Legal and Ethical Considerations in Marketing, Product Safety, and Intellectual Property

Businesses operating in the modern world have seen an increased attention to their marketing strategies and product safety as well as the use of intellectual property. That has ultimately led to ethical and legal considerations that are meant to create a regulatory framework over the manner, in which activities relating to these topics are handled by businesses. Although different parties will have diverse views on the issues surrounding each of the three, there has been public policy that has focused on ensuring that the set guidelines are followed. For instance, there has been vigorous debate on how best-copyrighted materials could become utilized to the interest of all parties involved. Similar attention has been accorded to the marketing strategies applied by corporations in promoting their products and services (Rodwin, 2012). Thus, most businesses are expected to adhere to ethical standards about their advertisement by being truthful with the information provided to potential clients. That includes a provision of data concerning the dangers a product or a service poses to its users.

As such, PharmaCARE’s use of AD23 has contradicted some of the legal and ethical guidelines set for marketing, intellectual property, and public safety in several ways. This paper focuses on outlining the areas, where the company has violated such regulations in its operations. In that case, the ethical and legal quandaries will relate to the guidelines broken by PharmaCARE’s use of CompCARE to make sales while avoiding monitoring by the regulatory agencies. Further, it will identify the areas, in which the firm desecrated ethical and legal rules in marketing of the AD23 drug as well as its concealment of significant information from the clients.

Ethical Issues

Marketing and Advertisement

In any form of advertisement, the promoters of various products and services are expected to base their marketing strategies on certain moral guidelines. That includes the need for them to ensure that they provide correct and fair information to their target audience. In the case of PharmaCARE, the firm may be deemed to have violated the ethical requirement. For instance, the company did not expressly indicate the dangers posed by using AD23 for the treatment of Alzheimer’s disease to the potential buyers. That left the clients exposed cardiac-related deaths that could have resulted from the utilization of the drug. Again, the firm marketed the drug targeting the wrong individuals by advertising it directly to the patients despite the fact that it was not commendable for general use as indicated.

Intellectual Property

On the other hand, according to intellectual property ethical guidelines, individuals who spend their resources, such as money and time, on the development of a particular product or the idea of its formulation should have a recompense in case the outcome is successful. As such, it may become considered unethical and unfair for other parties to draw profits to such an idea at the expense of the developer. Although PharmaCARE has made profits from the sale of AD23 as a treatment for Alzheimer’s disease, John does not consider the drug to have been successful. Thus, the firm may get viewed as having not violated the intellectual property right for its developers.

Public Safety

Pharmaceutical companies are expected to provide perfect information on the benefits as well as the side effects of their products to the potential users. Furthermore, they are required to acquire a permit from regulatory agencies, allowing them to supply such medication to the market. The violation of such guidelines will threaten the life of the users. In that regard, PharmaCARE has violated this ethical requirement based on several factors. First, the company makes sales of the drug without the necessary approval, and thus, the use of the drug remains inappropriate to society. Moreover, it is unethical for a drug firm to supply their product to the market when they have the full knowledge of the dangers the drug poses to the users. In the cease of PharmaCARE, the company has continued to sell AD23 despite having the full knowledge of the health risks it poses to Alzheimer’s disease patients. The moral requirement is that pharmaceutical firms should always place the health interest of their clients above that of their own, something that PharmaCARE violates.

Direct-to-Consumer Marketing

Direct-to-consumer marketing strategy relates to making advertisements about a given medication directly to patients. Although the approach could be beneficial in some ways, its drawbacks far outweigh its benefits for the pharmaceutical industry. One of the greatest disadvantages of this form of marketing strategy is that it has allowed patients to prescribe medication for themselves with little or no adherence to physician’s guidelines (Ventola, 2011). Therefore, it exposes them to the dangers of wrongful prescription that would otherwise end up endangering their health. Moreover, it has also been attributed to the increased tendencies by the patients to question the mode of treatment accorded to them by the doctors.

Another danger of this marketing model is that it encourages the manufacturers in the pharmaceutical industry to concentrate on profit making at the expense of public safety. Since the market is wider in comparison to that of health organizations, firms will rarely pay attention to quality, focusing on quantity (Donohue, Cevasco, & Rosenthal, 2007). Therefore, private citizens do not have the knowledge or the ability to monitor the success rate of the drug effectively. Consequently, they become susceptible to diseases, and they could end up developing more health complications. In some instances, certain medications do not necessarily mix; thus, they would require proper doctor’s prescription to ensure that the patient’s life does not appear threatened (Ventola, 2011). However, when these drugs are easily marketed and accessible to patients, such an advice from a physician is rarely sought.

