Professional Documents
Culture Documents
in the pharmaceutical
industry
By the same author
I n e q u a l i t y , C r i m e and P u b l i c Policy
CORPORATE CRIME
in the pharmaceutical
industry
John Braithwaite
Braithwaite, John.
Corporate crime in the pharmaceutical industry.
Bibliography: p.
Includes index.
1. Commercial crimes - Case studies. 2. Corporations -
Corrupt practices - Case studies. 3. Drug trade - United
States - Employees - Corrupt practices - Case studies.
4. Professional ethics. 5. White collar crimes.
I. Title. [DNLM: 1. Drug industry-Standards. 2. Crime.
QV773B814cJ
HV6769.B7 1983 364.1'68 83-11149
ISBN 0-7102-0049-8
Contents
Preface vii
1 I n t r o d u c t i o n : an i n d u s t r y c a s e study of c o r p o r a t e c r i m e 1
2 Bribery 11
5 Antitrust 159
6 T h e c o r p o r a t i o n as p u s h e r 204
7 D r u g c o m p a n i e s and t h e T h i r d W o r l d 245
8 Fiddling 279
9 S t r a t e g i e s for c o n t r o l l i n g c o r p o r a t e c r i m e 290
A p p e n d i x G e t t i n g i n t e r v i e w s with c o r p o r a t e e x e c u t i v e s 384
Notes 389
Bibliography 408
Index 428
V
Preface
T h i s b o o k is an i n d u s t r y c a s e study of c o r p o r a t e c r i m e . It a t t e m p t s
t o d e s c r i b e t h e w i d e v a r i e t y o f t y p e s o f c o r p o r a t e c r i m e which occur
w i t h i n o n e i n d u s t r y . W h e n I t a u g h t a c o u r s e on c o r p o r a t e c r i m e at
t h e U n i v e r s i t y of C a l i f o r n i a , I r v i n e , in 1979 I found that s t u d e n t s
had a n a m o r p h o u s u n d e r s t a n d i n g o f t h e subject a s a n i n c o m p r e -
h e n s i b l e evil p e r p e t r a t e d by the p o w e r f u l . They w e r e at a loss to
d e s c r i b e p a r t i c u l a r e x a m p l e s . P a r t o f t h e p u r p o s e o f this b o o k i s t o
fill this g a p b y d e s c r i b i n g m a n y e x a m p l e s o f c o r p o r a t e c r i m e ,
e x a m p l e s w h i c h s h o w t h e d e p t h a n d s e r i o u s n e s s o f the c r i m e
p r o b l e m in the p h a r m a c e u t i c a l industry.
T h e b o o k also has a n a n a l y t i c a l p u r p o s e w h i c h i s m o r e i m p o r t a n t
t h a n its d e s c r i p t i v e function. This is to use t h e p h a r m a c e u t i c a l
i n d u s t r y ' s e x p e r i e n c e t o t e n t a t i v e l y e x p l o r e t h e effectiveness o f
different t y p e s o f m e c h a n i s m s for t h e c o n t r o l o f c o r p o r a t e c r i m e .
M o s t of t h e c h a p t e r s h a v e a first s e c t i o n w h i c h d e s c r i b e s several
c o r p o r a t e c r i m e s , followed b y a n i n t e r p r e t i v e section which uses
i n f o r m a t i o n g a i n e d from i n t e r v i e w s with c o r p o r a t e e x e c u t i v e s and
o t h e r s to cast light on p o s s i b l e policy i m p l i c a t i o n s from t h e s e case
studies.
S o m e of my i n f o r m a n t s will not be p l e a s e d with t h e way I have
w r i t t e n t h e b o o k . T h e y will think it a o n e - s i d e d a c c o u n t which
f o c u s e s a t t e n t i o n o n p h a r m a c e u t i c a l i n d u s t r y a b u s e s t o the exclu-
sion of all t h e w o r t h w h i l e t h i n g s t h e i n d u s t r y has a c h i e v e d for
m a n k i n d . A f t e r all, t h e p h a r m a c e u t i c a l i n d u s t r y has b e e n r e s p o n -
sible for r e m o v i n g t u b e r c u l o s i s , g a s t r o e n t e r i t i s , and d i p h t h e r i a
from a m o n g t h e ten l e a d i n g c a u s e s o f d e a t h i n d e v e l o p e d c o u n t r i e s .
U n f o r t u n a t e l y , it is t h e j o b of c r i m i n o l o g i s t s to e x p l o r e the s e a m y
vii
Preface
side of h u m a n e x i s t e n c e . If a c r i m i n o l o g i s t u n d e r t a k e s a study of
m u g g i n g or m u r d e r , no o n e e x p e c t s a ' b a l a n c e d ' a c c o u n t which
g i v e s d u e c r e d i t to t h e fact t h a t m a n y m u g g e r s are good family m e n ,
l o v i n g f a t h e r s w h o p r o v i d e their c h i l d r e n w i t h a C h r i s t i a n u p b r i n g -
i n g , o r p e r h a p s g e n e r o u s p e o p l e w h o h a v e s h o w n a willingness t o
h e l p n e i g h b o u r s i n t r o u b l e . Y e t c r i m i n o l o g i s t s are e x p e c t e d t o
p r o v i d e such ' b a l a n c e ' w h e n t h e y s t u d y c o r p o r a t e c r i m i n a l s .
T h e fact t h a t I h a v e not e m p h a s i s e d their good d e e d s d o e s not
m e a n t h a t I am not g r e a t l y a p p r e c i a t i v e of t h e a s s i s t a n c e and hospi-
tality afforded me by i n f o r m a n t s from t h e i n d u s t r y . I o w e an intel-
lectual debt to many w h o have d o n e previous research on the
p h a r m a c e u t i c a l i n d u s t r y . It w o u l d be i m p o s s i b l e to m e n t i o n all by
n a m e . P a r t i c u l a r l y useful, h o w e v e r , h a v e b e e n the i n v e s t i g a t i v e
j o u r n a l i s m of M o r t o n M i n t z of t h e Washington Post, t h e work on
t h a l i d o m i d e of t h e I n s i g h t T e a m of The Sunday Times of L o n d o n ,
a n d t h e s c h o l a r s h i p o f M i l t o n S i l v e r m a n and G a r y Gereffi.
D i s c u s s i o n s and c o r r e s p o n d e n c e with B r e n t Fisse and Bud Loftus
w e r e influential in c h a n g i n g t h e d i r e c t i o n of my t h i n k i n g on key
d i l e m m a s . I a m also i n d e b t e d t o D a v i d B i l e s , R i c h a r d G a v e n , Bill
G i b s o n , R o y H a r v e y , K a t h e r i n e P i t t , Ivan P o t a s , P e t e r R h e i n s t e i n ,
B r u c e S w a n t o n and G r a n t W a r d l a w for critical c o m m e n t s o n e a r l i e r
drafts o f t h e m a n u s c r i p t .
V a l e r i e B r a i t h w a i t e and Gil G e i s p r o v i d e d great a s s i s t a n c e
d u r i n g t h e A m e r i c a n f i e l d w o r k stage o f t h e r e s e a r c h . A p p r e c i a t i o n
i s a l s o d u e t o J a n i n a B u n c and A n n e t t e W a t e r s for their p a i n s t a k i n g
and a c c u r a t e t y p i n g of t h e m a n u s c r i p t . I am grateful to the
A u s t r a l i a n - A m e r i c a n E d u c a t i o n a l F o u n d a t i o n for s u p p o r t with a
F u l b r i g h t F e l l o w s h i p t o c o n d u c t t h e fieldwork and t o t h e A u s t r a l i a n
I n s t i t u t e of C r i m i n o l o g y for s u p p o r t i n g t h e project in A u s t r a l i a .
vm
1 Introduction: an industry case
study of corporate crime
T h e m a j o r i t y o f p e o p l e w h o w o r k i n t h e p h a r m a c e u t i c a l industry
s u b s c r i b e to high s t a n d a r d s of integrity and do e v e r y t h i n g in their
p o w e r to stay w i t h i n t h e c o n s t r a i n t s of the law. In the c o u r s e of this
r e s e a r c h , I m e t p h a r m a c e u t i c a l e x e c u t i v e s w h o i m p r e s s e d me with
t h e s i n c e r i t y o f t h e i r c o m m i t m e n t t o t h e p u b l i c welfare m u c h m o r e
t h a n m a n y o f t h e i n d u s t r y ' s critics i n p o l i t i c s , r e g u l a t o r y a g e n c i e s ,
t h e p u b l i c i n t e r e s t m o v e m e n t , and a c a d e m i a .
Valerie B r a i t h w a i t e accompanied me to many pharmaceutical
c o m p a n i e s , forever c o n s t r a i n i n g m e from d r i v i n g o n t h e w r o n g side
o f t h e r o a d . O n e d a y , a s w e d r o v e back t o N e w Y o r k , she said: 'But
t h e s e p e o p l e a r e s o n i c e , J o h n . D o you think they really are
c o r r u p t ? ' M y initial r e s p o n s e w a s : "You've s p e n t the day being
s h o w n a r o u n d and t a k e n t o lunch b y the c o m p a n y ' s public r e l a t i o n s
staff. T h e y ' r e paid to be n i c e . S o m e p e o p l e in t h e s e c o m p a n i e s get
paid a lot of m o n e y b e c a u s e t h e y ' r e g o o d at being r u t h l e s s b a s t a r d s ,
and o t h e r s get big m o n e y t o e n t e r t a i n p e o p l e like you b e c a u s e
t h e y ' r e g o o d a t b e i n g n i c e . ' But really t h a t w a s a n i n a d e q u a t e
a n s w e r . I r r e s p e c t i v e of w h a t t h e y ' r e paid to b e . m o s t o f t h e m in fact
are principled p e o p l e .
T h e r e a r e t h r e e t y p e s o f p r i n c i p l e d p e o p l e i n the p h a r m a c e u t i c a l
i n d u s t r y . F i r s t , t h e r e a r e t h o s e w h o directly p a r t i c i p a t e i n c o m p a n y
a c t i v i t i e s w h i c h d o p u b l i c h a r m , but w h o sincerely believe the
c o m p a n y p r o p a g a n d a w h i c h tells t h e m that they are c o n t r i b u t i n g t o
t h e i m p r o v e m e n t o f c o m m u n i t y h e a l t h . S e c o n d , t h e r e are p e o p l e
w h o p e r c e i v e t h e c o m p a n y t o b e e n g a g i n g i n c e r t a i n socially
harmful p r a c t i c e s and fight t o o t h and nail w i t h i n t h e o r g a n i s a t i o n to
s t o p t h o s e p r a c t i c e s . T h i r d , t h e r e are p e o p l e w h o have n o direct
I
Introduction: an industry case study of corporate crime
A r m s t r o n g (1977) a s k e d a l m o s t t w o t h o u s a n d m a n a g e m e n t
s t u d e n t s from t e n c o u n t r i e s to play t h e roles of b o a r d m e m b e r s of a
t r a n s n a t i o n a l p h a r m a c e u t i c a l c o m p a n y . T h e decision facing the
b o a r d w a s a real-life s i t u a t i o n which had c o n f r o n t e d t h e U p j o h n
c o m p a n y : ' s h o u l d it r e m o v e from t h e m a r k e t a drug which had b e e n
found t o e n d a n g e r h u m a n life? S e v e n t y - n i n e p e r cent o f the
m a n a g e m e n t s t u d e n t b o a r d s o f d i r e c t o r s not only refused t o with-
d r a w t h e d a n g e r o u s d r u g , but also u n d e r t o o k legal o r political
m a n o e u v r e s to forestall efforts of t h e g o v e r n m e n t to ban it.* This
w a s t h e s a m e a c t i o n a s t h e U p j o h n b o a r d itself t o o k , a n action
w h i c h 97 p e r cent o f a s a m p l e o f 7 1 r e s p o n d e n t s classified as 'socially
i r r e s p o n s i b l e ' ( A r m s t r o n g , 1977: 197). U s i n g d e l a y i n g tactics t o
k e e p a d a n g e r o u s but profitable drug on t h e m a r k e t is s o m e t h i n g
2
Introduction: an industry case study of corporate crime
[ T ] h e usual r e s t r a i n t s on a n t i s o c i a l b e h a v i o r o p e r a t e t h r o u g h a
s e l f - i m a g e : T c a n ' t see m y s e l f d o i n g that' In an institutional
s e t t i n g , h o w e v e r , that isn't b e i n g d o n e by me but through me as an
a c t o r , a role p l a y e r in an u n r e a l ' g a m e ' t h a t e v e r y o n e is ' p l a y i n g '
( S t o n e . 1975: 2 3 5 ) .
P e o p l e in g r o u p s b e h a v e in w a y s t h a t w o u l d be i n c o n c e i v a b l e for
any o f t h e m a s i n d i v i d u a l s . G r o u p t h i n k ( J a n i s , 1971) and w h a t
A r e n d t ( 1 9 6 5 ) r e f e r r e d to as 'rule by n o b o d y ' are i m p o r t a n t in
c o r p o r a t e d e c i s i o n - m a k i n g w h i c h results i n h u m a n suffering.
B a n d u r a ( 1 9 7 3 : 213) e x p l a i n e d the basic p s y c h o l o g y o f 'rule b y
nobody'.
[ O n e ] b u r e a u c r a t i c p r a c t i c e for r e l i e v i n g s e l f - c o n d e m n a t i o n for
a g g r e s s i o n is to rely on g r o u p d e c i s i o n - m a k i n g , so that no single
i n d i v i d u a l feels r e s p o n s i b l e for w h a t is e v e n t u a l l y d o n e . I n d e e d ,
social o r g a n i s a t i o n s go to g r e a t l e n g t h s to d e v i s e s o p h i s t i c a t e d
m e c h a n i s m s for o b s c u r i n g r e s p o n s i b i l i t y for d e c i s i o n s that affect
o t h e r s a d v e r s e l y . . . . T h r o u g h division of l a b o r , division of
d e c i s i o n - m a k i n g , a n d c o l l e c t i v e a c t i o n , p e o p l e can b e
c o n t r i b u t o r s t o cruel p r a c t i c e s and b l o o d s h e d w i t h o u t feeling
p e r s o n a l l y r e s p o n s i b l e or s e l f - c o n t e m p t u o u s for their part in it.
T h e r e a r e a large n u m b e r o f p s y c h o l o g i c a l s t u d i e s d e m o n s t r a t i n g
t h a t m e m b e r s of a g r o u p will risk m o r e as g r o u p m e m b e r s t h a n they
will as i n d i v i d u a l s ( S t o n e r . 1968; W a l l a c h et al.. 1964; Bern et al..
1 9 6 5 ; W a l l a c h a n d K o g a n . 1965; B u r n s t e i n and V i n o k u r . 1973;
C a r t w r i g h t , 1 9 7 3 ; M u h l e m a n e t a l . . 1976; S h a w . 1976). P s y c h o l o -
gists call this t e n d e n c y for c a u t i o u s i n d i v i d u a l s to s u p p o r t m o r e
3
h a z a r d o u s g r o u p d e c i s i o n s t h e ' g r o u p risky shift p h e n o m e n o n ' .
T h e p h e n o m e n o n i s far from u b i q u i t o u s , h o w e v e r . W h e n c a u t i o u s
c h o i c e s a r e m o r e socially d e s i r a b l e , g r o u p p r e s s u r e s can actually
3
Introduction: an industry case study of corporate crime
T h i s b o o k d o c u m e n t s a b o m i n a b l e h a r m which g r o u p d e c i s i o n -
m a k i n g i n t h e p h a r m a c e u t i c a l i n d u s t r y has caused o n m a n y o c c a s -
i o n s . T h e ' c o l l e c t i v e evil' o f m a n y p h a r m a c e u t i c a l c o m p a n i e s i s
m a n i f e s t e v e n t h o u g h s o m a n y 'nice p e o p l e ' w o r k for t h e m . H o e c h s t
and B a y e r , t h e l a r g e s t and third largest c o m p a n i e s i n world phar-
m a c e u t i c a l sales r e s p e c t i v e l y , and b o t h a m o n g the w o r l d ' s largest
t h i r t y c o r p o r a t i o n s , are d e s c e n d e d from G e r m a n y ' s I . G . F a r b e n
c o m p a n y . I . G . F a r b e n r a n k s with the S t a n d a r d Oil Trust a s o n e o f
t h e t w o g r e a t e s t c a r t e l s i n w o r l d h i s t o r y . After the S e c o n d W o r l d
W a r , t h e A l l i e s b r o k e u p I . G . into effectively t h r e e c o m p a n i e s :
4
H o e c h s t , B A S F and B a y e r . T w e l v e t o p I . G . F a r b e n e x e c u t i v e s
w e r e s e n t e n c e d t o t e r m s o f i m p r i s o n m e n t for slavery and m i s t r e a t -
m e n t offences a t t h e N u r e m b e r g w a r c r i m e s trials. I . G . built and
o p e r a t e d a m a s s i v e c h e m i c a l p l a n t at A u s c h w i t z with slave l a b o u r :
t h e I . G . facilities a t A u s c h w i t z w e r e s o e n o r m o u s that they used
m o r e e l e c t r i c i t y t h a n t h e e n t i r e city o f B e r l i n . A p p r o x i m a t e l y
300,000 concentration-camp workers passed through I.G.
A u s c h w i t z . A t least 2 5 , 0 0 0 o f t h e m w e r e w o r k e d t o d e a t h ( B o r k i n ,
1978: 127). O t h e r s d i e d i n I . G . ' s d r u g t e s t i n g p r o g r a m . T h e follow-
ing p a s s a g e in a l e t t e r from t h e c o m p a n y to the c a m p at A u s c h w i t z
d e m o n s t r a t e s t h e a t t i t u d e o f I . G . F a r b e n t o the subjects o f its d r u g
testing:
4
Introduction: an industry case study of corporate crime
In c o n t e m p l a t i o n of e x p e r i m e n t s with a n e w soporific d r u g , we
w o u l d a p p r e c i a t e y o u r p r o c u r i n g for us a n u m b e r o f w o m e n . . . .
We r e c e i v e d y o u r a n s w e r but c o n s i d e r the price of 200 m a r k s a
w o m a n e x c e s s i v e . We p r o p o s e to pay not m o r e t h a n 170 m a r k s a
h e a d . I f a g r e e a b l e , w e will t a k e p o s s e s s i o n o f t h e w o m e n . W e
n e e d a p p r o x i m a t e l y 150. . . . R e c e i v e d t h e o r d e r of 150 w o m e n .
D e s p i t e t h e i r e m a c i a t e d c o n d i t i o n , t h e y w e r e found satisfactory.
W e shall k e e p y o u p o s t e d o n d e v e l o p m e n t s c o n c e r n i n g this
e x p e r i m e n t . . . . T h e t e s t s w e r e m a d e . All subjects died. We
shall c o n t a c t you s h o r t l y on t h e subject of a n e w load ( G l o v e r .
1977: 5 8 ) .
5
Introduction: an industry case study of corporate crime
d r u g s ( C h a p t e r 4 ) , and a d i s t u r b i n g r e c o r d of criminal n e g l i g e n c e in
the unsafe m a n u f a c t u r e of drugs ( C h a p t e r 5).
T h i s b o o k is not d i r e c t e d at h o w to c h a n g e p e o p l e in o r d e r to
p r e v e n t such c r i m e , but a t t r a n s f o r m a t i o n s t o institutional
a r r a n g e m e n t s and t h e law a s c r i m e - r e d u c t i o n s t r a t e g i e s . T h e unfor-
t u n a t e reality w i t h w h i t e - c o l l a r c r i m e i s t h a t c o u r t s , and s o m e t i m e s
t h e p u b l i c , t e n d to e x c u s e it b e c a u s e t h e i n d i v i d u a l s involved are
s i n c e r e a n d e l o q u e n t i n justifying t h e i r b e h a v i o u r . T h e y are often
e x c u s e d b e c a u s e they are p a r a g o n s o f s u c c e s s , pillars o f respect-
a b i l i t y w h o m a y be p r o m i n e n t in c h a r i t y w o r k or t h e c h u r c h . W h i l e
such r e a c t i o n s d e s e r v e c o n d e m n a t i o n b e c a u s e o f their class b i a s ,
q u e s t i o n s of i n d i v i d u a l b l a m e w o r t h i n e s s will not loom large here
until t h e c o n c l u d i n g c h a p t e r of t h e b o o k . T h e focus will be on the
s t r u c t u r a l p r e c o n d i t i o n s for the c r i m e r a t h e r t h a n on the c r i m i n a l .
F o l l o w i n g S u t h e r l a n d ( 1 9 4 9 ) , I t a k e t h e view t h a t to e x c l u d e civil
v i o l a t i o n s from a c o n s i d e r a t i o n of w h i t e - c o l l a r c r i m e is an a r b i t r a r y
o b f u s c a t i o n b e c a u s e for m a n y of t h e t y p e s of illegal activities dis-
c u s s e d in t h i s b o o k p r o v i s i o n exists in law for b o t h civil and c r i m i n a l
p r o s e c u t i o n o f t h e s a m e c o n d u c t . " M o r e o v e r , while s o m e o f the
p r a c t i c e s d i s c u s s e d a r e civil m a t t e r s in s o m e p a r t s of t h e w o r l d , they
a r e c r i m i n a l in o t h e r s . In g e n e r a l , t h e civil-criminal d i s t i n c t i o n is a
d o u b t f u l o n e ( F r i e b e r g , 1981). T h u s , c o r p o r a t e c r i m e i s defined
h e r e as c o n d u c t of a c o r p o r a t i o n , or of e m p l o y e e s acting on behalf
of a c o r p o r a t i o n , w h i c h is p r o s c r i b e d and p u n i s h a b l e by law. T h e
c o n d u c t c o u l d b e p u n i s h a b l e b y i m p r i s o n m e n t , p r o b a t i o n , fine,
r e v o c a t i o n o f l i c e n c e , c o m m u n i t y service o r d e r , i n t e r n a l discipline
o r d e r o r o t h e r c o u r t - i m p o s e d p e n a l t i e s discussed i n this b o o k .
T y p e s o f c o n d u c t w h i c h are subject only t o d a m a g e s a w a r d s w i t h o u t
a n y a d d i t i o n a l p u n i s h m e n t ( e . g . f i n e , p u n i t i v e d a m a g e s ) are not
w i t h i n t h e d e f i n i t i o n o f c o r p o r a t e c r i m e a d o p t e d h e r e . M o s t o f the
c o r p o r a t e c r i m e s d i s c u s s e d in this b o o k w e r e not punished by law
e v e n t h o u g h t h e y w e r e punishable.
I f o n e m e a s u r e s t h e s e r i o u s n e s s o f c r i m e a c c o r d i n g t o public
i n d i g n a t i o n a g a i n s t t h e offence in t h e c o m m u n i t y at l a r g e , t h e n this
b o o k is a b o u t s e r i o u s c r i m e . This view is c o n f i r m e d by a c r o s s -
n a t i o n a l s t u d y of a t t i t u d e s to t h e s e r i o u s n e s s of c r i m e a m o n g 1,909
r e s p o n d e n t s from eight c o u n t r i e s ( S c o t t and A l - T h a k e b , 1977). A
d r u g c o m p a n y e x e c u t i v e allowing his c o m p a n y t o m a r k e t a d r u g
" k n o w i n g t h a t it m a y p r o d u c e harmful side-effects for most indi-
v i d u a l s ' w a s r a t e d in t h e U n i t e d S t a t e s as c o m m i t t i n g a c r i m e m o r e
s e r i o u s t h a n all of t h e F B I index offences e x c e p t m u r d e r and r a p e .
6
Introduction: an industry case study of corporate crime
7
Introduction: an industry case study of corporate crime
q u a l i t a t i v e u n d e r s t a n d i n g o f t h e c o n t o u r s o f c o r p o r a t e c r i m e s and
h o w t h e y u n f o l d , w e c a n n o t begin t o c o m p r e h e n d w h a t lies b e h i n d
t h e q u a n t i t a t i v e d e s c r i p t i o n s . M o r e o v e r , the liberal use o f q u o t e s
from p h a r m a c e u t i c a l e x e c u t i v e s t h r o u g h o u t the text will a t t e m p t to
i l l u m i n a t e t h e social c o n s t r u c t i o n o f t h e p h e n o m e n o n b y the a c t o r s
themselves.
A n i n d u s t r y - w i d e case s t u d y o f c o r p o r a t e c r i m e has b e e n c h o s e n
in p r e f e r e n c e to a m o r e d e t a i l e d study of a p a r t i c u l a r offence or
a p a r t i c u l a r c o m p a n y partly b e c a u s e t h e latter are m o r e v u l n e r a b l e
t o w i t h d r a w a l o f c o - o p e r a t i o n b y vital i n f o r m a n t s . M o r e i m p o r -
t a n t l y , at this stage of t h e i n t e l l e c t u a l d e v e l o p m e n t of the field, a
f a l t e r i n g a t t e m p t to p a i n t a b r o a d e r c a n v a s is justified so t h a t the
w o r k m i g h t h a v e r e l e v a n c e t o the i m p o r t a n t c o n c e p t u a l g r o u n d -
w o r k b e i n g laid by j u r i s t s w o r k i n g from their a r m c h a i r s . H a v i n g
c o m p l e t e d t h e s t u d y , I am m o r e c o n v i n c e d t h a n ever t h a t a s u p e r i o r
u n d e r s t a n d i n g of a p a r t i c u l a r c r i m e in a p a r t i c u l a r firm is g a i n e d
w h e n t h e r e s e a r c h e r h a s a g r a s p of h o w t h e industry w o r k s as a
whole.
T h e o r i g i n a l s t r a t e g y for i n t e r v i e w s with e x e c u t i v e s w a s to m e e t
w i t h p e o p l e at t h e level of chief e x e c u t i v e officer or s e c o n d in
c o m m a n d of Australian subsidiaries of A m e r i c a n transnationals,
and t h e n t o i n t e r v i e w i n t h e U n i t e d S t a t e s the h e a d q u a r t e r s
Introduction: an industry case study of corporate crime
e x e c u t i v e s t o w h o m t h e A u s t r a l i a n s a n s w e r e d . O n e r e s e a r c h goal
w a s to e x p l o r e t h e diffusion of a c c o u n t a b i l i t y for law v i o l a t i o n s
b e t w e e n h e a d q u a r t e r s and s u b s i d i a r i e s i n t r a n s n a t i o n a l c o r p o r -
a t i o n s . In t h e e n d , h o w e v e r , I t o o k i n t e r v i e w s w h e r e I could get
t h e m . I n s o m e c a s e s , t h e h e a d q u a r t e r s i n t e r v i e w s w e r e d o n e first,
and s u b s i d i a r y i n t e r v i e w s later. A total of 131 i n t e r v i e w s w e r e
c o n d u c t e d - 75 in t h e U n i t e d S t a t e s , 15 in A u s t r a l i a , 10 in M e x i c o , 9
in G u a t e m a l a a n d 2 in t h e U n i t e d K i n g d o m . A l m o s t half of these
i n t e r v i e w s w e r e with e x e c u t i v e s at t h e level of chief e x e c u t i v e officer
of a s u b s i d i a r y or a m o r e s e n i o r p e r s o n at h e a d q u a r t e r s .
R e s e a r c h e r s t e n d t o o v e r e s t i m a t e t h e difficulties o f g e t t i n g inter-
v i e w s w i t h t o p e x e c u t i v e s a b o u t c o r p o r a t e c r i m e . O n e o f the
significant i n f o r m a n t s in this study w a s t h e p r e s i d e n t of a major
t r a n s n a t i o n a l w h o e n j o y e d a n a n n u a l r e m u n e r a t i o n from t h e
c o m p a n y o f o v e r U S $ 7 0 0 , 0 0 0 . M o s t i n t e r v i e w s w e r e longer t h a n a n
h o u r in d u r a t i o n , but 13 lasted for less t h a n thirty m i n u t e s . T a b l e 1.1
lists t h e l o c a t i o n s o f t h e formal i n t e r v i e w s w i t h e x e c u t i v e s .
I n a d d i t i o n t o t h e s e formal i n t e r v i e w s , a t t e m p t s w e r e m a d e t o ask
e x e c u t i v e s q u e s t i o n s after they had given e v i d e n c e b e f o r e t h e R a l p h
E n q u i r y i n t o t h e p h a r m a c e u t i c a l industry held i n A u s t r a l i a d u r i n g
1978. T h e s e fleeting q u e s t i o n and a n s w e r sessions p r o v i d e d n o
i n f o r m a t i o n o f v a l u e . M u c h m o r e v a l u a b l e w e r e t h e i n t e r v i e w s with
i n f o r m a n t s w h o had left t h e i n d u s t r y , officers in t h e P h a r m a c e u t i c a l
M a n u f a c t u r e r s A s s o c i a t i o n s [ P M A s ] i n e a c h c o u n t r y visited ( e x c e p t
G u a t e m a l a ) , p u b l i c i n t e r e s t a c t i v i s t s , and officers i n r e g u l a t o r y
a g e n c i e s i n t h e U n i t e d S t a t e s , A u s t r a l i a and t h e U n i t e d K i n g d o m .
T h e s e s u p p l e m e n t a r y i n t e r v i e w s t o g e n e r a t e leads from o t h e r
s o u r c e s w e r e a l m o s t e q u a l i n n u m b e r t o t h e formal i n d u s t r y inter-
v i e w s . N e v e r t h e l e s s , t h e industry i n t e r v i e w s w e r e t h e m o r e
i m p o r t a n t s o u r c e o f i n f o r m a t i o n . A n a p p e n d i x sets out t h e s t r a t e -
g i e s w h i c h w e r e used i n soliciting and c o n d u c t i n g t h e s e i n t e r v i e w s .
N o n e of t h e i n f o r m a n t s is identified by n a m e .
W i t h c o r p o r a t e c r i m e r e s e a r c h , it is w r o n g to a s s u m e that all o n e
m u s t do is get s e n i o r e x e c u t i v e s to ' c o m e c l e a n ' . T h e full story must
b e p i e c e d t o g e t h e r and c r o s s - c h e c k e d from m u l t i p l e s o u r c e s . N o
e x e c u t i v e , no m a t t e r h o w s e n i o r , k n o w s a n y t h i n g like the full story
o f illegal b e h a v i o u r i n t h e p h a r m a c e u t i c a l i n d u s t r y . E x e c u t i v e s
often m a k e i t t h e i r b u s i n e s s not t o k n o w a b o u t c e r t a i n t h i n g s g o i n g
on b e l o w t h e m in t h e o r g a n i s a t i o n . Often it is part of the j o b of
l o w e r - l e v e l e x e c u t i v e s t o e n s u r e that t h e i r s u p e r i o r s are not t a i n t e d
with k n o w l e d g e o f illegal c o n d u c t . M o r e o v e r , s e n i o r e x e c u t i v e s
9
Introduction: an industry case study of corporate crime
HI
2 Bribery
A w o r l d l y - w i s e m o r a l relativism s e e m s to h a v e b e e n the r e a c t i o n
from m a n y following t h e L o c k h e e d scandal of t h e m i d - 1 9 7 0 s . If the
a c c e p t e d p r a c t i c e in S a u d i A r a b i a is to give t h e royal family a piece
of t h e a c t i o n w h e n t h e y buy s o m e aircraft from y o u , then w h o are
A m e r i c a n s or B r i t o n s to say that t h e i r w a y s of d o i n g b u s i n e s s are
m o r a l l y s u p e r i o r ? I n any c a s e , A m e r i c a n s p e r c e i v e the high
p u r p o s e s of A m e r i c a n foreign policy and n a t i o n a l security as
a d v a n c e d if fighters a r e b o u g h t from L o c k h e e d r a t h e r t h a n from a
foreign p o w e r .
B r i b e r y has a less a c c e p t a b l e gloss if its p u r p o s e is to p e r s u a d e a
h e a l t h official to a l l o w a d a n g e r o u s d r u g on to the m a r k e t ; or, failing
t h a t , to e n t i c e a c u s t o m s officer to allow t h e b a n n e d p r o d u c t into the
c o u n t r y . B r i b i n g an i n s p e c t o r to t u r n a blind eye to an u n s a n i t a r y
d r u g - m a n u f a c t u r i n g plant can hardly be r a t i o n a l i s e d as in the
n a t i o n a l i n t e r e s t . It will be s h o w n t h a t t h e s e types of b r i b e r y are
c o m m o n in the international pharmaceutical industry. Bribery is
defined as t h e giving of r e w a r d s b e y o n d t h o s e allowed by law to
e n t i c e a p e r s o n w i t h a duty of trust to p e r v e r t , c o r r u p t or c o m -
p r o m i s e t h a t t r u s t . E x t o r t i o n is defined as t h e soliciting of a b r i b e .
T h e c o n c e r n o f this c h a p t e r will not b e with m i n o r ' g r e a s e ' p a y m e n t s
to get b u r e a u c r a t s to do t h e j o b t h e y are paid for. but with what
R e i s m a n ( 1 9 7 9 : 75) h a s called "variance b r i b e s ' .
M a n y of t h e p a y m e n t s to m i n i s t e r s and officials by p h a r m a -
ceutical c o m p a n i e s are extorted by the recipients. Conversely,
r e s p o n d e n t s told o f m a n y s i t u a t i o n s w h e r e i t w a s the c o m p a n y
w h i c h initiated t h e illegal t r a n s a c t i o n . I r r e s p e c t i v e o f t h e a l l o c a t i o n
o f guilt b e t w e e n t h e t w o p a r t i e s , the point r e m a i n s t h a t h e r e w e are
11
Bribery
d e a l i n g with c o n d u c t w h i c h c a n n o t b e b e n i g n l y t o l e r a t e d a s 'cus-
t o m a r y b u s i n e s s p r a c t i c e i n foreign c o u n t r i e s ' .
N o t all forms of b r i b e r y s e e m e d to b o t h e r e x e c u t i v e s in the
p h a r m a c e u t i c a l i n d u s t r y . It w a s g e n e r a l l y a c c e p t e d that paying off
h e a l t h i n s p e c t o r s i n c e r t a i n Third W o r l d c o u n t r i e s w a s n o r m a l and
a c c e p t a b l e business practice. H o w e v e r , there was considerable
c o n c e r n o v e r t h e b r i b i n g of g o v e r n m e n t officials to get t r a d e secrets
c o n c e r n i n g m a n u f a c t u r i n g p r o c e s s e s . Such secrets arc necessarily
m a d e a v a i l a b l e t o g o v e r n m e n t s for n e w p r o d u c t a p p r o v a l . Italy was
f r e q u e n t l y m e n t i o n e d as the c o u n t r y w h e r e such b r i b e s , often of
o n l y a few t h o u s a n d d o l l a r s , w e r e passed to t h e Ministry of H e a l t h .
M a n y p i r a t e m a n u f a c t u r e r s are a l l o w e d to o p e r a t e in Italy in viola-
tion of international patent a g r e e m e n t s . ' G u a t e m a l a n executives
a l s o said it w a s c o m m o n t h e r e for g o v e r n m e n t officials to hand o v e r
n e w d r u g r e g i s t r a t i o n d'Kumentation to local firms in e x c h a n g e for a
'few h u n d r e d q u e t z a l s [ d o l l a r s ] ' . T h e local firm t h e n s u b m i t s exactly
t h e s a m e r e s e a r c h d a t a on t h e safety of t h e d r u g in o r d e r to h a v e its
p r o d u c t a p p r o v e d . T h e p r o d u c t it m a n u f a c t u r e s , possibly in a bath
t u b , m a y b e a r little r e s e m b l a n c e t o t h e p r o d u c t t o which the sub-
m i t t e d s a f e t y - t e s t i n g d a t a r e l a t e s . A n y set of d a t a w h i c h carefully
m e e t s all t h e legal r e q u i r e m e n t s will suffice to get a p e r m i t n u m b e r
to p r i n t on all b o t t l e s . In G u a t e m a l a no o n e is going to c h e c k
w h e t h e r the c o n t e n t s of the bottle c o r r e s p o n d to the information in
t h e p r o d u c t r e g i s t r a t i o n d o c u m e n t s . T o begin w i t h , t h e g o v e r n m e n t
2
d o e s not have a testing laboratory.
T h e n o f c o u r s e t h e r e i s t h e m o r e s t r a i g h t f o r w a r d kind o f i n d u s -
trial e s p i o n a g e w h e r e e m p l o y e e s sell secrets directly t o their
c o m p a n y ' s c o m p e t i t o r . On some occasions the crime is in response
to a b r i b e to t h e spy. a n d on o t h e r o c c a s i o n s t h e e m p l o y e e initiates
t h e e s p i o n a g e . A d i s g r u n t l e d e m p l o y e e of M e r c k stole the p r o c e s s
for m a k i n g a l p h a m e t h y l d o p a ( ' A l d o m e t ' ) , a n a n t i - h y p e r t e n s i v e
d r u g . T h e c o m p e t i t o r w h o w a s offered t h e p l a n s t u r n e d t h e m d o w n
a n d notified M e r c k . M o s t n o t o r i o u s a m o n g t h e p h a r m a c e u t i c a l
s p i e s w a s Dr S i d n e y M a r t i n F o x , a f o r m e r e m p l o y e e of L e d e r l e
L a b o r a t o r i e s , t h e C y a n a m i d s u b s i d i a r y . He set up a spy ring which
sold m i c r o f i l m c o p i e s of secret d o c u m e n t s and stolen c u l t u r e s of
m i c r o - o r g a n i s m s to six Italian d r u g firms ( D a v i e s , 1976). F o x and
h i s a s s o c i a t e s a r e b e l i e v e d to have b e e n paid £ 3 5 , 0 0 0 by o n e firm
a l o n e . A l o n g w i t h f i v e c o n f e d e r a t e s . Fox w a s c o n v i c t e d and im-
p r i s o n e d u n d e r t h e F e d e r a l Stolen P r o p e r t y s t a t u t e b y a N e w Y o r k
c o u r t in J a n u a r y 1966.
12
Bribery
T h e c o n s e q u e n c e s o f t h e s e c o m p a n y - a g a i n s t - c o m p a n y c r i m e s are
less s e r i o u s t h a n w h e n c o n s u m e r s are t h e v i c t i m s . I t i s t h e latter t y p e
of b r i b e r y w h i c h will be t h e c o n c e r n of this c h a p t e r .
13
Bribery
m a n y p a r t s o f t h e w o r l d . I've s p o k e n t o p e o p l e a t the S E C w h o
i n t e r v i e w c o m p a n i e s o n such m a t t e r s and they tell m e t h a t the
p r a c t i c e s a r e still w i d e s p r e a d . W h y do large c o r p o r a t i o n s feel that
t h e y h a v e to do this sort of t h i n g ? " In o t h e r w o r d s , "I'm no b a b e in
t h e w o o d s . I k n o w y o u d o it, but w h y ? ' ' T h e a p p r o a c h almost never
failed to elicit a l e n g t h y and r e v e a l i n g d i s c u s s i o n . A m o n g t h e 27 US
e x e c u t i v e s on w h o m I tried t h e "no b a b e in t h e w o o d s ' a p p r o a c h ,
n o n e d e n i e d t h a t b r i b e r y had b e e n w i d e s p r e a d i n the past a m o n g
A m e r i c a n p h a r m a c e u t i c a l c o m p a n i e s , and only 6 d e n i e d that
b r i b e r y w a s still c o m m o n t o d a y a m o n g A m e r i c a n p h a r m a c e u t i c a l
c o m p a n i e s . Of t h e 21 w h o felt t h a t b r i b e r y still w a s c o m m o n ,
h o w e v e r , only 1 felt t h a t it w a s as c o m m o n t o d a y as it had b e e n in
t h e past. As we shall see later, t h e r e a r e g r o u n d s for s u s p e c t i n g that
o n t h e l a t t e r p o i n t t h e o t h e r 2 0 e x e c u t i v e s may h a v e b e e n d e s c r i b i n g
the situation accurately.
T h e offices o f t h e U S S e c u r i t i e s and E x c h a n g e C o m m i s s i o n ( S E C )
are g o l d m i n e s of information about "questionable p a y m e n t s ' by
A m e r i c a n c o r p o r a t i o n s . V a l e r i e B r a i t h w a i t e and I spent a n u m b e r
o f d a y s r e a d i n g and p h o t o c o p y i n g d o c u m e n t s i n the W a s h i n g t o n ,
N e w Y o r k a n d L o s A n g e l e s offices o f t h e S E C a s well a s i n t e r v i e w -
ing s e v e r a l officers. T h e m o s t c e n t r a l d o c u m e n t s relating t o each
c o m p a n y a r e listed i n T a b l e 2.1 (p. 3 1 ) , but i n s o m e c a s e s t h e s e w e r e
s u p p o r t e d b y a large n u m b e r o f a d d i t i o n a l c o m p a n y d o c u m e n t s .
R e a d e r s m a y r e q u e s t further i n f o r m a t i o n a b o u t t h e s e d o c u m e n t s b y
writing to me.
T h e w e a l t h of i n f o r m a t i o n arises largely from the S E C ' s volun-
t a r y d i s c l o s u r e p r o g r a m m e . C o m p a n i e s which p a r t i c i p a t e d i n this
p r o g r a m m e w e r e led t o u n d e r s t a n d that such p a r t i c i p a t i o n would
14
Bribery
l e s s e n t h e l i k e l i h o o d t h a t t h e o v e r l o a d e d S E C staff w o u l d p r o c e e d
w i t h e n f o r c e m e n t a c t i o n a g a i n s t t h e m . N o formal g u a r a n t e e against
p r o s e c u t i o n was given, however. U n d e r the voluntary p r o g r a m m e ,
the c o m p a n y conducts a detailed investigation of corrupt payments
by e m p l o y e e s u n d e r t h e a u s p i c e s of ' p e r s o n s not involved in the
a c t i v i t i e s i n q u e s t i o n ' , and t h e n m a k e s a v a i l a b l e t o the S E C staff'all
details c o n c e r n i n g the questionable practices uncovered' (Herlihy
a n d L e v i n e , 1976: 5 8 5 ) . I n t h e p u b l i c d i s c l o s u r e s t h e S E C g e n e r a l l y
a l l o w e d c o m p a n i e s t o p r o t e c t their b u s i n e s s c o n t a c t s b y d e s c r i b i n g
e v e n t s w h i l e w i t h h o l d i n g t h e n a m e s o f t h e r e c i p i e n t s and the coun-
tries where corrupt payments were m a d e .
A b o u t t h i r t y o t h e r c o m p a n i e s which S E C i n v e s t i g a t i o n found t o
h a v e a p a r t i c u l a r l y bad r e c o r d on q u e s t i o n a b l e p a y m e n t s w e r e
forced into c o n s e n t d e c r e e s . A m a j o r r e q u i r e m e n t of the c o n s e n t
d e c r e e s w a s a n e x t r a o r d i n a r i l y d e t a i l e d d i s c l o s u r e o f the c i r c u m -
s t a n c e s s u r r o u n d i n g s u s p e c t e d c o r r u p t p a y m e n t s . I n e x c h a n g e for
such d e t a i l e d d i s c l o s u r e and c e r t a i n r e f o r m s of the c h e c k s and
b a l a n c e s w i t h i n t h e c o m p a n y for the p r e v e n t i o n o f b r i b e r y , t h e S E C
a g r e e d n o t to p r o s e c u t e for any c r i m i n a l a c t i o n . To this end it is
a g r e e d t h a t t h e d i s c l o s u r e s i n t h e c o n s e n t d e c r e e are not t o b e
t r e a t e d as e v i d e n c e of any criminal act. As G e i s ( 1 9 7 9 : 23) has
r e m a r k e d , t h e c o r p o r a t i o n in e s s e n c e says: T d i d n ' t do it, but I
w o n ' t do it a g a i n . ' "Burglars m i g h t wish t h e y had it so g o o d ' , G e i s
p l e a d s . I n e q u i t a b l e t h o u g h i t c e r t a i n l y is, t h e reality i s that t h e S E C
d o e s n o t h a v e t h e r e s o u r c e s t o i n v e s t i g a t e every c o m p a n y s u s p e c t e d
of b r i b e r y in t h e s a m e w a y as p o l i c e d e p a r t m e n t s are able to investi-
g a t e m o s t o f f e n d e r s c a u g h t in t h e act of or s u s p e c t e d of b u r g l a r y .
T h e v o l u n t a r y d i s c l o s u r e and c o n s e n t d e c r e e p r o g r a m m e s w e r e
m e a n s o f m a k i n g t h e m o s t o f t h e s e limited r e s o u r c e s . T h e y a t least
p e r m i t t e d a c r u d e c h e c k on the e x t e n t of c o r r u p t p a y m e n t s by all of
t h e l a r g e s t A m e r i c a n c o r p o r a t i o n s . T h e S E C a t o n e t i m e looked a t
t h e foreign b u s i n e s s p r a c t i c e s of all t h e F o r t u n e 500 c o m p a n i e s .
R e s e a r c h e r s w h o h a v e e n g a g e d i n d e t a i l e d scrutiny o f t h e c o r r u p -
t i o n r e v e a l e d b y t h e S E C d i s c l o s u r e p r o g r a m m e s all a g r e e t h a t the
p h a r m a c e u t i c a l i n d u s t r y is r e v e a l e d as h a v i n g o n e of t h e w o r s t
records.
Of t h e 32 i n d u s t r i e s t h a t spent m o r e t h a n SI million in i m p r o p e r
o v e r s e a s p a y m e n t s , h a l f w e r e i n aircraft, oil, food and d r u g s .
Seven were in d r u g s , which was the most c o m m o n (Clinard et al.,
1979: 199).
15
Bribery
. . . t h e t w o l a r g e s t identifiable g r o u p s w e r e drug m a n u f a c t u r e r s
and c o m p a n i e s e n g a g e d i n p e t r o l e u m refining and r e l a t e d
s e r v i c e s ( S E C , 1976).
. . . t w e l v e [ p h a r m a c e u t i c a l ] c o m p a n i e s had m a d e v o l u n t a r y
d i s c l o s u r e s , which w a s the h i g h e s t n u m b e r for any industry equal
only to t h e oil i n d u s t r y ( K u g e l and G r u e n b e r g , 1977: 7 8 ) .
It s e e m s t h a t c e r t a i n i n d u s t r i e s are p a r t i c u l a r l y p r o n e to e n g a g e in
o v e r s e a s p a y m e n t s . H e a v y capital g o o d s i n d u s t r i e s , such a s
a e r o s p a c e , a r m s , o r t h o s e i n d u s t r i e s that are closely r e g u l a t e d b y
foreign g o v e r n m e n t a g e n c i e s , such a s p h a r m a c e u t i c a l c o m p a n i e s ,
a r e s u b j e c t to u n u s u a l l y h e a v y p r e s s u r e s for payoffs ( H e r l i h y and
L e v i n e , 1976: 5 6 6 ) .
S i m i l a r l y , K e n n e d y and S i m o n ( 1 9 7 8 ) , in a classification of c o m -
p a n i e s d i s c l o s i n g c o r r u p t p a y m e n t s a c c o r d i n g t o i n d u s t r y , found
" d r u g s ' to t o p t h e list with 10 e n t r i e s . A d a m s and R o s e n t h a l ( 1 9 7 6 ) .
in t h e i r b r e a k d o w n by i n d u s t r y , classified 22 u n d e r "drugs and
h e a l t h c a r e " , m o r e t h a n i n any o t h e r c a t e g o r y . All o f t h e s e r e v i e w s
u n d e r e s t i m a t e t h e p r o p o r t i o n o f d o c u m e n t e d d i s c l o s u r e s w h i c h are
a t t r i b u t e d t o p h a r m a c e u t i c a l c o m p a n i e s . E i t h e r t h r o u g h less t h a n
e x h a u s t i v e search of S E C files, or because the disclosures a p p e a r e d
l a t e r t h a n t h e i r d e a d l i n e s for p u b l i c a t i o n , all t h e a b o v e reviews have
m i s s e d a c o n s i d e r a b l e n u m b e r of s u b s t a n t i a l d i s c l o s u r e s by phar-
m a c e u t i c a l c o m p a n i e s . T a b l e 2. 1 lists d i s c l o s u r e s of q u e s t i o n a b l e
p a y m e n t s m a d e by 29 pharmaceutical c o m p a n i e s . Of the 20 US
c o m p a n i e s w i t h t h e highest w o r l d w i d e sales i n p h a r m a c e u t i c a l
p r o d u c t s , 19 have disclosed substantial questionable payments. No
o t h e r i n d u s t r y g r o u p has a n y t h i n g a p p r o a c h i n g this record o f d o c u -
mented corrupt payments. T h e q u a l i t a t i v e and q u a n t i t a t i v e
e v i d e n c e p r e s e n t e d i n this c h a p t e r s u s t a i n s t h e c o n c l u s i o n t h a t t h e
p h a r m a c e u t i c a l i n d u s t r y i s m o r e p r o n e t o b r i b e r y t h a n any o t h e r i n
i n t e r n a t i o n a l b u s i n e s s . P o s s i b l y this i s b e c a u s e , like a e r o s p a c e c o m -
p a n i e s , p h a r m a c e u t i c a l firms deal with big win or lose s i t u a t i o n s -
t h e n e w billion d o l l a r p r o d u c t t o b e a p p r o v e d , the ten million d o l l a r
h o s p i t a l s u p p l y c o n t r a c t t o b e w o n . M o r e o v e r , the m u l t i t u d e o f
r e g u l a t o r y d e c i s i o n s t o w h i c h p h a r m a c e u t i c a l c o m p a n i e s are s u b -
j e c t e d c r e a t e s m a n y o p p o r t u n i t i e s for b u y i n g off r e g u l a t o r s . T h e
c o m p a n y a m o n g t h e t o p 2 0 U S p h a r m a c e u t i c a l firms which did not
d i s c l o s e any q u e s t i o n a b l e p a y m e n t s w a s Eli Lilly.
16
Bribery
p h a r m a c e u t i c a l c o m p a n i e s are s t a g g e r i n g especially c o n s i d e r i n g
t h a t m a n y of t h e s e a m o u n t s do not consist of o n e or t w o huge
p a y m e n t s . A u s t r a l i a n e x e c u t i v e s told m e t h a t i n s o m e A s i a n c o u n -
t r i e s d r u g r e g i s t r a t i o n s c o u l d be s e c u r e d for quite small c o r r u p t
p a y m e n t s . "Slip t h e m $100 and y o u ' r e r i g h t , ' a s one e x p l a i n e d .
I n c l u d e d in t h e m i l l i o n s of d o l l a r s d i s c l o s e d by m a n y of the
c o m p a n i e s might be some hundreds or t h o u s a n d s of bribes.
T h e c o r r u p t i o n often r e a c h e s t h e h i g h e s t levels o f g o v e r n m e n t .
T h e following i n c i d e n t ( w h i c h d o e s not a p p e a r i n t h e S E C dis-
c l o s u r e d o c u m e n t s ) w a s r e p o r t e d in the New York Times.
L e t u s n o w r e v i e w t h e d i s c l o s u r e s m a d e b y t h e largest c o m p a n i e s .
M r G a d s d e n w a s a w a r e t h a t p a y m e n t s o f t h e kind u n d e r
investigation were rather c o m m o n in the conduct of business in
s o m e foreign c o u n t r i e s , but stated t h a t p r i o r t o t h e i n v e s t i g a t i o n
he did not b e l i e v e t h a t t h e C o m p a n y or its e m p l o y e e s w e r e
i n v o l v e d in any such p a y m e n t s , e x c e p t for m i n o r g r a t u i t i e s .
B a s e d on all t h e e v i d e n c e it r e c e i v e d d u r i n g t h e c o u r s e of the
i n v e s t i g a t i o n , t h e C o m m i t t e e b e l i e v e s this i s a n a c c u r a t e
s t a t e m e n t . The C o m m i t t e e was advised, however, that in two
i n s t a n c e s p o s s i b l e w a r n i n g signals may h a v e b e e n s o u n d e d i n M r
G a d s d e n ' s p r e s e n c e w h i c h could h a v e p r o m p t e d him t o p r o b e
into t h e m a t t e r s n o w i n q u e s t i o n . M r G a d s d e n did not recall one
o f t h e s e i n c i d e n t s . H e did not p u r s u e t h e s e c o n d which o c c u r r e d
in A p r i l 1 9 7 5 ; h o w e v e r , he w a s i n f o r m e d at that t i m e t h a t line
e x e c u t i v e s had g i v e n a s s u r a n c e t h e r e w e r e and w o u l d b e n o
p r o b l e m s o f this n a t u r e a t M e r c k . M r G a d s d e n w a s a w a r e o f and
a p p r o v e d t h e m a k i n g of a s u b s t a n t i a l foreign political
c o n t r i b u t i o n , d i r e c t i n g t h a t t h e c o n t r i b u t i o n be m a d e only if it
w a s legal to do so.
18
Bribery
T h e c o m m i t t e e also r e a c h e d t h e s e c o n c l u s i o n s a b o u t R a y m o n d
E . S n y d e r ( E x e c u t i v e Vice P r e s i d e n t , A d m i n i s t r a t i o n ) :
Mr S n y d e r s t a t e d t h a t he w a s not i n v o l v e d in the a u t h o r i z a t i o n ,
a p p r o v a l o r r e c o r d i n g o f any o f the i m p r o p e r p a y m e n t s t o foreign
g o v e r n m e n t e m p l o y e e s . F u r t h e r m o r e , h e stated that a l t h o u g h h e
b e l i e v e d t h e C o m p a n y ' s foreign s u b s i d i a r i e s c o n f o r m e d to a
g e n e r a l i n d u s t r y p r a c t i c e i n s o m e foreign c o u n t r i e s o f m a k i n g
p a y m e n t s of m o d e s t s u m s of this t y p e , he k n e w of no specific
major disbursement or improper documentation. There were
r e c o l l e c t i o n s a m o n g o t h e r s i n t e r v i e w e d that [there w e r e ] o n
s e v e r a l o c c a s i o n s t r a n s a c t i o n s i n v o l v i n g possible i m p r o p e r
p a y m e n t s by foreign s u b s i d i a r i e s . . . [ a n d ] no c o r r e c t i v e s t e p s
w e r e t a k e n a t t h a t t i m e . M r S n y d e r did not r e m e m b e r such
specific d i s c u s s i o n s p r i o r to t h e w i d e publicity given to such
g e n e r a l i n d u s t r y p r a c t i c e s in 1975, a l t h o u g h he t h o u g h t it p o s s i b l e
t h a t s o m e such t r a n s a c t i o n s may h a v e b e e n involved i n r e v i e w s o f
a n u m b e r of u n u s u a l a c c o u n t i n g i t e m s , i n c l u d i n g p a y m e n t s for
w h i c h d o c u m e n t a t i o n did not a p p e a r t o b e c o m p l e t e .
(i) t h e r e w a s a n a t m o s p h e r e o f a c c e p t a n c e c r e a t e d b y t h o s e
r e s p o n s i b l e for d i r e c t i n g and s u p e r v i s i n g the i n t e r n a t i o n a l and
t h e financial affairs o f t h e C o m p a n y ;
(ii) t h e r e w a s an effort by i n t e r n a t i o n a l line and c o n t r o l l e r
p e r s o n n e l to k e e p d e t a i l s with r e s p e c t to such p a y m e n t s from
c o m i n g to top m a n a g e m e n t attention on the assumption that,
d e s p i t e t h e a t m o s p h e r e o f a c c e p t a n c e , t o p m a n a g e m e n t did not
want to be involved;
(iii) t h e r e w a s an a b s e n c e of effective p r o b i n g by t o p
m a n a g e m e n t , d e s p i t e s o m e i n d i c a t i o n s t h a t such p r o b i n g w a s i n
order.
I n t h e s t a t e m e n t s t o t h e S E C , M e r c k e x c u s e d t h e b e h a v i o u r o f its
p e r s o n n e l b y p o i n t i n g o u t that:
T h e s e p a y m e n t s w e r e m a d e b e c a u s e t h e e m p l o y e e s involved
g e n e r a l l y b e l i e v e d t h a t i) t h e y w e r e b e i n g p r e s s u r e d by foreign
g o v e r n m e n t e m p l o y e e s t o m a k e such p a y m e n t s , ii) m a n a g e m e n t
19
Bribery
a c c e p t e d t h e s e p r a c t i c e s as n e c e s s a r y to a c h i e v e sales goals in
s o m e c o u n t r i e s a b r o a d , and iii) t h e y w e r e acting in t h e best
interests of the C o m p a n y .
US r a n k in p h a r m a c e u t i c a l sales: 2
A m e r i c a n H o m e P r o d u c t s is a much larger company than Merck,
b u t s m a l l e r in p h a r m a c e u t i c a l s , only 39 p e r cent of its sales being of
d r u g s ( G e r e f f i . 1979: 13). A total of S3.4 million in q u e s t i o n a b l e
p a y m e n t s w a s m a d e in 41 different c o u n t r i e s . A p p r o v a l s for g o v e r n -
m e n t p u r c h a s e s w o r t h S40.5 million w e r e o b t a i n e d b e t w e e n 1971
a n d 1975 by p a y i n g g o v e r n m e n t officials a c o m m i s s i o n r a n g i n g
b e t w e e n 1 per c e n t and 15 p e r cent of the value of the sale. O t h e r
p a y m e n t s w e r e m a d e "to o b t a i n action o n n e c e s s a r y g o v e r n m e n t
c l e a r a n c e s ' . A m e r i c a n H o m e P r o d u c t s disclosed that:
N o n - c o m m i s s i o n type p a y m e n t s were m a d e in a n u m b e r of
c o u n t r i e s t o foreign g o v e r n m e n t e m p l o y e e s primarily i n
c o n n e c t i o n with the granting of required g o v e r n m e n t
a p p r o v a l s . . . . T h e t o t a l s do not i n c l u d e o c c a s i o n a l n o m i n a l
g r a t u i t i e s and tips t o p e r s o n s p e r f o r m i n g r o u t i n e m i n i s t e r i a l
d u t i e s (8K form l o d g e d with S E C : F e b . 7 6 : 4 ) .
In a d d i t i o n to t h e a b o v e , t h e c o m p a n y a d m i t t e d to a legal charit-
a b l e c o n t r i b u t i o n of $ 3 8 , 0 0 0 for an ' e s s e n t i a l l y political p u r p o s e "
w h i c h w a s f a v o u r e d by a high g o v e r n m e n t official. A t t e n t i o n is
d r a w n to this only to s h o w s o m e of t h e a c t i v i t i e s which are e x c l u d e d
from t h e a g g r e g a t e f i g u r e s o n q u e s t i o n a b l e p a y m e n t s r e p o r t e d h e r e .
Warner-Lambert
US r a n k in p h a r m a c e u t i c a l s a l e s : 3
W a r n e r - L a m b e r t and its s u b s i d i a r y P a r k e - D a v i s disclosed S2.6
m i l l i o n in q u e s t i o n a b l e p a y m e n t s in 14 c o u n t r i e s . A bank a c c o u n t
n o t o n t h e c o r p o r a t e b o o k s w a s used t o pay c o m m i s s i o n s o n g o v e r n -
m e n t sales i n s o m e c a s e s , w h i l e o t h e r c o m m i s s i o n s w e r e b o o k e d a s
m a r k e t i n g e x p e n s e s . E r r o n e o u s tax d e d u c t i o n s from t h e s e pay-
m e n t s w e r e m a d e t o t h e point w h e r e t h e c o m p a n y w a s obliged t o
pay $ 3 2 5 , 8 3 9 i n a d d i t i o n a l t a x .
T u c k e d a w a y i n t h e d o c u m e n t s l o d g e d with t h e S E C i s the a d m i s -
sion t h a t p a y m e n t s w e r e m a d e t o get n e w p r o d u c t s a p p r o v e d for
20
Bribery
m a r k e t i n g : ' O t h e r p a y m e n t s w e r e m a d e t o foreign g o v e r n m e n t
e m p l o y e e s to e x p e d i t e a variety of g o v e r n m e n t a l a c t i o n s with
r e s p e c t t o p r i c e s , p r o d u c t r e g i s t r a t i o n s , d i v i d e n d s , t a x e s , and o t h e r
m a t t e r s . ' (8K: M a r . 7 6 ) .
Pfizer
US r a n k in p h a r m a c e u t i c a l sales: 4
C o m p a r e d w i t h t h e t h r e e largest c o m p a n i e s . Pfizer disclosed t h e
r e l a t i v e l y m o d e r a t e total o f $ 2 6 4 , 0 0 0 i n p a y m e n t s t o g o v e r n m e n t
e m p l o y e e s i n t h r e e c o u n t r i e s . A n a d d i t i o n a l p a y m e n t o f $22,500
h a d b e e n m a d e t o a foreign t r a d e a s s o c i a t i o n 'which p a y m e n t had
b e e n solicited with t h e i n d i c a t i o n t h a t it w o u l d be used to m a k e
c o n t r i b u t i o n s to v a r i o u s political p a r t i e s in that foreign country".
Pfizer also said t h a t it paid a further $ 2 1 , 0 0 0 as a 'professional fee',
' t h e r e c i p i e n t o f w h i c h i n d i c a t e d s o m e p o r t i o n m i g h t b e used t o
m a k e a p a y m e n t t o foreign g o v e r n m e n t e m p l o y e s [sic]' (8K: M a r ,
76).
Upjohn
US r a n k in p h a r m a c e u t i c a l sales: 6
U p j o h n has d i s c l o s e d t h e s e c o n d largest a m o u n t o f q u e s t i o n a b l e
p a y m e n t s - an a g g r e g a t e of $4.2 million. An initial d i s c l o s u r e of
$2.7 m i l l i o n in 22 c o u n t r i e s w a s soon followed by an a d m i s s i o n that
e v i d e n c e for t h e l a r g e r sum of $4.2 million in 29 c o u n t r i e s w a s
a v a i l a b l e . A n u n u s u a l e l e m e n t i n U p j o h n ' s d i s c l o s u r e i s the large
s u m w h i c h i s c o n c e d e d a s h a v i n g b e e n paid t o n o n - g o v e r n m e n t
hospital e m p l o y e e s - $474,000. No outside directors knew o f t h e
p a y m e n t s but i n s i d e d i r e c t o r s e i t h e r k n e w o f t h e p a y m e n t s o r
actually approved them.
Squibb
US r a n k in p h a r m a c e u t i c a l sales: 7
T h e d o c u m e n t e d h i s t o r y o f b r i b e r y w i t h S q u i b b goes back further
than with most of the transnational pharmaceutical corporations.
D u r i n g t h e 1960s S q u i b b w a s a s u b s i d i a r y of t h e O l i n M a t h i e s o n
C h e m i c a l C o r p o r a t i o n . T h e illegal p a y m e n t s c o n c e r n e d $1.5
m i l l i o n w o r t h o f a n t i b i o t i c s m a n u f a c t u r e d b y S q u i b b and sent t o
C a m b o d i a a n d V i e t n a m b e t w e e n 1958 and 1963 u n d e r t h e U S
21
Bribery
It h a p p e n e d t h a t t h e r e w a s a law w h i c h said in e s s e n c e t h a t a
p e r s o n w h o had b e e n c o n v i c t e d of a felony could not t r a n s p o r t a
w e a p o n in i n t e r s t a t e c o m m e r c e . T h i s c r e a t e d a legal p r o b l e m for
O l i n , b e c a u s e it had b e e n c o n v i c t e d o f a felony, w a s in the e y e s of
t h e law a p e r s o n a n d had a division t h a t m a d e w e a p o n s for use by
the a r m e d forces. C o n g r e s s resolved the dilemma by enacting a
law t h a t , in effect, got O l i n off t h e h o o k ( M i n t z , 1967: 3 8 3 j ) .
Bristol-Myers
US r a n k in p h a r m a c e u t i c a l sales: 8
Bristol-Myers have disclosed $3.0 m i l l i o n in questionable pay-
m e n t s . A n i n v e s t i g a t i o n c o m m i t t e e a p p o i n t e d b y the B r i s t o l - M y e r s
b o a r d p r o v i d e s s o m e i n t e r e s t i n g insights i n its r e p o r t a b o u t h o w t h e
p a y m e n t s , which were generally made in cash, were concealed.
22
Bribery
T h e i n v e s t i g a t i o n c o n c l u d e d t h a t n o m e m b e r o f the b o a r d o f
d i r e c t o r s , e m p l o y e e or n o n - e m p l o y e e , knew that payments were
being made. H o w e v e r ,
A t I n t e r n a t i o n a l D i v i s i o n h e a d q u a r t e r s i n N e w Y o r k and R o m e ,
e x e c u t i v e s i n c l u d i n g financial p e r s o n n e l had varying d e g r e e s o f
k n o w l e d g e o f t h e m a k i n g o f p a y m e n t s t o o b t a i n sales and o f
facilitating p a y m e n t s . I n t h o s e c o u n t r i e s w h e r e p a y m e n t s w e r e
m a d e , t h e g e n e r a l m a n a g e r s w e r e a w a r e o f and a u t h o r i z e d t h e
m a k i n g o f t h e p a y m e n t s . A r e a vice p r e s i d e n t s and r e g i o n a l
d i r e c t o r s g e n e r a l l y had s o m e k n o w l e d g e o f p a y m e n t s m a d e i n
t h e i r t e r r i t o r i e s (8K: A u g 7 6 ) .
T h e c o m m i t t e e r e p o r t e d o n the following d e c i s i o n o f t h e B r i s t o l -
M y e r s B o a r d , a d e c i s i o n w h i c h t h e S E C w a s a p p a r e n t l y willing t o
accept.
23
Bribery
Schering-Plough
US r a n k in p h a r m a c e u t i c a l sales: 9
S c h e r i n g - P l o u g h r e p o r t e d q u e s t i o n a b l e p a y m e n t s o f $1.1 million
b e t w e e n 1971 and 1976. E a r l y d i s c l o s u r e s of $0.8 million had to be
s u p p l e m e n t e d in 1977 with further r e v e l a t i o n s . T h e s e i n c l u d e d
explicit reference to p a y m e n t s to secure product registrations:
2 . I n a n o t h e r foreign c o u n t r y , p a y m e n t s o f a p p r o x i m a t e l y
$ 2 2 0 , 0 0 0 w e r e m a d e d u r i n g t h e y e a r s 1972 t h r o u g h 1976 to
private consultants engaged to secure product registrations, or
r e n e w a l s thereof, i n t h a t c o u n t r y . I n a d d i t i o n , i n t h a t s a m e
c o u n t r y , p a y m e n t s t o t a l l i n g a p p r o x i m a t e l y $ 17,000 w e r e m a d e in
the y e a r s 1972, 1975 and 1976 to c o n s u l t a n t s e n g a g e d to settle
p r o p o s e d i n c o m e t a x a s s e s s m e n t s . S e n i o r m a n a g e m e n t has b e e n
a d v i s e d t h a t all or a p o r t i o n of t h e a f o r e s a i d p a y m e n t s may have
b e e n p a s s e d on to p u b l i c officials r e s p o n s i b l e for p r o c e s s i n g the
r e g i s t r a t i o n s or tax a s s e s s m e n t s a l t h o u g h it has no direct
k n o w l e d g e o f any such p a y m e n t s .
3 . I n a n o t h e r foreign c o u n t r y , p a y m e n t s i n the a m o u n t o f
a p p r o x i m a t e l y $ 3 7 , 0 0 0 w e r e m a d e d u r i n g t h e y e a r s 1972 t h r o u g h
1976, in c o n n e c t i o n with a p p l i c a t i o n s for p r o d u c t r e g i s t r a t i o n s in
that c o u n t r y , to individuals who w e r e part-time consultants to a
g o v e r n m e n t a g e n c y r e s p o n s i b l e for issuing such r e g i s t r a t i o n s
(8K: A p r , 77).
A m e r i c a n H o s p i t a l S u p p l y ( A H S ) , a r e l a t i v e l y small c o r p o r a t i o n
c o m p a r e d w i t h s o m e o f t h o s e a b o v e ( c o n s o l i d a t e d net e a r n i n g s for
five y e a r s to J u n e 1976 w e r e $208 m i l l i o n ) , s u r p a s s e d all o t h e r
p h a r m a c e u t i c a l c o m p a n i e s with questionable p a y m e n t s a m o u n t i n g
to a s t a g g e r i n g $ 5 . 8 million. T h i s figure d o e s not i n c l u d e q u e s t i o n -
a b l e p a y m e n t s b y c o m p a n i e s i n w h i c h A H S has m i n o r i t y i n t e r e s t s
( u p t o 5 0 p e r c e n t ) . I t w a s c o n c e d e d that A H S ' h a s b e e n only
24
Bribery
p a r t i a l l y successful in i n d u c i n g t h e s e foreign c o m p a n i e s to c o r r e c t
p r a c t i c e s w h i c h v i o l a t e its P o l i c i e s ' . A H S specialises i n c o n t r a c t s t o
s u p p l y h o s p i t a l s w i t h a w i d e r a n g e of r e q u i r e m e n t s from syringes to
drugs.
T h e A H S p a y m e n t s w e r e t h e subject o f a n S E C c o n s e n t d e c r e e ,
w h i c h , a m o n g o t h e r t h i n g s , m a n d a t e d a hefty a u d i t c o m m i t t e e
r e p o r t i n t o t h e i n t e r n a l affairs o f t h e c o r p o r a t i o n .
T h e a u d i t c o m m i t t e e r e p o r t o f 2 5 F e b r u a r y 1977 r e v e a l e d that
q u e s t i o n a b l e p a y m e n t s , mainly c o m m i s s i o n s t o hospital a d m i n i s -
t r a t o r s who gave the c o m p a n y c o n t r a c t s , were m a d e in Australia.
