Turing Pharmaceuticals Ethical Violations

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Scandals involving corporate responsibility and ethics have recently plagued the business community. For example, the Wells Fargo account scam, the Starbucks case, Volkswagen defrauding carmakers, and the most recent price gouging of the Daraprim drug by Turing Pharmaceuticals through its CEO Martin Shkreli. These blunders demonstrate unequivocally that ethics in the industry are a thing of the past.
It means that people are no longer concerned about ethics when doing business. Instead, they are only concerned about making big money, with little regard for the general consumer’s well-being. To some extent, people can gamble with the lives of other individuals in the quest for making profits, which is the case with the Turing Pharmaceuticals. Therefore, it is significant to incorporate ethics education in our institutions and the places of work to transform the tarnished business reputation on unethical conducts.

Brief History of Turing Pharmaceuticals

Turing Pharmaceuticals is a pharmaceutical corporation, based in Zug, Switzerland. The company was launched in February 2015 by Shkreli Martin where he acquired three primary assets from Orphan Drug developer known as Retrophin (Beck, 2015). The company is named after a British computer scientist Alan Turing. Apparently, the firm has two marketed products, Vecamyl for hypertension treatment and Daraprim for the treatment of toxoplasmosis. In August 2015, the company acquired the US marketing rights to supply Daraprim from Impax Laboratories.

The Turing Pharmaceuticals CEO Martin Shkreli was born on 17th March 1983.In 2004, he acquired a bachelor’s in business administration from Baruch University. After his graduation from university, he became a co-founder of a hedge fund known as MSMB capital management. Afterwards, he turned out to be a co-founder and the chief executive officer of Retrophin biotechnology company. Finally, he founded and became the chief executive officer of Turing Pharmaceuticals, where after some times, he orchestrated a drastic rise of Drug Daraprim price by more than 5000% from an initial price of $13.5 to $750 per pill (Pollack, 2015).

Turing Pharmaceuticals Controversy

In September 2015, Turing Pharmaceuticals through its chief executive officer Mr. Shkreli hiked the price of Daraprim tablet from $13.5 to $750 overnight, an increase of over 5000% (Pollack, 2015). The drug acts as an effective therapy for toxoplasmosis in the patients who have compromised immune system as a result of illnesses such as cancer, HIV/AIDS, among others. In the past, the Daraprim pill price was $13, however, since its patent expired and Turing was the only company that brought it back, the price increased rapidly (Beck, 2015).

In Britain, the pill costs $0.66, and even less amount in India. It has been in existence for 62 years until the expiry of the patent right where Martin Shkreli took over and immediately hiked the price, which makes it clear that the drug was a monopoly (Long & Heather, 2017). Nevertheless, the Turing CEO used this opportunity to enrich himself with abnormal profits, at the expense of the suffering and desperate patients. In fact, there are both legal and ethical dilemmas at this scenario. Apparently, the Turing CEO was the former hedge fund manager, which had another controversial moral issue.

Consequently, the Daraprim drug is the only difference between life and death of the infected patients; hence, making the gouging of the price a serious ethical issue. It brings about the question of the unregulated drug prices in the US, which is contrary to other developed nations all over the globe. Another thing to consider is the employees of the firm, and evaluate on how they responded or reacted to the adverse increase in price for Daraprim. It is unfortunate that no single person in the company did anything to control the malicious price increment. Nevertheless, the employees of the firm had a social responsibility to take moral stands or actions to influence the price.

Stakeholders Affected by Turing Pharmaceuticals Scandal

The price hike of Doraprim affected several groups of people referred to as the stakeholders. The primary group affected is the patients, as they were the first to feel the pinch. In fact, the increase in price drastically increased their cost of living, not forgetting that most of them cannot work to get money for the upkeep and maintenance. Unfortunately, this rise in price could only lead to death because most of the users could not afford the medicine anymore.