Furthermore, direct-to-consumer marketing has also encouraged the use of unauthorized medication, as drugs could become usable for a different purpose from their sanctioned treatment. Moreover, this marketing has also been considered to contribute heavily to increased consumer costs and a low number of patients visiting hospitals. When drugs are marketed directly to the patients, the market is wider and it does not question the effectiveness of the medication (Donohue, Cevasco, & Rosenthal, 2007). Hence, the manufacturer raises the cost as demand skyrockets. Therefore, although direct-to-consumer marketing model may be suitable for other industries, it is certainly not an appropriate technique for the pharmaceutical industry.

Regulating Compounding Pharmacies

Under the new law in the United States, the Compounding Quality Act, compounding pharmacies are required to register voluntarily with the Food and Drug Administration (FDA) agency in a similar way drug manufacturers do. However, for those firms operating as traditional drugstores with small weekly prescriptions, the regulation remains with pharmacy boards at the state level. As per the newly set guidelines, FDA has been provided with the authority to track the products made by various chemists as well as receive reports relating to the compounding drugs (National Conference of State Legislatures, 2014). More to say, they have also been bestowed with the legal ability to conduct safety inspections of such firms. Hence, in the case of PharmaCARE, FDA could trace the manufacturing and marketing strategies applied by the company on the AD23 drug. That would include investigations on the effectiveness of the drug and its adherence to the established legal framework for production. However, the approach could only be effective in instances where pharmacies make voluntary registering with FDA (National Conference of State Legislatures, 2014). Therefore, the most appropriate technique for FDA to succeed in regulating PharmaCARE behavior would be by convincing physicians and hospitals to conduct operations with chemists that have registered with the agency.

Nevertheless, the state pharmacy board has enough power to monitor the operations of drugstores. Therefore, they have the ability to move in and investigate the processes of PharmaCARE without necessarily requiring the firm’s approval. That allows them to identify the violations made by PharmaCARE through its subsidiary firm CompCARE that has principally violated ethical and legal guidelines by conspiring with compounding pharmacies to sell the drug for general use. Thus, both FDA and the state regulatory boards could join in monitoring PharmaCARE operations. FDA could focus on the safety of its drug formulation to licensing of the drug for manufacturing, while the state pharmacy boards focus on the distribution and sales network of the associated drugstores. Moreover, FDA could carry on with the investigations to establish the clinics and hospitals as well as physicians who have conspired to have the drug sold for general use (National Conference of State Legislatures, 2014). On the licensing part, FDA could prosecute the company for wrongfully presenting AD23 as an approved medication for Alzheimer’s disease.

Application of the U.S. Intellectual Property Law by PharmaCARE

Although John played a recognizable role in the creation of the new drug formula for AD23, PharmaCARE had devised some important ways, in which it could limit Johns claim to the intellectual property rights for the drug development. First, the company became the originator of the idea by recognizing the drug’s potential to treat Alzheimer’s disease. Secondly, the firm ensured that John remained the company’s employee and worked through the time outlined for his workstation duties. Thirdly, PharmaCARE allowed John to utilize its resources, including materials, expenses, and labor. More to say, the firm also made sure that the newly developed product retained its former name as of the old formula, hence making it look like an improvement other than an invention. The combination of these activities has allowed the company to have an advantage over John in claiming the ownership of the drug. Despite those successes for PharmaCARE, the company would still be required to make some compensation to John and his team who have played an integral part in the realization of the new drug.

One way for reimbursing John for his work would involve increasing his salary. That could be done in lump sum payments or under a royalty’s arrangement. The amount, which John receives in such a situation, would be a representation of the amount of contribution made while researching for the enhanced AD23 drug. Secondly, the company could also provide for the recognition of the employees’ effort into making the invention a reality. Therefore, John could become recognized for the role played in the discovery and improvement of the new AD23 formula. That may happen through the awards by the firm, for instance, wall plaques, luncheons, or annual award dinners.

