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Ethical Issues Relating to AIDS Drug Price Hike by Turing Pharmaceuticals 2

Ethical Issues Relating to AIDS Drug Price Hike by Turing Pharmaceuticals

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Case background

Turing Pharmaceuticals acquires a $13.50 essential AIDS drug and hikes the price by as much as 5000%

In August 2015, Turing pharmaceuticals acquired Daraprim, a 70-year-old drug used to treat parasitic infections mostly in AIDS patients. Within a month the drug was retailing at $750 up from just $13.50. While the company justified the hike as necessary to fund production and toxoplasmosis research, the public felt the company was not justified in hiking the price of a drug used by vulnerable AIDS patients. In fact, the public opinion is that Turing Pharmaceuticals is driven by profit maximization and not societal welfare[ CITATION Pol15 l 1033 ].

Corporate social responsibility

Businesses have several responsibilities to maintain. Such responsibilities range from basic to the higher-level obligations[ CITATION Mic13 l 1033 m Kot11].

Basic corporate responsibilities

  • One of the most important basic-level responsibilities is economic; to maximize profits to ensure shareholders have a return on their investment.

  • Fulfilling legal obligations such as acquisition of appropriate licenses and payment of taxes.

Higher-level corporate responsibilities

  • At the higher level, the business is expected to maintain its ethical (social) responsibilities such measures as exclusion of slave and child labour in supply chain and engaging in environmentally sustainable production.

  • The business may also choose to fulfil philanthropic obligation such as donation to charities and research funds.

Clearly, Turing Pharmaceuticals fulfilled its basic (economic and legal) responsibilities by hiking the price of Daraprim thus realizing massive profits by selling an approved drug at a higher price, a practice that is not legally restricted. However, the company failed to meet its higher-level corporate responsibilities by raising the price of an essential drug to a price that most vulnerable AIDS patients could not afford.

Triple bottom-line

From the triple bottom-line perspective, Turing pharmaceuticals cannot be judged to have performed well by focusing on profit maximization and neglecting social responsibility of producing fairly priced drugs.

According to the triple bottom-line accounting framework, a business should assess its corporate performance from three perspectives; profitability, and social and environmental sustainability. This means that profit alone cannot be used as an indicator or performance in business without regard to social and environmental impact[ CITATION Car14 l 1033 m Den09].

Distributive justice

A company such as Turing that engages in ruthless profit maximization by hiking Daraprim price to the detriment of vulnerable AIDS patients does not uphold distributive justice in the society it operates in.

The ethics of distributive justice hold that resources in society should be distributed in a manner that is in the best interest of society as a whole. Wealth and affordable healthcare are societal resources that in some cases are unequally distributed in society such that a small section of society is can easily access them while the larger populations can barely afford such basic resources [ CITATION Den09 l 1033 m Zim07].

Criticism of the case and recommendations

Turing engaged in social irresponsibility by hiking the price of an essential aids drug. Turing may have gained higher profitability but damaged its public image and brand. Turing also engaged in profit maximization at the expense of societal welfare thus committing a social injustice that affected its triple bottom-line performance.

Turing can improve its triple bottom-line performance and be socially responsible by adopting a corporate strategy to increase revenue generation through sale of a fairly priced drug portfolio as opposed to overpricing a single essential AIDS drug. In doing so, Turing will improve its brand value and reputation to gain public support for sustained long-term profitability.

References

Blowfield, M., 2013. Business and Sustainability: Oxford University Press.

Carrol, A. & Buchholtz, A., 2014. Business and Society: Ethics, Sustainability, and Stakeholder Management: Cengage Learning.

Collins, D., 2009. Essentials of Business Ethics: Creating an Organization of High Integrity and Superior Performance: John Wiley and Sons.

Kotter, P. & Lee, N., 2011. Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause: John Wiley & Sons.

Pollack, A., 2015. Drug Goes From $13.50 a Tablet to $750, Overnight. Available at:
[Online] http://www.nytimes.com/2015/09/21/business/a-huge-overnight-increase-in-a-drugs-price-raises-protests.html?_r=0 [Accessed 4 May 2016].

Zimmerli, W., Richter, K. & Holzinger, M., 2007. Corporate Ethics and Corporate Governance: Springer Science & Business Media.