Good Example Of Legal And Ethical Considerations Essay

Type of paper: Essay

Topic: Business, Company, Commerce, Drugs, Property, Ethics, Copyright Law, Advertising

Pages: 6

Words: 1650

Published: 2020/12/09


Legal and ethical issues relating to marketing, advertising, intellectual property and product safety are very important and influence the reputation of the company. Many companies claim to be ethical and caring, but in practice it may turn out that they violate some or all the above mentioned issues while conducting their activities. Seeing an opportunity to realize big profits in a short period of time, many companies forget about ethics and do whatever it takes in order to maximize gains. In this essay we shall analyze the case of PharmaCARE and CompCARE – its subsidiary. We will see that both the parent company and the subsidiary violated many ethical and legal issues, and even caused over 200 deaths trying to realize more profit from sales of the new drug. Besides, we will analyze the potential suits against PharmaCARE and examine the whistleblower protection conditions and possibilities.
Ethical standards are very important for business, especially nowadays when information is spread via Internet immediately, and can remain online for a very long time, making it extremely difficult for a company to retain its good reputation after even a minor violation of the ethical norms. Keeping that in mind we still may observe that ethical standards are often violated in marketing and advertising, intellectual property and product safety. The most common reasons for such unethical behavior are the possibility to gain a considerable profit (for top-managers and shareholders) and the pressure of authority and situation (for ordinary employees).
Let us research several ethical issues relating to marketing and advertising, intellectual property and regulation of product safety, and determine whether PharmaCARE together with its subsidiary CompCARE violated any of those issues in their AD23 campaign.
If we start examining the advertising industry, we shall observe that this industry is strictly regulated and it is monitored by the Federal Trade Commission. According to Ingram (n.d.), the most important requirement for advertising is that it has to be truthful, not deceptive and not unfair. Apart from that, advertisers have to pay extra attention to the ethical issues when they advertise products to children, when they advertise potentially harmful products and when they use special psychological tactics to increase the demand for their product. In the case of PharmaCARE it is difficult to determine whether the company violated any of the above mentioned ethical issues relating to advertising. But taking into account the fact that the company sold its subsidiary just a couple of weeks before AD23 was linked to cardiac deaths, we may assume that the company was aware of the possible connection between the drug and the heart attacks and did not warn its patients about this. It that is indeed the case, then PharmaCARE did violate the ethical issue relating to advertising of a potentially harmful product.
As for ethical issues relating to marketing, Sandilands (n.d.) states that person responsible for the marketing campaign for a particular product must be aware of the following: stereotyping (attributing specific roles to particular groups), subliminal messaging (inserting subliminal messages which influence the consumer’s thinking and perception), exploiting social paradigms (certain types of marketing that may be perceived as offensive by some ethnic or cultural groups). Applied to the case of PharmaCARE, we do not observe violation of any ethical issues which were mentioned in this paragraph.
An ethical issue relating to the intellectual property is that it is just and fair that a person who spent time and money for developing a product has a right to receive compensation if other people are willing to use the result of his/her work for their benefit (De George, 2005). At the same time, if the employee made an invention or developed a useful model etc. during the course of his/her work for an employer, it is usually the employer who obtains an intellectual property right for such invention or useful model. In the situation of PharmaCARE it is highly probable that the latter was the case; and apart from that it is mentioned that executives and managers received huge bonuses – it is possible that part of the money was paid as a compensation for intellectual property rights. Thus, from the information mentioned in the case we may conclude that the company did not violate mentioned ethical issues relating to the intellectual property.
Product safety is an ethical obligation of the producer. Gray (2011) states that the company has to provide its consumers a product which is safe for ordinary use. The company should not ignore safety standards even if that means that the company needs to invest more money or time. In the PharmaCARE case we see the violation of this issue. In order to save time (and perhaps money) avoiding the FDA procedures, the company established a subsidiary which was selling AD23 on a prescription basis. The product they sold to their patients was not safe; it had harmful side effects which caused death.
During the past several decades, the amount of Direct-to-Consumer (DTC) drug advertising has increased rapidly; this has its benefits as well as downsides. Ventola (2011) mentions many arguments which support DTC drug advertising, among which are: advertisements serve as a source of medical information to the consumers by mean of which they become better informed and educated in this area; encourages patients to contact their health care providers, clinicians and to improve compliance; promotes competition and lower prices etc. But despite these and several other advantages of DTC drug advertising, in my opinion the disadvantages of this issue are more important. One of the disadvantages of DTC drug advertising is misinforming the consumers by omitting some important information or by including some specific information which is difficult to comprehend for people without a special knowledge. Another downside of DTC advertising of drugs is that it usually overemphasizes the potential benefits of the drug and avoids information about the potential risks. Apart from that DTC promote new drugs before all the potential side-effects of those drugs have been discovered. Besides, DTC drug advertising contributes to the medicalization of the society and encourages drug over-utilization, simultaneously increasing the risk of inappropriate (unnecessary or harmful) prescription of drugs to the patients. DTC drug advertising also worsens the relations between the patients and the clinicians diminishing the patient’s trust in their health care provider’s competence; and it increases costs because usually it is more expensive drugs which have little or no advantage over their cheaper analogues that are extensively advertised. As we have observed, DTC has a great number of disadvantages, and it is necessary to implement certain regulations and remedies is order to make it more beneficial for the consumers (Ventola, 2011).
