Ethics and Competition in the Pharmaceutical Market

by Danielle Collazo, Featured Contributor

Competition within an industry can force to corporations to succumb to unethical practices in order to maintain a sustainable profit margin and retain market share. Ethical dilemmas in the healthcare industry are especially sensitive as human lives are at risk; nonetheless, competition in the pharmaceutical sector is vast, and among top industry players is a plethora of resources and power. Within the pharmaceutical industrEthicsy, common unethical practices include the manipulation clinical trials to produce a favorable outcome, avoiding disclosure of undesirable study results, and controlling third-party research and academia organizations through payoffs, among others (e.g., promoting off-label drug use). High research and development costs coupled with a sense of urgency to be first to market has led drug companies to neglect core values and social responsibility, which pressures competitors to do the same; this chain reaction diminishes prescribers’ confidence and some cases results in patient deaths. The trade organization Pharmaceutical Research and Manufacturers of America is the largest lobby group in Washington and seeks to press Congress to pass legislative acts in favor of pharmaceutical companies.

Government organizations, such as the FDA’s Center for Drug Evaluation and Research (CDER) oversees and reviews research for drugs in development with the mission to prevent “quackery” of pharmaceutical companies’ data and is tasked with continuously improving oversight processes to ensure that drugs are safe, effective, and all side effects have been evaluated. However, for the pharmaceutical industry to develop organic ethical practices, it is the responsibility of senior leadership within the industry to utilize internal compliance and audit committees to proactively monitor development activity and enforce consumer safety as the top priority to maintain a level playing field in which companies can simultaneously embrace ethics and competition.

Drug development is estimated at $800 million and the longer it takes to bring a drug to market, the more prolonged until a return of investment is seen. Inaccurate data submissions can cost a company as much as $100,000 for a rewrite, highlighting the importance of ethical reporting and quality control. Similar to other industries, the first player to launch a new, novel product can set a favorable market price, but increased competition quickly drives average selling prices down. Patent rights expire after seven years, so there is a limited time frame to incur maximum profits, and drug companies may face an ethical dilemma between rushing a drug to market to maximize profit and taking the necessary steps to ensure that it is safe to prescribe to patients.

Pharmaceutical companies frequently use medical journals to report favorable clinical trials; in one study, manufacturer-funded clinical trials were “four times more likely to have results favorable to the company” compared to studies conducted by independent sources, and >60% of published trials are funded by industry (Smith, 2005). This creates a conflict of interest for journal editors to accept publishing questionable trial data to meet their year-end sales goals, especially since pharmaceutical companies are willing to pay high prices to have favorable trials published. Journals funded by industry players include Annals of Internal Medicine, JAMA, Lancet, and New England Journal of Medicine.

In 1980, President Ronald Reagan passed the Byah-Dole Act, allowing pharmaceutical manufacturers to use research institutions and academic centers for patent discoveries, through public funding from the National Institute of Health (NIH). Unethical competition has provoked the industry to offer astounding consulting fees to key opinion leaders in academia and the NIH to conduct their studies, as an attempt for manufacturers to gain control of the way the research is being performed.

The Orphan Drug Act of 1983 was passed in order to encourage pharmaceutical companies to develop drugs for rare diseases through incentives and a more lax approval process. In 2008 alone, 25 orphan drugs reached sales over $100 million, benefiting the drug companies that developed these blockbusters with public funding. Data revealed that orphan drugs were frequently approved with fewer outcome studies and clinical research, calling for an increased investment in post-market research funded by manufacturers.

Establishing Ethical Culture in Competition
The FDA needs to regain control and remove bias toward the deep-pocketed industry, starting by better scrutinizing the industry’s research studies. Further, medical journals need to improve their process for reviewing drug study protocols and make the sponsors clear to readers, increasing their accountability for the accuracy of the claims they publish.

Reforming the life cycle review and requirements of drugs by the FDA can help track the success rate of recently launched drugs. Reforming the Orphan Drug Act could benefit patients and payers by improving post-market study protocols and requiring orphan drug manufacturers to pay back a portion of their government-subsidized research in order to fund further research. Price regulation on orphan drugs could ensure that all eligible patients can afford and obtain the drugs as well.

Companies can achieve a high level of ethics internally through development of a strong Board of Directors and Audit Committee, by which a compliant, patient-centered tone at the top permeates into all departments and franchises within the company. The frequent fine drug manufacturers incur related to false claims and inaccurate data are perceived as operating costs, and rarely exceed the profits companies see from promoting unstudied, off-label use of their drugs (e.g., Eli Lilly’s Zyprexa, GSK’s Paxil and Avandia). To achieve ethical competition, the pharmaceutical industry needs reallocate funds used for advertising, consulting, and unethical practices to develop high-quality, effective drugs in which comparative effectiveness is significant and achieved through fair and scrutinized studies. Failure to do so will likely lead to doctors’ skepticism of prescribing patients new drugs and patents turning to alternative, natural therapies which pose less risk and uncertainty.

The Truth About the Drug Companies: How They Deceive Us and What to Do About It (Hoey, J)
Ethical considerations in orphan drug approval and use (Kesselheim, A. S.)
Medical Journals Are an Extension of the Marketing Arm of Pharmaceutical Companies (Smith, R.)


Danielle Collazo
Danielle Collazo
DANIELLE is a Biotech consulting industry professional with a passion for business integrity and compliance. She currently supports the CEO of a boutique biotech consulting firm in company operations, training, and market research. Danielle graduated with a Master's in Business Ethics and Compliance (GPA: 3.94) from New England College of Business in 2013 and attained My BA in Communications from SUNY Albany in 2009. Her areas of specialty are strategy, problem solving, implementing contingency/remediation solutions, and strategies to create a compliant corporate culture. She grew up on Long Island and currently lives in the greater Boston area.

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  1. Great article. I worked for many years with the Pharmaceutical Industry. I had our CTO work with me on potential solutions to the problems associated with Off- Label Marketing. In a conversation with a CFO at a very large Pharmaceutical Company,we discussed technology solutions to possibly eliminate the problem and the resulting fines levied. He sent us to the the head of Marketing, who asked us how we got in to see him while denying they even had a problem in spite of the newspaper and magazine articles to the contrary. The first step in fixing a problem is acknowledgement that a problem exists,