Austria, Belgium, Brazil, Chile, France, G r e e c e , Guatemala,
India, Iran, Israel, Italy, Japan, Mexico, Norway, Peru,
P h i l i p p i n e s , Q a t a r , S a u d i A r a b i a , S o u t h K o r e a , S p a i n , T u r k e y and
V e n e z u e l a . M a n y o f t h e p a y m e n t s d i r e c t e d t o i n d i v i d u a l s i n these
c o u n t r i e s w e r e l a u n d e r e d t h r o u g h Swiss b a n k a c c o u n t s . O t h e r
intermediaries t h r o u g h w h i c h funds p a s s e d included public
r e l a t i o n s c o n s u l t a n t s , law firms and an a r c h i t e c t u r a l firm o w n e d by
hospital board m e m b e r s .
T h e w o r s t a l l e g a t i o n set d o w n in t h e c o n s e n t d e c r e e c o n c e r n e d a
m a j o r p r o j e c t t o e q u i p t h e n e w K i n g Faisal Specialist H o s p i t a l a t
R i y a d h , S a u d i A r a b i a , b e t w e e n 1972 and 1976. T h e c o n s e n t o r d e r
a l l e g e s t h a t S4.6 million w a s p a i d , mostly t h r o u g h a L i e c h t e n s t e i n
t r u s t , 'for t h e benefit o f p e r s o n s i n c h a r g e o f t h e p r o j e c t , p e r s o n s i n
a n affected M i n i s t r y o f t h e S a u d i g o v e r n m e n t and p e r s o n s o f p o w e r
and i n f l u e n c e with t h e Saudi g o v e r n m e n t ' .
T h e c o n s e n t d e c r e e p r o v i d e s a fascinating illustration of h o w the
b o a r d of d i r e c t o r s can be p r o t e c t e d from t h e taint of k n o w l e d g e
e v e n in a r e l a t i v e l y small c o m p a n y w h i c h is d i s p o s i n g of a very large
amount of money.
A p r o - f o r m a financial e a r n i n g s s t a t e m e n t p r o j e c t e d for t h e
H o s p i t a l c o n t r a c t , i n c l u d i n g a n e x p e n s e item identified a s
' C o m m i s s i o n s - SI,506[,000],' was submitted to A m e r i c a n
H o s p i t a l ' s board of directors by m a n a g e m e n t at the time board
a p p r o v a l for t h e e q u i p p i n g c o n t r a c t w a s s o u g h t . A l t h o u g h
A m e r i c a n H o s p i t a l policy r e q u i r e d b o a r d a p p r o v a l o f all
c o n s u l t i n g a g r e e m e n t s t h a t e x c e e d e d $ 2 5 , 0 0 0 i n fees, n o b o a r d
a p p r o v a l to e n t e r i n t o fee or c o m m i s s i o n a r r a n g e m e n t s in
25
Bribery
c o n n e c t i o n w i t h t h e subject c o n t r a c t w a s sought o r o b t a i n e d b y
m a n a g e m e n t . A m e r i c a n Hospital maintains that the personnel
w o r k i n g on t h e p r o p o s e d c o n t r a c t failed to inform t h e highest
c o r p o r a t e officers and d i r e c t o r s o f A m e r i c a n H o s p i t a l o f t h e
m a t t e r a l l e g e d i n P a r a g r a p h 1 1 h e r e i n a b o v e (p. 4 ) .
Union payments"
I t w o u l d a p p e a r t h a t tax i m p l i c a t i o n s o f A H S ' s u n i o n p a y m e n t s
w e r e a s o u r c e o f g r e a t e r c o n c e r n t h a n their p r o p r i e t y .
In J u l y 1976 a w a r e h o u s e e m p l o y e e of A H S / M e x i c o w a s fired.
The e m p l o y e e p e r s u a d e d a union to picket the w a r e h o u s e in
p r o t e s t of his firing. In o r d e r to e n d t h e p i c k e t i n g , the p e r s o n n e l
m a n a g e r o f A H S / M e x i c o n e g o t i a t e d with the u n i o n official i n
c h a r g e of t h e p i c k e t s . T h a t u n i o n official offered to s t o p t h e
p i c k e t i n g in r e t u r n for a cash p a y m e n t to him. T h e A H S / M e x i c o
p e r s o n n e l m a n a g e r refused t o m a k e t h e d i r e c t p a y m e n t i n cash
b u t m a d e a $ 6 0 0 p a y m e n t to t h e p i c k e t i n g u n i o n in t h e form of a
c h e c k m a d e p a y a b l e to t h e u n i o n in r e t u r n for a receipt from the
u n i o n so t h a t t h e p a y m e n t could be d e d u c t e d for tax p u r p o s e s .
T h e r e c e i p t did not m e e t all t h e r e q u i r e m e n t s of M e x i c a n tax law
and A H S / M e x i c o ' s i n d e p e n d e n t accountants determined it to be
a nondeductible expense (pp. 45-6).
Payments to physicians
26
Bribery
r e w a r d s t o d o c t o r s w h o used c e r t a i n i m p l a n t a b l e A H S medical
devices in preference to c o m p e t i n g b r a n d s . An example of an
i m p l a n t a b l e d e v i c e w o u l d be a heart p a c e m a k e r . I n c l u d e d in a list of
q u e s t i o n a b l e p a y m e n t s , w e find i n t h e c o n s e n t d e c r e e :
c) In a t h i r d c o u n t r y , i m p r o p e r p a y m e n t s to p h y s i c i a n s or o t h e r
d e s i g n a t e d r e c i p i e n t s a m o u n t i n g t o $ 1 5 1 , 0 0 0 i n c o n n e c t i o n with
t h e p r e s c r i p t i o n by such p h y s i c i a n s for i m p l a n t s of an A m e r i c a n
H o s p i t a l subsidiary's device to meet what the c o m p a n y c o n t e n d s
w e r e p r e v i o u s l y e s t a b l i s h e d c o m p e t i t i v e p r a c t i c e s ( p . 6.).
W i t h r e s p e c t t o p h a r m a c e u t i c a l p r o d u c t s and m e d i c a l d e v i c e s ,
p a y m e n t s to c u s t o m s officials can be a s e r i o u s m a t t e r if t h e y are
m a d e t o facilitate t h e i m p o r t o f p r o d u c t s which a r e not a p p r o v e d a s
safe a n d effective by t h e c o u n t r y c o n c e r n e d . T h e r e is insufficient
i n d i c a t i o n i n t h e a u d i t c o m m i t t e e r e p o r t a s t o w h e t h e r this w o u l d b e
t h e c a s e with A H S p a y m e n t s . T h e r e p o r t simply states that A H S
m a d e p a y m e n t s to M e x i c a n c u s t o m s officials in 1975, inter alia, to
'misclassify g o o d s t o p e r m i t t h e i r i m p o r t a t i o n ' .
P a y m e n t s w e r e a l s o m a d e t o M e x i c a n c u s t o m s officials w h o
e x t o r t e d the p a y m e n t s by threats of confiscation. O t h e r p a y m e n t s
w e r e m a d e t o ' i m p o r t A H S C g o o d s a t a l o w e r c u s t o m s rate t h a n t h a t
1
m a n d a t e d b y M e x i c a n law for t h o s e p r o d u c t s ' .
27
Bribery
h u n d r e d d o l l a r s c a s h . T h e s e c u s t o m e r s r a n g e d from g o v e r n m e n t
officials a n d c u s t o m s officials to o r d i n a r y city p o l i c e m e n (p. 4 4 ) .
Rorer-Amchen
T h e R o r e r - A m c h e n d i s c l o s u r e d o c u m e n t s are v a g u e c o n c e r n i n g
h o w m u c h w a s a c t u a l l y involved i n q u e s t i o n a b l e p a y m e n t s . Cer-
t a i n l y , a sum of $ 8 3 7 , 0 0 0 in p a y m e n t s for several specific p u r p o s e s
w a s m e n t i o n e d . T h e a d d i t i o n a l 8 K R e p o r t for M a r c h 1976 says that
' T h e g r e a t e s t p o r t i o n o f the p a y m e n t s t o g o v e r n m e n t officials and
e m p l o y e e s d e s c r i b e d in P a r a g r a p h A [$336,000 in an u n n a m e d
s u b s i d i a r y b e t w e e n 1971 and 1976] w a s m a d e to e x p e d i t e the regis-
t r a t i o n of n e w p r o d u c t s . // appears that such payments were made in
connection with the registration of all products registered during the
period covered by the investigation' (p. 7, e m p h a s i s a d d e d ) .
We a r e also told t h a t 'a p a y m e n t of a p p r o x i m a t e l y $49,(KX) to a
t r a d e a s s o c i a t i o n , a p p a r e n t l y w i t h the u n d e r s t a n d i n g that t h e
p a y m e n t , a l o n g w i t h p a y m e n t s from o t h e r c o m p a n i e s i n t h e s a m e
b u s i n e s s , w o u l d be paid to o n e or m o r e political p a r t i e s in recog-
n i t i o n o f p r i o r g o v e r n m e n t a l a c t i o n a l l o w i n g price i n c r e a s e s ' ( p .
4 - 5 ) . ' O t h e r p a y m e n t s w e r e m a d e t o o b t a i n f a v o r a b l e and e x p e d i -
t i o u s tax s e t t l e m e n t s for 1972 a n d 1973 and to c a u s e the t e r m i n a t i o n
of a fiscal i n s p e c t i o n ' (p. 8 ) . In a n o t h e r e x a m p l e :
T h e p a y m e n t t o p e r m i t t h e use o f j o i n t p r o d u c t i o n facilities
e n a b l e d t h e s u b s i d i a r y t o m o v e its o p e r a t i o n s t o a n o t h e r plant
w i t h o u t c o m p l y i n g with g o v e r n m e n t a l r e g u l a t i o n s r e l a t i n g t o
such m o v e ( p . 8 ) .
T h e R o r e r - A m c h e n d i s c l o s u r e t o t h e S E C e x p l a i n s h o w its slush
fund w a s m a i n t a i n e d :
T h e w i t h d r a w a l of t h e funds w a s a c c o u n t e d for e i t h e r by f i c t i t i o u s
e n t r i e s on t h e b o o k s of t h e s u b s i d i a r y or as t h e p a y m e n t of
i n v o i c e s p r o v i d e d b y third p e r s o n s w h o p r o v i d e d n o g o o d s o r
s e r v i c e s t o t h e s u b s i d i a r y . C h a r g e s w e r e m a d e o n the b o o k s o f t h e
s u b s i d i a r y for t h e g o o d s or services d e s c r i b e d on the i n v o i c e s and
t h e a m o u n t s d e d u c t e d for local i n c o m e tax p u r p o s e s . U p o n
p a y m e n t the supplier o f t h e invoice d e d u c t e d a commission
( w h i c h a p p e a r s t o h a v e r a n g e d from 6 % t o 15%) and a p p l i c a b l e
t a x e s , and r e t u r n e d the balance to a senior executive o f t h e
s u b s i d i a r y (8K A l : M a r . 7 6 : 4 ) .
28
Bribery
Syntex
D u r i n g t h e p e r i o d o f his e m p l o y m e n t b y t h e s u b s i d i a r y , t h e
p e r s o n is u n d e r s t o o d to have p r o v i d e d gifts to and e n t e r t a i n m e n t
for g o v e r n m e n t officials w h o p a r t i c i p a t e d in p u r c h a s i n g
d e c i s i o n s , and t o h a v e m a d e c e r t a i n p a y m e n t s t o e x p e d i t e
g o v e r n m e n t p a y m e n t o f i n v o i c e s for p r o d u c t s p u r c h a s e d (6K:
Oct, 76).
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D u r i n g t h e c o u r s e o f t h e r e v i e w i t w a s also n o t e d t h a t , a t t i m e s
d u r i n g t h e five y e a r s e n d e d July 3 1, 1976, with r e s p e c t to c e r t a i n
n o n - g o v e r n m e n t c u s t o m e r s l o c a t e d o u t s i d e the W e s t e r n
h e m i s p h e r e in s u b s t a n t i a l l y all c a s e s , v a r i o u s p r a c t i c e s w e r e used
w h i c h i n v o l v e d i n v o i c i n g i n a m o u n t s h i g h e r t h a n actual sales
p r i c e s a n d s u b s e q u e n t l y refunding t h e difference a s r e q u e s t e d
and d i r e c t e d b y t h e c u s t o m e r s (6K: O c t . 7 6 ) .
Medtronic
M e d t r o n i c is a m e d i c a l d e v i c e c o m p a n y which is t h e largest
m a n u f a c t u r e r o f h e a r t p a c e m a k e r s i n the w o r l d . T h e c o m p a n y i s
i n c l u d e d h e r e b e c a u s e o f t h e c o n s i d e r a b l e a t t e n t i o n d e v o t e d t o the
p a c e m a k e r i n d u s t r y i n this b o o k and b e c a u s e o f t h e e v i d e n c e from
M e d t r o n i c o f d i r e c t e n t i c e m e n t s being offered t o p h y s i c i a n s t o use
t h e i r p r o d u c t . A t o t a l of $ 3 2 3 , 5 6 3 in q u e s t i o n a b l e p a y m e n t s w a s
d i s c l o s e d . All b u t $ 6 7 , 0 0 0 of this w a s d i r e c t e d to p h y s i c i a n s :
I n o n e c o u n t r y c e r t a i n p r a c t i c e s w e r e found that w e r e
q u e s t i o n a b l e o r i m p r o p e r u n d e r t h e laws o f t h a t c o u n t r y
c o n s i s t i n g of p a y m e n t of e x p e n s e s for t r i p s for p h y s i c i a n s not
r e l a t e d to b u s i n e s s p u r p o s e ; p a y m e n t of e x p e n s e s of t h e wife or
family of a p h y s i c i a n to a c c o m p a n y him w h e n on M e d t r o n i c
r e i m b u r s e d t r a v e l ; and t h e d o n a t i o n o f e q u i p m e n t t o p h y s i c i a n s
(8K: F e b . 77: 3).
I n t h i s s a m e c o u n t r y , p a y m e n t s o f $8,262 w e r e m a d e t o two
physicians who in return provided research papers of no
substance.
In a n o t h e r c o u n t r y , a sales c o m m i s s i o n o f 2 5 % w a s paid to an
individual who was characterized as a distributor. H e , in turn,
p a s s e d on a m a j o r p o r t i o n of this c o m m i s s i o n to t h e p h y s i c i a n
p l a c i n g o r d e r s . P a y m e n t s , t o t a l i n g $ 4 8 , 5 0 0 , r e l a t e d t o $194,000 o f
sales over a p p r o x i m a t e l y two y e a r s , which was approximately
1 5 % o f t h e total sales i n t h a t c o u n t r y (8K: F e b . 7 7 : 4 ) .
T h e w e l t e r o f d o c u m e n t s a v a i l a b l e i n t h e offices o f t h e S E C confirm
t h e c o n c l u s i o n from t h e i n t e r v i e w s w i t h i n d u s t r y e x e c u t i v e s : b r i b e r y
is r o u t i n e and w i d e s p r e a d in the international pharmaceutical
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US rank in Amount of
pharmaceutical questionable
sales, 1977 payments Years of Major
Company ( G e r e f f i , 1979) disclosed payments sources
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A l m o s t e q u a l l y d i s t u r b i n g i s t h e kind o f p a y m e n t r e v e a l e d b y
B e c t o n - D i c k i n s o n w h e r e "a r e p r e s e n t a t i v e of a local g o v e r n m e n t
h e a l t h official w a s paid $ 1 2 , 0 0 0 in cash to forestall the t h r e a t o f t h e
g o v e r n m e n t official t o close o n e o f t h e C o m p a n y ' s p l a n t s ' (8K: Sept
7 6 : 2 ) . T h e r e is a sad s e q u e l to the A m e r i c a n H o s p i t a l Supply
d i s c l o s u r e t h a t M e x i c a n h e a l t h i n s p e c t o r s w e r e paid off 'not to
r e p o r t the subsidiary's violations o f t h e Mexican H e a l t h C o d e ' . In
1979, n i n e M e x i c a n w o m e n died i n t h e M o n t e r e y h o s p i t a l m a t e r n i t y
w a r d after b e i n g g i v e n c o n t a m i n a t e d i n t r a v e n o u s solution m a n u -
f a c t u r e d b y A H S M e x i c o . T h e c a u s e o f d e a t h w a s ' t r a u m a t i c shock'
d u e t o viral c o n t a m i n a t i o n . T h e A H S i n t r a v e n o u s solution w a s
f o u n d t o b e ' c o n t a m i n a t e d with g r a m n e g a t i v e b a c t e r i a s , staphy-
l o c o c c u s , a n d p r o b a b l y m o l d ' (La Prensa, 25 O c t o b e r 1979).
C r i m i n a l c h a r g e s a g a i n s t A H S e x e c u t i v e s are p r o c e e d i n g .
E n g l i s h - s p e a k i n g p e o p l e s s o m e t i m e s t o o readily a s s u m e that
t h e i r s t a n d a r d s of c o r r u p t i b i l i t y are far h i g h e r t h a n t h o s e of non-
W e s t e r n c o u n t r i e s w h i c h have a t t r a c t e d m o s t a t t e n t i o n i n t h e
b r i b e r y s c a n d a l s . W i t h i n t h e U n i t e d S t a t e s t h e state o f N e v a d a
fulfils a s i m i l a r r o l e to s o m e T h i r d W o r l d c o u n t r i e s which are h a v e n s
from p h a r m a c e u t i c a l r e g u l a t i o n . A Los Angeles Times article on the
free a v a i l a b i l i t y o f t h e ' y o u t h d r u g ' G e r o v i t a l i n N e v a d a m a d e the
following points.
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w a s d i s c l o s e d t h a t t h e bill's a u t h o r w a s r e n t i n g a c o n d o m i n i u m at
T a h o e from a m a n on trial for s m u g g l i n g l a e t r i l e .
A N e v a d a i n v e s t i g a t i o n is p e n d i n g a g a i n s t t h e chief s t o c k h o l d e r
of R o m - A m e r P h a r m a c e u t i c a l C o . , the Las Vegas-based
c o m p a n y t h a t m a k e s G e r o v i t a l , a n d t w o o t h e r m e n for allegedly
b r i b i n g a s t a t e a s s e m b l y m a n to push a bill last M a y t h a t w o u l d
h a v e m a d e G e r o v i t a l a v a i l a b l e i n t h e state w i t h o u t a p r e s c r i p t i o n
(Los Angeles Times, 13 N o v . 1979; P a r t I, 2 0 ) .
I t i s t r u e t h a t U S F o o d and D r u g A d m i n i s t r a t i o n i n s p e c t o r s have
a r e m a r k a b l e r e p u t a t i o n for i n t e g r i t y . In spite of this they are
offered b r i b e s from t i m e t o t i m e . F u l l e r ( 1 9 7 2 : 3 0 0 - 1 ) r e c o u n t s t h e
s t o r y of an F D A i n s p e c t o r w h o w a s offered $10,000 by a small d r u g
m a n u f a c t u r e r w h o he w a s t r y i n g to close d o w n . T h i s w a s a case of
b o t h a t t e m p t e d b r i b e r y and b l a c k m a i l . T h e m a n u f a c t u r e r had
o p e n e d a savings a c c o u n t for t h e i n s p e c t o r , w i t h o u t t h e i n s p e c t o r ' s
k n o w l e d g e , a n d had b e e n r e g u l a r l y d e p o s i t i n g several h u n d r e d
d o l l a r s a m o n t h in t h e a c c o u n t . T h e m a n u f a c t u r e r a t t e m p t e d to give
t h e i n s p e c t o r a c h o i c e b e t w e e n t a k i n g t h e $ 1 0 , 0 0 0 quietly and not
p r o s e c u t i n g , o r h a v i n g t o e x p l a i n t h e b a n k a c c o u n t t o his s u p e r i o r s .
T a k i n g his c h a n c e s o n t h e l a t t e r o p t i o n , t h e i n s p e c t o r successfully
convicted the m a n u f a c t u r e r .
O n e F D A e m p l o y e e told o f a n i n s t a n c e o f a k i c k b a c k w i t h i n the
US p h a r m a c e u t i c a l i n d u s t r y w i t h very s e r i o u s i m p l i c a t i o n s . A
p h a r m a c e u t i c a l c o m p a n y e m p l o y e e with r e s p o n s i b i l i t y for a n i m a l
t o x i c o l o g y s t u d i e s w a s r e c e i v i n g illegal c o m m i s s i o n s from an
o u t s i d e t e s t i n g l a b o r a t o r y t o which h e w a s s e n d i n g w o r k . T h e
t e s t i n g l a b o r a t o r y w a s said by my F D A i n f o r m a n t to be o n e of
n o t o r i o u s l y low s t a n d a r d s . T o t h e c r e d i t o f the p h a r m a c e u t i c a l
c o m p a n y , i t r e p o r t e d t h e b e h a v i o u r o f its e m p l o y e e t o the F D A .
T h e F D A successfully p r o s e c u t e d t h e c o n t r a c t t e s t i n g l a b o r a t o r y
a n d w o u l d h a v e a l s o p r o s e c u t e d t h e d r u g c o m p a n y e m p l o y e e had h e
not d i e d s o o n after i n v e s t i g a t i o n s b e g a n .
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m a i n t a i n e d t h a t t h e y w e r e less c o r r u p t t h a n the A m e r i c a n s . A n d o f
c o u r s e b o t h A m e r i c a n and E u r o p e a n t r a n s n a t i o n a l e x e c u t i v e s
m a i n t a i n e d t h a t t h e i r r e l u c t a n c e t o b r i b e w a s m u c h g r e a t e r t h a n that
of indigenous pharmaceutical companies in Third-World countries.
P e r h a p s t h e s e o p i n i o n s b e a r s o m e r e l a t i o n s h i p t o the reality;
p e r h a p s they do not.
T w o g o v e r n m e n t p h a r m a c e u t i c a l b u y e r s have b e e n i m p r i s o n e d i n
K e n y a after c o n v i c t i o n for a c c e p t i n g b r i b e s of $14,000 from
H o f f m a n - L a R o c h e , t h e Swiss d r u g c o m p a n y , for allegedly favour-
ing t h e i r p r o d u c t s w h e n s p e n d i n g the g o v e r n m e n t ' s m e d i c i n e
b u d g e t ( H e l l e r , 1977: 5 6 ) . Y u d k i n ( 1 9 7 8 : 811) claims that t h e t w o
h e a l t h officials had b o u g h t sufficient q u a n t i t i e s of an a n t i b a c t e r i a l
a g e n t a n d a t r a n q u i l l i s e r from H o f f m a n - L a R o c h e to last the n a t i o n
for m o r e t h a n ten y e a r s - n o t a h e a l t h y s i t u a t i o n with p r o d u c t s
h a v i n g a shelf-life of only a c o u p l e of y e a r s .
T h e S E C d i s c l o s u r e s manifest c o n s i d e r a b l e differences b e t w e e n
c o m p a n i e s i n t h e e x t e n t t o w h i c h t o p m a n a g e m e n t i n the U S had
d e t a i l e d k n o w l e d g e o f t h e p a y m e n t s . I n s o m e they clearly did: i n
o t h e r s t h e r e w a s no way of k n o w i n g . W h a t is clear is that in most
c a s e s t h e t o p p e r s o n i n t h e s u b s i d i a r y had d e t a i l e d k n o w l e d g e . This
fits w i t h e v i d e n c e from my i n t e r v i e w s . T h e S E C d i s c l o s u r e s give a
m i s l e a d i n g p i c t u r e of t h e n a t u r e of b r i b e r y in the i n t e r n a t i o n a l
p h a r m a c e u t i c a l i n d u s t r y with r e s p e c t to the s e n i o r i t y of t h e
r e c i p i e n t s o f p a y m e n t s . M e r c k w a s t h e only p h a r m a c e u t i c a l
c o m p a n y w h i c h d i s c l o s e d a p a y m e n t to a c a b i n e t - l e v e l official.
T h e g e n e r a l m a n a g e r o f t h e L a t i n A m e r i c a n subsidiary t a k e s t h e
h e a l t h m i n i s t e r - usually he is called a m i n i s t e r for social s e c u r i t y -
t o d i n n e r . M a y b e h e gets 1 5 p e r c e n t . T h e g e n e r a l m a n a g e r gives
him an e n v e l o p e w i t h $ 1 0 , 0 0 0 or $ 1 5 , 0 0 0 in it and say 'My
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35
Bribery
36
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T h e a r r e s t s w e r e t h e b e g i n n i n g s of a c r u s a d e by the newly e l e c t e d
P o r t i l l o g o v e r n m e n t a g a i n s t c o r r u p t r e l a t i o n s h i p s b e t w e e n the
p h a r m a c e u t i c a l i n d u s t r y and officers of its I n s t i t u t e of Social
S e c u r i t y ( I M S S ) . A n u m b e r of s e n i o r officials with r e s p o n s i b i l i t y for
a p p r o v i n g p r i c e i n c r e a s e s for p h a r m a c e u t i c a l sales t o t h e g o v e r n -
m e n t w e r e d i s m i s s e d by t h e n e w D i r e c t o r of Social Security amid a
flurry of a l l e g a t i o n s t h a t they had b e e n a c c e p t i n g b r i b e s from the
i n d u s t r y . A f t e r a m a t t e r of only d a y s , w e e k s in a c o u p l e of c a s e s , the
i m p r i s o n e d d e f e n d a n t s w e r e r e l e a s e d on bail. Bail w a s set at t h e
s t a g g e r i n g figure of a l m o s t o n e million p e s o s (SO.44 m i l l i o n ) e a c h .
T h e C a m a r a held a m e e t i n g with P r e s i d e n t P o r t i l l o on 15 M a r c h
1977, in w h i c h it u p b r a i d e d t h e P r e s i d e n t t h a t "the d e n o u n c i n g and
t h e o p i n i o n s a r o u n d i t had w i t h o u t r h y m e o r r e a s o n c a u s e d great
1
h a r m t o t h e e n t i r e p h a r m a c e u t i c a l i n d u s t r y ' . S o m e m o n t h s later
t h e g o v e r n m e n t d r o p p e d t h e c h a r g e s a g a i n s t t h e eight d e f e n d a n t s .
T h e s e c r e t a r y o f t h e C a m a r a , and o t h e r industry e x e c u t i v e s t o
w h o m I s p o k e , w e r e o f t h e view t h a t t h e g o v e r n m e n t n e v e r b e l i e v e d
it had t h e e v i d e n c e to convict t h e d e f e n d a n t s of b r i b e r y , or "fraud,
falsification o f d o c u m e n t s and a t t e m p t s a g a i n s t the p u b l i c e c o n o m y '
as t h e c h a r g e r e a d , and n e v e r i n t e n d e d to c o n s u m m a t e its legal
t h r e a t s a g a i n s t such powerful f i g u r e s . P r o b a b l y they w e r e right. A s
t h e 1977 A n n u a l R e p o r t o f t h e C a m a r a a r g u e d : ' T h i s raid w a s i n
r e a l i t y a i m e d at l a u n c h i n g a m o r a l i z i n g c a m p a i g n to t u r n into reality
t h e a i m s set forth by t h e n e w G o v e r n m e n t of the R e p u b l i c at
Inauguration Day.'
A n u n d e r s t a n d i n g o f t h e g o v e r n m e n t ' s p u r p o s e can b e g a i n e d
from t h e a c c o u n t b y t h e g e n e r a l m a n a g e r o f o n e t r a n s n a t i o n a l
c o n c e r n i n g w h a t h a p p e n e d w h e n h e and t h e g e n e r a l m a n a g e r s o f
t h e o t h e r l a r g e c o r p o r a t i o n s , w e r e called t o g e t h e r b y t h e n e w
D i r e c t o r o f Social S e c u r i t y .
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P e o p l e b r o u g h t u p i n t h e g o v e r n m e n t are i n c o m p e t e n t and
c o r r u p t . But t h i n g s are c h a n g i n g . T h e y are n o w getting s o m e
p e o p l e [inspectors] w i t h 10 y e a r s or m o r e p h a r m a c e u t i c a l
i n d u s t r y e x p e r i e n c e . T h e s e p e o p l e k n o w their stuff. T h e y k n o w
w h a t q u e s t i o n s t o ask. T h e y k n o w w h e r e t o look. A l s o b e c a u s e
t h e y a r e not b r o u g h t up in t h e g o v e r n m e n t they have not l e a r n t so
much corrupt ways.
I r r e s p e c t i v e of w h a t t h e effect on c r i m e of this M e x i c a n c r u s a d e
w a s , i t d o e s t h r o w u p a n a p p r o a c h t o t h e p r o b l e m unfamiliar, and
perhaps abhorrent, to Western reformers. This approach
r e c o g n i s e s t h a t in t h e a p p l i c a t i o n of law to t h e i n t e r n a t i o n a l phar-
m a c e u t i c a l i n d u s t r y in a c o u n t r y like M e x i c o t h e r e is no j u s t i c e . If
t h e s t a t e a t t e m p t s to use law as a tool of j u s t i c e , p o w e r and m o n e y
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will s u b v e r t t h e a t t e m p t . But the s t a t e can effectively use the
a p p a r a t u s of law e n f o r c e m e n t for d r a m a t i c g e s t u r e s , to d e l i v e r a
s h o r t s h a r p s h o c k in w h i c h no o n e is d o n e t e r r i b l e h a r m . Such
g e s t u r e s c a n n o t b e s u s t a i n e d for long b e c a u s e o n c e the i n t e r n a t i o n a l
b u s i n e s s c o m m u n i t y recoils from t h e s h o c k and r e g r o u p s , it is a
w o r t h y a d v e r s a r y t o t h e state i n i n s t i t u t i o n a l p o w e r . T h e p o i n t ,
h o w e v e r , is not to sustain t h e s h o c k , but simply to jolt the b u s i n e s s
c o m m u n i t y into a c c e p t i n g n e w , m o r e l a w - a b i d i n g r e l a t i o n s h i p s with
government.
T h e U S c r u s a d e a g a i n s t b r i b e r y b e g a n i n e a r n e s t with the L o c k h e e d
s c a n d a l . It led to t h e F o r e i g n C o r r u p t P r a c t i c e s A c t of 1977. which
p r o h i b i t s U S c o m p a n i e s from p a y i n g b r i b e s e v e n w h e n t h e pay-
m e n t s a r e m a d e o u t s i d e t h e U n i t e d S t a t e s . Such e x t r a t e r r i t o r i a l
a p p l i c a t i o n of US law is not e x t r a o r d i n a r y , having p r e c e d e n t s in tax,
a n t i t r u s t , t r a d e m a r k and t r a d i n g w i t h t h e e n e m y laws. A b o u t thirty
c o n s e n t d e c r e e s h a v e also b e e n struck b e t w e e n the S E C and com-
p a n i e s d i s c l o s i n g q u e s t i o n a b l e p a y m e n t s . I n t h e case o f t h e
A m e r i c a n H o s p i t a l S u p p l y c o n s e n t d e c r e e discussed e a r l i e r , t h e
c o m p a n y , inter alia, a g r e e d to p u b l i s h t h e results of a d e t a i l e d
i n v e s t i g a t i o n into its affairs by an audit c o m m i t t e e , to refrain in
future from any political c o n t r i b u t i o n s , legal or illegal, and only
r e a c h w r i t t e n a r r a n g e m e n t s w i t h c o n s u l t a n t s w h o must have a n
e s t a b l i s h e d p l a c e o f b u s i n e s s and o t h e r clients o r c u s t o m e r s , [be]
i n d e p e n d e n t o f t h e p r o s p e c t i v e A H S C c u s t o m e r and its m a n a g e -
1 0
m e n t p e r s o n n e l , a n d r e n d e r b o n a fide s e r v i c e s t o A H S C ' .
40
Bribery
41
Bribery
E v e n in t h e m o s t c o r r u p t of e n v i r o n m e n t s it is p o s s i b l e , with
d e t e r m i n a t i o n , t o resist c o r r u p t p a y m e n t s . M a n y e x e c u t i v e s
c a n n o t , h o w e v e r , b e b o t h e r e d w i t h such d e t e r m i n a t i o n .
T h e y k n o w w e a r e f o r b i d d e n t o pay b r i b e s . I n s t e a d w e h a v e t o
rely on f r i e n d s h i p with t h e m . We t a k e t h e m to the very best
r e s t a u r a n t s . . . . A n d good w i n e . We h o p e t h a t they will g r a n t us
a p p r o v a l s b e c a u s e w e are friends.
42
Bribery
T h e f o r m e r m i n i s t e r , w h o r e s i g n e d several m o n t h s a g o , i s said t o
h a v e h e l p e d c o n t r i b u t e t o t h e c o u n t r y ' s r e c e n t social d i s c o n t e n t
b y his h a n d l i n g o f t h e n a t i o n a l h e a l t h i n s u r a n c e s c h e m e .
A c c o r d i n g t o n e w s p a p e r r e p o r t s , h e i s a l l e g e d t o have a c c e p t e d
b r i b e s in r e t u r n for limiting t h e r a n g e of d r u g s which d o c t o r s
c o u l d p r e s c r i b e , and p u b l i c i n d i g n a t i o n a t this alleged c o r r u p t i o n
is r e p o r t e d to be o n e o f t h e c a u s e s o f t h e r e c e n t riots in T e h e r a n .
43
Bribery
44
Bribery
45
Bribery
T h e U S c r u s a d e a g a i n s t b r i b e r y has p r o m p t e d m o r e stringent
s c r u t i n y of s t a n d a r d s of c o r p o r a t e p r o p r i e t y in a wide r a n g e of a r e a s
b e y o n d j u s t b r i b e r y . T h i s influence has also b e e n w o r l d w i d e r a t h e r
t h a n limited t o t h e U n i t e d S t a t e s . T h e s e t w o p o i n t s w e r e b o r n e o u t
in t h e following c o m m u n i c a t i o n I r e c e i v e d from a s e n i o r m a n a g e r in
one of A u s t r a l i a ' s largest c o m p a n i e s :
T h e s t r o n g e s t s u p p o r t t h a t i n t e r n a l audit has r e c e i v e d i n r e c e n t
t i m e s has b e e n t h e e n a c t m e n t i n the U S o f t h e F o r e i g n C o r r u p t
P r a c t i c e s A c t of 1977. T h i s A c t , which I am sure you have
46
Bribery
T o m e e t any o b l i g a t i o n s u n d e r this A c t , m o s t U S c o m p a n i e s
h a v e , on a c o s t / b e n e f i t b a s i s , d e c i d e d to s t r e n g t h e n their internal
a u d i t f u n c t i o n s and e n s u r e g r e a t e r c o - o p e r a t i o n b e t w e e n t h e
i n t e r n a l a u d i t and e x t e r n a l a u d i t o r s . T h i s has m e a n t t h a t internal
a u d i t o r o r g a n i s a t i o n s have had to look to i n c r e a s i n g their
standards of professional practice.
W o r k o n t h e a g r e e m e n t has b e e n t h e r e s p o n s i b i l i t y o f t h e U n i t e d
Nations Commission on Transnational Corporations ( E C O S O C ,
1979; A s a n t e , 1979). J o i n t l y with t h i s , t h e C o m m i s s i o n i s w o r k i n g
o n a w i d e r ' C o d e o f C o n d u c t for T r a n s n a t i o n a l C o r p o r a t i o n s ' which
will p r o b a b l y i n c l u d e p r o v i s i o n s on n o n - i n t e r f e r e n c e in internal
p o l i t i c a l affairs, a b s t e n t i o n from c o r r u p t p r a c t i c e s , transfer p r i c i n g ,
r e s t r i c t i v e b u s i n e s s p r a c t i c e s , c o n s u m e r p r o t e c t i o n and e n v i r o n -
mental protection (UN Commission on Transnational Corpora-
tions, 1978,1979).
A crucial q u e s t i o n is w h e t h e r t h e s e i n t e r n a t i o n a l a g r e e m e n t s can
d o m u c h m o r e t h a n d e p e n d o n i n d i v i d u a l n a t i o n s t o e n f o r c e the
a g r e e m e n t . T h e y c a n , o f c o u r s e , foster m u t u a l assistance i n investi-
g a t i o n , e x t r a d i t i o n , a n d o t h e r m e a s u r e s t o e n s u r e t h a t every act o f
i n t e r n a t i o n a l b r i b e r y is p u n i s h a b l e u n d e r s o m e set of n a t i o n a l laws
r a t h e r t h a n b e i n g a l l o w e d t o fall b e t w e e n t h e i n t e r s t i c e s a m o n g
t h e m . M a n y h o p e , h o w e v e r , particularly with the broader Code of
47
Bribery
A n a p p r o p r i a t e legal link w o u l d h a v e t o b e e s t a b l i s h e d b e t w e e n
t h e d e c i s i o n at the i n t e r n a t i o n a l level and its e x e c u t i o n
( a d m i n i s t r a t i o n of s a n c t i o n s ) at t h e n a t i o n a l level. A legally
b i n d i n g u n d e r t a k i n g b y t h e S t a t e s a d o p t i n g t h e C o d e would b e
t h e m o s t effective such link. An u n d e r t a k i n g on a n o n - b i n d i n g
b a s i s w o u l d p r o b a b l y be h o n o u r e d by S t a t e s in a large n u m b e r of
c a s e s , b u t t h e c e r t a i n t y o f t h e link b e t w e e n decision and s a n c t i o n
would diminish (UN Commission on Transnational
C o r p o r a t i o n s , D e c e m b e r 1978: 2 3 ) .
I n m a n y s i t u a t i o n s s t a t e s a d o p t i n g t h e c o d e w o u l d i g n o r e non-
b i n d i n g u n d e r t a k i n g s . H o w e v e r , i t i s not u n r e a l i s t i c t o e x p e c t that
p o l i t i c a l l y a s t u t e r e c o m m e n d a t i o n s for s a n c t i o n w o u l d be acted
u p o n . I m a g i n e , for e x a m p l e , i f U n i t e d B r a n d s had b e e n b r o u g h t
b e f o r e a UN p a n e l in c o n n e c t i o n with its a g r e e m e n t to pay a S2.5
million bribe to the H o n d u r a n Finance Minister. The purpose of
t h i s c e l e b r a t e d c o r r u p t p a y m e n t w a s t o e n t i c e the F i n a n c e M i n i s t e r
t o u n d e r c u t t h e tax r a t e o n b a n a n a s p r e v a i l i n g a m o n g the U n i o n d e
P a i s e s E x p o r t a d o r e s d e B a n a n o ( U P E B ) . O n e w o u l d expect that a
48
Bribery
49
Bribery
P e r c e n t a g e of
respondents
listing factor
Public disclosure: publicity; media coverage;
better communication 31
G o v e r n m e n t r e g u l a t i o n , l e g i s l a t i o n , and
i n t e r v e n t i o n ; federal c o u r t s 10
50
3 Safety testing of drugs:
from negligence to fraud
E a c h y e a r in t h e U n i t e d S t a t e s a q u a r t e r of a million p e o p l e and
m a n y m i l l i o n s o f a n i m a l s a r e e x p e r i m e n t e d u p o n with new d r u g s
( S u b c o m m i t t e e on H e a l t h , 1976a: P a r t I I , 3 3 6 ) . T h e great cost of
t h i s e x p e r i m e n t a t i o n in suffering and m o n e y can only be justified if
d a t a c o l l e c t i o n and i n t e r p r e t a t i o n a r e h o n e s t and o b j e c t i v e . R e g r e t -
t a b l y , r e s e a r c h e r s r e t a i n e d b y t h e p h a r m a c e u t i c a l industry have not
a l w a y s m e t t h e s e s t a n d a r d s . All o f f o r m e r F D A C o m m i s s i o n e r
G o d d a r d ' s s u c c e s s o r s have r e p e a t e d before C o n g r e s s i o n a l h e a r i n g s
t h e c o n c e r n s o v e r r e s e a r c h e r d i s h o n e s t y first e x p r e s s e d b y G o d d a r d
at a P h a r m a c e u t i c a l M a n u f a c t u r e r s A s s o c i a t i o n M e e t i n g in 1966
( S u b c o m m i t t e e o n H e a l t h , 1976: P a r t I I , 157).
I h a v e b e e n s h o c k e d at t h e m a t e r i a l s that c o m e in. In a d d i t i o n to
t h e p r o b l e m o f q u a l i t y , t h e r e i s t h e p r o b l e m o f d i s h o n e s t y i n the
i n v e s t i g a t i o n a l n e w d r u g u s a g e . I will a d m i t t h e r e are grey a r e a s
i n t h e I N D s i t u a t i o n , but t h e c o n s c i o u s w i t h h o l d i n g o f
u n f a v o r a b l e a n i m a l clinical d a t a is not a grey m a t t e r . T h e
d e l i b e r a t e c h o i c e o f clinical i n v e s t i g a t o r s k n o w n t o b e m o r e
c o n c e r n e d a b o u t i n d u s t r y friendships t h a n i n d e v e l o p i n g good
d a t a is not a grey a r e a m a t t e r . T h e p l a n t i n g in j o u r n a l s of articles
t h a t b e g i n to c o m m e r c i a l i z e w h a t is still an i n v e s t i g a t i o n a l n e w
d r u g is not a grey m a t t e r a r e a . T h e s e a c t i o n s run c o u n t e r to the
law a n d t h e efforts [sic] g o v e r n i n g d r u g i n d u s t r y .
51
Safety testing of drugs: from negligence to fraud
c h e c k w h i c h t u r n e d up the c a s e of an a s s i s t a n t professor of m e d i c i n e
w h o had r e p u t e d l y t e s t e d t w e n t y - f o u r d r u g s for nine different
c o m p a n i e s . " P a t i e n t s w h o died while o n clinical trials w e r e not
r e p o r t e d to the sponsor', an audit revealed. 'Dead people were
listed as s u b j e c t s of t e s t i n g . P e o p l e r e p o r t e d as subjects of t e s t i n g
w e r e not in t h e h o s p i t a l at t h e t i m e of t h e t e s t s . P a t i e n t c o n s e n t
f o r m s b o r e d a t e s i n d i c a t i n g t h e y w e r e signed b y t h e subjects after
t h e s u b j e c t s d i e d . ' A c o m m e r c i a l d r u g - t e s t i n g firm which had
o s t e n s i b l y w o r k e d on 82 d r u g s for 28 s p o n s o r s was the subject of
a n o t h e r audit.
Dear Nelson,
T h e e n c l o s e d l e t t e r is from a very fine p a t i e n t . I t h o u g h t
y o u w o u l d be i n t e r e s t e d in h e r very vivid and a r t i c u l a t e
d e s c r i p t i o n o f t h e a d v e r s e s y m p t o m s she e n c o u n t e r e d with
Indomethacin.
I w o u l d e m p h a s i z e t h a t t h e s e do not a l a r m me nor i n d i c a t e any
e v i d e n c e of o r g a n i c d a m a g e but 1 am afraid t h e y will offer s o m e
p r a c t i c a l p r o b l e m s i n m a r k e t i n g this d r u g .
N e e d l e s s to say, I am very grateful for all o f y o u r kind efforts in
r e g a r d to my trip to J a p a n .
I'll look f o r w a r d to s e e i n g y o u on my r e t u r n . I think we m u s t
get t o g e t h e r and p l a n o n p u b l i s h i n g s o m e o f t h e d a t a which w e
h a v e c o l l e c t e d . B e s t r e g a r d s a l w a y s ( U S S e n a t e , 1969: P a r t 8 ,
3453).
52
Safety testing of drugs: from negligence to fraud
Dear Dr Cantwell:
I r e c e i v e d y o u r l e t t e r this m o r n i n g and w a n t to t h a n k you for
s u g g e s t i n g a g r a n t for t h e r h e u m a t o l o g y s e c t i o n at t h e U n i v e r s i t y
of [a large s t a t e u n i v e r s i t y ] .
Since you w e r e h e r e we h a v e s t a r t e d a n u m b e r of n e w p a t i e n t s
o n i n d o m e t h a c i n ( t h e L X c a p s u l e s ) . A t least t h r e e o f t h e p a t i e n t s
c o m p l a i n e d of s e v e r e e p i g a s t r i c d i s t r e s s within 30 m i n u t e s after
t a k i n g t h e c a p s u l e . T h e r e f o r e , in t h e next few subjects we started
t h e m o u t on 1 c a p s u l e twice a day i n c r e a s i n g 1 c a p s u l e daily until
t h e y r e a c h e d t h e m a x i m u m 6 c a p s u l e s and b e l i e v e it or not we
e n c o u n t e r e d no d i s t r e s s . This is t h e m e t h o d we will follow for t h e
t i m e b e i n g , w i t h o u r f i n g e r s c r o s s e d (US S e n a t e , 1969: P a r t II.
461).
D r S t a n l e y W . J a c o b o f t h e U n i v e r s i t y o f O r e g o n M e d i c a l School
w a s h i r e d b y R e s e a r c h I n d u s t r i e s I n c . t o m o n i t o r t w o safety tests o n
a n e w d r u g for i n f l a m m a t i o n o f t h e b l a d d e r . In 1979, w h e n t h e F D A
i n v e s t i g a t e d i r r e g u l a r i t i e s in t h e d a t a c o l l e c t e d in t h e s e s t u d i e s , it
was found that Dr J a c o b owned about $600,000 w o r t h of R e s e a r c h
I n d u s t r i e s stock ( M c T a g g a r t , 1980: 176).
I n t h e t h r e e y e a r s 1977-80 t h e F D A c l a i m s t o h a v e d i s c o v e r e d a t
least 6 2 d o c t o r s w h o had s u b m i t t e d m a n i p u l a t e d o r d o w n r i g h t
falsified clinical d a t a . Dr R o n a l d C. S m i t h , a p s y c h i a t r i s t , w a s hired
by six p h a r m a c e u t i c a l c o m p a n i e s b e t w e e n 1971 and 1978, i n c l u d i n g
S a n d o z , U p j o h n a n d C y a n a m i d , t o test a t least a d o z e n p s y c h o -
t r o p i c d r u g s . A n F D A scientist s a y s , ' W e l e a r n e d from a n office
a s s i s t a n t . . . t h a t t h e way t h e d o c t o r got t h e pill c o u n t to c o m e out
c o r r e c t w a s t o c o u n t t h e c o r r e c t n u m b e r o f pills the p a t i e n t should
h a v e t a k e n and t h e n t o flush t h e m d o w n t h e t o i l e t ' ( M c T a g g a r t ,
1980: 177). An F D A c h e c k found t h a t only 3 or 4 out of 60 p a t i e n t s
listed as h a v i n g b e e n t e s t e d by S m i t h had actually b e e n given t h e
drugs.
S o m e p h y s i c i a n s h a v e b e e n t h e subject o f t e r r i b l e m i s f o r t u n e s o n
t h e e v e o f F D A i n v e s t i g a t i o n s into t h e q u a l i t y o f t h e d a t a they have
c o l l e c t e d for s u b m i s s i o n to t h e a g e n c y in s u p p o r t of n e w d r u g
a p p l i c a t i o n s . Dr J a m e s Scheiner, an o r t h o p e d i c surgeon of Fairfax,
V i r g i n i a , w h o had d o n e several e x p e r i m e n t s for J o h n s o n and
J o h n s o n , had his office v a n d a l i z e d t h e n i g h t before an F D A audit of
his r a w d a t a . T h e m i n d l e s s v a n d a l s d u m p e d all t h e r e c o r d s r e l a t i n g
to t h e s t u d i e s to be a u d i t e d into a w h i r l p o o l b a t h . J u s t before his
n e x t s c h e d u l e d F D A audit Dr S c h e i n e r had a fire in his office. A n d
53
Safety testing of drugs: from negligence to fraud
t h e n i g h t b e f o r e t h a t i n s p e c t i o n w a s r e s c h e d u l e d , D r S c h e i n e r was
v i c i o u s l y m u g g e d by an a s s a i l a n t w h o w i e l d e d a p a p e r w e i g h t from
his office. A n o t h e r d o c t o r , F r a n c o i s S a v e r y , w h o had e a r n e d a
f o r t u n e t e s t i n g e x p e r i m e n t a l d r u g s for H o f f m a n - L a R o c h e and
o t h e r l e a d i n g c o m p a n i e s , suffered t h e m i s f o r t u n e o f a c c i d e n t a l l y
d r o p p i n g his d a t a o v e r b o a r d w h i l e out in a r o w b o a t . A US court did
n o t b e l i e v e h i m ; he w a s s e n t e n c e d to five y e a r s ' p r o b a t i o n for felony
fraud.
T h e p r o b l e m is t h a t m o s t fraud in clinical trials is unlikely to e v e n
b e d e t e c t e d . M o s t c a s e s which d o c o m e t o public a t t e n t i o n only d o
so b e c a u s e of e x t r a o r d i n a r y c a r e l e s s n e s s by the criminal p h y s i c i a n ,
as in t h e following i l l u s t r a t i o n :
In e a r l y July 1978, an a m b u l a n c e r u s h e d J u n e F r o m a n to a
hospital in N e w York City. F r o m a n , a patient of Dr J e r o m e
R o t s t e i n , had b e e n t r e a t e d for a s e v e r e case of a r t h r i t i s with an
e x p e r i m e n t a l d r u g called S u d o x i c a n , m a n u f a c t u r e d b y Pfizer
C o m p a n y . R o t s t e i n w a s s u p p o s e d t o b e m o n i t o r i n g F r o m a n ' s use
of S u d o x i c a n carefully in late J u n e and early J u l y , and w a s
s u p p o s e d to r e p o r t any u n u s u a l r e a c t i o n s to federal officials.
I n s t e a d o f c o n d u c t i n g m o n i t o r i n g t e s t s , h o w e v e r , R o t s t e i n went
o n v a c a t i o n i n E u r o p e . B y t h e t i m e h e r e t u r n e d , F r o m a n had
a l r e a d y b e e n a d m i t t e d t o t h e h o s p i t a l , her liver dissolved b y
S u d o x i c a n . 'In no w a y could she be s a v e d , no m a t t e r w h a t we did
for h e r , ' R o t s t e i n told F D A officials later. B u t R o t s t e i n p o i n t e d
t h e finger of b l a m e for h e r d e a t h at Pfizer C o m p a n y officials,
c l a i m i n g t h e y hid t h e d r u g ' s s e r i o u s a d v e r s e side effects from him
and t r i e d t o c o n v i n c e him not t o r e p o r t t h e d e a t h t o F e d e r a l
a u t h o r i t i e s , it is a killer d r u g , ' R o t s t e i n said, i killed a p a t i e n t
b e c a u s e I d i d n ' t k n o w t h e d r u g c a u s e d h e p a t i c toxicity. I was led
d o w n a blind alley by p e o p l e w h o s h o u l d have k n o w n b e t t e r . ' . . .
A l e r t e d by news of F r o m a n ' s d e a t h , F D A investigators reviewed
r e p o r t s t h a t Pfizer had s u b m i t t e d t o t h e F D A . S t r a n g e l y , t h e s e
r e p o r t s i n c l u d e d r e s u l t s , p u r p o r t e d l y from F r o m a n ' s c a s e ,
r e c o r d e d u p t o several d a y s before her h o s p i t a l i z a t i o n , t h a t
s h o w e d ' e s s e n t i a l l y n o r m a l clinical s t u d i e s ' . After i n v e s t i g a t o r s
e x a m i n e d t h e clinical s t u d i e s closely t h e y found t h a t R o t s t e i n had
b e e n o u t o f t h e c o u n t r y and had n e v e r d o n e any o f t h e s t u d i e s . I f
F r o m a n had n o t d i e d , t h e F D A m i g h t well h a v e a c c e p t e d t h e
falsified S u d o x i c a n t e s t s , and millions of A m e r i c a n s could have
b e e n e x p o s e d to h e r fate (Mother Jones, J u n e 1982, p. 4 7 ) .
54
Safety testing of drugs: from negligence to fraud
T h e r e a r e an infinite v a r i e t y of w a y s s h o r t of o u t r i g h t falsification
w h i c h can be used by an i n v e s t i g a t o r w h o is a c a p t i v e of industry
i n t e r e s t s . A s o n e B r i t i s h e x p e r t has n o t e d :
T h e p r o b l e m of s u p p r e s s i o n of facts is w i d e s p r e a d . A typical
c a s e o c c u r s a l o n g t h e following l i n e s ; a t o x i c o l o g i c a l study has
b e e n c o n d u c t e d and gives an e q u i v o c a l r e s u l t , or a result
u n f a v o u r a b l e to t h e p r o d u c t . A s e c o n d s t u d y is c o n d u c t e d and at
t i m e s e v e n a t h i r d in w h i c h t h e d o s e levels are adjusted or the
p r o t o c o l s modified in such a way that e v e n t u a l l y a result
f a v o u r a b l e t o t h e a p p l i c a n t ' s p r o d u c t i s o b t a i n e d . O n l y the result
f a v o u r a b l e t o t h e a p p l i c a n t ' s p r o d u c t i s s u b m i t t e d t o the
r e g u l a t o r y a u t h o r i t y . . . . M i c r o s c o p i c a l e x a m i n a t i o n s of
h i s t o p a t h o l o g i c a l slides m a y b e m a d e b y m o r e t h a n o n e
p a t h o l o g i s t e a c h o f w h o m m a y h a v e c o m e t o different
c o n c l u s i o n s , yet only the c o n c l u s i o n s f a v o u r a b l e t o t h e d r u g are
submitted to the regulatory authority. On one occasion where
such a s i t u a t i o n has b e e n d e t e c t e d t h e a p p l i c a n t w i t h a dismissive
g e s t u r e said ' t h a t i n v e s t i g a t o r gives t h e w r o n g r e s u l t s , w e will not
use him a g a i n ' . [This a t t i t u d e r e v e a l s t h e c o m m e r c i a l p r e s s u r e
t h a t can be b r o u g h t to b e a r on an i n v e s t i g a t o r by t h e t h r e a t of loss
o f f u t u r e w o r k . ] . . . A case can be cited w h e r e s o m e d r a m a t i c
falls in h a e m o g l o b i n o f t h e o r d e r of 3-4 g/100 ml in t w o a n i m a l s
w e r e a t t e m p t e d to be hidden by p r e s e n t i n g the haematological
d a t a a s m e a n s and s t a n d a r d e r r o r s and c o m m e n t i n g i n the text
t h a t o v e r a l l t h e m e a n h a e m o g l o b i n levels w e r e only slightly
r e d u c e d w h e n b e f o r e a n d after t r e a t m e n t v a l u e s w e r e c o m p a r e d
(Griffin, 1 9 7 7 : 2 9 , 3 1 ) .
55
Safety testing of drugs: from negligence to fraud
T h e p r o b l e m i s not r e s t r i c t e d t o A n g l o - S a x o n c o u n t r i e s . I n
November 1982, a J a p a n e s e c o m p a n y , N i p p o n C h e m i p h a r ,
a d m i t t e d to p r e s e n t i n g bogus data to the J a p a n e s e G o v e r n m e n t
w i t h its a p p l i c a t i o n to m a r k e t a p a i n - k i l l e r and a n t i - i n f l a m m a t i o n
drug u n d e r the brand n a m e of N o r v e d a n . The company submitted
c o o k e d up data to the G o v e r n m e n t in the name of Dr H a r c i o
S a m p e i , c h i e f o f plastic s u r g e r y a t N i p p o n U n i v e r s i t y . T h e good
d o c t o r had a c c e p t e d 2.4 million Y e n in cash from the c o m p a n y in
r e t u r n for p e r m i s s i o n t o use his n a m e . M o r e d i s t u r b i n g are similar
56
Safety testing of drugs: from negligence to fraud
I n 1962 t h e F o o d and D r u g A d m i n i s t r a t i o n m a d e m u l t i p l e
seizures of R e g i m e n Tablets on charges of misbranding. In
c o n n e c t i o n w i t h t h i s , t h e g o v e r n m e n t t o o k d e p o s i t i o n s from t w o
p h y s i c i a n s w h o had b e e n e n g a g e d t o c o n d u c t clinical t e s t s with
t h e d r u g ( p h e n y l p r o p a n o l a m i n e h y d r o c h l o r i d e ) , which i s n o
longer on the m a r k e t . Dr Ernest C. Brown of Baltimore, whose
fee w a s $ 1 0 0 0 , a d m i t t e d in his d e p o s i t i o n , F D A said in a l e t t e r
t o S e n a t o r H u m p h r e y , t h a t 3 0 o f t h e 4 3 c h a r t s h e had s u b m i t t e d
on 50 patients 'were fabricated'. Dr Kathleen E. R o b e r t s of
San F r a n c i s c o a n d later T o l e d o , w h o w a s paid $ 4 0 0 0 ,
a c k n o w l e d g e d in h e r d e p o s i t i o n t h a t her r e p o r t w a s ' u n t r u e in its
entirety'. Her charts on 57 of 75 patients 'were complete
f a b r i c a t i o n s ' , t h e a g e n c y told H u m p h r e y . O f t h e r e m a i n d e r , 'only
t h e p a t i e n t s ' initials a n d s t a r t i n g w e i g h t s w e r e c o r r e c t ' ( M i n t z
1967: 3 2 6 ) .
In J a n u a r y 1964 a B r o o k l y n g r a n d j u r y r e t u r n e d an i n d i c t m e n t
a g a i n s t t h e R e g i m e n a d v e r t i s i n g a g e n c y for p r e p a r i n g false copy for
a d r u g p r o d u c t at t h e d i r e c t i o n of a client.
57
Safety testing of drugs: from negligence to fraud
An u n n a m e d p h y s i c i a n w a s said in t h e i n d i c t m e n t to have b e e n
i n d u c e d to ' c h a n g e t h e c o n c l u s i o n of a clinical test he had
p e r f o r m e d w i t h t h e t a b l e t s ' . E n d o r s e r s o f t h e pills, t h e i n d i c t m e n t
a s s e r t e d , w e r e s h o w n b e i n g w e i g h e d each w e e k , the scales
r e g i s t e r i n g w e i g h t losses e a c h t i m e . A c t u a l l y , t h e b e f o r e - a n d -
after m o d e l s w e r e on strict diets a n d . said the i n d i c t m e n t , had
b e e n t a k i n g p r e s c r i p t i o n d r u g s u n d e r s u p e r v i s i o n of a physician
( M i n t z , 1967: 3 2 7 ) .
T h e R o b i n c a s e study w a s s t a g g e r i n g b e c a u s e m a n y o f t h e most
r e p u t a b l e c o m p a n i e s i n t h e p h a r m a c e u t i c a l industry had used him
for clinical t r i a l s at s o m e s t a g e . R o b i n had ' t e s t e d ' 45 p r o d u c t s for 22
firms, p u r p o r t e d l y on a total of 6,400 p a t i e n t s . E x p o s u r e of R o b i n
c a n be t r a c e d to a statistical analysis of his p a p e r s by Dr J o h n
N e s t o r , a n F D A scientist. I n a n i n t e r n a l F D A c o m m u n i c a t i o n
N e s t o r said t h a t his a n a l y s i s ' i n d i c a t e s t h a t , in g e n e r a l , his results
a r e i m p o s s i b l e ' , and t h a t he 'is a fraud'. T h i s led S e n a t o r H u m p h r e y
to r a i s e a n u m b e r of q u e s t i o n s in t h e S e n a t e at t h e t i m e as to why the
d r u g c o m p a n i e s had not also found t h e r e s u l t s ' i m p o s s i b l e ' .
A n o t h e r c a s e w a s that o f D r L e o J . C a s s , d i r e c t o r o f t h e H a r v a r d
58
Safety testing of drugs: from negligence to fraud
L a w S c h o o l H e a l t h S e r v i c e . F D A s u s p i c i o n s w e r e first a r o u s e d b y
t h e e x t r a o r d i n a r i l y large n u m b e r o f i n v e s t i g a t i o n s ' that C a s s
R e s e a r c h A s s o c i a t e s had m a d e 'in a short p e r i o d of t i m e ' . M o s t of
t h e m a j o r c o m p a n i e s had r e t a i n e d C a s s ' s c o m p a n y . H e had u n d e r -
t a k e n 84 r e s e a r c h p r o j e c t s for t e s t i n g i n v e s t i g a t i o n a l d r u g s and 25
p r o j e c t s for p r o d u c t m a r k e t i n g a p p l i c a t i o n s .
I n his p e r s u a s i v e d o c u m e n t a t i o n o f t h e w i d e s p r e a d fraud i n t h e
clinical t e s t i n g o f d r u g s , M i n t z also relied o n t h e r e v e a l i n g c o n t e n t s
o f c o n f i d e n t i a l d o c u m e n t s such a s t h e following internal F D A
m e m o r a n d u m ( M i n t z . 1967: 3 3 4 ) .
59
Safely testing of drugs: from negligence to fraud
A n o t h e r f a s c i n a t i n g c o m m u n i c a t i o n is from a p h y s i c i a n to a
m a n u f a c t u r e r . T h e p h y s i c i a n s e e m s t o b e h a p p y t o have t h e d r u g
c o m p a n y w r i t e his p a p e r for him w i t h o u t so m u c h as seeing t h e d a t a .
MER/29
60
Safety testing of drugs: from negligence to fraud
•pet' l a b o r a t o r y m o n k e y . A f t e r a few m o n t h s on M E R / 2 9 , it w a s
u n a b l e to j u m p o n t o the w e i g h i n g p a n , a simple trick all t h e
m o n k e y s had b e e n t r a i n e d t o p e r f o r m . A c c o r d i n g t o M r s J o r d a n ,
t h e m o n k e y 'got very m e a n , t h e r e w a s a loss of w e i g h t , and it
c o u l d n ' t see well e n o u g h t o hit t h e pan . . . i n o u r o p i n i o n , this
m o n k e y w a s sick d u e to a r e a c t i o n from this d r u g . '
M r s J o r d a n r e p o r t e d this t o h e r s u p e r v i s o r , ' D r ' W i l l i a m King (it
w a s later d i s c o v e r e d t h a t he had not yet b e e n a w a r d e d his m e d i c a l
d e g r e e ) , w h o i n t u r n informed M e r r e l l ' s d i r e c t o r o f biological
s c i e n c e s , D r E v e r t van M a a n e n :
D r van M a a n e n , w i t h t h e c o n c u r r e n c e o f D r K i n g , then d e c i d e d
t o t h r o w o u t t h e sick male drug m o n k e y m e n t i o n e d a b o v e from
the e x p e r i m e n t a n d s u b s t i t u t e a n o t h e r c o n t r o l m o n k e y i n his
p l a c e w h i c h had n e v e r b e e n o n M E R / 2 9 .
A f t e r this d e c i s i o n , D r van M a a n e n called M r s J o r d a n into his
office a n d i n s t r u c t e d her to m a k e this s u b s t i t u t i o n in w o r k i n g up
t h e w e i g h t c h a r t s . . . . M r s J o r d a n r e s e n t e d b e i n g a s k e d to . . .
r e n d e r a false r e p o r t , and refused to sign her c h a r t s . Dr K i n g
o r d e r e d h e r t o n e v e r m e n t i o n t h e s u b s t i t u t i o n . She w a s told t h a t
this w a s t h e w a y t h e C o m p a n y w a n t e d it and to forget it. She w a s
told t h a t t h i s o r d e r had c o m e from h i g h e r u p and t h e r e w a s
n o t h i n g she c o u l d do a b o u t it but obey t h e o r d e r and do as t h e
' h i g h e r - u p s ' w a n t e d ( R i c e , 1969).
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Safety testing of drugs: from negligence to fraud
T h e l e n g t h s t o w h i c h R i c h a r d s o n had b e e n p r e p a r e d t o g o t o get
t h e d r u g o n t h e m a r k e t are r e v e a l e d i n the c h a r g e s . C o u n t t h r e e ,
for e x a m p l e , d e a l t w i t h R i c h a r d s o n - M e r r e l l ' s r e p o r t s of a c h r o n i c
t o x i c i t y s t u d y i n m o n k e y s . T h e c o m p a n y had r e p o r t e d that
m o n k e y N o . 51 w a s given M e r 29 at o n e d o s e level for six m o n t h s
a n d at a l o w e r d o s e level for a further ten m o n t h s , but w h a t the
F D A i n s p e c t o r s u n c o v e r e d was t h a t t h e h i g h e r d o s e o f M E R 2 9
had n e v e r b e e n a d m i n i s t e r e d t o m o n k e y 5 1 and t h e lower d o s e
had b e e n a d m i n i s t e r e d for a s h o r t e r t i m e t h a n c l a i m e d . In toto,
t h e e x p e r i m e n t had lasted for 7 m o n t h s and 26 days and not t h e 16
m o n t h s s t a t e d i n t h e a p p l i c a t i o n t o t h e F D A . M o n k e y 3 5 , o n the
o t h e r h a n d , had b e e n d e s i g n a t e d a c o n t r o l for t h e '16 m o n t h
s t u d y , ' a l t h o u g h in fact for t h e first 6 m o n t h s . N o . 35 had b e e n
g i v e n a d r u g similar to M e r 29 and had not b e e n used as a c o n t r o l
a t all. T h e c o m p a n y ' s a p p l i c a t i o n t o t h e F D A c l a i m e d that
m o n k e y s had not lost b o d y w e i g h t w h e n in fact t h e y h a d , and t h a t
a m o n k e y had suffered no liver or gall b l a d d e r d a m a g e w h e n in
fact it had ( K n i g h t l e y et a l . , 1979: 6 7 ) .
T h e r e w e r e a b u s e s in o t h e r s t u d i e s . In a dog s t u d y , a n i m a l s which
d i e d w e r e r e p l a c e d with t h r e e a d d i t i o n a l d o g s t o i m p r o v e the
f i g u r e s . ' A m o n g b e a g l e d o g s , M e r r e l l c o v e r e d u p the fact that
p o r t i o n s o f t h e g o n a d s had u n d e r g o n e " m a r k e d t u b u l a r and inter-
stitial a t r o p h y " ' ( F u l l e r , 1972: 9 0 ) . T h e r e w a s also a c o v e r - u p of
i r r e p a r a b l e eye d a m a g e t o the lab a n i m a l s . I n s o m e cases the lenses
o f t h e e y e s w e r e c l o u d e d s o m u c h t h a t t h e retina could not b e
o b s e r v e d . T h e s e a n d o t h e r eye i n f e c t i o n s led o n e p a t h o l o g i s t t o
c o m m e n t in his r e p o r t t h a t he had ' n e v e r seen such an i n v o l v e m e n t
o f t h e l e n s ' ( F u l l e r , 1972: 9 0 ) .
M c M a s t e r [ A s s o c i a t e D i r e c t o r o f Clinical R e s e a r c h ] had
r e s p o n d e d to a d o c t o r in O m a h a w h o had c o m p l a i n e d t h a t his
62
Safety testing of drugs: from negligence to fraud
A M e r r e l l i n t e r d e p a r t m e n t a l m e m o r a n d u m noted t h a t a p a p e r
s i g n e d by a N e w J e r s e y p h y s i c i a n - ' p r e p a r e d for t h e most part by
u s ' - had b e e n a c c e p t e d by t h e Journal of the Medical Society of New
Jersey. A n o t h e r internal m e m o r a n d u m r e c o m m e n d e d continued
p a y m e n t of a p e r s o n a l c o n s u l t a t i o n fee to a p h y s i c i a n , mainly on the
g r o u n d s t h a t t h e c o m p a n y could not afford t o risk a l i e n a t i o n o f t h e
d o c t o r at t h a t t i m e . ' P e r h a p s ' , it w a s o p t i m i s t i c a l l y noted by a
M e r r e l l e m p l o y e e , i s h o u l d n ' t r e g a r d this a s b l a c k m a i l ' (US
S e n a t e , 1969: P a r t 1 0 3 9 7 2 ) . A n early a p p r o a c h t o military h o s p i t a l s
w a s justified as follows: ' W e w e r e not t h i n k i n g h e r e so m u c h of
h o n e s t clinical w o r k as we w e r e of a p r e - m a r k e t i n g softening prior
t o t h e i n t r o d u c t i o n o f t h e p r o d u c t ' ( U S S e n a t e , 1969: P a r t 1 0 , 3 9 7 1 ) .
B y M a r c h o f l 9 6 1, M c M a s t e r - a l t h o u g h still w r i t i n g o t h e r w i s e to
d o c t o r s w h o c o m p l a i n e d - c o n c l u d e d p r i v a t e l y t h a t ' t h e r e can b e
n o d o u b t o f t h e a s s o c i a t i o n o f M E R / 2 9 t h e r a p y with [hair]
63
Safety testing of drugs: from negligence to fraud
T h e u p s h o t o f t h e i n v e s t i g a t i o n w a s t h a t M e r r e l l , the p a r e n t
R i c h a r d s o n - M e r r e l l , ' D r ' K i n g , D r V a n M a a n e n and M e r r e l l vice-
p r e s i d e n t W e r n e r all p l e a d e d 'no c o n t e s t ' to a variety of c r i m i n a l
fraud c o u n t s . I n t h e w o r d s o f M a t t h e w F . M c G u i r e , t h e n Chief
J u d g e o f t h e U S D i s t r i c t C o u r t for t h e District o f C o l u m b i a , t h e
p l e a s w e r e ' t a n t a m o u n t to a plea of g u i l t y ' . F i n e s of $60,000 and
$20,000 were levied against M e r r e l l and R i c h a r d s o n - M e r r e l l
respectively. The three individual defendants were each sentenced
t o m e r e l y six m o n t h s ' p r o b a t i o n . I f c o r p o r a t i o n s are r a t i o n a l , profit-
m a x i m i s i n g c r e a t u r e s , a total fine of $80,000 w o u l d have to be
r e g a r d e d as a j u s t i f i a b l e risk given t h a t R i c h a r d s o n - M e r r e l l esti-
m a t e d t h e p o t e n t i a l m a r k e t for M E R / 2 9 as $4.25 billion a year
( K n i g h t l e y et a l . , 1979: 6 5 ) .
T h e m a i n r e a s o n for t h e n o - c o n t e s t p l e a s w a s t h a t M e r r e l l w a s
w o r r i e d t h a t t h e trial r e c o r d c o u l d be used to a d v a n t a g e by victims
of M E R / 2 9 in civil s u i t s . R e g a r d l e s s , t h e civil suits did follow,
a l m o s t 500 of t h e m . R i c h a r d s o n - M e r r e l l is believed to h a v e paid out
a b o u t $200 m i l l i o n in d a m a g e s mostly settled out of c o u r t . T h i s has
b e e n a s e v e r e b u r d e n , e v e n for a F o r t u n e 500 c o m p a n y .
