The United States is home to some of the biggest pharmaceutical companies worldwide. Therefore, it’s no doubt that Americans have access to one of the most advanced healthcare systems in the world. However, these very people also have long-standing issues with their pharmaceutical system.

From issues in drug pricing to illegal marketing tactics and prioritizing profit over patient safety, the so-called big pharma is not a stranger to these allegations.

In fact, the federal government has also taken notice of these issues in many instances. For instance, the U.S. Department of Justice made pharmaceutical giant Johnson & Johnson pay billions in criminal and civil fines after the company engaged in illegal marketing tactics to promote off-label uses of its antipsychotic drug called Risperdal.

Aside from causing gynecomastia or male breast growth, this allegation was also cited in several Risperdal lawsuits filed in the court. However, this is just one of the many issues that the pharma industry has faced or is still facing today.

Read on to learn more about the ethical issues that continue to rock the pharmaceutical industry to this day.

How big is the drug industry in the U.S.?

The American pharmaceutical industry alone holds almost half of the global pharmaceutical market. In 2019 alone, the country generated over $490 billion of revenue.

But what does this mean for American consumers?

Unfortunately, they can suffer from the consequences as pharmaceutical spending in the U.S. continues to be on the rise.

In fact:

By 2023, it’s projected that Americans would spend anywhere between $635 and $655 billion on medicine. Compared to 2019, this is a 29.6 to 33.7% increase in pharmaceutical expenditures.

To better understand how massive this spending is, China, which comes in second place in drug expenditures, is expected to spend $170 billion in the same year of 2023. That’s not even one-third of the expenditure in the U.S.

Moreover, five of the world’s top ten pharmaceutical companies are headquartered in the country. These are all multinational corporations but run their operations worldwide from the U.S. These top five companies based on revenue include:

• Johnson & Johnson (1st)
• Pfizer (3rd)
• Merck & Co. (6th
• AbbVie (9th)
• Abbott Laboratories (10th)

However, as the country remains on top as the largest market for pharmaceutical products in the world, U.S. drug companies have also been involved in some of the biggest ever pharma lawsuits based on settlement amounts.

Of the top ten biggest ever suits in the pharmaceutical world, these American companies were involved in six:

• Pfizer ($2.3 billion in 2009)
• Johnson & Johnson $2.2 billion in 2013)
• Abbott Laboratories ($1.5 billion in 2012)
• Eli Lilly and Co. ($1.4 billion in 2009)
• Merck ($950 million in 2011)
• Amgen ($762 million in 2007)

And this is where things start to go south. As different companies get caught in scandals and issues, ethical concerns are on the rise. As it turns out, the pharmaceutical industry has faced several challenges in ethical aspects.

Ethical Issues in the Pharmaceutical Industry

In many businesses, the goal is to sell a product to satisfy demand. A certain company’s objective is to gain profit without breaking the laws of the land. This is generally accepted in the world of business and rarely raises questions on ethics.

Ethics is a set of moral principles that affect how people make decisions and lead their lives. It is concerned with what is morally good and bad in the world. And even though putting profit first is a common scenario in several businesses, there are industries in which social welfare is expected to be prioritized over profit.

The pharma industry is one of them. However, in recent decades, we have seen this industry fail over and over again in upholding its ethical responsibility to the public. Ironically, an industry that’s responsible for people’s health and wellbeing has major problems with its ethical practices.

Drug Pricing

Several price gouging incidents took the pharmaceutical world by storm. One instance was in 2016 when Mylan Laboratories hiked EpiPen prices by almost 600% in less than a decade.

EpiPen is the brand name of a medical device used for injecting the drug epinephrine. It is a life-saving medication used in emergencies to treat very serious allergic reactions to insect bites, foods, and other drugs. A sharp increase in EpiPen’s price between 2009 and 2019 sparked outrage. A set of EpiPens, then sold for around $100, now costs $600.

The incident also prompted debate over whether the pharmaceutical company acted unethically. Because as it turns out, aside from drug price increases, Mylan also cemented the market dominance of EpiPen by expanding its marketing efforts for epinephrine as a whole. The company’s CEO, Heather Bresch, blamed the price gouging on American healthcare.

As with several other pharma execs before her, she argued that the profit goes into research and development for the drug as well as product marketing. Here’s the catch, though: epinephrine, the drug administered by Mylan’s EpiPen, is the same drug that has been used for the treatment of allergic reactions for decades.

Questionable Marketing Tactics

Marketing and promotion make up a huge part of the activities of drug companies. In fact, research suggests that the amount of money spent on marketing is far more than what’s being invested for the research and development of a drug.

A 2008 study estimated that the drug industry spent a whopping $57.5 billion in 2004 on marketing in the U.S. alone. That’s almost twice as much as was invested in research and development. Moreover, some companies’ marketing tactics have questionable ethical standards and could potentially jeopardize patients’ health.

For instance, drug promotion and marketing often involve advertising, gift-giving, and offering financial support for medically-related activities like travel to meetings. In this ethical issue, healthcare professionals are almost always involved.

This raises questions about whether there’s an association between the pharmaceutical industry and doctors, and whether this alleged financial association affects doctors’ prescribing habits.