Thirdly, the company may commemorate the role played by John in the realization of the new medication. Most employees feel appreciated when their success goes to the books of history for the role they played in the development of their company. In some instances, some have considered this one of the best recognitions they receive from the corporations where they work. Although PharmaCARE could decide on applying all the three forms of compensations, it may use either of them or a combination of two, depending on the agreement reached with John.

Example of Intellectual Property Theft

In the case Leonard v. Stemtech Int’l Inc., Andrew Paul Leonard, the plaintiff, filed for copyright encroachment against the defendant. The plaintiff alleged violation Stemtech had wrongly acquired and used a photographic image that he had created. The said picture had been taken during the 1990s, but it was not registered until 2007. However, the use of the photographs by Stemtech had happened in 2006, and the plaintiff had demanded $950 compensation but only received $500 (Leonard v. Stemtech Int’l Inc., 2016). However, the defendant had gone ahead using the pictures without Leonard’s permission on other works, despite having failed to settle the full amount requested by the plaintiff for the first use of the images.

In the ruling at the jury awarded the plaintiff $1.6 million against the defendant. Further, the District Court denied Stemtech’s motion requesting for a new trial based on contributory, vicarious liability, and damages. An appeal by the defendant to the U.S. Court of Appeals for the Third Circuit affirmed the stand made by the District Court. The accusations affected the customer trust in the products manufactured and supplied by Stemtech Int’l Inc. Thus, the company was required to rebuild confidence among its closest associates. However, due to the nature of the infringement, the brand damage did not survive for long and it was rectified eventually (Leonard v. Stemtech Int’l Inc., 2016).

Potential Issue Surrounding John’s Wife Death

Despite the fact that John’s wife may have died from complications emanating from the use of AD23 medication, his litigation process could become hindered by his knowledge of this consequence. As an employee of the company, John was well aware of the risks of using AD23 and he still allowed his wife to use it. Therefore, there is a possibility that he could fail to benefit from the compensation for the damage caused. On the other hand, other litigants of the PharmaCARE case could argue of their lack of knowledge of the dangers of using AD23 prescription that had contributed to the demise of their relatives or friends. Thus, in such a situation, they would stand a chance to receive a compensation for the losses incurred as the result of negligence by the manufacturer. 

John Whistleblower Case

Although John had been part of PharmaCARE, he might make an argument of his case as having been a whistleblower. In this case, he might argue that despite being part of the team that had improved Ad23, he did not know of the dangers caused by the drug after improvement. Again, John could state his reservations that pushed him to seek legal advice after coming across a memo outlining the potential threat posed by AD23 to patients. Further, he might base his case on the fact that despite having recognized the dangers of AD23, PharmaCARE went ahead to encourage the sale of the drug.

The firm conspired with clinics, physicians, hospitals, and pharmacies to manipulate the patients into buying the drug that had not approved by FDA as it was presented by PharmaCARE and CompCARE. For the purpose of his role as an informer, John might cite protection of the OSH Act Section 11(c) that prohibits discrimination for his role in whistleblowing. That would include protection from being rendered jobless through sacking. Addiitonally, he should become assured of his compensation for the loss of his wife due to the use of the AD23 drug. However, as the enhancement of AD23 was not successful, it may be impossible for him to seek compensation for the role he had played in its improvement after reading the memo. Nonetheless, he qualifies for compensation for the sales made before he realized the ineffectiveness of the drug. Moreover, John should be shielded from prosecution for passing company information to third party that is the law firm in this case.

Conclusion

Ethical and legal considerations play a critical role in guaranteeing the success of a business and the relationship between the stakeholders. During their activities, such as marketing and advertising, organizations hope to attract potential buyers for their products. However, they should do so by providing correct and fair information to their clients. For example, the case of PharmaCARE indicates that the company knowingly sold its AD23 drug to patients even after recognizing its life-threatening situation. Although PharmaCARE may be ethically liable for such an offence, such a liability may not be legal, considering that the official seller of AD23 was CompCARE a subsidiary of PharmaCARE but a different organization altogether. Again, the use of direct-to-consumer marketing may not be the most suitable approach for drug manufacturing industries due to possible manipulation to gain profits at the expense of quality. Moreover, patients are denied the opportunity to make proper consultations with physicians; hence, they could make rush decisions that threaten their health and well-being.

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