B e f o r e leaving t h e M E R / 2 9 case study it is w o r t h m e n t i o n i n g s o m e
o f t h e m o r e trivial a b u s e s w h i c h t e n d t o b e forgotten w h e n c o m p a r e d
w i t h t h e s e r i o u s c r i m e s m e n t i o n e d a b o v e . A s discussed earlier i t i s
t h e m o r e s u b t l e a b u s e s w h i c h are p r o b a b l y m o r e w i d e s p r e a d and
c o n s e q u e n t l y d o m o r e h a r m . C o n s i d e r t w o perfectly legal acts o f
social i r r e s p o n s i b i l i t y u n c o v e r e d b y t h e M E R / 2 9 i n v e s t i g a t i o n s .
W h e n d o c t o r s a t t h e M a y o C l i n i c i n M i n n e s o t a a s k e d for t h e
n e c e s s a r y f o r m s to r e p o r t to C i n c i n n a t i a b o u t side effects,
M c M a s t e r sent a l o n g only t w o ; t h e d o c t o r s a t M a y o w r o t e b a c k
a s k i n g for a t least t h r e e m o r e . ' Y o u have u n d e r - e s t i m a t e d u s , '
t h e y told M c M a s t e r j o k i n g l y ( U n g a r , 1973: 103).
64
Safety testing of drugs: from negligence to fraud
G i v e n w h a t is k n o w n a b o u t h o w easy it is to d i s c o u r a g e d o c t o r s
from m a k i n g a d v e r s e d r u g r e a c t i o n r e p o r t s , * this m i n o r act of social
i r r e s p o n s i b i l i t y c a n be a small part of a p a t t e r n of neglect. T h e same
c o u l d be said o f t h e following perfectly legal, and on its own trivial,
abuse.
Thalidomide
T h e l e s s o n s from t h a l i d o m i d e a r e m a n y . T h e m o s t i m p o r t a n t o f
all c o n c e r n s t h e n e e d for i n t e r n a t i o n a l e x c h a n g e of i n f o r m a t i o n on
a d v e r s e r e a c t i o n and t h e a b o l i t i o n o f t r a d e n a m e s for d r u g s . I n t h e
early 1960s w h e n t h e a d v e r s e effects of t h a l i d o m i d e w e r e b e i n g
discussed, so i n a d e q u a t e was the international c o m m u n i c a t i o n
65
Safety testing of drugs: from negligence to fraud
a m o n g d r u g r e g u l a t o r y a g e n c i e s t h a t c o m p a n i e s could for s o m e
t i m e i s o l a t e bad n e w s a b o u t a d r u g to t h e c o u n t r y w h e r e t h e
u n t o w a r d r e s e a r c h a p p e a r e d . H e n c e several h u n d r e d t h a l i d o m i d e
b a b i e s w e r e b o r n in J a p a n d u r i n g t h e p e r i o d of o v e r a y e a r w h e n
sales c o n t i n u e d t h e r e after t h e p r o d u c t had b e e n w i t h d r a w n from
t h e m a r k e t i n E u r o p e . I n Italy t h a l i d o m i d e r e m a i n e d o n the m a r k e t
for ten m o n t h s after w i t h d r a w a l in t h e rest of E u r o p e , and in
C a n a d a for t h r e e m o n t h s .
T h e m o r e t h a n fifty different t r a d e n a m e s u n d e r w h i c h thali-
d o m i d e w a s m a r k e t e d i n different c o u n t r i e s w a s the single most
i m p o r t a n t factor in d e l a y i n g an i m m e d i a t e halt to sales ( T a u s s i g ,
1963). Dr P e r O l a v L u n d b e r g w r o t e in an article in t h e Swedish
Medical Journal, 1965:
At t h e e n d o f N o v e m b e r 1961 s o m e of my c o l l e a g u e s at t h e
A c a d e m i c H o s p i t a l ( U p p s a l a ) w e r e sitting r e a d i n g a small notice
in a S t o c k h o l m n e w s p a p e r c o n c e r n i n g a G e r m a n drug called
C o n t e r g a n , w h i c h at a r e c e n t c o n g r e s s had b e e n r e p o r t e d to have
a p o s s i b l e t e r a t o g e n i c a c t i o n . We n a t u r a l l y w a n t e d to k n o w if this
w a s s o m e t h i n g to r e m e m b e r and if t h e d r u g in q u e s t i o n existed in
S w e d e n . A t e l e p h o n e call to a c h e m i s t r e s u l t i n g in an i n t e n s i v e
s t u d y o f t h e l i t e r a t u r e gave u s t h e a n s w e r : n e i t h e r C o n t e r g a n nor
any s i m i l a r d r u g s e e m e d t o exist i n o u r c o u n t r y . U n f o r t u n a t e l y ,
this w a s not t r u e ( S j o s t r o m and N i l s s o n , 1972: 132).
T h a l i d o m i d e , w h i c h had b e e n m a r k e t e d a s C o n t e r g a n i n
G e r m a n y , w a s sold i n S w e d e n a s N e u r o s e d y n and N o x i d y n . W h e n
t h a l i d o m i d e w a s w i t h d r a w n i n S w e d e n , t h e a u t h o r i t i e s did not w a r n
m o t h e r s a g a i n s t using pills a l r e a d y r e l e a s e d . C o n s e q u e n t l y a t least
five b a b i e s w e r e b o r n n e e d l e s s l y c r i p p l e d . T h e S w e d i s h m a n u -
f a c t u r e r of t h a l i d o m i d e a l l o w e d t h e p r o d u c t to be sold in A r g e n t i n a
for t h r e e m o n t h s after it had b e e n w i t h d r a w n in S w e d e n .
In a b o o k p u b l i s h e d in July 1976 T e f f a n d M u n r o r e p o r t e d that as
r e c e n t l y as M a r c h 1976 thirty t h a l i d o m i d e t a b l e t s had t u r n e d up in a
West Sussex c a m p a i g n to return unused medicines. Investigative
j o u r n a l i s t s p l a y e d a m o r e i m p o r t a n t role t h a n h e a l t h r e g u l a t o r y
a u t h o r i t i e s in m a n y p a r t s of the w o r l d in saving c h i l d r e n from
thalidomide.
A n a l e r t B r a z i l i a n r e p o r t e r had a s u s p i c i o n t h a t t h a l i d o m i d e w a s
b e i n g sold in p h a r m a c i e s in his o w n large city, Sao P a u l o , b e c a u s e
h e h a d s u d d e n l y b e c o m e a w a r e o f n u m b e r s o f limbless n e w b o r n s .
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Safety testing of drugs: from negligence to fraud
U p o n i n q u i r y , h o w e v e r , h e w a s told b y a u t h o r i t i e s t h a t
t h a l i d o m i d e w a s n o t b e i n g sold in Sao P a u l o . He p e r s i s t e d in his
q u e s t i o n i n g , a n d d i s c o v e r e d that t h a l i d o m i d e w a s i n d e e d b e i n g
w i d e l y sold b u t t h a t it w a s k n o w n to t h e p u b l i c and t h e
' a u t h o r i t i e s ' only b y its b r a n d n a m e s : Slip®. O n d a s i l ® . V e r d i l ® .
S e d i n ® . a n d S e r a l i s ® . W h e n this w a s m a d e k n o w n , 2.5 million
t a b l e t s c o n t a i n i n g t h a l i d o m i d e i n p h a r m a c i e s and p h a r m a c e u t i c a l
factories in Sao P a u l o w e r e confiscated by officials. C o u n t l e s s
c h i l d r e n and t h e i r p a r e n t s m u s t a l w a y s be grateful to that
i n q u i s i t i v e r e p o r t e r ( B u r a c k , 1976: 7 0 - 1 ) .
L e t u s r e t u r n t o t h e b e g i n n i n g o f t h e t h a l i d o m i d e story. T h e d r u g
w a s d i s c o v e r e d i n t h e 1950s b y t h e G e r m a n c o m p a n y , C h e m i e
G r u n e n t h a l . T h a l i d o m i d e w a s basically t o b e used a s a n h y p n o t i c
( s l e e p i n g pill) a n d t r a n q u i l l i s e r . E a r l y clinical trials w e r e u n s a t i s -
factory a n d t h e r e w e r e n o d o u b l e blind t e s t s ( w h e r e n e i t h e r d o c t o r
nor p a t i e n t k n o w s w h a t d r u g t r e a t m e n t t h e p a t i e n t i s r e c e i v i n g ) .
I n s t e a d i t s e e m s t h a t t h e c o m p a n y relied o n w h a t w e r e i m p r e s s i o n -
istic t e s t i m o n i a l s from clinicians such as Dr J u n g :
Dr J u n g w a s on a r e t a i n e r of a b o u t DM 2 0 0 a m o n t h ( t h e n a b o u t
$ 6 0 ) from G r u n e n t h a l . In a clinic in C o l o g n e , he had given
t h a l i d o m i d e to t w e n t y p a t i e n t s , for only four w e e k s . Yet his
a d m i r a t i o n for t h e d r u g a p p e a r e d o v e r w h e l m i n g .
He h a d , for e x a m p l e , used it on four y o u t h s w h o w e r e suffering
from m o r a l t e n s i o n as t h e result of m a s t u r b a t i o n . In confidential
c h a t s , t h e y had r e v e a l e d t o him t h a t after t a k i n g t h a l i d o m i d e their
d e s i r e t o m a s t u r b a t e had d e c r e a s e d , t h e i r m o r a l t e n s i o n had
e v a p o r a t e d , and t h e y felt m u c h b e t t e r . A l s o , said D r J u n g ,
t h a l i d o m i d e had cured p r e m a t u r e ejaculation in a n u m b e r of
married patients w h o s e wives were reported to have expressed
g r e a t s a t i s f a c t i o n w i t h t h e r e s u l t s . On t h e basis of his t r i a l s , Dr
J u n g r e p o r t e d t o G r u n e n t h a l a t t h e b e g i n n i n g o f J u n e 1955 t h a t
he c o n s i d e r e d t h a l i d o m i d e ready to be m a r k e t e d (Knightley et
al., 1979:26).
Y e t , as G r u n e n t h a l g a t h e r e d its g l o w i n g t e s t i m o n i a l s from s u b -
s e r v i e n t d o c t o r s , o t h e r p h y s i c i a n s w e r e informing t h e c o m p a n y ,
e v e n b e f o r e t h e d r u g w a s p l a c e d o n t h e m a r k e t , o f side-effects
which included giddiness, nausea, constipation, a 'hangover',
w a k e f u l n e s s a n d an allergic r e a c t i o n . In spite of t h i s , G r u n e n t h a l
l a u n c h e d t h a l i d o m i d e with a n a d v e r t i s i n g c a m p a i g n a i m e d a t selling
67
Safety testing of drugs: from negligence to fraud
O n M a r c h 3 0 , 1960, a G r i i n e n t h a l r e p r e s e n t a t i v e r e p o r t e d that
initial a p p r o a c h e s to a d o c t o r in I r a n had b e e n unsuccessful.
' H o w e v e r , since t h e I r a n i a n d o c t o r is very m a t e r i a l i s t i c in his
o u t l o o k , c o n c r e t e r e s u l t s should b e f o r t h c o m i n g s o o n . ' . . . w h a t
G r i i n e n t h a l w a n t e d a b o v e all w a s quick r e s u l t s . T h e c o m p a n y
s p e l l e d o u t its policy on trials in a letter to t h e P o r t u g u e s e
l i c e n s e e , F i r m a P a r a c e l s i a , o f O p o r t o : ' T o b e quite clear a b o u t it:
a q u i c k p u b l i c a t i o n , p e r h a p s in t h r e e m o n t h s , with the r e p o r t s of
fifteen t o t w e n t y successful c a s e s w h o h a v e t o l e r a t e d the d r u g
w e l l , is m o r e i m p o r t a n t to us t h a n a b r o a d l y b a s e d , large w o r k
t h a t will not a p p e a r for eight t o t w e l v e m o n t h s . F r o m t h i s , you
can see w h a t kind of t e s t e r s we h a v e in m i n d . '
68
Safety testing of drugs: from negligence to fraud
u n d e r t o o k to try t h a l i d o m i d e on c h i l d r e n at t h e U n i v e r s i t y C l i n i c ,
B o n n . F o r t y c h i l d r e n , m o s t o f w h o m had brain d a m a g e , w e r e
g i v e n t h e d r u g u n d e r Dr L a n g ' s s u p e r v i s i o n for p e r i o d s of up to
n i n e w e e k s without the permission or knowledge of their parents.
The doses w e r e ten to twenty times higher than Griinenthal's
r e c o m m e n d e d d o s e for a d u l t s . O n e child had a c i r c u l a t o r y
c o l l a p s e , o n e child died from a c o n g e n i t a l h e a r t d e f e c t , a t w e n t y -
o n e - m o n t h - o l d b a b y w i t h c o n v u l s i v e d i s o r d e r s lost her vision
t e m p o r a r i l y , and a t h r e e - m o n t h - o l d baby died from h e a r t failure.
D r L a n g c o n s i d e r e d i t very q u e s t i o n a b l e t h a t any o f t h e s e
r e a c t i o n s w a s c o n n e c t e d with t h a l i d o m i d e , and r e p o r t e d t o t h e
c o m p a n y : in g e n e r a l t e r m s C o n t e r g a n could be d e s c r i b e d as a
r a p i d - a c t i n g s e d a t i v e p a r t i c u l a r l y suited for use with c h i l d r e n '
( K n i g h t l e y e t a l . , 1979: 3 4 - 5 ) .
V e r y different t r e a t m e n t a w a i t e d d o c t o r s w h o p l a n n e d t o publish
unfavourable reports about thalidomide. One company memor-
a n d u m s h o w e d h o w a r e p o r t o n p e r i p h e r a l n e u r i t i s from t h a l i d o -
m i d e s u b m i t t e d b y o n e d o c t o r w a s held u p : ' T h e friendly c o n n e c t i o n
w i t h [ t h e e d i t o r o f t h e j o u r n a l ] c o n t r i b u t e d t o t h e delay i n t r e a t m e n t
o f t h e s u b m i t t e d m a n u s c r i p t . ' W h e n t h e possibility o f legal c o n s e -
q u e n c e s from t h e p r o m o t i o n o f t h e i r ' c o m p l e t e l y safe' d r u g b e c a m e
c l e a r , t h e g a m e o f h a r a s s i n g clinicians w h o p r o d u c e d u n f a v o u r a b l e
r e p o r t s b e g a n in e a r n e s t . G r i i n e n t h a l hired a p r i v a t e d e t e c t i v e to
r e p o r t on hostile physicians. The detective m a d e notes on the
p r i v a t e lives a n d family c i r c u m s t a n c e s o f c e r t a i n p h y s i c i a n s . O n e
r e p o r t says: ' T h e father o f D r B . i s a n e x - c o m m u n i s t and n o w a d a y s
a m e m b e r o f S E D ' ( S j o s t r o m and N i l s s o n , 1972: 6 9 ) .
D i s t i l l e r s b o u g h t t h e licence t o m a r k e t t h a l i d o m i d e i n G r e a t
B r i t a i n . T h e c o m p a n y w a s p r i m a r i l y a h u g e spirits and liquor m a n u -
f a c t u r e r . K n o w l e d g e o f side-effects from t h a l i d o m i d e c a m e later t o
D i s t i l l e r s ' a t t e n t i o n t h a n with G r i i n e n t h a l . B u t w h e n a n a w a r e n e s s
did b e g i n , it w a s s u p p r e s s e d , j u s t as in t h e c a s e of G r u n e n t h a l . By
F e b r u a r y 1961 d o z e n s o f c a s e s o f p e r i p h e r a l n e u r i t i s had b e e n
b r o u g h t to Distillers' attention. The company began to consider
p u t t i n g 'a little m 6 r e e m p h a s i s ' on t h e risk of p e r i p h e r a l n e u r i t i s 'in
t h e h o p e t h a t t h e n u m b e r o f cases will d i m i n i s h i f d o c t o r s are a w a r e
o f t h e p o s s i b i l i t y ' . D i s t i l l e r s ' sales p e o p l e w e r e not a l t o g e t h e r
e n t h u s i a s t i c a b o u t this idea. O n e sales e x e c u t i v e , J . P a t o n , w r o t e :
it is not o u r j o b to e d u c a t e t h e m e d i c a l p r o f e s s i o n how to look out
for v a r i o u s c o n d i t i o n s . F r o m a sales p r o m o t i o n point of v i e w , t h e
69
Safety testing of drugs: from negligence to fraud
A l e x a n d e r F l a w n , b o r n o n J a n u a r y 9 , 1962, w a s o n e o f t h e
w o r s t - d a m a g e d t h a l i d o m i d e c h i l d r e n in B r i t a i n . He had a
d e f o r m e d and s h o r t e n e d a r m w i t h a h a n d w i t h o u t a t h u m b . T h e
o t h e r h a n d had o n e e x t r a finger. H i s p a l a t e had a g a p i n g hole in it.
H i s face w a s p a r a l y s e d o n o n e side. O n e ear w a s c o m p l e t e l y
70
Safety testing of drugs: from negligence to fraud
m i s s i n g , t h e o t h e r grossly d e f o r m e d . F o r t h e first e i g h t e e n
m o n t h s of his life, he v o m i t e d his food a c r o s s t h e r o o m with
p r o j e c t i l e - l i k e f o r c e . It soon b e c a m e c l e a r that his brain w a s
d a m a g e d , t h a t he w a s d e a f and d u m b , and had p o o r vision in his
left e y e . ' W h e n A l e x w a s b o r n , I was frightfully b r a v e , ' said
J u d i t h F l a w n . i cut off all my feelings. T h i s w a s a t e r r i b l e m i s t a k e
b e c a u s e I d i d n ' t c o m e alive a g a i n for s e v e n y e a r s ' ( K n i g h t l e y et
a l . , 1979: 112).
O n t h e o t h e r side o f t h e w o r l d , P r o f e s s o r L e n z o f H a m b u r g
U n i v e r s i t y had r e a c h e d t h e s a m e c o n c l u s i o n s a s M c B r i d e . O n 2 6
N o v e m b e r 1961 t h e m a s s c i r c u l a t i o n n e w s p a p e r Welt am Sonntag
t o o k u p L e n z ' s f i n d i n g s with t h e h e a d l i n e : M A L F O R M A T I O N S
F R O M T A B L E T S - A L A R M I N G SUSPICION OF PHYSI-
CIAN'S GLOBALLY DISTRIBUTED DRUG. Grunenthal
a t t a c k e d L e n z a n d t h e Welt am Sonntag article as s e n s a t i o n a l i s t , yet
w i t h d r e w t h a l i d o m i d e from t h e G e r m a n m a r k e t ' B e c a u s e press
r e p o r t s h a v e u n d e r m i n e d t h e basis of scientific d i s c u s s i o n . . . .'
T h a l i d o m i d e w a s n e v e r a p p r o v e d for m a r k e t i n g i n t h e U n i t e d
S t a t e s t h a n k s t o t h e c a u t i o n o f F D A scientist D r F r a n c e s K e l s e y ,
w h o w a s h o n o u r e d b y P r e s i d e n t K e n n e d y for saving t h e n a t i o n from
t h e d i s a s t e r . C a u t i o u s r e g u l a t o r s in F r a n c e and Israel also refused to
a p p r o v e the drug.
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Safety testing of drugs: from negligence to fraud
A t least t e n t h a l i d o m i d e c h i l d r e n w e r e b o r n i n the U n i t e d S t a t e s .
The m o r e sophisticated Richardson-Merrell pharmacologists were
guilty of m a n y sins of o m i s s i o n . T h e y k n e w that a drug like thali-
d o m i d e c o u l d c r o s s the p l a c e n t a l b a r r i e r . "Yet k n o w i n g that thali-
d o m i d e might affect t h e f o e t u s , R i c h a r d s o n - M e r r e l l did no a n i m a l
r e p r o d u c t i o n t e s t s o r c o n t r o l l e d clinical trials o n m o t h e r s d u r i n g t h e
s e n s i t i v e p e r i o d of p r e g n a n c y to see w h e t h e r in fact it did'
( K n i g h t l e y et a l . , 1979: 7 2 ) . T h e r e w e r e sins of c o m m i s s i o n as well.
T h e clinical d a t a w h i c h w e r e p r e s e n t e d to F D A in its s u b m i s s i o n for
a p p r o v a l of t h a l i d o m i d e w e r e m i s l e a d i n g and c o n c o c t e d in a variety
o f w a y s . O n e crucial p a p e r w r i t t e n b y i n d e p e n d e n t p h y s i c i a n , D r
R a y O. N u l s e n of O h i o , w a s in fact w r i t t e n by t h e m e d i c a l d i r e c t o r
of R i c h a r d s o n - M e r r e l l .
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Safety testing of drugs: from negligence to fraud
w h o a r g u e d t h a t t h e r e w a s n o c o n c l u s i v e p r o o f that t h a l i d o m i d e
c a u s e d birth deformities.
T h e trial a n d its a t t e n d a n t publicity w a s bitter. On 26 M a y 1970
t h e p r o s e c u t i o n c o m p l a i n e d t o t h e c o u r t t h a t five j o u r n a l i s t s had
b e e n t h r e a t e n e d w i t h ' r e p r i s a l s ' b y G r u n e n t h a l for w r i t i n g stories
w h i c h did not m e e t with the c o m p a n y ' s a p p r o v a l . I t b e g a n t o a p p e a r
t h a t t h e trial w o u l d go on for ever. T h i s suited G r u n e n t h a l . T h e i r
t a c t i c w a s t o s u g g e s t ( c o r r e c t l y ) that the p r o t r a c t e d criminal pro-
ceedings were holding up out-of-court settlement of compensation
c l a i m s for t h e t h a l i d o m i d e families. G r u n e n t h a l d e c l a r e d : i f w e
w a i t to see w h e r e t h e trial gets us, we shall still be sitting here in ten
y e a r s ' t i m e a n d t h e c h i l d r e n will h a v e n o t h i n g . I f w e are forced t o ,
we shall fight to t h e e n d , and t h a t , of c o u r s e , will diminish the
r e s o u r c e s a v a i l a b l e for any p a y m e n t b y t h e c o m p a n y . "
73
Safety testing of drugs: from negligence to fraud
T h e story o f M o r a g M c C a l l u m i l l u s t r a t e s t h a t w h a t e v e r the
t h a l i d o m i d e s e t t l e m e n t s could b e c o n s t r u e d a s c o n s t i t u t i n g , i t
w o u l d not b e called j u s t i c e .
74
Safety testing of drugs: from negligence to fraud
O n e c o u p l e from L i e g e . B e l g i u m , p o i s o n e d t h e i r e i g h t - d a y - o l d
t h a l i d o m i d e d a u g h t e r . T h e y w e r e c h a r g e d with m u r d e r , but
a c q u i t t e d to t h e wild a c c l a i m of a t h o u s a n d p e o p l e w h o had c r u s h e d
i n t o t h e c o u r t r o o m for t h e w e e k - l o n g trial. H a d they b e e n c o n v i c t e d
w h i l e s o m a n y c u l p a b l e c o m p a n y e x e c u t i v e s r o a m e d free, w e would
h a v e w i t n e s s e d o n e of the m o r e t e r r i b l e ironies in t h e history of
criminal justice.
G. D. Searle
T h e t h a l i d o m i d e d i s a s t e r r e s u l t e d in a g e n e r a l t i g h t e n i n g of drug
r e g u l a t o r y laws i n m o s t d e v e l o p e d c o u n t r i e s a r o u n d t h e g l o b e .
A n o t h e r fiasco in t h e m i d - 1 9 7 0 s i n v o l v i n g t h e G. D. Searle cor-
p o r a t i o n p r o d u c e d d r a m a t i c r e g u l a t o r y c h a n g e i n t h e m o r e specific
a r e a o f t h e safety t e s t i n g o f d r u g s .
S e a r l e , o n e o f t h e largest A m e r i c a n p h a r m a c e u t i c a l c o m p a n i e s
w a s s u b j e c t e d to a b a r r a g e of a l l e g a t i o n s before S e n a t o r E d w a r d
K e n n e d y ' s S u b - c o m m i t t e e on Health of the Senate Judiciary
C o m m i t t e e b e t w e e n 1975 and 1977. K e n n e d y and t h e F D A w e r e
c o n v i n c e d t h a t b o t h fraud and i n c o m p e t e n c e w e r e w i d e s p r e a d i n
t h e S e a r l e safety t e s t i n g p r o g r a m m e . F D A h e a d S c h m i d t testified t o
p a r t i c u l a r c o n c e r n o v e r t h e testing o f w h a t w a s t o b e c o m e S e a r l e ' s
top-selling line, A l d a c t o n e .
T h i s r e p o r t clearly i n d i c a t e d a d o s e - r e l a t e d i n c r e a s e in the
f r e q u e n c y o f liver and t e s t i c u l a r t u m o r s and r e c o m m e n d e d that
t h e s e findings be a n a l y z e d for statistical significance.
Although F D A regulations require 'alarming findings'to be
s u b m i t t e d t o t h e A g e n c y p r o m p t l y , this had not b e e n d o n e .
I n t h e c o u r s e o f o u r r e v i e w o f t h e 7 8 - w e e k study o n r a t s , w e
75
Safety testing of drugs: from negligence to fraud
S i m i l a r a l l e g a t i o n s w e r e m a d e by S c h m i d t with r e s p e c t to the
sweetening ingredient. Aspartame.
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Safety testing of drugs: from negligence to fraud
O n e final e x a m p l e with r e g a r d t o A s p a r t a m e : O u r i n v e s t i g a t o r s
found t h a t a p a t h o l o g i s t ' s s u m m a r y w a s e d i t e d in such a m a n n e r
as to a l t e r , g e n e r a l l y in a f a v o r a b l e d i r e c t i o n , s o m e o f t h e
p a t h o l o g i s t ' s s u m m a r i z e d f i n d i n g s . T h e original r e p o r t w a s not
s u b m i t t e d ( S u b c o m m i t t e e o n H e a l t h . 1976a: P a r t I I , 15).
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Safety testing of drugs: from negligence to fraud
specific a c t s , but r a t h e r a c u m u l a t i v e p a t t e r n o f c o n d u c t . T h e F D A
itself had a d m i t t e d t h a t this w a s t h e case t h r o u g h t h e w o r d s of its
t a s k force t o i n v e s t i g a t e t h e c o n d u c t o f S e a r l e ' s a n i m a l s t u d i e s .
S e a r l e also g a v e a b l a n k c h e q u e to R i c h a r d H a m i l l from B a x t e r -
T r a v e n o l to set up a s o p h i s t i c a t e d c o r p o r a t e c o m p l i a n c e g r o u p
w h i c h w o u l d t r a v e l t h e w o r l d d o i n g c o m p l i a n c e a u d i t s t o e n s u r e that
all s u b s i d i a r i e s in all a r e a s of t h e c o r p o r a t i o n ' s o p e r a t i o n s w e r e
m e e t i n g b o t h c o m p a n y and legal s t a n d a r d s . H a m i l l ' s key a p p o i n t -
m e n t s i n t h e c o m p l i a n c e g r o u p w e r e also from o u t s i d e S e a r l e . A s
S e a r l e ' s G r o u p M a n a g i n g D i r e c t o r for the S o u t h - E a s t A s i a n
Region complained to me:
7S
Safety testing of drugs: from negligence to fraud
W e h a v e t h r e e b o s s e s t o w o r k for n o w , w h e r e a s local c o m p a n i e s
h a v e only o n e . F i r s t l y , we m u s t follow local l a w s , like the local
C o r p o r a t e Affairs C o m m i s s i o n . S e c o n d l y , w e have got t o have
t h e S e c u r i t i e s and E x c h a n g e C o m m i s s i o n a s a boss. A n d t h i r d l y ,
w e h a v e t o h a v e t h e i n t e r n a l c o r p o r a t i o n c o n t r o l s which o u r
c o m p a n y has set u p since t h e K e n n e d y h e a r i n g s . W i t h t h r e e
different k i n d s o f c h e c k s on our b e h a v i o u r t h e r e is far less c h a n c e
t h a t a n A m e r i c a n m u l t i n a t i o n a l c o m p a n y will b r e a k the law
c o m p a r e d with an A u s t r a l i a n c o m p a n y .
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Safety testing of drugs: from negligence to fraud
T h e i m p a c t o f t h e K e n n e d y S e a r l e h e a r i n g s has b e e n inter-
n a t i o n a l , a s m a n y d e v e l o p e d c o u n t r i e s are n o w e n a c t i n g G L P s
similar to those o f t h e United States.
O n e o f t h e issues r a i s e d b y t h e S e a r l e i n v e s t i g a t i o n s w a s t h e rela-
t i o n s h i p b e t w e e n c o n t r a c t l a b o r a t o r i e s and large p h a r m a c e u t i c a l
c o m p a n i e s . C a n p h a r m a c e u t i c a l c o m p a n i e s use their c o m m e r c i a l
p o w e r to i m p o s e a set of e x p e c t a t i o n s on c o n t r a c t l a b o r a t o r i e s
w h e r e b y u n f a v o u r a b l e r e s u l t s c a u s e t h e l a b o r a t o r y t o b e l i e v e that i t
will be u n l i k e l y to get future c o n t r a c t s ? C a n a c o m p a n y w h i c h w a n t s
to p u s h t h r o u g h a q u i c k and dirty s t u d y , yet which w a n t s to m a i n t a i n
its o w n s t a n d a r d s for r e s e a r c h e x c e l l e n c e , get a c o n t r a c t lab to do
s h o d d y w o r k for it? T h e o p i n i o n of F D A officers I s p o k e w i t h w a s
t h a t c e r t a i n c o n t r a c t labs have f l o u r i s h e d b y u n d e r c u t t i n g r e s p o n -
sible l a b o r a t o r i e s on price and m a k i n g a profit by fabricating d a t a
a n d c u t t i n g c o r n e r s o n scientific r i g o u r .
A b r o g a t i o n o f r e s p o n s i b i l i t y i n o n e case ( B i o m e t r i c T e s t i n g I n c . )
d i s c u s s e d i n t h e K e n n e d y h e a r i n g s w a s t w o steps r e m o v e d from the
m a n u f a c t u r e r . H e r e t h e c o n t r a c t l a b o r a t o r y had widely used s u b -
contractors.
D R S C H M I D T . M a n y o f t h e laboratory d e t e r m i n a t i o n s are
s u b c o n t r a c t e d with l i t t l e , i f a n y , m o n i t o r i n g o f t h e p e r f o r m a n c e
o f t h e s e s u b c o n t r a c t o r s . I n this c o n n e c t i o n , i t c a m e t o o u r
a t t e n t i o n last w e e k t h a t former e m p l o y e e s o f o n e o f t h e s e
s u b c o n t r a c t o r s h a v e c h a r g e d t h a t t h e y w e r e i n s t r u c t e d to falsify
d a t a by t h e i r e m p l o y e r . . . .
S o m e o f t h e l a b o r a t o r y d e t e r m i n a t i o n s alleged t o have b e e n
c a r r i e d o u t w e r e found b y t h e F D A i n v e s t i g a t o r s not t o have b e e n
c a r r i e d o u t at all.
S E N A T O R K E N N E D Y . W h a t d o e s this m e a n , t h a t n o n e x i s t e n t
experiments were reported?
D R S C H M I D T . Y e s , sir, i t i s c o m m o n l y called ' d r y - l a b e l i n g ' b y
some.
( S u b c o m m i t t e e o n H e a l t h , 1976a: P a r t I I I , 13).
L a t e i n 1979 t w o f o r m e r v i c e - p r e s i d e n t s o f B i o m e t r i c T e s t i n g Inc.
p l e a d e d guilty to c h a r g e s of c o n s p i r i n g to falsify r e p o r t s of a n i m a l
tests on certain drug products in order to show them harmless when
SO
Safety testing of drugs: from negligence to fraud
. . . m a n y a n i m a l w e i g h t s w e r e r e c o r d e d as having b e e n c o l l e c t e d
w h i l e t h e a n i m a l s w e r e alive o n d a t e s s u b s e q u e n t t o their d a t e s o f
d e a t h ; s e v e r a l a n i m a l s w e r e r e c o r d e d a s having died o n m o r e
t h a n o n e d a t e , u s u a l l y with different v e r s i o n s o f gross post
m o r t e m findings; e x t r e m e variations in body weight were noted
b o t h d u r i n g s u c c e s s i v e w e i g h i n g s o f t h e s a m e a n i m a l s and within
a n y g r o u p o f a n i m a l s w e i g h e d a t t h e s a m e t i m e , e v e n t h o u g h all
a n i m a l s w e r e r e p o r t e d t o have r e c e i v e d s t a n d a r d care and d r u g
a d m i n i s t r a t i o n ( S u b c o m m i t t e e o n H e a l t h , 1977: P a r t I V , 144).
F D A h a v e a c c e p t e d a s u b s e q u e n t S y n t e x i n - h o u s e r e p l i c a t i o n for
N a p r o s y n a s d e m o n s t r a t i n g t h e safety o f t h e p r o d u c t . A t t h e t i m e o f
w r i t i n g , t h e I B T fiasco is still s o m e t h i n g of a legal m u d d l e . A
C h i c a g o g r a n d j u r y h a s r e t u r n e d c r i m i n a l i n d i c t m e n t s against four
f o r m e r I B T e m p l o y e e s . S e c u r i t i e s class action suits have b e e n filed
a g a i n s t S y n t e x to t h e benefit of all p e r s o n s w h o b o u g h t Syntex
81
Safety testing of drugs: from negligence to fraud
82
Safety testing of drugs: from negligence to fraud
* QUALITY A S S U R A N C E UNIT
G L P r e g u l a t i o n s r e q u i r e that l a b o r a t o r i e s had a quality
a s s u r a n c e unit as a s e l f - r e g u l a t o r y c h e c k t h a t s t a n d a r d s are
b e i n g m a i n t a i n e d w i t h i n the l a b . M o s t did not have o n e .
* RECORD RETENTION
M a n y l a b o r a t o r i e s had r e c o r d s w h i c h w e r e s o i n a d e q u a t e t h a t
f i n d i n g o u t e x a c t l y w h a t w a s g o i n g o n and d e m o n s t r a t i n g guilt
in any c r i m i n a l p r o c e e d i n g a g a i n s t t h e m w o u l d be difficult.
* TEST SUBSTANCE CONTROL
L a c k of t e s t i n g for e a c h b a t c h of test s u b s t a n c e - c a r r i e r mix for
r a t e o f r e l e a s e and h o m o g e n e i t y o f mix w e r e the most p r e v a l e n t
problems.
* EQUIPMENT
L a c k o f w r i t t e n s t a n d a r d o p e r a t i n g p r o c e d u r e s ( S O P s ) for the
c l e a n i n g , c a l i b r a t i o n , m a i n t e n a n c e and r e p a i r functions w a s the
main problem.
T h e C o o k ( 1 9 7 9 ) study o f 2 8 l a b o r a t o r i e s c o n c l u d e d that i n t h e
t w o y e a r s b e t w e e n t h e s t u d i e s , a p e r i o d d u r i n g which t h e B i o -
r e s e a r c h M o n i t o r i n g Staff s w u n g into effective o p e r a t i o n , t h e
a v e r a g e c o m p l i a n c e rate over the 86 G L P s c o m m o n to both studies
i m p r o v e d from 6 0 p e r cent t o 8 7 p e r c e n t . E v e n t h o u g h t h e r e w e r e
p r o b l e m s of comparability b e t w e e n the two studies, three
i m p r o v e m e n t s s e e m e d q u i t e clear.
* T h e p e r c e n t of labs h a v i n g an o p e r a t i o n a l Q A U [Quality
Assurance Unit] i n c r e a s e d from 32 to 79 p e r c e n t o v e r the t w o -
year period.
* T h e p e r c e n t of labs i n c o m p l i a n c e w i t h t h e r e q u i r e m e n t for
a r c h i v a l s t o r a g e o f d a t a with a d e q u a t e i n d e x i n g i n c r e a s e d from
58 to 82 p e r c e n t .
* F i n a l l y , t h e a v e r a g e lab had 48 p e r c e n t of r e q u i r e d S O P ' s in
1977 c o m p a r e d to 78 p e r c e n t in 1979 ( C o o k , 1979: viii).
In spite of t h e s e i m p r o v e m e n t s w h i c h might r e a s o n a b l y be
a t t r i b u t e d to the Bioresearch M o n i t o r i n g P r o g r a m , problems
r e m a i n e d . O n e lab in t h e 1979 study had as m a n y as 42 G L P
v i o l a t i o n s . A d m i t t e d l y , m a n y o f t h e s e w e r e relatively trivial m a t t e r s
in t h e m s e l v e s , b u t t h e y do add up to a d i s t u r b i n g p a t t e r n of
n e g l i g e n c e . A m a z i n g l y , i n the a f t e r m a t h o f t h e Searle and I B T
fiascos, we find in b o t h s t u d i e s a r e l a t i v e l y low level of c o m p l i a n c e
with regulations c o n c e r n i n g the 'handling of d e a d / m o r i b u n d
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Safety testing of drugs: from negligence to fraud
* O n e lab i n c o r r e c t l y i n d i c a t e d t h a t clinical o b s e r v a t i o n s w e r e
m a d e daily.
* T h e s a m e lab i n a c c u r a t e l y r e p o r t e d t h e c o m p o s i t i o n o f t h e
control substance.
* A n o t h e r lab did not p o i n t out readily a p p a r e n t and statistically
significant d i f f e r e n c e s in test and c o n t r o l a n i m a l s .
* A n o t h e r lab r e p o r t e d t h a t histological e x a m i n a t i o n s (with
p r e s u m a b l y negative findings) were m a d e on specimens, which
w e r e in fact not m a d e .
* F i n a l l y , a fourth lab did not r e p o r t clinically significant
o b s e r v a t i o n s ( e x c e s s i v e salivation of d o g s ) in its final study
r e p o r t ( C o o k , 1979: 19).
I n spite o f t h e w i d e s p r e a d p r o b l e m s w i t h a n i m a l d a t a , most
o b s e r v e r s w o u l d a g r e e w i t h t h e view o f Griffin (1977: 29) that:
' F a b r i c a t i o n of r e s u l t s is not as c o m m o n in toxicity studies [with
a n i m a l s ] as it is at t h e clinical trial [with h u m a n s ] s t a g e . ' B e t w e e n
1972 a n d 1974 t h e F D A did a survey of c o m p l i a n c e a m o n g 155
clinical i n v e s t i g a t o r s w o r k i n g for 15 s p o n s o r s , most t r a n s n a t i o n a l s
( S u b c o m m i t t e e o n H e a l t h , 1975). S e v e n t y - f o u r p e r c e n t (115) failed
to c o m p l y with o n e or m o r e of t h e r e q u i r e m e n t s of t h e law for
clinical i n v e s t i g a t o r s .
T h i r t y - f i v e p e r cent o f t h e clinicians in t h e s a m p l e failed to o b t a i n
p r o p e r c o n s e n t from t h e i r p a t i e n t s , a n a r e a o f a b u s e w h i c h will
be d i s c u s s e d in t h e next s e c t i o n . Fifty p e r cent failed to k e e p
a c c u r a t e r e c o r d s o f t h e a m o u n t o f d r u g s r e c e i v e d from t h e s p o n s o r
a n d d i s t r i b u t e d to test s u b j e c t s . T h i s is a s e r i o u s m a t t e r , as Mr
G r e g o r y A h a r t o f t h e G e n e r a l A c c o u n t i n g Office testified before
the Senate.
I f t h e i n v e s t i g a t o r d o e s not k e e p t r a c k o f t h e d r u g s , i t i s p o s s i b l e
h e has g i v e n t h e m t o p e o p l e w h o a r e not t r a i n e d clinical
i n v e s t i g a t o r s o r t h a t h e h a s given t h e m t o p a t i e n t s o u t s i d e t h e
control study.
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Safety testing of drugs: from negligence to fraud
T w e n t y - e i g h t p e r cent o f t h e s a m p l e o f c l i n i c i a n s failed t o a d h e r e
t o s t u d y p r o t o c o l s . T w e n t y - t h r e e p e r c e n t failed t o m a i n t a i n r e c o r d s
w h i c h a c c u r a t e l y reflect t h e c o n d i t i o n s o f the p a t i e n t b e f o r e , d u r i n g
a n d after t h e s t u d y , and 22 p e r c e n t did not retain case r e c o r d s as
required.
T h i s survey did not i n c l u d e s t u d i e s c o n d u c t e d i n - h o u s e by the
s p o n s o r and s t u d i e s r e g u l a t e d b y t h e F D A ' s B u r e a u o f B i o l o g i e s .
T h e F D A w a s r e q u e s t e d b y t h e G e n e r a l A c c o u n t i n g Office t o d o
f u r t h e r s u r v e y s to a s s e s s the levels of c o m p l i a n c e in t h e s e a r e a s .
A m o n g 3 5 clinical i n v e s t i g a t i o n s c o n d u c t e d i n - h o u s c b y the
s p o n s o r , all 35 failed to c o m p l y with o n e or m o r e of the F D A
r e g u l a t i o n s ( S u b c o m m i t t e e o n H e a l t h . 1976a: Part I I , 3 4 2 ) . T h e
r e c o r d for s t u d i e s s u b m i t t e d t o t h e B u r e a u o f B i o l o g i e s w a s b e t t e r .
T w e n t y - e i g h t of t h e 48 clinical i n v e s t i g a t o r s i n s p e c t e d satisfied all
F D A regulations.
T h e p r o b l e m c o n t i n u e s . I n t h e 1978 h e a r i n g s before the K e n n e d y
S u b c o m m i t t e e t h e f r a u d u l e n t p r a c t i c e s w h i c h had raised such a
f u r o r e y e a r s b e f o r e w e r e still a p p a r e n t . Clinical d a t a w e r e still being
' g r a p h i t e d ' ; a c a s e had recently a p p e a r e d of a clinical i n v e s t i g a t o r
w i t h a forged m e d i c a l l i c e n s u r e c e r t i f i c a t e ; d a t a c o l l e c t e d on o n e
p r o d u c t w a s b e i n g s u b m i t t e d for a n o t h e r ; and s o on. C o m m i s s i o n e r
D o n a l d K e n n e d y c a t a l o g u e d a long list of a b u s e s w h i c h r e m a i n e d of
major concern.
* C a s e r e p o r t s on f i c t i t i o u s s u b j e c t s , and on subjects w h o w e r e
n e v e r a d m i n i s t e r e d the i n v e s t i g a t i o n a l d r u g . O b v i o u s l y ,
d e p e n d e n c e o n such s p u r i o u s d a t a m i g h t result i n e x p a n d e d
t e s t i n g o f a d r u g or in t h e p o s s i b l e a p p r o v a l of a drug for use in a
c o n d i t i o n w h e r e it w a s , in fact, ineffective.
* C a s e r e p o r t s c o n t a i n i n g t h e r e s u l t s of clinical l a b o r a t o r y w o r k
w h i c h w a s not a c t u a l l y p e r f o r m e d . T h e p u r p o s e o f such
l a b o r a t o r y w o r k is to assess t h e safety o f t h e drug in h u m a n
s u b j e c t s - for e x a m p l e , ifa d r u g is toxic to t h e liver, and t e s t s of
liver function a r e not p e r f o r m e d , t h e n t h e drug might not be
w i t h d r a w n i n t i m e t o p r e v e n t p e r m a n e n t liver d a m a g e o r d e a t h .
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T h e q u e s t i o n is w h e t h e r it is t o l e r a b l e to subject p a t i e n t s to risk
w h e n t h e goal i s m e r e l y t o r e p l i c a t e s o m e t h i n g a l r e a d y a v a i l a b l e ,
e v e n t h o u g h o n o c c a s i o n s s o m e t h i n g s u p e r i o r t o existing t h e r a p i e s
m i g h t r e s u l t . Is it not a r e a s o n a b l e p r i n c i p l e to subject p e o p l e to risk
only w h e n t h e goal is explicitly to p r o d u c e s o m e t h i n g b e t t e r for
p e o p l e ? T h i s is t h e p o s i t i o n i m p l i e d in C l a u s e 5 o f t h e D e c l a r a t i o n of
Helsinki on ethics in biomedical research: ' 5 . Every biomedical
r e s e a r c h project involving h u m a n subjects should be preceded by
careful a s s e s s m e n t of p r e d i c t a b l e risks in c o m p a r i s o n with fore-
s e e a b l e b e n e f i t s to t h e subject or to o t h e r s . . . .'
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Safety testing of drugs: from negligence to fraud
M o s t o f t h e suffering o f p a t i e n t s w h o a r e g i v e n e x p e r i m e n t a l d r u g s ,
or w h o a r e given a p l a c e b o w h e n t h e y m i g h t have b e e n t r e a t e d by
o t h e r m e a n s , i s w a s t e d , i n the 1960s F o o d and D r u g C o m m i s s i o n e r
G o d d a r d e s t i m a t e d t h a t only one i n t e n d r u g s t h a t w e r e investi-
g a t i o n a l l y s t u d i e d w o u l d e v e n t u a l l y b e a p p r o v e d for m a r k e t i n g '
( S h a p o , 1979: 4 8 ) . T h e law has a role to play in c u t t i n g u n n e c e s s a r y
suffering to a m i n i m u m .
One reported decision (Hyman v. Jewish Chronic Disease
Hospital)'" i l l u s t r a t e s h o w a w e s o m e t h e m o r a l q u e s t i o n s can be. Dr
C h e s t e r S o u t h a m , a p r e s t i g i o u s c a n c e r r e s e a r c h e r , had u n d e r t a k e n
t o build u p o n p r e v i o u s r e s e a r c h w h i c h had s h o w n that h e a l t h y
p e o p l e w i t h o u t c a n c e r reject foreign c a n c e r cells w h i c h are injected
into t h e m m u c h m o r e quickly t h a n c a n c e r p a t i e n t s . S o u t h a m now
w o n d e r e d w h e t h e r p e o p l e w h o w e r e d e b i l i t a t e d but not suffering
from c a n c e r w o u l d r e a c t with t h e s p e e d of rejection of h e a l t h y
p e o p l e , o r o f p e o p l e with existing c a n c e r s . T w e n t y - t w o aged
p e r s o n s from t h e J e w i s h C h r o n i c D i s e a s e H o s p i t a l w e r e selected for
a s t u d y to a n s w e r this q u e s t i o n .
M o r e o v e r , t h e r e w a s a t least s o m e m e d i c a l o p i n i o n that i n c e r t a i n
c a s e s c a n c e r o u s t u m o u r s w o u l d form and s p r e a d . A s i t t u r n e d o u t ,
t h e y did n o t . T h e e l d e r l y p a t i e n t s t h r e w off t h e injected cells as
p r o m p t l y a s h e a l t h y p a t i e n t s . T h i s result had i m p o r t a n t m e d i c a l
i m p l i c a t i o n s . It s u g g e s t e d t h e possibility t h a t t h e b o d y might possess
d e f e n c e m e c h a n i s m s a g a i n s t c a n c e r w h i c h could b e a r o u s e d t o fight
t h e d i s e a s e . T h e r i g h t s and w r o n g s o f t h e r e s e a r c h e r ' s b e h a v i o u r are
t r o u b l i n g p r e c i s e l y b e c a u s e t h e e x p e r i m e n t w a s not a trivial o n e .
B u t it m u s t be p o i n t e d o u t that in spite o f t h e intrinsic difficulties of
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Safety testing of drugs: from negligence to fraud
T h e U n i t e d S t a t e s d o e s not h a v e a g o o d historical r e c o r d on
subjecting powerless groups to d a n g e r o u s medical experimenta-
t i o n . T h e r e a r e m a n y e x a m p l e s t o m a t c h the infamous denial o f
p e n i c i l l i n to A l a b a m a b l a c k s suffering from syphilis to o b s e r v e the
l o n g - t e r m effects of t h e d i s e a s e . O f t e n they have involved
p r i s o n e r s . I t i s t e l l i n g t h a t s o m e o f t h e G e r m a n d o c t o r s o n trial a t
N u r e m b e r g a t t e m p t e d to defend t h e m s e l v e s by citing a n u m b e r of
A m e r i c a n s t u d i e s o n p r i s o n e r s . A m o n g t h o s e cited w a s the w o r k o f
Colonel Strong (later Professor of Tropical Medicine at Harvard).
W i t h o u t t h e k n o w l e d g e o f t h e victims he infected with plague a g r o u p
of p r i s o n e r s c o n d e m n e d to d e a t h . L a t e r he did an e x p e r i m e n t in
w h i c h p r i s o n e r s w e r e r e w a r d e d with t o b a c c o for being given beri-
b e r i . O n e died as a result o f t h e e x p e r i m e n t ( P a p p w o r t h , 1967: 6 1 ) .
T h u s t h e O h i o S t a t e P e n i t e n t i a r y i n C o l u m b u s has p r o v i d e d
v o l u n t e e r s for c a n c e r r e s e a r c h e x p e r i m e n t s . T h e s e men w e r e
g i v e n i n j e c t i o n s o f live c a n c e r cells. ( N o n e o f t h e m d e v e l o p e d
c a n c e r . ) A t C o o k C o u n t y jail i n C h i c a g o p r i s o n e r - v o l u n t e e r s
w e r e i n j e c t e d w i t h b l o o d from p a t i e n t s w h o had l e u k e m i a . ( N o n e
of these c o n t r a c t e d the disease either.) W h a t is important.
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Safety testing of drugs: from negligence to fraud
d e c i s i o n . T h e r e will b e c a s e s , h o w e v e r , w h e r e the i n d e t e r m i n a t e
risk of a legal b a c k l a s h from lack of safety is far o u t w e i g h e d by t h e
e x t r a o r d i n a r y sales p r o s p e c t s for a d r u g . In t h e s e cases senior
e x e c u t i v e s m a y c h o o s e t o i g n o r e o r d i s t o r t the a d v i c e o f p e o p l e
w h o m t h e y pay t o give t h e m o b j e c t i v e d a t a o n d r u g s . C o m p a n i e s
m a y . a s i n t h e S e a r l e a n d t h a l i d o m i d e case s t u d i e s , seek i n f o r m a t i o n
from a n u m b e r of scientists but only r e p o r t to the h e a l t h a u t h o r i t i e s
t h e f i n d i n g s o f t h o s e w h o say good t h i n g s a b o u t t h e p r o d u c t . U S
c o m p a n i e s often c o m m i s s i o n clinical s t u d i e s i n m a n y c o u n t r i e s , but
only r e p o r t t o t h e F D A t h e d a t a from t h o s e c o u n t r i e s which
p r o d u c e f a v o u r a b l e r e s u l t s . T h e r e s e a r c h e r s involved may b e
h o n e s t and o b j e c t i v e , in no way c o n n i v i n g to satisfy t h e c o m p a n y ' s
p r o f i t - m a k i n g i n t e r e s t s . It is j u s t t h a t t h e i r d a t a are used selectively
for t h a t p u r p o s e .
T h e r e is a r a n g e of w a y s t h a t fraud can o c c u r . S e n i o r e x e c u t i v e s
c a n set o u t to be d i s h o n e s t by h a v i n g d i s h o n e s t r e s e a r c h e r s w o r k for
t h e m , or t h e y can be d i s h o n e s t by t w i s t i n g t h e w o r k of h o n e s t
r e s e a r c h e r s . T h e n t h e r e i s t h e p r o b l e m o f c o m p a n i e s which set out
t o b e h o n e s t , but w h i c h p e r p e t r a t e fraud b e c a u s e , u n b e k n o w n t o
t h e m , t h e y h a v e d i s h o n e s t r e s e a r c h e r s w o r k i n g for t h e m . Possibly
t h e l a t t e r is t h e m o s t c o m m o n kind of fraud, b u t it is unlikely to
b e c o m e p u b l i c l y k n o w n b e c a u s e a c o m p a n y which d i s c o v e r s that
o n e of its officers had b e e n fudging d a t a will be e m b a r r a s s e d by its
failure t o p r e v e n t this from h a p p e n i n g u n d e r its n o s e .
T h r e e research directors interviewed were open enough to admit
t h a t t h e y had found i n s t a n c e s o f p e o p l e w h o w o r k e d for t h e m
fudging d a t a . I n n o n e o f t h e s e cases had t h e p r o b l e m g o n e p u b l i c .
W h y do e m p l o y e e s p r o d u c e d i s h o n e s t d a t a for a c o m p a n y w h i c h
d e m a n d s honesty of them?
T o b e g i n t o a p p r e c i a t e the a n s w e r t o this q u e s t i o n w e must h a v e
a n u n d e r s t a n d i n g o f t h e i n t e n s i t y o f c o m m i t m e n t o f m a n y scientists
t o t h e i r w o r k . T h e a b s o r p t i o n ' s y m b o l i z e d b y t h e idealized p o r t r a i t
o f t h e scientist g r a b b i n g c a t n a p s i n his l a b o r a t o r y while p u r s u i n g t h e
n e w e s t l e a d , rival t h e i m a g e s o f t h e g r e a t a r t i s t s ' ( S h a p o , 1979: 9 ) .
O n e A m e r i c a n e x e c u t i v e c h a r a c t e r i s e d t h e a t t i t u d e o f his scientists
as follows: ' T h e c h e m i s t w h o s y n t h e s i s e s a new c o m p o u n d is very
p o s s e s s i v e a b o u t it. It is his offspring, and he d e f e n d s it like a son or
d a u g h t e r . A l s o t h e p h a r m a c o l o g i s t w h o s h o w s t h a t this new c o m -
p o u n d has c e r t a i n effects of t h e r a p e u t i c v a l u e sees it as his b a b y . It is
n o t so m u c h t h a t t h e y will lie and c h e a t to defend it, but t h e y will be
b i a s e d . ' T h e line b e t w e e n bias and fraud is of c o u r s e a fine o n e , and
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S o m e t i m e s t h e goal p e r f o r m a n c e c r i t e r i o n w h i c h c r e a t e s p r e s s u r e
for f r a u d / b i a s is not for t h e p r o d u c t i o n of a c e r t a i n n u m b e r of
w i n n e r s but s i m p l y for c o m p l e t i n g a p r e d e t e r m i n e d n u m b e r of
e v a l u a t i o n s in a given y e a r . O n e m e d i c a l d i r e c t o r told me t h a t o n e
of his staff had run 10 trials which s h o w e d a d r u g to be clear on a
c e r t a i n t e s t , t h e n f a b r i c a t e d d a t a o n t h e r e m a i n i n g 9 0 trials t o s h o w
t h e s a m e r e s u l t . T h e fraud had b e e n p e r p e t r a t e d by a scientist w h o
w a s falling b e h i n d in his w o r k l o a d and w h o had an o b l i g a t i o n to
c o m p l e t e a c e r t a i n n u m b e r of e v a l u a t i o n s for t h e y e a r .
T h e p u r p o s e of this s e c t i o n has b e e n to s h o w that it is an overly
s i m p l i s t i c m o d e l o f c o r p o r a t e m i s c o n d u c t w h i c h a s s u m e s that all
fraud is m o t i v a t e d by t h e d e s i r e for profit. F r a u d can be an illegiti-
m a t e m e a n s to a c h i e v i n g any o n e of a w i d e r a n g e of o r g a n i s a t i o n a l
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Safety testing of drugs: from negligence to fraud
a n d p e r s o n a l g o a l s w h e n l e g i t i m a t e m e a n s t o goal a t t a i n m e n t are
b l o c k e d ( G r o s s , 1978).
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Safety testing of drugs: from negligence to fraud
w i t h a n i r r e s p o n s i b l e p a t t e r n o f c o n d u c t , n o individual e l e m e n t o f
w h i c h is s a n c t i o n a b l e in its o w n right. H e a l t h a u t h o r i t i e s can
e l i m i n a t e specific g r o s s a b u s e s , but in t h e final analysis the public is
a t t h e m e r c y o f t h e s c i e n t i s t ' s i n t e g r i t y . C l e a r l y s o m e scientists and
s o m e d r u g c o m p a n i e s h a v e m o r e i n t e g r i t y t h a n o t h e r s . T h e medical
d i r e c t o r of an A m e r i c a n c o m p a n y told of an instance w h e n a
c o n t r a c t lab had d o n e only r i g h t - a n g l e d s e c t i o n s o n t h e o r g a n s o f
sacrificed a n i m a l s . He insisted on o b l i q u e s e c t i o n s as well to
i n c r e a s e t h e p r o b a b i l i t y of finding a p r o b l e m w h i c h he had r e a s o n to
s u s p e c t m i g h t exist. R e g u l a t i o n s can n e v e r force scientists to go the
e x t r a m i l e w h e n t h e r e i s r e a s o n t o d o so. I n d e e d , o n e o f t h e d a n g e r s
of o v e r - r e g u l a t i o n is t h a t it can e n g e n d e r an a t t i t u d e t h a t p e o p l e
h a v e no r e s p o n s i b i l i t y b e y o n d t h a t w h i c h is set d o w n in the r e g u l a -
t i o n s . A t least this w a s t h e view o f s o m e r e s p o n d e n t s a b o u t the
i m p a c t o f ' o v e r - r e g u l a t i o n ' o n their w o r k a t t i t u d e s and t h o s e o f
their employees.
A r e a l i s t i c a p p r a i s a l leads to t h e c o n c l u s i o n that t h e F D A .
p e r h a p s unlike many other US regulatory agencies, has done more
to foster m e t h o d o l o g i c a l i n n o v a t i o n t h a n to stultify it. A n u m b e r of
i n t e r v i e w r e s p o n d e n t s p o i n t e d o u t t h a t w h e n a n F D A i n s p e c t o r sees
a g o o d n e w idea in t h e c o u r s e of an i n s p e c t i o n , h e / s h e will tell
c o l l e a g u e s and o t h e r c o m p a n i e s w h o h a v e not c a u g h t o n t o the
i m p r o v e m e n t . S i n c e F D A r e g u l a t i o n s are b a s e d o n the c u r r e n t state
o f t h e a r t , t h e i n n o v a t i o n m a y in t i m e c o m e to be r e g a r d e d as such
an i m p o r t a n t s a f e g u a r d as to d e s e r v e m a n d a t o r y status as a regula-
t i o n . T h i s role of t h e F D A in fostering i n n o v a t i o n is a m a t t e r of
c o n s i d e r a b l e c o n c e r n t o c o m p a n i e s , and p e r i o d i c a t t e m p t s are
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T h e p o i n t is t h a t t h i s d o e s seem so difficult to e x p l a i n . M o r e o v e r ,
t h e i m p r e s s i o n c o m m u n i c a t e d by m o s t of t h e o p e r a t i n g staff of
c o r p o r a t i o n s i n t e r v i e w e d was t h a t t h e great majority o f g o v e r n m e n t
i n s p e c t o r s were o p e n to persuasion w h e n they a t t e m p t e d to impose
scientifically i r r a t i o n a l r e g u l a t o r y r e q u i r e m e n t s . R e g u l a t o r y Affairs
staff, h o w e v e r , fairly c o n s i s t e n t l y e s p o u s e d the view that r e g u l a -
t i o n s i n e v i t a b l y p r o d u c e d i r r a t i o n a l i t y . R e g u l a t i o n s s o m e t i m e s are
i m p o s e d a r b i t r a r i l y and i r r a t i o n a l l y b y c e r t a i n g o v e r n m e n t in-
s p e c t o r s , b u t a r b i t r a r i n e s s and i r r a t i o n a l i t y are not a n i n e v i t a b l e
c o n s e q u e n c e of r e g u l a t i o n per se. T h e s o l u t i o n is not to do away
w i t h r e g u l a t i o n , but t o d i s m i s s (or transfer t o o t h e r d u t i e s ) irrational
i n s p e c t o r s , a n d to be on g u a r d against r e g u l a t i o n s w h i c h in p r a c t i c e
p r o v e c o s t - i n e f f e c t i v e . T h e a n t i - r e g u l a t o r y i d e o l o g y is seen at its
worst in the same A b b o t t document:
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Safety testing of drugs: from negligence to fraud
I n e v i t a b l y , t h e c o m p a n y will c o m e t o k n o w o f m o s t p r o b l e m s
long b e f o r e t h e r e g u l a t o r s . T h e y h a v e m o r e i n f o r m a t i o n r e p o r t e d t o
t h e m , m o r e staff c a p a b l e o f a s s e s s i n g t h a t i n f o r m a t i o n , and m o r e
i n t i m a t e k n o w l e d g e of a p r o d u c t w h i c h they c r e a t e d . E x t e r n a l l y
i m p o s e d r e g u l a t i o n is t h e r e f o r e not only a m o r e c l u m s y tool than
s e l f - r e g u l a t i o n to c o n t r o l t h e s u b t l e t i e s of scientific a b u s e , it is a tool
w h i c h will n o r m a l l y only be a p p l i e d after t h e d a m a g e is d o n e . T h e
fact t h a t s e l f - r e g u l a t i o n offers m o r e p r o t e c t i o n t h a n e x t e r n a l
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r e g u l a t i o n i s e v e n m o r e o v e r w h e l m i n g l y t h e case i n m a n y c o u n t r i e s ,
including the d e v e l o p e d e c o n o m i e s of D e n m a r k , Finland, N o r w a y ,
S p a i n , S w i t z e r l a n d and G e r m a n y , ' " w h e r e g o v e r n m e n t a p p r o v a l i s
not r e q u i r e d b e f o r e a c o m p a n y b e g i n s p r e l i m i n a r y safety t e s t i n g of a
new drug on h u m a n beings. W h e r e there is no external regulation,
s e l f - r e g u l a t i o n p r o v i d e s t h e sole p r o t e c t i o n .
I n t e r n a l c o m p a n y i n s p e c t o r s a r e m o r e likely t o k n o w w h e r e the
b o d i e s a r e b u r i e d t h a n g o v e r n m e n t i n s p e c t o r s . T h e medical
d i r e c t o r m e n t i o n e d a b o v e w h o b e c a m e s u s p i c i o u s t h a t o n e o f his
s c i e n t i s t s had c o n d u c t e d a 100-trial s t u d y by r u n n i n g 10 and fabri-
c a t i n g 9 0 had a v a i l a b l e m a n y w a y s o f c h e c k i n g o u t his d o u b t s . H e
c o u l d verify t h e n u m b e r o f a n i m a l s t a k e n from t h e a n i m a l s t o r e , the
a m o u n t o f d r u g s u b s t a n c e which had b e e n u s e d , t h e n u m b e r o f
s a m p l e s w h i c h had b e e n t e s t e d , and s o o n . H i s familiarity with t h e
l a b o r a t o r y m a d e this e a s y . As an i n s i d e r he could do so quietly
w i t h o u t r a i s i n g t h e kind of a l a r m w h i c h might lead t h e c r i m i n a l to
p o u r a n a p p r o p r i a t e a m o u n t o f d r u g s u b s t a n c e d o w n t h e sink. F o r a
g o v e r n m e n t i n s p e c t o r this w o u l d h a v e b e e n m o r e difficult.
F D A G o o d L a b o r a t o r y P r a c t i c e s r e g u l a t i o n s have r e c o g n i s e d
this f u n d a m e n t a l reality and p l a c e d p r e d o m i n a n t r e l i a n c e on self-
regulatory m e c h a n i s m s . Each drug-testing laboratory is required by
t h e r e g u l a t i o n s t o h a v e a Q u a l i t y A s s u r a n c e U n i t ( Q A U ) w h i c h will
act as an i n t e r n a l p o l i c e m a n of r e g u l a t o r y c o m p l i a n c e . Such a
s e l f - r e g u l a t o r y r e q u i r e m e n t shifts t h e financial b u r d e n o f r e g u l a t i o n
a w a y from g o v e r n m e n t and on to t h e c o r p o r a t i o n . It is r e a s o n a b l e
t h a t a c o m p a n y w h i c h m a k e s a profit b e c a u s e o f t h e benefits of a
d r u g s h o u l d also b e a r t h e cost of p r o t e c t i n g the public from its
p o t e n t i a l d a n g e r s . " S e c o n d , a s w e shall see later i n the b o o k , e v e n
t h e w e a l t h i e s t g o v e r n m e n t s i n t h e w o r l d c a n n o t afford effective
i n s p e c t i o n of c o r p o r a t e c o n d u c t as a m a t t e r of sheer b u d g e t a r y
p r a c t i c a l i t y . T h e F D A w a s q u i c k t o learn from the S e a r l e investi-
g a t i o n t h a t i n - d e p t h r e t r o s p e c t i v e r e v i e w o f d a t a w a s a n o p t i o n that
t h e a g e n c y c o u l d only afford i n e x t r a o r d i n a r y c i r c u m s t a n c e s .
The decision to t h r o w the major b u r d e n of regulation on to an
internal Q A U raised some thorny issues, however. Industry argued
t h a t i f Q A U s had t o m a k e their f i n d i n g s a v a i l a b l e t o t h e F D A , t h e n
t h e i r e f f e c t i v e n e s s as a m a n a g e m e n t tool to e n s u r e t h e quality of
r e s e a r c h w o u l d b e u n d e r m i n e d . A Q A U w h i c h k n e w t h a t its
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Safety testing of drugs: from negligence to fraud
T h e s t r u c t u r e d c o m m u n i c a t i o n b l o c k a g e which p r o t e c t e d t h e
R i c h a r d s o n - M e r r e l l b o a r d from k n o w l e d g e o f t h e M E R / 2 9 fraud
i l l u s t r a t e s S t o n e ' s p o i n t . S t o n e a r g u e s t h a t t h e law h a s a n i m p o r t a n t
role t o play i n e n s u r i n g t h a t t r a n s n a t i o n a l c o r p o r a t i o n s h a v e a n
effective i n t e r n a t i o n a l c o m m u n i c a t i o n s s y s t e m . F o r a p h a r m a -
c e u t i c a l c o m p a n y , i n f o r m a t i o n a b o u t t h e safety o f its p r o d u c t s
s h o u l d be g a t h e r e d not only from its o w n l a b o r a t o r i e s a r o u n d t h e
w o r l d , b u t also from d o c t o r s , h o s p i t a l s , p h a r m a c i s t s , u n i v e r s i t y
r e s e a r c h e r s , health regulatory authorities, independent contract
l a b o r a t o r i e s , a n d c o m p e t i t o r s i n all c o u n t r i e s . M o r e o v e r , c o l l e c t i n g
the information is not e n o u g h . The information, digested in an
a p p r o p r i a t e form for a c t i o n , m u s t b e d e l i v e r e d t o t h e ' r i g h t ' d e s k s .
T h e t h a l i d o m i d e d i s a s t e r s h o w e d t h a t this i s exactly w h a t d o e s not
h a p p e n i n p h a r m a c e u t i c a l c o m p a n i e s . B a d n e w s from o n e p a r t o f
t h e w o r l d d o e s n o t t r a v e l quickly e n o u g h t o o t h e r p a r t s o f t h e w o r l d .
M o s t r e g u l a t o r y a g e n c i e s only r e q u i r e t h a t a d v e r s e r e a c t i o n s which
c o m e to t h e a t t e n t i o n of t h e c o m p a n y within their country be
reported.
S e l f - r e g u l a t i o n s h o u l d b e m o r e t h a n s e t t i n g u p i n t e r n a l policing
s y s t e m s . T h e very s t r u c t u r e of a r e s e a r c h o r g a n i s a t i o n will have
i m p l i c a t i o n s for c r i m e p r e v e n t i o n , and p r e v e n t i n g fraud o u g h t to be
a c o n s i d e r a t i o n in d e c i s i o n s on o r g a n i s a t i o n a l s t r u c t u r e s . P e r h a p s
the most criminogenic research a r r a n g e m e n t is a hierarchical o n e ,
c e n t r a l l y c o n t r o l l e d by a study d i r e c t o r w h o gives a d i s c r e t e task to
each s u b o r d i n a t e . E v e r y m e m b e r of the research organisation
r e p o r t s t o j u s t o n e s u p e r i o r . A n y o n e p e r s o n i s a w a r e only o f w h a t
s/he a n d t h e p e o p l e w h o a n s w e r t o h i m / h e r are d o i n g . B e y o n d t h i s ,
e a c h r e s e a r c h e r is in t h e d a r k as to w h a t t h e o t h e r is d o i n g . ' B a d
n e w s ' c a n be s t o p p e d by o n e s u p e r i o r w h o d e c i d e s t h a t it will rise no
further in the organisational hierarchy.
O p p o s e d t o this i s a r e s e a r c h t e a m a p p r o a c h , c o m m o n l y
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Safety testing of drugs: from negligence to fraud
c h a r a c t e r i s e d i n i n d u s t r y a s m a t r i x m a n a g e m e n t . H e r e t h e study
d i r e c t o r is the c o o r d i n a t o r o f a system of inter-relationships among
1 1
r e s e a r c h e r s . E a c h has a task w h i c h o v e r l a p s with s o m e o n e else's
t a s k . It is t h e r e f o r e e s s e n t i a l t h a t e a c h k n o w s w h a t t h e o t h e r is
d o i n g . To facilitate this t h e m a t r i x r e s e a r c h t e a m will typically have
a w e e k l y m e e t i n g w h e r e e a c h m e m b e r will give a r e p o r t on
p r o g r e s s . W h e n different p e o p l e are w o r k i n g o v e r t h e s a m e f i g u r e s
it is m o r e difficult to fiddle t h o s e figures. U n d e r a system w h e r e
e v e r y o n e k n o w s w h a t e v e r y o n e else is d o i n g it is hard to p r e v e n t bad
n e w s from r e a c h i n g t h e t o p . C o n v e r s e l y , it is difficult for s o m e o n e
at t h e t o p to q u i e t l y p a s s d o w n an i n s t r u c t i o n to have s o m e dirty
work done. The research director of an American transnational
w h i c h h a d c h a n g e d from a h i e r a r c h i c a l to a m a t r i x r e s e a r c h o r g a n -
i s a t i o n e x p l a i n e d : ' U n d e r t h e old system I could go and tell one of
my s e c t i o n h e a d s to t h r o w o u t a sick rat and not tell a n y o n e a b o u t it.
