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Ethical Issues in Pharmaceutical Drug Pricing

 [Draft] Annotated Bibliographies by Trevor Coffrin

(under supervision of Dr. Chris MacDonald)



1). “Ethics, Pricing and the Pharmaceutical Industry” by Richard A. Spinello

Spinello discusses the merits of both free market and government regulated drug pricing, concluding that each approach has insurmountable problems associated with it: government regulated pricing is self-defeating, and the free market model allows prices to rise to an unreasonable level. Instead, Spinello proposes that pharmaceutical companies adopt a Rawlsian theory of distributive justice. By adopting this theory, life-saving drugs would be considered equal to “primary social goods” that ought to be afforded to every person. Thus, the ethically minded corporation should try to fairly distribute life-saving drugs at a reasonable cost, while still maintaining reasonable profits. Spinello further introduces a model that serves as a guide for pharmaceutical companies to help determine the just distribution of life-saving and non-life-saving drugs.

2). “Beyond Philanthropy: the pharmaceutical industry, corporate social responsibility and the developing world” A report by Oxfam, Save the Children, and VSO.

            This report explores five key areas of responsibility for pharmaceutical companies in dealing with people dying from treatable diseases in developing countries. The five areas are: pricing; patents; joint public private initiatives; research and development; and appropriate use of medicines. This report outlines recommendations for pharmaceutical companies in each of these five areas. This report urges pharmaceutical companies to increase R & D on diseases particularly affecting developing nations. Furthermore, it encourages transparent policies with respect to a wide variety of issues. Concerning pricing, the authors argue for a global tiered-pricing system. The authors argue that as socially responsible companies, drug manufacturers have certain responsibilities to help those that are suffering. The drug companies are in a privileged position to help those suffering and dying in developing countries.

3). Priceless Goods: How Should Life-Saving Drugs Be Priced? by Ian Maitland.

            Maitland argues that market-controlled drug pricing is the most efficient method of producing life-saving drugs. That is, free-market economies produce more new life-saving drugs than any other regulated or controlled system of drug production. Therefore, leaving drug companies free to price life-saving drugs benefits the greatest number of people. Hence, it is the morally superior system. Maitland further argues that pharmaceutical companies are under no greater moral obligation than any other company to provide affordable life-saving drugs: the burden of affordable drugs must rest with all of us.

             Maitland reviews many of the current arguments raised by others, including whether profits of drug companies should be regulated; several key points concerning drug patents; and the issue of publicly funded research and the implication that the public has a right to the drugs developed under such a system. Maitland rejects each of these charges against pharmaceutical companies by referring to his thesis that drugs sold in a free-market economy is the most efficient and ethical of all systems.

4). “Notes on the Ethics of Drug Pricing” by Marc J. Roberts

            A key issue in the debate of drug pricing is whether it is a public or private responsibility to set drug prices. Roberts points out that many would likely prefer such a responsibility to be in the public sphere, due to the fairer distribution of power in government. The inherent problem with the private sphere is the traditional view of corporate responsibility, where CEO’s are expected to maximize profits for shareholders without letting personal ethical beliefs interfere with their decision-making. But, as some argue, the fact that managers have discretion over some personal matters allows the possibility for managers to exercise discretion over their personal ethical beliefs concerning business decisions. One attempt to address this problem is the possibility of creating professional standards of obligations for CEO’s comparable to those of doctors and lawyers. Another approach is the method of “reflective criticism.” Roberts briefly describes this approach as a balancing between moral theories and our intuitions about the implications of such theories as they apply to particular cases.

5). “Affordable Access to Essential Medication in Developing Countries: Conflicts between Ethical and Economic Imperatives” by Udo Schüklenk and Richard E. Ashcroft.

            The authors explore the impediments faced by developing nations in gaining access to life-saving drugs, especially access to AIDS drugs in Africa. The chief impediment is intellectual property rights. While allowances are made through the WTO to permit developing nations to produce their own generic AIDS drugs under special circumstances, these nations have met with resistance by large pharmaceutical companies who use economic threats as a deterrent for the production of cheap drugs. Significantly, Schüklenk and Ashcroft suggest that governments of developing nations might be partly to blame for the lack of access to essential AIDS drugs because of their inability or lack of desire to implement the necessary infrastructure to deliver such drugs. The authors explore four possible ways to solve the problem of high priced life-saving drugs: charitable donations by pharmaceutical companies; price reductions by pharmaceutical companies; public-private partnerships, and compulsory licensing. The first three proposals are rejected, in favour of the compulsory licensing approach. This approach would allow developing countries to produce their own generic brand of AIDS drugs in situations where a national emergency exists.

6). “Are pharmaceutical prices just? A discussion of business, values, and ethics” by Leah J. Rosin.

Rosin reports on the proceedings of a conference held in October 2003, at Santa Clara University, in California. Audience members were critical of the actions of large pharmaceutical companies, citing huge profits, large sums of money spent on advertising, and the general lack of sharing costly drugs with those people most in need. One drug company representative responded by saying that it is not clear why drug companies ought to be considered more responsible for addressing concerns about human pain and suffering in developing nations than other corporations or individuals.

One proposal for dealing with the high cost of drugs and their availability to developing nations was given by audience members: charity groups or governments should buy patent rights from drug companies at a reasonable price, hire companies to produce a generic copy of the drug, and then distribute these drugs to deserving people in developing countries.

7). The Price is Unfair! A Conceptual Framework of Price Fairness Perceptions by Lan Xia; Kent B. Monroe; Jennifer L. Cox. 

The authors offer a brief overview of several theories of justice as they apply to the concept of price fairness. An in-depth account of buyers’ perceived price fairness is given, as well as the various causes and contributing factors of these perceptions. Furthermore, a definition of price fairness is given. Finally, the authors provide helpful strategies to be used by managers in the buyer-seller relationship to address issues of perceived price fairness.

8) Profiting from Pain: Where Prescription Drug Dollars Go by Families USA

            This report outlines spending and profit of nine major pharmaceutical companies in the US during 2001. The authors dismiss arguments by drug companies that high drug prices are needed in order to fund R&D on new drugs. The authors argue that considerably more money is spent on things such as advertising and marketing, rather than R&D. In addition, this report gives a thorough account of compensation packages and salaries of top executives and CEO’s. The authors argue that drug companies could easily lower the cost of drug prices without affecting investment into R&D by lowering salaries of top executives. This report is also critical of the fact that very few of the new drugs on the market represent an improvement over drugs that already exist. Finally, the authors argue for price moderation, and that moderation can only be achieved by increased competition in the pharmaceutical industry. Competition is restrained due to the misuse of the patent system. 



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