicians may believe that one brand of drug may be the better drug for a certain generic drug class. Yet, he or she may be required by law to prescribe the generic name of the drug rather than the brand name. In a best case scenario, a physician may be required to prescribe both the generic name and the brand name. Yet, it is possible that the physician may have a deep conviction that a certain brand of the drug may the more appropriate drug. Unfortunately, a law may demand that the physician be impartial to competing brands of the drug on the ground that they drugs belong to the same generic name. Identifying what brand name to prescribe represents one ethical dilemma. As Greenberg (2008, p. 547) pointed out, generic substitution does not always makes sense. Not all generics are equivalent (Greenberg, 2008, p. 548). In case of Prozac, for example, one drug information website describes fluoxetine to be containing SOME of the same ingredients as Prozac (www.drugs.com/cid/fluoxetine.html). Of course, while the said information will have to be verified, the information is nevertheless indicative the brand-names and generic names are not always 100% equivalents. Another ethical dilemma that can be involved is whether the physician or medical professional would go to the extent of differentiating drugs of various brand names for the same generic name. The law may constrain the physician or medical professional from doing this but the important ethical principle of doing no harm to patients may be compromised. In other words, this violates the principle of beneficence (Edge and Groves, 2006, p. 65). If medical service is not provided at its best, a medical professional can construe the same as doing some harm to his or her patient or violating the said principle of beneficence. While the two dilemmas mentioned above directly confront a medical professional, however, society may also asked if generic competition would really lead to more benefits for society as a whole or whether a middle of the road solution can be the better solution. Of course, the possible dilemmas are not exhausted and the two serves to merely highlight that ethical dilemmas are involved in the shift to generic competition. References Brenton, P., Sheehy, J., and Vancaurteren, 2000. Technical barriers to trade in the European union for accession countries. CEPS Working Paper No. 144. Brussels: Centre for European Policy Studies. Edge, R. and Groves, J. (2006). Ethics of health care. Thomson-Delmar Learning. Greenberg, P. (2008). Does generic substitution always make sense? Journal of Medical Economics, 11, 547-553. Pharmaceutical Services Negotiating Committee, 2010. Drug tarfiff news: Change to Tegaderm listing. Retreieved 12 August 2010 from http://www.psnc.org.uk/news.php/661/change_to_tegaderm_size_listings Public Citizen Watch, 2001. Rx R&D Myths: The case against the drug Industry’s R&D “Scare Card”. Pennsylvania: Public Citizen’s Congress Watch. Tanton, D. (2009). Prozac: The ultimate deception (It’s risks “far outweigh” any potential benefit). Retrieved 12 August 2010 from http://www.drtanton.com/books/Prozac_TheUltimateDeception_Ebook.pdf Read More