U n d e r t h e n e w s y s t e m this i s not p o s s i b l e . '
T h e p r o b l e m o f t h e financial d e p e n d e n c e o f c o n t r a c t labs i s
p o i n t e d l y i l l u s t r a t e d by t h e following view of P e t e r N o e l from o n e of
the largest British contract labs, the H u n t i n g t o n Research C e n t r e .
N o t u n c o m m o n l y , w e a r e a s k e d : 'Will y o u p l e a s e p r e p a r e a
p r o t o c o l and e s t i m a t e of cost for a 3 - ( 6 - e t c . ) m o n t h study in rats
( d o g s , p r i m a t e s , e t c . ) on a d r u g ( p e s t i c i d e , food a d d i t i v e , e t c . ) ? '
W e h a v e l e a r n e d t h a t h o w e v e r p r e c i s e and d e t a i l e d o u r
p r o t o c o l s , it is t h e e s t i m a t e o f c o s t a l o n e which is o c c a s i o n a l l y the
b a s i s for s e l e c t i n g a t e s t i n g facility. L o w e r costs have n o t
i n f r e q u e n t l y b e e n r e a c h e d b y a b b r e v i a t i n g p r o t o c o l s and
s o m e t i m e s , s p o n s o r s could not, or would not, appreciate the
d i f f e r e n c e s i n t h e c o n t e n t s o f t h e study p r o p o s e d . T h e
i n t r o d u c t i o n o f f i n a n c i a l c o n s i d e r a t i o n s leads t o c o m p e t i t i o n
( N o e l , 1977: 112).
C o m p e t i t i o n in p r i c e t a k e s place at t h e e x p e n s e of c o m p e t i t i o n in
q u a l i t y b e c a u s e w h e r e a s t h e s p o n s o r suffers directly from higher
p r i c e s , often it is only t h e c o n s u m e r w h o will suffer from p o o r e r
q u a l i t y . W h e n m a r k e t m e c h a n i s m s h a v e a n anti-social effect o f t h i s
k i n d , t h e r e is an o b v i o u s n e e d for r e g u l a t i o n s w h i c h set a m i n i m u m
s t a n d a r d b e l o w w h i c h no r e s e a r c h o r g a n i s a t i o n is a l l o w e d to fall in
r e s p o n s e t o m a r k e t p r e s s u r e s . A further p r o t e c t i o n a g a i n s t b i d d i n g
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Safety testing of drugs: from negligence to fraud
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Safety testing of drugs: from negligence to fraud
An a l t e r n a t i v e w h i c h a v o i d s s o m e of t h e s e p r o b l e m s is for the
g o v e r n m e n t to a p p r o v e a list of i n d e p e n d e n t 'third p a r t i e s ' to
u n d e r t a k e d r u g t e s t i n g . T h e s e w o u l d b e p r i m a r i l y p r i v a t e and
u n i v e r s i t y l a b o r a t o r i e s , and p e r h a p s s o m e l a b o r a t o r i e s i n g o v e r n -
m e n t d e p a r t m e n t s . T h e g o v e r n m e n t could act a s a ' b r o k e r ' a w a r d -
ing b i d s to c o n d u c t e v a l u a t i o n s paid for by s p o n s o r s on t h e basis of
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Safety testing of drugs: from negligence to fraud
e c o n o m i c s , q u a l i t y o f p r o t o c o l s , e x p e r i e n c e with t h e e v a l u a t i o n o f
t h e t y p e o f p r o d u c t c o n c e r n e d and t e c h n i c a l c o m p e t e n c e . W i t h the
e l i m i n a t i o n o f t h e d i r e c t c a s h n e x u s b e t w e e n s p o n s o r and con-
t r a c t o r , scientific i n d e p e n d e n c e c o u l d b e a s s u r e d . C o n t r a c t s w o u l d
be w o n a c c o r d i n g to t h e quality of past r e s e a r c h , not a c c o r d i n g to
how pleasing the results were to the sponsor. Even greater guaran-
t e e s w o u l d p r e v a i l w e r e t h e r e a r e q u i r e m e n t t h a t the s t u d i e s b e
u n d e r t a k e n by two or more research contractors. Contractors
p r o d u c i n g data which the superior m e t h o d o l o g i e s of competitors
s h o w e d to be in e r r o r w o u l d lose o u t in t h e c o m p e t i t i v e struggle for
research excellence.
T h e U S N a t i o n a l C a n c e r I n s t i t u t e t a k e s its g u a r a n t e e s o f t h e
intergrity of research u n d e r t a k e n by i n d e p e n d e n t contractors even
further. C o n t r a c t o r s are sent c o d e d c o m p o u n d s and r e q u i r e d t o
r e t u r n r a w d a t a s h e e t s t o a n o t h e r i n d e p e n d e n t c o n t r a c t o r which
d o e s t h e statistical a n a l y s i s . T h e first lab is t h e r e f o r e in no p o s i t i o n
to fiddle its r e s u l t s at t h e d a t a analysis s t a g e . To c h e c k that t h e lab is
d o i n g its r a w d a t a c o l l e c t i o n p r o p e r l y , N C I will o c c a s i o n a l l y slip it a
c o d e d c o m p o u n d w h i c h has c e r t a i n clearly e s t a b l i s h e d effects t o
a s c e r t a i n t h a t such effects are r e p o r t e d . T h e s e k i n d s o f c h e c k s are
o b v i o u s l y c o s t l y , but t h e r e is no r e a s o n t h a t t h e y could not be used
s p a r i n g l y in a r e a s of high sensitivity or i m p o r t a n c e , or w h e r e
g r o u n d s for s u s p i c i o n exist.
O n e r e a s o n w h y simply r e m o v i n g t h e d i r e c t cash n e x u s b e t w e e n
s p o n s o r and c o n t r a c t o r b y h a v i n g t h e g o v e r n m e n t act a s b r o k e r
m i g h t not be sufficient for all s i t u a t i o n s is t h a t it d o e s not r e m o v e
p r e s s u r e s on c o n t r a c t o r s to a c h i e v e a c e r t a i n s a m p l e size by a
d e a d l i n e . W e h a v e s e e n t h a t d a t a can b e fabricated i n o r d e r t o m e e t
a d e a d l i n e , j u s t as it c a n be m a n u f a c t u r e d to p r o d u c e favourable
r e s u l t s . H e n c e t h e r a t i o n a l e for t h e m o r e s t r i n g e n t r e q u i r e m e n t s o f
c o m p e t i t i o n b e t w e e n c o n t r a c t o r s and t h e N a t i o n a l C a n c e r I n s t i t u t e
m e a s u r e s . J u s t a s w i t h t o x i c o l o g i c a l s t u d i e s , t h e r e are i n c e n t i v e s for
d a t a f a b r i c a t i o n a m o n g clinical i n v e s t i g a t o r s (especially w h e n a s
m u c h a s $ 1 , 0 0 0 p e r subject i s paid b y A m e r i c a n c o m p a n i e s ,
e n a b l i n g s o m e d o c t o r s to e a r n up to $1 million a y e a r from d r u g
r e s e a r c h ) . T h e case for N C I t y p e m e a s u r e s h e r e i s t h e r e f o r e also
clear.
A t least i f clinical t e s t i n g c o n t r a c t s w e r e a w a r d e d b y g o v e r n m e n t ,
we would no longer have the situation of the Australian Medical
D i r e c t o r o f a n A m e r i c a n t r a n s n a t i o n a l w h o could say quite o p e n l y
to m e : ' O f c o u r s e we do p a t a d o c t o r on t h e back and c o n g r a t u l a t e
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Safety testing of drugs: from negligence to fraud
O n e o f t h e m a n y l e s s o n s from t h e t h a l i d o m i d e d i s a s t e r w a s the
i m p o r t a n c e of giving c o m p a n y officers g u a r a n t e e s of a right to
p u b l i s h f i n d i n g s p r o m p t l y from t h e r e s e a r c h they do for the
c o m p a n y . D u r i n g F e b r u a r y and M a r c h o f 1962, D r S o m e r s of
D i s t i l l e r s g a v e t h a l i d o m i d e t o four p r e g n a n t w h i t e r a b b i t s . O f t h e 18
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Safety testing of drugs: from negligence to fraud
b a b y r a b b i t s b o r n , 1 3 had t h e t e r r i b l e t y p e s o f d e f o r m i t i e s n o w
a s s o c i a t e d with t h a l i d o m i d e . S o m e r s w a s a n x i o u s t o publish his
f i n d i n g s q u i c k l y . B u t w h e n G r u n e n t h a l l e a r n e d o f t h e r e s u l t s , they
w r o t e to D i s t i l l e r s s u g g e s t i n g t h a t p u b l i c a t i o n s h o u l d be d e l a y e d for
t h e t i m e b e i n g . S o m e r s , with a n integrity w h i c h m a n y r e s e a r c h e r s
w i t h i n i n d u s t r y m i g h t not h a v e s h o w n , p u b l i s h e d his p a p e r in The
Lancet of 28 A p r i l 1962.
A t least o n e A m e r i c a n c o m p a n y , S c h e r i n g , a l l o w s its s c i e n t i s t s ,
as a m a t t e r of c o n t r a c t , t h e right to p u b l i s h i n d e p e n d e n t l y in
a c a d e m i c j o u r n a l s any f i n d i n g s from t h e i r r e s e a r c h . This i s a n
i m p o r t a n t p r o t e c t i o n n o t only b e c a u s e i t e n a b l e s c o m p a n y scientists
to b l o w t h e w h i s t l e after a s e r i o u s c o v e r - u p , b u t also b e c a u s e t h e r e is
b o u n d to be a p r e v e n t i v e effect from t h e k n o w l e d g e t h a t a c o m -
p a n y ' s c o v e r c o u l d be b l o w n at any t i m e by a scientist w h o has a
c o n t r a c t u a l right to do so.
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Safety testing of drugs: from negligence to fraud
T h e policy o f t h e F D A n e c e s s a r i l y has b e e n t h a t u n l e s s t h e r e i s a
c o m p e l l i n g r e a s o n t o b e l i e v e o t h e r w i s e , w e w o u l d p r o c e e d from
t h e a s s u m p t i o n t h a t t h e f o u n d a t i o n w a s i n t a c t , and that the
e v i d e n c e s u b m i t t e d t o s u p p o r t a n a p p l i c a t i o n reflected
p r o f e s s i o n a l i s m a n d science o f t h e h i g h e s t o r d e r ( G a r d n e r , 1977:
5).
A p o s i t i o n m o r e firmly g r o u n d e d in t h e r e a l i t i e s d o c u m e n t e d h e r e
has been expressed by Epstein (1978: 300):
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Safety testing of drugs: from negligence to fraud
109
4 Unsafe manufacturing practices
L a w s r e g u l a t i n g t h e safe m a n u f a c t u r e o f d r u g s h a v e b e e n r e s p o n -
sive to c r i s e s in a w a y very similar to t h e r e g u l a t i o n of t e s t i n g . It will
b e s e e n i n this c h a p t e r h o w t h e U S F o o d , D r u g and C o s m e t i c A c t o f
1938 w a s b r o u g h t i n t o b e i n g after o v e r o n e h u n d r e d p e o p l e died i n
t h e elixir s u l f a n i l a m i d e d i s a s t e r . T h e B r i t i s h C o m m i t t e e o n Safety
o f D r u g s w a s set u p after t h e t h a l i d o m i d e t r a g e d y . T o u g h e r con-
t r o l l i n g l e g i s l a t i o n e n s u e d in F r a n c e w h e n in 1954 m o r e t h a n a
h u n d r e d p e o p l e died after b e i n g g i v e n i n c o r r e c t l y labelled t a b l e t s
for t h e t r e a t m e n t of b o i l s .
M o s t c o u n t r i e s n o w h a v e r e g u l a t i o n s for G o o d M a n u f a c t u r i n g
P r a c t i c e s ( G M P s ) . I n s o m e c o u n t r i e s , such a s the U n i t e d S t a t e s ,
violations o f t h e regulations are criminal offences, while in o t h e r s ,
s u c h a s A u s t r a l i a , G M P s are little m o r e t h a n v o l u n t a r y c o d e s . ' T h e
k i n d s o f p r o b l e m s w h i c h such c o d e s a d d r e s s r a n g e from unsafe
p r a c t i c e s w h i c h i n v o l v e no c r i m i n a l i n t e n t , such as failure to
p r o p e r l y c l e a n a m a c h i n e b e t w e e n p r o d u c t i o n r u n s o f different
t y p e s o f d r u g s (so t h a t t h e f i r s t p r o d u c t might c o n t a m i n a t e
t h e s e c o n d ) t o m o r e u n u s u a l t y p e s o f offences w h i c h n o r m a l l y
involve criminal intent. An example o f t h e latter would be where
a m a n u f a c t u r e r w a n t o n l y a t t e m p t e d to save m o n e y by s u b s t i t u t i n g
a less e x p e n s i v e i n g r e d i e n t for t h e o n e set d o w n in the specifica-
tions.
T h e F D A has a D r u g P r o d u c t P r o b l e m R e p o r t i n g P r o g r a m which
is a m a j o r s o u r c e of l e a d s on G M P v i o l a t i o n s . In t h e year e n d i n g
3 1 M a r c h 1978, F D A had 6,100 d r u g p r o b l e m s r e p o r t e d from
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O t h e r p r o b l e m s r e p o r t e d w e r e a d v e r s e r e a c t i o n s , visible
p r e c i p i t a t e s or s e d i m e n t s in d r u g s m a i n l y in solution form,
c r a c k e d o r c r u m b l e d d o s a g e u n i t s such a s t a b l e t s o r glass
a m p u l e s , m i s s i n g o r i m p r o p e r listing o f label e x p i r a t i o n d a t e s ,
e m p t y o r slack-filled d o s a g e u n i t s , s u s p e c t e d p o t e n c y p r o b l e m s ,
and a b n o r m a l o d o r o r t a s t e ( H o p k i n s , 1978).
T h e F D A e n f o r c e m e n t r e p o r t s i n d i c a t e t h a t b e t w e e n M a r c h 1975
a n d S e p t e m b e r 1977 t h e r e w e r e 687 C l a s s I and II recalls from the
m a r k e t o f p r e s c r i p t i o n d r u g s ( P a u l s and K l o e r , 1978: 11). C l a s s III
r e c a l l s , for p r o b l e m s w h i c h a r e 'not likely to c a u s e a d v e r s e h e a l t h
c o n s e q u e n c e s ' w e r e e x c l u d e d from t h e s e f i g u r e s . M o s t recalls are
v o l u n t a r y . T h e F D A , o r t h e c o m p a n y itself, m i g h t d i s c o v e r a
p r o b l e m a n d t h e c o m p a n y will a g r e e , p e r h a p s u n d e r t h r e a t o f court
a c t i o n , t o recall t h e p r o d u c t from t h e m a r k e t . F o r the p e r i o d
J a n u a r y 1974 to D e c e m b e r 1977 t h e r e w e r e 177 court a c t i o n s initi-
a t e d a g a i n s t p h a r m a c e u t i c a l c o m p a n i e s for alleged drug p r o d u c t
q u a l i t y p r o b l e m s ( P a u l s and K l o e r , 1978: 17). T h e s e included in-
j u n c t i o n s , s e i z u r e s and p r o s e c u t i o n s .
S o m e recalls h a v e b e e n m a s s i v e . I n 1 9 7 1 , a single drug c o m p a n y
had to recall from t h e m a r k e t a total of 957 million digoxin t a b l e t s
( S i l v e r m a n a n d L e e , 1974: 140). S i l v e r m a n and L e e have also
d e t a i l e d h o w recalls c a n involve s e r i o u s m a t t e r s :
s u l f a - d r u g s w i t h m o l d , and h o r m o n e s o l u t i o n s w i t h unidentified
f e v e r - p r o d u c i n g c o n t a m i n a n t s . O n e lot o f a n a n t i h i s t a m i n e
solution was shipped in bottles that reportedly exploded because
o f t h e gas p r o d u c e d by c o n t a m i n a t i n g b a c t e r i a . In a r e p o r t on o n e
lot of m o r e t h a n a million digitalis t a b l e t s , an F D A r e p o r t said,
' P o t e n c y c a n n o t be d e t e r m i n e d ; u n k n o w n interfering substance
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Unsafe manufacturing practices
S u c h g r o s s a b u s e s are less c o m m o n i n d e v e l o p e d c o u n t r i e s .
H o w e v e r , Bud Loftus, former Director o f t h e F D A ' s Division of
D r u g M a n u f a c t u r i n g , p o i n t s out that in the late 1950s and early
1960s i n t h e U n i t e d S t a t e s t h e c o u n t e r f e i t i n g o f d r u g s and p i r a t i n g o f
p u n c h e s and dies b e c a m e a big p r o b l e m (see also K r e i g , 1967).
O t h e r k i n d s o f s e r i o u s p r o d u c t safety v i o l a t i o n s are frequently
p e r p e t r a t e d today by transnational companies in developed
c o u n t r i e s . I n 1979 w e saw M e r c k u n d e r t a k e t w o p r o d u c t r e c a l l s , and
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Unsafe manufacturing practices
W y e t h , t h e A m e r i c a n H o m e P r o d u c t s s u b s i d i a r y , c a s t i g a t e d with a
b i t i n g r e g u l a t o r y l e t t e r from t h e F D A . T h e l e t t e r o f 2 1 J u n e alleged
'failure to provide a d e q u a t e ventilation to minimize contamination
o f p r o d u c t s b y e x t r a n e o u s a d u l t e r a n t s and d i s s e m i n a t i o n o f m i c r o -
o r g a n i s m s from o n e a r e a to a n o t h e r . . . failure to m a i n t a i n e q u i p -
m e n t i n a c l e a n m a n n e r b y r e a s o n o f t h e p r e s e n c e o f m o l d ' , and
r e f e r r e d t o ' e q u i p m e n t c o n s t r u c t e d o f w o o d w h i c h d o e s not a s s u r e
e x c l u s i o n from d r u g s of c o n t a m i n a n t s from p r e v i o u s b a t c h e s that
m i g h t affect safety, quality or p u r i t y . . .'. T h e F D A also told the
P r e s i d e n t of A m e r i c a n H o m e P r o d u c t s , John Culligan. that the
c o m p a n y had failed 'to subject m a t e r i a l s liable t o m i c r o b i o l o g i c a l
c o n t a m i n a t i o n t o m i c r o b i o l o g i c a l tests p r i o r t o u s e ' , and that t h e r e
is no a s s u r a n c e of stability of finished d r u g s , in that the stability
t e s t i n g p r o g r a m d o e s not i n c l u d e q u a n t i t a t i v e assays o f t h e p r e s e r t -
a t i v e s y s t e m n o r any m i c r o b i o l o g i c a l t e s t i n g o f A m p h o j e l , A - M - T
and O x a i n e - M . '
In 1979 in A u s t r a l i a we saw an e x t r e m e l y h a z a r d o u s p a c k a g i n g
m i x - u p i n w h i c h q u i n i n e d i h y d r o c h l o r i d e w a s d i s c o v e r e d i n blister
p a c k a g e s of L a s i x a m p u l e s . Lasix injections are often used in e m e r -
g e n c y s i t u a t i o n s to r e m o v e e x c e s s i v e fluid r a p i d l y from t h e b o d y , as
i n t h e t r e a t m e n t o f a c u t e h e a r t failure. Q u i n i n e d i h y d r o c h l o r i d e i s
given to patients w h o may have malaria. The Japanese Ministry of
H e a l t h a n d W e l f a r e found t h a t as of 31 M a r c h 1979 126 d r u g -
m a n u f a c t u r i n g p l a n t s , c o m p r i s i n g 9.4 p e r cent of t h o s e in the
c o u n t r y , w e r e n o t i n c o m p l i a n c e with t h e M i n i s t r y ' s G M P
s t a n d a r d s . T h u s , we a r e not d e a l i n g with a p r o b l e m which is limited
to p o o r c o u n t r i e s or d a y s g o n e by. N e v e r t h e l e s s , we shall begin with
an e a r l y crisis w h i c h c h a n g e d t h e history of t h e p h a r m a c e u t i c a l
industry.
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Unsafe manufacturing practices
114
Unsafe manufacturing practices
W e s u b s e q u e n t l y l e a r n e d t h a t t h e m a n u f a c t u r e r had b e g u n
r e c e i v i n g a n u m b e r o f c o m p l a i n t s a b o u t t h e large v o l u m e
p a r e n t e r a l s s t a r t i n g i n D e c e m b e r , 1968. T h e c o m p l a i n t s w e r e
r u n n i n g at an e v e n h i g h e r level by t h e end o f F e b r u a r y .
B u t t h e c o m p a n y did not recall s u s p e c t s t o c k s ; it did not notify
F D A . I n s t e a d , i t had its r e p r e s e n t a t i v e s c h e c k i n g o u t s t a n d i n g
s t o c k s s i m p l y by visual e x a m i n a t i o n . If t h e r e w a s no visible
e v i d e n c e of c o n t a m i n a t i o n , the solutions were to be accepted as
satisfactory.
N o t only w a s this m e a s u r e i n a d e q u a t e , i t w a s n ' t e v e n a l l o w e d
i n all i n s t a n c e s . W e h a v e found u n o p e n e d cases that w e r e m a r k e d
with a s y m b o l t h a t t h e firm said i n d i c a t e d c o n t a m i n a t i o n and
a p p r o v a l by its field p e r s o n n e l .
T h i s e n t i r e c h a i n o f e v e n t s r a i s e s s o m e real q u e s t i o n s . W a s the
m a n u f a c t u r e r m o r e c o n c e r n e d a b o u t t h e security o f its r e p u t a t i o n
t h a n t h e safety o f its p r o d u c t s ? M o r e c o n c e r n e d a b o u t profits
t h a n p a t i e n t s ? It is n o t a story c a l c u l a t e d to build p u b l i c
confidence in the drug industry.
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Unsafe manufacturing practices
I n J a n u a r y 1971 t h e r e w e r e further s h a t t e r i n g r e v e l a t i o n s . E i g h t
d e a t h s o v e r t h e p r e v i o u s t h r e e m o n t h s w e r e r e p o r t e d from the
H e n r y F o r d H o s p i t a l i n D e t r o i t . T h e r e w e r e also 4 5 o t h e r cases o f
b l o o d p o i s o n i n g at t h e h o s p i t a l t r a c e d to the A b b o t t fluids. St
A n t h o n y ' s hospital in D e n v e r reported 24 cases, including one
d e a t h . T h e r e p o r t s m o u n t e d t h r o u g h o u t J a n u a r y and F e b r u a r y .
Fifty d e a t h s w e r e b l a m e d o n t h e c o n t a m i n a t i o n b y the U S C e n t e r
for D i s e a s e C o n t r o l .
It w a s d i s c o v e r e d that the p r o b l e m w a s as it had b e e n in 1964,
a r i s i n g from a d e s i g n c h a n g e to a s c r e w - o n c a p . If t h e b o t t l e w a s
s h a k e n o r t h e t o p b a n g e d l o o s e , g e r m s w o u l d b e w a s h e d from u n d e r
t h e n e w - s t y l e disc lining t h e c a p . A b b o t t w a s e v e n t u a l l y p u s h e d into
a m a s s i v e r e c a l l , t h e biggest in F D A h i s t o r y , and its p r o d u c t i o n line
s h u t d o w n . T h e F D A w e r e u n d e r s t a n d a b l y h e s i t a n t t o act b e c a u s e
A b b o t t s u p p l i e d 4 5 per cent o f t h e m a r k e t for t h e p r o d u c t . W e r e
p a t i e n t s g o i n g to die as a result of not b e i n g able to get s u p p l i e s from
o t h e r small c o m p a n i e s ? P r o b a b l y n o n e d i d , but t h e r e c e r t a i n l y w e r e
p r o b l e m s , a s t h e following d e p r e s s i n g a n e c d o t e i l l u s t r a t e s .
O n e h o s p i t a l s u p e r i n t e n d e n t frantically p h o n e d a different
p h a r m a c e u t i c a l h o u s e , since his i n t r a v e n o u s supply w a s s h r i n k i n g
to z e r o . ' W e ' r e really on a s p o t , ' he told the detail m a n . 'I've got
to h a v e at least five or six d o z e n IV b o t t l e s of v a r i o u s s o l u t i o n s
h e r e by six o ' c l o c k t o n i g h t , or I d o n ' t k n o w w h a t ' s going to
h a p p e n to t h e p a t i e n t s . I c a n ' t use t h e A b b o t t stuff, o b v i o u s l y .
C o u l d you possibly help me o u t ? '
' A b s o l u t e l y , ' c a m e t h e c h e e r y voice o f t h e detail m a n . "Don't
w o r r y a b o u t it at a l l . '
T h e s u p e r i n t e n d e n t w a s s t u n n e d and grateful t h a t h e could get
t h i s e m e r g e n c y h e l p . "You canT he a s k e d i n c r e d u l o u s l y .
' N o p r o b l e m at all,' said t h e d e t a i l m a n . 'I'll j u s t get t h e o r d e r
d o w n on t h e pad a n d have t h e stuff up t h e r e by m i d - a f t e r n o o n . "
116
Unsafe manufacturing practices
I n t h e n e w s r e p o r t s o n t h e n o n - s t e r i l e s o l u t i o n s and their r e p o r t e d
350 v i c t i m s from 21 h o s p i t a l s , A b b o t t ' s long history of delin-
q u e n c i e s w i t h t h e s o l u t i o n s w a s not r e c o g n i s e d a s a n issue. N e v e r -
t h e l e s s , this t i m e t h e F D A could not resist t h e p r e s s u r e t o
r e c o m m e n d c r i m i n a l p r o s e c u t i o n s t o t h e J u s t i c e D e p a r t m e n t . Five
A b b o t t e x e c u t i v e s , as well as t h e c o m p a n y itself, w e r e indicted by a
g r a n d j u r y . I t w a s t h e only o c c a s i o n i n the d e c a d e w h e n t h e F D A
w e n t to c o u r t w i t h c r i m i n a l c h a r g e s a g a i n s t a major t r a n s n a t i o n a l
p h a r m a c e u t i c a l c o m p a n y . A n A b b o t t e x e c u t i v e told m e t h a t the
c o m p a n y , o u t o f c o n c e r n t o p r o t e c t its p e o p l e from b e i n g m a d e
sacrificial l a m b s , offered to plead guilty if t h e c h a r g e s against indi-
v i d u a l e x e c u t i v e s w e r e d r o p p e d . B u t t h e offer w a s r e j e c t e d . T h e
2
c o u r t a c q u i t t e d t h e c o m p a n y and its officers of all c h a r g e s .
H o s p i t a l p e r s o n n e l w h o used m e t h o d s o f o p e n i n g c a p s o n the
b o t t l e s w h i c h t h e c o m p a n y m i g h t n o t h a v e f o r e s e e n w e r e held
p a r t i a l l y r e s p o n s i b l e for t h e t r a g e d y . H o w e v e r , the m o r e funda-
m e n t a l p r o b l e m w a s t h a t t h e r e w a s not t h e e v i d e n c e t o link the
specific G M P v i o l a t i o n s r e p o r t e d b y t h e F D A ' s district i n s p e c t o r s a s
t h e c a u s e o f t h e sterility p r o b l e m . I t could b e e s t a b l i s h e d t h a t t h e r e
w e r e G M P v i o l a t i o n s , t h o u g h t h e r e w a s d i s p u t e a b o u t h o w major
t h e y w e r e . T h e e v i d e n c e w a s also c o m p e l l i n g t h a t n o n - s t e r i l e solu-
t i o n s had b e e n p r o d u c e d and t h a t p e o p l e died as a result. E v e n
h e r e , t h e r e w e r e e v i d e n t i a r y p r o b l e m s , h o w e v e r . B u d L o f t u s , the
F D A ' s D i r e c t o r of D r u g Manufacturing at the t i m e , explains:
T h e i n s u r m o u n t a b l e difficulty w a s t h a t t h e p r o s e c u t i o n c o u l d not
p r o v e a c a u s a l c o n n e c t i o n b e t w e e n t h e alleged G M P v i o l a t i o n s and
the alleged non-sterility.
I n s p i t e o f t h e a c q u i t t a l , A b b o t t did suffer. T h e cost o f c r i m i n a l
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Unsafe manufacturing practices
c o n v i c t i o n w o u l d h a v e b e e n n o t h i n g c o m p a r e d with t h e cost t o
A b b o t t o f its p l a n t s h u t - d o w n . A b b o t t e x e c u t i v e s c l a i m e d that the
c o s t o f t h e 1971 F D A r e g u l a t o r y a c t i o n against t h e m w a s $480
m i l l i o n , p r o b a b l y an e x a g g e r a t e d f i g u r e , but it d o e s give s o m e
i m p r e s s i o n o f t h e w a y t h a t r e g u l a t o r y c o s t s can b e h i g h e r t h a n any
fine w h i c h a c o u r t c o u l d c o n c e i v a b l y i m p o s e . T h e n t h e r e w e r e
p e r s o n a l c o s t s t o t h e A b b o t t e x e c u t i v e s w h o s e r e p u t a t i o n s w e r e put
o n t r i a l . T h e y suffered t e r r i b l e p e r s o n a l b a t t e r i n g s u n d e r days o f
c r o s s - e x a m i n a t i o n . A s o n e c o l l e a g u e s y m p a t h i s e d : ' T h e guys w h o
w e r e d e f e n d a n t s i n t h a t c a s e , s o m e o f t h e m are b a s k e t cases t o d a y .
T h e y ' v e never been the same since.'
Evans Medical
A s i m i l a r B r i t i s h d i s a s t e r i n v o l v i n g c o n s i d e r a b l e injury and d e a t h
from t h e use o f c o n t a m i n a t e d i n t r a v e n o u s s o l u t i o n s w a s the subject
of an official e n q u i r y in 1972 ( C l o t h i e r R e p o r t , 1972). T h e p r o b l e m
a r o s e w h e n a b a t c h of p r o d u c t at E v a n s M e d i c a l failed to reach
sterilising t e m p e r a t u r e in an autoclave. The government enquiry
r e v e a l e d t h a t t h e d i s a s t e r was t h e result o f b o t h t h e i g n o r i n g o f s o m e
o f t h e c o m p a n y ' s S t a n d a r d O p e r a t i n g P r o c e d u r e s ( S O P s ) and t h e
i n a d e q u a c y o f o t h e r S O P s w h i c h w e r e followed.
W h e n t h e c o n t a m i n a t e d b a t c h w a s p r o d u c e d , the r e c o r d i n g
t h e r m o m e t e r a t t a c h e d to t h e a u t o c l a v e failed to indicate a rise in
t e m p e r a t u r e . This warning was ignored in contravention of SOPs
b e c a u s e t h e r e c o r d i n g t h e r m o m e t e r s had a history o f b r e a k i n g
d o w n . I t w a s c o m m o n for t h e p e n o f o n e t h e r m o m e t e r t o b e c o m e
s t u c k , refusing t o m o v e from the b a s e l i n e . N o r m a l l y , t h e instru-
m e n t t e c h n i c i a n w o u l d r e p a i r t h e t h e r m o m e t e r and i t w o u l d show
that the t e m p e r a t u r e was n o r m a l . H e n c e , an attitude developed
w h e r e t e m p e r a t u r e w a r n i n g s w e r e not t a k e n seriously.
S O P s afforded w e a k quality g u a r a n t e e s i n t h a t t h e y placed the
d e c i s i o n to r e l e a s e a b a t c h of p r o d u c t for sale in t h e h a n d s of
p r o d u c t i o n staff i n s t e a d of quality c o n t r o l staff. O b v i o u s l y p r o -
d u c t i o n staff h a v e a s t r o n g e r i n c e n t i v e to see t h e i r p r o d u c t i o n
a p p r o v e d and d e s p a t c h e d . There were other respects in which SOPs
c r e a t e d i n c e n t i v e s for p r o d u c t i o n staff to t a k e t h e ' e a s y ' c o u r s e in
o v e r s e e i n g t h e q u a l i t y o f t h e i r o w n w o r k : i n t h e a b s e n c e o f firm
d i r e c t i o n from q u a l i t y c o n t r o l , s a m p l e s w e r e i n p r a c t i c e selected b y
p r o d u c t i o n staff only from t h e t o p layer in e a c h c a g e , no d o u b t
b e c a u s e this was the easiest course. It is the C o m m i t t e e ' s opinion
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Unsafe manufacturing practices
t h a t . . . b o t t l e s in t h e u p p e r t w o l a y e r s of the c a g e s w e r e s t e r i l e , and
t h o s e i n t h e lowest layer w e r e not s t e r i l e ' ( C l o t h i e r R e p o r t , 1972:
11). T h e c o m m i t t e e o f e n q u i r y c o n c l u d e d t h a t t h e g e n e r a l l y sloppy
a p p r o a c h to S O P s w a s t h e result of a 'lack of v i g o u r ' a m o n g key
m i d d l e m a n a g e r s and a w i l l i n g n e s s to p l a c e in r e s p o n s i b l e p o s i t i o n s
p e o p l e w h o w e r e i n a d e q u a t e l y t r a i n e d i n quality c o n t r o l p r i n c i p l e s .
A p p r o x i m a t e l y a q u a r t e r of a m i l l i o n h e a r t p a t i e n t s a r o u n d the
w o r l d h a v e b a t t e r y - p o w e r e d c a r d i a c p a c e m a k e r s i m p l a n t e d i n their
b o d i e s t o n o r m a l i s e h e a r t b e a t . S o m e o f t h e activities o f M e d t r o n i c ,
t h e l a r g e s t p a c e m a k e r m a n u f a c t u r e r i n t h e w o r l d , w e r e discussed i n
t h e c h a p t e r o n b r i b e r y . S e n a t e h e a r i n g s h a v e also w i t n e s s e d a
c o n c e r t e d a t t a c k o n M e d t r o n i c b y D r Sidney Wolfe c o n c e r n i n g t h e
q u a l i t y of its m a n u f a c t u r i n g . He listed t h e following difficulties:
W o l f e a l s o d r e w a t t e n t i o n to a r e p o r t from a M i n n e a p o l i s F D A
i n s p e c t i o n t e a m : ' M e d t r o n i c s has i n s t i t u t e d a p r o g r a m of resteriliz-
ing p a c e m a k e r s and l e a d s t h a t h a v e b e e n d i s i m p l a n t e d p r i o r t o
e x p i r a t i o n o f t h e w a r r a n t y p e r i o d . T h e s e d e v i c e s are t h e n i m p l a n t e d
i n t o n e w p a t i e n t s . ' W o l f e w a s c o n c e r n e d a b o u t the "the possibility
of b a c t e r i a l and viral infections from such a gross p r a c t i c e as r e u s i n g
p a c e m a k e r s ' ( S u b c o m m i t t e e o n H e a l t h , 1973: 2 8 8 ) . Since 1972 i n
t h e U n i t e d S t a t e s t h e r e h a v e b e e n a total of 34 v o l u n t a r y recalls of
p a c e m a k e r lots m a n u f a c t u r e d b y v a r i o u s c o m p a n i e s .
The present case study is concerned with M e d t r o n i c s ' main com-
p e t i t o r , the second largest m a n u f a c t u r e r of p a c e m a k e r s , the Cordis
C o r p o r a t i o n . In 1975 in t h e D i s t r i c t C o u r t for t h e S o u t h e r n D i s t r i c t
o f F l o r i d a , t h e F D A s o u g h t a n i n j u n c t i o n t o close d o w n t h e p r o -
d u c t i o n o f C o r d i s p a c e m a k e r s until satisfactory quality c o n t r o l
m e a s u r e s w e r e i n t r o d u c e d . T h e c a s e study p r o v i d e s s o m e invalu-
a b l e l e s s o n s a b o u t t h e limits of legal s o l u t i o n s to m a n u f a c t u r i n g
quality p r o b l e m s .
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Unsafe manufacturing practices
A d e f e c t i v e l y m a n u f a c t u r e d h e a r t p a c e m a k e r is a frightful risk to
h u m a n h e a l t h . A car w h i c h runs well 95 p e r c e n t o f t h e t i m e may be
r e g a r d e d as a g o o d c a r , but h i g h e r s t a n d a r d s m u s t be e x p e c t e d o f a
p a c e m a k e r w h i c h only has to fail o n c e to c a u s e s e r i o u s injury or
d e a t h . D r C e n t e r , o n e o f t h e g o v e r n m e n t w i t n e s s e s a t the injunc-
tion h e a r i n g , outlined the range of possible medical c o n s e q u e n c e s
o f p a c e m a k e r defect.
W e l l , t h e w o r s t c o m p l i c a t i o n , of c o u r s e , is d e a t h . If you have a
r u n a w a y p a c e m a k e r , w h e r e it's r u n n i n g a t six. eight h u n d r e d
times a m i n u t e , that's instant death.
If you h a v e a p a c e m a k e r t h a t r u n s at 150 and the p a t i e n t is not
a w a r e o f t h e p r o b l e m but j u s t i s not feeling w e l l , t h e s e c a r d i a c
p a t i e n t s c a n n o t t o l e r a t e that r a t e for an indefinite p e r i o d of t i m e
a n d c o u l d c o n c e i v a b l y go into heart failure and d i e .
T h e r e a r e p a c e m a k e r s t h a t fail i n t e r m i t t e n t l y . T h e y might fail
for, let's s a y , a few s e c o n d s at a t i m e . It may be sufficient so
t h a t t h e p a t i e n t e i t h e r has a s i n k a b l e e p i s o d e , a b l a c k o u t spell
a n d falls, or he m i g h t suffer a b r o k e n a r m . b r o k e n leg, fractured
skull.
If t h e p e r i o d is long e n o u g h , t h e y m a y n e v e r survive that period
b e c a u s e t h e h e a r t r a t e d o e s n ' t r e t u r n i n t i m e t o again get their
circulation back to normal.
T h e r e a r e s y m p t o m s w h i c h are m i n i m a l , such a s dizzy spells,
w h e r e e i t h e r t h e h e a r t r a t e slows down because the p a c e m a k e r is
s l o w e d d o w n or a p e r s o n m a y go i n t o h e a r t failure a g a i n b e c a u s e
t h e r a t e h a s s l o w e d d o w n and t h e p a t i e n t c a n n o t t o l e r a t e it.
T h e r e a r e p a t i e n t s t h a t are not a w a r e o f a n y s y m p t o m s and that
on e x a m i n a t i o n o n e can find a d e f e c t i v e p a c e m a k e r .
T h e a n s w e r is it can r a n g e a n y w h e r e from n o t h i n g to instant
death.
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Unsafe manufacturing practices
s p e c i f i c a t i o n s , n o c a l i b r a t i o n p r o c e d u r e s , and n o m a i n t e n a n c e
s c h e d u l e . O n e critical a r e a w h e r e all o f t h e s e deficiencies w e r e
r e p o r t e d t o exist w a s with the h e l i u m leak t e s t e r . P a c e m a k e r
p r o b l e m s h a v e b e e n s h o w n t o arise from m o i s t u r e leaking into the
c o m p o n e n t s , so leak t e s t i n g is critical.
I n s o m e c a s e s e m p l o y e e s w e r e found t o b e a s s e m b l i n g p a c e m a k e r
p a r t s o n t h e s t r e n g t h o f d i a g r a m s w h i c h had h a n d w r i t t e n , u n d a t e d ,
u n a u t h o r i s e d c h a n g e s all o v e r t h e m . S o m e t i m e s o p e r a t o r s w e r e
a s s e m b l i n g a c c o r d i n g to c h a n g e s to specifications given verbally or
t e l e p h o n e d i n from e n g i n e e r i n g . O n e o p e r a t o r w a s e v e n w o r k i n g
from a d i a g r a m for a kit different from t h e o n e she w a s w o r k i n g on.
W h e n i t e m s failed c e r t a i n t e s t s , t h e y w e r e often r e t e s t e d to see if a
p o s i t i v e result w a s p r o d u c e d o n t h e s e c o n d test w i t h o u t a n evalu-
a t i o n of why t h e failure o c c u r r e d on t h e first. V a r i o u s t y p e s of
t e s t i n g e q u i p m e n t w e r e alleged t o b e d e f e c t i v e . M a i n t e n a n c e o f
e q u i p m e n t w a s b e i n g d o n e o n c e every t w o w e e k s instead o f every
week according to requirements.
P a c e m a k e r s a r e e n c a p s u l a t e d several t i m e s i n e p o x y . T h e w r i t t e n
r e q u i r e m e n t s o f t h e firm w e r e t o s a m p l e and test t h e s q u a r e root o f
the n u m b e r of incoming quarts of epoxy. Inspectors observed
o p e r a t o r s t o s a m p l e only o n e q u a r t p e r lot. F o r e x a m p l e , w h e n a 964
q u a r t lot c a m e in, 3 2 s a m p l e s should have b e e n c h e c k e d , not o n e .
'Life t e s t i n g ' w a s d o n e t o see h o w the p a c e m a k e r s stood u p t o
s t r e s s . H o w e v e r , t h e F D A c o u n s e l s u m m e d u p how i n s p e c t o r s
a l l e g e d the life-testing device to be of limited v a l u e :
t h e c h a r t used t o r e c o r d t h e t e m p e r a t u r e o f t h a t critical d e v i c e
f o c u s e d so strongly in t h e m i d d l e t h a t it c o u l d n ' t be r e a d , and
w h e n this w a s p o i n t e d o u t t o m a n a g e m e n t , they put a n o t h e r c h a r t
on and t h e p a p e r d i d n ' t m a t c h and t h e r e a d i n g said 140 d e g r e e s ,
w h e n t h e o v e n s h o u l d have b e e n and p r o b a b l y w a s a t 4 0 .
3
It w a s a l l e g e d t h a t p y r o g e n - f r e e w a t e r for t h e final c l e a n i n g of
t h e p a c e m a k e r s w a s left t o stand o v e r n i g h t . F D A c o u n s e l L e v i n e
c o m p l a i n e d , 'I d o n ' t e v e n let w a t e r used to b r u s h my t e e t h stand
o v e r n i g h t . ' It w a s a l s o c l a i m e d that c e r t a i n p a r t s w e r e not stored in a
c l e a n , d r y , lint-free a t m o s p h e r e and t h a t solder w a s b e i n g put o n
p a c e m a k e r s w i t h o u t t e s t i n g t h e s o l d e r i n g flux, c l e a n i n g fluid and oil
in t h e s o l d e r i n g m a c h i n e for p u r i t y .
T h e g o v e r n m e n t a l l e g e d c e r t a i n w a i v e r d e v i a t i o n s . Specifications
were established, but when lots failed t o meet them they w e r e
passed.
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Unsafe manufacturing practices
W e l l , realistically s p e a k i n g , t h e r e i s n o way t o a d e q u a t e l y
m o n i t o r a p a t i e n t on a m o n t h l y basis. If t h e r e is a p r o b l e m in t h e
p a c e m a k e r , you c a n e x a m i n e t h e p a t i e n t a t t w o o'clock and
e v e r y t h i n g is p e r f e c t . T h e first e v i d e n c e of failure may o c c u r at
2:15 t h a t s a m e d a y . T h e r e f o r e , i f y o u r a p p o i n t m e n t t o see t h e
p a t i e n t is not for a n o t h e r m o n t h and t h e r e is a rapid
d e t e r i o r a t i o n , or e v e n a slow d e t e r i o r a t i o n , it's obviously very
p o s s i b l e t h a t if n o t h i n g is d o n e in t h e m e a n t i m e , t h e r e n e v e r will
be a s e c o n d visit.
H e n c e t h e F D A view w a s t h a t a p a t t e r n o f n e g l e c t o f quality w a s
c o m p o u n d e d by a r e l u c t a n c e on t h e part of t h e c o m p a n y to t a k e
effective a c t i o n to p r o t e c t p a t i e n t s o n c e t h e fruits of this n e g l e c t
b e c a m e a p p a r e n t . T h u s t h e n e e d for a n i n j u n c t i o n t o close d o w n
C o r d i s until t h e s i t u a t i o n w a s s t r a i g h t e n e d out. T h e c o u r t declined
t o g r a n t t h e F D A its i n j u n c t i o n .
C o u n s e l for C o r d i s did not d i s p u t e very m a n y o f t h e F D A ' s 148
a l l e g e d d e f i c i e n c i e s . I t w a s c o n c e d e d : ' R e g r e t t a b l y , p a c e m a k e r s are
n o t p e r f e c t , t h e p a c e m a k e r i n d u s t r y is not p e r f e c t , and C o r d i s is not
p e r f e c t . " N e v e r t h e l e s s , it w a s a r g u e d : ' C o r d i s is at least as good as
t h e rest o f t h e p a c e m a k e r i n d u s t r y . '
T h e s e c o n d e l e m e n t o f t h e successful C o r d i s defence w a s that
the suffering to p a t i e n t s from g r a n t i n g t h e g o v e r n m e n t its
i n j u n c t i o n w o u l d e x c e e d t h e benefits t o t h e m . T h e C o r d i s d e f e n c e
attorney:
N o w , I t h i n k t h e C o u r t also will h a v e to be a w a r e o f t h e p o t e n t i a l
effect of g r a n t i n g t h e g o v e r n m e n t t h e relief w h i c h it s e e k s in
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Unsafe manufacturing practices
D r M o r s e ' s t e s t i m o n y was d i s p a r a g e d b y F D A o n t h e g r o u n d s
t h a t he a d m i t t e d to b e i n g a C o r d i s s h a r e h o l d e r .
C o r d i s had a p o i n t . If a C o r d i s s h u t d o w n c a u s e d c e r t a i n p a t i e n t s
to c h a n g e over to a n o t h e r brand of p a c e m a k e r , medical evidence
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Unsafe manufacturing practices
I t h i n k it w o u l d be a c a t a s t r o p h e o f t h e first o r d e r . T h e r e w o u l d
be h y s t e r i a a m o n g t h e p a t i e n t s . . . . T h e r e w o u l d be a
t r e m e n d o u s r e a c t i o n t h r o u g h o u t t h e c o u n t r y , b e c a u s e this i s t h e
s e c o n d largest m a n u f a c t u r e r in the c o u n t r y . It would j u s t s h a k e
t h e faith of e v e r y o n e w h o has a p a c e m a k e r in t h e m , and t h e s e
p e o p l e a r e c o n c e r n e d , and t h e r e i s o v e r a h u n d r e d t h o u s a n d o f
them.
T h e r e is no e v i d e n c e e i t h e r of p r e s e n t v i o l a t i o n of l a w , since the
g o v e r n m e n t has not b e e n t h e r e t o see w h a t c o n d i t i o n s are r i g h t
n o w , n o r h a v e t h e y p r e s e n t e d any e v i d e n c e o f l i k e l i h o o d o f
r e c u r r e n c e , w h i c h I t h i n k is sort of a logical impossibility w h e n
you don't k n o w what the situation is right now.
H o w e v e r , i f t h e C o u r t has e v e n t h e slightest d o u b t , w e very
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Unsafe manufacturing practices
J u d g e F a y , in his d e c i s i o n to d e n y t h e m o t i o n for a p r e l i m i n a r y
i n j u n c t i o n , s u g g e s t e d that the F D A could t a k e up this offer and
s e n d in a t e a m of i n s p e c t o r s to assess t h e c u r r e n t s i t u a t i o n .
T h e F D A w a s not t o b e d e t e r r e d a n d t o o k u p the offer. Before
d i s c u s s i n g t h e s e further d e v e l o p m e n t s , i t i s w o r t h c o n s i d e r i n g the
i m p l i c a t i o n s of w h a t had t r a n s p i r e d up to that point. T h e r e will
a l w a y s b e d e l a y s b e t w e e n a n i n s p e c t i o n and court action b a s e d o n
t h e r e s u l t s of t h a t i n s p e c t i o n , e s p e c i a l l y given the g e n e r a l policy of
t h e F D A ( a n d m o s t o t h e r r e g u l a t o r y a g e n c i e s ) o f giving offenders
an o p p o r t u n i t y v o l u n t a r i l y to set their h o u s e in o r d e r before t a k i n g
c o u r t a c t i o n . H e n c e , t h e r e i s t h e o p p o r t u n i t y for the c o m p a n y t o
i g n o r e F D A w a r n i n g s u p t o t h e p o i n t o f t h e c o u r t h e a r i n g and t h e n
a r g u e in c o u r t t h a t it has n o w rectified all s h o r t c o m i n g s . T h e regu-
l a t o r y a g e n c y is t h e n invited to do a n o t h e r i n s p e c t i o n and t h e
a d v e r s a r i e s a r e set on t h e r o u n d a b o u t a g a i n . This p r o b l e m is not so
a c u t e w i t h c r i m i n a l p r o s e c u t i o n s or civil d a m a g e s a c t i o n s against a
c o m p a n y for past a c t i o n s . I t i s w h e n t h e r e g u l a t o r y a g e n c y s e e k s
i n j u n c t i v e relief t h a t t h e p r o b l e m is w o r s t . I n j u n c t i o n s to p r e v e n t a
d a n g e r o u s p r a c t i c e a r e m o r e i m p o r t a n t t h a n r e t r i b u t i o n against past
sins in t e r m s o f t h e i m m e d i a t e p r i o r i t y of a r e g u l a t o r y a g e n c y to save
lives and p r e v e n t suffering.
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Unsafe manufacturing practices
P a r t o f t h e g o v e r n m e n t ' s c a s e i s saying t h a t , w e l l , w h e n w e c a m e
b a c k in this m o s t r e c e n t i n s p e c t i o n we saw t h e same t h i n g s we saw
i n t h e M a y - J u n e i n s p e c t i o n a n d way back i n t h e F e b r u a r y
i n s p e c t i o n , and o b v i o u s l y t h a t w o u l d be very significant, if it w e r e
t r u e , t h a t we had d o n e n o t h i n g . I t h i n k t h a t w o u l d be very bad.
W e i n t e n d t o d e m o n s t r a t e t h a t w e d i d , i n fact, d o s o m e t h i n g
a b o u t e v e r y t h i n g and i n fact n o n e o f t h e later o b s e r v a t i o n s are
r e a l l y t h e s a m e . T h e r e a r e s e v e r a l , two o r t h r e e , that the s a m e
s i t u a t i o n r e c u r r e d , but we will s h o w t h a t we t o o k significant
m e a s u r e s i n t h e i n t e r i m w h i c h u n f o r t u n a t e l y i n t w o o r t h r e e cases
o u t of a b o u t 150 did not w o r k well e n o u g h and we have t a k e n
more m e a s u r e s since.
T h e C o m m i s s i o n e r , P r o f e s s o r H i n e s , t e n d e d t o r e s p o n d i n his
r e p o r t t o t h e u n d e r l y i n g reality o f t h e C o r d i s p r o b l e m r a t h e r t h a n t o
t h e e x t e n t to w h i c h specific deficiencies had b e e n rectified. He did
c o n c l u d e t h a t F D A ' s 137 n e w a l l e g a t i o n s w e r e s u b s t a n t i a l l y c o r r e c t
a n d t h a t m a n y o f t h e deficiencies w h i c h existed i n t h e A u g u s t -
O c t o b e r i n s p e c t i o n w e r e similar t o deficiencies n o t e d i n t h e t w o
e a r l i e r i n s p e c t i o n s . C o r d i s c o r r e c t i o n s o f t h e e a r l i e r deficiencies
w e r e d e s c r i b e d as 'reactive rather than pro-active'. Professor Hines
found that the FDA observations represented 'significant
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Unsafe manufacturing practices
P e r h a p s P r o f e s s o r H i n e s w a s influenced b y this w a r n i n g w h e n i n
his r e p o r t he w a s careful to frame his r e c o m m e n d a t i o n s as reforms
w h i c h s h o u l d b e u n d e r t a k e n b y C o r d i s . H e did not r e c o m m e n d that
C o r d i s b e shut d o w n o r t h a t F D A s u p e r v i s i o n w a s r e q u i r e d . I n d e e d ,
t h e d e f e n d a n t s w e r e a b l e t o m a k e m u c h o f t h e fact that m a n y o f t h e
c h a n g e s a n d i m p r o v e m e n t s r e q u i r e d p a c e m a k e r production t o b e
u n d e r w a y i n o r d e r t h a t t h e n e e d e d i m p r o v e m e n t s could b e effected.
T h i s , o f c o u r s e , w a s a p o o r a r g u m e n t for a l l o w i n g C o r d i s t o con-
t i n u e d i s t r i b u t i n g p a c e m a k e r s w h i l e its o p e r a t i o n s w e r e b e i n g
brought under appropriate controls.
A n i n j u n c t i o n s h o u l d n o w b e issued. T h e t e r m s o f t h e injunction
w o u l d b e t h o s e c o n t a i n e d i n the C o m m i s s i o n e r ' s
R e c o m m e n d a t i o n s . T h e s e r e q u i r e C o r d i s activity (1) t o e s t a b l i s h
a c c e p t a b l e reliability g o a l s , (2) t o e s t a b l i s h d a t a c o l l e c t i o n and
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statistical a n a l y s e s of field e x p e r i e n c e in o r d e r to d e v e l o p
e s t i m a t e s o f p a c e r r e l i a b i l i t y , (3) t o b r i n g K a p p a pacer m o d e l
p r o d u c t i o n u n d e r t h e p r o d u c t a s s u r a n c e system and t o modify
p r o m o t i o n a l l i t e r a t u r e t o reflect t h e n e w n e s s o f t h e d e v i c e , (4) t o
c o m p l e t e the design of a c o m p r e h e n s i v e pacer assurance system,
to i n c l u d e t h e t h i r t e e n a r e a s specified by t h e C o m m i s s i o n e r in
o r d e r t o a c h i e v e rigid c o n t r o l , (5) t o i n c r e a s e final p r o d u c t
t e s t i n g , (6) to staff t h e i n t e r n a l quality a u d i t g r o u p so that it can
be v i g o r o u s [ s i c ] , and (7) to d e v e l o p a high reliability discipline
and i n t e g r a t i o n o f m a n a g e m e n t p o l i c i e s .
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T h i s h a v i n g b e e n s e t t l e d , t h e r e w a s n o w t h e q u e s t i o n o f criminal
p r o s e c u t i o n s . U l t i m a t e l y , n o r e c o m m e n d a t i o n went from t h e F D A
to t h e J u s t i c e D e p a r t m e n t for a c r i m i n a l p r o s e c u t i o n . T h e district
d i r e c t o r w a n t e d t o p r o c e e d w i t h c r i m i n a l a c t i o n against t h e
c o m p a n y a n d t h e t w o e x e c u t i v e s w h o had b e e n d i s m i s s e d . I n
c o n t r a s t , t h e view o f t h e F D A h e a d office official w h o had d o n e the
n e g o t i a t i n g w a s t h a t it w o u l d be "vindictive' to p r o s e c u t e t h e "two
old m e n ' w h o had suffered e n o u g h from p r o f e s s i o n a l d i s g r a c e and
loss o f e m p l o y m e n t . M o r e o v e r , t h e r e w e r e informal i n d i c a t i o n s
t h a t t h e y w e r e highly unlikely to ever go b a c k to t h e p h a r m a c e u t i c a l
industry and pose a threat to the public again. This senior F D A
officer justified his p o s i t i o n as follows:
I s t a t e d my o p i n i o n t h a t t h e g o v e r n m e n t w o u l d win if it w e n t
f o r w a r d [on t h e case a g a i n s t t h e c o r p o r a t i o n and two individual
d e f e n d a n t s ] . I r e c o m m e n d e d t h a t the case be not p r o s e c u t e d at
all b e c a u s e , in my o p i n i o n , t h e p u b l i c h e a l t h and welfare w o u l d
n o t be at all s e r v e d . T h e p r o b l e m had b e e n c o r r e c t e d . We had
m a g n i f i c e n t (if b e l a t e d ) c o o p e r a t i o n from t h e firm. T h e former
p l a n t m a n a g e r a n d p l a n t Q C d i r e c t o r (they had different t i t l e s ,
b u t I c a n ' t r e m e m b e r t h e m ) w e r e o u t o f t h e i n d u s t r y ; so. any
p u n i s h m e n t of t h e m w o u l d be strictly p u n i t i v e . . . . T h e district
office s c r e a m e d "Foul. T h e law is t h e l a w . ' T h a t kind of r e a s o n i n g
has a l w a y s d i s g u s t e d me b e c a u s e w h e n it is used the tail literally
w a g s t h e d o g . T h e stated p u r p o s e o f t h e C o n g r e s s i n e n a c t i n g the
A c t w a s "to p r o t e c t t h e p u b l i c h e a l t h and w e l f a r e . . . . ' T o o , F D A
t o o k into c o n s i d e r a t i o n its t r a c k r e c o r d with the court j u r i s d i c t i o n
i n v o l v e d . T h a t p a r t i c u l a r F D A district office w a s not r e s p e c t e d b y
a t least o n e j u d g e u p t h e r e w h o t h o u g h t they w e r e high h a n d e d
a n d less t h a n o b j e c t i v e i n a n o t h e r m a t t e r referred t o him.
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F o l l o w i n g c o m p l a i n t s o f e n l a r g e d b r e a s t s i n male e m p l o y e e s and
m e n s t r u a l d i s o r d e r s i n f e m a l e s , N I O S H i n v e s t i g a t e d the plant i n
M a y , 1976, a n d found e v i d e n c e o f e x c e s s i v e o e s t r o g e n e x p o s u r e .
I n t h i s c a s e , m a n a g e m e n t i n s t i t u t e d t h e n e c e s s a r y dust c o n t r o l
m e a s u r e s and i m p r o v e d w o r k p r a c t i c e s , w h i c h a p p e a r t o have
4 0
r e s o l v e d t h e p r o b l e m ( E p s t e i n . 1978: 2 2 8 ) . "
O n e c o n t r a c e p t i v e m a n u f a c t u r e r c l a i m e d that e x t e n s i v e p r e c a u -
t i o n s w e r e t a k e n i n t h e i r P u e r t o R i c a n o p e r a t i o n t o r e d u c e t h e risk
t o w o r k e r s from o e s t r o g e n i n t h e a t m o s p h e r e . W o r k e r s a r e r o t a t e d
i n a n d o u t o f t h a t section o f t h e w o r k e n v i r o n m e n t with the highest
risk: t h e c o n t r a c e p t i v e s are m a n u f a c t u r e d in a part of t h e plant
w h i c h is p h y s i c a l l y s e p a r a t e d from t h e rest; and o t h e r special
m e a s u r e s . H o w e v e r , I w a s told by s e n i o r m a n a g e m e n t of this
A m e r i c a n c o m p a n y t h a t t h e high safety s t a n d a r d s o f its P u e r t o
R i c a n p l a n t w e r e not m a t c h e d i n its British o p e r a t i o n . E v e n t h o u g h
t h e B r i t i s h c o n t r a c e p t i v e p l a n t had b e e n a p p r o v e d b y g o v e r n m e n t
i n s p e c t o r s , t h e c o r p o r a t i o n ' s i n t e r n a t i o n a l c o m p l i a n c e unit w a s not
satisfied t h a t it met c o r p o r a t e safety s t a n d a r d s . S t r e n g t h e n e d by the
a r g u m e n t t h a t his o w n g o v e r n m e n t found the plant safe, the
m a n a g i n g d i r e c t o r o f t h e British s u b s i d i a r y w a s f i g h t i n g the a t t e m p t
b y h e a d q u a r t e r s c o r p o r a t e c o m p l i a n c e staff t o i m p o s e h i g h e r
standards.
A h e a d q u a r t e r s c o m p l i a n c e e x e c u t i v e e x p l a i n e d t h e p r o b l e m : 'It
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Unsafe manufacturing practices
T h e C o r d i s c a s e s t u d y i l l u s t r a t e d s o m e o f the p r o b l e m s with
i n j u n c t i v e r e m e d i e s to unsafe m a n u f a c t u r i n g p r a c t i c e s . In part it is
t h e b y n o w o f t - r e p e a t e d p r o b l e m o f W e s t e r n law not being geared
to deal w i t h a p a t t e r n of c o n d u c t but with specific e g r e g i o u s acts.
H o w e v e r , it is a l s o a p r o b l e m o f t h e slow r e s p o n s e of legal p r o c e s s e s
t o m a t t e r s w h i c h r e q u i r e i m m e d i a t e a c t i o n . T h e c o m p a n y which has
a socially d a n g e r o u s p a t t e r n of a d m i n i s t r a t i o n has t i m e to rectify
specific c o m p l a i n t s before t h e c o u r t h e a r i n g t a k e s p l a c e , while not
d e a l i n g w i t h t h e u n d e r l y i n g m a l a i s e . T h e n , w e h a v e s e e n , a regu-
l a t o r y r o u n d a b o u t c a n b e g i n . It is p e r h a p s for t h e s e r e a s o n s t h a t one
s e n i o r F D A official e x p r e s s e d t h e view: ' T h e F e d e r a l j u d i c i a r y has a
p r i v a t e c o n t e m p t for a g e n c i e s w h o s e e k i n j u n c t i o n s . T h e y feel t h a t
t h e y r e s o r t t o i n j u n c t i o n s w h e n they fail a t d o i n g their own j o b . '
S i m i l a r c o n s i d e r a t i o n s a p p l y to t h e limits of p r o s e c u t i o n for
v i o l a t i o n s o f G M P r e g u l a t i o n s . I n t h e first p l a c e , n o set o f regula-
t i o n s can specify all t h e t y p e s o f c o n d u c t t h a t a c o m p a n y , following a
s o c i a l l y r e s p o n s i b l e p a t t e r n o f m a n u f a c t u r i n g o r g a n i s a t i o n , should
a d o p t . R e g u l a t i o n s can e v e n specify t h a t c e r t a i n t y p e s o f c o m -
p o n e n t s be s a m p l e d for testing from t h e t o p , m i d d l e and b o t t o m of a
c o n t a i n e r to e n s u r e t h a t it is not p u r e in o n e section but i m p u r e in
a n o t h e r . H o w e v e r , r e g u l a t i o n s c a n n o t r e a s o n a b l y i m p o s e a formal
r e q u i r e m e n t t h a t s a m p l e s b e t a k e n from m o r e t h a n t h r e e p a r t s o f
t h e c o n t a i n e r w h e n s o m e o n e has a h u n c h t h a t s o m e t h i n g could b e
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w r o n g . R e g u l a t i o n s c a n e n f o r c e m i n i m u m s t a n d a r d s , but they
c a n n o t e n f o r c e c o m m o n sense and social r e s p o n s i b i l i t y .
A g a i n t o r e p e a t a c o n c l u s i o n from o t h e r c h a p t e r s , g o v e r n m e n t
i n s p e c t o r s a r e not in as g o o d a p o s i t i o n as i n s i d e r s to d i s c o v e r w h e n
r e g u l a t i o n s h a v e b e e n v i o l a t e d . T h e following s t a t e m e n t from a
c o r p o r a t e c o m p l i a n c e e x e c u t i v e w a s not u n c o m m o n : "We've had a
s i t u a t i o n w h e r e an F D A i n s p e c t i o n h a s given a plant a clean bill of
h e a l t h o n e w e e k , and o u r i n s p e c t o r s have c o m e i n t h e next w e e k t o
p o i n t out a d o z e n t h i n g s w h i c h are not up to s t a n d a r d . '
In fact, F D A i n s p e c t o r s c a n n o t give a plant a "clean bill of h e a l t h '
since t h e i r only r e s p o n s i b i l i t y i s t o r e p o r t G M P v i o l a t i o n s w h i c h
t h e y n o t i c e . T h e y do not w r i t e a r e p o r t which says that a c e r t a i n
a s p e c t of m a n u f a c t u r i n g w a s a p p r o v e d as satisfactory. This differs
from t h e g r a d i n g s y s t e m used by t h e i n s p e c t o r a t e of the C a n a d i a n
H e a l t h P r o t e c t i o n B r a n c h . O b v i o u s l y , if a p r o b l e m arises in an
o p e r a t i o n w h i c h has j u s t b e e n given a positive g r a d i n g by t h e
g o v e r n m e n t , t h e n t h e c o m p a n y can defend itself b y p o i n t i n g t o this.
S u c h a p o s s i b i l i t y p e r h a p s d o e s put i n s p e c t o r s on their m e t t l e . T h e
o t h e r a d v a n t a g e i s t h a t i t e n a b l e s t h e g o v e r n m e n t formally t o use
b o t h t h e p s y c h o l o g y of p r a i s e and of criticism in i m p r o v i n g
standards.
I n s p e c t i o n s by c o r p o r a t e c o m p l i a n c e staff are also m o r e likely to
u n c o v e r p r o b l e m s than g o v e r n m e n t inspections because of the
g r e a t e r degree of o p e n n e s s with the former.
O u r i n s t r u c t i o n s t o officers w h e n d e a l i n g with F D A i n s p e c t o r s i s
t o only a n s w e r t h e q u e s t i o n s a s k e d , not t o p r o v i d e any e x t r a
i n f o r m a t i o n , not t o v o l u n t e e r a n y t h i n g , and not t o a n s w e r any
q u e s t i o n s o u t s i d e y o u r a r e a o f c o m p e t e n c e . O n the o t h e r h a n d w e
[the c o r p o r a t e c o m p l i a n c e staff] can ask a n y o n e a n y t h i n g and
e x p e c t a n a n s w e r . T h e y are told that w e are part o f t h e s a m e
family a n d , u n l i k e t h e g o v e r n m e n t , w e are w o r k i n g for t h e s a m e
final o b j e c t i v e s . '
An a d v e r s e r e p o r t from a g o v e r n m e n t i n s p e c t o r in m a n y situ-
a t i o n s will be a m a t t e r of g r e a t e r c o n c e r n to a factory m a n a g e r t h a n
a n a d v e r s e r e p o r t from a n i n s p e c t o r from c o r p o r a t e h e a d q u a r t e r s .
B u t this n e e d not n e c e s s a r i l y b e t r u e . T h e m a n a g e r ' s s u p e r i o r s may
s y m p a t h i s e w h e n he or she is v i c t i m i s e d by ' t h o s e b a s t a r d s from
F D A m a k i n g u n r e a s o n a b l e d e m a n d s ' . B u t a n internal a d v e r s e
r e p o r t is less likely to elicit social s u p p o r t from s u p e r i o r s . W h e n
t h e r e is no o u t - g r o u p to b l a m e , an a d v e r s e r e p o r t m i g h t have a m o r e
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138
Unsafe manufacturing practices
139
Unsafe manufacturing practices
T h e cost of q u a l i t y is t h e e x p e n s e of d o i n g t h i n g s w r o n g . It is t h e
s c r a p , r e w o r k , s e r v i c e after s e r v i c e , w a r r a n t y , i n s p e c t i o n , t e s t s ,
and s i m i l a r a c t i v i t i e s m a d e n e c e s s a r y b y n o n c o n f o r m a n c e
p r o b l e m s . B e t w e e n 1967 and 1977, t h e m a n u f a c t u r i n g cost of
q u a l i t y at I T T h a s b e e n r e d u c e d by an a m o u n t e q u i v a l e n t to 5
p e r c e n t of s a l e s . T h a t is a g r e a t deal of m o n e y . T h e savings
p r o j e c t e d by t h e c o m p t r o l l e r w e r e $30 million in 1968; $157
m i l l i o n in 1 9 7 1 ; $328 million in 1 9 7 3 ; and in 1 9 7 6 - $ 5 3 0 million!
We had e l i m i n a t e d - t h r o u g h defect p r e v e n t i o n - costs
a m o u n t i n g to t h o s e dollar figures ( C r o s b y , 1979: 12).
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Unsafe manufacturing practices
T h e r e p o r t ' s g e n e r a l a t t i t u d e o n e n c o u r a g i n g c o m p l i a n c e i n place
o f r e g u l a t i o n is i l l u s t r a t e d (in t h e d r u g s e c t i o n o f t h e r e p o r t ) by its
r e c o m m e n d a t i o n s for c o n t r o l of insulin and a n t i b i o t i c s :
in t h e 1969 fiscal y e a r , only 0.3 p e r cent of insulin s a m p l e s and
1 p e r c e n t of a n t i b i o t i c b a t c h e s w e r e rejected as not m e e t i n g
specified s t a n d a r d s . T h e Study G r o u p b e l i e v e s F D A may b e
e x p e n d i n g m o r e r e s o u r c e s i n a s s u r i n g t h e quality o f a n t i b i o t i c s
a n d insulin b y b a t c h certification t h a n t h e p r o b l e m d i c t a t e s . T h e
n e e d for this level of c o n t r o l w a s c e r t a i n l y n e c e s s a r y w h e n
a n t i b i o t i c s w e r e first m a r k e t e d . We a r e not sure if it is n e c e s s a r y
today.
R E C O M M E N D A T I O N : 2 6 . C o n s i d e r a p r o g r a m o f statistical
s a m p l i n g for a n t i b i o t i c s and insulin r a t h e r t h a n b a t c h - b y - b a t c h
certification.'
T h e r e a s o n i n g s u p p o r t i n g this r e c o m m e n d a t i o n w o u l d
u n d e r m i n e any effective F D A p r o g r a m t h a t m i g h t d e v e l o p .
B a s i c a l l y , it says t h e r e is a p r o g r a m t h a t has b e e n effective in
i n s u r i n g t h e q u a l i t y of all insulin and a n t i b i o t i c s that r e a c h t h e
m a r k e t . It h a s b e e n so effective, in fact, t h a t it should be
discontinued.