Another affected group is the Turing Pharmaceuticals firm. In fact, the company received terrible reactions and responses from the community and the public at large, which thoroughly discredited the enterprise. It is true that for a short period, their profits skyrocketed, however, they declined in the long-run. Besides the patients and the Turing Company, the government of the united states had a significant role in this unethical case. The reason being, they had the obligation of coming in, outlaw the Turing Pharmaceuticals, and create something better to avoid the issue from reoccurring in the future.

Finally, the biotech industry entirely is under evaluation and microscope due to Turing malpractice. In fact, all employees of biotech companies get monitored frequently. Any other stakeholders that might be affected by the misconduct are the other pharmaceutical firms and the patent holders.

The Financial Impact of the Violation

The decision by Martin Shkreli to hastily increase the Daraprim price had financial implications to all the stakeholders. The price hike was an unethical business practice that brought about more harm than good to most of the stakeholders. The condition to raise the prices of each tablet by more than 5000% was a planned deal, where the firm decided to exclude the regular wholesalers and pharmacies from the distribution channel to create a limited competition, substantial for the new price (Court, 2016). Various analysts and countrymen evaluated the scenario, where they affirmed that CEO Shkreli Martin decision was intentional; therefore, unethical, as the firm prioritized profits over the ethical reasoning. The financial impact of the violation includes;

Bankruptcy and financial Annihilation to the Patients

Most of the individuals blamed the government for failing to regulate the pharmaceutical drug pricing. However, it is clear that the company considered profit to be more relevant than anything else, which makes the Turing CEO and other supporting agents of the firm as an egoist. The team intentionally wanted to see people dying due to lack of the pills. The previous patent right owners of Daraprim, Impax Laboratories were resonating and mature enough. For more than sixty years, the Impax Laboratories made sure that are all the patients diagnosed with toxoplasmosis, cancer or aids had better shots in fighting their illnesses by obtaining the pill at a fair price.

The Turing Pharmaceuticals exorbitant prices rendered the citizens helpless at times by which they needed help (Beck, 2015). The company acted unethically by restricting public access to the previously available commodity. Turing puts the pill into a stranglehold, monopolizing it, which altered with the basic medication right of citizens. The CEO of Turing said that they had raised the price to make the company more profitable, and successful. However, the price increase made many patients unable to access the drug. In fact, in a normal circumstance, using a tablet that cost $13.5 per pill, and the price drastically rises to $750, only a few people who can afford to acquire it. Also, those affording it will become bankrupt after some time, where they end up dying hopelessly.

Those companies who supplied the drug with as little as $13.5 remained on the market, meaning, they were able to fund their operations and make some profit. The price increase was malicious, where people cared more on their self-interest by enriching themselves at the expense of poor citizens.

Turing Pharmaceuticals incurred Losses

The expectations of Martin Shkreli was to make abnormal profits out of the clean deal. However, the 5000% increase in the pill price did not bring the company into the black jet as they expected. During their third quarter period that ended on September 30th, 2015, the firm posted a net loss of $14.6 million. The loss in those three months covered the time by which Turing Corporation had acquired the marketing rights to Daraprim, where they picked up the rights in August and raised the price from $13.5 to $750 (Court, 2016). However, by September, the medical regulators wrote a letter expressing their concern, and the news started spreading, bringing a lot of social criticism.

Actions to Prevent Ethical Violation

Government Regulation

The government should come in, introduce and implement some regulations to control the prices of those drugs with the ability to save the human life. The price control would allow every person from every economic status to access and afford the life-saving medicines. Daraprim had been in existence for the last 62 year, with a standard price of $13.50 per pill, which then hiked to $750 per tablet immediately when Turing Pharmaceuticals acquired the patent rights (Court, 2016). The situation expresses a pure greed of money and lack of human decency from the firm’s management.

The Turing Pharmaceuticals CEO does not demonstrate doing the right thing. Nevertheless, he had not applied the utilitarianism theory when making a decision of hiking the prices drastically. The company violated both the antitrust law by raising the price of the essential pill and also violated a fundamental ethical principle (Long & Heather, 2017). The absence of any legal actions and follow through to influence the reduction of price shows the lack of government involvement to control the drug business.

