In thinking about companies to research as a paper topic, I was intrigued by one organization that has recently been at the forefront of the mainstream media—Valeant Pharmaceuticals.
1.In 2006, ICN Pharmaceuticals changed its named to Valeant and the company has been a strong performer on Wall Street since. Today, the company designs, develops, and markets a variety of generic and branded pharmaceuticals in addition to medical devices, such as contact lenses. Together, these products are marketed in some form in over 100 countries worldwide. Frequently listed as one of the most innovative companies, the Canada-based drug company has developed a strategy of rapid mergers and acquisitions to increase strengths and leverage supply chain synergies and capabilities. Additionally, this process often involves buying the rights to competitors’ drugs and then hiking the prices to increase profits and shareholder returns. A recent example of this process is evidenced by notable heart-drugs Nitropress and Isuprel, each of which were purchased by Valeant last year and saw price increases of 212% and 525%, respectively. As Valeant’s stock price continued to soar, it acquired billions of dollars worth of debt and faced staunch public and political opposition for its drug pricing policies. Additionally, Valeant’s dedicated focus on acquiring drugs as opposed to research and development in the creation of its own drugs has left the company vulnerable to failure. Moreover, Valeant has been criticized for accounting fraud and other unethical accounting practices. The organization recently requested an extension in reporting its earnings statements and admitted to wrongly booking millions of dollars worth of revenue. Valeant’s stock price has seen a consistent decline throughout 2016. Their past success is currently no more–can the organization recover or is it doomed to fail?
Valeant’s CEO, after recently returning from medical leave, has agreed to step down amongst the continuing allegations and scandal. Michael Pearson has also agreed to testify before the Senate, so it will be interesting to see how this case develops going forward. In looking at the organizational structure of the paper, I plan to begin with a historical overview of the company’s growth and initial success, including specific examples of acquisitions and other drugs. Then, the paper will continue by analyzing Valeant’s drug pricing strategies as well as some other operational practices (e.g. partnerships with pharmacies, etc) that have come under criticism recently.
2. Clearly, Valeant provides a fruitful topic for ethical analysis, specifically with regards to its drug pricing strategy and seemingly relentless focus on shareholder returns. Additionally, the pharmaceutical company’s questionable accounting practices provide an excellent topic for ethical analysis.
For my paper, I plan to invoke the ethical framework of deontology for my analysis of Valeant. As we have discussed throughout class, this theory focuses on dutifulness, rights and obligations, and universalism. Additionally, an important concept in deontology is Kant’s notion of the categorical imperative. I will certainly use the Bowie article we read throughout my deontological analysis and have also located other sources which discuss the ethical implications of drug pricing and fraudulent accounting.
Some of the various questions I hope to address include: is Valeant’s primary duty and responsibility to Wall Street, its shareholders, or the patients who benefit (and often depend) from the company’s products? I believe that although the moral objection that high prices limit an equitable access to various drugs is clear, the debate is much deeper than this. From the other perspective of the argument, drug companies often rationalize price hikes with the necessity for increased profits and sales in funding research and development. Without the price increases, many contend, innovation would be severely lessened. Also, what would a world be like in which every pharmaceutical company acted in the same manner as Valeant and raised the prices of its drugs by such magnitude? Although this in unlikely, as competition theoretically sets a cap on prices, it is an important thought experiment in considering the ethics and morality of Valeant’s operations.
- Bowie Article
- Ethics of Pharmaceutical Pricing
3. I am confident that Valeant provides an excellent vehicle into a larger policy discussion concerning accounting standards, oversight, and drug pricing. I will analyze how companies such as Valeant are able to accomplish these accounting errors even after regulations have been put in place to limit this possibility. Drug pricing is a policy issue that has been of prominent importance in recent years. As Congress continues to pay more attention to drug pricing strategies, new legislation could be enacted that greatly changes the industry. Democratic frontrunner Hillary Clinton has been vocal on the issue of drug pricing, and the House Oversight Committee continues to issue subpoenas to various pharmaceutical executives, such as the infamous Martin Skhreli. The issue of drug pricing could become an increasingly important issue as this year’s presidential election further develops. Additionally, Valeant faced scrutiny for its move to Canada, which many argue was motivated by tax reduction. This could provide some additional policy analysis concerning the contentious issue of corporate inversions whereby organizations move their headquarters abroad in search of a more favorable tax or regulatory climate.
Thought, critiques, comments welcome. Let me know what you think!