Ethical Problems in GlaxoSmithKline (GSK)
Businesses engage in unethical behaviors for various reasons the most prominent being increasing their profit margins. Competition has seen many players get into the market and the urge for cutting corners to beat competition gets overwhelming. This was the case in a pharmaceutical giant- GSK that saw the company admit to being unethical and as a result lost 3 billion dollars in fines. This paper will look at the issue that saw GSK find itself in a precarious position, role of whistle blowers, and how the same unethical practice affected its employees. The paper will end by critiquing the company and its operations.
Summary of the case
According to the Justice Department Website (Justice.gov, 2012), the company pleaded guilty to three counts of criminal liability. In a legal language, the company accepted to be held responsible for unlawful promotion and advertisement of three of its drugs that are in the prescription category, failure to report and disclose some safety data and false pricing. To a layman, those are complicated words that might not mean a lot. To decipher the same case, the media digested the legal language to what a layman can understand. According to the The New York Times (2012), the company commited bribery, encouraging the prescription of drugs not suitable to underage children and failing to report safety problems with one of their drugs (Avandia).
To be specific, the company put the safety and interests of the public behind its profits. In detail, The Guardian reported that the company bribed doctors to prescribe its products to members of the public even when there was no need for the same. To clarify this, the company made doctors prescribe antidepresants to minors, a practice that is often dangerous as antidepresants are highly associated with suicidal tendencies in adolescents and young adults. To ensure that the doctors oblige, the company went out of its way to spend lavishly in a bid to woe them. The Guardian went ahead to explain that the company’s med reps paid kickbacks to doctors who prescribed the drugs. The kickbacks were not just kickbacks, they were exquisite trips to highend resorts in Bermuda, California and as far as Jamaica. If that is not corporate misconduct, I don’t know what is.
Psychiatrists were not left behind in the bribery activities since they were needed to make sure that the antidepresants were consumed by everyone who set foot in their offices. They got flying tickets to five-star hotels in the name of attenting conferences and giving presentations. Entertaintment went as far as fishing, and golfing among others all on the company. As if that was not enough, the company went ahead to manipulate information in medical journals to favor it. Independent doctors got in the company’s payrol to ensure that GSK’s drugs got a positive mention in such journals. One payment could not be assumed, a $275,000 check to one doctor, Dr Drew Pinsky to host a radio show that was popular with listeners and in this case, the drug in question was called “Wellbutrin”. The doctor, on public radio claimed that the drug could treat problems such as weight gain, ADHD and sexual dysfunction among others. It is wise to note that the drug was not approved by the authorities for the treatment of the said complications. The doctor shamelessly said that the drug could deliver 60 orgasims to a woman in a night (The Guardian, 2012).
Doctors were rewarded handsomely by the company for giving talks about the drugs. The handsome rewards were more than what they got in the theatres. “Independent” doctors were paid unimaginable sums of money to produce DVDs which were funded by the company in a bid to convince doctors of the benefits of using the drug ‘Advair’ over what its competitors had. The DVD was shown to doctors for more than 900 times and the producing doctor got rewards averaging more than $1.5 million from GSK. The drug was said to be the best in handling Asthma better than any other in the market while in fact the drug was intended for mild asthma. GSK wanted it prescribed for all kinds of asthma, mild or worse.
Role of Whistleblowers in Exposing GlaxoSmithKline
The government, which was the accuser in the case against GSK did not just find the information that helped it incriminate GSK and recover $3 billion. The company was brought to the limelight by its two former senior marketing officers. What resulted was the biggest whistle blower (qui tam) civil suit. The whistle blowers were Greg Thorpe and Blair Hamrick. In the year 2001, both of them reported to management that there was illegal marketing activities and off-label prescription, the management did nothing about it but instead, they were fired. In essence, the message was clear, GSK was interested in hefty profits rather than public safety and well-being.