At this point, the government could come in and speak on behalf of the sick citizens. Apparently, the public had raised awareness of the government concerning the unethical and inhumane malpractice from Turing Company. Therefore, it could take stern action against the victims of the scandal, and stabilize the price for the patients to afford.

Involve more Players in the market, to avoid Monopoly

After the exit of Impax Laboratories, Turing Pharmaceuticals became the only business supplying Daraprim to the consumers. In a monopoly market, where there is no government intervention, there is a high probability of the suppliers taking advantage of the situation to enrich themselves. Apparently, in a monopoly market system, the supplier is the price setter, where he can even create a temporal deficit to increase the prices of the commodity.

In the case of Turing Company, the CEO took advantage of exclusive marketing rights to hike the price of Daraprim drug knowing that there was no other alternative for the patients. If there were many players in the market, the company could not think of raising the price of the drug. Therefore, the government could have offered licenses to other traders in the field of medicine.

Application of Utilitarianism Theory of Ethics

There are various theories of ethics which govern most of the people when making any decisions. For instance, the Kantianism theory, which states that one should act rationally, and allow or assist other people to act rationally (Kroll, 2015). Also, the theory asserts that one should respect and mind the well-being of other individuals, and always be motivated by good will. If Martin applied these ethical principles more so the Utilitarianism theory, the case could not have appeared.

The Utilitarianism concept bases its argument on the fact that a person’s happiness is not more valuable than that of the other person’s. The theory emphasizes that any business should aim to maximize the well-being and the happiness of other people, more so the customers in the long-run (Long & Heather, 2017). Therefore, any action or decision that hurts or oppress them in one way or another is unethical. In the Turing case, the price increase brings happiness to shareholders of the company, leaving all the other stakeholders suffering. Therefore, if Martin Shkreli had moral and ethical lessons in his mind; the whole inhuman action could not have occurred.

Establishment of a Standard Pharmaceutical Code of Ethics

Many citizens in the USA believe that the primary objective of pharmaceutical firms is to conduct adequate studies, to identify or discover drugs that are essential to the survival of millions of people. In a perfect environment, the companies entitled to provide pharmaceutical services should establish a working code of conduct, which should govern any player in the field. For instance, in the accounting field, there is a practical code of ethics where failure to follow them results in a severe punishment or action. The code of ethics may be there in the Pharmaceutical industry; however, it may not be that active or cautious enough to follow the proceedings of every member. Nevertheless, in the United States, the pharmaceutical industry is the most profitable business venture; therefore, financial prosperity has a significant influence on how these firms operate.

Legal or accounting Irregularities that occurred

Jacking up Drug Price and Conducting Fraud

The drastic increase in the price of Daraprim is an accounting fraud where CEO Martin Shkreli wanted to enrich himself at the expense of the desperate patients. It is both a legal and unethical practice to take advantage of the suffering party to make unreasonable profits. The price of any commodity should be slightly above the marginal cost, for an ordinary profit. However, setting a price margin of more than 5000% is a fraud by itself, where legal actions needed to be taken.

However, besides the skyrocketing the Daraprim price, CEO Shkreli was accused of frequently losing money for investors, where he lied to them, took their assets from the company and used them to pay off debts. In fact, Martin Shkreli runs his Pharmaceutical firm like a Ponzi scheme where he used the amount from the business to pay off the defrauded investors from the previous company. That’s why the agents of the FBI arrested him at his apartment where they forced him to walk through the gaggle of the camera men outside the FBI Headquarters. Through the federal indictment and a major complaint from the SEC, various authorities claimed that Martin Shkreli started losing cash and that’s when he began to lie the investors.

