Ethics of Pricing Drugs

8/13/2019 Ethics of Pricing Drugs

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Prepared by:AnuradhaNavya

SarikaVishal


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Ethicality of various issues such asTaking advantage of physically vulnerable people

Provide a great service to humanity by developing drugs for many diseases,should we expect them to adhere to the strictest moral guidelines?

OR like other businesses, have one ultimate goal in mindto make money

???Charging people whatever they are willing to pay - is it acceptable?

Could pharma companies deliver less expensive drugs without sacrificing

R & D?

What would you call an unethical price or unreasonable profit?

Point to ponder:

Pharmaceutical companies are intrinsically different from most otherbusinesses because many of their products are necessary for survival,which makes them providers of indispensable healthcare.


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45 million Americans,including 11 millionchildren, who arecurrently un-insured

Many health insurancecompanies are decreasingthe benefits of itsmembers

Employers are evencompletely droppingmedical benefits


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Azidothymide (by Burroughs-Wellcome Company) treatingcomplications from AIDS - $6500 a year same as an expensive cancertherapy

Arguments by BWC to justify the price: High R&D costs fundamental principle of Free Market economics - high risk deserves

high rewards

Threat of obsolescence Proceeds from sale of AZT would be used to finance other AIDS drugs

Soon, a superior 2ndgeneration of AZT would make the current one obsolete

Patent expires -> market share of AZT would fall due to generic competition

Compensate for many commercially unsuccessful drugs

Point to ponder:Last year, the average pharmaceutical company earned $36 millionmore than was needed to pay off R&D costs for each new drug. Theexcess profit was claimed to represent about 4.3% of the price of eachdrug.

-Ann-Marie McIntyre, Key Issues in the Pharmaceutical Industry


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AZT (by Burroughs-Wellcome Company) treating complications fromAIDS - $6500 a year same as an expensive cancer therapy

Arguments by BWC to justify the price: High R&D costs

Threat of obsolescence

Proceeds from sale of AZT would be used to finance other AIDS drugs Soon, a superior 2ndgeneration of AZT would make the current one obsolete

Patent expires -> market share of AZT would fall due to generic competition

Point to ponder:

Last year, the average pharmaceutical company earned $36 millionmore than was needed to pay off R&D costs for each new drug. Theexcess profit was claimed to represent about 4.3% of the price of eachdrug.

-Ann-Marie McIntyre, Key Issues in the Pharmaceutical Industry


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Ethical Questions

1 How to judge a reasonable/ethical profit level in case ofvital commodities?

2

Should free market determine the price of essential goods

such as pharmaceuticals?

3 Is it ethical to make profits at the expense of human

sufferings?

4 Should pharmaceutical companies choose humane empathy

and fairness over superior financial performance?


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1 Charging the price determined by the market

forces

2

Free Market Philosophy: Primary duty of

managers is to maximize Shareholders wealth

3 Free Market Philosophy: Managers should not

consider social factors while making decisions

4 Corporate decisions often have powerful social

impact


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5Stakeholder Model: Linking pricing with social

and ethical concerns

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Corporations acting as more responsible social

agents

7 Free Market Philosophy: Corporations are pure

economic agents

8 Hence, Free market policy is not useful for

ethical pricing


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Price determined by calculating Industrys average cost

Impact on inefficient firms with above average costs

Diminished competition, fewer players and higherprices

No real incentives for efficiency and cost controls

Unfeasible solution


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Self-Regulation: The burden of morality and social responsibilitydoes not lie in the marketplace or in the hand of governmentregulation but falls directly on the corporation and its managers

Moral Point of view: Primacy to virtues such as justice, integrity andrespect

Turning from a narrow self interest to a wider interest of others


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Justice is not a part of the virtue, but the whole ofexcellence or virtue Aristotle