It was however surprising to know that the management that Thorpe was reporting to was aware of what was happening. When the whistle blowers decided to get attorneys to represent them, the company (GSK) chose a top executive to oversee an internal investigation that produced nothing to that effect. To me, this was a stunt to induce the whistle blowers that there was something being done but in the real sense, nothing was happening, just the ‘ordinary’ marketing. All this information was filled in court (prnewswire.com, 2012). The website continues to say that as the complaints brought forward by the whistle blowers was under investigation by the government, GSK allegedly forged documents that connected the Food and Drug Administration (FDA) which was the government agency concerned with such matters. The GSK corporate counsel was indicted as a result of those allegations.
The two whistle blowers provided first-hand information and exhibits regarding marketing misconduct according to documents filed by Kenney & McCafferty which was the legal firm representing the whistleblowers. A legal officer in government was quoted by prnewswire.com (2012), saying that insider information provided by the whistle blowers provided more than persuasive proof of GSK misconduct with reference to an asthma drug-Advair. The government was able to recover almost 70% of its $1.017 billion that was in civil settlement out of the asthma drug claims.
When the government discovered that it was being defrauded by GSK by paying more through its Medicaid and Medicare programs, the whistleblower’s information became more relevant. The government was being cheated to pay more for its citizens in those programs and as such, the actions of GSK became actionable in the False Claims Act. The government was being defrauded due to off-label prescriptions and kickback induced prescriptions which are paid for by the government through its healthcare programs.
How Employment-at-Will Affected the Employees and the Company
According to the The National Conference of State Legislatures (2016), emloyment at will is understood to mean that an‘employer can terminate an employee at any time for any reason, except an illegal one, or for no reason without incurring legal liability. Likewise, an employee is free to leave a job at any time for any or no reason with no adverse legal consequences.’ The statement herewith means that the company was at liberty to fire Greg Thorpe and Blair Hamrick at will especially when the company discovered that the two were a threat to the company’s profit making spree, and they were actually fired. Does it end here? Of course not. Every rule has an exception. There are exceptions to the at-will rule and are either common law exceptions or statutory exceptions. The exception relevant to this case is under whistle blowing and it is statutory.
Whistleblowers are supposed to be protected from employment action in case they report a wrong doing on the part of the employer. But how easy is it to implement this? To begin with, the concerned employee will never be comfortable working in an evidently hostile environment while the employer will not be willing to maintain a ‘traitor’ in their payroll. This is what happened to the whistle blowers. According to The Telegraph (2012), the GSK whistle blowers lost their jobs and no other employer was willing to take them on board for the period of 10 years that the case was ongoing. But they were rewarded by the government to a tune of $250 million.
The company lost $3 billion and public trust. It was however interesting to note that the company’s share price rose the following morning by 1.3% (CNN Money, 2012).
The company use of marketing or public relations in repairing damage caused by the reported lapse in ethics
GlaxoSmithKline greatly bruised its reputation with the scandal that hit it about bribing the doctors to prescribe their drugs and giving false information about the properties of their drugs. The malpractice by the company depicted it as not upholding the ethics of an honorable citizenship thereby destroying goodwill with the public. It can be observed that through the past scandals and heavy fines for companies such as GlaxoSmithKline found guilty for unethical practices taint the public perceptions. The feeling of betrayal by the company forces the company to engage in activities seeking to control the damage caused. The GSK television advertisements were found to be deceptive and this eroded the public trust to great extent. This left the company with a bigger problem of deciding how to respond and rebuild this reputation.
GlaxoSmithKline was found guilty in New Zealand for deceptive advertising that was misleading concerning the content of Vitamin C in one of their products. The company engaged in both marketing and public relationship campaigns in attempt to rectify the damages. The company released a statement to the media that indicated that their acceptance of the charges as well as finding that the advertisement may have been deceptive. The marketing approach saw the company remove the misleading claim from the packaging. In an attempt to restore good public relations the company created a 60-second apology commercial (Twomey et al. 2011).
In an effort to create abidance to ethical behavior, the GSK has created reforms in its marketing practices. The changes include changing its pay structure, incentives offered to drug detailing representatives, removing the tie between the sales and the compensation, and the removal of compensation to doctors for their promotion activities to its doctors. While these practices lead to reduced sales level, they were necessary in repairing the torn public trust (Kessel, 2014).