Antitrust Law violations

Antitrust laws are regulations that apply to all businesses to prohibit various practices that can restrain trade. For instance, price-fixing conspiracies, corporate mergers to eliminate competition or any predetermined actions with the aim of achieving or maintaining a monopoly power. The U.S. Federal Trade Commission started investigating the Turing Pharmaceuticals for possible antitrust violation.

The probe seems real as it occurs with the connection of Turing’s malicious decision of skyrocketing the Daraprim price by more than 5000% because of monopoly power (Beck, 2015). The company through its CEO and the management took advantage of their monopoly in the supply of the Daraprim tablet, and they wanted to maintain it while oppressing the consumers.

Lesson learned from Turing Pharmaceuticals Ethical Dilemma Case

The opportunities for dishonesty and deception surrounds us every day in our lives. In an accounting professional, as individuals, there are decisions that we make about how we conduct ourselves in every situation we face or every interaction make in our workplace. Nevertheless, through allowing ourselves to break or bend the laws governing us, then we end up breaking larger rules that may cause trouble to other people surrounding us and to ourselves. Therefore, it is always substantial to be keen and cautious of all the activities we conduct and maintain the highest morality.

Another lesson is on the importance of utilitarianism theory. The argument is based on the decisions we make as individuals, and the impacts they have on the other people surrounding us. Unlike Turing CEO, as a leader or a manager, the choices we make should maximize the happiness of all the conscious being. In anything that we do, we should consider the feelings of all the stakeholders affected. If the action will turn to be offensive to many people than the favored one, it is better to decline the act. Therefore, it is morally correct to value the emotions and the feelings of every party affected by our choices.

Finally, human decency is incomparable with any monetary gains. That is, the life of a person is sacred, where no any amount of money can equate it; hence, it should be given the highest priority. Any individual should not take advantage of any situation to compromise the welfare or the health status of another person in the name of making a profit. The Turing company did not have a substantial basis of hiking or jacking the price of Daraprim. Instead, they only wanted to make a supernormal profit by oppressing the suffering patients.

Ethics Evaluation and Conclusion

It is clear that Turing Pharmaceuticals was wrong and unethical for skyrocketing the price of Daraprim from the standard price of $13.5 to $750 per tablet. Nevertheless, the malicious decision to raise the price affected so many patients in the United States who were innocent. The actions conducted by Martin Shkreli were out of selfishness and greed, which makes it unethical and immoral. The price increment was unaffordable and unreasonable, not forgetting that the users of the drug needed it desperately to survive.

The CEO of the pill took advantage of the temporary monopoly of the market, where he was also arrogant in the media by stating that any person who disagreed with his lack of human decency was a moron. If the company increased the price of the drug with a reasonable markup, every person could understand the situation. In fact, it is the primary objective of any enterprise to maximize profit, and minimize the cost of production; however, some decisions are oppressive and unjust. Nevertheless, the Turing Pharmaceutical is a moral lesson to all of us, which we need to uphold ethics in any business we conduct, and we should consider the welfare of living beings than anything else.

References

Beck, J. (2015, September 22). The Drug With a 5,000 Percent Markup. Retrieved from: http://www.theatlantic.com/health/archive/2015/09/daraprim-turing-pharmaceuticals-martin-shkreli/406546/

Court, E. (2016, February 4). Here’s why Daraprim still costs 750 a pill. Retrieved from: http://www.marketwatch.com/story/heres-why-daraprim-still-costs-750-a-pill-2016-02-03

Kroll, J. (2015). The Differences Between Utilitarianism & Ethical Egoism. Retrieved from: http://www.ehow.com/info_8662427_differences-between-utilitarianism-ethical-egoism.html

Long, Heather. (2017) “‘Hated’ CEO Lowering Price of $750 AIDS Drug Daraprim.” CNNMoney. Cable News Network.

Pollack, A. (2015, September 20). Drug Goes From 13.50 to 750, Overnight. Retrieved from: http://www.nytimes.com/2015/09/21/business/a-huge-overnight-increase-in-a-drugs-price-raises-protests.html?_r=0

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