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Unsafe manufacturing practices
G M P p r o s e c u t i o n s t o b e s t r a i g h t f o r w a r d m a t t e r s . T h e costs i n t i m e
a n d m o n e y o f p r o s e c u t i o n s i n v o l v i n g highly t e c h n i c a l m a t t e r s can
be e n o r m o u s . E v e n in w h a t w o u l d seem on t h e surface like t h e less
technical matter o f t h e recent US prosecution of Morton-Norwich
c o n c e r n i n g t h e sterility o f b a n d a g e s m a n u f a c t u r e d b y t h e c o m p a n y ,
1 2
we saw a trial w h i c h lasted t h r e e y e a r s . In this case u n t a n g l i n g the
c o m p l e x i t y w a s not assisted w h e n t h e j u d g e , sitting a l o n e , acci-
d e n t a l l y sent y e a r s of his n o t e s on t h e trial to t h e d u m p .
O n e c o u l d i m a g i n e t h a t if a p r o s e c u t i o n o f a large p h a r m a c e u t i c a l
c o m p a n y w e r e e v e r t o t a k e place i n A u s t r a l i a , t h e e n t i r e A u s t r a l i a n
g o v e r n m e n t G M P i n s p e c t o r i a l force could b e tied u p for m o n t h s .
W o u l d such a c o n c e n t r a t i o n of r e s o u r c e s on o n e case m a k e for
c o s t - e f f e c t i v e e n f o r c e m e n t ? P u t s i m p l y , a c o n s i s t e n t policy of
p r o s e c u t i o n of all s e r i o u s G M P offences is a policy w h i c h no g o v e r n -
m e n t c o u l d afford. T h i s s t a t e m e n t s h o u l d be qualified by p o i n t i n g
o u t t h a t i n M e x i c o p r o s e c u t i o n s for G M P offences are fairly
r o u t i n e , b u t t h e p e n a l t i e s a r e so low (5 - 5,000 p e s o s ) t h a t the fines
a r e effectively a licence fee to v i o l a t e t h e law. O n e M e x i c a n
pharmaceutical executive explained:
In t h e last s e c t i o n it w a s p o i n t e d o u t t h a t in any o r g a n i s a t i o n t h e r e
are occasions w h e n it is economically rational to temporarily
s u s p e n d c o m m i t m e n t t o quality s t a n d a r d s . O n e t y p e o f c i r c u m -
s t a n c e is w h e r e a p r o d u c t is in short supply and m a j o r c u s t o m e r s are
c o m p l a i n i n g t o t h e m a r k e t i n g m a n a g e r b e c a u s e they c a n n o t get
s u p p l i e s . I f t h e q u a l i t y c o n t r o l m a n a g e r fails to pass a major b a t c h of
t h e p r o d u c t b e c a u s e it falls j u s t s h o r t of specifications t h e quality
c o n t r o l m a n a g e r m i g h t c o m e u n d e r p r e s s u r e from t h e m a r k e t i n g
m a n a g e r t o p a s s t h e b a t c h a s ' n e a r e n o u g h ' . T h e p r e s s u r e might b e
particularly strong w h e n certain major c u s t o m e r s are threatening to
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s w i t c h to a c o m p e t i n g b r a n d u n l e s s c o n t i n u i t y of s u p p l i e s is g u a r a n -
teed.
A n o t h e r s i t u a t i o n i s o n e i n w h i c h a n o r g a n i s a t i o n a l s u b - u n i t , but
n o t n e c e s s a r i l y t h e w h o l e o r g a n i s a t i o n , sees it as in its i n t e r e s t s to
put the quality control m a n a g e r under pressure to reverse a
d e c i s i o n . A m a n u f a c t u r i n g plant might h a v e a p r o d u c t i o n t a r g e t set
by h e a d q u a r t e r s . A failed b a t c h w o u l d place it in j e o p a r d y of not
3
m e e t i n g t h a t t a r g e t . ' F r o m t h e p u b l i c i n t e r e s t point o f view the
s o l u t i o n to this p r o b l e m is to s t r u c t u r e t h e o r g a n i s a t i o n so that the
q u a l i t y c o n t r o l m a n a g e r is i n s u l a t e d from p r e s s u r e from m a n u -
f a c t u r i n g o r m a r k e t i n g . T h i s c e r t a i n l y d o e s not h a p p e n i n m a n y
p h a r m a c e u t i c a l c o m p a n i e s w h e r e quality c o n t r o l m a n a g e r s a n s w e r
to the manufacturing m a n a g e r or to an executive whose primary
r e s p o n s i b i l i t y is for m a r k e t i n g and m a n u f a c t u r i n g .
O t h e r c o m p a n i e s , e s p e c i a l l y A m e r i c a n t r a n s n a t i o n a l s , have b e e n
s e n s i t i v e to t h i s p r o b l e m . T h e y h a v e an a r r a n g e m e n t w h e r e b y a
q u a l i t y c o n t r o l d e c i s i o n can only be o v e r r u l e d by the p r e s i d e n t . T h e
q u a l i t y c o n t r o l d i r e c t o r m a k e s a n i n d e p e n d e n t w r i t t e n decision o n
e a c h b a t c h w h i c h s/he duly signs. I f t h e p r e s i d e n t w i s h e s t o o v e r r u l e
a q u a l i t y c o n t r o l d e c i s i o n s/he m u s t do so in writing o v e r h i s / h e r
s i g n a t u r e . People b e c o m e corporation presidents in part because
t h e y e x h i b i t a m o d i c u m o f c a u t i o n . I m a g i n e the c o n s e q u e n c e s for a
p r e s i d e n t o f s e r i o u s injuries t o c o n s u m e r s b e c a u s e s/he o v e r r u l e d i n
w r i t i n g a q u a l i t y c o n t r o l d e c i s i o n . No m a t t e r h o w low t h e c h a n c e s of
t h i s w e r e p e r c e i v e d to b e , it w o u l d be a foolish risk for a c o r p o r a t i o n
p r e s i d e n t t o t a k e for t h e s a k e o f o n e b a t c h o f d r u g s . W h i l e t h e
d e s t r u c t i o n of a b a t c h m i g h t be a m a j o r a g g r a v a t i o n to t h e p h a r m a -
ceuticals m a r k e t i n g or manufacturing m a n a g e r , to the president it is
a m i n o r m a t t e r . Effectively t h e n , such a n o r g a n i s a t i o n a l s t r u c t u r e
p r e c l u d e s any p o s s i b i l i t y o f quality c o n t r o l b e i n g formally over-
ruled.
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I n a d d i t i o n t o e n s u r i n g t h a t quality m a n a g e r s d o not r e p o r t t o
m a r k e t i n g o r p r o d u c t i o n m a n a g e r s , t h e f o r m e r must b e i n s u l a t e d
from any influence by t h e latter o v e r t h e i r future p r o m o t i o n , salary
i n c r e m e n t s , o r p e r f o r m a n c e r e p o r t s . T h e d a n g e r s p r e s e n t h e r e are
well i l l u s t r a t e d by t h e following e x c h a n g e with a M e x i c a n plant
manager.
H e r e we h a v e a s i t u a t i o n w h e r e a m u c h m o r e powerful m a n a g e r ' s
d e f i n i t i o n o f ' r e a s o n a b l e n e s s ' will a l w a y s hold sway over t h a t of an
o r g a n i s a t i o n a l l y w e a k quality a s s u r a n c e d i r e c t o r . O b v i o u s l y the
e x t e n t t o w h i c h p e o p l e w i t h r e s p o n s i b i l i t y for quality s t a n d a r d s
h a v e o r g a n i s a t i o n a l c l o u t is a c o n t i n u u m .
C o n s i d e r t h e following A m e r i c a n t r a n s n a t i o n a l i n which the cor-
p o r a t e c o m p l i a n c e p o s i t i o n h a s very little c l o u t . H e a d q u a r t e r s has a
c o r p o r a t e c o m p l i a n c e g r o u p with a small staff of six. T h e c o m -
p l i a n c e d i r e c t o r is a r e l a t i v e l y j u n i o r p e r s o n with little e x p e r i e n c e
w i t h i n t h e c o m p a n y . T h e d i r e c t o r has only a n a d v i s o r y r o l e , b e i n g
u n a b l e to instruct a manufacturing plant to do anything. He reports
to a t e c h n i c a l affairs v i c e - p r e s i d e n t w h o is similarly u n a b l e to issue
d i r e c t i v e s to a m a n u f a c t u r i n g p l a n t . T h e i n t e r n a t i o n a l influence of
t h e c o m p l i a n c e g r o u p e x t e n d s only t o C a n a d a . O t h e r s u b s i d i a r i e s
a r e g i v e n a u t o n o m y to set their own s t a n d a r d s w i t h i n t h e limits set
b y b r o a d c o m p a n y g u i d e l i n e s . A p a r t from C a n a d a , h e a d q u a r t e r s
c o m p l i a n c e staff d o n o t g o o u t t o t h e s u b s i d i a r i e s t o a u d i t c o m -
p l i a n c e w i t h c o r p o r a t e s t a n d a r d s . E v e n with r e s p e c t t o the
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Unsafe manufacturing practices
T h e q u a l i t y c o n t r o l d i r e c t o r m a k e s a lot of little d e c i s i o n s e v e r y
d a y w h i c h c a n b r i n g him into conflict with the p r o d u c t i o n
m a n a g e r . If a s a m p l e o f t e n pills is t e s t e d from the line every thirty
m i n u t e s and o n e of t h o s e pills is o u t s i d e specs he has to d e c i d e
w h e t h e r t h a t o n e pill w a s an o d d i t y or t h e result of his m i s t a k e , or
w h e t h e r he w a n t s to anger the p r o d u c t i o n manager by stopping
t h e line until t h e p r o b l e m is s o r t e d out. If he d e c i d e s t h e r e is a
q u a l i t y p r o b l e m i n t h e s a m p l e t h e n e v e r y pill p r o d u c e d o n e a c h
side of t a k i n g t h a t o n e s a m p l e will have to be r e t r i e v e d . It's not
r e a l l y such a big p r o b l e m b e c a u s e t h e y will all have g o n e in one
bin.
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Unsafe manufacturing practices
T h e a b o v e has p r a c t i c a l i m p l i c a t i o n s for g o v e r n m e n t a c t i o n t o
p r o t e c t p a t i e n t s . T h e fact t h a t G M P i n s p e c t i o n t e a m s from
c o r p o r a t e h e a d q u a r t e r s can p r o b a b l y d o a b e t t e r j o b t h a n g o v e r n -
m e n t i n s p e c t o r s i m p l i e s t h a t it is g o o d policy for g o v e r n m e n t to
r e q u i r e such i n t e r n a l i n s p e c t i o n s and p e r h a p s c o n c e n t r a t e their
efforts m o r e on a u d i t i n g t h e a u d i t o r s . S i m i l a r l y , t h e fact t h a t a
quality control m a n a g e r answering to production or marketing is
b o u n d to be c o m p r o m i s e d from t i m e to t i m e i m p l i e s t h a t g o v e r n -
m e n t s s h o u l d p r o h i b i t such o r g a n i s a t i o n a l s t r u c t u r e s . I n d e e d , F D A
c o m p l i a n c e staff a r e a b l e t o d o this u n d e r G M P r e g u l a t i o n s , and
i n c r e a s i n g l y a r e d o i n g s o , a t least with large c o m p a n i e s . O t h e r
g o v e r n m e n t s have n o such p o w e r s . H e n c e , m a n y t r a n s n a t i o n a l s
w h i c h s c r u p u l o u s l y s t r u c t u r e their A m e r i c a n o r g a n i s a t i o n s o a s t o
i n s u l a t e q u a l i t y c o n t r o l m a n a g e r s from e c o n o m i c p r e s s u r e s d o j u s t
t h e o p p o s i t e i n o t h e r p a r t s o f t h e w o r l d . T h e following s t a t e m e n t b y
a r e g u l a t o r y affairs d i r e c t o r , w h o w a s formerly a quality c o n t r o l
d i r e c t o r w i t h a n o t h e r t r a n s n a t i o n a l , s h o w s h o w effective g o v e r n -
m e n t i n t e r v e n t i o n in t h e o r g a n i s a t i o n a l form of a c o m p a n y is easier
said t h a n d o n e . G o v e r n m e n t i n s p e c t o r s m u s t look b e l o w the surface
t o avoid b e i n g s e d u c e d b y a p p e a r a n c e s .
If y o u l o o k at t h e o r g a n i z a t i o n a l c h a r t of m a n y c o m p a n i e s you
will see t h a t t h e q u a l i t y c o n t r o l d i r e c t o r r e p o r t s directly to t h e
p r e s i d e n t . T h e F D A i n s p e c t o r c o m e s a r o u n d and asks w h o t h e
q u a l i t y c o n t r o l d i r e c t o r r e p o r t s t o , and w h e n he is told that it's t h e
p r e s i d e n t he g o e s a w a y p l e a s e d . T h a t ' s h o r s e s h i t . . . .
I w o u l d n ' t tell an F D A i n s p e c t o r t h i s , b u t I'll tell you [If only all
i n f o r m a n t s had s h o w n m e such s o l i c i t u d e . ] O k a y , t h e quality
c o n t r o l d i r e c t o r d o e s m a k e t h e final d e c i s i o n to recall a p r o d u c t
a n d only t h e p r e s i d e n t can o v e r r u l e him. B u t t h e c o m p a n y has
s t a n d a r d o p e r a t i n g p r o c e d u r e s c o n c e r n i n g a p o s s i b l e recall. T h e
p r o c e d u r e s specify t h a t t h e quality c o n t r o l d i r e c t o r m u s t c o n s u l t
c e r t a i n p e o p l e a b o u t his d e c i s i o n - s o m e o f t h e m m o r e senior
t h a n h i m , or m o s t of t h e m . A m e e t i n g of m a y b e five p e o p l e will
t a k e p l a c e a n d t h e y will m a k e a r e c o m m e n d a t i o n that the quality
c o n t r o l d i r e c t o r w o u l d be foolish not to follow - if he w a n t s to
k e e p his j o b i n t h e long t e r m , t h a t is. T h e r e will a l w a y s b e s o m e
l a w y e r s o n t h e s e c o m m i t t e e s . T h e y h a v e m o s t say. B u t they b e a r
n o n e o f t h e r e s p o n s i b i l i t y . T h e quality c o n t r o l d i r e c t o r d o e s t h a t .
I h a v e b e e n p r e s s u r e d by t h e l a w y e r s n o t to m a k e a recall in this
s i t u a t i o n and it w a s t o u g h . T h e y c o m e at you with h e a r t s and
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Unsafe manufacturing practices
D o n ' t b e u n n e r v e d b y all t h e h o r r o r s t o r i e s a b o u t i r r a t i o n a l j u r y
v e r d i c t s a n d t h e i n t r i c a c i e s o f t h e law. H a r d l y any o f t h o s e t h i n g s
o c c u r r e d because o f t h e original incident. They occurred because
s o m e o n e w h o had c o n t r i b u t e d t o t h e p r o b l e m d i d n ' t h a v e e n o u g h
s e n s e or c o u r a g e to face up to it early and get a r e a s o n a b l e
settlement.
I h a v e n e v e r seen a p r o d u c t safety p r o b l e m , real or p o t e n t i a l ,
t h a t d i d n ' t get itself h a n d l e d with a n a b s o l u t e m i n i m u m o f
e x p e n s e w h e n i t w a s faced m a t u r e l y .
T h e o t h e r r a t i o n a l e for q u a l i t y c o n t r o l being g r a n t e d p r o f e s s i o n a l
s t a t u s c o n c e r n s t h e kind o f p r o f e s s i o n a l s o c i a l i s a t i o n w h i c h might
go on w i t h a u n i v e r s i t y d e g r e e in q u a l i t y c o n t r o l . G r a d u a t e s would
h o p e f u l l y be socialised into c e r t a i n i d e a l s of scientific inde-
p e n d e n c e , o f p u t t i n g p r o f e s s i o n a l s t a n d a r d s a h e a d o f profit. I n t h i s ,
o n e is e n c o u r a g e d by Q u i n n e y ' s (1963) classic study in which he
f o u n d t h a t p h a r m a c i s t s w i t h a p r o f e s s i o n a l i d e o l o g y w e r e less likely
to violate laws regulating their work than were pharmacists with a
b u s i n e s s i d e o l o g y . Of c o u r s e it is difficult not to be cynical a b o u t
h o w m u c h p r o t e c t i o n t h e p u b l i c i s afforded b y c o m m i t m e n t t o the
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i d e o l o g y of a p r o f e s s i o n . N e v e r t h e l e s s , it is t r u e t h a t it would be
i m p o s s i b l e to w r i t e r u l e s to c o v e r all t h e difficult ethical j u d g m e n t s
w h i c h d o c t o r s m u s t face. T h e only p r o t e c t i o n w h i c h p a t i e n t s can
rely on in m o s t s i t u a t i o n s is t h e p r o f e s s i o n a l e t h i c s o f t h e d o c t o r .
G i v i n g q u a l i t y c o n t r o l p r o f e s s i o n a l s t a t u s and a p r o f e s s i o n a l
i d e o l o g y is no p a n a c e a , b u t it is a m e a s u r e w h i c h has m e r i t . F o r t h e
s a m e r e a s o n , t h e p r o f e s s i o n a l i s a t i o n o f o c c u p a t i o n a l safety would
be a d e s i r a b l e d e v e l o p m e n t .
I r o n i c a l l y , p e r h a p s , a u t o m a t i o n h o l d s o u t s o m e h o p e o f partially
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Unsafe manufacturing practices
a l l e v i a t i n g t h e l a t t e r p r o b l e m s . D e v i c e s for r e a d i n g c o d e s p r i n t e d
on b o t t l e s or t u b e s for o i n t m e n t can a u t o m a t i c a l l y c h e c k and eject
t u b e s w h i c h h a v e b e e n m i s t a k e n l y l a b e l l e d , for e x a m p l e . B u t t h e r e
a r e limits t o w h i c h h u m a n c h e c k s can b e r e p l a c e d with m e c h a n i c a l
surveillance.
A l i e n a t e d w o r k e r s are c a r e l e s s w o r k e r s . T h e y b e c o m e a g g r a -
v a t e d w h e n forced t o c o m p l y w i t h r e g u l a t i o n s w h i c h seem petty t o
t h e m , w h e n t h e y are r e p r i m a n d e d for only initialling a record w h i c h
r e q u i r e s t h e i r full s i g n a t u r e . E x a s p e r a t i o n o v e r the p e r c e i v e d
p e t t i n e s s o f t h e r e g u l a t i o n s l e a d s t o less d i l i g e n c e w h e n the follow-
ing o f r e a l l y i m p o r t a n t r e g u l a t i o n s i s r e q u i r e d . W o r k e r s a b r o g a t e
social r e s p o n s i b i l i t y t o u n e n t h u s i a s t i c rule following.
A n o t h e r c o n s e q u e n c e o f a l i e n a t i o n i s industrial s a b o t a g e
( D u b o i s , 1979). O n e t r a n s n a t i o n a l p h a r m a c e u t i c a l c o m p a n y has
faced a s i t u a t i o n w h e r e w o r k e r s a t t e m p t e d to set fire to o n e of its
A m e r i c a n f a c t o r i e s . A n e x e c u t i v e from a n o t h e r c o m p a n y d e s c r i b e d
an e x t r a o r d i n a r i l y m a l i c i o u s act of s a b o t a g e w h i c h could have
( p e r h a p s d i d ) cost lives: "We had a n industrial s a b o t a g e p r o b l e m
w h e r e a w o r k e r w a s p u t t i n g q u a r t e r s inside t h e lids o f t h e c o n t a i n e r s
[of an i n j e c t a b l e p r o d u c t ] . M a y b e he w a s t r y i n g to get back at [the
c o m p a n y ] . ' T h e F D A did not find o u t a b o u t t h e p r o b l e m . T h e
w o r k e r w a s d i s m i s s e d , but t h e c o m p a n y did not notify F D A for fear
of a d v e r s e p u b l i c i t y a r i s i n g from his p r o s e c u t i o n .
T h e r e a r e s o l u t i o n s . R u l e s which g e n u i n e l y a r e petty should b e
e l i m i n a t e d , a n d r u l e s w h i c h only s e e m p e t t y t o t h e u n i n f o r m e d
s h o u l d b e e x p l a i n e d . ' F r o m t h e p o i n t o f view o f m o t i v a t i o n , " k n o w -
w h y " i s m o r e i m p o r t a n t t h a n " k n o w - h o w " ' ( M o d y , 1969: 4 7 ) .
W o r k e r s m u s t b e p e r s u a d e d a s t o t h e d e s i r a b i l i t y o f rule-following
a n d d o c u m e n t a t i o n , b u t t h e y m u s t also b e given r e a s o n t o b e l i e v e
t h a t t h e y h a v e s o m e influence o v e r t h o s e r u l e s . A d e g r e e o f w o r k e r
p a r t i c i p a t i o n i n r u l e - m a k i n g m a y b e t h e p r i c e that m a n a g e m e n t and
g o v e r n m e n t m i g h t h a v e t o a c c e p t for w o r k e r c o m m i t m e n t t o t h e
rules.
In a small w a y , this h a p p e n s in s o m e factories a l r e a d y . U n d e r
A b b o t t ' s Q u a l i t y A l e r t A w a r d s c h e m e w o r k e r s can suggest new
S O P s . W o r k e r s w h o c o m e forward with a useful quality alert
s u g g e s t i o n a r e p r e s e n t e d w i t h a pin. F o r their second s u g g e s t i o n
t h e y a r e g i v e n a g r e e n s t o n e for the p i n , for t h e i r third a red s t o n e ,
a n d s o o n . " A b b o t t likes t o k e e p its w o r k e r s ' p a r t i c i p a t i o n within
r e a s o n a b l e l i m i t s , h o w e v e r . W h e n h e a d q u a r t e r staff saw o n t h e
n o t i c e b o a r d of o n e p l a n t t h a t a w o r k e r had b e e n given a special
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Unsafe manufacturing practices
E v e n t h e t r a n s n a t i o n a l s w h i c h e n f o r c e t h e strictest o f inter-
national auditing systems cannot achieve c o m p l e t e uniformity of
s t a n d a r d s a r o u n d t h e w o r l d . A n d c o m p a n i e s w h i c h m a k e only
t o k e n efforts to a c h i e v e such a policy a l l o w , by default, vast
disparities in G M P s to continue. N e v e r t h e l e s s , it is undoubtedly
true that in T h i r d - W o r l d countries the G M P standards o f t h e trans-
n a t i o n a l s , n o m a t t e r h o w m u c h l o w e r t h a n a t h e a d q u a r t e r s , are
g e n e r a l l y h i g h e r t h a n t h o s e o f m o s t locally o w n e d m a n u f a c t u r e r s .
T r a n s n a t i o n a l s a r e s o m e t i m e s a l o b b y i n g force for u p g r a d i n g the
G M P s t a n d a r d s in T h i r d - W o r l d c o u n t r i e s . T h e y see this as a way of
p u t t i n g ' b a t h t u b ' c o m p e t i t o r s o u t o f b u s i n e s s . C e r t a i n l y this s e e m e d
t o b e t h e effect o f t h e d e c i s i o n o f t h e P o r t i l l o g o v e r n m e n t i n M e x i c o
t o c l o s e d o w n 300 o f t h e 600 p h a r m a c e u t i c a l c o m p a n i e s o p e r a t i n g i n
t h e c o u n t r y in 1977.
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Unsafe manufacturing practices
d r u g r e g u l a t o r y p r a c t i c e s before b e i n g a d m i t t e d . C o u n t r i e s i n the
E u r o p e a n Free Trade Association (Ireland, Austria, D e n m a r k ,
Finland, Hungary. Iceland, Liechtenstein, Norway, Portugal.
S w e d e n , S w i t z e r l a n d and G r e a t B r i t a i n ) now have a " C o n v e n t i o n
for t h e M u t u a l R e c o g n i t i o n o f I n s p e c t i o n s i n R e s p e c t o f t h e M a n u -
f a c t u r e o f P h a r m a c e u t i c a l P r o d u c t s . ' T h i s has b e e n a c h i e v e d
t h r o u g h a d e g r e e of a g r e e m e n t on u n i f o r m i t y of i n s p e c t i o n stan-
d a r d s . U n d e r t h e a g r e e m e n t i n s p e c t o r s from o n e c o u n t r y can g o
into a n o t h e r to check the manufacturing standards of products to be
imported. The Benelux countries (Belgium, Netherlands,
L u x e m b u r g ) and t h e A n d e a n P a c t c o u n t r i e s ( P e r u , E c u a d o r ,
B o l i v i a , C o l o m b i a and V e n e z u e l a ) h a v e b o t h m a d e p r o g r e s s o n
e s t a b l i s h i n g s o m e u n i f o r m i t y i n d r u g r e g u l a t i o n within t h e i r g r o u p s .
The F r e n c h have been most anxious in recent years to improve
G M P s , G L P s and t h e s t r i n g e n c y o f t h e drug a p p r o v a l p r o c e s s
p r e c i s e l y so t h e y can b e t t e r c o m p e t e for t h e d e v e l o p e d c o u n t r y
m a r k e t s . B r i t i s h c o n t r a c t l a b o r a t o r i e s w r i t e to the F D A asking for
G L P i n s p e c t i o n s s o t h a t t h e y can tell c u s t o m e r s t h a t they are
a p p r o v e d u n d e r A m e r i c a n G L P s . T h e r e can b e n o d o u b t , t h e n , that
t h e i n t e r n a t i o n a l i s a t i o n of capital i s , in a g g r e g a t e , a force to
u p g r a d e t h e s t a n d a r d s o f t h o s e w h o lag b e h i n d .
V a s t d i s p a r i t i e s r e m a i n , but t h e y are n a r r o w i n g . T h e p l a n t
m a n a g e r o f t h e M e x i c a n subsidiary of an A m e r i c a n company was
p r e p a r e d to give w h a t s e e m e d an h o n e s t a s s e s s m e n t of h o w far his
factory had c o m e and h o w far it had to g o .
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Unsafe manufacturing practices
It t a k e s t i m e for us to c a t c h up to US s t a n d a r d s . I k n o w h o w
m a c h i n e s s h o u l d be c l e a n e d . B u t t h e y say we should h a v e
i n s t r u c t i o n s i n w r i t i n g o n h o w t o clean m a c h i n e s . B e f o r e w e
had n o t h i n g i n w r i t i n g . N o w w e are b e g i n n i n g t o w r i t e t h i n g s
down.
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Unsafe manufacturing practices
158
5 Antitrust
159
Antitrust
T h e t h r e e l e a d i n g B r i t i s h c o m p a n i e s - B o o t s , B e e c h a m and G l a x o -
in 1972 e a r n e d 45 p e r c e n t , 41 per cent and 22 per cent r e s p e c t i v e l y
o n c a p i t a l e m p l o y e d . R a n k X e r o x w a s t h e only c o m p a n y w h i c h w a s
m o r e p r o f i t a b l e t h a n B o o t s and B e e c h a m i n that year a m o n g t h e top
100 B r i t i s h firms (Gereffi, 1979: 6 0 ) .
A m y r i a d of r e s e a r c h e r s from different p a r t s of the w o r l d have
s h o w n h o w r e c o r d e d profits in the p h a r m a c e u t i c a l industry are far
i n e x c e s s o f m a n u f a c t u r i n g i n d u s t r y a v e r a g e s ( N a d e r , 1973; B u r a c k ,
1976; 6 6 - 8 ; S i l v e r m a n , 1976: 1 2 1 ; L a b o u r P a r t y , 1976: 2 0 - 1 ;
C l a r k s o n , 1977, 1979; M a e s d a y , 1977: 2 7 6 ; S l a t t e r , 1977; S u b -
c o m m i t t e e o n H e a l t h , 1977; A g a r w a l , 1978; Lall, 1978; Gereffi,
1 9 7 9 ; U n i t e d N a t i o n s C e n t r e o n T r a n s n a t i o n a l C o r p o r a t i o n s , 1979:
5 4 - 9 ) . E c o n o m i s t s d e f e n d i n g t h e i n d u s t r y have a r g u e d that
r e c o r d e d profit figures in t h e p h a r m a c e u t i c a l industry artificially
inflate t h e t r u e r a t e o f r e t u r n o n i n v e s t m e n t ( A y a n i a n , 1975;
S c h w a r t z m a n , 1975; Stauffer, 1975; P h a r m a c e u t i c a l M a n u f a c t u r e r s
A s s o c i a t i o n , 1977). T h e c e n t r a l t h r u s t o f their a r g u m e n t i s that
" d i s c o v e r y i n t e n s i v e * i n d u s t r i e s such as p h a r m a c e u t i c a l s are in a
u n i q u e s i t u a t i o n . E x c e s s i v e profits i n t h e industry are a n a c c o u n t i n g
i l l u s i o n , t h e y say, a r i s i n g from t h e fact t h a t r e s e a r c h and d e v e l o p -
m e n t e x p e n d i t u r e s a r e not c a p i t a l i s e d a s a n i n v e s t m e n t asset, but
r a t h e r a r e set a g a i n s t c u r r e n t i n c o m e . Gereffi (1979) p o i n t s o u t ,
h o w e v e r , t h a t t h e p r a c t i c e of not t r e a t i n g r e s e a r c h as a capital
i n v e s t m e n t can r e s u l t in e i t h e r an u n d e r s t a t e m e n t or an over-
s t a t e m e n t o f t h e ' r e a l ' o r e c o n o m i c rate o f r e t u r n . S o m e o f the
s t a t e m e n t s o f p r o - i n d u s t r y e c o n o m i s t s o n t h e q u e s t i o n o f profits
have been calculatingly misleading.
160
Antitrust
s h a r e i n s t a b i l i t y . W h e n w e look a t t h e r a w d a t a , h o w e v e r , w e find
t h a t t o p of t h e list for m a r k e t - s h a r e instability is that struggling
i n d u s t r y , ' p e t r o l e u m * . C o u l d i t b e t h a t c e r t a i n i n d u s t r i e s are b o t h
h i g h l y risky a n d highly p r o f i t a b l e ?
T h e s m o k e s c r e e n from i n d u s t r y e c o n o m i s t s c a n n o t d i s p l a c e the
r e a l i t y t h a t p h a r m a c e u t i c a l profits are e x t r a o r d i n a r i l y high. If actual
profits m e r e l y b a l a n c e d risk, t h e n o n e w o u l d e x p e c t capital t o b e
i n v e s t e d in t h e p h a r m a c e u t i c a l i n d u s t r y at t h e same rate as t h e
all-industry average. The United Nations Centre on Transnational
C o r p o r a t i o n s ( 1 9 7 9 : 5 7 - 8 ) s h o w s t h a t t h i s is not so. F r o m 1953 to
1967 in t h e U n i t e d S t a t e s , e q u i t y c a p i t a l in d r u g s i n c r e a s e d 584 per
c e n t , t h e s e c o n d h i g h e s t figure for any i n d u s t r y g r o u p . E q u i t y
c a p i t a l for t h e w h o l e m a n u f a c t u r i n g sector i n c r e a s e d only 183 per
c e n t d u r i n g t h e s a m e p e r i o d . I n o t h e r w o r d s , drug profits h a v e
a t t r a c t e d new m o n e y at more than three times the average rate.
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Antitrust
c o m p a n i e s c h a r g e a l m o s t w h a t e v e r t h e y c h o o s e for a p r o d u c t .
T h e r e a r e not t h e c o m p e t i t i v e forces t o m a k e price b e a r any relation
to c o s t s . R o u s s e l , a F r e n c h firm, sold a d r u g used for m e n o p a u s a l
d i s o r d e r s ( e s t r a d i o l p r o g y n o n ) to S c h e r i n g in bulk form. S c h e r i n g
did no r e s e a r c h on t h e d r u g . T h e y simply put t h e p r o d u c t into tablet
form in b o t t l e s of 60 u n d e r their o w n label. T h e b o t t l e s , which
c o n t a i n e d 11.7 c e n t s w o r t h o f t h e d r u g , w e r e sold for S 8 . 4 0 , a
m a r k - u p o f 7079 p e r cent ( M i n t z , 1967: 3 5 9 ) .
D e f e n d e r s o f t h e p h a r m a c e u t i c a l i n d u s t r y c o r r e c t l y point out that
t h e o v e r a l l s t r u c t u r e of the i n d u s t r y is not m o n o p o l i s t i c or o l i g o -
p o l i s t i c . In B r i t a i n , for e x a m p l e , t h e t o p five firms a c c o u n t e d for
o n l y 2 6 . 6 p e r c e n t of p h a r m a c e u t i c a l sales for 1973 ( S l a t t e r , 1977:
4 7 ) . A g a i n t h e p e o p l e w h o point to such statistics put up a mis-
l e a d i n g s m o k e s c r e e n . It is only meaningful to talk a b o u t d e g r e e of
c o n c e n t r a t i o n in a m a r k e t for p r o d u c t s which are s u b s t i t u t a b l e . F o r
e x a m p l e , it is m e a n i n g f u l to talk a b o u t c o n c e n t r a t i o n in t h e a u t o -
m o b i l e m a r k e t b y o b s e r v i n g w h a t p r o p o r t i o n o f t h e m a r k e t i s con-
t r o l l e d by t h e five l e a d i n g car m a n u f a c t u r e r s . T h i s is b e c a u s e F o r d s
o r C h r y s l e r s c a n b e s u b s t i t u t e d for G e n e r a l M o t o r s c a r s . H o w e v e r ,
t h e p r o d u c t s o f o n e drug m a n u f a c t u r e r which m a k e s a n t i b i o t i c s
c a n n o t b e s u b s t i t u t e d for t h o s e o f a n o t h e r which p r o d u c e s tran-
q u i l l i s e r s o r c o n t r a c e p t i v e s . W h e n o n e l o o k s a t the c o n c e n t r a t i o n
w i t h i n t h e r a p e u t i c c a t e g o r i e s , t h e p h a r m a c e u t i c a l industry e m e r g e s
as a highly o l i g o p o l i s t i c m a r k e t ( S l a t t e r , 1977: 4 8 - 9 ) .
S c h w a r t z m a n ' s ( 1 9 7 6 : T a b l e 6.14) d a t a e n a b l e u s t o e x a m i n e t h e
p e r c e n t a g e o f t h e US m a r k e t c o n t r o l l e d by t h e leading four firms for
n i n e m a j o r t h e r a p e u t i c c a t e g o r i e s i n 1973. B e g i n n i n g with the
l o w e s t four-firm c o n c e n t r a t i o n r a t i o , t h e results w e r e : s e d a t i v e s - 6 1
p e r c e n t , a n a l g e s i c s (ethical s y s t e m i c ) - 66 p e r c e n t ; a n t i b i o t i c s
( t o t a l ) - 69 p e r c e n t ; a n t i h i s t a m i n e s - 76 p e r c e n t ; oral d i u r e t i c s - 77
p e r c e n t ; p s y c h o s t i m u l a n t s - 83 per c e n t ; t r a n q u i l l i s e r s (oral
a t a r a c t i c s ) - 86 p e r c e n t ; a n t i a r t h r i t i c s - 96 per c e n t ; and anti-
d i a b e t i c s (oral h y p o g l y c e m i c s ) - 98 per c e n t . C o n c e n t r a t i o n is e v e n
m o r e p r o n o u n c e d at t h e level of bulk drug p r o d u c t i o n . For
e x a m p l e , a s c o r b i c acid ( V i t a m i n C) in d o s a g e forms is sold by m o r e
t h a n a h u n d r e d c o m p a n i e s . T h e e n t i r e o u t p u t o f t h e v i t a m i n itself,
h o w e v e r , i s p r o d u c e d b y M e r c k . Pfizer, and R o c h e ( U N C e n t r e o n
T r a n s n a t i o n a l C o r p o r a t i o n s , 1979: 3 8 ) . B y their selling policies
b u l k p r o d u c e r s are a b l e t o c o n t r o l t h e e x t e n t o f c o m p e t i t i o n . M a n y
b u l k p r o d u c e r s a r e m o n o p o l i s t s . N e a r l y 500 o f t h e 650 bulk
m e d i c i n a l c h e m i c a l s sold in the U n i t e d S t a t e s in 1975 w e r e a v a i l a b l e
162
Antitrust
Legal monopolies
T h e f u n d a m e n t a l m e c h a n i s m which g u a r a n t e e s limited price c o m -
p e t i t i o n in t h e p h a r m a c e u t i c a l i n d u s t r y is t h e g r a n t i n g of p a t e n t s to
t h e d i s c o v e r e r s of n e w m e d i c i n e s for a p e r i o d of 16, 17 or 20 y e a r s ,
t h e p e r i o d d e p e n d i n g on the c o u n t r y . T h e h o l d e r of a p r o d u c t
p a t e n t has e x c l u s i v e r i g h t s o v e r t h e m a n u f a c t u r e and sale of the
p r o d u c t until t h e p a t e n t e x p i r e s . It is a legal m o n o p o l y . By defini-
t i o n , w h e n a d r u g is still u n d e r p a t e n t price c o m p e t i t i o n is
precluded.
A m o s t v o c i f e r o u s o p p o n e n t of legal m o n o p o l i e s on m e d i c i n e s
w a s S e n a t o r K e f a u v e r w h o a d v o c a t e d "the long-held m o r a l belief
t h a t no o n e s h o u l d h a v e the right to w i t h h o l d from t h e p u b l i c
p r o d u c t s w h i c h r e l i e v e suffering and may spell the difference
b e t w e e n life a n d d e a t h ' . N a t i o n s differ in the e x t e n t to w h i c h they
p e r m i t legal m o n o p o l i e s o v e r m e d i c i n e s . M a n y c o u n t r i e s will not
p a t e n t m e d i c i n a l p r o d u c t s , but grant t h e m u c h w e a k e r p r o t e c t i o n o f
p a t e n t s for a p a r t i c u l a r m e t h o d of p r o d u c i n g a d r u g (e.g. A r g e n t i n a ,
Austria. Cameroon. C e n t r a l African E m p i r e . Chad, Chile,
Colombia, C o n g o , D a h o m e y , Denmark. Egypt, Gabon, Ghana.
G r e e c e , I n d i a , Ivory Coast. M a d a g a s c a r , the N e t h e r l a n d s .
Pakistan, Senegal. Spain, Sweden, Switzerland, Upper Volta,
U r u g u a y , V e n e z u e l a , Yugoslavia). A dwindling number of coun-
tries grant neither product nor process patents (e.g. Brazil, Iran,
2
Italy, R e p u b l i c of K o r e a , T u r k e y ) . A n u m b e r of countries which
r e c o g n i s e b o t h p r o d u c t and p r o c e s s p a t e n t s have a d o p t e d p r o -
v i s i o n s for c o m p u l s o r y licensing of c o m p e t i n g firms to p r o d u c e t h e
p r o d u c t in the public interest (e.g. Australia, C a n a d a , Federal
R e p u b l i c o f G e r m a n y , G r e a t B r i t a i n ( r e p e a l e d i n 1977), I s r a e l ) .
S e n a t o r K e f a u v e r o n c e w e n t close i n t h e U n i t e d States t o w i n n i n g
s u p p o r t for a p r o p o s a l to r e d u c e t h e p e r i o d of p a t e n t p r o t e c t i o n for
d r u g s t o t h r e e y e a r s . A t t h e end o f t h a t p e r i o d t h e d i s c o v e r e r w o u l d
h a v e t o m a k e t h e p r o d u c t a v a i l a b l e u n d e r licence t o all c o m p e t i t o r s
for a r o y a l t y fee of up to 8 p e r cent.
163
Antitrust
i n c e n t i v e for i n n o v a t i o n . T h e q u e s t i o n that K e f a u v e r w a s a s k i n g ,
h o w e v e r , i s h o w m u c h i n c e n t i v e i s sufficient. I n a d d i t i o n t o u n d e r -
m i n i n g c o m p e t i t i o n t h e r e are o t h e r w a y s that t h e quest for p a t e n t s
can run c o u n t e r t o t h e p u b l i c i n t e r e s t . D u r i n g the S e c o n d W o r l d
W a r , D r V . B u s h , d i r e c t o r o f t h e U S Office o f Scientific R e s e a r c h ,
w a s r e s p o n s i b l e for g e t t i n g t h e d r u g c o m p a n i e s t o m a k e t h e new
w o n d e r d r u g , p e n i c i l l i n , a v a i l a b l e in q u a n t i t y for the war effort. In
A p r i l 1943 B u s h r e p o r t e d t h a t t h e c o m p a n i e s had c o - o p e r a t e d "after
a f a s h i o n ' . In a letter to an A r m y A i r C o r p s c o n s u l t a n t , Dr B u s h
c o m p l a i n e d : ' T h e y h a v e n o t m a d e their e x p e r i m e n t a l results and
their d e v e l o p m e n t of manufacturing processes generally available,
h o w e v e r . . . this is the p r o b l e m ' ( M i n t z , 1967: 366). T h e p r o b l e m
w a s t h a t ' t h e firms w e r e t o o busy trying t o c o r n e r p a t e n t s o n v a r i o u s
p r o c e s s e s in t h e p r o d u c t i o n of penicillin to p r o d u c e much of it'
( H a r r i s , 1964). T h e c o - o r d i n a t o r o f t h e W a r P r o d u c t i o n B o a r d ' s
special penicillin p r o g r a m m e , Albert L. Elder, wrote in a January
1944 m e m o r a n d u m :
A n o t h e r w a y t h a t t h e p a t e n t m e c h a n i s m r e b o u n d s against the
p u b l i c i n t e r e s t is t h r o u g h c r e a t i n g i n c e n t i v e s for r e s e a r c h effort to
be directed at ' m e - t o o ' drugs rather than therapeutic advances. In
C h a p t e r 3 we saw t h a t t h e g r e a t m a j o r i t y of n e w p r o d u c t s which
c o m e o n t h e m a r k e t are m o l e c u l a r m a n i p u l a t i o n s o f p r o d u c t s
a l r e a d y u n d e r p a t e n t . T h e y are a t t e m p t s t o get a r o u n d t h e legal
m o n o p o l y by p a t e n t i n g a m e - t o o p r o d u c t which is m o l e c u l a r l y
d i s t i n c t but t h e r a p e u t i c a l l y i d e n t i c a l . S c a r c e r e s e a r c h t a l e n t and
m o n e y are directed at me-too research precisely because of the
p a t e n t s y s t e m . M e - t o o r e s e a r c h has o c c a s i o n a l l y s t u m b l e d u p o n
significant t h e r a p e u t i c a d v a n c e s ( e . g . p r e d n i s o n e from c o r t i s o n e ;
T h o r a z i n e from t h e e a r l y a n t i h i s t a m i n e s ) . Y e t h o w m u c h m o r e o f
v a l u e m i g h t t h e s e scientists have d i s c o v e r e d i f their goal had b e e n
t h e m a x i m u m a d v a n c e m e n t of m e d i c i n e i n s t e a d of finding a l o o p -
hole a r o u n d a patent?
b e f o r e a S e n a t e s u b c o m m i t t e that d u r i n g his t e n u r e at S q u i b b
an e s t i m a t e d 25 per cent of r e s e a r c h funds w e r e d e v o t e d to ' w o r t h -
w h i l e ' p r o j e c t s , a n d 7 5 p e r c e n t t o the d e v e l o p m e n t o f m e - t o o d r u g s
a n d u n i m p o r t a n t c o m b i n a t i o n p r o d u c t s . C o n s o l e testified that 'with
m a n y of t h e s e p r o d u c t s , it is clear w h i l e t h e y are on t h e d r a w i n g
b o a r d t h a t t h e y p r o m i s e no utility. T h e y p r o m i s e s a l e s . It is not a
q u e s t i o n of p u r s u i n g t h e m b e c a u s e s o m e t h i n g may c o m e of it. . .it
is p u r s u e d s i m p l y b e c a u s e t h e r e is a profit in it' ( S i l v e r m a n and L e e ,
1974: 4 0 ) . P a t e n t laws also restrict the c a p a c i t y o f i n d u s t r y
r e s e a r c h e r s t o c o n s u l t w i t h o u t s i d e scientists o n t h e p r o g r e s s o f t h e i r
w o r k . T o d o s o m i g h t e n d a n g e r t h e secrecy o f a p a t e n t a b l e i n n o v a -
tion. O n e of A m e r i c a ' s most eminent pharmacologists. Professor
K e n n e t h L. M e l m o n , testified before t h e S e n a t e : i k n o w for a fact
t h a t t h e p r e s e n t p a t e n t laws have p r e v e n t e d m y scientific c o o p e r -
a t i o n w i t h i n d u s t r y ' ( S u b c o m m i t t e e o n H e a l t h , 1974, P a r t 2 : 6 8 5 ) .
T h e i m p o r t a n t fact a b o u t p a t e n t s i s t h a t t h e r e i s s t r o n g e v i d e n c e
t h a t t h e i r r e s t r i c t i v e effect on c o m p e t i t i o n c o n t i n u e s long after the
p a t e n t s c o n c e r n e d h a v e e x p i r e d ( S l a t t e r , 1977; 7 2 - 3 ) . A c o m p a n y
w h i c h h a s h a d e x c l u s i v e m a r k e t i n g o f a n e w p r o d u c t for a n u m b e r o f
y e a r s g e t s c o n s u m e r s ( d o c t o r s ) i n the habit o f using ( p r e s c r i b i n g )
t h a t p r o d u c t ( W h i t t e n , 1979). L a t e e n t r a n t s t o t h e m a r k e t after the
p a t e n t has e x p i r e d have to struggle a g a i n s t this a d v a n t a g e . A
F e d e r a l T r a d e C o m m i s s i o n study ( B o n d and L e a n , 1977) i n d i c a t e s
t h a t late e n t r a n t s g e n e r a l l y fail to do t h i s , at least in t h e oral
d i u r e t i c s and a n t i a n g i n a l m a r k e t s w h i c h w e r e t h e subject o f the
s t u d y . N e i t h e r h e a v y p r o m o t i o n n o r p r i c e c u t t i n g w a s successful i n
p e r s u a d i n g d o c t o r s t o select t h e s u b s t i t u t e b r a n d s o f t h e e n t r a n t s i n
g r e a t v o l u m e . O n e m u s t s y m p a t h i s e with t h e a p p a r e n t l y irrational
i n t r a n s i g e n c e o f t h e p r e s c r i b i n g p h y s i c i a n . T h e b e w i l d e r i n g array o f
b r a n d n a m e s w h i c h c o n f r o n t s t h e d o c t o r - 2 0 , 0 0 0 b r a n d n a m e s for
t h e 700 different d r u g s on t h e m a r k e t in t h e U n i t e d States - m e a n s
t h a t t h e d o c t o r is d o i n g well if s/he can r e m e m b e r the b r a n d n a m e of
3
t h e first v e r s i o n w h i c h a p p e a r s . T h e d o c t o r has e n o u g h t o learn
w i t h o u t b o t h e r i n g w i t h t h e b r a n d n a m e s o f late m a r k e t e n t r a n t s .
H e n c e t h e r a t i o n a l e for t h e policy a d v o c a t e d b y m a n y r e f o r m e r s o f
a b o l i s h i n g b r a n d n a m e s . E a c h p r o d u c t w o u l d h a v e a single g e n e r i c
n a m e , so that choices between c o m p e t i n g suppliers would be made
m o r e on t h e b a s i s of p r i c e and quality and less on t h e s t r e n g t h of
habits c o n d i t i o n e d by early entry.
T h e e x t e n t t o w h i c h t h e early m a r k e t e n t r a n t with a n e x p i r e d
p a t e n t can resist p r i c e r e d u c t i o n s w h i l e m a i n t a i n i n g m a r k e t
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d o m i n a n c e c a n b e s t a g g e r i n g . T h e m o s t e x p e n s i v e p r o d u c t often
h a s t h e g r e a t e s t s h a r e o f t h e m a r k e t . F r e q u e n t l y the leading b r a n d
sells at five to ten t i m e s t h e price o f t h e c h e a p e s t s u p p l i e r s . In t h e
c a s e o f t h e r e s e r p i n e m a r k e t , the a v e r a g e price c h a r g e d i n t h e
U n i t e d S t a t e s by t h e four lowest cost s u p p l i e r s w a s S I . 1 7 (1,000 0.25
m g . t a b l e t s ) . T h e l e a d i n g b r a n d , C i b a - G e i g y ' s S e r p a s i l , sold for
S 3 8 . 7 1 , more than 30 times as much (UN Centre on Transnational
4
C o r p o r a t i o n s , 1979: 4 9 . 1 3 6 ) .
T h e fact t h a t p a t e n t s c r e a t e legal m o n o p o l i e s , and that they a l l o w
a r b i t r a r y p r i c e differentials t o c o n t i n u e e v e n after t h e y e x p i r e , has
i m p o r t a n t i m p l i c a t i o n s for c r i m e . I n t h e m i n d o f t h e p h a r m a c e u t i c a l
e x e c u t i v e , t h e r e is little m o r a l difference b e t w e e n legal and illegal
5
p r i c e fixing. T h e m o r a l a u t h o r i t y of a n t i t r u s t law rests in a s s u m p -
t i o n s a b o u t t h e v a l u e o f free c o m p e t i t i o n . P h a r m a c e u t i c a l execu-
t i v e s find difficulty in e s t a b l i s h i n g t h e r e l e v a n c e of this m o r a l
a u t h o r i t y t o t h e i r w o r k s i t u a t i o n i n which e s c h e w i n g price c o m -
p e t i t i o n is n o r m a l a n d legal. M o r e t h a n l e g a l , it is affirmatively
s a n c t i o n e d i n law t h r o u g h p a t e n t s .
T h e e x i s t e n c e of legal m o n o p o l y p o i n t s up t h e a m b i g u i t y felt by
t h e e x e c u t i v e a b o u t t h e i m p r o p r i e t y o f illegal m o n o p o l y . I n d e e d ,
p h a r m a c e u t i c a l e x e c u t i v e s a r e socialised t o p e r c e i v e moral virtue i n
a n t i c o m p e t i t i v e p r i c i n g p r a c t i c e s . R e p e a t e d l y m y i n f o r m a n t s would
a d m o n i s h t h a t such pricing p r a c t i c e s w e r e a way of e n s u r i n g that
p r o p e r r e w a r d s and incentives went to the innovators of health-
g i v i n g d r u g s . ' P r i c e fixing saves lives' is a c a r i c a t u r e of this p o s i t i o n ,
b u t t h e c a r i c a t u r e g r a s p s t h e e s s e n c e o f t h e stance w h i c h has real
m o r a l a u t h o r i t y t o p h a r m a c e u t i c a l e x e c u t i v e s . 'Price c o m p e t i t i o n i s
t h e s t r e n g t h o f t h e free e n t e r p r i s e s y s t e m ' has n o moral a u t h o r i t y
b e c a u s e it is r e c o g n i s e d for the h u m b u g it is with r e s p e c t to t h e i r
industry.
Advantages of oligopoly
166
Antitrust
O f c o u r s e t h e a b o v e a r g u m e n t s and t h e d a t a o f t h e last c h a p t e r
s u g g e s t i n g t h e s u p e r i o r q u a l i t y p e r f o r m a n c e o f the t r a n s n a t i o n a l s
do n o t imply t h a t by b e c o m i n g e v e n larger, t r a n s n a t i o n a l s will
f u r t h e r i m p r o v e t h e i r quality p e r f o r m a n c e .
E c o n o m i e s of scale in p r o d u c t i o n are of limited r e l e v a n c e to
pharmaceuticals.
167
Antitrust
T h e r e a r e c e r t a i n l y e c o n o m i e s o f scale i n p r o m o t i o n . L a r g e firms
spend almost as much on p r o m o t i o n as they do on production.
S m a l l firms find it i m p o s s i b l e to r e t a i n a large t e a m of d e t a i l e r s for
d o c t o r v i s i t s , t o t a k e o u t full-page a d v e r t i s e m e n t s i n leading
m e d i c a l j o u r n a l s , s p o n s o r c o n f e r e n c e s i n A c a p u l c o , and d o all the
o t h e r t h i n g s n e c e s s a r y for e n t r y t o t h e b r a n d - n a m e m a r k e t . T h e s e
s c a l e - e c o n o m i e s in p r o m o t i o n are not a justification for o l i g o p o l y ,
b u t o n e o f t h e c a u s e s of it. T h e y c o n s t i t u t e a m a j o r b a r r i e r for e n t r y
of n e w c o m p e t i t o r s . M o r e o v e r , the question of w h e t h e r p r o m o t i o n
is on b a l a n c e a social benefit will be c o n s i d e r e d critically in t h e next
chapter.
T h e s t r o n g e s t i n d u s t r y justification for o l i g o p o l y c o n c e r n s
e c o n o m i e s o f scale i n r e s e a r c h and d e v e l o p m e n t . H a n s e n (1979)
f o u n d t h e a v e r a g e c u r r e n t cost of d e v e l o p i n g a new c h e m i c a l entity
to t h e s t a n d a r d s r e q u i r e d for m a r k e t i n g as a drug in t h e U n i t e d
S t a t e s to be $54 m i l l i o n . C l e a r l y , this is b e y o n d the r e s o u r c e s of
s m a l l c o m p a n i e s . T h e O E C D c o n s i d e r e d t h a t 'for a r e s e a r c h - b a s e d
p h a r m a c e u t i c a l c o m p a n y t o have r e a s o n a b l e p r o s p e c t s o f g r o w t h , i t
is u s u a l l y c o n s i d e r e d t h a t at least 300 r e s e a r c h w o r k e r s should be
e m p l o y e d ' ( O E C D , 1969). I n c r e a s i n g l y , p r o d u c t i n n o v a t i o n s are
c o n c e n t r a t e d i n t h e r e s e a r c h d i v i s i o n s o f t h e largest c o m p a n i e s
b e c a u s e o f e s c a l a t i n g r e g u l a t o r y r e q u i r e m e n t s and t e c h n i c a l
d e m a n d s for n e w b r e a k t h r o u g h s . G r a b o w s k i and V e r n o n ( 1 9 7 9 : 4 7 )
s h o w t h a t w h i l e t h e s h a r e of d r u g sales of the largest four firms
r e m a i n e d fairly c o n s t a n t b e t w e e n 1957 and 1 9 7 1 , t h e p r o p o r t i o n o f
i n n o v a t i o n a l o u t p u t ( n e w c h e m i c a l e n t i t i e s ) a c c o u n t e d for b y t h e
four l a r g e s t firms i n c r e a s e d from 24 p e r cent to 49 p e r c e n t . B e t w e e n
168
Antitrust
O n e s u s p e c t s t h a t p h a r m a c e u t i c a l c o m p a n i e s m o r e often t h a n not
d e c i d e a g a i n s t m a r k e t i n g a beneficial yet u n p r o f i t a b l e p r o d u c t .
N e v e r t h e l e s s , in a perfectly c o m p e t i t i v e m a r k e t , c o m p a n i e s could
n o t afford t h e l u x u r y o f a n y lines w h i c h c a u s e losses. T o t h e e x t e n t
t h a t s e r v i c e d r u g s d o e x i s t , t h e y are m a d e p o s s i b l e b y t h e oligo-
p o l i s t i c s t r u c t u r e o f t h e m a r k e t . I n c o n c l u s i o n , t h e n , t h e r e are
c e r t a i n i m p o r t a n t p u b l i c benefits from o l i g o p o l y i n t h e p h a r m a -
c e u t i c a l i n d u s t r y . T h e q u e s t i o n is, h o w e v e r , w h e t h e r t h e public
w o u l d be b e t t e r s e r v e d by direct p u b l i c funding for t h e s e benefits
(for e x a m p l e , g o v e r n m e n t p r o d u c t i o n o f service d r u g s ) , while sub-
s i d i s i n g such f u n d i n g from t h e savings which w o u l d follow from
breaking oligopolistic power.
169
Antitrust
170
Antitrust
A f u n d a m e n t a l reality of any e c o n o m i c i n s t i t u t i o n is t h a t it
c r e a t e s n e w t e m p t a t i o n s , p r e s s u r e s and o p p o r t u n i t i e s for c r i m e
w h i c h a r e u n i q u e t o it. P a t e n t s c r e a t e p a t e n t p i r a t e s , a n d . a s w e saw
i n C h a p t e r 2 , b r i b e s for e m p l o y e e s t o disclose c o m m e r c i a l s e c r e t s .
P r i c e c o n t r o l s c r e a t e illegal price i n c r e a s e s . In 1977 the M e x i c a n
g o v e r n m e n t i m p o s e d fines of up to 5().(XX) p e s o s ( S U S 2 , 7 1 5 ) on
forty companies for increasing prices without government
a p p r o v a l . M o r e t y p i c a l l y , f i n d i n g l o o p h o l e s t o get a r o u n d price
c o n t r o l laws i s t h e p r e f e r r e d s t r a t e g y . I n M e x i c o , c o m p a n i e s w h o
h a v e had a price of say 100 p e s o s a p p r o v e d for a b o t t l e o f 2 0 t a b l e t s
m a n o e u v r e a r o u n d t h e law by m a r k e t i n g a n e w pack of 24 t a b l e t s for
150 p e s o s . A m o r e w i d e l y used s t r a t e g y is t h e ' r e g i s t r a t i o n l o o p -
h o l e ' . W h e n t h e price of o n e of its d r u g s is fixed at an unsatisfac-
torily low l e v e l , t h e c o m p a n y s u b m i t s a n e w r e g i s t r a t i o n a p p l i c a t i o n
for t h e s a m e d r u g u n d e r a n e w n a m e ; or, if it has o n e . a m e - t o o
version o f t h e original.
S o m e o f t h e g o v e r n m e n t price r e g u l a t o r s t o w h o m I s p o k e had
little d o u b t that c o m p a n i e s often p r o v i d e d t h e m with false and
m i s l e a d i n g i n f o r m a t i o n on costs in o r d e r to get a price i n c r e a s e . O n e
c o m p a n y i n f o r m a n t told m e t h a t t h e m a n a g i n g - d i r e c t o r o f his t r a n s -
n a t i o n a l had a s c h e m e for s h o w i n g the A u s t r a l i a n H e a l t h D e p a r t -
m e n t t h a t its t r a n s f e r prices for r a w m a t e r i a l s i m p o r t e d from
c o r p o r a t e h e a d q u a r t e r s w e r e twice w h a t they i n fact w e r e . H a l f the
r a w m a t e r i a l s w e r e i m p o r t e d from h e a d q u a r t e r s at. say. S10 a g r a m
a n d half sent free of c h a r g e 'for use in c o n d u c t i n g trials'. W h i l e the
real cost of t h e s h i p m e n t w a s $5 a g r a m , t h e H e a l t h D e p a r t m e n t
c o u l d be s h o w n an i n v o i c e to i n d i c a t e t h a t t h e transfer price w a s
S10.
171
Antitrust
b e g a n to c h a t . In t h e c o u r s e of an a m i a b l e c o n v e r s a t i o n he m e n -
t i o n e d t h a t he w a s off to play t e n n i s on the c o u r t s of a n o t h e r
p h a r m a c e u t i c a l c o m p a n y l o c a t e d n e a r b y . W i t h c a l c u l a t e d naivety I
said: ' O h a r e n ' t you c u t - t h r o a t c o m p e t i t o r s w h o are a l w a y s a t e a c h
o t h e r ' s t h r o a t s ? ' - a t a u t o l o g o u s q u e s t i o n t h a t still rings in my e a r s .
N o , h e s a i d , t h e y got o n well t o g e t h e r . W h y , h e c o n t i n u e d ,
j u s t r e c e n t l y w e got t o g e t h e r a b o u t 3 0 o f u s , all o f t h e a c c o u n t a n t s
a n d f i n a n c e d i r e c t o r s . . . t o sit a r o u n d t h e table t o g e t h e r and
w o r k o u t p r i c e s t h a t we could all a g r e e on in t h e s u b m i s s i o n s that
w e m a k e t o t h e H e a l t h D e p a r t m e n t . . . . S o t h a t , for e x a m p l e ,
we w o u l d all p u t d o w n r o u g h l y the s a m e price for the costs of
d i s t r i b u t i n g a d r u g s o t h a t the H e a l t h D e p a r t m e n t c o u l d n ' t c o m e
to o n e of us and say: ' L o o k , o t h e r c o m p a n i e s are c o s t i n g this at a
lot less t h a n y o u a r e . '
T h e H o f f m a n - L a R o c h e case s t u d y
V a l i u m a n d L i b r i u m h a v e b e e n b e t t e r t h a n gold for H o f f m a n - L a
R o c h e , t h e Swiss p a t e n t - h o l d e r s o f t h e t r a n q u i l l i s e r s . R o c h e sales o f
V a l i u m in t h e U n i t e d S t a t e s a l o n e a p p r o a c h e d $200 million for 1972
m a k i n g i t t h e t o p - s e l l i n g p r e s c r i p t i o n d r u g ( N a d e r , 1973). Inter-
n a t i o n a l p r i c e v a r i a t i o n s for V a l i u m reflect t h e c a p a c i t y of the
t r a n s n a t i o n a l w i t h a legal m o n o p o l y to c h a r g e w h a t e v e r t h e traffic
172
Antitrust
will b e a r . E v e n w i t h i n t h e E E C , i n G e r m a n y R o c h e sells V a l i u m a t
a l m o s t four t i m e s t h e p r i c e i t c h a r g e s i n B r i t a i n (1976 p r i c e s ) . R o c h e
h a s q u o t e d t h e Sri L a n k a n g o v e r n m e n t a price for V a l i u m 70 t i m e s
higher than the price charged by an Indian company ( A g a r w a l ,
1 9 7 8 b ) . T h e P a p u a N e w G u i n e a g o v e r n m e n t has b e e n offered
V a l i u m a t o n e t e n t h t h e price c h a r g e d t o the n e i g h b o u r i n g
A u s t r a l i a n g o v e r n m e n t ( G o r r i n g , 1978: 9 3 ) .
I n t h e late 1960s t h e B r i t i s h g o v e r n m e n t d e c i d e d t h a t H o f f m a n -
L a R o c h e w a s a b u s i n g m o n o p o l y p o w e r b y its pricing o f V a l i u m a n d
L i b r i u m . N e g o t i a t i o n s with t h e c o m p a n y led t o p a y m e n t s o f S I . 6
m i l l i o n to t h e g o v e r n m e n t for excess profits b e t w e e n 1967 and 1969.
R o c h e r e g a r d e d p a y i n g s o m e o f their profits t o t h e g o v e r n m e n t a s
p r e f e r a b l e to c u t t i n g t h e i r p r i c e s for fear t h a t t h e l a t t e r w o u l d lead
t o d e m a n d s from o t h e r c o u n t r i e s for e q u i v a l e n t price r e d u c t i o n s .
V a l i u m w a s also g i v e n free of c h a r g e to h o s p i t a l s in the N a t i o n a l
H e a l t h S e r v i c e . T h e r e w e r e c o m p e n s a t i n g benefits from this
e x p e n s e . P a t i e n t s started on Valium in hospital would continue on it
w h e n d i s c h a r g e d , and young doctors would acquire the habit of
p r e s c r i b i n g t h e d r u g d u r i n g their h o s p i t a l t r a i n i n g .
T h e B r i t i s h M o n o p o l i e s C o m m i s s i o n r e p o r t o n L i b r i u m and
V a l i u m focused i n t e r n a t i o n a l a t t e n t i o n o n m o n o p o l i s t i c d r u g
p r i c i n g . A n t i - c a r t e l c o u r t a c t i o n s followed i n W e s t G e r m a n y and
t h e N e t h e r l a n d s t o r e d u c e t h e p r i c e s o f L i b r i u m and V a l i u m . F o r
H o f f m a n - L a R o c h e , and for t h e p h a r m a c e u t i c a l i n d u s t r y g e n e r a l l y ,
the a d v e r s e publicity o f t h e British report o p e n e d the floodgates of
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Antitrust
t o u g h e r g o v e r n m e n t a l price c o n t r o l s a l m o s t e v e r y w h e r e except t h e
U n i t e d S t a t e s , w h e r e t h e P M A lobby p r o v e d a s s t r o n g a s ever.
H o f f m a n - L a R o c h e had d o n e a disservice to the industry by p u s h i n g
t o o h a r d , by failing to realise that w h i l e t h e m a r k e t could i m p o s e no
u p p e r limit on its p r i c e s , p u b l i c o p i n i o n c o u l d . W h i l e it had violated
no a n t i t r u s t l a w s , it had b r e a c h e d t h e c o m m u n i t y ' s sense of fair
p l a y , a n d i n d o i n g s o d e m o n s t r a t e d t h e limited r e l e v a n c e o f anti-
t r u s t law t o t h e p r o t e c t i o n o f d r u g c o n s u m e r s .
T h e logical u p s h o t of a r b i t r a r y i n t e r n a t i o n a l price v a r i a t i o n in
p h a r m a c e u t i c a l s o c c u r r e d i n 1973. F o l l o w i n g the M o n o p o l i e s
C o m m i s s i o n r e p o r t B r i t a i n had c h e a p e r d r u g prices t h a n t h e rest o f
the E E C . An enterprising Dutch firm, Centrafarm, began buying
H o f f m a n - L a R o c h e L i b r i u m and V a l i u m from British w h o l e s a l e r s
and t h e n reselling the drugs in the N e t h e r l a n d s , undercutting Roche
p r i c e s on sales of its o w n p r o d u c t . C e n t r a f a r m e v e n b o u g h t a
p r o d u c t ( N e g r a m ) i n B r i t a i n w h i c h had b e e n m a n u f a c t u r e d i n
H o l l a n d . T h e y b r o u g h t i t back t o resell i n H o l l a n d , again u n d e r -
c u t t i n g p r i c e s o n t h e local m a r k e t . T h e n t w o D u t c h l i c e n c e - h o l d e r s
for N e g r a m , S t e r l i n g and W i n t h r o p , sued C e n t r a f a r m for b r e a c h o f
p a t e n t a n d t r a d e m a r k r i g h t s . W h i l e they w o n i n t w o D u t c h c o u r t s ,
t h e S u p r e m e C o u r t i n t h e H a g u e , for t h e first t i m e e v e r , w e n t t o t h e
E E C C o u r t for a r u l i n g .
B e f o r e t h e L u x e m b o u r g C o u r t , t h e D u t c h g o v e r n m e n t b a s e d its
c a s e for d e m a n d i n g t h e d o c u m e n t s o n the p o t e n t i a l d a n g e r t o public
h e a l t h - t h e only g r o u n d s t h e R o m e t r e a t y allows for r e s t r i c t i n g
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Antitrust
T h e w i d e l y a c c e p t e d m o t i v a t i o n for t h e U K p o s i t i o n w a s straight
s e l f - i n t e r e s t . If B r i t i s h c o m p a n i e s are forced to sell c h e a p e r
e l s e w h e r e in E u r o p e , t h e y will a r g u e t h a t they can no l o n g e r hold
to t h e low p r i c e s c h a r g e d in B r i t a i n and t h e cost to t h e N H S will
g o u p ( L a m b e r t , 1976).
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Antitrust
176
Antitrust
T A B L E 5.1 W e i g h t e d a n n u a l a v e r a g e price t o r e t a i l e r s o f
t e t r a c y c l i n e , 2 5 0 m g , 100 c a p s u l e s '
Bristol Squibb
Pfizer Cyanamid (Polycycline (Steclin Upjohi
(Tetracyn) (Achromycin) & Brislacycline) & Tetracycline) (Panm
J $ S $ $
1955 30.60 30.60 30.60 30.60 30.60
1956 30.60 30.60 30.60 30.60 30.60
1957 30.60 30.60 30.60 30.60 30.60
1958 30.60 30.60 30.60 30.60 30.60
1959 30.60 30.60 30.60 30.60 30.60
1960 28.67 29.36 28.87 29.15 29.31
1961 26.01 25.88 25.88 26.00 25.95
1962 23.81 23.75 23.82 23.31 23.80
1963 22.00 22.00 22.00 22.00 22.00
1964 19.35 19.36 19.51 19.43 13.02
1965 17.60 17.60 17.74 17.60 8.41
1966 16.05 15.62 15.88 15.79 7.08
1967 11.75 11.37 14.95 8.41 6.57
1968 5.02 11.22 14.26 4.25 4.94
1969 4.25 11.22 6.00 4.25 4.95
1970 4.25 9.23 4.46 4.25 4.08
1971 4.25 4.50 4.17 4.25 3.86
1972 3.36 4.50 4.17 4.25 3.62
1973 3.25 4.50 3.25 4.25 2.52
1974 3.31 3.90 3.25 4.25 2.47
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Antitrust
Cyanamid -
Achromycin
Capsules.
2 5 0 m g . 100's
(Unit cost)* S2.26 SI.57 SI.77 $1.64 $1.59 $1.52 $1.56
Pfizer -
Tetracyn
Capsules,
2 5 0 m g . 100's
( A c t u a l unit
cost) S3.87 S3.01 S3.08 $2.74 $3.24 $2.94 $1.70
Bristol -
Polycycline
Capsules,
2 5 0 m g . 100's
(Reaveraged
unit c o s t ) * S6.24t NA SI.08 $1.67 $1.91 $1.92 $1.86
(January
•57)
Squibb -
Steclin
Capsules,
2 5 0 m g . 100's
( U n i t factory
cost)* NA $11.28 $9.47 $9.50 $9.58 $9.59 $7.71
Upjohn -
Panmycin
Capsules.
2 5 0 m g . 100's
(Unit finished
goods cost) $14.61 $9.86 NA NA $9.39 NA $7.98
(October)
$12.08
(December)
NA = not available.
D o e s not include royalty p a y m e n t s ,
t In 1 9 5 4 B r i s t o l ' s r e a v e r a g e d unit c o s t s w e r e : $ 6 0 . 2 5 ( M a y ) . $ 4 7 . 4 1 ( J u n e ) . $ 3 9 . 6 1 ( J u l y ) .
