Ethics in the Pharmaceutical sector

At the first GoodCorporation debate on ethics in the pharmaceutical sector the issues of compliance, corporate values and industry standards were widely discussed.

The debate was introduced with a thought provoking analysis by Paul Woods of the main ethical concerns for the industry. Paul opened with his belief that Pharma is now at a key point with important decisions to be made about commercial governance. Some leading industry leaders are stressing the importance of compliance. This involved going beyond laws and regulations, establishing new approaches to stakeholder interactions and of building new relationships built on trust and shared values.  Key messages include that ‘competitive advantage in the future will come by distinguishing a company through integrity’.

One company has stopped worldwide sponsorship of HCPs to attend international congresses, which has stimulated a debate on whether this is a brave, forward-looking move or something on which industry consensus, a collective industry position, should have been sought.

Paul set out his own position that the future for business practices could be primarily driven by values rather than laws. Laws, regulations and ever stricter compliance rules have been useful but more rules are likely to achieve little more. In fact it can be argued that the law is beginning to get in the way of doing the right thing, inhibiting an ethical path forward. Values, set out in internal and external Codes of Practice, but more importantly embedded in company culture could and should define future business activities. An important part of this new position is that pharmaceutical companies genuinely act as responsible partners in healthcare, which many industry leaders are talking about.

Paul took the US as an example of a heavily rules-based environment. Marketing practice is dominated by legal action, which reach the courts often years after the alleged transgressions. Even though several companies have reached settlements in $100s million, cases still arise and from outside it seems that huge fines are not working. The reaction from many companies is to immerse managers in detailed compliance regulations, rather than conducting discussions on ethical dilemmas, which would stimulate much more thought about a company’s values.

Paul believed that that the reason for breaches occurring is not a lack of clarity or knowledge of rules, nor punishments being an insufficient deterrent. It is much more often a misunderstanding of what behaviour is expected and as a result someone making the wrong judgement. Hence the industry would be better driving values-based codes as the dominant governance mechanism on a worldwide basis, while working to develop each individual’s moral compass. Laws and the courts would sit very much on the reserves bench.

As practical approaches Paul suggested using a company’s influence to lobby for some radical changes and expansion in international and local marketing codes, to go where codes have feared to tread, in effect to make the legislation largely redundant. At company level, training should be values based, led by the ethics leaders not lawyers.  The industry should also work with health professionals worldwide to get them to accept joint responsibility for the industry. In particular, the industry should accept that the mega-medical congresses funded by Pharma money have to disappear within a few years.

The discussion opened with a show of hands which revealed that a narrow majority was in favour of sector-wide development of Codes of Conduct rather than individual development of ethical actions by firms.

Those supporting group action suggested that industry-wide codes kept the bar high for the benefit of the sector as a whole and ensured that behaviour is consistent across the industry. Some of the best ethical practices in the US, it was felt, have resulted from legal action that has had a direct and positive influence on industry codes of conduct.

It was also argued that if companies act unilaterally, there could be a temptation to use behavioural decisions as a marketing strategy that can then be reversed in tougher economic times, therefore lowering the standards of ethical conduct. That said, it was noted that many current industry codes of practice pre-date legislation; one of the reasons for the implementation of codes was to enable companies to keep an eye on each other. But experience teaches that codes and legislation cannot stop all forms of bad behaviour.

Where to set the bar was also discussed at some length. Some felt that industry codes needed to be high and challenging, not the lowest common denominator. But others felt that if the bar were too high, it would give big pharma, with substantial resources for compliance, a competitive advantage over small pharma.

Those opposing the notion of an industry-wide approach to codes and standards felt strongly that it should be the prerogative of individual companies to use good behaviour to distinguish themselves from their rivals in a highly competitive market. They also argued that this approach would drive standards higher. Guidelines can be interpreted differently by different organisations, sometimes allowing less ethical organisations to find an alternative way of doing what the standard had set out to prevent.

Looking at the UK market, it was felt that here the industry code of practice was strong.  However, this in turn raises the problem of exporting codes of conduct across international boundaries.  In certain parts of the world it was felt that there was a need for more legislation to support industry codes.

Where the debate converged was over the issue of values. It was stated that all laws come from values-based principles, that shared values should be the basis from which codes of conduct and indeed legislation should be derived.  It was felt that values are independent of resources and can therefore be shared by large and small pharmaceutical companies alike. It was also stated that as laws and codes cannot cover all areas of conduct, ensuring that values-based decision-making is part of corporate culture should be essential.

GoodCorporation’s own work in the pharmaceutical sector supports the view that there are competitive opportunities for companies to obtain from developing aspects of their Codes of Conduct ahead of their industry peers. However, from a society point of view, it is also important that the sector works together to ensure that poor ethical practice is identified and collective action is taken to ensure minimum good standards are in place across the sector as a whole.

GoodCorporation Business Ethics Debate October 2011