Pharmaceuticals The Ethics of Drug Pricing.pdf

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Case Analysis & Report Subject: Ethics & Stakeholder Management Centennial College School of Business2 TABLE OF CONTENTS PREFACE  Executive Summary 3  Background 5 Stakeholders  Prob... lem Identification 7 Problem Statement  Problem Analysis 11 Fishbone Diagram & Analysis  SWOT Analysis 13  Evaluation of Alternatives 14 Pro’s & Con’s of Alternatives  Recommended Course of Action 16  Developing Action Plan 18  Implementation 19  Conclusion 21  References 22 Executive Summary3 This case elicits a classic example of unethical pricing of drugs by pharma giants. It involves the intervention of top management to dominate the price of generic drugs. The most vital character involved in the case is the founder and former CEO of Turing Pharmaceuticals, Martin Shkreli. Turing Pharmaceuticals came into light when it sored its drugs’ price (Daraprim) from $13.50 per pill to $750 per pill in the charge of Martin Shkreli. This decision was made shortly after the acquisition of manufacturing and commercialization rights of Daraprim from Impax Laboratory. Daraprim is a lifesaving drug which is famous in the USA treating toxoplasmosis, this drug comes under the essential list of medicines of World Health Organization and is often used for people with compromised immune systems, including AIDS patients, as well as cancer patients. The immediate increase in price of Daraprim affected the patient as it was very difficult for them to afford at a time the insurance company increased the premium to their members, this sudden increase also affected the insurance companies but as they increased their premiums ultimately the final user i.e. customer was highly affected. This sudden increase in the price of life saving drug had an adverse effect on the reputation of Turing. The company can make good profit by increasing the price behaving unethically in short run, in a long run company’s goodwill is adversely affected continuing such unethical practices for making huge profits in short run Turing may fail in long run. Reputation/goodwill is the most valuable asset of the company. Turing was criticized for its unethical practices. Just because of its high rates it even became difficult for the government to supply it to the lower class. So, patients were highly affected with such increases making it difficult for them to afford and may likely lead to death for many who cannot afford. Unethical decision was made by the management of the company which also includes the CEO like sudden hike in the price of product, boost in the salary and financial discrepancy due to making improper decision and practicing unfair. If such unethical practices continue after such scandal of Daraprim then the company will fail.4 Turing also chose a tighter distribution model for Daraprim which restricted the entry of its competitors allowing it to take monopolistic advantage this made the drug costly. A 5000% increase in price led to a public outcry and discussions between congress members which demanded an explanation for the same from the company. To clear out the elevated issue of price rise, Martin Shkreli voiced the reason for such increase. He mentioned that the companies were incurring losses from the particular product segment. Moreover, he needed funds for research and development of Daraprim to improve its efficacy and reduce its ill effects. Some employees opposed the hike in price fearing criticism by media while some supported it by providing further explanation of such price rise. Many medical institutions warned Turing of advising patients to use XYZ in place of Daraprim indicating the oppose of the hike in price. This all had a negative impact on the valuable reputation of the companies. Turing can reduce the price with help of government grants and sponsorships which can help to save the reputation of the company. Although a price rise for the given reasons is supported but the sudden spike in prices are never a valid reason in case of price of medications as it is a product which can save lives whose worth cannot be determined in monetary terms. Background5 In 2015, Turing Pharmaceuticals came in limelight to increasing the price for one of its important drugs Daraprim(pyrithiamine) to 5000% hike as $13.50 to $750 per pill which comes under essential drugs as this fight to help diseases like AIDS and Cancer. And all this change made by one person Mr. Martin Shkreli the founder and former Chief executive officer of Turing, all media and news channels blamed Mr. Martin in their headlines and news, media started sharing all the stories related to Turing and this drug and they also telecasted the emotional stories of patients. This case created lots of criticism for Health care system of the United States. Mr. Shkreli influenced the distribution model of Daraprim, he controlled the distribution change with lots of imitations and defended his decision with pointless arguments. Shkreli claimed that this decision will help Turing to increase their revenue which can help Turing to fund a research and development model to modernize and invent new highly effective drugs. Martin Shkreli, a school dropout and highly interested teenager in stocks and money, started his career as an intern with Cramer, Berkowitz & Co. But he feels like education is important for his field and he completed his education and earned a business degree from New York’s Baruch college. And he started as a founder of a hedge fund but due to massive loss he closed his firm a year later. Then he tried his luck in a biotech firm named Retrophin Ltd. but was removed from the post after he was caught handling management improperly. And after that again he collaborated with another biotech company Turing. The senior officers of Turing were upset with Shkreli’s decision of price hike in Daraprim and they were more concerned about Turing’s image. The US government demanded to explain the price hike decision in a report with a valid reason. In one interview in New York Shkreli explained that all the extra money of profit they invested in the company's research and development. But then it was a burden on insurance companies as they have to pay for claimed medication for the customers so they hike the premium rates and some companies even removed these drugs from their claim list. A per price watch report of the US government that claimed that from 2006 to 2015 the drugs price increased every year with a remarkable hike according to analysis. Horizon [Show More]

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