GlaxoSmithKline agreed to execute a corporate integrity agreement (CIA) with the Department of Health and Human Services and Office of the Inspector General. Under the CIA, the GSK would come up with changes in its executive compensation program to allow the organization recoup annual bonuses and other long-term incentives from employees who engaged in significant misconduct. This agreement further required the company to maintain transparency in its research practice and the publication process. The company also agreed to abide by the specified policies in its contracts with health care payors (DOJ, 2012).
Restoring an ethical culture within an organization became a top priority for GlaxoSmithKline. The ethical lapses that the company experienced were a big blow to the reputation of the company with the stakeholders and the regulators. The company needed to check on its value corporate value system that guided the activities of its members. Ethics culture starts with the development of ethical leadership throughout the organization. The GSK needed to put ethical frameworks into the diverse culture. The company needed to shift their attention from gaining profits to satisfying the needs of the patients. The company reduced the shift from creating too much value to the stock’s performance which was a principal way of fostering wrong behavior in the company’s activities (Kessel, 2014)
Critique of the company, its operations, and the ethical dilemma caused
GlaxoSmithKline was found guilty for engaging in unethical malpractices in the promotion for its products. Company admitted three fraud charges that included: promoting off-label use of anti-depressant drugs, withholding important data about drugs and issuing unsupported claims and finally the use if unethical and inappropriate tactics in marketing its drugs to the doctors seeking their approval for prescriptions.
GSK conducted unlawful marketing of the antidepressant Paxil for use on children and adolescents. This marketing and promotion saw Paxil hit the record of top 10 selling drugs earning annual sales of over $1.8 billion. However, all clinical studies conducted on the effectiveness of the Paxil on children and adolescents failed to show any efficacy of this drug on this age group. The drug was approved by FDA for treatment of depression in adults only. The company had manipulated findings to create a picture that that the drugs were as well effective on the adolescents. This represented fraudulent and misleading study which GSK greatly referred to in promoting Paxil for use of this young group of patients (Mercola, 2012). GSK was further engaging in unlawful marketing of antidepressant Wellbutrin used for weight loss and treating sexual dysfunction. The company has contracted a public relations firm to advertise the powers of this drug in helping reducing weight and increasing the sexual function. This drug was promoted as “happy, horny, skinny drug”. This was a fraud as the drug was only approved to deal with depression (Thomas, 2013). The doctors were given sugar coated treat to support this claim. These included expensive entertainment, vacations, high pays for speaking on forums and tickets to Madonna concerts. This represents unethical practices for a company entrusted to produce products meant to restore the health of patients.
GSK further engaged in unethical behavior of withholding safety data from the clinical experience and other sources as law required to the FDA for the diabetes drug Avandia. This drug had been found to be profound dangerous through studies, a fact that GSK kept for themselves for over 10 years. This withholding was aimed to protect the level of sales. The drug was attributed to causing over 83000 heart attacks. The drug that had been launched in 1999 became a hit in the market. By 2006, it recorded annual revenues of $ 3.2 billion. Studies conducted showed that he use of this drug caused 43% increase risk of heart attack and 64% higher risk of cardiovascular death. The drugs had turned to be a killer, something the GSK were aware of but never made it known (Mercola, 2012).
For all the fraudulent activities in the US, GlaxoSmithKline was fined $3 billion. This amount was not proportion to the size of damage that the company had caused to its customers. Furthermore, for a company recording net incoming of over $7.7 billion, this was small pinch to its. In fact, the attorney responsible with GSK lawsuits dismissed this fine as a mere cost that GSK considered expense of doing business. This settlement method that GSK used to settle its criminal and civil liabilities in a way protected the real perpetrators of this scam from being responsible of their greedy acts.
The GSK was found guilty for the criminal charges against it. The law under provisions of Food, Drug, and Cosmetic Act, a company is required to state the intended use of a drug to the FDA. The FDA then determines whether the product is safe and effective for the specified use. Any promotion by the producer of this product for other used is referred as off-label used and the product becomes misbranded. GSK products such as Paxil, Wellbutrin and Avandia were found to be misbranded. This unethical behavior misleads the physicians in the work. The patients depend on the word of the physicians to prescribe the drugs best for their conditions. The greed for profit by this drug manufacturing companies put millions of patients at risk and the harming the reputation of the innocent doctors.