A study from the University of Toronto showed that within a year, psychiatry residents and interns attended over 35 meetings and 70 drug lunches in which they received up to 75 promotional items and $800 in gifts. In different surveys, however, physicians often deny that these gifts influence their behavior. However, other surveys indicate that this is far from being the case.

For instance, a survey including 120 physicians in Cleveland, Ohio, indicated that those who met with pharmaceutical representatives were 13.2 times more likely to request that the company’s products be included in their hospital formulary. Meanwhile, physicians who accepted money as speakers were 21.4 times more likely to do the same. Lastly, those who accepted money to conduct research were 9.2 times more likely to do so.

The study authors concluded that there is a “strong, consistent, specific and independent” association between physicians’ requests that the drug be included in the hospital formulary and dealings with drug companies.

Taking Advantage of Patent Laws

A patent is an intellectual property right that offers protection for any novel invention. In the case of the industry, some drug manufacturers tend to patent features of medications that don’t represent real innovation. The abuse of patent laws also enables monopolies and prevents competition in the drug industry.

For instance, AbbVie Inc.’s rheumatoid arthritis medication Humira (adalimumab), the world’s top-selling prescription drug with more than $12 billion in U.S. sales each year, was first approved in 2002. Today, it makes more money than all of the NFL teams, combined.

The drug’s initial patent expired in 2016. However, three years before its expiration, the drug company applied for and obtained over 75 patents that would extend its monopoly for up to 2034.

Another instance of a company manipulating patent laws involved Valeant Pharmaceuticals International, Inc. The drug company has been accused of price gouging, a secret network of specialty pharmacies, as well as fraud.

When former CEO Michael Pearson joined Valeant in 2008, he adopted a new business model for the company. Instead of investing billions of dollars for the development of a new drug that may be rejected by the U.S. Food and Drug Administration (FDA), he thought of acquiring companies that currently hold drug patents.

He believed that by acquiring these companies, he could drastically increase their drug prices, potentially raking in hefty profits. And since the company owned a patent, there would be no competition in the market to keep prices low.

Pearson immensely slashed Valeant’s budget for research and development. Instead, he focused on acquisitions to gain profit. His plan was successful at first, as he was able to raise the company’s stock to a high of $262. However, in the process of acquiring these companies, Valeant accumulated substantial debt.

In the end, this debt, along with the company’s shady business practices, made Valeant’s shares plummet.

Industry Funding of Clinical Trials

A clinical trial is important in evaluating the safety and efficacy of new drugs or other medical devices. It becomes a potential issue, however, if clinical trials are funded by pharmaceutical companies with a financial interest in the outcomes of these trials.

Moreover, scientists who conduct and evaluate these clinical trials also often receive monetary compensation from the drug companies involved. The potential concerns that these arrangements might raise were explained in a JAMA article.

According to the article, one question that should be asked is that if individuals with financial stakes in the products being evaluated should be involved in clinical trials that test the products’ efficacy.

Moreover, unlike publicly funded research, industry-funded trials may be negatively affected by business interests. For instance, several trials supported by the pharmaceutical industry are often prematurely terminated for financial rather than scientific or ethical reasons.

One study argued that this practice “dangerously implies that business needs can override both scientific intent and the ethical obligation to patients already randomized.”

Is something being done?

There have been many attempts by the government to regulate the pharmaceutical industry and its shady practices. For instance, in recent years, state policymakers have proposed statutes aimed at curbing the influence of industry payments and gifts in physician practices.

Other states have also enacted “sunshine laws” that require drug companies to disclose payments or gifts to physicians. These laws often require disclosure of information such as consulting payments. However, the legislation still contains significant exemptions. Some of its critics also question the laws’ efficacy.

There’s no doubt, however, that government regulation can be highly effective in changing the behaviors of the industry. The mere thought of scrutiny by the federal government can motivate changes in some practices by the industry, as seems to have happened when the media and policymakers took notice of industry behaviors.

Still, lawmakers must weigh the possible benefits and costs of a policy to determine whether federal legislation will be in the best interests of the public. In the case of pharma companies, their policies should support research and development while making sure that consumers have easy access to the medications that they need.

The Bottom Line

The U.S. pharmaceutical industry is a significant component of its economy. By being the largest market for pharma products in the world, it carries huge responsibilities for American consumers.

And being an industry that’s expected to prioritize people’s well-being over profit, it also faces ethical issues that are different from other industries. However, in recent decades, numerous drug companies have been caught in several issues, scandals, and even lawsuits that show how business ethics may be slipping in many of these companies.

Moreover, although many legislations have already been passed to address these issues of unethical practices and shady behaviors, there’s still more work to be done. The ethical issues that the pharmaceutical industry is caught in demonstrate the need to restructure the industry.

One of its biggest problems is the lack of competition in some life-saving drugs. In many cases, this lack of competition makes companies raise drug prices to obscene levels. Ultimately, this practice prevents patients from having easy access to the medication they need to survive.

More policies should be implemented to achieve fair pricing of drugs. And until the pharmaceutical industry accepts its moral duty to provide people with drugs that they need for their wellbeing and not merely seeing these drugs as a means of gaining profit, government intervention is still necessary to achieve this goal.

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