Under the current regulatory scheme, compounding pharmacies are typically regulated by the federal legislation and by state boards of the pharmacy. The state boards of the pharmacy have different levels of rules and practices as well as enforcement and oversight policies. The FDA is not responsible for regulating compounding pharmacies but it has the right to inspect them. The parties responsible for regulating compounding pharmacies could have inspected CompCARE and could have monitored more closely all stages of drugs production. They could have inspected the drugs compounded by CompCARE and stopped the manufacturing if they discovered that the drug is unsafe (PJRX Group, 2012). Based on the information provided in the CompCARE case, it appears that this compounding pharmacy was preparing and selling bulk orders of AD23 without having individual prescriptions. As a compounding pharmacy it should have been engaged in manufacture and distribution of prescription drugs, but CompCARE exceeded this scope without registering with the FDA. This could lead to legal exposure of this compounding pharmacy due to its illegal practices. With regard to PharmaCARE, it needs to be checked whether this company had a right to provide the databases with personal data of its customers to its subsidiary.
PharmaCARE benefited from the US intellectual property legislation which is transparent and predictable in the process of solving disputes. In the US, intellectual property legislation covers trademarks (protect company’s brand), patents (protect company’s inventions) and copyrights (protect creative expressions). An inventor is the person who dominated intellectually in the process of invention and who contributed to the claims of patentable invention. Inventors who work for a particular company usually assign or sell their intellectual property rights to this company. The amount of compensation depends on the jurisdiction and provisions of the employment agreements (if any); sometimes an employee has to assign his intellectual property rights without any compensation at all. Taking into account the above mentioned, it is difficult to determine whether John has any claim to being the true inventor of AD23; it is highly probable that in accordance with his employment agreement he had to assign all the intellectual property rights to PharmaCARE, maybe even without compensation. Nonetheless, there are many ways PharmaCARE could compensate John for use of his intellectual property, and namely: paying a reasonable fee for the invention, paying royalty for using his invention, paying a certain percentage from the profit realized while selling AD23; recognition and promotion; stock options in the company.
A current example of intellectual property theft is the case of Sinovel Wind Group Co., a Chinese wind turbine maker which was accused of stealing software technology from an American company AMSC. The company filed several suits against Sinovel connected with the theft by the latter of the company’s intellectual property. A former AMSC engineer stole the technology for Sinovel, after which he received a $1.2 million contract and an apartment in Beijing. In June 2013 criminal charges were brought against Sinovel showing that American government is taking measures to protect intellectual property of American companies which are doing business in China, and at the same time suggesting the Chinese companies which are trying to expand their business internationally, that violation of intellectual property rights can have more serious consequences than they are used to having in China. This case had an effect not only on Sinovel’s brand, but also on the brand of Chinese companies as a whole adding to their image of dishonest and unreliable companies which are used to stealing intellectual property with no legal consequences. It is expected thought that this case as well as similar cases will eventually teach Chinese companies to treat intellectual property in a Western way (Ailworth, 2013).
As AD23 was not approved by FDA, potentially John has the right to sue the pharmacy for selling him a drug with a severe side-effect which caused his wife’s death. But it would be very difficult to prove that the pharmacists violated their legal duty of care when prescribing the drug. Apart from that, as John was one of the pharmacists who worked on reformulation of the drug in order to maximize its effect in slowing down the progression of Alzheimer’s disease, the company could file a suit against him as the person responsible for the lethal side-effects caused by the drug he reformulated. Potential litigants against PharmaCARE as a result of AD23 could be surviving family members of other people who died from heart attacks after using the drug as well as the shareholders of PharmaCARE and WellCo, but it seems that none of these potential litigants has a good chance to succeed in the suit against PharmaCARE. The company will probably claim that it is not responsible for any damage because it was not directly involved in the manufacture and sales of AD23.
The major arguments John can make to claim that he is a whistleblower are that his is an employee of the company he is making a disclosure about, and he wants to report the things done by the company which aren’t right, which endanger other people’s lives and which are covered up by the top management. But it is important that he tells the information only to a person or body which is authorized to receive the whistleblower disclosures (GOV.UK, 2015). It this case, the law firm of Dewey, Chetum, and Howe does not seem to be such an authorized body; the firm can nonetheless provide John legal advice how to act in this situation. In general, whistleblowers are protected from litigations for disclosure of information, besides they cannot be dismissed and/or bullied at work for whistleblowing. In case any of these protections is violated, the offender will have to make compensation to the whistleblower for the damage caused.
In conclusion, we may observe that although ethical issues are very important in business nowadays, in practice not all companies act ethically relating to marketing, advertising, intellectual property and product safety. We have discussed the positive and negative consequences of Direct-to-Consumer marketing by pharmaceutical companies and concluded that there is much to be improved and regulated in order for this this type of marketing to bring benefit to the consumers. We observed that compounding pharmacies are not regulated by FDA which leaves them some area for manipulations with the drugs they sell. Besides we have analyzed the benefits of US intellectual property law and several ways of compensating the true inventor for the use of his intellectual property. We have examined a real-world case of intellectual property theft and discussed the potential effects of it on the company’s brand. And finally we discussed the procedure of whistleblowing as well as the protections which are provided for the employees who are disclosing information.


Ailworth, E. (2013, June 30). Theft Case Against Chinese Firm Carries a Warning. The Boston Globe. Retrieved from
De George, R.T. (2005). Intellectual Property and Pharmaceutical Drugs: An Ethical Analysis. Business Ethics Quarterly 15, no.4. Retrieved from
GOV.UK (2015, January 28). Whistleblowing. Retrieved from
Gray, JW (2011). Moral Issues Related to Consumers. Retrieved from
Ingram, D. (n.d.) List of Ethical & Legal Issues When Advertising. Retrieved from
PJRX Group (2012). Regulating Compounding Pharmacies: What Do Pharmacists Think? Retrieved from
Sandilands, T. (n.d.) Markeing Issues That Have Ethical Implications. Retrieved from
Ventola, C.L. (2011). Direct-to-Consumer Pharmaceutical Advertising: Therapeutic or Toxic? Retrieved from

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