In the civil settlement, GSK agreed to rectify the unethical conduct related to promotion of drugs, non-covered uses and bribing doctors to subscribe their drug, making misleading statements and making reports on false best prices and underpaying rebates owed to the Medicaid Drug Rebate Program.
The GSK troubles are not only within the market in the US. Lawsuits in other countries are evidence of the company’s unethical path in attempt to seek more profit and a growth in its stock. Being a multinational company, GSK, is affected by differences in the ethical standards in various national jurisdiction leading to scandal emerging on the international levels. In China, GSK had its office clamped down for its marketing practices. The practice of paying physicians to prescribe drugs is unacceptable and criminal act in the West but within the accepted limits in the Chinese drug marketplace (Kessel, 2014). Such a difference in accepted standards raised blows in other regions where the action are termed as unethical.
The GSK engages in government lobbying. It can be observed that the pharmaceutical industry spends over $200 million annually on lobbying activities in the US. Following this path, GSK was found by a Congressional report to engage in acts that intimidated independent researches and misrepresentation of medical data to cover up the medical concerns of its product. This act not only puts the company at risk of destroying its brand reputation but also puts the regulator, FDA, in jeopardy for allowing such act to be perpetrated (Kessel, 2014)
CNN Money. (2012, July 2). GlaxoSmithKline in $3 billion fraud settlement. Retrieved from CNN Money Website: http://money.cnn.com/2012/07/02/news/companies/GlaxoSmithKline-settlement/
Department of Justice (DOJ). (2012). GlaxoSmithKline to Plead Gulity and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data. Retrieved from https://www.justice.gov/opa/pr/glaxosmithkline-plead-guilty-and-pay-3-billion-resolve-fraud-allegations-and-failure-report
Justice.gov. (2012, July 2). GlaxoSmithKline to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data. Retrieved from Department of Justice Website: https://www.justice.gov/opa/pr/glaxosmithkline-plead-guilty-and-pay-3-billion-resolve-fraud-allegations-and-failure-report
Kessel, M. (2014). Restoring the Pharmaceutical Industry’s Reputation. Nature Biotechnology, 983-990.
Mercola. (2012). GlaxoSmithKline: Guilty in Largest Health Fraud Settlement in US History. Retrieved from http://articles.mercola.com/sites/articles/archive/2012/07/16/glaxosmithkline-plead-guilty.aspx
prnewswire.com. (2012, July 2). GlaxoSmithKline’s (GSK) $3 Billion Whistleblower Settlement Has Paid for One Of America’s Most Expensive Failed Corporate Internal Investigations, Qui Tam Whistleblowers’ Attorneys Say. Retrieved from prnewswire.com website: http://www.prnewswire.com/news-releases/glaxosmithklines-gsk-3-billion-whistleblower-settlement-has-paid-for-one-of-americas-most-expensive-failed-corporate-internal-investigations-qui-tam-whistleblowers-attorneys-say-161083505.html
The Guardian. (2012). GlaxoSmithKline fined $3bn after bribing doctors to increase drugs sales . Retrieved from The Guardian Website: https://www.theguardian.com/business/2012/jul/03/glaxosmithkline-fined-bribing-doctors-pharmaceuticals
The National Conference of State Legislatures. (2016). The At-Will Presumption and Exceptions to the Rule. Retrieved from The National Conference of State Legislatures Website: http://www.ncsl.org/research/labor-and-employment/at-will-employment-overview.aspx
The New York Times . (2012, July 2). Glaxo Agrees to Pay $3 Billion in Fraud Settlement. Retrieved from The New York Times Website: http://www.nytimes.com/2012/07/03/business/glaxosmithkline-agrees-to-pay-3-billion-in-fraud-settlement.html?_r=0
The Telegraph. (2012, July 4). Glaxo whistleblowers to share $250m windfall. Retrieved from The Telegraph Website: http://www.telegraph.co.uk/finance/newsbysector/pharmaceuticalsandchemicals/9374104/Glaxo-whistleblowers-to-share-250m-windfall.html
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