$ 2 9 . 7 9 ( A u g u s t ) . $ 2 3 . 7 3 ( S e p t e m b e r ) . $9.01 ( O c t o b e r ) . $6.24 ( N o v e m b e r ) . $4.91 (December).
t h a t is. s a l e s t o h o s p i t a l s and o t h e r p u b l i c i n s t i t u t i o n s . T h e r e w a s
c o n s i d e r a b l e e v i d e n c e t h a t t h e t e t r a c y c l i n e c o m p a n i e s did hold the
line o n s e c r e t b i d s . O n e i l l u s t r a t i o n w a s with a n $ 8 3 0 , 0 0 0 c o n t r a c t
w i t h t h e M i l i t a r y M e d i c a l S u p p l y A g e n c y i n 1957. B r i s t o l , Pfizer
a n d C y a n a m i d all bid S I . 8 3 a b o t t l e . B u t Pfizer had bid on t h e w r o n g
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Antitrust
I w a s d i s t u r b e d to l e a r n t h a t we w e r e the successful b i d d e r to L o s
A n g e l e s C o u n t y b e c a u s e w e bid o n t e t r a c y c l i n e 2 5 0 m g . c a p s u l e s
S22.49 p e r 100 less 2% d i s c o u n t . It is nice to get a Steclin o r d e r
finally from L o s A n g e l e s C o u n t y , but I have my fingers c r o s s e d ,
a n t i c i p a t i n g c e r t a i n r e a c t i o n s to w h a t we did. which may not be
good.
W h e n I got J a c k ' s p e r m i s s i o n t o q u o t e 2 % cash d i s c o u n t , t h e r e
w a s no q u e s t i o n in his mind or m i n e t h a t we e x p e c t e d you to
q u o t e the 2% as a c a s h d i s c o u n t .
179
Antitrust
I n f o r m a t i o n I p r e v i o u s l y r e c e i v e d and as w a s r e p o r t e d to you in
my l e t t e r of 4 - 2 7 - 5 5 stated that S q u i b b w a s to get the a w a r d
in N e w a r k b e c a u s e o f t h e fact that t h e y did a l l o w a 2%
discount.
It n o w d e v e l o p s from further r e p o r t that S q u i b b called the
a t t e n t i o n o f t h e P u r c h a s i n g Office in N e w a r k to the fact that t h e r e
w a s an a s t e r i s k on t h e i r bid, w h i c h m e a n t that the 2% w o u l d not
be a l l o w e d . On t h e basis of this i n f o r m a t i o n , Pfizer, S q u i b b .
B r i s t o l and L e d e r l e w e r e e q u a l i n b i d d i n g the $ 2 2 . 4 9 . O n May
4 t h , M r . Z i e g l e r , as a r e p r e s e n t a t i v e of L e d e r l e , w a s called in for
a d r a w i n g out o f a hat. B r i s t o l w a s successful and has r e c e i v e d t h e
award.
Y o u r e p o r t e d on a r e c e n t bid m a d e to M i l w a u k e e C o u n t y , for
which we thank you.
On Bid N o . 635 for 100's of T e t r a c y c l i n e 2 5 0 M g . , L e d e r l e ' s
p r o d u c t w a s offered at $ 2 1 . 0 8 p e r 100. In o r d e r to p r o p e r l y record
t h i s v i o l a t i o n I m u s t k n o w w h e t h e r this w a s a direct bid by
L e d e r l e , o r w h e t h e r t h e bid w a s m a d e t h r o u g h a d e a l e r .
I w o u l d very m u c h a p p r e c i a t e y o u r setting me straight.
180
Antitrust
181
Antitrust
T h e l a t t e r w a s not r e l e v a n t , o f c o u r s e , t o m o s t o f t h e U S p r i c e -
fixing c a s e s . M o s t d r a m a t i c o f t h e c i r c u m s t a n t i a l e v i d e n c e w a s the
c o n v i c t i o n in N e w Y o r k state in D e c e m b e r 1955 of J o h n G. B r o a d y ,
a l a w y e r a n d p r i v a t e i n v e s t i g a t o r , for w i r e - t a p p i n g n u m e r o u s tele-
p h o n e s , i n c l u d i n g t h o s e o f Bristol and S q u i b b ' s e x e c u t i v e offices.
P f i z e r ' s g e n e r a l c o u n s e l had paid B r o a d y $ 6 0 , 0 0 0 t o m a k e c e r t a i n
i n v e s t i g a t i o n s a n d his illegal a c t i o n s s t e m m e d from t h o s e investi-
g a t i o n s . L i k e so m u c h o f t h e e v i d e n c e for c o n s p i r a c y , this w a s highly
c i r c u m s t a n t i a l . E v e n i f B r o a d y w a s b u g g i n g the Bristol and S q u i b b
e x e c u t i v e s u i t e s at Pfizer's b e h e s t , h o w could it be p r o v e d that this
w a s d o n e to p o l i c e a c o n s p i r a c y ?
182
Antitrust
M o r e o v e r , t h e J u d g e c o n c l u d e d : i n t h e face o f t h e g o v e r n m e n t ' s
c i r c u m s t a n t i a l p r o o f and a r g u m e n t , s t a n d s t h e d e f e n d a n t s ' v i g o r o u s
and c o m p l e t e d e n i a l s o f t h e e x i s t e n c e o f any a g r e e m e n t o r con-
s p i r a c y to e n g a g e in t h e illegal acts c h a r g e d in t h e i n d i c t m e n t . '
W h i l e t a k i n g p a i n s t o point out t h a t c i r c u m s t a n t i a l e v i d e n c e could
b e highly r e l e v a n t , h e a p p r o v i n g l y cited J u d g e M e d i n a ' s s t a t e m e n t
in t h e Investment Bankers' c a s e " on d e t e r m i n i n g t h e e x i s t e n c e of
c o n s p i r a c y : ' T h e a n s w e r m u s t not be f o u n d in s o m e crystal ball or
v a g u e l y s e n s e d by s o m e p r o c e s s of i n t u i t i o n , b a s e d u p o n a c h a n c e
p h r a s e used h e r e or t h e r e . . . .'
To c o n c l u d e . J u d g e Canella q u o t e d Judge C h a s e in US v.
Buchalter: ' N o t h i n g this c o u r t might n o w say could b e t t e r sum-
m a r i z e t h e r a t i o n a l e of its o p i n i o n in t h e i n s t a n t c a s e . '
184
Antitrust
a s s u m p t i o n t h a t t e t r a c y c l i n e w a s i n h e r e n t l y p r o d u c e d b y the
p r o c e s s d i s c l o s e d in' t h e C y a n a m i d p a t e n t o n c h l o r t e t r a c y c l i n e ,
t e t r a c y c l i n e itself w a s not p a t e n t a b l e . H e n c e t h e e x a m i n e r ' s con-
c l u s i o n w a s t h a t Pfizer had identified t e t r a c y c l i n e a s o n e o f a n u m b e r
of d r u g s p r o d u c e d in an 'old p r o c e s s ' and t h e r e f o r e c o n s t i t u t e d no
a d v a n c e m e n t over prior art.
T h i s s e t b a c k c a u s e d Pfizer's p a t e n t a g e n t t o direct Pfizer scientists
to e v a l u a t e the e x a m i n e r ' s assumption of co-production. Subse-
q u e n t l y t h e r e s e a r c h w a s s t o p p e d , h o w e v e r . Yet t h e t e s t s w e r e i n
fact c o n t i n u e d and t h e r e s u l t s r e c o r d e d o u t s i d e t h e n o r m a l l a b o r a -
t o r y r e c o r d s . T h e s e secret d a t a s h o w e d t h e e x a m i n e r ' s a s s u m p t i o n
to be correct, according to the g o v e r n m e n t ' s evidence.
A p a r t from t h e c o n c e a l m e n t o f test r e s u l t s , i t w a s alleged that
Pfizer r i g g e d o t h e r t e s t s . T h e e x a m i n e r had a g r e e d t o r e a d m i t the
a p p l i c a t i o n i f Pfizer could d e m o n s t r a t e t h a t t e t r a c y c l i n e could not
b e r e c o v e r e d from f e r m e n t a t i o n b r o t h s p r o d u c e d i n a c c o r d a n c e
with the chlortetracycline process patent. G o v e r n m e n t evidence
i n d i c a t e d t h a t t h e m i c r o - o r g a n i s m s s e l e c t e d by Pfizer for this test
w e r e k n o w n t o b e p o o r p r o d u c e r s o f a n t i b i o t i c s , and t h a t the w h o l e
t e s t p r o c e d u r e w a s s t r u c t u r e d t o m i n i m i s e a n t i b i o t i c p r o d u c t i o n and
d i s c o v e r y . T h e p a t e n t w a s g r a n t e d , but t h e p a t e n t e x a m i n e r w a s
l a t e r t o testify t h a t i f h e had k n o w n o f t h e t e c h n i c a l c o n d i t i o n s u n d e r
w h i c h t h e Pfizer test had b e e n c o n d u c t e d , h e w o u l d not have
granted the patent.
185
Antitrust
186
Antitrust
187
Antitrust
d e f e n d a n t s r e s p o n d e d with s w e e p i n g c l a i m s o f p r i v i l e g e ,
p r i m a r i l y b e c a u s e o f a l l e g e d a t t o r n e y - c l i e n t r e l a t i o n s h i p , but also
o n t r a d e s e c r e t and r e l a t e d g r o u n d s . V a r i o u s privileges w e r e
claimed as to several hundred thousand d o c u m e n t s . In order to
d e a l w i t h t h e issues t h a t t h e o b j e c t i o n s r a i s e d . J u d g e L o r d , o n
A u g u s t 5, 1971, appointed a t h r e e - m e m b e r team of discovery
m a s t e r s t o m a k e p r e l i m i n a r y rulings o n privilege and t o m a k e
r e c o m m e n d a t i o n s t o him ( W o l f r a m 1976: 3 1 4 - 1 5 ) .
O n e o f t h e m a i n a r g u m e n t s o f t h e d e f e n d a n t s against c r e a t i o n o f
t h e c o n s u m e r c l a s s e s w a s t h a t trial o f t h e c l a i m s i n t h e s e classes
w o u l d be u n m a n a g e a b l e for a n u m b e r of r e a s o n s . F i r s t , t h e
d e f e n d a n t s w o u l d insist u p o n their right to j u r y trial as to each
a n d e v e r y c o n s u m e r ' s c l a i m . T h i s w o u l d r e q u i r e t h e services o f all
t h e federal j u d g e s in t h e e n t i r e s y s t e m o v e r a p e r i o d of several
y e a r s . J u d g e L o r d r e s p o n d e d with t h e d e v a s t a t i n g r e m a r k t h a t
t h e w a y to try to a j u r y a vast n u m b e r of d a m a g e claims w a s to try
all of a s t a t e ' s c o n s u m e r d a m a g e c l a i m s at o n c e . T h e e v i d e n c e
w o u l d not c o n s i s t o f a n infinite p a r a d e o f individual c o n s u m e r s
w i t h t e s t i m o n y a b o u t family d r u g s t o r e p u r c h a s e s . R a t h e r
e c o n o m i s t s a n d s t a t i s t i c i a n s w o u l d d e s c r i b e t h e total v o l u m e o f
c o n s u m e r sales and t h e p r o b a b l e p r i c e s t h a t w o u l d have b e e n
charged in the absence ofthe antitrust violations. In other w o r d s ,
t h e ' d a m a g e ' issue c o u l d b e r e f r a m e d t o i n q u i r e into t h e e x t e n t o f
injury t h a t t h e a n t i t r u s t v i o l a t i o n had w r e a k e d u p o n all
c o n s u m e r s w i t h i n t h e s t a t e . As to this i s s u e , a single j u r y could
h e a r all t h e e v i d e n c e a n d r e n d e r a final and b i n d i n g verdict. T h e
c o n s u m e r m e m b e r s o f t h e class w o u l d t h e n simply m a k e claims
188
Antitrust
a g a i n s t w h a t e v e r fund w a s p r o d u c e d b y t h e v e r d i c t . T h e
d e f e n d a n t s w o u l d h a v e n o further l e g i t i m a t e i n t e r e s t i n t h e
q u e s t i o n o f d a m a g e d i s t r i b u t i o n and could b e e x c u s e d . T h e
v a l i d a t i o n of c l a i m s a n d d i s t r i b u t i o n could be h a n d l e d by a t e a m
a p p o i n t e d b y t h e j u d g e . T h e costs o f d i s t r i b u t i o n w o u l d b e t a k e n
o u t o f t h e fund. A l t h o u g h t h e s e c o n c e p t s w e r e t e n t a t i v e . J u d g e
L o r d b e l i e v e d t h a t s o l u t i o n s t o so-called m a n a g e a b i l i t y p r o b l e m s
were ready to hand.
189
Antitrust
t h e c l e a r , u n e q u i v o c a l and c o n v i n c i n g e v i d e n c e which a c h a r g e of
fraud r e q u i r e s .
M o r e o v e r , J u d g e W e i n e r held t h a t e v e n i f m i s l e a d i n g informa-
t i o n had b e e n p r o v i d e d t o t h e p a t e n t office, t h e g o v e r n m e n t had not
p r o v e d t h a t t h i s h a d b e e n d o n e with i n t e n t t o defraud:
T h e J u s t i c e D e p a r t m e n t i s c o n s i d e r i n g w h e t h e r i t will a p p e a l
Judge Weiner's decision.
Tetracyclines today
R e a d e r s m i g h t be e x c u s e d for t h i n k i n g t h a t t h e issues of c o n c e r n in
t h i s c h a p t e r a r e less i m p o r t a n t t h a n t h o s e a d d r e s s e d i n the p r e v i o u s
t w o c h a p t e r s b e c a u s e w e a r e h e r e d e a l i n g only with m o n e y and not
t h r e a t s to h u m a n life. T h i s is a m i s t a k e n v i e w , a p r o d u c t o f W e s t e r n
m i d d l e - c l a s s affluence. M o s t o f t h e w o r l d ' s p o p u l a t i o n d o not
b e n e f i t from " w o n d e r d r u g s ' b e c a u s e t h e y c a n n o t afford t h e m . I n
I n d i a , 8 0 p e r c e n t o f t h e p o p u l a t i o n d o e s not h a v e access t o d r u g s
190
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191
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192
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193
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t h e r a t i o n a l o l i g o p o l i s t is b e h a v i n g in exactly t h e s a m e way as is
t h e r a t i o n a l seller in a c o m p e t i t i v e l y s t r u c t u r e d i n d u s t r y ; he is
s i m p l y t a k i n g a n o t h e r factor into a c c o u n t [likely r e a c t i o n s o f
rivals to a p r i c e c u t ] . . . w h i c h he has to t a k e into a c c o u n t b e c a u s e
t h e s i t u a t i o n in w h i c h he finds h i m s e l f p u t s it t h e r e .
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p r i c i n g b e h a v i o u r ; and h e n c e t h e c o n c e r n o f m a n y a n t i t r u s t
e n f o r c e r s t o m a k e e x c h a n g e o f pricing i n f o r m a t i o n a m o n g c o m -
p e t i t o r s a perse a n t i t r u s t offence.
T h e p h a r m a c e u t i c a l i n d u s t r y has the last w o r d in m a r k e t intelli-
g e n c e t h r o u g h t h e p r i c i n g s u r v e y s o f p h a r m a c i s t s and o t h e r o u t l e t s
c o n d u c t e d in m o s t m a j o r c o u n t r i e s by the I M S c o m p a n y . Simply by
s u b s c r i b i n g t o I M S you can find e x a c t l y w h a t y o u r c o m p e t i t o r s are
c h a r g i n g for different d o s a g e forms a n d d o s a g e s t r e n g t h s o f a given
p r o d u c t . C o u l d w e s e r i o u s l y talk o f m a k i n g I M S illegal? N o t w i t h -
s t a n d i n g its i m p r a c t i c a l i t y , m a k i n g price i n f o r m a t i o n e x c h a n g e aper
se a n t i t r u s t v i o l a t i o n w o u l d be u n d e s i r a b l e b e c a u s e pricing intelli-
g e n c e c o n f e r s social benefits as well as c o s t s .
I n g e n e r a l , t h e m o r e i n f o r m a t i o n sellers h a v e a b o u t t h e prices
a n d o u t p u t o f t h e i r c o m p e t i t o r s t h e m o r e efficiently the m a r k e t
will o p e r a t e . A firm c a n n o t d e c i d e h o w m u c h to p r o d u c e , or
i n d e e d w h e t h e r t o p r o d u c e a t all, w i t h o u t k n o w i n g w h a t the
m a r k e t p r i c e is. . . . Y e t such i n f o r m a t i o n could also be useful in
e n a b l i n g a c a r t e l to restrict its o u t p u t by limiting t h e e x p a n s i o n of
p r o d u c t i v e c a p a c i t y . I n f o r m a t i o n is t h u s a t w o - e d g e d s w o r d : it is
n e c e s s a r y if t h e c o m p e t i t i v e p r o c e s s is to w o r k p r o p e r l y , but it can
a l s o facilitate c o l l u s i o n ( P o s n e r , 1976: 136).
S i m i l a r l y , t r a d e a s s o c i a t i o n m e e t i n g s are i n f a m o u s a s v e n u e s for
s w a p p i n g pricing plans. Some of the P h a r m a c e u t i c a l Manufac-
t u r e r s ' A s s o c i a t i o n s a r o u n d t h e w o r l d h a v e s u b c o m m i t t e e struc-
t u r e s b a s e d o n p r o d u c t g r o u p i n g s w h i c h w o u l d o b v i o u s l y facilitate
collusion a m o n g producers of therapeutically equivalent drugs.
Lilly clearly see t r a d e a s s o c i a t i o n m e e t i n g s a s p r o v i d i n g e x c e l l e n t
o p p o r t u n i t i e s for a n t i t r u s t v i o l a t i o n s w h e n they d e v o t e c o n s i d e r -
a b l e a t t e n t i o n to t h e m a t t e r in t h e i r Guidelines of Company Policy
( S e p t e m b e r , 1978):
H o w e v e r , t r a d e a s s o c i a t i o n m e e t i n g s are a l m o s t invariably a
f a v o r i t e a r e a of e x a m i n a t i o n by a n t i t r u s t e n f o r c e m e n t officials.
It is i m p o r t a n t t h a t e m p l o y e e s be p a r t i c u l a r l y careful to
c o n d u c t t h e m s e l v e s i n a m a n n e r t h a t i s a b o v e suspicion w h e n
a t t e n d i n g t h e s e m e e t i n g s . T h e following r u l e s should b e o b e y e d
carefully:
1 . A t t e n d only m e e t i n g s o f l e g i t i m a t e t r a d e and p r o f e s s i o n a l
a s s o c i a t i o n s held for p r o p e r b u s i n e s s , scientific, or
professional purposes.
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A g a i n , t r a d e a s s o c i a t i o n m e e t i n g s are a n a r e a which i s k n o w n t o
c a u s e p r o b l e m s , b u t which the law c a n n o t effectively deal with
b e c a u s e t h e a c t i v i t i e s t h a t t a k e p l a c e w i t h i n t h e m also confer social
b e n e f i t s ( e . g . diffusion of i n n o v a t i o n , p r o m o t i o n of self-regula-
tion).
C r e a t i n g v a r i o u s per se offences to p r o h i b i t b e h a v i o u r k n o w n to
be a s s o c i a t e d w i t h p r i c e fixing d o e s not s e e m a very p r o d u c t i v e
r e s p o n s e to the w i d e s p r e a d impossibility of proving conspiracy
( P o s n e r , 1976, 1977). An a l t e r n a t i v e r o u t e is to focus on structural
p r e c o n d i t i o n s r a t h e r t h a n the c o n d u c t which such s t r u c t u r e s
p r o d u c e . D i v e s t i t u r e o r d e r s and p r o h i b i t i o n o f m e r g e r s a r e the
m o s t w i d e l y s u p p o r t e d s t r u c t u r a l r e m e d i e s . Such m e a s u r e s d e m a n d
c o n s i d e r a b l e political will and for t h a t r e a s o n have not b e e n
a d o p t e d ( A d a m s , 1 9 5 1 ; E l z i n g a . 1969; P f u n d e r e t a l . , 1972). I n the
U n i t e d S t a t e s , t h e A n t i t r u s t D i v i s i o n o f t h e J u s t i c e D e p a r t m e n t has
p e r m i t t e d five m a s s i v e m e r g e r s a m o n g t r a n s n a t i o n a l p h a r m a -
c e u t i c a l c o m p a n i e s d u r i n g t h e last fifteen y e a r s : M e a d J o h n s o n and
B r i s t o l M y e r s ; P l o u g h and S c h e r i n g ; C i b a and G e i g y ; P a r k e D a v i s
a n d W a r n e r - L a m b e r t ; D o w and R i c h a r d s o n - M e r r e l l . I n any c a s e ,
one w o n d e r s how much would be achieved by attempts to break up
t h e i n d u s t r y . M a n y o f t h e p h a r m a c e u t i c a l c o m p a n i e s which h a v e
m e r g e d i n r e c e n t t i m e s w e r e not c o m p e t i t o r s (in the sense t h a t their
p r o d u c t lines w e r e not t h e r a p e u t i c a l l y s u b s t i t u t a b l e ) . E v e n t h e
c o m b i n a t i o n o f t w o m e m b e r s (or t h e b r e a k i n g i n t w o o f one
m e m b e r ) o f t h e s a m e o l i g o p o l y might not m a k e m u c h difference
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g i v e n w h a t w e k n o w a b o u t h o w little c o m p e t i t i o n t h e r e i s t o start
with in most o f t h e oligopolies. Finally, it is known that research
p r o d u c t i v i t y i n c r e a s e s with c o m p a n y size; s o i t b e c o m e s possible
t h a t a t t e m p t s t o b r e a k u p the industry m i g h t have m i n i m a l i m p a c t
on c o m p e t i t i o n w h i l e r e d u c i n g t h e flow of t h e r a p e u t i c b r e a k -
throughs.
T h e r e are a great many alternative types of structural remedies
available in the pharmaceutical industry, however. Abolishing
p a t e n t s i s t h e m o s t radical s o l u t i o n for r e s t o r i n g c o m p e t i t i o n . A s a n
a l t e r n a t i v e t o b r e a k i n g u p t h e large c o m p a n i e s , this w o u l d foster the
e n t r y o f m a n y s m a l l e r c o m p e t i t o r s t o c h a l l e n g e the g i a n t s . A s has
b e e n pointed out a l r e a d y , patents have the advantage of r e w a r d i n g ,
a n d t h e r e b y e n c o u r a g i n g i n v e s t m e n t i n i n n o v a t i o n . H o w e v e r , this
benefit s h o u l d n o t b e e x a g g e r a t e d . P a t e n t r e w a r d s , a s K n i g h t (1971)
p o i n t e d o u t , g o t o t h o s e w h o put t h e 'finishing t o u c h ' o n a n innova-
t i o n , w h e n t h e activity w h i c h is m o s t d e s e r v i n g of r e w a r d is basic
r e s e a r c h . T h e r o u t i n i s e r g e t s the i n c e n t i v e s w h i l e t h e real p i o n e e r -
ing and e x p l o r a t i o n are d o n e b y o t h e r s . M o r e o v e r , i n m e d i c i n e
p a t e n t s a r e r e s e r v e d for i n n o v a t o r s i n c h e m i c a l t r e a t m e n t s but not
i n n o v a t o r s i n n o n - c h e m i c a l t r e a t m e n t s . T h i s c o n c e n t r a t e s scarce
r e s e a r c h r e s o u r c e s a n d t a l e n t into c h e m i c a l s o l u t i o n s w h e n alter-
n a t i v e d i r e c t i o n s for r e s e a r c h m i g h t c o n f e r a g r e a t e r social b e n e f i t . "
T h e s e k i n d s o f a r g u m e n t s lead K n i g h t t o a r g u e a g a i n s t p a t e n t
m o n o p o l i e s : 'It w o u l d s e e m to be a m a t t e r of political i n t e l l i g e n c e
a n d a d m i n i s t r a t i v e c a p a c i t y t o r e p l a c e artificial m o n o p o l y w i t h
s o m e d i r e c t m e t h o d o f s t i m u l a t i n g and r e w a r d i n g r e s e a r c h . '
Such 'direct m e t h o d s of stimulating and rewarding research'
w o u l d , of c o u r s e , cost a g r e a t deal of p u b l i c m o n e y . W a l k e r (1971)
c o n c l u d e d o n t h e b a s i s o f his e c o n o m i c r e s e a r c h that t h e costs t o t h e
p u b l i c o f p a y i n g for all o f t h e r e s e a r c h c o n d u c t e d b y t h e p h a r m a -
c e u t i c a l i n d u s t r y w o u l d b e m o r e t h a n c o m p e n s a t e d for b y the
s a v i n g s in p r i c e r e d u c t i o n s which w o u l d follow from a b o l i s h i n g
p a t e n t s . P h a r m a c e u t i c a l c o m p a n i e s w o u l d n o t c o m p l e t e l y stop their
r e s e a r c h a c t i v i t i e s i f p a t e n t s w e r e a b o l i s h e d . T h e r e w o u l d still b e
g r e a t a d v a n t a g e s in b e i n g t h e first in t h e d o c t o r ' s surgery with a n e w
product.
M o r e o v e r , w e h a v e seen that t h e r e are c e r t a i n a d d i t i o n a l c o n s e -
q u e n c e s o f p a t e n t s w h i c h run c o u n t e r t o t h e p u b l i c interest a p a r t
from t h e i r a d v e r s e i m p a c t o n c o m p e t i t i o n . T h e S e c o n d W o r l d W a r
fiasco w i t h p e n i c i l l i n i l l u s t r a t e d o n e o f t h e m . T h e m o s t i m p o r t a n t i s
t h a t m o s t r e s e a r c h a n d safety t e s t i n g r e s o u r c e s are d i r e c t e d a t
197
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c o u l d still b e r e l e v a n t . V a l i u m w o u l d b e c o m e R o c h e d i a z e p a m and
w o u l d c o m p e t e w i t h d i a z e p a m sold b y v a r i o u s c o m p a n i e s , but the
magic o f t h e Valium brand name would disappear.
T h a l i d o m i d e d e m o n s t r a t e d t h e o t h e r i m p o r t a n t justification for
abolishing brand names. Many deformed babies were born because
o f t h e c o n f u s i o n s u r r o u n d i n g t h e d o z e n s o f different c o m m e r c i a l
n a m e s u n d e r w h i c h t h a l i d o m i d e w a s sold a r o u n d t h e w o r l d . I t
w o u l d be e a s i e r for d o c t o r s b o t h to get t h e i r initial t r a i n i n g a n d to
k e e p u p w i t h n e w d e v e l o p m e n t s i f only o n e n a m e w e r e a s s o c i a t e d
w i t h e a c h distinct m o l e c u l a r e n t i t y . I n t h e U n i t e d S t a t e s a t the
m o m e n t t h e r e are a l m o s t 3 0 r e g i s t e r e d b r a n d n a m e s for each p r e s -
cription drug on the m a r k e t ( U N C e n t r e on Transnational Corpor-
ations, 1979:47).
T h e r e a r e m a n y c o m p r o m i s e m e a s u r e s t h a t g o only part o f t h e
way towards undermining the quasi-monopolistic power of brand
n a m e s . All but four A m e r i c a n s t a t e s have n o w r e p e a l e d their a n t i -
s u b s t i t u t i o n l a w s , so t h a t p h a r m a c i s t s are e m p o w e r e d to s u b s t i t u t e a
c h e a p e r , b u t t h e r a p e u t i c a l l y e q u i v a l e n t , g e n e r i c p r o d u c t for t h e
b r a n d n a m e w h i c h t h e p h y s i c i a n w r i t e s o n the p r e s c r i p t i o n . I n s o m e
s t a t e s this cost s a v i n g can be m a d e only if t h e p h y s i c i a n e x p r e s s e s
a p p r o v a l o f g e n e r i c s u b s t i t u t i o n o n t h e p r e s c r i p t i o n form; i n o t h e r s
s u b s t i t u t i o n i s a u t o m a t i c a l l y p e r m i t t e d unless t h e physician
expressly indicates disapproval ofthe practice.
O t h e r c o m p r o m i s e m e a s u r e s aim t o r e d u c e c o n s u m e r costs b y
m a k i n g both physicians and pharmacists m o r e price conscious.
D r u g c o m p e n d i a with information on comparative therapeutic
efficacy and p r i c e s a r e p u b l i s h e d by g o v e r n m e n t s in t h e U n i t e d
K i n g d o m , S w e d e n and N o r w a y (Gereffi, 1979: 2 3 ) . I n the U n i t e d
S t a t e s , t h e D e p a r t m e n t o f H e a l t h and H u m a n S e r v i c e s n o w s e n d s
lists o f d r u g - p r i c e c o m p a r i s o n s t o p h y s i c i a n s and p h a r m a c i s t s t o
e n c o u r a g e t h e m t o l o w e r t h e i r p a t i e n t s ' e x p e n d i t u r e (Business
Week, 6 O c t o b e r 1 9 7 5 : 9 9 ) . A n u m b e r of c o u n t r i e s , a n d s o m e
A m e r i c a n s t a t e s , r e q u i r e t h e p o s t i n g o f p r e s c r i p t i o n prices i n phar-
m a c i e s t o facilitate cost-effective p u r c h a s i n g (Gereffi, 1979: 2 3 - 4 ) .
T h e g r e a t a d v a n t a g e o f s t r u c t u r a l r e m e d i e s such a s t h e a b o l i t i o n
o f b r a n d n a m e s , p a t e n t s , and a n t i - s u b s t i t u t i o n laws i s that they d o
n o t i n v o l v e t h e b u r e a u c r a t i c and legal costs o f a n t i t r u s t p r o s e c u t i o n s
and divestitures. S o m e progress is being m a d e towards a more
competitive pharmaceutical market. The proportion of United
S t a t e s d r u g p r e s c r i p t i o n s w h i c h are w r i t t e n g e n e t i c a l l y rose from
6 p e r c e n t in 1966 to 12.4 p e r cent in 1977 ( U N C e n t e r on
199
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200
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201
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It t h e r e f o r e s e e m s u n d e s i r a b l e for a m a t t e r like t h e b r e a k - u p of a
c o m p a n y with $20 billion in assets to be d e c i d e d e i t h e r by the c o u r t s
o r t h r o u g h t h e secret p o w e r o f a d m i n i s t r a t i v e d e c i s i o n - m a k i n g .
S u r e l y t h e b r e a k - u p of I B M is a big e n o u g h political issue to be
d e b a t e d b y e l e c t e d r e p r e s e n t a t i v e s and v o t e d o n i n the C o n g r e s s .
C y n i c s w o u l d be justified in p o i n t i n g out t h a t political r e g u l a t i o n is
m o r e s u s c e p t i b l e t o t h e p o w e r o f big m o n e y t h a n legal r e g u l a t i o n .
C e r t a i n l y political r e g u l a t i o n must be a c c o m p a n i e d by s t r o n g
g u a r a n t e e s o f o p e n n e s s and effective laws p r o h i b i t i n g c o r p o r a t e
campaign contributions.
T h e t h r u s t of t h e c o n c l u s i o n to this c h a p t e r is t h e r e f o r e funda-
m e n t a l l y different from t h o s e o f t h e p r e v i o u s t w o . T h e p r e v i o u s t w o
c h a p t e r s p r e s e n t e d a r g u m e n t s for a g r e a t e r role for s e l f - r e g u l a t i o n ,
a g r e a t e r role for a d m i n i s t r a t i v e r e g u l a t i o n and a role for litigious
r e g u l a t i o n o f safety less c e n t r a l t h a n t h e o t h e r t w o s t r a t e g i e s . T h e
p r e s e n t c h a p t e r also a r g u e s for i n f r e q u e n t r e g u l a t i o n t h r o u g h t h e
c o u r t s , b u t i m p l i e s an i n c r e a s e d role for political r a t h e r t h a n
a d m i n i s t r a t i v e r e g u l a t i o n , and a m i n i m a l role for self-regulation.
W i t h safety m a t t e r s t h e r e is an i m p o r t a n t place for self-regulation
b e c a u s e up to a p o i n t g o v e r n m e n t a n d b u s i n e s s share a c o m m o n
i n t e r e s t in t h e sale of safe p r o d u c t s . In c o n t r a s t , c o m p a n i e s do not
g e n e r a l l y h a v e an i n t e r e s t in e n f o r c i n g t h e setting of l o w e r p r i c e s for
t h e i r p r o d u c t s . Since t h e m a r k e t and t h e c o u r t s have failed t o
r e g u l a t e p h a r m a c e u t i c a l p r i c e s effectively, and since self-regulation
of pricing w o u l d be to put Dracula in charge o f t h e blood bank, the
o n l y c o u r s e i s for g r e a t e r p o l i t i c a l - a d m i n i s t r a t i v e " price c o n t r o l .
As a r g u e d e a r l i e r , it is g e n e r a l l y p r e f e r a b l e to h a v e such c o n t r o l s
t o w a r d t h e political end o f t h e p o l i t i c a l - a d m i n i s t r a t i v e c o n t i n u u m .
H o w e v e r , voting in the legislature on every major antitrust matter
w o u l d clearly clog up t h e legislative p r o c e s s ( N e u s t a d t , 1980:
1 4 6 - 4 9 ) . L o w e r levels o f p o l i t i c i s a t i o n (such a s t h r o u g h a n i n d e -
p e n d e n t c o m m i s s i o n c o n d u c t i n g a n e n q u i r y and t h e n m a k i n g a
r e c o m m e n d a t i o n for c a b i n e t d e c i s i o n u n d e r t h e W e s t m i n s t e r
s y s t e m , o r p e r h a p s u n d e r the A m e r i c a n system a n i n d e p e n d e n t
c o m m i s s i o n m a k i n g r e c o m m e n d a t i o n s w h i c h will a u t o m a t i c a l l y b e
a d o p t e d u n l e s s t h e C o n g r e s s c h o o s e s t o v e t o t h e m within a fixed
p e r i o d ) , m u s t be a p p l i e d to all but t h e m o s t crucial a n t i t r u s t d e t e r -
m i n a t i o n s . To the extent that professional opinion is relevant to
t h e s e p o l i t i c a l d e c i s i o n s , it s h o u l d be p r i m a r i l y t h e professional
o p i n i o n s o f e c o n o m i s t s , not l a w y e r s . M o r e important than
202
Antitrust
p r o f e s s i o n a l o p i n i o n i s c o n s u m e r o p i n i o n . T h i s s h o u l d b e fostered
by f i n a n c i a l s u p p o r t for c o n s u m e r g r o u p s to m o u n t s u b m i s s i o n s to
g o v e r n m e n t , r e p r e s e n t a t i o n of c o n s u m e r groups on relevant com-
m i t t e e s of e n q u i r y a n d full p u b l i c a c c e s s to r e c o r d s of g o v e r n m e n t
d e l i b e r a t i o n s o n a n t i t r u s t m a t t e r s . W i t h o u t such g u a r a n t e e s ,
politicised antitrust would be captured by the superior power ofthe
c o r p o r a t i o n s i n t h e s a m e way t h a t legal a n t i t r u s t has b e e n .
203
6 The corporation as pusher
204
The corporation as pusher
h a p p e n s in t h e d i s t r i b u t i o n of legal d r u g s of a d d i c t i o n . Gorring
d e l i n e a t e s t h e c o m m o n l y held beliefs a b o u t h e r o i n as:
1. T h a t a h u g e a n d e l a b o r a t e o r g a n i z a t i o n , forming a n e t w o r k
a c r o s s i n t e r n a t i o n a l b o u n d a r i e s , exists t o h a n d l e it.
2 . T h a t t h e p o w e r b r o k e r s i n this o r g a n i z a t i o n , c o n c e r n e d only
w i t h m a x i m i z i n g profits w h i c h run t o t h o u s a n d s o f per c e n t ,
c o r n e r all s u p p l i e s o f t h e d r u g .
3. T h a t a d i s t r i b u t i o n h i e r a r c h y e x i s t s . At t h e t o p are faceless
m e n i n s o m e undefined foreign c o u n t r y i n t h e E a s t . B e l o w
t h e m a r e a g e n t s w h o a r r a n g e supply t o i m p o r t e r s i n o t h e r
countries. The importers, in turn, have agents who operate a
sales n e t w o r k t h r o u g h o u t their own c o u n t r y t o a c h i e v e
m a x i m u m d i s t r i b u t i o n . A t t h e lowest level i s t h e p u s h e r w h o s e
j o b it is to see t h a t , i r r e s p e c t i v e of c o n s e q u e n c e s , the
m a x i m u m n u m b e r o f c o n s u m e r s use a s m u c h o f t h e drug a s
t h e y can afford to pay for.
4. T h a t t h e c o n s u m e r ' s welfare is i m p o r t a n t only b e c a u s e a
d e a d c o n s u m e r n o l o n g e r uses d r u g s a n d , i f his d e a t h i s
a t t r i b u t e d to t h e use of d r u g s , it may d i s c o u r a g e o t h e r s from
taking them.
5 . T h a t t h e i m m o r a l i t y o f t h e o p e r a t i o n lies i n t h e d e l i b e r a t e ,
p r o f i t - m o t i v a t e d c r e a t i o n of a n e e d w h i c h is seen as
d e t r i m e n t a l to b o t h t h e c o n s u m e r and society as a w h o l e . T h e
fact t h a t t h e c o n s u m e r d e r i v e s t r a n s i e n t p l e a s u r e from the
g r a t i f i c a t i o n of this illicit n e e d i n c r e a s e s t h e i m m o r a l i t y .
6. T h a t o t h e r c r i m i n a l activities o c c u r in t h e p r o c e s s of
d i s t r i b u t i o n - b r i b e r y and c o r r u p t i o n of officials, r u t h l e s s
m e a s u r e s t a k e n to squeeze out rival distributors.
G o r r i n g a r g u e s t h a t t h e h e r o i n t r a d e is not as highly o r g a n i s e d as
p o p u l a r belief w o u l d h a v e it. O p i u m is g r o w n by p e a s a n t s and
p u r c h a s e d by small t r a d e r s . T h e factories w h e r e it is refined into
h e r o i n a r e small and often makeshift. W h i l e t h e r e are m a n y large
d e a l e r s (see M c C o y , 1980), e q u a l l y significant are t h e small s e l l e r s ,
w h o , far from cynically m a n i p u l a t i n g a d d i c t i o n i n o t h e r s , are
a d d i c t s t h e m s e l v e s w h o buy for their o w n use and sell excess to
f r i e n d s . C o n v e r s e l y , G o r r i n g ' s a r g u m e n t t h a t her six p o i n t s con-
stitute a m o r e a c c u r a t e depiction of the multinational p h a r m a -
c e u t i c a l i n d u s t r y h a r d l y n e e d s t o b e r e p e a t e d h e r e . T h i s c h a p t e r will
p r o v i d e f u r t h e r t e s t i m o n y to t h e validity of all t h e p o i n t s e x c e p t
n u m b e r 4 , w h i c h g o e s t o o far.
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The corporation as pusher
A bit of history
S o m e o f t h e g r e a t p h a r m a c e u t i c a l c o m p a n i e s o f t o d a y o w e their
e x i s t e n c e to profits from t h e t r a d e in h e r o i n and m o r p h i n e in an era
w h i c h laid t h e f o u n d a t i o n s for the s e l f - p e r p e t u a t i n g cycles of
a d d i c t i o n t o t h e s e d r u g s i n m o d e r n s o c i e t i e s . T h e next g e n e r a t i o n
m i g h t l o o k b a c k on t h e a c t i v i t i e s of H o f f m a n - L a R o c h e in p u s h i n g
V a l i u m a n d L i b r i u m w i t h disgust e q u a l to that we feel t o d a y
t o w a r d s t h e i r h e r o i n sales b e t w e e n t h e w a r s . It is fair c o m m e n t to
say t h a t R o c h e h a s a l w a y s b e e n o n e step a h e a d o f public o p i n i o n ,
m a k i n g m a s s i v e profits from d r u g s of a d d i c t i o n in t h e e r a before t h e
d r u g b e c o m e s a m a t t e r o f w i d e s p r e a d p u b l i c c o n c e r n . O t h e r global
206
The corporation as pusher
207
The corporation as pusher
T h e n u m b e r o f d e a t h s from a d v e r s e d r u g r e a c t i o n s i n t h e U n i t e d
S t a t e s e a c h y e a r has b e e n a hotly d i s p u t e d q u e s t i o n , with s o m e
r e s e a r c h e r s c l a i m i n g t h a t the n u m b e r could be as high as 130,000 for
h o s p i t a l - i n d u c e d r e a c t i o n s alone ( e . g . S h a p i r o e t a l . , 1971). I r r e s -
p e c t i v e of w h e t h e r a m o r e a c c u r a t e figure is 30,000 or 130,000, it is
c e r t a i n t h a t A m e r i c a p a y s a heavy price for b e i n g an o v e r m e d i c a t e d
s o c i e t y . I n v a r i a b l y , d r u g s which are powerful e n o u g h to c o n t r o l a
d i s e a s e a r e also c a p a b l e o f c a u s i n g s e v e r e injury t o p a t i e n t s . A s one
c o r p o r a t e m e d i c a l d i r e c t o r e x p l a i n e d : ' P r e s c r i p t i o n d r u g s are n o
more than tamed poisons.'
T h e d i s e a s e s for w h i c h a d r u g is r e c o m m e n d e d a r e called its
i n d i c a t i o n s , and the d i s e a s e s for w h i c h it w o u l d be p a r t i c u l a r l y
d a n g e r o u s t o use t h e drug are its c o n t r a - i n d i c a t i o n s . P h a r m a -
c e u t i c a l c o m p a n i e s n a t u r a l l y have a n i n t e r e s t i n e x p a n d i n g m a r k e t s
b y p r o m o t i n g w i d e i n d i c a t i o n s a n d limiting c o n t r a - i n d i c a t i o n s .
P h a r m a c e u t i c a l c o m p a n i e s e v e n m a n a g e t o invent n e w d i s e a s e s
as indications. M a d i s o n A v e n u e is able to respond creatively when
t h e p h a r m a c e u t i c a l c o m p a n y says: ' H e r e ' s t h e c u r e , find t h e
d i s e a s e . ' A n e x a m p l e o f such c r e a t i v i t y was t h e p r o m o t i o n o f
L i l l y ' s A v e n t y l for a n e w d i s e a s e called ' b e h a v i o r a l drift'.
B e h a v i o r a l drift, a c c o r d i n g t o t h e m e d i c a l j o u r n a l a d v e r t i s e m e n t s ,
is defined as:
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The corporation as pusher
209
The corporation as pusher
u s e d c a u t i o u s l y p r e c i s e l y b e c a u s e o f t h e a d v e r t i s i n g h y p e o f Lilly's
p r o m o t i o n o f D a r v o n in the y e a r s following its r e l e a s e .
T h e m o s t w a n t o n e x a m p l e o f t h e o v e r u s e o f a d r u g causing social
h a r m b e c a u s e of p r o m o t i o n for e x c e s s i v e i n d i c a t i o n s is that of
c h l o r a m p h e n i c o l by P a r k e - D a v i s ( n o w a s u b s i d i a r y of W a r n e r -
L a m b e r t ) . C h l o r a m p h e n i c o l is a r e m a r k a b l y effective a n t i b i o t i c in
t h e t r e a t m e n t of a limited r a n g e of infections - t y p h o i d fever,
h a e m o p h i l u s i n f l u e n z a , and a few o t h e r s . B u t it was p r o m o t e d as a
b r o a d - s p e c t r u m a n t i b i o t i c , and p r e s c r i b e d by d o c t o r s for every-
t h i n g from s o r e t h r o a t s to a c n e . In its first y e a r on the m a r k e t , 1 9 5 1 ,
P a r k e - D a v i s sold $52 million w o r t h o f c h l o r a m p h e n i c o l ( b r a n d
n a m e C h l o r o m y c e t i n ) , to put the c o m p a n y at the top of drug-
c o m p a n y e a r n i n g s for t h a t y e a r .
U n f o r t u n a t e l y , c h l o r a m p h e n i c o l w a s a s s o c i a t e d with a n u m b e r o f
s e r i o u s s i d e - e f f e c t s , t h e w o r s t being a p l a s t i c a n a e m i a . A p l a s t i c
a n a e m i a causes a terrible d e a t h , especially in children. The prob-
a b i l i t y o f t h e side-effect a p p e a r i n g w a s not high, s o i n the t r e a t m e n t
of a s e r i o u s d i s e a s e like t y p h o i d , it w a s a risk w o r t h t a k i n g . But for
t h e t r e a t m e n t o f c o m m o n cold and o t h e r trivial c o m p l a i n t s t h e risk
is u n c o n s c i o n a b l e . T h e F D A was c o n c e r n e d , and in 1952 issued an
official w a r n i n g t h a t c h l o r a m p h e n i c o l "should not be used indis-
c r i m i n a t e l y for m i n o r i n f e c t i o n s ' . P a r k e - D a v i s m i s r e p r e s e n t e d the
F D A w a r n i n g to its o w n sales r e p r e s e n t a t i v e s in a " P r e s i d e n t ' s
L e t t e r ' w h i c h r e a d : ' C h l o r o m y c e t i n [ c h l o r a m p h e n i c o l ] has b e e n
officially c l e a r e d b y t h e F D A and t h e N a t i o n a l R e s e a r c h C o u n c i l
w i t h no r e s t r i c t i o n s on t h e n u m b e r or t h e r a n g e of d i s e a s e s for w h i c h
C h l o r o m y c e t i n may be a d m i n i s t e r e d . ' The Nelson S u b c o m m i t t e e
d i s c o v e r e d in N o v e m b e r 1967 that 3.5 to 4 million A m e r i c a n s w e r e
b e i n g d o s e d w i t h P a r k e - D a v i s C h l o r o m y c e t i n e a c h year. I f the drug
h a d b e e n p r e s c r i b e d only for c o n d i t i o n s for which it w a s truly
i n d i c a t e d , it w a s e s t i m a t e d t h a t only 10,000 p e r s o n s at most w o u l d
h a v e r e c e i v e d it ( U S S e n a t e , 1968; P a r t 6: 2 5 6 6 ) . A n a t i o n a l survey
in 1975, m o r e t h e n t w e n t y y e a r s after the fatal side-effects of
c h o l o r a m p h e n i c o l w e r e clearly e s t a b l i s h e d , found that d u r i n g t h e
year 93,000 c h l o r a m p h e n i c o l prescriptions were written in the US
for u p p e r r e s p i r a t o r y infections ( S u b c o m m i t t e e o n H e a l t h , 1978:
664).
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The corporation as pusher
D e a r D o c t o r : F o r a n e n t e r t a i n e r , a p p l a u s e i s very p e r s o n a l and
an i m m e d i a t e sign of a p p r e c i a t i o n , so this a l b u m is my way of
a p p l a u d i n g you in t h e m e d i c a l p r o f e s s i o n . It is a special a l b u m
t h a t w e h a v e w o r k e d o u t w i t h A b b o t t L a b o r a t o r i e s , and m y g r e a t
h o p e is t h a t it will give you p l e a s u r e p e r h a p s at a t i m e you have a
211
The corporation as pusher
I do not p r e s u m e to h a v e t h e c o m p e t e n c e to p r o n o u n c e on the
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The corporation as pusher
difficult q u e s t i o n o f w h a t c o n s t i t u t e s r a t i o n a l p r e s c r i b i n g . H o w e v e r ,
w h e r e r e s e a r c h has b e e n d o n e b y p e o p l e with t h e r e l e v a n t e x p e r -
t i s e , e v i d e n c e o f o v e r p r e s c r i b i n g has b e e n found. A t t h e U n i v e r s i t y
of S o u t h e r n California Medical C e n t e r , w h e r e 600,000 prescrip-
t i o n s a r e w r i t t e n e a c h y e a r , a g r o u p of five p h y s i c i a n s a n d t w o
p h a r m a c i s t s , in c o l l a b o r a t i o n with h o s p i t a l staff from all special-
i t i e s , defined r a t i o n a l m a x i m u m p r e s c r i p t i o n s for 7 8 c o m m o n d r u g s
( M a r o n d e e t a l . , 1971). F o r s e d a t i v e s and t r a n q u i l l i s e r s 3 0 - 4 0 p e r
c e n t of p r e s c r i p t i o n s w r i t t e n w e r e found to be in excessive q u a n -
t i t i e s . T h a t is, r a t i o n a l p r e s c r i b i n g , solely i n t e r m s o f a m o u n t s
( w i t h o u t considering w h e t h e r it was rational to prescribe the
p r o d u c t at all) m i g h t r e s u l t in a d r o p in sales o f t h e o r d e r of 3 0 - 4 0
p e r c e n t . T h i s f i g u r e a l s o i g n o r e s o v e r m e d i c a t i o n resulting from
patients obtaining rational prescriptions independently from
n u m e r o u s p h y s i c i a n s . A further i n t e r e s t i n g finding w a s t h a t a l m o s t
half t h e e x c e s s i v e p r e s c r i p t i o n s c o u l d be a c c o u n t e d for by a small
m i n o r i t y o f 3.4 p e r cent o f t h e p h y s i c i a n s w h o w e r e super-
prescribers.
I n a n o t h e r s t u d y , Stolley e t al. (1972) found t h a t d o c t o r s w h o
w e r e , a c c o r d i n g t o t h e i r c r i t e r i a , r a t i o n a l p r e s c r i b e r s , relied m o r e
h e a v i l y o n t h e r e a d i n g o f m e d i c a l j o u r n a l s for i n f o r m a t i o n a b o u t
d r u g s than on industry p r o m o t i o n . But there is a wealth of evidence
from s u r v e y s o f d o c t o r s t o d e m o n s t r a t e t h a t o v e r w h e l m i n g l y t h e
most i m p o r t a n t source of information about drugs is the p h a r m a -
c e u t i c a l i n d u s t r y : sales r e p r e s e n t a t i v e s , p r o m o t i o n a l m a t e r i a l i n t h e
m a i l , j o u r n a l a d v e r t i s e m e n t s , m e e t i n g s , cocktail parties organised
2
by t h e i n d u s t r y , e t c . . . . (Office of H e a l t h E c o n o m i c s , 1978;
W a l k e r , 1 9 7 1 ; M i n t z , 1967: 8 6 ; M o s e r , 1974; American Medical
News, 1 9 7 3 ; E a t o n a n d P a r i s h , 1976).
T h e s e s u r v e y s a l s o s h o w t h a t t h e m o s t i m p o r t a n t single s o u r c e o f
i n f o r m a t i o n , particularly concerning new drugs, is the pharma-
c e u t i c a l c o m p a n y sales r e p r e s e n t a t i v e . T h e r e i s e v i d e n c e t h a t
p h y s i c i a n s w h o get m o r e visits from sales r e p r e s e n t a t i v e s w r i t e
m o r e p r e s c r i p t i o n s . W a l k e r ( 1 9 7 1 : 7 4 ) found t h a t d o c t o r s w h o w r i t e
o v e r 150 p r e s c r i p t i o n s a w e e k r e c e i v e m o r e t h a n eight visits a w e e k
from sales r e p r e s e n t a t i v e s . D o c t o r s w h o w r o t e fewer t h a n 5 0 p r e s -
c r i p t i o n s a w e e k r e c e i v e d fewer t h a n half t h i s n u m b e r of visits. This
n e e d n o t n e c e s s a r i l y m e a n t h a t t h e e x t r a visits c a u s e i n c r e a s e d s a l e s ,
b e c a u s e r e p r e s e n t a t i v e s select for special a t t e n t i o n d o c t o r s w h o are
k n o w n a s h e a v y p r e s c r i b e r s . M o r e c o n v i n c i n g i s t h e f i n d i n g that
a m o n g p h y s i c i a n s w h o w r o t e o v e r 5 0 p r e s c r i p t i o n s a w e e k , 8 0 per
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The corporation as pusher
c e n t r e p o r t e d t h a t i n d u s t r y w a s t h e i r m o s t i m p o r t a n t source o f
information about new d r u g s ; a m o n g those writing 31-50 pres-
c r i p t i o n s p e r w e e k , half relied p r i m a r i l y o n industry s o u r c e s and
half p r i m a r i l y o n p r o f e s s i o n a l s o u r c e s ; and a m o n g d o c t o r s writing
30 or fewer p r e s c r i p t i o n s a w e e k , only 40 p e r cent relied p r i m a r i l y
on industry sources (Walker, 1971: 74).
S h e is s t a n d i n g a l o n e b e f o r e a d a r k e n e d b a c k g r o u n d : a y o u n g
c o l l e g e g i r l , c a r r y i n g b o o k s . T h e c o r n e r s o f h e r m o u t h are t u r n e d
d o w n . It is n o t a grim e x p r e s s i o n b u t it e x h i b i t s c o n c e r n and
s u g g e s t s u n c e r t a i n t y . T h e copy u n d e r her p i c t u r e r e a d s : ' A
W h o l e N e w W o r l d . . . of A n x i e t y . ' S u r r o u n d i n g her on t h e
b a c k g r o u n d a r e italicised s u g g e s t i o n s o f w h a t t h e a n x i o u s world
m i g h t b e . ' T h e n e w c o l l e g e s t u d e n t may be afflicted by a sense of
lost i d e n t i t y in a s t r a n g e e n v i r o n m e n t . ' A n o t h e r s u g g e s t i o n :
' E x p o s u r e to n e w friends and o t h e r influences may force her to
r e e v a l u a t e herself and h e r g o a l s . ' Y e t a n o t h e r : ' H e r newly
s t i m u l a t e d i n t e l l e c t u a l c u r i o s i t y may m a k e h e r m o r e sensitive t o
a n d a p p r e h e n s i v e a b o u t u n s t a b l e n a t i o n a l and w o r l d c o n d i t i o n s . '
I f w o r l d affairs and p e e r p r e s s u r e d o n ' t m a k e h e r a n x i o u s , t h e a d
s u g g e s t s a n o t h e r c a u s e . M a y b e it's ' u n r e a l i s t i c p a r e n t a l
e x p e c t a t i o n s ' o r ' t o d a y ' s c h a n g i n g m o r a l i t y ' and ' n e w f r e e d o m '
t h a t a r e d o i n g it. E v e n t h o u g h this last p r o b l e m s e e m s t o suggest
h e r n e e d for b i r t h c o n t r o l pills m o r e t h a n a n y t h i n g e l s e , the real
a n s w e r to h e r w o e s is s o m e t h i n g different. 'To h e l p free h e r of
excessive anxiety . . . adjunctive L I B R I U M . ' O f course. ' W h e n
m o u n t i n g p r e s s u r e s c o m b i n e t o t h r e a t e n t h e e m o t i o n a l stability
o f t h e a n x i o u s s t u d e n t , a d j u n c t i v e use o f L i b r i u m can h e l p relieve
the s y m p t o m s caused by her excessive anxiety. T o g e t h e r with
y o u r ( t h e d o c t o r ' s ) c o u n s e l i n g and r e a s s u r a n c e , L i b r i u m , i f
i n d i c a t e d , can help the anxious student to handle the primary
p r o b l e m and to " g e t h e r b a c k on her feet" ' ( P e k k a n e n 1973:
77-8).
V a l i u m and L i b r i u m h a v e b e e n p r o m o t e d a s s o l u t i o n s t o almost
e v e r y p s y c h o l o g i c a l s t a t e which falls s h o r t of total s e r e n i t y . At the
s a m e t i m e V a l i u m has b e e n p r o m o t e d for 'psychic s u p p o r t for the
t e n s e i n s o m n i a c ' and for t h e ' a l w a y s w e a r y ' . P e r h a p s m o s t a p p e a l -
ingly of all to t h e m e d i c a l p r o f e s s i o n , V a l i u m has b e e n a d v e r t i s e d in
214
The corporation as pusher
M o r e e m b a r r a s s i n g for M e r c k w a s t h e d i s c o v e r y b y S e n a t e
i n v e s t i g a t o r s of i n s t r u c t i o n s to its sales r e p r e s e n t a t i v e s w h i c h
e m p h a s i s e d c l a i m s for safety and efficacy far in e x c e s s of w h a t w a s
legal i n t h e s e n s e o f h a v i n g b e e n a p p r o v e d b y t h e F D A . T h e
i n s t r u c t i o n s a l s o said: it is o b v i o u s t h a t I n d o c i n will w o r k in t h a t
w h o l e h o s t o f r h e u m a t i c c r o c k s and c r u d s w h i c h e v e r y g e n e r a l
p r a c t i t i o n e r , i n t e r n i s t , a n d o r t h o p e d i c s u r g e o n sees every day i n his
p r a c t i c e . ' A c c o r d i n g t o t h e S e n a t e h e a r i n g s t h e i n s t r u c t i o n s con-
tinued:
215
The corporation as pusher
216
The corporation as pusher
[ S e r a x ] w a s r e c o m m e n d e d i n the t r e a t m e n t o f a n x i e t y and t e n s i o n
of p a t i e n t s from all age g o u p s , i n c l u d i n g t h e e l d e r l y . T h e
advertisement which appeared in three medical journals,
e m p h a s i z e d t h e use o f t h e p r o d u c t for t h e t r e a t m e n t o f e l d e r l y
p a t i e n t s a n d i n c l u d e d a w a r n i n g in fine print t h a t g r e a t c a r e should
be t a k e n in s e l e c t i n g a d o s a g e , as a s t r o k e or d e a t h could result.
T h e a d v e r t i s e m e n t also r e f e r r e d to a study involving 148 'elderly
p a t i e n t s ' b u t failed to reveal t h a t t h e s a m p l e age r a n g e
c o m m e n c e d at 35 y e a r s for m a l e s a n d 33 y e a r s for f e m a l e s . A
d o s a g e o f t h e d r u g up to 40 m g . a day w a s q u o t e d from t h e study
d e s p i t e t h e fact t h a t t h e a p p r o v e d p a c k a g e labelling limited t h e
initial d o s a g e in o l d e r p a t i e n t s to 30 m g . a day.
O n e r e p o r t f a v o u r a b l y c o m p a r i n g a s p e c t s o f Serax t h e r a p y
w i t h a c o m p e t i n g p r o d u c t w a s r e p r o d u c e d i n the a d v e r t i s e m e n t .
S t u d i e s w h i c h reflected different c o n c l u s i o n s w e r e o m i t t e d . I t w a s
i m p l i e d t h a t t h e p a r t i c u l a r study q u o t e d r e p r e s e n t e d the m e d i c a l
c o n s e n s u s as to t h e p e r f o r m a n c e of S e r a x in r e l a t i o n to a
c o m p e t i n g p r o d u c t . F i n a l l y , t h e p r o d u c t w a s r e c o m m e n d e d for
t h e t r e a t m e n t o f ' a n x i e t y - l i n k e d d e p r e s s i o n ' , d e s p i t e the fact that
t h e t r e a t m e n t o f d e p r e s s i o n w a s specifically c o n t r a - i n d i c a t e d o n
the label.
O n t h e s e g r o u n d s t h e F . D . A . c o n s i d e r e d that t h e
a d v e r t i s e m e n t c o n t a i n e d n e i t h e r a fair nor factual b a l a n c e , and
p r o v i d e d t h e r e a d e r with d a n g e r o u s l y m i s l e a d i n g d o s a g e
i n f o r m a t i o n . It w a s also c o n s i d e r e d offensive b e c a u s e it
p r e s c r i b e d t h e d r u g for p u r p o s e s for w h i c h it w a s c o n t r a -
i n d i c a t e d . O n t h e basis o f t h e c o n t e n t s o f this a d v e r t i s e m e n t the
p r o d u c t was seized.
S o m e o f t h e a d v e r t i s i n g m i s r e p r e s e n t a t i o n s have b e e n m u c h
m o r e s u b t l e . O n e for A b b o t t ' s P l a c i d y l , a s l e e p i n g pill, c o n t a i n e d a
p i c t u r e of a p r e g n a n t w o m a n , with t h e h e a d i n g , 'give us her n i g h t s ' .
T h e small p r i n t at t h e b o t t o m of t h e ad i n d i c a t e d that Placidyl
s h o u l d not b e g i v e n t o w o m e n i n early p r e g n a n c y . A b b o t t a p p a r -
e n t l y a r g u e d t h a t this ad w a s lawful b e c a u s e t h e w o m a n in the
p i c t u r e w a s in late p r e g n a n c y .
O n e c o u l d c o n t i n u e ad infinitum w i t h p h a r m a c e u t i c a l a d v e r t i s e -
m e n t s w h i c h m a k e false, e x a g g e r a t e d o r m i s l e a d i n g c l a i m s . T h e
S a i n s b u r y C o m m i t t e e i n G r e a t B r i t a i n w a s p r e s e n t e d with the
results of a survey by W a d e and E l m e s o f t h e Q u e e n ' s University of
B e l f a s t w h i c h found t h a t 22 of 45 a d v e r t i s e m e n t s in t h e study
217
The corporation as pusher
i n c l u d e d u n w a r r a n t e d c l a i m s . I n a d d i t i o n i t w a s c o m m o n for
3
a d v e r s e effects to be o m i t t e d or glossed o v e r .
T h e r e is an infinite v a r i e t y of w a y s t h a t m i s l e a d i n g i m p r e s s i o n s
can be created in pharmaceutical advertisements. Advertising
a g e n c i e s a r e skilled a t d e s i g n i n g l a y o u t s w h i c h highlight the good
n e w s a n d n o t t h e b a d . W h e n a p r o d u c t a t t r a c t e d f a v o u r a b l e results
from e a r l y r e s e a r c h s t u d i e s , but u n f a v o u r a b l e findings from later
m o r e s o p h i s t i c a t e d w o r k , a d v e r t i s e m e n t s m i g h t only refer t o the
4
e a r l y s t u d i e s . N o t i n f r e q u e n t l y r e f e r e n c e s are m a d e t o o b s c u r e
j o u r n a l a r t i c l e s in such a way as to imply t h a t t h e source confirms the
c l a i m b e i n g m a d e w h e n this is not in fact t h e c a s e . T h e possibilities
for c o l o u r i n g reality are so m u l t i f a r i o u s t h a t u n d e r any system of
legal c o n t r o l s it is not difficult to s t e e r clear of b l a t a n t v i o l a t i o n s by
s k i r t i n g a r o u n d t h e b o u n d a r i e s o f legal r e q u i r e m e n t s . O n e regu-
l a t o r y affairs d i r e c t o r w a s r e m a r k a b l y h o n e s t o n this s c o r e :
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The corporation as pusher
D r . S a m m o n s : L e t m e p o i n t o u t t o y o u t h a t t h e A M A was o n e o f
t h e first p e o p l e to p o i n t out t h e p o t e n t i a l harmful effects of
Chloromycetin.
S e n . N e l s o n : B u t t h e disgraceful p a r t is, you p o i n t e d it out and
c o n t i n u e d t o t a k e t h e ads t h a t p r o m o t e d i m p r o p e r use o f t h e
d r u g , a n d I can d e m o n s t r a t e t h a t to y o u .
D r . S a m m o n s : S e n a t o r , C h l o r o m y c e t i n still has a place in t h e
a r m a m e n t a r i u m in the practice of m e d i c i n e .
S e n . N e l s o n : T h a t is kind of a n o n s t a t e m e n t ; but it is m i s u s e d 90
t o 9 9 p e r c e n t o f t h e t i m e , and you t o o k ads t h a t p r o m o t e d t h e
m i s u s e a n d I t h i n k it is disgraceful ( S u b c o m m i t t e e on H e a l t h ,
1973).
T h e A M A and P M A ( P h a r m a c e u t i c a l M a n u f a c t u r e r s A s s o c i -
a t i o n ) , a n d t h e i r e q u i v a l e n t s i n o t h e r c o u n t r i e s , are f i r m l y linked
within the medical-industrial c o m p l e x . The two associations almost
i n v a r i a b l y s u p p o r t e a c h o t h e r before c o m m i t t e e s o f e n q u i r y , and
p r o v i d e m u t u a l aid for l o b b y i n g efforts in t h e c a p i t a l s o f t h e w o r l d .
T h e n e x u s is i n v a l u a b l e for t h e P M A in b e i n g able to c o u n t on
' i n d e p e n d e n t ' p r o f e s s i o n a l s u p p o r t for t h e i r p o s i t i o n , and for the
A M A it is basically a c a s h n e x u s . A P M A p u b l i c r e l a t i o n s p e r s o n
told m e t h a t w h e n t h e P M A r u n s its g e n e r a l a d v e r t i s e m e n t s
219
The corporation as pusher
A t t i m e s t h e c a s h n e x u s w i t h i n the m e d i c a l - i n d u s t r i a l c o m p l e x
h a s v e r g e d o n t h e d o w n r i g h t c o r r u p t . H e n r y W e l c h served a s
d i r e c t o r o f t h e F D A ' s a n t i b i o t i c s division d u r i n g t h e b o o m p e r i o d
for a n t i b i o t i c s w h i c h c o i n c i d e d with t h e a l l e g e d t e t r a c y c l i n e pricing
conspiracy ( 1 9 5 3 - 6 0 ) . W e l c h was a target of public-interest-group
c r i t i c i s m for t h e zeal w i t h w h i c h he p u s h e d t h e use of a n t i b i o t i c s
( T u r n e r , 1976: 2 1 8 - 2 2 ) . T h r o u g h o u t his d i r e c t o r s h i p o f t h e a n t i -
biotics division, W e l c h was the editor of two private j o u r n a l s which
w e r e financially b a c k e d by a n t i b i o t i c m a n a u f a c t u r e r s such as Pfizer,
U p j o h n , S m i t h K l i n e and A b b o t t . A third W e l c h j o u r n a l failed, but
n o t b e f o r e P a r k e - D a v i s had sunk $ 1 0 0 , 0 0 0 into it. E d i t o r ' s h o n o r -
a r i u m s w e r e paid t o W e l c h . I n a d d i t i o n , b e t w e e n 1953 and 1960
W e l c h ' s s h a r e o f t h e profits, a s h a l f - o w n e r o f t h e c o m p a n y that
published the two journals, was $287,142.40.
R e c e n t l y , I w a s a p p r o a c h e d by a m a n w h o said he had an
o p p o r t u n i t y for me to p l a c e an article in a m a g a z i n e on a
f r e e - l a n c e b a s i s . He d e s c r i b e d very frankly his o w n r a t h e r c u r i o u s
o r g a n i z a t i o n . H e a n d his a s s o c i a t e s w e r e r e p r e s e n t i n g a c o m p a n y
w h i c h had d e v e l o p e d a n e w p r o d u c t to t r e a t a very c o m m o n
a i l m e n t . T h e y g u a r a n t e e d t o find t h e m e d i c a l r e s e a r c h e r s w h o
w o u l d test it, and had d o n e so. F u r t h e r , t h e y had a m e t h o d of
g e t t i n g it p u b l i s h e d m o r e quickly in a m e d i c a l j o u r n a l t h a n might
o t h e r w i s e be d o n e , so that it b e c a m e 'legitimate' news.
At t h i s p o i n t he w e n t to a m a g a z i n e and s u g g e s t e d a story on
t h e g e n e r a l t o p i c , a n d told t h e m a g a z i n e e d i t o r t h a t t h e c o m p a n y
220
The corporation as pusher
D r u g c o m p a n i e s d i s p e n s e n e g a t i v e a s well a s p o s i t i v e s a n c t i o n s t o
m a s s m e d i a o u t l e t s a c c o r d i n g t o h o w they p e r f o r m . I n J a n u a r y 1976
t h e New York Times ran a s e r i e s of a r t i c l e s on m e d i c a l incom-
p e t e n c e , including the misuse of prescription drugs. Retaliation in
t h e form of c a n c e l l a t i o n of half a m i l l i o n d o l l a r s ' w o r t h of a d v e r -
t i s i n g in Modern Medicine, a j o u r n a l o w n e d by t h e Times c o m p a n y ,
w a s said t o h a v e b e e n e x a c t e d . T h e n e w s p a p e r q u o t e d a n officer o f
t h e m e d i c a l j o u r n a l a s saying t h a t t h e c o m p a n i e s c a n c e l l e d their
a d v e r t i s e m e n t s b e c a u s e t h e y felt 'you d o n ' t feed p e o p l e w h o beat
y o u u p ' ( H u g h e s a n d B r e w i n , 1979: 2 1 9 ) .
A s w e m o v e t o w a r d s t h e twenty-first c e n t u r y , p h a r m a c e u t i c a l
a d v e r t i s i n g i s finding n e w , m o r e effective, m o d a l i t i e s . I n t h e U n i t e d
S t a t e s , 8 0 , 0 0 0 d o c t o r s i n 3 5 cities h a v e b e e n p r o v i d e d , free o f
c h a r g e , w i t h F M r a d i o sets t u n e d t o t h e P h y s i c i a n s R a d i o N e t w o r k .
T h e r a d i o s c o n s t a n t l y c h u r n out m e d i c a l n e w s and f e a t u r e s o f
i n t e r e s t to p h y s i c i a n s . M i x e d in with this is p r o m o t i o n a l copy on
n e w a n d old d r u g s . T h e P h y s i c i a n s R a d i o N e t w o r k c l a i m s a 'signi-
f i c a n t l y h i g h e r " s h a r e o f m i n d " a m o n g r a d i o h o l d e r s ' t h a n can b e
g a i n e d by a d v e r t i s i n g by d i r e c t mail or in j o u r n a l s ( H u g h e s and
B r e w i n , 1979: 2 0 3 ) . T h e initial lists of d o c t o r s to get free r a d i o sets
w e r e s u p p l i e d by a d v e r t i s i n g d r u g c o m p a n i e s from their lists of
k n o w n high p r e s c r i b e r s . P e r h a p s it will soon be free v i d e o - s e t s .
B e f o r e w e h a v e r e a l l y b e g u n t o c o m e t o grips with r e g u l a t i o n o f
pharmaceutical advertising in traditional channels, new, more
p o w e r f u l m o d a l i t i e s a r e d e m a n d i n g a r e a s s e s s m e n t of h o w drug
pushing can be brought under control.