John Rawls Theory of Justice

Principles for establishing just

institutions in a society Principle 1: The principle of equal liberty

Principle 2: The difference principle andall the principle of equal opportunity

Each person has an

equal right to the

most extensive basicliberties compatiblewith equal liberties

for all

Social and economic

inequalities are

arranged such that

they are to thegreatest benefit of

the least advantaged

Social and economic

inequalities are

attached to offices

and positions openfairly and equally to

all

DISTRIBUTIVE JUSTICE: Fair distribution of societys benefits and burdens


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Premium drugprices

ArtificialScarcity

Poor and lowermiddle class

unable to availcostly drugs

Inequitabledistribution

Unjustpricing

To explore fair pricing we use the concept of Kantian Personhood and Rawlstheory of Justice

Kantian PersonhoodEqual Worth and universaldignity for all

Self- fulfilment, selfdetermination, ability to liveones own conception of agood life

Respect the same capacity ofself-determination in others

Justice means that Kantian persons are entitled to liberties andmaterial goodsThese are called primary social goods: those which are absolutelynecessary for self-determination and fulfilmentDistribution of primary social goods should be detached fromability and merit

Inequities should not be tolerated if they violate the concept ofKantian personhoodTheir unequal distribution should only be allowed if it benefitsthe least advantaged in the society(difference principle)

Healthcare is a material good, should be detached from ability and merit,

unequal distribution does not help least advantaged in any way


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The just pharmaceutical corporation must be diligent and consider implication of its pricingpolicies for an equitable distribution of products

Demand for justice has to be balanced with economic objectives

Goals of justice and economic viability are not mutually exclusive

Reasonable level ofprofitability

Trust corporations to arrive at their own estimates

Case histories: Hoffman-LaRoche v/s UK Govt.Corporation charged with quoting excessive prices forlibrium and valium. Reasonableprofitsprofits nohigher than is necessary to obtain the desired

performance of industry from the point of view ofeconomy as a whole

For those drugs which are truly essential, the just corporation will aim to charge priceswhich assure largest possible distribution of this product with a reasonable level ofprofitability


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Distributive justice cannot be the exclusive concern in pricing, but must be given its proportionateweight depending on criticality of the drug for patients

What is the nature of the malady?

Is it life threatening or physically and/or mentally disruptive? Does it deprive the afflicted of their physical or mental well-being (e.g. schizophrenia) or is it more of an inconvenience

(e.g. baldness)?

Nature of disease

Do patients have other options?

Is there any other therapeutic recourse?

Is this medication a last resort for the illness in question?

Treatment Alternatives

Are there other drags available for similar effectiveness and if so how affordable are these drugs?

Medicine alternatives

At the planned pricing level will people likely he deprived of treatment?

Price affordability

How "experimental" is this drug considered to be?

What is the likelihood that government agencies and insurance companies will offer assistance so that it can be afforded byeveryone who needs it?

Riskiness

Who is the likely end-user of the drug? The chronically ill? The elderly?

Special consideration should be given to these groups who bear the biggest burden of high drug prices.

End-user


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Premium pricing policy perpetuated byindustry wide peer pressure

No followers for a company which distributes

its products equitably Current impasse can be overcome by decisive

intervention and European Style control

Transcend traditional thinking and bottomline mentality


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Adopt a framework that centers on mutuallybeneficial relationships

Independent government regulators dont have

access to information , Collaborative approachwill ensure the community is well-served


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Healthcare, under primary social goods, crucialfor ones self determination

Distribution not on ones standing in the

community Pharmaceutical firms must impose restraints

on profits for sake of distributive justice

Involvement of government will lead tocumbersome pricing regulations ,in effective inlong run


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Imperative of justice has to be balance withfinancial objectives

The question of how critical the product is,

nature of illness and availability of substitutes Major producers should act in collaboration

with government to ensure fair pricing scheme

If done, promotes common good ,justcommunity and greater harmony betweencorporation and stakeholders


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Is it ethical to profit excessively at the expenseof human suffering?

Should free market, competitive forces

determine the price of essential goods likepharmaceuticals?

Ethics of Pricing Drugs

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