“I didn’t set out to commit a crime. I certainly didn’t set out to hurt anyone… I was kind of a hero, because I helped the company make its numbers every quarter. And I thought I was doing a good thing. I thought I was smart.” So said Andy Fastow, former chief financial officer of Enron in a speech at the Association of Certified Fraud Examiners’ convention last year. Fastow had recently been released from a six-year prison sentence for his role in the fraud and massive lapse in business ethics that led to the downfall of Enron.
For more than a decade, Enron has served as the poster child for corporate wrongdoing at its worst. And thanks to legislation, the threat of executive prosecution and public corporate embarrassment, it’s safe to say most companies are, for the most part, working to stay on the straight and narrow.
But gray areas about what’s right and what isn’t are still evident. One often repeated example is in pharmaceutical sales.
Pharmaceutical Industry in Danger of Lagging (Way) Behind in Ethical Business Practices
The list of companies in the pharmaceutical industry that have been accused of marketing drugs for off-label uses since the mid-2000s is long, to say the least. In the past decade, regulators have settled more than 30 False Claims Act cases with many large pharmaceutical companies.
In fact, one of the largest health care fraud settlements in U.S. history—which totaled $2.2 billion including criminal fines and forfeiture—involved a large pharmaceutical company found guilty of off-label marketing. In this case, the Associate Attorney General, Tony West, commented, “When companies put profit over patients’ health and misuse taxpayer dollars, we demand accountability.”
And these acts of wrongdoing don’t appear to be easing up. In 2014 alone, true to Mr. West’s proclamation, companies have seen fines of a combined total north of $200 million.
So what’s the problem? As Fastow said, it comes down to making the numbers. There seems to be a widespread mindset within the pharmaceutical industry that marketing drugs for off-label uses—and getting fined for doing so if the offender is unfortunate enough to get caught—is simply part of the cost of doing business.
Breaking the Law Cannot Be Part of an Organization’s Sales Strategy
The offenders in these cases aren’t rogue, one-off bad employees setting out to destroy a company in the name of greed and self-profit. These people tend to be decent employees and believe they are doing the right thing for their careers and their companies. In some cases, they’re even following direction from their superiors, who may have encouraged such behavior as a short-term solution to meet quarterly numbers.
Breaking the law as a sales strategy to deliver numbers isn’t the answer. And clearly, fines and penalties are not enough of a deterrent.
Regulators are recognizing that a bigger “stick” may be necessary. In the past, jail time has been used sparingly in cases of corporate crime, but this may be changing. Potentially more pharmaceutical sales executives and managers will consider carefully before endorsing or promoting an off-label marketing scheme. And hopefully, frontline sales reps will think twice before following orders.
If more perpetrators go to prison, ethical violations in business start to become personal. However, a better simultaneous deterrent can be cultivated.
What Business Leaders in the Pharmaceutical Industry Can Do To Improve Business Ethics
Leaders at the highest levels in the pharmaceutical industry should consider bolstering their ethics and compliance programs, and opening their eyes to the value of a strong corporate culture, as well as:
- Leaders across the industry need to speak with one voice that this type of misconduct won’t be tolerated. Good things can happen if executives and managers in the pharmaceutical industry discourage this type of wrongdoing, take action when it occurs, and encourage legal and ethical business practices.
- Shift corporate cultures and expectations—the “unwritten” rules—to focus on doing what’s right. And while the pursuit of an ethical culture may sound “soft” and non-profitable, again and again we see hard data validating that the long-term financial success of ethical companies outperforms competitors.
So we have two truths: Culture wins over written rules and laws. And ethical cultures win big financially over others. This leaves one question: When will the pharmaceutical industry internalize these realities and decisively rein in illegal promotion?