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The corporation as pusher
O b v i o u s l y it is m u c h m o r e difficult for h e a l t h a u t h o r i t i e s to
m o n i t o r t h e c l a i m s of sales r e p r e s e n t a t i v e s t h a n it is to m o n i t o r t h e
p r i n t e d w o r d . B u t s l i p - u p s o c c u r , such as w h e n a p r a c t i s i n g physi-
c i a n w h o h a p p e n e d to be a p a r t - t i m e F D A e m p l o y e e w a s told by a
P a r k e - D a v i s r e p r e s e n t a t i v e t h a t C h l o r o m y c e t i n p o s e d n o m o r e risk
of b l o o d d a m a g e t h a n any o t h e r a n t i b i o t i c - a claim t h a t the heavy
d e a t h toll from C h l o r o m y c e t i n can r e a d i l y d i s p r o v e ( e . g . B e s t ,
1967).
T h e M E R / 2 9 litigation unearthed a wealth of information about
t h e i n s t r u c t i o n s w h i c h w e n t o u t t o R i c h a r d s o n - M e r r e l l sales r e p r e -
s e n t a t i v e s o n h o w t o p u s h this d r u g :
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The corporation as pusher
B y a n d l a r g e , h o w e v e r , i t t a k e s e x t r a o r d i n a r y e v e n t s such a s t h e
M E R / 2 9 p r o s e c u t i o n s t o bring such a b u s e s t o t h e surface. A W H O
s u r v e y in 1968 s h o w e d t h a t m o s t g o v e r n m e n t s do not have legis-
l a t i o n w h i c h e n a b l e s t h e m t o c o n t r o l oral s t a t e m e n t s b y drug sales
r e p r e s e n t a t i v e s ( W H O , 1969). S o u t h Africa w a s t h e only e x c e p t i o n
f o u n d . T h e r e , w h e n e v e r a drug is a d v e r t i s e d orally for t h e first t i m e ,
w r i t t e n i n f o r m a t i o n e q u i v a l e n t t o t h a t r e q u i r e d for p a c k a g e inserts
m u s t be g i v e n to t h e p h y s i c i a n . In Yarrow v. Sterling Drug Inc. it
w a s held in t h e U n i t e d S t a t e s that a m a n u f a c t u r e r w a s liable for a
failure of its sales r e p r e s e n t a t i v e s to disclose side-effects, e v e n
w h e r e d i s c l o s u r e w a s m a d e i n labelling m a t e r i a l s ( A f t e r m a n , 1972).
In spite of t h e s e d e v e l o p m e n t s , it r e m a i n s a major irony t h a t the
m o s t influential m e t h o d o f d r u g p r o m o t i o n i s t h e least c o n s t r a i n e d
by l a w .
P h y s i c i a n s t h e m s e l v e s are t h e m o s t hopeful source o f c o n t r o l .
M a n y d o c t o r s enjoy g e t t i n g n e w s a m p l e s from t h e sales r e p r e s e n -
t a t i v e . A s o n e m e d i c a l d i r e c t o r e x p l a i n e d : ' D o c t o r s like n e w toys t o
p l a y w i t h . ' P h a r m a c e u t i c a l c o m p a n i e s d o not like t o upset d o c t o r s :
S a l e s r e p r e s e n t a t i v e s will be on t h e m a t if t h e y have r u b b e d
d o c t o r s u p t h e w r o n g w a y . O u r g r e a t c o n c e r n i s not s o m u c h
a v o i d i n g m i s r e p r e s e n t a t i o n , t h o u g h t h a t ' s i m p o r t a n t for its o w n
s a k e , but avoiding those kinds of m i s r e p r e s e n t a t i o n which upset
d o c t o r s . T h e c o m p a n y ' s credibility i s a l l - i m p o r t a n t .
D o c t o r s t h e r e f o r e i n v o k e a n effective c o n t r o l w h e n they w r i t e t o
t h e c o m p a n y t o c o m p l a i n a b o u t t h e c l a i m s o f a sales r e p r e s e n t a t i v e .
E v e n m o r e effective with a t r a n s n a t i o n a l is for t h e d o c t o r to c o m -
plain direct to world h e a d q u a r t e r s . A senior Australian executive
c o n c e d e d that doctors w h o have an intelligent understanding of
h o w t o sting t h e sales d e p a r t m e n t ' w o n ' t g o t h r o u g h t h e local p e o p l e
b e c a u s e t h e y will only c o v e r i t u p ' . C o r p o r a t e h e a d q u a r t e r s d o not
get a lot of f e e d b a c k a b o u t h o w its s u b s i d i a r i e s in far-flung p a r t s of
t h e w o r l d a r e p e r f o r m i n g , s o l e t t e r s from p h y s i c i a n s with s e r i o u s
c o m p l a i n t s can c r e a t e s o m e heat for t h e local sales d e p a r t m e n t . O n e
F D A official l a m e n t e d t h a t F D A c o m p l a i n t s t o t h e c o m p a n y a r e not
a l w a y s as effective a s a n c t i o n : 'Often t h e y will r e s p o n d to t h e
223
The corporation as pusher
A s h a d e o f g r e y a r e a w o u l d be w h e r e t h e c o m p a n y r e c o m m e n d s a
d o s a g e i n t h e r a n g e say 2 0 0 - 2 5 0 m i s . M a y b e m o s t specialists
a g r e e w i t h t h i s d o s a g e . B u t o n e specialist says to a sales
r e p r e s e n t a t i v e t h a t you really n e e d a d o s a g e of450 mis. T h e n t h e
s a l e s r e p r e s e n t a t i v e will go and say this to a G P : that such and
such a s p e c i a l i s t r e c o m m e n d s t h a t t h e d o s a g e really should be
450 mis.
S e n a t o r K e n n e d y o n c e d r e w a t t e n t i o n t o a J o h n s o n and J o h n s o n
t e a c h i n g m a n u a l w h i c h e m p h a s i s e d t h e selling r a t h e r t h a n the
i n f o r m a t i o n - p r o v i d i n g side of their w o r k : ' T h i n k s a l e s m e n and not
d e t a i l m e n . D e l e t e t h e w o r d " d e t a i l " from the v o c a b u l a r y and think
selling and s a l e s ' ( S u b c o m m i t t e e o n H e a l t h , 1974: 7 7 0 ) . T h e
p r e s s u r e to a c h i e v e sales m a k e s it difficult for the c o m p a n y r e p r e -
s e n t a t i v e t o b e o b j e c t i v e i n p r e s e n t i n g t h e a d v a n t a g e s and d i s a d v a n -
t a g e s , c o m p a r e d w i t h a l t e r n a t i v e t h e r a p i e s , o f t h e p r o d u c t s/he i s
p u s h i n g . I n d e e d , m a n y r e p r e s e n t a t i v e s discard any p r e t e n c e o f a
fair p r e s e n t a t i o n of risks and benefits. T h e former m e d i c a l d i r e c t o r
of S q u i b b , Dr A. D a l e C o n s o l e , said at o n e point in his t e s t i m o n y
b e f o r e t h e K e f a u v e r s u b c o m m i t t e e : ' T h e r e is a simple m a x i m , I
224
The corporation as pusher
T h e F D A s t a t e s t h a t t h e p r i n c i p a l t h e m e o f t h e a d suggests
u n a p p r o v e d uses of S e r e n t i l for relatively m i n o r or e v e r y d a y
a n x i e t y s i t u a t i o n s e n c o u n t e r e d often i n t h e n o r m a l c o u r s e o f
living. T h e fact is t h a t S e r e n t i l , a p h e n o t h i z i n e d r u g , is limited in
its use to c e r t a i n d i s e a s e s t a t e s . . . .
A c c o r d i n g t o a s e n i o r F D A official, S a n d o z sales r e p r e s e n t a t i v e s
w e r e h a v i n g difficulty in e x p l a i n i n g to d o c t o r s the fact that w h a t w a s
e s s e n t i a l l y t h e s a m e p r o d u c t c o u l d be u s e d for p s y c h o s i s on t h e one
h a n d , a n d for mild a n x i e t y o n t h e o t h e r . F D A r e g u l a t o r y action
a g a i n s t t h e S e r e n t i l a d v e r t i s i n g b r o u g h t t h e p r o d u c t differentiation
p r o b l e m to a h e a d . S a n d o z solved t h e p r o b l e m by selling t h e licence
to d i s t r i b u t e S e r e n t i l to a c o m p e t i t o r , B o e h r i n g e r - I n g e l h e i m ,
w h o s e sales r e p r e s e n t a t i v e s w o u l d not h a v e t h e p r o b l e m o f distin-
g u i s h i n g it from o t h e r p r o d u c t s in t h e i r line.
I n m o s t p a r t s o f t h e world sales r e p r e s e n t a t i v e s are paid b o n u s e s
a c c o r d i n g t o t h e i r sales p e r f o r m a n c e . T h e l a t t e r i s not a l w a y s easy t o
a s s e s s . T h e d o c t o r d o e s not place a n o r d e r w i t h t h e r e p r e s e n t a t i v e s .
225
The corporation as pusher
D e t a i l m e n a r e g e n u i n e l y c o n v i n c e d b y their e m p l o y e r s t h a t they
a r e w o r k i n g for t h e finest p h a r m a c e u t i c a l c o m p a n y in t h e
i n d u s t r y , a n d t h a t t h e i r p r o d u c t s are t h e best. M o r e t h a n t h i s ,
t h e y a r e c o n v i n c e d t h a t society is in n e e d of t h e i r e m p l o y e r s '
p r o d u c t s . T h e y m u s t t h e r e f o r e s p r e a d t h e word a s t o t h e w o r t h o f
t h e i r d r u g s ( S u b c o m m i t t e e o n H e a l t h , 1974: P a r t 3 : 7 3 3 ) .
226
The corporation as pusher
227
The corporation as pusher
A n e x a m p l e from N e w O r l e a n s w a s C a r r t o n e L a b o r a t o r i e s . O f its
3 , 0 0 0 s t o c k h o l d e r s , at least 1,200 w e r e p h y s i c i a n s . In M a r c h 1964,
c o m p a n y president, Dr William W. F r y e , D e a n o f t h e Louisiana
S t a t e U n i v e r s i t y School o f M e d i c i n e , w r o t e t o t h e c o m p a n y ' s
228
The corporation as pusher
L e t t e r s like t h i s d r e w a h e a r t w a r m i n g r e s p o n s e . I n t h e
s u b c o m m i t t e e h e a r i n g r e c o r d is a reply in w h i c h D r . J o s e p h A.
T h o m a s of N a t c h i t o c h e s , L o u i s i a n a , a g r e e d that 'it is up to us
s h a r e h o l d e r s t o m a k e o u r c o m p a n y g o and g r o w . ' F r o m
S h r e v e p o r t , D r . T. E. Strain w r o t e , 'I do a g r e e to p r e s c r i b e and
e n c o u r a g e m y a s s o c i a t e s t o use C a r r t o n e p r o d u c t s . ' Similar
l e t t e r s , s o m e o f t h e m m a k i n g i t clear t h a t t h e a u t h o r s w e r e glad t o
h e l p if to do so w a s c o n s i s t e n t with t h e p a t i e n t ' s h e a l t h n e e d s
c a m e from o t h e r s o u t h e r n states i n c l u d i n g A r k a n s a s , K e n t u c k y ,
a n d O k l a h o m a . D r . E . W a y n e Gilley o f C h a t t a n o o g a w r o t e t h a t
h e had ' s e n t p e r s o n a l l e t t e r s t o all d o c t o r s i n T e n n e s s e e w h o w e r e
k n o w n to have C a r r t o n e stock.' Dr. Boyce P. Griggs of
L i n c o l n t o n , N o r t h C a r o l i n a , a t t e m p t i n g t o initiate a c a m p a i g n o f
s u p p o r t for C a r r t o n e a m o n g his fellow p h y s i c i a n - s t o c k h o l d e r s ,
u r g e d t h a t ' w e . . . p r o m o t e o u r stock i n t e r e s t by way of actively
" p e n p u s h i n g " Carrtone products. . . . ' H e wrote them that
' C a r r t o n e ' s g r o w t h will r e w a r d you t h r o u g h y o u r h o l d i n g i n
C a r r t o n e stock . . . I l o o k u p o n C a r r t o n e a s a r o s e b u d a b o u t t o
b l o o m , s t o c k w i s e . . . L e t ' s p u s h t h e p e n for C a r r t o n e . . . .'
( M i n t z , 1967: 3 2 2 - 3 ) .
I do n o t k n o w w h o m a d e t h e s u g g e s t i o n , but it w a s m a d e a g a i n
a n d a g a i n t h a t t h e m e d i c a l staff b e a d v i s e d t o p u r c h a s e s u b s t a n t i a l
q u a n t i t i e s o f t h e c o m m o n stock i n C a r r t o n e L a b o r a t o r i e s w h i c h
w a s t h e n selling at a low price . . . a n d t h a t the H o s p i t a l t h e n
switch its e n t i r e b u s i n e s s t o C a r r t o n e L a b o r a t o r i e s .
W e w e r e ' g u a r a n t e e d ' t h a t t h e stock w o u l d triple o r q u a d r u p l e
i f w e t o o k such a c t i o n . . . [it] was t h e b a l d e s t p r o p o s i t i o n that I
h a v e e v e r h e a r d in 17 y e a r s of bulk p u r c h a s i n g ( M i n t z : 1967:
322-3).
229
The corporation as pusher
M i n t z i s r e l e n t l e s s i n using S e n a t e t e s t i m o n y t o d e m o n s t r a t e t h a t
p h y s i c i a n conflict of i n t e r e s t may be a p e r v a s i v e p r o b l e m .
230
The corporation as pusher
I m o s t s t r o n g l y p r o t e s t t h e use by a faculty m e m b e r of
publications ofthe University ofPittsburgh to make unwarranted
misleading s t a t e m e n t s about a product of A b b o t t
L a b o r a t o r i e s . . . . T h e scientific i n f o r m a t i o n we have - and it is
e x t e n s i v e - tells us c y c l a m a t e , at c u r r e n t l y used levels is safe and
useful in t h e h u m a n d i e t . . . . T h e p r i m e c o r p o r a t e i n t e r e s t of
A b b o t t L a b o r a t o r i e s is Health Care World Wide. . . . In Dr.
S c h u b e r t ' s s t a t e m e n t s , o u r p r o d u c t - and t h u s o u r r e p u t a t i o n - is
unjustifiably a t t a c k e d . F o r t h e s e r e a s o n s , w e m u s t p r o t e s t w h e n a
r e s p e c t e d a c a d e m i c i n s t i t u t i o n like t h e U n i v e r s i t y o f P i t t s b u r g h i s
u s e d to m a k e an u n w a r r a n t e d a t t a c k on t h e p r o d u c t of a
c o r p o r a t i o n t h a t is highly r e s p e c t e d for its scientific r e p u t a t i o n
a n d i n t e g r i t y . W e r e q u e s t t h a t you t a k e a p p r o p r i a t e action t o
c o r r e c t the misleading s t a t e m e n t s m a d e in the n a m e o f y o u r
U n i v e r s i t y ( T u r n e r 1976: 9 3 ) .
231
The corporation as pusher
o m i t t i n g e s s e n t i a l side-effect and c o n t r a - i n d i c a t i o n i n f o r m a t i o n in
a d v e r t i s i n g for t h e d r u g , P r e e M. T. T h e m a x i m u m $2,000 fine w a s
i m p o s e d by t h e U n i t e d S t a t e s District C o u r t for N e w J e r s e y after a
p l e a of no c o n t e s t by t h e c o m p a n y . W i t h i n a few y e a r s t h e r e had
b e e n six c r i m i n a l p r o s e c u t i o n s c o n c e r n i n g a d v e r t i s i n g . T h e F o o d ,
D r u g and C o s m e t i c A c t also p r o v i d e s for g o v e r n m e n t seizure o f
p r o d u c t s which have been improperly advertised. This permits
F D A a civil c o u r s e of a c t i o n as an a l t e r n a t i v e to criminal p r o s e c u -
t i o n , o n e w h i c h has m o r e s e v e r e c o n s e q u e n c e s for t h e c o m p a n y
t h a n a fine o f a few t h o u s a n d d o l l a r s . B u t seizure is an o b v i o u s l y
d e f e c t i v e r e c o u r s e for m i s l e a d i n g a d v e r t i s i n g . W h e n p a t i e n t s read
t h a t s t o c k s o f a p r o d u c t h a v e b e e n s e i z e d , they a s s u m e this m e a n s
t h a t t h e p r o d u c t itself is defective in s o m e w a y . T h i s is not t h e case
w i t h s e i z u r e s a r i s i n g from e x t r a v a g a n t a d v e r t i s i n g . A m e r i c a n
s e i z u r e s o f t h i s t y p e h a v e b e e n found t o g e n e r a t e u n n e c e s s a r y w o r r y
a m o n g p a t i e n t s a b o u t w h e t h e r they should c o n t i n u e using the d r u g s
they have in their medicine chests. Of course when batches of
p r o d u c t really a r e physically d e f e c t i v e , seizure is an essential
protection.
T h e last d e c a d e has seen a shift a w a y from not only the use of
s e i z u r e s , b u t t h e use of any litigious s o l u t i o n to t h e c o n t r o l of
a d v e r t i s i n g c l a i m s ( R h e i n s t e i n and H u g s t a d , 1979). C r i m i n a l p r o s e -
c u t i o n s s i m p l y d o not o c c u r any m o r e . F D A r e a s o n i n g i s that the
c r i m i n a l s a n c t i o n is not sufficiently flexible a d e v i c e for d e a l i n g with
t h e p r o b l e m . It w o u l d typically t a k e t h r e e y e a r s to b r i n g a criminal
5
p r o s e c u t i o n to a c o n c l u s i o n . By t h e n an a d v e r t i s i n g c a m p a i g n
w o u l d h a v e long since run its c o u r s e . T h e p r e f e r r e d strategy w a s t o
s t r i k e at an a d v e r t i s i n g c a m p a i g n i m m e d i a t e l y , d u r i n g t h e period it
was believed to have an impact. So the most c o m m o n sanctions
became:
T h e s e a r e effective s a n c t i o n s . P h a r m a c e u t i c a l c o m p a n i e s pay
a d v e r t i s i n g a g e n c i e s a g r e a t deal of m o n e y for effective a d v e r t i s i n g
232
The corporation as pusher
233
The corporation as pusher
w a y t h e A m e r i c a n F D A - i m p o s e d c o n t r o l h a s . W i t h the p r o g r e s s i v e
i n t r o d u c t i o n of US c o n t r o l s b e t w e e n 1961 and 1977 t h e p r o p o r t i o n
o f a d v e r t i s i n g s p a c e d e v o t e d t o side-effects and c o n t r a - i n d i c a t i o n s
increased markedly in t h e Journal of the American Medical
Association. In G r e a t B r i t a i n and A u s t r a l i a , in c o n t r a s t , i m p r o v e -
m e n t s w e r e n o t e v i d e n t d u r i n g this p e r i o d i n t h e c o u n t e r p a r t
j o u r n a l s . W h i l e m i n u s c u l e p r o p o r t i o n s o f t h e British and A u s t r a l i a n
a d v e r t i s i n g copy a r e d e v o t e d t o side-effects and c o n t r a - i n d i c a t i o n s ,
t h e p r o p o r t i o n of A m e r i c a n advertising space devoted to caution-
ary c o n t e n t is n o w a l m o s t as g r e a t as t h e s p a c e d e v o t e d to indi-
c a t i o n s . N o t w i t h s t a n d i n g t h i s , q u a n t i t y i s not q u a l i t y ; i t r e m a i n s t h e
i n d i c a t i o n s w h i c h a r e t h e subject o f e y e - c a t c h i n g copy i n t h e U n i t e d
1
States.
T h e r e is some e v i d e n c e suggesting that remedial advertisements
a r e effective from a s t u d y c o n d u c t e d for t h e F D A by A p p l i e d
M a n a g e m e n t S c i e n c e s ( S u b c o m m i t t e e o n H e a l t h , 1974: 2 0 0 3 - 3 0 ) .
T h e r e m e d i a l a d v e r t i s e m e n t is a t t r a c t i v e b e c a u s e it is such a public
k i n d of s a n c t i o n . H o p e f u l l y , all o t h e r m a n u f a c t u r e r s see it, and
g e n e r a l d e t e r r e n c e is fostered in t h e m o s t explicit way p o s s i b l e .
A p p l i e d M a n a g e m e n t Sciences asked a representative sample of
1,379 p h y s i c i a n s if t h e y had seen a r e m e d i a l a d v e r t i s e m e n t con-
c e r n i n g an o r a l c o n t r a c e p t i v e . A s u r p r i s i n g 2 4 . 6 p e r cent of the
s a m p l e saw and r e m e m b e r e d the r e m e d i a l a d v e r t i s e m e n t . M o r e
i m p o r t a n t l y , 3 6 . 8 p e r c e n t o f o b s t e t r i c i a n s and g y n a e c o l o g i s t s and
4 0 . 7 p e r c e n t o f p h y s i c i a n s w h o had e v e r p r e s c r i b e d t h a t b r a n d o f
o r a l c o n t r a c e p t i v e n o t i c e d t h e ad. T h i s surely can be c o u n t e d as
r e m a r k a b l y effective c o m m u n i c a t i o n of a r e g u l a t o r y action to the
relevant audience.
I n g e n e r a l , a d v e r s e publicity i s t h e m o s t f l e x i b l e , c h e a p , s p e e d y
a n d effective s a n c t i o n a g a i n s t p r o m o t i o n a l e x c e s s e s . T h e F D A has
legislative backing to disseminate information concerning drugs,
f o o d , d e v i c e s , or c o s m e t i c s which it c o n s i d e r s e i t h e r c o n s t i t u t e an
' i m m i n e n t d a n g e r to h e a l t h ' or i n v o l v e a ' g r o s s d e c e p t i o n of the
c o n s u m e r ' . T h e d i s c r e t i o n i s w i d e , p r o v i d i n g that ' n o t h i n g i n t h e
s e c t i o n shall be c o n s t r u e d to p r o h i b i t t h e S e c r e t a r y from . . . r e p o r t -
ing .. . t h e r e s u l t s of i n v e s t i g a t i o n s . . . .' It w a s held in Hoxsey
Cancer Clinic v. Folsom t h a t t h e F D A may issue such i n f o r m a t i o n
w i t h o u t a h e a r i n g , and t h a t no legal r e m e d y is a v a i l a b l e to p r e v e n t
its r e l e a s e to t h e p u b l i c ( A f t e r m a n , 1972: 122).
234
The corporation as pusher
T h e place of s e l f - r e g u l a t i o n
235
The corporation as pusher
M o r e i m p o r t a n t t h a n t r a d e a s s o c i a t i o n self-regulation i s intra-
c o r p o r a t e s e l f - r e g u l a t i o n . O n e c o m p a n y I visited c l a i m e d that if
t h e r e w e r e 30 p a p e r s a s s o c i a t e d w i t h a given a d v e r t i s i n g c l a i m , t h e n
t h e legal d e p a r t m e n t , q u i t e a p a r t from t h e m e d i c a l d e p a r t m e n t ,
w o u l d r e a d e a c h o f t h o s e 3 0 p a p e r s . A g a i n w e have a s i t u a t i o n
w h e r e only l a r g e c o m p a n i e s can afford a legal d e p a r t m e n t o f a size
to be a b l e to do t h i s . A n d of c o u r s e it w o u l d be n a i v e to a s s u m e t h a t
in this kind of w o r k t h e legal d e p a r t m e n t ' s function is p r i m a r i l y
s e l f - r e g u l a t o r y ; it is e q u a l l y to a d v i s e m a r k e t i n g staff on w h a t t h e y
c a n get a w a y w i t h . N e v e r t h e l e s s , i t i s i m p o r t a n t t o g r a n t t h e p r o -
fessional c o n s t i t u e n c i e s within the organisation power to over-rule
marketing on promotional claims.
M o s t l a r g e c o m p a n i e s h a v e fairly c o m p l e x s y s t e m s for a p p r o v i n g
n e w p r o m o t i o n a l m a t e r i a l . T y p i c a l l y , t h e m a r k e t i n g m a n a g e r will
236
The corporation as pusher
I n this p r o c e s s , o n e w o u l d h a v e t h o u g h t t h e legal d e p a r t m e n t
m i g h t afford as g r e a t a p r o t e c t i o n to t h e p u b l i c as t h e medical
d i r e c t o r . Y e t t h i s s e e m s not t o b e so. W h i l e t h e p r o f e s s i o n a l
s o c i a l i s a t i o n o f d o c t o r s i n d o c t r i n a t e s t h e m w i t h t h e ideal t h a t w h a t
t h e y a r e a b o u t i s p r o v i d i n g t h e best p o s s i b l e h e a l t h care t o the
p u b l i c , t h e s o c i a l i s a t i o n o f l a w y e r s e m p h a s i s e s serving the best
i n t e r e s t s o f t h e client ( w h o p a y s t h e bills) w h e t h e r t h e client i s right
o r w r o n g . P r o f e s s i o n a l i d e o l o g y p r o c l a i m s t h a t every p a r t i c i p a n t i n
a n a d v e r s a r y s y s t e m d e s e r v e s t h e best legal a d v i c e . C e r t a i n l y p r o -
fessional s o c i a l i s a t i o n b e c o m e s less and less i m p o r t a n t as b o t h
d o c t o r s and l a w y e r s b e c o m e l o o k - a l i k e o r g a n i s a t i o n p e r s o n s .
N e v e r t h e l e s s , t h e r e r e m a i n s o m e differences w h e r e b y d o c t o r s
c o n t i n u e t o see t h e i r u l t i m a t e mission a s being t o i m p r o v e t h e h e a l t h
o f t h e p u b l i c , w h i l e l a w y e r s see t h e i r r e s p o n s i b i l i t y a s t o p r o t e c t
t h e i r e m p l o y e r from t h e p u b l i c . O n e l a w y e r e x p r e s s e d a justifiable
c y n i c i s m w h e n I put t h e a b o v e i n t e r p r e t a t i o n to him: ' L a w y e r s are
o p e n a b o u t selling t h e i r skills t o t h e h i g h e s t b i d d e r ; but d o c t o r s
d e l u d e t h e m s e l v e s into b e l i e v i n g t h a t t h e y are serving s o m e o n e
o t h e r t h a n he w h o is p a y i n g t h e bills.' 1 r e s p o n d e d t h a t it is a
d e l u s i o n w h i c h m i g h t o c c a s i o n a l l y afford s o m e small p r o t e c t i o n t o
t h e p u b l i c . T h e l a w y e r a g r e e d t h a t this c o u l d b e .
L a w y e r s a r e , t h e n , self-consciously s e r v a n t s o f t h e c o r p o r a t e
i n t e r e s t r a t h e r t h a n t h e p u b l i c i n t e r e s t , e s s e n t i a l l y advising the
c o r p o r a t i o n o n w h a t t h e y can get a w a y w i t h . B u t this d o e s not m e a n
t h a t l a w y e r s see t h e i r m i s s i o n as profit m a x i m i s a t i o n for t h e
c o m p a n y . L a w y e r s see t h e i r goal as to be g o o d l a w y e r s , largely as
d e f i n e d by t h e i r p r o f e s s i o n a l s o c i a l i s a t i o n . It is t h e j o b of s e n i o r
m a n a g e m e n t t o a r t i c u l a t e t h e w o r k o f a s u b u n i t w h i c h d o e s good
l a w y e r i n g t o t h e o v e r a l l goals o f t h e o r g a n i s a t i o n :
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The corporation as pusher
W e h a v e s e e n t h a t t h e b u r d e n i m p o s e d o n t h e e c o n o m y b y phar-
m a c e u t i c a l p r o m o t i o n is t r e m e n d o u s . For the average A m e r i c a n
d o c t o r w h o writes $35,000 worth of prescriptions a year, about
$ 7 , 0 0 0 will h a v e b e e n spent in p e r s u a d i n g him or h e r to write t h o s e
p r e s c r i p t i o n s . T h i s i s c e r t a i n l y not a n a r e a w h e r e r e g u l a t i o n w o u l d
i m p o s e c o s t s t o b e p a s s e d o n t o t h e c o m m u n i t y . R e g u l a t i o n would
p r o d u c e s a v i n g s . H e a l t h a u t h o r i t i e s i n s o m e c o u n t r i e s have recog-
nised that excessive pharmaceutical p r o m o t i o n produces more
social h a r m t h a n g o o d and a r e acting t o r e d u c e c o r p o r a t e p r o m o -
t i o n a l e x p e n d i t u r e . T h e y can d o this b e c a u s e t h e i r g o v e r n m e n t s , a s
w e saw i n t h e last c h a p t e r , h a v e effective c o n t r o l o f d r u g p r i c e s . T h e
B r i t i s h g o v e r n m e n t i m p o s e s limits o n t h e a m o u n t s p h a r m a c e u t i c a l
c o m p a n i e s m a y s p e n d o n p r o m o t i o n . T h e pricing formula for N H S
p u r c h a s e s w a s r e v i s e d in 1978-9 to allow an a v e r a g e of 11 per cent of
s a l e s r e v e n u e t o g o o n p r o m o t i o n . T h i s has forced d o w n e x p e n d i -
t u r e on p r o m o t i o n by s e v e r a l p e r c e n t a g e p o i n t s in the last few y e a r s
to 12 p e r c e n t of r e v e n u e . T h i s is b e i n g further r e d u c e d as the
g o v e r n m e n t has n o w l o w e r e d the t a r g e t to 10 per c e n t . A similar
p r o c e s s has b e g u n i n F r a n c e , w h e r e t h e H e a l t h M i n i s t r y a d v i s e d
p h a r m a c e u t i c a l m a n u f a c t u r e r s in 1978 t h a t no firm will be allowed
to e x c e e d a m a x i m u m of 17 p e r c e n t of sales value on p r o m o t i o n for
social s e c u r i t y r e i m b u r s e d p r o d u c t s .
T h e A u s t r a l i a n H e a l t h D e p a r t m e n t also a r g u e d before t h e R a l p h
E n q u i r y t h a t i t s h o u l d b e e m p o w e r e d t o take steps t o r e d u c e
promotional expenditure:
T h e D e p a r t m e n t t a k e s t h e view t h a t m u c h o f t h e d r u g p r o m o t i o n
(mainly carried out by 'medical representatives' or 'drug
d e t a i l e r s ' ) is u n n e c e s s a r y , m u s t o b v i o u s l y i n c l u d e a significant
238
The corporation as pusher
bias a n d s h o u l d be largely r e p l a c e d by o b j e c t i v e i n f o r m a t i o n to
d o c t o r s from a u t h o r i t a t i v e and n o n - b i a s e d s o u r c e s , e.g. t h e
' A u s t r a l i a n P r e s c r i b e r ' ( A u s t r a l i a n D e p a r t m e n t o f H e a l t h , 1978:
66).
In a d d i t i o n , we s h o u l d n o t forget t h a t false a d v e r t i s i n g to p u s h t h e
e x c e s s i v e u s e of d a n g e r o u s d r u g s is so s e r i o u s a m a t t e r as to d e s e r v e
t h e s t i g m a o f t h e c r i m i n a l label. E x e m p l a r y p r o s e c u t i o n s o f c o m -
p a n i e s , p e r h a p s m a r k e t i n g m a n a g e r s , and c e r t a i n l y sales r e p r e s e n t -
atives are necessary to maintain stigma. Unlike many o f t h e matters
d i s c u s s e d i n p r e v i o u s c h a p t e r s , t h e s e a r e not c o m p l e x f e a t u r e s o f
c o r p o r a t e c o n d u c t w h i c h are difficult t o e x p l a i n i n c o u r t . T h e
p r i n t e d a d v e r t i s e m e n t is t h e r e for all to s e e , and it is not difficult to
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The corporation as pusher
b r i n g a n u m b e r of d o c t o r s into c o u r t to testify t h a t a p a r t i c u l a r
c o m p a n y sales r e p r e s e n t a t i v e m a d e c e r t a i n specific claims t o t h e m .
P o l i c e officers w o u l d wish t h e y had it so easy in i n v e s t i g a t i n g m o s t
o t h e r t y p e s of c r i m i n a l offences. R e m e m b e r i n g that all I am
s u g g e s t i n g i s e x e m p l a r y p r o s e c u t i o n s , t h e task o f c o n v i c t i o n would
be e v e n e a s i e r by s e l e c t i n g o u t t h e m o s t b l a t a n t cases for court
action.
A n e n f o r c e m e n t a p p r o a c h i s n e c e s s a r y b e c a u s e t h e self-regu-
l a t o r y t r a c k r e c o r d of i n d u s t r y in c o n t r o l l i n g p r o m o t i o n is not g o o d .
S e l f - r e g u l a t i o n has b e e n tried and failed. It can c o m p l e m e n t
g o v e r n m e n t r e g u l a t i o n , b u t , i n this a r e a , can n e v e r b e a n a l t e r n a t i v e
to it.
M o s t c o u n t r i e s p e r m i t t h e a d v e r t i s i n g o f p r e s c r i p t i o n d r u g s only i n
m e d i a o u t l e t s d i r e c t e d specifically a t d o c t o r s ( e . g . medical
j o u r n a l s ) , and not t h r o u g h m a s s m e d i a . H o w e v e r , e x c e p t in a few
E u r o p e a n c o u n t r i e s , the advertising of non-prescription drugs
( O T C d r u g s ) i s p e r m i t t e d t h r o u g h all m e d i a o u t l e t s . T h e m a i n
c o n c e r n a b o u t m a s s m e d i a a d v e r t i s i n g o f d r u g s i s not specific c l a i m s
w h i c h a r e f r a u d u l e n t o r i n a c c u r a t e , b u t t h e c o n t r i b u t i o n the a d v e r -
tising m a k e s to producing a pill-popping culture. Mass advertising
f o s t e r s t h e ' m e d i c a l i z a t i o n o f e v e r y d a y life':
O n c e a h u m a n p r o b l e m is defined as a d i s e a s e , t h e t e c h n o l o g i c a l
a p p a r a t u s m a y be b r o u g h t in for its c u r e . It is t h e r e f o r e in the
i n t e r e s t s o f t h e p h a r m a c e u t i c a l i n d u s t r y t o e x p a n d its m a r k e t b y
e n c o u r a g i n g d o c t o r s t o e x p a n d t h e m e d i c a l m o d e l and t o
m a i n t a i n a p u b l i c belief t h a t h u m a n suffering and pain are not
o r d i n a r y c o n c o m i t a n t s o f living but a r e d i s e a s e s w h i c h m e d i c i n e
c a n be e x p e c t e d to end ( W i n k l e r , 1977: 7 ) .
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The corporation as pusher
o f a l c o h o l a n d t o b a c c o ) ? W h y e x p o s e c h i l d r e n t o the guiles o f
p u s h e r s of d r u g s , illegal or legal? A g a i n , this t y p e of r e g u l a t i o n
w o u l d r e d u c e costs, not increase t h e m .
If people need information about chemical solutions to problems
t h e y m i g h t h a v e , t h e n t h e y can go to t h e i r d o c t o r , or at least to a
p h a r m a c i s t w h o could p r o v i d e t h e m w i t h o b j e c t i v e l i t e r a t u r e and
a d v i c e a b o u t O T C d r u g s . T e l e v i s i o n a d v e r t i s i n g o f d r u g s has b e e n
b a n n e d in S w e d e n for m o r e t h a n a d e c a d e . A r g u i n g that t e l e v i s i o n
d r u g a d v e r t i s i n g fosters drug a b u s e a m o n g c h i l d r e n , t h e a t t o r n e y s -
g e n e r a l o f e i g h t e e n A m e r i c a n states o n c e p e t i t i o n e d t h e U S F e d e r a l
C o m m u n i c a t i o n s C o m m i s s i o n t o halt T V a d v e r t i s i n g o f O T C d r u g s
b e t w e e n 6 a . m . a n d 9 p . m . daily ( K a t z , 1 9 7 6 : 2 9 ) . C o r p o r a t i o n s use
t h e r h e t o r i c o f l i b e r a l i s m t o defend t h e i r r i g h t t o a d v e r t i s e . B u t
l i b e r a l i s m i s t r a d i t i o n a l l y c o n c e r n e d with t h e right o f t h e individual
to do a n y t h i n g he or she likes so long as it d o e s no h a r m to o t h e r s ,
n o t w i t h t h e right of powerful c o r p o r a t i o n s to do i m m e n s e h a r m to
i n d i v i d u a l s and t o society with i m p u n i t y .
241
The corporation as pusher
242
The corporation as pusher
w h i c h i n d i c a t e s t h a t t h e p r o d u c t has b e e n p r e s c r i b e d for a p a r t i c u l a r
i n d i v i d u a l a n d s h o u l d not be given to o t h e r s will do m o r e to dis-
c o u r a g e t h a n e n c o u r a g e t h e p r a c t i c e . S e c o n d , i t i s a r g u e d that
p a t i e n t l a b e l l i n g could p r o d u c e a d v e r s e r e a c t i o n s i n p a t i e n t s
t h r o u g h s u g g e s t i o n . F D A a r g u e s t h a t s u g g e s t i o n effects play a
minimal role in causing serious adverse reactions. While patient
l a b e l l i n g m i g h t i n c r e a s e t h e reported i n c i d e n c e of a d v e r s e r e a c t i o n ,
a n u m b e r of s t u d i e s suggest t h a t t h e actual i n c i d e n c e of a d v e r s e
r e a c t i o n s will n o t i n c r e a s e ( M y e r s and C a l v e r t , 1 9 7 3 , 1 9 7 6 ; P a u l s o n
et a l . , 1976; E k l u n d and W e s s l i n g , 1976; B a s s and S u v e g e s , 1977;
W e i b e r t , 1977; K a n o u s e and M o r r i s , 1978). M o r e o v e r , t h e F D A
a r g u e d , at a p s y c h o l o g i c a l level t h e a d v a n t a g e s of p a t i e n t informa-
tion outweigh the disadvantages.
A n o t h e r p s y c h o l o g i c a l factor, t h o u g h , i s t h a t informed p a t i e n t s
m a y be less likely to be a m e n a b l e to a d v a n t a g e o u s p l a c e b o effects.
On the c o n t r a r y , the F D A reply, ' B e c a u s e the patient would know
w h a t effects t o e x p e c t from t h e d r u g and b e c a u s e p a t i e n t labelling
may e n h a n c e patient/physician c o m m u n i c a t i o n s , information in
p a t i e n t l a b e l l i n g a b o u t t h e effects o f t h e d r u g may e v e n i n c r e a s e the
p l a c e b o effect of a d r u g p r o d u c t . ' (Federal Register 4 4 ( 1 3 1 ) , 6 July
1979: 4 0 0 2 3 ) .
A n o t h e r a t t a c k o n p a t i e n t labelling i s t h a t i t w o u l d c a u s e p a t i e n t s
a t t i m e s t o b e a l a r m e d , and put m o r e p r e s s u r e o n t h e t i m e o f d o c t o r s
w h o will h a v e to r e a s s u r e t h e m a b o u t c e r t a i n m a t t e r s . Surely such a
p a t i e n t / p h y s i c i a n d i a l o g u e is p r e c i s e l y w h a t is lacking at the
m o m e n t and explains much o f t h e a p p a r e n t patient ignorance. A
r e l a t e d c o n c e r n i s t h a t p a t i e n t s m i g h t lose confidence i n their
d o c t o r ' s j u d g m e n t , p a r t i c u l a r l y i f t h e d o c t o r ' s s t a t e m e n t s conflict
w i t h w h a t is said on t h e p a t i e n t i n f o r m a t i o n s h e e t . Surely if t h e
d o c t o r c a n n o t r e c o n c i l e and e x p l a i n a d i s c r e p a n c y b e t w e e n w h a t
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The corporation as pusher
T h e o n l y p r i n t e d i n f o r m a t i o n p a t i e n t s r e c e i v e d i n t h e past has
b e e n from d r u g c o m p a n y p u b l i c r e l a t i o n s d e p a r t m e n t s . T h e r e i s a
n e e d for d e m y s t i f i c a t i o n of s o m e o f t h i s 'information*. On a r e c e n t
visit to San F r a n c i s c o a p h a r m a c i s t g a v e me a R o c h e ' M e d i c a t i o n
E d u c a t i o n ' p a m p h l e t w h i c h told m e , a m o n g s o m e o t h e r q u i t e con-
s t r u c t i v e t h i n g s , t h a t ' E x t e n s i v e t e s t i n g i n t h e d e v e l o p m e n t a l stage
of a m e d i c a t i o n ' s life p r e d i c t s q u i t e a c c u r a t e l y w h a t it will do for
m o s t p a t i e n t s . . . . ' I n a q u i t e s u b t l e w a y , t h e d o c u m e n t says: trust
u s , do w h a t d o c t o r tells y o u , and all will be well.
P a t i e n t l a b e l l i n g r e g u l a t i o n s , like m o s t r e g u l a t i o n s , are e m p t y
g e s t u r e s u n l e s s t h e r e i s f o l l o w - u p t o e n s u r e that t h e y are i m p l e -
m e n t e d . The Australian Health D e p a r t m e n t became concerned in
t h e late 1970s o v e r t h e risk of c a n c e r from p r o l o n g e d o e s t r o g e n
r e p l a c e m e n t t h e r a p y . S o t h e drug c o m p a n i e s w e r e told t h a t a
w r i t t e n w a r n i n g w o u l d have to be e n c l o s e d w i t h the m e d i c a t i o n . A
F o u r C o r n e r s t e l e v i s i o n t e a m b o u g h t t h e m e d i c a t i o n from t e n
S y d n e y p h a r m a c i s t s i n late 1978. T h e w a r n i n g w a s e n c l o s e d with
only one o f t h e purchases.
244
7 Drug companies and the
Third World
T h e i n t e r n a t i o n a l p h a r m a c e u t i c a l i n d u s t r y has a p u b l i c - i m a g e
p r o b l e m i n t h e T h i r d W o r l d . A n A m e r i c a n c o m p a n y I visited i n
M e x i c o City w a s l o c a t e d i n t h e midst o f o n e o f t h e city's w o r s t s l u m s .
T h e c o m p a n y w a s kind e n o u g h t o h a v e m e d r i v e n back t o m y hotel
in a h u g e w h i t e l i m o u s i n e d r i v e n by a g e n t l e m a n in a p a r a - m i l i t a r y
u n i f o r m . A s w e w o u n d our way t h r o u g h t h e n a r r o w s t r e e t s o f the
s l u m , I c o u l d see a h e a d a g r o u p of c h i l d r e n p o i n t i n g at our car in
c o n s p i r a t o r i a l f a s h i o n . A s w e a p p r o a c h e d t h e y rolled u n d e r t h e
l i m o u s i n e a tin c a n w h i c h had b e e n i n g e n i o u s l y modified to p r o -
t r u d e s h a r p e d g e s w h i c h w o u l d p u n c t u r e any t y r e . A j o y o u s t i r a d e
o f S p a n i s h a c c o m p a n i e d t h e feat. Scoffing r e f e r e n c e t o ' A m e r i c a n o '
w a s all I could u n d e r s t a n d . F o r t u n a t e l y t h e tin c l a n g e d u n d e r the
l i m o u s i n e w i t h o u t t o u c h i n g t h e t y r e s and I w a s saved t h e e x p e r i e n c e
of e x p l a i n i n g t h a t I w a s ' A u s t r a l i a n o , no A m e r i c a n o ' .
It is s u r p r i s i n g h o w i n f o r m e d (ill-informed the c o m p a n i e s w o u l d
s a y ) m a n y o r d i n a r y p e o p l e i n t h e T h i r d W o r l d are a b o u t w h a t they
see a s t h e a b u s e s o f t r a n s n a t i o n a l p h a r m a c e u t i c a l c o m p a n i e s . W h e n
I e x p l a i n e d in very c a u t i o u s t e r m s w h a t I w a s d o i n g to a G u a t e m a l a n
taxi d r i v e r , h e s a i d , ' W h a t you should k n o w i s t h a t t h e s e c o m p a n i e s
u s e o u r p e o p l e a s g u i n e a pigs t o try out t h e i r n e w d r u g s . ' T h e
r e s e n t m e n t a g a i n s t t h e p h a r m a c e u t i c a l i n d u s t r y i s o f c o u r s e part o f
the w i d e r r e s e n t m e n t against exploitative activities by transnational
c o r p o r a t i o n s in g e n e r a l . A n d indeed the behaviour of pharma-
c e u t i c a l t r a n s n a t i o n a l s in c o u n t r i e s like G u a t e m a l a is difficult to
d i s t i n g u i s h from t h a t o f o t h e r t r a n s n a t i o n a l s . T h e y c o n s p i r e and use
t h e i r p o l i t i c a l influence t o s u b v e r t e g a l i t a r i a n tax r e f o r m s , and t o
p r e v e n t t h e f o r m a t i o n o f t r a d e u n i o n s a m o n g their e m p l o y e e s ; they
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c o - o p e r a t e w i t h t h e C I A and t h e r i g h t - w i n g military d i c t a t o r s h i p
w h i c h c o n t r o l s t h e c o u n t r y t o m a i n t a i n 'political stability'. U n f o r t u -
n a t e l y , t h e latter often r e s p o n d t o c o m p l a i n t s from A m e r i c a n c o m -
p a n i e s a b o u t s u b v e r s i v e w o r k e r s b y h a v i n g t h e m shot.
All t h i s d e t r a c t s from t h e fact t h a t t r a n s n a t i o n a l p h a r m a c e u t i c a l
c o m p a n i e s i n t h e T h i r d W o r l d tend t o h a v e h i g h e r s t a n d a r d s o f
q u a l i t y c o n t r o l t h a n local f i r m s , often t e n d t o b e m o r e c i r c u m s p e c t
t h a n locals i n t h e c l a i m s m a d e i n p r o d u c t p r o m o t i o n , i n m a n y cases
h a v e a l e s s e r p r o c l i v i t y to b r i b e h e a l t h officials, and pay their
w o r k e r s h i g h e r w a g e s t h a n local firms. A l t h o u g h t h e s e facts may say
m o r e a b o u t t h e l a m e n t a b l e s t a n d a r d s o f local capitalists t h a n t h e
u p r i g h t n e s s of t r a n s n a t i o n a l , an appreciation of them is necessary
for a b a l a n c e d p e r c e p t i o n . T h e b u s i n e s s p r a c t i c e s of t r a n s n a t i o n a l s
i n t h e T h i r d W o r l d are n o w o r s e , and i n m a n y w a y s b e t t e r , t h a n
t h o s e o f i n d i g e n o u s e n t e r p r i s e s . T h e m o r a l failure o f the t r a n s -
n a t i o n a l s lies in t h e i r w i l l i n g n e s s to settle for m u c h l o w e r s t a n d a r d s
a b r o a d than at h o m e .
Undermedicated societies
W e a r e h e r e , i n t h i s I n t e r n a t i o n a l Y e a r o f t h e C h i l d , b e c a u s e 2.6
m i l l i o n c h i l d r e n will die this year from i m m u n i z a b l e d i s e a s e s
b e c a u s e they won't have access to already-developed vaccines.
T h e r e will be 72 m i l l i o n c a s e s of m e a s l e s in t h e w o r l d this y e a r .
A n d at a t i m e w h e n m e a s l e s is n e a r i n g e x t i n c t i o n in t h e U n i t e d
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Drug companies and the Third World
I n t h e U n i t e d S t a t e s , p h y s i c i a n s are w a r n e d t h a t use o f
c h l o r a m p h e n i c o l m a y result in s e r i o u s or fatal a p l a s t i c a n e m i a
a n d o t h e r b l o o d d y s c r a s i a s . P h y s i c i a n s in M e x i c o are given a
s i m i l a r w a r n i n g i n t h e p r o m o t i o n a l m a t e r i a l for P a r k e - D a v i s '
C h l o r o m y c e t i n , b u t no w a r n i n g s a r e listed for t h e same p r o d u c t in
C e n t r a l A m e r i c a ( S i l v e r m a n , 1977: 159).
W o r s e , w h e n S i l v e r m a n a p p e a r e d before t h e U S S e n a t e t o discuss
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Drug companies and the Third World
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Drug companies and the Third World
m e n s t r u a l p a i n , p r o b l e m s o f t h e m e n o p a u s e , and a host o f o t h e r
conditions.
I n t h e U n i t e d S t a t e s , p h y s i c i a n s are w a r n e d o f t h e possibility o f
m a n y s i d e - e f f e c t s , e s p e c i a l l y t h r o m b o e m b o l i c c h a n g e s t h a t can
lead to s e r i o u s or fatal b l o o d c l o t s .
In L a t i n A m e r i c a , for all t h e p r o d u c t s s t u d i e d h e r e , t h e risk of
t h r o m b o e m b o l i c c h a n g e s i s i g n o r e d . N o a d v e r s e r e a c t i o n s o f any
k i n d a r e g i v e n for t h e S e a r l e p r o d u c t i n E c u a d o r , C o l o m b i a , o r
B r a z i l for t h e P a r k e - D a v i s p r o d u c t in C e n t r a l A m e r i c a , and for
t h e W y e t h p r o d u c t i n E c u a d o r , C o l o m b i a , o r Brazil
( S u b c o m m i t t e e o n M o n o p o l y , 1976: 1 5 3 6 3 - 4 ) .
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Drug companies and the Third World
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Drug companies and the Third World
A f u r t h e r long list of d o u b l e s t a n d a r d s h a s b e e n d o c u m e n t e d by
M e d a w a r ( 1 9 7 9 ) . A p a r t i c u l a r c o n t r i b u t i o n of M e d a w a r ' s w o r k is in
showing that r e c o m m e n d e d dosage is a n o t h e r area of abuse. For
e x a m p l e , t h e m a x i m u m r e c o m m e n d e d d o s a g e for B u r r o u g h s -
W e l l c o m e ' s Migril (for m i g r a i n e ) w a s t w i c e a s high, o r m o r e t h a n
t w i c e as h i g h , in A f r i c a and A s i a as in t h e U n i t e d S t a t e s and U n i t e d
K i n g d o m ( M e d a w a r , 1979: 1 1 6 - 7 ) .
T h e m o s t r e c e n t c o n t r i b u t i o n s t o t h i s t r a d i t i o n have b e e n b y
M e l r o s e ( 1 9 8 2 ) and M u l l e r ( 1 9 8 2 ) . M u l l e r ( 1 9 8 2 : 55) h a s , a m o n g
o t h e r r e v e l a t i o n s , d e m o n s t r a t e d t h e a b u s e o f d i u r e t i c s t o deal with
t h e b l o a t i n g and puffing s y m p t o m s of k w a s h i o r k o r , a form of child-
h o o d m a l n u t r i t i o n . M u l l e r q u o t e s from a B B C i n t e r v i e w with a
h e a l t h w o r k e r from B a n g l a d e s h :
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Drug companies and the Third World
O n e o f t h e m o s t d i s t u r b i n g r e v e l a t i o n s b y M e l r o s e (1982: 102-6)
c o n c e r n e d the p r o m o t i o n of anabolic steroids as appetite stimulants
for c h i l d r e n in t h e T h i r d W o r l d .
All this a d d s up to a d e a d l y t e n d e n c y for Third W o r l d c o n s u m e r s
t o get i n a p p r o p r i a t e m e d i c a t i o n . T h e t e n d e n c y i s reinforced b y
n o n - e x i s t e n t , i n a d e q u a t e o r rarely e n f o r c e d p r e s c r i p t i o n laws. I n
a l m o s t all c o u n t r i e s in L a t i n A m e r i c a you can get practically any
d r u g from a p h a r m a c y w i t h o u t a p r e s c r i p t i o n . S i l v e r m a n told the
U S S e n a t e o f t h e following e x p e r i e n c e :
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Drug companies and the Third World
S i l v e r m a n also g a v e a c c o u n t s o f L a t i n A m e r i c a n p h a r m a c i s t s
p r o v i d i n g a p a t i e n t with only a o n e - d a y supply of an a n t i b i o t i c
( w h e n it is e s s e n t i a l to use t h e d r u g for at least a w e e k ) b e c a u s e ' s h e
only had t h e m o n e y to buy e n o u g h for o n e d a y ' ; s u b s t i t u t i n g
c h l o r a m p h e n i c o l for a t e t r a c y c l i n e p r e s c r i p t i o n b e c a u s e t h e s h o p
had run o u t of t e t r a c y c l i n e , and similar p r a c t i c e s ( S i l v e r m a n , 1976:
125).
I d e c i d e d to e x p e r i e n c e this p h e n o m e n o n myself in M e x i c o City -
t h e l a r g e s t m e t r o p o l i s of t h e T h i r d W o r l d and surely o n e of t h e
p l a c e s w h e r e o n e w o u l d e x p e c t t o see o b s e r v a n c e o f p r e s c r i p t i o n
l a w s . I visited e i g h t p h a r m a c i e s in t h e affluent Z o n a R o s a a r e a of
t h e city c o m p l a i n i n g in b r o k e n S p a n i s h of 'la t o u r i s t a ' ( t r a v e l l e r ' s
d i a r r h o e a ) . At t h r e e of t h e p h a r m a c i e s I w a s offered L o m o t i l , a
p r e s c r i p t i o n d r u g w i t h w o r r y i n g side-effects, but n o d o u b t s o m e -
t h i n g a d o c t o r m i g h t h a v e given me a p r e s c r i p t i o n for. At a fourth
p h a r m a c y , I w a s offered c l i o q u i n o l ( C i b a - G e i g y E n t e r o v i o f o r m ) ;
a n d at a n o t h e r , a v a r i a t i o n on t h i s , C i b a - G e i g y M e x a f o r m a .
C l i o q u i n o l is b a n n e d in m a n y c o u n t r i e s , and in most c o u n t r i e s
w h e r e o n e can get c l i o q u i n o l on p r e s c r i p t i o n it is specifically w a r n e d
t h a t t h e d r u g s h o u l d not be a p p l i e d to its historical use - t r a v e l l e r ' s
d i a r r h o e a . I n J a p a n , c l i o q u i n o l used i n t h e t r e a t m e n t o f d i a r r h o e a
w a s a s s o c i a t e d w i t h s o m e 9,000 cases of a d i s e a s e called S M O N
(Subacute myelo-optic neuropathy) (WHO Drug Information,
O c t . - D e c , 1977: 9 - 1 5 ) . J a p a n e s e c o u r t s h a v e a l r e a d y a w a r d e d
S M O N v i c t i m s o f c l i o q u i n o l $456 million i n c o m p e n s a t i o n . T h e
d r u g is a s s o c i a t e d with s e r i o u s n e u r o t o x i c effects on t h e spinal c o r d ,
t h e n e r v e s o f t h e b o d y surfaces and t h e o p t i c n e r v e . W h i l e t h e
p r o b a b i l i t y of t h e s e side-effects is a p p a r e n t l y not so high as to justify
b a n n i n g t h e d r u g for limited u s e s , i n the light o f t h e S M O N d i s a s t e r
it is a g r o s s a b u s e to use c l i o q u i n o l for simple d i a r r h o e a .
T h e sixth p h a r m a c y offered a d r u g called Y o d o z o n o , m a n u -
f a c t u r e d b y t h e K a l o s c o m p a n y . T h i s m y s t e r i o u s p r o d u c t i s not
listed in t h e M e x i c a n Diccionario de Especialidades Farmaceuticas.
T h e n e x t p h a r m a c y offered m e T r e d a , a n a n t i b i o t i c p r o d u c e d b y t h e
S a n f e r c o m p a n y . A n d l o and b e h o l d , w h a t should b e the last
p r o d u c t d r a g g e d o u t o f t h e r e f r i g e r a t o r for m y M e x i c a n d i a r r h o e a ?
N o n e o t h e r t h a n o u r old friend, P a r k e - D a v i s C h l o r o m y c e t i n .
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Drug companies and the Third World
M a n y of t h e A m e r i c a n c o m p a n i e s I visited c l a i m e d t h a t Silver-
m a n ' s b o o k had forced t h e m t o put t h e i r h o u s e i n o r d e r . T o varying
d e g r e e s t r a n s n a t i o n a l s h a v e pulled a t i g h t e r reign on t h e p r o -
m o t i o n a l c l a i m s m a d e b y s u b s i d i a r i e s . I n p a r t this c h a n g e has b e e n
m e d i a t e d b y s t r o n g i n t e r n a t i o n a l c o n s u m e r a t t a c k s against p h a r m a -
c e u t i c a l m a r k e t i n g p r a c t i c e s b y such c o a l i t i o n s a s H e a l t h A c t i o n
I n t e r n a t i o n a l . I n s o m e c o m p a n i e s , affiliates n o w m u s t g o t h r o u g h
q u i t e a n a r d u o u s p r o c e s s t o use v a r i a t i o n s from the p r o m o t i o n a l
c l a i m s a p p r o v e d b y h e a d q u a r t e r s . All subsidiary p r o m o t i o n a l
m a t e r i a l - j o u r n a l a d v e r t i s i n g , e n t r i e s in MIMS, p a t i e n t l a b e l l i n g -
in s o m e c o m p a n i e s m u s t be a p p r o v e d by a h e a d q u a r t e r s m e d i c a l
g r o u p . T h e basis o f t h e d e l i b e r a t i o n s o f such medical g r o u p s i s s o m e
form o f i n t e r n a t i o n a l p r o d u c t d i s c l o s u r e d o c u m e n t w h i c h c o n t a i n s
all t h e i m p o r t a n t side-effects, c o n t r a - i n d i c a t i o n s , and r e q u i r e d
w a r n i n g s for t h e p r o d u c t . Often t h e l a t t e r m i g h t not be as s t r i n g e n t
as F D A r e q u i r e m e n t s , b u t t h e y w o u l d set a fairly high i n t e r n a t i o n a l
minimum standard.
I c o u l d n o t h e l p but be i m p r e s s e d by s o m e of t h e s e c o r p o r a t e
medical g r o u p p e o p l e . They seemed to a p p r o a c h the challenge of
t i g h t e n i n g t h e p r o m o t i o n a l c l a i m s b e i n g m a d e i n s u b s i d i a r i e s from
G u a t e m a l a t o G h a n a w i t h a l m o s t m i s s i o n a r y zeal. I w a s s u r p r i s e d a t
the a d v e r s a r y stance they occasionally evidenced t o w a r d s sub-
sidiary general m a n a g e r s in their own corporation. The latter were
t h e e x p l o i t e r s , t h e e n e m y , a n d t h e c o m p a n y w a s going t o b e p u r g e d
of their a b u s e s . Of course in these intra-corporate struggles
b e t w e e n t h e forces o f ' g o o d ' and ' e v i l ' , it is often the l a t t e r w h o win
o u t . N e v e r t h e l e s s , w h a t s u r p r i s e d m e w a s t h a t the fight w a s being
f o u g h t w i t h such i n t e n s i t y . I t c e r t a i n l y s h a t t e r s t h e m o n o l i t h i c i m a g e
that outsiders have ofthe corporation. The other interesting point is
t h a t e a c h o f t h e s e c o r p o r a t e g r o u p s r e s p o n s i b l e for r e g u l a t i n g
p r o m o t i o n a r o u n d t h e w o r l d typically has m o r e staff r e s o u r c e s and
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Drug companies and the Third World
b e t t e r - t r a i n e d p e o p l e t h a n t h e i r c o u n t e r p a r t s i n any r e g u l a t o r y
a g e n c y i n t h e w o r l d , i n c l u d i n g t h e F D A (with five p r o f e s s i o n a l s
r e s p o n s i b l e for r e g u l a t i n g p r o m o t i o n ) . E v e n t h o u g h t h e s e intra-
c o r p o r a t e c r u s a d e r s for t h e c o n s u m e r i n t e r e s t often lose their
b a t t l e s , o n e s u s p e c t s t h a t t h e y save m o r e lives and p r e v e n t m o r e
u n n e c e s s a r y suffering t h a n t h e i r c o u n t e r p a r t s , t o t h e e x t e n t t h e y
e x i s t , i n t h e w o r l d ' s r e g u l a t o r y a g e n c i e s . T h e i r s t r u g g l e s are not
e a s y . O r g a n i z a t i o n a l c h a n g e s can b e m a d e t o isolate and n e u t r a l i z e
e x e c u t i v e s w h o h a v e t o o m u c h zeal for r e f o r m . T h e following
i n c i d e n t , for e x a m p l e , w a s r e p o r t e d b y D a l e C o n s o l e , S q u i b b ' s
former Medical Director:
T h e real e r u p t i o n o c c u r r e d in a b o u t 1955 w h e n , as I u n d e r s t o o d
it, P a r k e - D a v i s h a d offered S q u i b b a license to m a r k e t
c h l o r a m p h e n i c o l in some of Squibb's South A m e r i c a n
m a r k e t s . . . . I w a s p r e s e n t e d with t h e p r o s p e c t of m a r k e t i n g
c h l o r a m p h e n i c o l u n d e r t h e S q u i b b label m a k i n g all t h e excessive
c l a i m s for t h e d r u g and e x c l u d i n g a w a r n i n g s t a t e m e n t since it w a s
n o t r e q u i r e d in t h e c o u n t r i e s in w h i c h sale is p r o p o s e d . I refused
to a p p r o v e t h e t e n t a t i v e copy and m a d e it clear t h a t I w o u l d
t e n d e r my r e s i g n a t i o n b e f o r e I w o u l d a p p r o v e the c o p y .
A p p a r e n t l y my c o l l e a g u e s t h o u g h t I w a s sufficiently v a l u a b l e and
i n s t e a d of m a k i n g a c o n f r o n t a t i o n out o f t h e issue t h e y d e c i d e d to
use a n end p l a y . T h e O v e r s e a s D i v i s i o n a p p o i n t e d its o w n
Medical D i r e c t o r who was in no way responsible to me (US
S e n a t e , 1969: 4 4 9 6 ) .
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Drug companies and the Third World
T h e r e a r e a s m a n y t r a n s n a t i o n a l c o m p a n i e s a s t h e r e are w a y s i n
w h i c h a t t e m p t s a r e m a d e t o i m p o s e c o r p o r a t e p r o m o t i o n a l stan-
d a r d s o n s u b s i d i a r i e s . O n e c o m p a n y has a n i n t e r n a t i o n a l p r o d u c t
d i s c l o s u r e d o c u m e n t from w h i c h s u b s i d i a r i e s c a n n o t d e l e t e c o n t r a -
i n d i c a t i o n s and side-effects. Yet they may use their d i s c r e t i o n to
a d d i n d i c a t i o n s . M a n y t r a n s n a t i o n a l s are tightly r e g u l a t e d from
h e a d q u a r t e r s as to w h a t t h e y can p u t in semi-official p u b l i c a t i o n s
like MIMS, but h a v e total a u t o n o m y o v e r local m e d i c a l j o u r n a l
a d v e r t i s i n g . C o r p o r a t e m e d i c a l g r o u p s can use t h e c a r r o t o f cost
s a v i n g as well as t h e stick of h e a d q u a r t e r s c o n t r o l :
W e p r o v i d e p a c k a g e i n s e r t s and a d v e r t i s i n g p a c k a g e s from
[ h e a d q u a r t e r s ] . T h e s e a r e not a s e x h a u s t i v e s t a n d a r d s a s r e q u i r e d
by F D A . M i n o r side effects m i g h t be put u n d e r a g e n e r a l h e a d i n g
r a t h e r t h a n listed s e p a r a t e l y . B u t it's a h i g h e r s t a n d a r d t h a n t h e
s u b s i d i a r y w o u l d d o t h e m s e l v e s . T h e cost o f t h e subsidiary re-
d o i n g t h e w o r k often c a u s e s t h e m t o use our m a t e r i a l .
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Dumping
257
Drug companies and the Third World
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Drug companies and the Third World
T H E N A M E C H A N G E : W h e n a p r o d u c t i s w i t h d r a w n from the
A m e r i c a n m a r k e t , r e c e i v i n g a lot of bad publicity in the p r o c e s s ,
t h e a s t u t e d u m p e r simply c h a n g e s its n a m e .
T H E L A S T M I N U T E P U L L O U T : W h e n it looks as if a chemical
being tested by the E n v i r o n m e n t a l Protection Agency won't
p a s s , t h e m a n u f a c t u r e r will w i t h d r a w t h e a p p l i c a t i o n for
r e g i s t r a t i o n and t h e n label t h e c h e m i c a l 'for e x p o r t o n l y . ' T h a t
w a y , t h e m a n u f a c t u r e r d o e s n ' t h a v e t o notify the i m p o r t i n g
c o u n t r y that the chemical is banned in the U . S .
D U M P T H E W H O L E F A C T O R Y : Many companies,
p a r t i c u l a r l y p e s t i c i d e m a n u f a c t u r e r s , will simply close d o w n their
A m e r i c a n p l a n t s and b e g i n m a n u f a c t u r i n g a h a z a r d o u s p r o d u c t i n
a c o u n t r y c l o s e to a g o o d m a r k e t .
T H E F O R M U L A C H A N G E : A favorite w i t h drug and p e s t i c i d e
c o m p a n i e s . C h a n g i n g a f o r m u l a slightly by a d d i n g or s u b t r a c t i n g
a n i n e r t i n g r e d i e n t p r e v e n t s d e t e c t i o n b y s p e c t r o m e t e r s and o t h e r
scanning devices keyed to certain molecular structures.
T H E S K I P : Brazil - a p r i m e d r u g m a r k e t w i t h its large p o p u l a t i o n
a n d v i r u l e n t t r o p i c a l d i s e a s e s - has a law t h a t says no o n e m a y
i m p o r t a d r u g t h a t is n o t a p p r o v e d for use in t h e c o u n t r y of o r i g i n .
A real c h a l l e n g e for t h e wily d u m p e r . H o w d o e s he do it?
G u a t e m a l a h a s no such l a w ; in fact, G u a t e m a l a s p e n d s very little
e a c h y e a r r e g u l a t i n g d r u g s . S o , t h e d r u g i s first s h i p p e d t o
G u a t e m a l a , which b e c o m e s the export nation.
T H E I N G R E D I E N T D U M P : Y o u r p r o d u c t w i n d s u p being
b a n n e d . D o n ' t d u m p it. S o m e w i s e - a s s r e p o r t e r from Mother
Jones will find a bill of l a d i n g and e x p o s e y o u . E x p o r t t h e
i n g r e d i e n t s s e p a r a t e l y - p e r h a p s via different r o u t e s - to a small
r e c o m b i n i n g facility or a s s e m b l y p l a n t you have set up w h e r e
y o u ' r e d u m p i n g it, or in a c o u n t r y a l o n g t h e w a y . R e a s s e m b l e
t h e m a n d d u m p t h e p r o d u c t ( D o w i e , 1979: 2 5 ) .
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Drug companies and the Third World
p r o d u c t s u b m i t t e d for a p p r o v a l by a t r a n s n a t i o n a l c o m p a n y h a s
n e v e r b e e n r e j e c t e d . I m m e d i a t e l y the c o m p a n y is in a p o s i t i o n to
say t h a t t h e p r o d u c t is a p p r o v e d in the c o u n t r y of m a n u f a c t u r e .
G u a t e m a l a is a l s o an a t t r a c t i v e l o c a t i o n b e c a u s e t h e r e is effectively
no r e g u l a t i o n of t h e p h a r m a c e u t i c a l i n d u s t r y . Since factories are
n e v e r i n s p e c t e d by g o v e r n m e n t officials, t h e r e is wide scope for
e c o n o m i s i n g on quality control checks which would be mandatory
in t h e U n i t e d S t a t e s . A d o u b l e s t a n d a r d of m a n u f a c t u r i n g quality is
a l s o f r e q u e n t l y p e r p e t r a t e d by t h e t r a n s n a t i o n a l which g r a n t s a
l i c e n c e for m a n u f a c t u r e to local T h i r d W o r l d c o m p a n i e s n o t o r i o u s
for c u t t i n g c o r n e r s on quality.
A n o t h e r p h e n o m e n o n that s o m e e x e c u t i v e s w e r e p r e p a r e d t o
c o n c e d e m i g h t h a p p e n from t i m e t o t i m e w a s t h e d u m p i n g i n t h e
T h i r d W o r l d of d r u g s w h i c h fail to m e e t t h e quality specifications of
the developed country w h e r e they are manufactured. An
A u s t r a l i a n e x e c u t i v e , w h o d e n i e d t h a t his c o m p a n y w o u l d ever
d u m p a b a t c h w h i c h fell b e l o w s p e c i f i c a t i o n s , did a d m i t t h a t w h e n a
J a p a n e s e c o n t r a c t had fallen t h r o u g h , t h e p r o d u c t w a s sold t o
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Drug companies and the Third World
M a l a y s i a with J a p a n e s e l a b e l l i n g w h i c h M a l a y s i a n s w o u l d n o t h a v e
b e e n able t o r e a d .
An executive of the A u s t r a l i a n subsidiary of a n o t h e r trans-
n a t i o n a l a d m i t t e d t h a t b a t c h e s o f p r o d u c t w o u l d often b e s h i p p e d
from t h e U n i t e d S t a t e s t o A u s t r a l i a b e f o r e q u a l i t y c o n t r o l c h e c k s
w e r e c o m p l e t e d . S a m p l e s o f t h e final p r o d u c t w o u l d s i m p l y b e
t a k e n out and tested while the product was in transit. He claimed
t h a t 'All d r u g c o m p a n i e s o r p h a r m a c e u t i c a l c o m p a n i e s i n A u s t r a l i a
i m p o r t d r u g s i n a n t i c i p a t i o n like t h i s . ' T h e p r a c t i c e c u t s d o w n
d e l i v e r y d e l a y s . B u t t h e p r o b l e m a r i s e s w h e n t h e foreign s u b s i d i a r y
is told t h a t t h e b a t c h has failed to p a s s q u a l i t y c o n t r o l . I n s t e a d of
d e s t r o y i n g t h e b a t c h , t h e r e m i g h t be a s i t u a t i o n a l i n d u c e m e n t to sell
it to i m p a t i e n t c u s t o m e r s who resent d e l a y s , or even to m a k e some
m o n e y o n t h e side b y sales o n t h e black m a r k e t .
