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Making Ethical Business decisions to protect and enhance Brands Image (Part 1/3)

Pfizer Logo

Pfizer Logo

Brand and branding have a great impact on the society as a whole and not only the people who buy their products. In addition to the shareholders and consumers, who are affected by the decisions made by the brand’s management personalities, there are a number of external people who also share the impact. Several companies face the task of considering all these stakeholders who are a part of the society.

An ethical brand enhances the firm’s reputation, such a reputation reinforces the brand in turn; while an unethical brands’ behaviour endangers severe damage or destruction of the entire brand. So how does one make ethical decision? How does the company arrive at the perfect decision?

We provide you with a complete process of making perfectly ethical decisions. Presenting to you is a Case Study on the pharmaceutical giant Pfizer. This case study focuses on the ethical dilemma faced by Pfizer, the world largest Pharmaceutical Company. The paper analyses the company’s current ethical dilemmas and corporate problems to identify one of the most challenging ethical questions the company would be facing in the upcoming 5 years, “Should Pfizer, prioritize its profitability (long-term existence) over its Consumer’s health?” Further, the case conducts a complete ethical analysis to find an appropriate action that should be taken to hedge against the ethical challenge.

Let us begin, by looking at the current ethical challenges, Pfizer is facing.

  • The shares of Pfizer are at a 10 yr low, down 20%. Pfizer is desperate to regain the confidence of its investors.  With the sales and profitability decreasing the company could further lose its profitability and market capital to its competitors in the near future (Herper, M, 2008).  Should Pfizer prioritize its Oncology activities, over other disease research activities, in view of a primary reason being, to increase its share price and number of investors?
  • Misunderstanding dosage instructions on prescriptions is a common phenomenon caused due to inadequate literacy about medications in consumer’s psyche (Wolf, M, et al, 2007). Should Pfizer take the responsibility for the negative side-effects that consumers face, due to un-prescribed usage of its drugs?
  • Pfizer faces a dilemma over the upcoming losses due to the expiring patents of its most successful drugs, Lipitor and Celebrex. To hedge against these losses the company recently announced laying-off 10000 employees as a restructuring strategy to cut costs (BBC News | Business, 2007). Should Pfizer put across thousands of careers at stake on account of sustaining its profitability?

The most important ethical challenge for the future (Analysis)
The product life-cycle of pharmaceutical products is stretched by patent laws to justify and facilitate recovery of huge expenses incurred on the research and innovation of products. Patents allow Pfizer to enjoy exclusivity, of 20 years (Pfizer.com Public Policy, n.d); over its invention to cover up the research expenses it incurred to develop the innovation. Almost half of these 20 years, precisely 8 years, are spent in testing and getting the FDA approval of the drug (Pfizer.com Public Policy, n.d). After the completion of these 20 years it becomes a daunting task for the company to recover from its expenditure (if it already hasn’t), because Generic competitors copy the drugs and enter the market with equivalents at a much lower price, triggering a dominos effect leading to pricing wars, which causes, Pfizer and many of its competitors, to face a substantial downfall in the market share (figure 1) and also revenue losses (Strategy + Business, n.d.).

Figure 1: The downfall of Market share after generic releases

Marketshare drop after patent expiry

Marketshare drop after patent expiry

(Source: Pfizer.com Public Policy, n.d )

Lipitor, a cholesterol lowering drug, plays a major role in Pfizer’s success. It is the largest selling and #1 prescribed medicine in the world (Lipitor, n.d). The current portfolio of upcoming inventions of Pfizer does not show potential enough to reinstate the success level achieved from its drugs like Lipitor, whose main patent is expiring in 2010 (figure 2) (Herper, 2008).

Figure 2: Pfizer’s expiring Patents

Pfizer's Patent expiry

Pfizer's Patent expiry

(Source: Pfizer.com SEC Filings, n.d )

The investors are loosing the confidence as well as patience in Pfizer (Herper, 2008). It seems to be difficult for Pfizer to come up with an equally successful drug. The company’s share prices are hovering on a ten-year low and Pfizer is desperate to showcase profitable numbers on its financial reports to sustain its trust within the shareholders and investors (Herper, 2008).

All these pressures, corner Pfizer into a situation which forces it to involve in activities which help in leveraging company sales and profits, such as Off-labelling.

What is Off-labelling?
Off-labelling is the usage of prescription drugs to treat diseases and disorders for which the drug has not gained an approval for from the FDA (Food and Drugs Administration) (Levick, n.d).

Off-labelling is not a new phenomenon for pharmaceutical industry. Pfizer (or its acquired companies) and its competitors have been involved in paying up million-dollar compensations resulting out of off-labelling cases filed against them (US Department of Justice, 2004). One such recent incident came to light in 2007, when Pharmacia, a subsidiary of Pfizer was found guilty of Off-label marketing its, growth hormone medicine Genotropin, as an anti-ageing and athletic performance enhancement lifestyle product (Federal Bureau of Investigation, 2007).

Pfizer probably looks at off-labelling as a strategic marketing method and an efficient alternative to mitigate the diminishing share prices, but it may have overlooked its particular implications in the recent upcoming years. There is a potential of a major set back for Pfizer. The company could loose the benefits of consumer loyalty and trust, in the worst case scenario, if 5 years down the line its product portfolio is not as impressive as it is now. It will be extremely asking task for Pfizer to retain its global position of being the largest pharmaceutical company.

Ethical challenge
If Pfizer chooses short-term benefit of attracting investors by involving in off-labelling activities, in order to showcase profitability (prioritizing market pressures over its consumer health), it faces a potential danger of loosing long-term market share due to consumer hatred and deviating preferences. On the other hand, if it fails to come up with strategic alternatives to hedge against the lowering share prices and the bearish shareholders, the company could loose its working capital affecting its daily operations including that of its research departments.

Ethical Question
Should Pfizer, prioritize its profitability (long-term existence) over its Consumer’s health?

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