Business Ethics and Reputation in Pharmaceutical and Medical Device Companies

Richi Gil

Nowhere else in the corporate world will you find a higher purpose: Pharma and medical device companies exist to help mankind live better and longer. This higher purpose is what drives thousands of scientists, R & D departments, FDA agents, and marketing specialists in the industry to work everyday. It’s what they’ve chosen as their inspiration, where they’ve decided to spend the best hours of the best days of the best years of their lives. It’s also, unfortunately so, sometimes unconsciously forgotten by many leadership teams across the board at these corporations.

Take for instance the recent agreement by Johnson & Johnson to pay $1 billion in a settlement as a result of a decade-long civil investigation into the fraudulent marketing of the antipsychotic drug Risperdal. The drug was heavily pushed as a dementia drug, among other uses, causing dangerous side effects, when it’s only approved use was for schizophrenia. Events like this and many others frequenting our daily headlines, are, for some leaders, seen as a “cost of doing business” in the pharma and medical device world. Normally, a billion dollar loss would be a crippling, if not fatal business mistake for most other industries.

Trials and fines related to unethical behavior like J&J are well documented; but what is the point of recording this data if there is no effective action from individual companies to change the behaviors leading to unethical decisions in the first place? If just one company changes in this way, it has the potential to help all pharma companies raise reputations as they follow suit. This type of corporate transformation is one of the fastest ways to reach large groups people and can have a significant impact on society.

This article aims to make a case for changing the leadership behavior directly related to unethical actions paradoxically steering pharma and medical device companies’ reputations away from their intended and passionate higher purpose.  By defining a body of ethical values first and acting out these values in every meeting and decision making process, companies can transform reputations and ethical standards on a holistic level—not just a top-down basis.

The business of pharma and medical device ethics, or let’s say the workers whose charge it is to be highly concerned with ethics, lives in the R&D department. This is also where value decisions are first made. In any decision, at the moment of making tradeoffs, one value is always subordinated to another. In R & D, it could be said this is the easiest place to subordinate value A) pleasing shareholders to value B) creating medicines and devices that save and improve lives. But then, somewhere in the process, a drug or device is released when it’s just below a certain standard, the long-term side effects are not as clear as the short-term financial benefits, or, as in J&J’s case, released for one purpose and used for another. It’s also at some point during this process that managers and leadership teams begin to walk a thin line, the decision-making process becomes cloudy, and the higher purpose becomes distorted.

Once a sub-par product not up to the standard of a company’s higher purpose is released the waters become even murkier. Marketing decisions relating to product launches and product pushes are then made. These next decisions are biased from the beginning as they inherently function on something other than truth.

There needs to be a universal call to action for all pharma and medical device leadership teams to question if they are making decisions based on conscious values or mental models concealing the ethics of the situation and creating groupthink. Groupthink is a thought process, usually unconscious, that keeps people from questioning the fundamentals of a situation. For example, with J&J, the decision makers on the Risperdal team might have unconsciously concluded that pleasing shareholders in the short term was best due to the incredibly high cost of researching and developing the drug. The way to do that was to “naturally” sell Risperdal to a larger target market, and if they were helping dementia patients in the meantime all the better for society, right? They were not able to become aware of the negative long-term effect through this pattern of unconscious thoughts. These unconscious thoughts can be best thought of as a “filter” that prevents people from a deeper reflection.

The problem is not the filter itself; it’s more the problem of people forgetting they see the world through individual filters or mental models. When people remember their own filters, they may take the time to question themselves, and then question others’ filters plus their reasoning and data—rather than accepting blindly what they say—until the truth of the situation comes to light. Once the truth is revealed, the ethical dilemma is also revealed and the possibility to make conscious choices with clear connection to the company’s higher purpose increases tenfold.

To do this though, takes awareness, discipline, and practice. Social scientists have found a remarkably high correlation between our capacity to delay gratification and our physical and mental health. This same concept applies to business. Companies that are disciplined enough to subordinate (what appear to be) urgent matters to important, higher purpose matters generate greater profitability, growth, and value for shareholders than those that focus on the problem of the day. This is the important point that Raj Sisodia makes in his book Firms of Endearment. Companies that base their actions on a higher purpose, have a conscious culture, and develop conscious leaders have consistently outperformed the S&P 500. They’ve even outperformed Jim Collins–designated Good to Great companies for the last 15, 10, 5 and 3 years. Today’s research is consistently proving this compelling trend—building a conscious business is also good business.

Pharma and medical device companies need to develop a decision making “technology” that works to blend the technical dimension of their business (the quality of drug and data from trials) with the human dimension (how leaders formulate strategies people use to be healthier) of their business. There is no human approach that will make up for a flawed technical approach. The process has to start with questions like: Do you objectively have a good product to put on the market? Are the clinical trials proving your drug is a good enough solution to the betterment of the world or to heal people? If on a technical level we don’t have a good drug, are you going to put it in the market, or are you going to sit down and say we have a problem here, let’s talk about it? It can be done, but you’ll have to do it one conversation at a time. There are no silver bullets.


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