R e p u t a b l e p h a r m a c e u t i c a l c o m p a n i e s d o e n g a g e i n illegal drug
s m u g g l i n g . T h e c o r p o r a t i o n can d e n y r e s p o n s i b i l i t y for p o o r quality
p r o d u c t d u m p e d t h r o u g h t h e black m a r k e t . I n d o n e s i a , b e c a u s e o f
its strict r e q u i r e m e n t s for e s t a b l i s h i n g local m a n u f a c t u r i n g p l a n t s , is
a victim of m u c h s m u g g l i n g past c u s t o m s officials. T w o s e n i o r
A u s t r a l i a n executives of one A m e r i c a n transnational brazenly
admitted that their c o m p a n y entered the Indonesian m a r k e t by the
A u s t r a l i a n subsidiary posting the product to an agent in Singapore
w h o w o u l d s m u g g l e it into I n d o n e s i a for b l a c k m a r k e t s a l e s on a
o n e - t o - o n e basis t o I n d o n e s i a n p h a r m a c i s t s . I n this s i t u a t i o n , any
a d v e r s e r e a c t i o n s a r i s i n g from p o o r q u a l i t y i n t h e p r o d u c t c o u l d
easily be blamed on 'counterfeiters'. Trythall (1977) estimates that
15 p e r c e n t of t h e d r u g s sold in I n d o n e s i a are s m u g g l e d from
S i n g a p o r e . T h e r e i s only o n e c a s e w h e r e a n a l l e g a t i o n o f s m u g g l i n g
by a r e p u t a b l e c o m p a n y h a s g o n e p u b l i c :
I n C h i l e u n d e r t h e A l l e n d e g o v e r n m e n t , Pfizer's s u b s i d i a r y w a s
a c c u s e d o f s m u g g l i n g d r u g s illegally a c r o s s t h e b o r d e r t o Bolivia
a n d P e r u . T h e G o v e r n m e n t felt t h a t t h e o n l y w a y t o p r e v e n t such
activities w a s state control o f t h e c o m p a n y . Unfortunately the
m i l i t a r y c o u p o f S e p t e m b e r 1973 p r e v e n t e d t h e legal c a s e
r e a c h i n g any c o n c l u s i o n ( H e l l e r , 1977: 5 5 ) .
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Drug companies and the Third World
I t h a s b e e n c o r r e c t l y p o i n t e d o u t t h a t different c o u n t r i e s have
d i f f e r e n t b e n e f i t - r i s k ratios for p a r t i c u l a r m e d i c i n e s . P e r h a p s in t h e
U n i t e d S t a t e s t h e a b u s e p o t e n t i a l of a d r u g with s e r i o u s side-effects
is so g r e a t t h a t b a n n i n g it is justified. B u t if t h e d i s e a s e a g a i n s t w h i c h
t h a t d r u g is m o s t useful is a s c o u r g e in t r o p i c a l c o u n t r i e s , t h e n t h o s e
c o u n t r i e s m i g h t be justified in d e c i d i n g t h a t , for t h e m , t h e benefits
outweigh the risks.
So t h e D r u g R e g u l a t i o n R e f o r m Bills of 1978 and 1979 p r o p o s e d
to the C o n g r e s s that export of drugs not a p p r o v e d in the United
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Drug companies and the Third World
C e r t i f i c a t i o n by foreign g o v e r n m e n t s in d e v e l o p i n g c o u n t r i e s is a
n e g l i g i b l e p r o t e c t i o n for c o n s u m e r s t h e r e . O f 2 2 L a t i n A m e r i c a n
c o u n t r i e s , for e x a m p l e , only 12 r e q u i r e any kind of r e g i s t r a t i o n of
i m p o r t e d d r u g s . Slightly u n d e r 20 r e q u i r e r e g i s t r a t i o n , but only a
small n u m b e r do medical review o f t h e drugs. Two of these are
medical reviews by doctors' trade associations, rather than by
p u b l i c h e a l t h officials. M a n y of t h e s e c o u n t r i e s do not have
s p e c i a l i s t s t o e v a l u a t e d r u g c o m p a n y p r o m o t i o n s . T h e large
m a j o r i t y d o not h a v e t h e t o p quality m e d i c a l l i b r a r i e s e v e n .
T h o s e d e v e l o p i n g c o u n t r i e s t h a t d o h a v e any kind o f drug c o n t r o l
a r e l o o k i n g at c h e m i c a l p u r i t y of d r u g e n t i t y , r a t h e r t h a n at the
d e s i g n a n d c o n d u c t of safety and effectiveness s t u d i e s
( S u b c o m m i t t e e o n H e a l t h , 1978: 1619).
T h e q u e s t i o n i s h o w high d o a b s t r a c t d e m o c r a t i c v a l u e s like
national sovereignty rate c o m p a r e d to protection of consumers
263
Drug companies and the Third World
264
Drug companies and the Third World
r i s k - b e n e f i t r a t i o i n t h e i r p a r t o f t h e w o r l d s h o u l d b e listened t o . B u t
t h e b u r d e n o f p e r s u a s i o n should b e o n t h e foreign g o v e r n m e n t
w h i c h w a n t s t h e e x p o r t e r t o c o m p r o m i s e its n a t i o n a l s t a n d a r d s .
S i m p l y notifying t h e foreign g o v e r n m e n t t h a t t h e p r o d u c t i s b a n n e d
in t h e U S , and s a y i n g ' t a k e it at y o u r o w n peril' is not placing t h e
b u r d e n o f p r o o f o n t h e foreign g o v e r n m e n t .
I f t h e r e really w e r e a b u r d e n o f p r o o f placed o n g o v e r n m e n t s w h o
w a n t e d t o i m p o r t b a n n e d d r u g s from t h e U S , t h e n t h e F D A w o u l d
n o t b e i n u n d a t e d w i t h foreign g o v e r n m e n t s k n o c k i n g a t t h e i r d o o r .
W h i l e i t m i g h t b e t r u e t h a t r i s k - b e n e f i t ratios vary s o m e w h a t with
g e o g r a p h y , t h e m o r e f u n d a m e n t a l reality i s t h a t risk-benefit ratios
a c r o s s t h e b o a r d a r e a l m o s t i n v a r i a b l y w o r s e i n t h e Third W o r l d
t h a n i n t h e U n i t e d S t a t e s . A m e r i c a n p a t i e n t s w h o are a d m i n i s t e r e d
d r u g s with a high risk and high benefits h a v e t h e i r s y m p t o m s
m o n i t o r e d carefully by a qualified p h y s i c i a n . If this d o e s not
h a p p e n , t h e p h y s i c i a n can be sued. A G u a t e m a l a n will typically buy
t h e s a m e d r u g from a p h a r m a c y w i t h o u t a p r e s c r i p t i o n , and
p r o b a b l y t a k e i n a p p r o p r i a t e d o s a g e s ( M u l l e r , 1982: 1 1 0 - 1 1 ) . C o n -
c e i v a b l y t h e e x p i r y d a t e w h i c h w a s o n c e s t a m p e d o n the b o t t l e will
h a v e b e e n e r a s e d . T h e u n t r a i n e d ' p h a r m a c i s t ' , influenced b y
c o m p a n y sales r e p r e s e n t a t i v e s w h o s e c l a i m s are not subject t o
g o v e r n m e n t r e g u l a t i o n , m a y r e c o m m e n d t h e p o t e n t d r u g for a n
u n a p p r o v e d use u n t h i n k a b l e i n t h e U n i t e d S t a t e s . T o m a k e t h i n g s
w o r s e , t h e u n s u p e r v i s e d p a t i e n t m i g h t t a k e t h e d r u g with a l c o h o l o r
s o m e o t h e r d r u g w h i c h i n t e r a c t s d a n g e r o u s l y with it. T h e s e are j u s t
s o m e of the r e a s o n s why risk-benefit ratios are almost invariably
w o r s e in the Third W o r l d .
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Drug companies and the Third World
w e r e initially t e s t e d i n C h i l e b y S y n t e x and M e r c k ( G e r m a n y ) . E v e n
w i t h i n C h i l e , t h e e m p h a s i s w a s o n illiterate l o w e s t - i n c o m e p e o p l e ,
t h e s e c o n s t i t u t i n g 345 o f t h e 390 w o m e n t e s t e d ( Z a n a r t u , 1968).
O t h e r m e t h o d s o f c o n t r a c e p t i o n r e c e i v e d their t e s t i n g i n this w a y ,
i n c l u d i ng v a r i o u s t e c h n i q u e s for t h e use of i n t r a - u t e r i n e d e v i c e s ,
and m o r e recently the addition of copper to these devices. This
w a s initially t e s t e d in C h i l e w i t h large scale follow-
up s u r v e y s in C o l u m b i a , I r a n , K o r e a , T a i w a n and T h a i l a n d . . . .
[ D e p o - P r o v e r a ] has b e e n t e s t e d i n B r a z i l . T h a i l a n d , C h i l e ,
P h i l i p p i n e s , Sri L a n k a , H o n g K o n g , E g y p t , H o n d u r a s , P e r u ,
M e x i c o and P a k i s t a n . W h e n r e s e a r c h into its possible effect on
t h e w e i g h t and b l o o d p r e s s u r e o f w o m e n t a k i n g the injections
w a s c a r r i e d o u t in S o u t h Africa, t h e r e s e a r c h e r s saw fit to
e x a m i n e t h e s e f e a t u r e s b y e x p e r i m e n t i n g with N e g r o (75 p e r
c e n t ) a n d A s i a t i c (25 per c e n t ) w o m e n , r a t h e r t h a n o n w o m e n
w i t h t h e s a m e c o l o u r e d skin a s t h e r e s e a r c h e r s ( H e l l e r , 1977:
52-4).
M o r e i m p o r t a n t l y , d i s t r i b u t i o n o f t h e d r u g i n t h e T h i r d W o r l d can
act as a d e v i c e for s c r e e n i n g o u t d r u g s w h i c h are o b v i o u s l y i n a p p r o -
p r i a t e for e v e n a t t e m p t i n g r e g i s t r a t i o n i n d e v e l o p e d c o u n t r i e s . I f
G u a t e m a l a n I n d i a n s fall ill at t h e first sniff of t h e d r u g , t h e n t h e
2
c o s t s o f m u c h e x p e n s i v e t e s t i n g i n t h e U n i t e d S t a t e s can b e s a v e d .
I r o n i c a l l y , G r a b o w s k i and V e r n o n , t w o p r o - i n d u s t r y e c o n o m i s t s .
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I n d e e d , G r a b o w s k i a n d V e r n o n g o o n t o cite L a s a g n a and
W a r d e l l ' s e v i d e n c e that because o f t h e 'regulatory n i g h t m a r e ' in the
U n i t e d S t a t e s , A m e r i c a n firms a r e i n c r e a s i n g l y shifting t h e i r initial
clinical t e s t i n g o f f s h o r e . L a s a g n a and W a r d e l l (1975) studied new
d r u g c o m p o u n d s clinically tested b y 1 5 large A m e r i c a n c o m p a n i e s
b e t w e e n 1960 a n d 1974. W h e r e a s b e f o r e 1966 t h e s e firms ( w h i c h
a c c o u n t for 80 per c e n t of US R & D e x p e n d i t u r e ) did virtually all
t h e i r clinical t e s t i n g first in t h e U n i t e d S t a t e s , by 1974 m o r e w e r e
b e i n g t e s t e d a b r o a d initially t h a n w e r e b e i n g t e s t e d first i n t h e U S .
I t has a l r e a d y b e e n p o i n t e d o u t that T h i r d W o r l d clinical d a t a are
n o t a g r e a t d e a l of use in influencing r e g i s t r a t i o n d e c i s i o n s in
d e v e l o p e d c o u n t r i e s . N e v e r t h e l e s s , t h e r e can b e indirect influences.
C l i n i c a l d a t a from a T h i r d W o r l d c o u n t r y m i g h t assist r e g i s t r a t i o n
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Drug companies and the Third World
T h e r e a r e a m y r i a d of factors to c o n s i d e r in d e c i d i n g in which
c o u n t r i e s to c o m m e n c e clinical trials: w h e r e to go for a p p r o v a l first,
s e c o n d and t h i r d ; w h e r e t o set u p t h e first m a n u f a c t u r i n g - e x p o r t i n g
o p e r a t i o n s . V a r i a b l e s such a s a v e r a g e length o f t i m e before new
d r u g a p p r o v a l i n t h e c o u n t r y , c e n t r a l i t y o f t h e a p p r o v a l for w i n n i n g
a p p r o v a l i n o t h e r c o u n t r i e s , cost o f m a n u f a c t u r e , skill o f t h e phar-
maceutical workforce in that country, must be considered. Large
c o r p o r a t i o n s p u t s y s t e m s analysis g r o u p s o n t o t h e s e p r o b l e m s .
E x p e r t s t h r o w d a t a o n all o f t h e v a r i a b l e s into the c o m p u t e r t o c o m e
up w i t h an o p t i m a l s o l u t i o n . O f t e n t h e solution will c o m e o u t in t h e
form of a P E R T d i a g r a m , a simplified e x a m p l e of which is illus-
t r a t e d i n F i g u r e 7 . 1 . T h e figure i m a g i n e s t h a t a sensible solution t o
t h e h y p o t h e t i c a l p r o b l e m w o u l d be to first m a r k e t and clinically test
the drug in P a r a g u a y (where new product registration generally
t a k e s only a m o n t h ) . T h e n the d a t a from this clinical t e s t i n g ( p r e -
s u m a b l y t o g e t h e r w i t h a n i m a l t e s t i n g from t h e U n i t e d S t a t e s ) w o u l d
be used to a t t e m p t registration in Belgium. The Belgian approval
w o u l d t h e n be used to gain e n t r y to a n u m b e r of large T h i r d W o r l d
m a r k e t s such a s B r a z i l , and s o on. T h e h y p o t h e t i c a l P E R T d i a g r a m
in F i g u r e 7.1 is an oversimplified v e r s i o n of a realistic o n e , which
would include registration paths, manufacturing paths, marketing-
p r o m o t i o n a l p a t h s , and n u m e r o u s o t h e r s . Different sections o f t h e
P E R T m o d e l would be circulated to various constituencies in the
c o r p o r a t i o n w h o w o u l d send back c o m m e n t s o n h o w silly t h e
c o m p u t e r h a d b e e n , a n d m o d i f i c a t i o n s t o t h e g r a n d plan w o u l d b e
m a d e a c c o r d i n g l y . T o l e r a n c e s have t o b e built into t h e m o d e l with
" e x p e c t e d d a t e s ' qualified b y ' p r o b a b l e d e l a y s ' and ' p o s s i b l e d e l a y s ' .
F i n a l l y , it s h o u l d be p o i n t e d o u t t h a t m a n y large c o r p o r a t i o n s do
not go in for this kind of g r a n d p l a n n i n g very m u c h at all. S o m e
E u r o p e a n c o m p a n i e s g o for r e g i s t r a t i o n i n t h e i r h o m e c o u n t r y first.
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a n d t h e n s u b s i d i a r i e s m o r e or less h a v e a u t o n o m y to m a r k e t a n e w
p r o d u c t w h e n e v e r they decide.
A l l t h a t h a s b e e n a t t e m p t e d h e r e is to s h o w that using p e o p l e in
t h e T h i r d W o r l d as ' g u i n e a pigs' is often part of a very c o m p l e x
t o t a l i t y . It is a c o m p l e x i t y w h i c h m a n i f e s t s t h e r a t i o n a l i t y of t h e
t r a n s n a t i o n a l c o r p o r a t i o n in finding t h e line of least r e s i s t a n c e to
early m a r k e t i n g t h r o u g h the c o m p l e x j u n g l e of the international
r e g u l a t o r y n o n - s y s t e m . T r a n s n a t i o n a l s use system against non-
s y s t e m . W h i l e t h e t r a n s n a t i o n a l ' s w o r l d w i d e goals are c o h e r e n t , the
g o a l s of t h e r e g u l a t o r y a g e n c i e s of t h e world are conflicting.
C o r p o r a t i o n s t h e r e f o r e e x p l o i t t h e fact t h a t r e g u l a t o r y g o a l s only
h a v e c o h e r e n c e at a n a t i o n a l level w h i l e c o r p o r a t e c o h e r e n c e is
transnational.
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s e r v i c e s t o A r a b c o u n t r i e s , Sri L a n k a , and B a n g l a d e s h . S a r a b h a i
C h e m i c a l s , a p r i v a t e c o m p a n y , has h e l p e d e s t a b l i s h a t u r n k e y plant
i n C u b a u n d e r a U N I D O p r o g r a m m e ( L a l l , 1979b: 2 3 8 ) .
T h e o t h e r d r a m a t i c T h i r d W o r l d reform initiative i n r e c e n t t i m e s
b e g a n in Sri L a n k a in 1972 with t h e e s t a b l i s h m e n t of a S t a t e P h a r -
maceuticals C o r p o r a t i o n ( S P C ) . The SPC introduced centralised
b u y i n g o f p h a r m a c e u t i c a l i m p o r t s for t h e w h o l e c o u n t r y . I m p o r t a -
t i o n w a s s t o p p e d for d r u g s r e g a r d e d a s t h e r a p e u t i c a l l y i r r a t i o n a l ,
t o o e x p e n s i v e c o m p a r e d with a l t e r n a t i v e t h e r a p i e s , o r excessively
toxic. The result was a reduction o f t h e n u m b e r of imported drugs
from 2 , 1 0 0 to 6 0 0 . W o r l d w i d e c o m p e t i t i v e t e n d e r i n g for large
q u a n t i t i e s of d r u g s on t h e limited list r e d u c e d t h e n a t i o n ' s drug bill
b y o v e r 4 0 p e r c e n t (Lall and B i b i l e , 1978). D r u g s w e r e not
i m p o r t e d by t h e S P C w h i c h did not c a r r y q u a l i t y certification from
a b r o a d or w h i c h failed to satisfy their o w n quality c o n t r o l labor-
a t o r y . B u t s o m e s u b s t a n d a r d g e n e r i c p r o d u c t s did slip t h r o u g h t h e
n e t , and t h e s e i n s t a n c e s w e r e highly p u b l i c i s e d b y t h e t r a n s n a t i o n a l
b r a n d - n a m e i m p o r t e r s . A n o t h e r part o f t h e p r o g r a m m e o f reform
was the r e p l a c e m e n t of brand n a m e s with generic prescribing. The
t r a n s n a t i o n a l s successfully f o m e n t e d s t r o n g o p p o s i t i o n t o this
a m o n g t h e Sri L a n k a n m e d i c a l p r o f e s s i o n . Sales r e p r e s e n t a t i v e s
b e c a m e l o b b y i s t s a n d political o r g a n i s e r s .
T h e r e l a t i o n s h i p b e t w e e n the S P C and t h e foreign f i r m s w a s bad.
D u r i n g 1974 Pfizer refused an S P C r e q u e s t to m a k e t e t r a c y c l i n e
c a p s u l e s from r a w m a t e r i a l w h i c h t h e g o v e r n m e n t had a l r e a d y
p u r c h a s e d from H o e c h s t . T h e result w a s t h a t t e t r a c y c l i n e c a p s u l e s
h a d to be airlifted into t h e c o u n t r y at g r e a t e x p e n s e (Lall and B i b i l e ,
1978). I n r e t a l i a t i o n , t h e S P C , with t h e s u p p o r t o f t h e M i n i s t e r for
I n d u s t r i e s , m o v e d for t h e n a t i o n a l i s a t i o n o f Pfizer. H o w e v e r , t h e
U S g o v e r n m e n t a c t e d decisively t o p r e v e n t n a t i o n a l i s a t i o n . ' T h e
U S A m b a s s a d o r p e r s o n a l l y i n t e r v e n e d with t h e P r i m e M i n i s t e r i n
t h e m a t t e r ' (Lall a n d B i b i l e , 1978: 3 1 4 ) . I n t h e final a n a l y s i s , t h e
s m a l l c o u n t r y p r o v e d n o m a t c h for t h e m i g h t o f t h e m u l t i n a t i o n a l s .
A l r e a d y the reforms were breaking d o w n when the election of a
n o n - s o c i a l i s t g o v e r n m e n t i n 1977 saw t h e a l m o s t total d i s m a n t l i n g
ofthe SPC.
T h i s k i n d of flexing of m u s c l e s by m u l t i n a t i o n a l s in the T h i r d
W o r l d i s all t o o c o m m o n . M u l l e r ( 1 9 8 2 : 3 7 - 8 ) has p r o v i d e d o n e
a c c o u n t of a w a r n i n g from t h e W e s t G e r m a n e m b a s s y to a
T a n z a n i a n u n i v e r s i t y a b o u t t h e i r d e p e n d e n c e o n G e r m a n aid t o
b u i l d a n e w e n g i n e e r i n g school after t w o of its m e d i c a l faculty
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c i r c u l a t e d a p a p e r criticizing t h e G e r m a n c o m p a n y , A s t a W e r k e ,
for m a r k e t i n g in Africa a d r u g which had b e e n b a n n e d in t h e UK
a n d U S o n safety g r o u n d s .
N e v e r t h e l e s s , t h e d r a m a t i c e v e n t s o f Sri L a n k a have n o w b e e n
r e p l a c e d by a b r o a d - b a s e d T h i r d W o r l d a s s a u l t on drug prices
s u p p o r t e d b y t h e U n i t e d N a t i o n s . W H O has p r o d u c e d a list o f 2 2 5
' e s s e n t i a l d r u g s ' w h i c h form a g u i d e l i n e for t h e g r o w i n g n u m b e r of
c o u n t r i e s w h i c h w i s h t o r e d u c e drug costs b y p r u n i n g n o n - e s s e n t i a l
i m p o r t s . T h e m o s t d r a m a t i c r e c e n t initiative has b e e n b y the
B a n g l a d e s h i g o v e r n m e n t w h i c h , i n J u n e 1982, w i t h d r e w 4 0 per cent
of t h e d r u g s on t h e m a r k e t (a total of 1,792 p r o d u c t s ) w h i c h t h e
g o v e r n m e n t v i e w e d as d a n g e r o u s , u s e l e s s or o v e r p r i c e d . A
n u m b e r o f c o u n t r i e s h a v e i n s t i t u t e d a c e n t r a l drug p r o c u r e m e n t
system: Algeria, Brazil, Chad, Egypt, Ethiopia, Guinea, India,
I r a q , R w a n d a , S y r i a , T a n z a n i a and U g a n d a , a m o n g o t h e r s
( G e r e f f i , 1979: 7 3 ) . C e n t r a l i s e d b u y i n g p r o v i d e s t h e cost a d v a n -
t a g e s o f bulk p u r c h a s e s , b a r g a i n i n g p o w e r , and s u p e r i o r p r o d u c t
information-gathering.
O b v i o u s l y , t h o u g h , t h e u l t i m a t e s o l u t i o n t o i m p o s s i b l e d r u g costs
is for t h e rest o f t h e T h i r d W o r l d to follow t h e I n d i a n e x a m p l e and
d e v e l o p their own manufacturing capacity. The interesting conse-
q u e n c e of such a shift from t h e point of view of this b o o k w o u l d be a
higher incidence of Good Manufacturing Practice violations,
i n d i a n i s a t i o n ' has p r o d u c e d o v e r 2,500 small drug p r o d u c e r s o n the
s u b - c o n t i n e n t . O v e r a n e i g h t - y e a r p e r i o d e n d i n g i n 1968, nearly o n e
fifth of t h e d r u g s a n a l y s e d in I n d i a w e r e found to be s u b s t a n d a r d
( A g a r w a l , 1978b: 6 1 ) . S i m i l a r l y , w h e n P a k i s t a n p r e c i p i t o u s l y
a t t e m p t e d t o a b o l i s h b r a n d n a m e s i n 1973, a d e q u a t e quality c h e c k s
o n t h e g e n e r i c s u b s t i t u t e s w h i c h f l o o d e d t h e m a r k e t w e r e not
p r o v i d e d for. T h e r e s e n t m e n t o f d o c t o r s o v e r the quality p r o b l e m s ,
c o m b i n e d w i t h l o b b y i n g b y t h e t r a n s n a t i o n a l s ( i n c l u d i n g total with-
d r a w a l from P a k i s t a n b y C i b a - G e i g y ) , c a u s e d t h e e x p e r i m e n t t o
fail.
Q u a l i t y p r o b l e m s on a large scale a r e not i n e v i t a b l e if a d e q u a t e
G M P i n s p e c t i o n a n d a well-staffed n a t i o n a l t e s t i n g l a b o r a t o r y are
p r o v i d e d for. C e r t a i n l y t h e e v i d e n c e is, a s w e saw i n C h a p t e r 4 , that
i t i s t h e t r a n s n a t i o n a l s w h o , o n a v e r a g e , have the highest G M P
s t a n d a r d s . N e v e r t h e l e s s , it is p o s s i b l e to find individual g e n e r i c
m a n u f a c t u r e r s w h o h a v e s t a n d a r d s t o m a t c h the t r a n s n a t i o n a l s .
I n d e e d t h e t r a n s n a t i o n a l s t h e m s e l v e s r e c o g n i s e this w h e n t h e y buy
from, o r license o u t p r o d u c t i o n t o , g e n e r i c m a n u f a c t u r e r s .
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Drug companies and the Third World
A m e r i c a n t r a n s n a t i o n a l s have e v e n b e e n k n o w n o n o c c a s i o n s t o
b u y d r u g s from E a s t e r n E u r o p e a n m a n u f a c t u r e r s . N e v e r t h e l e s s ,
T h i r d W o r l d g o v e r n m e n t s w h o m o v e t o foster i n d i g e n o u s p r o d u c -
t i o n c a n n o t afford t o lose sight o f t h e reality t h a t , u n l e s s r e g u l a t e d ,
t h e c u t t i n g of c o r n e r s on quality will be e n d e m i c in small-scale drug
production.
I n t h e final a n a l y s i s , t h e T h i r d W o r l d c a n n o t d o w i t h o u t the
t r a n s n a t i o n a l s . M o s t o f t h e t o p r e s e a r c h and d e v e l o p m e n t e x p e r t i s e
in t h e w o r l d is a c c u m u l a t e d w i t h i n t h e t r a n s n a t i o n a l s . It will
c o n t i n u e t o b e t h e t o p t w e n t y c o m p a n i e s w h o will p r o v i d e most o f
t h e i m p o r t a n t t h e r a p e u t i c b r e a k t h r o u g h s . T h e T h i r d W o r l d has a n
i n t e r e s t i n e n t i c i n g t h e t r a n s n a t i o n a l s t o d e v o t e m o r e than the
m i n u s c u l e p r o p o r t i o n o f t h e i r r e s e a r c h t a l e n t w h i c h they c u r r e n t l y
a l l o c a t e t o t r o p i c a l d i s e a s e s . W h i l e t h e T h i r d W o r l d c a n n o t afford
to cut itself off c o m p l e t e l y from the flow of i n n o v a t i o n s from t h e
t r a n s n a t i o n a l s , n e i t h e r can it afford to buy d r u g s on the t r a n s -
n a t i o n a l s ' t e r m s . W h y should d e v e l o p i n g c o u n t r i e s pay a gross
p r e m i u m for r e s e a r c h and d e v e l o p m e n t e x p e n d i t u r e w h i c h i s
p r i m a r i l y d i r e c t e d a t 'rich m a n ' s d i s e a s e s ' ?
T h e r e a r e t w o s o u n d r e a s o n s why i t i s d e f e n s i b l e for d e v e l o p i n g
c o u n t r i e s t o cut t h e i r d e p e n d e n c y o n the t r a n s n a t i o n a l s , e v e n w h e n
t h a t r e s u l t s in t h e i r c o n s u m e r s g e t t i n g d r u g s w h i c h have a higher
i n c i d e n c e o f q u a l i t y failure. T h e first i s t h a t i n d i g e n o u s p r o d u c t i o n
s t a n d a r d s will r e m a i n low so long as local m a n u f a c t u r e r s are
a l l o w e d to o p e r a t e only on t h e fringe o f t h e i n d u s t r y . At one t i m e all
the t r a n s n a t i o n a l s were b a c k r o o m o p e r a t o r s . They developed
s t a n d a r d s o f e x c e l l e n c e w h e n t h e y w e r e given o p p o r t u n i t i e s t o
e x p a n d . S e c o n d l y , it is not really p u t t i n g m o n e y a h e a d of p e o p l e to
justify t o l e r a t i n g c h e a p d r u g s which d o not a l w a y s r e a c h the h i g h e s t
s t a n d a r d s o f q u a l i t y . I n c o u n t r i e s w h e r e t h e r e i s not e n o u g h
m e d i c i n e t o g o a r o u n d , d r u g s b e l o w half price can m e a n twice a s
m a n y p e o p l e g e t t i n g m e d i c i n e . O b v i o u s l y t h e r e is a cut-off point
b e y o n d w h i c h such a t e r r i b l e trade-off could not be c o u n t e n a n c e d .
E v e n m o r e i m p o r t a n t i s t h e t r a d e - o f f b e t w e e n public e x p e n d i t u r e
o n d r u g s and e x p e n d i t u r e o n o t h e r h e a l t h p r i o r i t i e s . Third W o r l d
c o u n t r i e s s p e n d a n u n a c c e p t a b l y high p r o p o r t i o n (often o v e r 4 0 per
c e n t ( M e d a w a r , 1982: 2 2 ) ) o f t h e i r small h e a l t h b u d g e t s o n d r u g s ,
w h e n d r u g s a r e far from t h e highest p r i o r i t y . T h e g r e a t e s t a t t e n t i o n
n e e d s to be d e v o t e d to the underlying causes of Third World health
p r o b l e m s i n m a l n u t r i t i o n and p o o r s a n i t a t i o n . P r e v e n t i v e m e d i c i n e
is a h i g h e r p r i o r i t y t h a n pills; clean w a t e r is m o r e i m p o r t a n t t h a n
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a n t i b i o t i c s , food m o r e i m p o r t a n t t h a n v i t a m i n pills. W h e n s o m e o f
t h e m o n e y n o w b e i n g s p e n t o n d r u g s can b e r e d i r e c t e d t o c l e a n i n g
up t h e s e u n d e r l y i n g p r o b l e m s , m o r e lives will be saved.
M o r e o v e r , as M u l l e r (1982: 112-13) has persuasively a r g u e d , it can
be s o u n d h e a l t h policy even to k e e p d r u g s off the m a r k e t which have
b e e n p r o v e n effective in clinical studies w h e n s t a n d a r d s of medical
p r a c t i c e a r e m o r e likely t o d e l i v e r t h e side-effects t h a n t h e c u r e :
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Drug companies and the Third World
N e v e r t h e l e s s , t h e r e a r e r u m b l i n g s o f r e f o r m . R e a l i s i n g t h a t the
c o s t s o f effective n a t i o n a l r e g u l a t o r y a g e n c i e s are b e y o n d their
r e a c h . T h i r d W o r l d c o u n t r i e s are b e g i n n i n g t o d e v e l o p r e g i o n a l
r e g u l a t o r y s y s t e m s . T h e C a r i b b e a n c o m m u n i t y , with U n i t e d
N a t i o n s a s s i s t a n c e , is l e a d i n g t h i s m o v e m e n t by setting up a r e g i o n a l
drug testing laboratory in Jamaica. The World Health Organisation
is d e v e l o p i n g s i m p l e t e s t s for d r u g quality w h i c h can confirm the
i d e n t i t y a n d basic efficacy of d r u g s in s i t u a t i o n s w h e r e l a b o r a t o r i e s
d o n o t exist. T h e i d e a i s t h a t p r i m a r y h e a l t h care w o r k e r s a l o n g the
d i s t r i b u t i o n c h a i n can d o p e r i o d i c basic t e s t i n g . W H O i s also assist-
ing b e l e a g u e r e d T h i r d W o r l d r e g u l a t o r y a g e n c i e s b y t h e p u b l i c a t i o n
of a q u a r t e r l y b u l l e t i n p r o v i d i n g i n f o r m a t i o n on t h e r e g u l a t o r y
s t a t u s i n different p a r t s o f t h e w o r l d o f n e w and old d r u g s .
T h e e m e r g i n g i n t e r n a t i o n a l and r e g i o n a l c o - o p e r a t i o n i n the
T h i r d W o r l d is e n c o u r a g i n g , as is t h e c o n s t r u c t i v e role b e i n g played
by an array of UN agencies ( W H O , U N C T A D , U N I D O , U N D P
and U N I C E F (see A g a r w a l , 1978b)). Third World countries which
c a n n o t afford effective r e g u l a t i o n n a t i o n a l l y h a v e most to gain from
i n t e r n a t i o n a l r e g u l a t o r y initiatives such a s t h e Certification S c h e m e
on the Quality of Pharmaceutical P r o d u c t s Moving in International
C o m m e r c e (see C h a p t e r 4 ) and W H O ' s i n t e r n a t i o n a l d r u g a d v e r s e -
reaction-reporting scheme.-' In addition to United Nations
i n i t i a t i v e s t o t r a n s f e r quality c o n t r o l t e c h n o l o g y t o t h e T h i r d W o r l d ,
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t h e S w e d i s h g o v e r n m e n t is p l a y i n g an i m p o r t a n t r o l e . A S w e d i s h
s t a t e - o w n e d p h a r m a c e u t i c a l company is helping developing coun-
t r i e s to e s t a b l i s h p l a n t s to m a n u f a c t u r e their o w n essential d r u g s of
high quality.
G r o w i n g n u m b e r s o f d e v e l o p i n g c o u n t r i e s are d e m a n d i n g certifi-
c a t e s of free sale b e f o r e t h e y will a l l o w d r u g s to be i m p o r t e d - that
i s , a d o c u m e n t i n d i c a t i n g t h a t t h e drug is a p p r o v e d for c o n s u m p t i o n
4
in t h e e x p o r t i n g c o u n t r y . W h i l e this p r o v i d e s s o m e g u a r a n t e e s for a
g o v e r n m e n t w h i c h c a n n o t afford its o w n e x h a u s t i v e scientific evalu-
a t i o n of a p r o d u c t , we h a v e seen in this c h a p t e r t h a t t r a n s n a t i o n a l
c o r p o r a t i o n s h a v e g r e a t flexibility in p l a y i n g t h e w o r l d system to
c i r c u m v e n t such p r o t e c t i o n s . A r e g i s t r a t i o n - m a r k e t i n g strategy can
b e d e v e l o p e d t h a t c o n c e n t r a t e s o n early s t r a t e g i c n e w drug
a p p r o v a l s in foreign c o u n t r i e s from w h i c h initial e x p o r t s will be
sourced.
E l s e w h e r e ( B r a i t h w a i t e , 1979a, 1980) I have d e s c r i b e d law
evasion as a more p r e d o m i n a n t m o d u s operandi of transnational
c o r p o r a t i o n s t h a n b l a t a n t law v i o l a t i o n . T h e c o r p o r a t i o n e x p l o i t s
d i f f e r e n c e s in n a t i o n a l laws to find t h e line of least r e s i s t a n c e to
a c h i e v i n g its e n d s . T r a n s f e r p r i c i n g , w h i c h will be discussed in t h e
n e x t c h a p t e r , is a n o t h e r classic i l l u s t r a t i o n of a law e v a s i o n strategy
( t a x l a w s a r e n o t v i o l a t e d , but e v a d e d ) . T h e c o n d u c t o f clinical
t e s t i n g o n T h i r d W o r l d ' g u i n e a p i g s ' w h i c h w o u l d not b e p e r m i t t e d
as safe in d e v e l o p e d c o u n t r i e s and d u m p i n g are i l l u s t r a t i o n s of
i n t e r n a t i o n a l law e v a s i o n par e x c e l l e n c e . O n e e v a d e s laws on h o w a
p r o d u c t s h o u l d be i n t r o d u c e d to t h e m a r k e t ; the o t h e r e v a d e s a law
t h a t t h e p r o d u c t s h o u l d b e w i t h d r a w n from the m a r k e t .
T h e s o l u t i o n to t h e p r o b l e m of global c o r p o r a t i o n s p l a y i n g off the
r e g u l a t o r y s t a n d a r d s of o n e c o u n t r y a g a i n s t t h o s e of a n o t h e r is a
d e g r e e of h a r m o n i s a t i o n of those standards. The United Nations is
a l r e a d y f o s t e r i n g i n t e r n a t i o n a l m i n i m u m s t a n d a r d s with r e s p e c t t o
G M P s , t e s t i n g o f d r u g q u a l i t y , p r o t e c t i o n o f t h e subjects o f h u m a n
e x p e r i m e n t a t i o n , and industrial h e a l t h and safety. W h i l e cynicism is
t h e m o s t c o m m o n r e s p o n s e t o such U N a g r e e m e n t s , t h e y d o have
v a l u e w h e n t h e a c c o r d is struck w i t h i n t h e c o n t e x t of a w i d e r will to
r e f o r m . T h e r e is a will in m o s t c o u n t r i e s t o d a y to t i g h t e n up the
u n e v e n n e s s in the regulatory stringency applied to the p h a r m a -
c e u t i c a l i n d u s t r y . I n s o m e cases e v e n t h e t r a n s n a t i o n a l c o m p a n i e s
a r e p r e p a r e d t o s u p p o r t t o u g h e r r e g u l a t o r y c o n t r o l s w h e r e t h e y can
see t h a t this will i m p o s e costs on local c o m p e t i t o r s w h i c h t h e t r a n s -
nationals already meet.
276
Drug companies and the Third World
277
Drug companies and the Third World
for an i n s p e c t i o n so t h a t t h e y m i g h t a n n o u n c e to their c u s t o m e r s
t h a t t h e y h a d b e e n certified a s m e e t i n g F D A s t a n d a r d s . E v e n t h e
S w i s s t r a n s n a t i o n a l set m a n y o f t h e i r w o r l d w i d e p r o c e d u r e s i n
a r e a s like t e s t i n g for sterility and p o t e n c y t o m e e t F D A r e q u i r e -
m e n t s . F o r m a n y m a t t e r s i t m a k e s e c o n o m i c sense t o m e e t t h e
h i g h e s t s t a n d a r d s e v e r y w h e r e r a t h e r t h a n t o confuse e m p l o y e e s b y
c h o p p i n g and c h a n g i n g . H o f f m a n - L a R o c h e p l a n t s i n I n d o n e s i a , t h e
P h i l i p p i n e s , a n d S w i t z e r l a n d itself all o p e r a t e to m e e t m a n y
s t a n d a r d s w h i c h w e r e w r i t t e n i n W a s h i n g t o n . T h e U n i t e d States
e n j o y s t h e e c o n o m i c benefits from d o m i n a t i n g the w o r l d ' s p h a r m a -
c e u t i c a l m a r k e t s . I t c a n n o t enjoy t h o s e benefits w h i l e d e n y i n g its
r e s p o n s i b i l i t y for uplifting w o r l d w i d e standards of c o n s u m e r
protection.
278
8 Fiddling
I n t h e 1920s, D r F . D o n a l d C o s t e r t o o k c o n t r o l o f M c K e s s o n and
R o b b i n s , a n old and r e s p e c t e d p h a r m a c e u t i c a l c o m p a n y , but h a r d l y
a h i g h flyer on t h e stock e x c h a n g e . C o s t e r , e v e r y o n e b e l i e v e d , w a s a
f i n a n c i a l g e n i u s . ' By 1938 he had built up t h e c o m p a n y to o n e o f t h e
279
Fiddling
t h r e e l a r g e s t p h a r m a c e u t i c a l c o m p a n i e s i n the U n i t e d S t a t e s . I n
p a r t , D r C o s t e r built u p t h e e m p i r e b y selling c o m p a n y p r o d u c t s
w h i c h h a d high a l c o h o l c o n t e n t ( m a i n l y hair t o n i c ) t o u n d e r w o r l d
b o o t l e g g e r s d u r i n g p r o h i b i t i o n . H o w e v e r , C o s t e r ' s real g e n i u s w a s
i n c o n v i n c i n g b a n k s t h a t M c K e s s o n and R o b b i n s had assets w h i c h i t
did not i n fact h a v e . W h i l e o t h e r c o m p a n i e s c r u m b l e d d u r i n g the
d e p r e s s i o n , b a n k s c o n t i n u e d t o p o u r c a p i t a l into M c K e s s o n and
Robbins.
Dr C o s t e r a c h i e v e d such a r e p u t a t i o n for m a n a g e r i a l brilliance
a n d social r e s p e c t a b i l i t y t h a t in 1937 he w a s a p p r o a c h e d by influen-
tial s e c t i o n s of t h e R e p u b l i c a n Party to run a g a i n s t R o o s e v e l t for
p r e s i d e n t . A d v i s e d l y , h e d e c l i n e d . I n 1938 C o s t e r ' s m a s q u e r a d e
w a s d i s c o v e r e d . T h e p r e s i d e n t o f M c K e s s o n and R o b b i n s w a s i n
fact P h i l l i p M u s i c a , o n e of t h e g r e a t e s t con men in A m e r i c a n
h i s t o r y . As P h i l l i p M u s i c a he had b a n k r u p t e d a n u m b e r of c o m -
p a n i e s after f r a u d u l e n t l y p r o c u r i n g l o a n s o n t h e s t r e n g t h o f non-
existent assets. Before the c o m p a n i e s were b a n k r u p t e d , however,
t h e l o a n m o n e y s had b e e n d i v e r t e d t o M u s i c a family c o m p a n i e s .
M u s i c a had s e r v e d t w o prison s e n t e n c e s . O n e s e n t e n c e for b r i b i n g
c u s t o m s officials had b e e n p r e m a t u r e l y t e r m i n a t e d w h e n M u s i c a
s w u n g a p a r d o n from no less t h a n P r e s i d e n t Taft. ' D r C o s t e r ' s '
m u c h v a u n t e d M D a n d Phd d e g r e e s from the U n i v e r s i t y o f
H e i d e l b e r g were fake.
D u r i n g his p e r i o d a t t h e h e l m o f M c K e s s o n and R o b b i n s , ' D r
C o s t e r ' s i p h o n e d off a b o u t $20 million in c o m p a n y funds by having
t h e c o m p a n y pay to build up an i n c r e a s i n g i n v e n t o r y of bulk d r u g s in
its C a n a d i a n w a r e h o u s e . T h e i n v e n t o r y w a s , i n fact, virtually non-
e x i s t e n t . M o n e y t o pay for t h e i m a g i n a r y b u l k d r u g s w a s being
d i r e c t e d t h r o u g h a d u m m y c o m p a n y to the president of M c K e s s o n
a n d his family. It is b e l i e v e d t h a t s o m e of this m o n e y w a s used to pay
off b l a c k m a i l e r s ( a m o n g t h e m , D u t c h S c h u l t z ) w h o w e r e t h r e a t e n -
ing t o r e v e a l ' D r C o s t e r ' s ' past t o t h e b o a r d .
B u t M c K e s s o n a n d R o b b i n s could h a r d l y c o m p l a i n a b o u t the
d e p r e d a t i o n s o f t h e i r p r e s i d e n t . T h e c o m p a n y had b e e n a g r e a t e r
beneficiary o f ' C o s t e r ' s ' a c u m e n at materialising non-existent assets
t h a n ' C o s t e r ' himself. S i n g l e h a n d e d l y , ' C o s t e r ' built u p t h e e m p i r e .
I f t h e r e w e r e any real v i c t i m s , t h e y w e r e t h e b a n k s and t h e c o m -
p e t i t o r s ' C o s t e r ' had c r u s h e d , and t h e r e p u t a t i o n o f t h e c o m p a n y ' s
a u d i t o r s , Price W a t e r h o u s e .
'Coster' committed suicide after t h e persistent company
t r e a s u r e r d i s c o v e r e d t h a t t h e C a n a d i a n s t o c k p i l e o f bulk d r u g s w a s
280
Fiddling
C o m p a n y rips off c o m p a n y
C o r p o r a t e c r i m e s i n w h i c h o n e c o m p a n y f i n a n c i a l l y victimises
a n o t h e r are c o m m o n p l a c e in the international pharmaceutical
i n d u s t r y . I n 1979 J o h n s o n and J o h n s o n successfully sued t h r e e firms
( W a s h i n g t o n W h o l e s a l e D r u g E x c h a n g e , J a y e s H o l d i n g Inter-
n a t i o n a l , a n d J a y e s E x p o r t ) c o m p l a i n i n g t h a t t h e y had illegally
c o n s p i r e d to o b t a i n d r u g s at d i s c o u n t r a t e s r e s e r v e d for d e v e l o p i n g
c o u n t r i e s . J a y e s H o l d i n g I n t e r n a t i o n a l p u r c h a s e d 5,764 cases o f
O r t h o - N o v u m b i r t h c o n t r o l pills and Sultrin t a b l e t s a t t h e d i s c o u n t
rate by p r e t e n d i n g to represent the N i g e r i a n g o v e r n m e n t . J o h n s o n
and J o h n s o n c o m p l a i n e d that the fraudulently obtained discount
cost t h e m S2.3 m i l l i o n .
281
Fiddling
I n a d d i t i o n t o c o r p o r a t e c r i m e s w h i c h involve victimising o t h e r
c o m p a n i e s , t h e r e a r e t h o s e w h e r e g o v e r n m e n t s are v i c t i m s . O n e
such c a s e w a s t h e R e v c o M e d i c a i d fraud, subject of an i m p r e s s i v e
s t u d y by V a u g h a n ( 1 9 8 0 ) . R e v c o is not a p h a r m a c e u t i c a l m a n u -
f a c t u r e r , b u t a r e t a i l e r , a very large o n e listed in the F o r t u n e 500.
R e v c o a n d t w o of its e x e c u t i v e s p l e a d e d no c o n t e s t to a n u m b e r of
282
Fiddling
R a t h e r t h a n c o r r e c t t h e rejected c l a i m s for r e s u b m i s s i o n t o t h e
s t a t e , clerical w o r k e r s a t R e v c o h e a d q u a r t e r s w e r e i n s t r u c t e d t o
m a n u a l l y r e w r i t e c l a i m forms i n n u m b e r s e q u i v a l e n t t o the
r e j e c t e d c l a i m s . T h e y used m o d e l c l a i m s - claims w h i c h a l r e a d y
had b e e n a c c e p t e d b y t h e state and paid. D a t e s w e r e c h a n g e d ,
a n d t h e last t h r e e digits o f t h e six digit p r e s c r i p t i o n n u m b e r s w e r e
t r a n s p o s e d . N o a t t e m p t w a s m a d e t o alter a m o u n t s o f t h e
individual claims. The two executives believed that because of
the large n u m b e r of claims involved, the a m o u n t s would average
o u t ( V a u g h a n . 1980).
T h e R e v c o e x e c u t i v e s w e r e not a t t e m p t i n g t o e a r n illegitimate
p r o f i t s ; t h e y w e r e t r y i n g t o r e c o v e r m o n e y s t o which they w e r e ,
m o r e o r l e s s , e n t i t l e d . H o w e v e r , t h e y w e r e s u b s t i t u t i n g the legiti-
m a t e m e a n s for a c h i e v i n g t h a t goal with a c h e a p e r and m o r e con-
v e n i e n t i l l e g i t i m a t e m e a n s . Risk o f d e t e c t i o n o f t h e fraud w a s low
s i n c e t h e illicit c l a i m s w e r e w r i t t e n explicitly to satisfy t h e r e q u i r e -
m e n t s o f t h e c o m p u t e r . T h e g o v e r n m e n t ' s d i s c o v e r y o f t h e fraud
was accidental.
V a u g h a n ( 1 9 8 0 ) p o i n t s o u t t h a t R e v c o ' s i n t e r p r e t a t i o n o f the
c r i m e w a s t h a t i t w a s v i c t i m - p r e c i p i t a t e d . W i t h o u t t h e welfare
283
Fiddling
A l a r g e p r o p o r t i o n of t h e t r a n s a c t i o n s on t h e b o o k s of an inter-
n a t i o n a l c o m p a n y a r e sales from p a r e n t t o s u b s i d i a r y , s u b s i d i a r y t o
p a r e n t o r o n e s u b s i d i a r y t o a n o t h e r . I n t r a c o m p a n y transfer prices
can effectively shift profits from o n e part of the w o r l d to a n o t h e r .
F o r e x a m p l e , d r u g s m i g h t be s h i p p e d from a h i g h - t a x c o u n t r y to a
l o w - t a x c o u n t r y at b e l o w m a r k e t p r i c e s in o r d e r to shift profits to
w h e r e t h e y will a t t r a c t least tax. T r a n s f e r pricing is t h e r e f o r e a
c l a s s i c law e v a s i o n s t r a t e g y . T a x laws o f t h e h i g h - t a x c o u n t r y are not
v i o l a t e d , t h e y a r e e v a d e d . T h i s n e e d not n e c e s s a r i l y b e t r u e , h o w -
e v e r , a s t h e h i g h - t a x c o u n t r y may h a v e e n a c t e d laws r e q u i r i n g that
t r a n s f e r p r i c e s be set on an "arms l e n g t h ' basis ( t h a t is, as if the
c o m p a n y w e r e selling t o a n o t h e r r a t h e r t h a n t o itself).
284
Fiddling
t h e G e r m a n g i a n t , B a y e r . I n r e c e n t y e a r s I r e l a n d has a t t r a c t e d
m a n y n e w p h a r m a c e u t i c a l m a n u f a c t u r i n g p l a n t s partly b e c a u s e o f
its t a x a d v a n t a g e s . B u t t h e m o s t i m p o r t a n t tax h a v e n i n t h e p h a r m a -
ceutical industry is P u e r t o Rico.
M a n y A m e r i c a n t r a n s n a t i o n a l s h a v e sizeable m a n u f a c t u r i n g
p l a n t s in P u e r t o R i c o , and a large p r o p o r t i o n of t r a n s a c t i o n s
b e t w e e n t h e U n i t e d S t a t e s and o t h e r p a r t s o f t h e w o r l d g o t h r o u g h
P u e r t o R i c o , l e a v i n g s o m e e x t r a cash i n P u e r t o R i c o each t i m e . T h i s
e x p l a i n s the e x t r a o r d i n a r y return on pharmaceutical investment in
P u e r t o R i c o c a l c u l a t e d b y Wall S t r e e t a n a l y s t J o h n S . B u t t l e s I I .
B u t t l e s c a l c u l a t e s t h a t W a r n e r - L a m b e r t had a 110 per cent r e t u r n
on its i n v e s t m e n t in P u e r t o R i c a n p l a n t and e q u i p m e n t in 1976. F o r
A b b o t t t h e figure w a s 101 p e r c e n t , w h i l e for S c h e r i n g it w a s a
m e a g r e 90 p e r cent (Business Week, 22 M a y 1978: 154-6). In 1977,
a c c o r d i n g t o d a t a s u p p l i e d t o B u s i n e s s W e e k b y O p p e n h e i m e r and
C o . , S c h e r i n g r e c o r d e d 59.2 p e r cent of its w o r l d w i d e profits in
P u e r t o R i c o . F o r S q u i b b t h e f i g u r e w a s 53.7 per c e n t ; A b b o t t , 4 8 . 4
p e r c e n t ; S m i t h K l i n e , 4 5 . 7 per cent. All t h e s e c o m p a n i e s w e r e
o u t d o n e by S e a r l e w h i c h in b o t h 1976 and 1977 m a n a g e d to r e c o r d
o v e r 100 p e r cent of its w o r l d w i d e profits in P u e r t o R i c o . W h i l e the
rest of t h e w o r l d ran at a l o s s , large profits w e r e r e c o r d e d for
Searle's Puerto Rican subsidiary.
W h e n T h i r d W o r l d c o u n t r i e s a r e t h e v i c t i m s o f transfer pricing
the c o n s e q u e n c e s are most serious. Vaitsos (1974) conducted the
classic s t u d y o f high t r a n s f e r prices into Third W o r l d c o u n t r i e s .
H e f o u n d t h a t p h a r m a c e u t i c a l i m p o r t s into C o l o m b i a b y foreign-
o w n e d c o m p a n i e s w e r e o v e r p r i c e d b y 155 per c e n t , very m u c h
h i g h e r t h a n t h e o v e r p r i c i n g o f o t h e r i m p o r t s (specifically r u b b e r ,
c h e m i c a l s a n d e l e c t r o n i c s ) . - ' V a i t s o s e s t i m a t e d that i f C o l o m b i a
h a d b e e n p a y i n g a v e r a g e w o r l d p r i c e s for its p h a r m a c e u t i c a l
i m p o r t s , t h e c o u n t r y w o u l d h a v e s a v e d a c h a r g e of $20 million to
t h e C o l o m b i a n b a l a n c e o f p a y m e n t s i n 1968. A p p r o x i m a t e l y half o f
t h e e s t i m a t e d $20 m i l l i o n in e x c e s s profits r e p a t r i a t e d by t h e
transfer pricing would have gone to the C o l o m b i a n g o v e r n m e n t
i n t a x e s . V a i t s o s a l s o found t h a t several o f t h e largest t r a n s n a t i o n a l
p h a r m a c e u t i c a l c o m p a n i e s r e t u r n e d t h e i r profits via a h o l d i n g
c o m p a n y i n P a n a m a w h i c h , a t t h a t t i m e , w a s a tax h a v e n . T h e
s t u d y c o n c l u d e d t h a t t h e effective r a t e o f r e t u r n o n C o l o m b i a n
o p e r a t i o n s for fifteen global d r u g c o r p o r a t i o n s ranged from a low
of 3 8 . 1 p e r c e n t to a high of 962.1 per cent with an a v e r a g e of
7 9 . 1 p e r c e n t . Y e t t h a t y e a r t h e a v e r a g e d e c l a r e d profits s u b m i t t e d
285
Fiddling
286
Fiddling
B r a z i l is a l e a d e r in fostering e x c h a n g e of i n f o r m a t i o n b e t w e e n
c o u n t r i e s o n p h a r m a c e u t i c a l transfer p r i c e s . K n o w l e d g e i s p o w e r i n
n e g o t i a t i o n w i t h t r a n s n a t i o n a l s . G o v e r n m e n t s can d e m a n d l o w e r
t r a n s f e r p r i c e s only w h e n t h e y k n o w w h a t transfer p r i c e s are being
p a i d b y o t h e r c o u n t r i e s o n t h e s a m e p r o d u c t s . W h e n the B r a z i l i a n s
find t h a t a s u p p l i e r is a v a i l a b l e with p r i c e s m u c h c h e a p e r t h a n the
i n t r a c o m p a n y t r a n s f e r p r i c e , t h e y insist t h a t t h e t r a n s n a t i o n a l
s o u r c e from t h e c h e a p e r s u p p l i e r . I n t h e i n t e r n a t i o n a l transfer
p r i c i n g g a m e t h e i r o n y is t h a t t h e r h e t o r i c o f t h e free m a r k e t is often
empty without government intervention.
T h e m a i n p r o b l e m for d e v e l o p i n g c o u n t r i e s is a lack of r e s o u r c e s
t o m o u n t a c o n t i n u o u s , s o p h i s t i c a t e d and c o m p r e h e n s i v e m o n i t o r -
ing o f t r a n s f e r p r i c e s . G u a t e m a l a , for e x a m p l e , has rules against
c l a i m i n g e x c e s s i v e l y high transfer p r i c e s for i m p o r t e d m a t e r i a l s
w h e n s e e k i n g p r i c e i n c r e a s e s from t h e g o v e r n m e n t . H o w e v e r , i t
s e e m s t h a t n o o n e c h e c k s t h e cost f i g u r e s supplied b y t h e c o m -
p a n i e s . E f f e c t i v e l y , t h e c o m p a n i e s can get away with a n y t h i n g .
W i t h tax e v a s i o n t h r o u g h transfer p r i c i n g , d e v e l o p e d e c o n o m i e s are
p r o g r e s s i n g t o w a r d s e x c h a n g e o f i n f o r m a t i o n b e t w e e n tax a u t h o r i -
t i e s a n d e v e n i n t e r n a t i o n a l tax a u d i t s ( e . g . C a n a d a with t h e U n i t e d
S t a t e s ) . In contrast, poor countries a r e ' i n danger of being excluded
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Fiddling
Conclusion
T h e financial m a n i p u l a t i o n s d i s c u s s e d i n this c h a p t e r s e e m t o r e p r e -
s e n t t y p e s o f c o r p o r a t e c r i m e which a r e q u a l i t a t i v e l y different from
t h o s e d i s c u s s e d e a r l i e r . R e a d e r s may feel t h a t i n a t t e m p t i n g t o
c o v e r c o m p r e h e n s i v e l y t h e s p e c t r u m o f c o r p o r a t e c r i m e s which
o c c u r in o n e i n d u s t r y , we a r e left with a m u d d l e of d i s p a r a t e
c r i m i n a l f o r m s . Y e t in the final c h a p t e r it will b e c o m e clear that
t h e s e v a r i o u s forms o f c o r p o r a t e c r i m e d o have i m p o r t a n t c h a r a c -
teristics in c o m m o n .
W h a t do a Dr F. D o n a l d C o s t e r g a m e with i m a g i n a r y assets and a
M E R / 2 9 g a m e with i m a g i n a r y r a t s and m o n k e y s h a v e i n c o m m o n ?
A t t h e i r r o o t , t h e p r o b l e m s h a v e similar s o l u t i o n s . B o t h c r i m e s
w e r e r e n d e r e d p o s s i b l e by t h e fact t h a t key i n d i v i d u a l s had a u t o -
c r a t i c c o n t r o l of e i t h e r a w h o l e o r g a n i s a t i o n , or a division within an
o r g a n i s a t i o n . C o n t r o l s t r a t e g i e s for b o t h t y p e s o f c r i m e m u s t focus
288
Fiddling
289
9 Strategies for controlling
corporate crime
The a r g u m e n t in outline
In t h e s u c c e e d i n g p a g e s an a t t e m p t will be m a d e to d e v e l o p a
b a l a n c e d p e r s p e c t i v e o n w h a t law can and c a n n o t a c h i e v e with
r e s p e c t to t h e p r o b l e m of c o r p o r a t e c r i m e as manifested in the
p h a r m a c e u t i c a l i n d u s t r y . It will be a r g u e d that an e m p i r i c a l u n d e r -
s t a n d i n g o f c o r p o r a t e c r i m e i n this i n d u s t r y implies t h a t law c a n n o t
a c h i e v e s i m u l t a n e o u s l y all t h e goals e x p e c t e d of it. E v e n t h o u g h
these goals are compatible within theories of j u r i s p r u d e n c e ,
e m p i r i c a l l y t h e y a r e often i n c o m p a t i b l e , not j u s t at t h e level of
i n d i v i d u a l c a s e s , but for t h e c r i m i n a l j u s t i c e system as a t o t a l i t y .
L e t us b e g i n with w h a t law can a c h i e v e . It will be a r g u e d t h a t law
e n f o r c e m e n t can r e d u c e c o r p o r a t e c r i m e i n t h e p h a r m a c e u t i c a l
i n d u s t r y , p r o b a b l y d r a m a t i c a l l y . T h e c r i m e r e d u c t i o n goal can b e
a c h i e v e d via a n u m b e r of s u b g o a l s . F i r s t , d e t e r r e n c e - b o t h specific
( a g a i n s t o f f e n d e r s ) and g e n e r a l ( a g a i n s t t h o s e w h o w i t n e s s t h e
s a n c t i o n i n g of o t h e r s ) - can be effective. This is so b e c a u s e cor-
p o r a t e o f f e n d e r s , w i t h m o r e t o lose t h a n t r a d i t i o n a l b l u e - c o l l a r
offenders, are inherently more deferrable.
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Strategies for controlling corporate crime
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Strategies for controlling corporate crime
T h e c o n s u m e r m o v e m e n t c o u n t e r s w i t h t h e claim that A m e r i c a
h a s a ' d e a t h lag' r a t h e r t h a n a ' d r u g lag'. T h e y point out t h a t the
U n i t e d S t a t e s w a s o n e o f t h e few c o u n t r i e s t o p r e v e n t t h e m a r k e t i n g
292
Strategies for controlling corporate crime
H e n c e , o n e m u s t d i s m i s s t h e p r o p o s i t i o n t h a t laws r e q u i r i n g the
p r e c l e a r a n c e of d r u g s can be r e p l a c e d by t h e free o p e r a t i o n of
m a r k e t f o r c e s . N e v e r t h e l e s s , t h e r e is a case for m a k i n g the new drug
a p p r o v a l p r o c e s s less of an all or n o n e affair. O n c e n e w p r o d u c t s
d e m o n s t r a t e c e r t a i n m i n i m u m safety r e q u i r e m e n t s they could b e
g i v e n s o m e form o f c o n d i t i o n a l a p p r o v a l for limited m a r k e t i n g .
D u r i n g t h e p r o b a t i o n p e r i o d t h e p r o d u c t w o u l d b e subject t o
s t r i n g e n t p o s t m a r k e t i n g s u r v e i l l a n c e . I m m e d i a t e l y a significant
p r o b l e m a p p e a r e d , the product would be withdrawn. At the
m o m e n t , o n c e a p r o d u c t has b e e n a p p r o v e d , w i t h d r a w a l i s a n
a r d u o u s p r o c e s s for a r e g u l a t o r y a g e n c y . I n d u s t r y also claims that
t h e a p o c a l y p t i c n a t u r e o f a n u n c o n d i t i o n a l a p p r o v a l forces regula-
t o r s to be o v e r c a u t i o u s in w e i g h i n g up risks and benefits. T h e
official h a s m u c h to lose by a p p r o v i n g a s e c o n d t h a l i d o m i d e , but
little to gain by a p p r o v i n g a n e w p r o d u c t w h i c h confers a m o d e r a t e
therapeutic advance.
T h e r e is a shift in p r o f e s s i o n a l o p i n i o n in favour of g r a d u a t e d
a p p r o v a l in the U n i t e d States, as evidenced by the Congressional
t e s t i m o n y o n t h e 1978 a n d 1979 D r u g R e f o r m Bills. Y e t t h e m o s t
c o m p e l l i n g a r g u m e n t a g a i n s t t h e d r u g lag as it exists in t h e U n i t e d
S t a t e s a t t h e m o m e n t i s o n e n e v e r voiced b y t h e i n d u s t r y : t h a t t h e
d r u g lag will shift t h e n e x t t h a l i d o m i d e d i s a s t e r from t h e d e v e l o p e d
world to the Third World w h e r e p o s t m a r k e t i n g surveillance of new
d r u g s is virtually non-existent (and w h e r e , c o n s e q u e n t l y , more
p e o p l e will die b e f o r e t h e d i s a s t e r i s d i s c o v e r e d ) . O n c e d i s c o v e r e d ,
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Strategies for controlling corporate crime
N o t all r e g u l a t i o n s a r e a b u r d e n o n t h e e c o n o m y . R e g u l a t i o n s
w h i c h b a n c e r t a i n t y p e s o f a d v e r t i s i n g o r limit a d v e r t i s i n g e x p e n d i -
t u r e o b v i o u s l y reduce c o s t s (see C h a p t e r 6 ) . W h e r e a n t i t r u s t laws
effectively i n c r e a s e c o m p e t i t i o n , this m i g h t b r i n g c o s t - r e d u c i n g
p r e s s u r e s i n t o play. O c c u p a t i o n a l h e a l t h and safety r e g u l a t i o n s
m i g h t i m p o s e a cost b u r d e n on t h e m a n u f a c t u r e r , but in the final
a n a l y s i s , may also i n c r e a s e t h e G r o s s N a t i o n a l P r o d u c t b y r e d u c i n g
t h e n u m b e r of d a y s lost t h r o u g h injury and t h e m e d i c a l costs of
t r e a t m e n t . N e v e r t h e l e s s , there are many regulations which impose
c o s t s o u t of all p r o p o r t i o n to c o m m u n i t y benefits. Often t h e s e are
r e g u l a t i o n s w h i c h w e r e o n c e cost-effective but w h i c h h a v e b e c o m e
a n a c h r o n i s m s t h r o u g h t e c h n o l o g i c a l o r e c o n o m i c c h a n g e . A n irony
o f i r r a t i o n a l r e g u l a t i o n s i s t h a t they i m p o s e p r o p o r t i o n a t e l y t h e
g r e a t e s t c o s t s on small b u s i n e s s e s . As a cost b a r r i e r to m a r k e t entry
for small c o m p e t i t o r s , o n e set of r e g u l a t o r y goals conflicts with
a n o t h e r (antitrust law).
T h e r e a r e s o l u t i o n s . M a j o r n e w r e g u l a t i o n s s h o u l d b e subject t o
cost o f r e g u l a t i o n i m p a c t s t a t e m e n t s . I t m u s t b e c a u t i o n e d , how-
e v e r , t h a t p r e p a r i n g a cost of r e g u l a t i o n impact s t a t e m e n t itself
i m p o s e s a c o n s i d e r a b l e cost. S u c h i m p a c t s t a t e m e n t s should t h e r e -
fore be p r e p a r e d only for m a j o r r e g u l a t o r y initiatives. If industry
d i s a g r e e s with an a g e n c y d e c i s i o n t h a t a n e w r e g u l a t i o n is not of
sufficient i m p o r t a n c e to justify t h e cost of an i m p a c t s t u d y , t h e n
i n d u s t r y s h o u l d be e n c o u r a g e d to c o n d u c t t h e study at its o w n
e x p e n s e w i t h i n t h e g u i d e l i n e s set d o w n b y t h e r e g u l a t o r y a g e n c y .
F o r e x i s t i n g r e g u l a t i o n s , sunset l e g i s l a t i o n has a n i m p o r t a n t
p l a c e . S u n s e t l e g i s l a t i o n is s o m e t h i n g of a c u r r e n t c r a z e in the
U n i t e d S t a t e s , b e g u n b y t h e C o l o r a d o s t a t e l e g i s l a t u r e i n 1976. T h e
s u n s e t p r i n c i p l e is t h a t r e g u l a t i o n s be given a finite life. At t h e end
of a p r e d e t e r m i n e d p e r i o d , r e g u l a t i o n s are r e v i e w e d . T h e y are
e i t h e r a b o l i s h e d , r e a u t h o r i s e d or r e w r i t t e n . S u n s e t legislation is a
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Strategies for controlling corporate crime
s o u n d w a y o f c u l l i n g cost-ineffective r e g u l a t i o n s , s t o p p i n g t h e un-
w a r r a n t e d e x p a n s i o n o f self-serving b u r e a u c r a t i c e m p i r e s , and
i m p o s i n g on a g e n c i e s a n e e d to e v a l u a t e their p e r f o r m a n c e . It could
m a k e r o u t i n e t h e a b o l i t i o n o f e n t i r e b u r e a u c r a c i e s w h i c h have
s e r v e d t h e i r h i s t o r i c a l p u r p o s e . H o w e v e r , the p r o b l e m with s u n s e t
l e g i s l a t i o n is a g a i n t h a t t h e r e v i e w p r o c e s s itself i m p o s e s c o n s i d e r -
a b l e c o s t s . In t h e U n i t e d S t a t e s it has r e q u i r e d an e x p a n s i o n of
l e g i s l a t i v e staffs t o i m p l e m e n t t h e d e t a i l e d o v e r s i g h t r e q u i r e d o f t h e
l e g i s l a t u r e . I n p r a c t i c a l t e r m s any l e g i s l a t u r e c o u l d afford t h e t i m e
to t h o r o u g h l y r e v i e w only o n e of its m a j o r r e g u l a t o r y a g e n c i e s a
year.
296
Strategies for controlling corporate crime
2
r e g u l a t i o n , well d o c u m e n t e d a s they a r e . T h i s i s b e c a u s e t h e
b e n e f i t s of r e g u l a t i o n are not so well d o c u m e n t e d . W h i l e i n d u s t r y
has an i n c e n t i v e to m e a s u r e a c c u r a t e l y the costs of installing air
p o l l u t i o n c o n t r o l d e v i c e s , w h o could m e a s u r e e v e n t h e e c o n o m i c
2
b e n e f i t s i n r e d u c e d h e a l t h c o s t s with any a c c u r a c y ? N o o n e has
e v e n a t t e m p t e d t o d o t h e s u m s t o e s t i m a t e t h e total f i n a n c i a l cost t o
t h e c o m m u n i t y o f t h e t h a l i d o m i d e d i s a s t e r . W e t e n d t o lose per-
s p e c t i v e b y b e i n g h a m m e r e d w i t h only o n e side o f t h e cost-benefit
equation.
I n a g g r e g a t e , g o v e r n m e n t s should s p e n d m o r e , not less, o n regu-
l a t i n g b u s i n e s s . T h e s u m s n e e d e d a r e not s o e n o r m o u s . T h e P a n
A m e r i c a n H e a l t h O r g a n i s a t i o n has set its m e m b e r c o u n t r i e s t h e
t a r g e t o f s p e n d i n g 0.5 p e r cent o f t h e v a l u e o f d r u g sales i n their
c o u n t r i e s o n d r u g c o n t r o l r e g u l a t i o n . M o s t o f its m e m b e r c o u n t r i e s
s p e n d less t h a n half t h a t a m o u n t a t p r e s e n t .
T h e d i s c u s s i o n in t h e p r e c e d i n g p a r a g r a p h s suffers from a kind
o f u n r e a l i t y . C h o i c e s a b o u t h o w m u c h m o n e y w e are willing t o
s p e n d i n a t t e m p t s t o p r e v e n t h u m a n suffering a r e not subject t o
r a t i o n a l n u m e r i c a l c a l c u l a t i o n . S u c h c h o i c e s reflect t h e p r o f o u n d
i r r a t i o n a l i t y t h a t s u r r o u n d s our a t t i t u d e s t o h u m a n suffering. N o
one would dare suggest that an attempt to rescue trapped miners be
a b a n d o n e d b e c a u s e it w o u l d cost t o o m u c h . Y e t cost is a major
o b j e c t i o n t o m a n y o c c u p a t i o n a l h e a l t h and safety p r o t e c t i o n s w h i c h
c a n b e s h o w n t o s a v e lives. A t t i t u d e s a r e d r a m a t i c a l l y t r a n s f o r m e d
as we shift from identifiable victims to a n o n y m o u s statistical
v i c t i m s . T h e p u n d i t s of cost-benefit a n a l y s i s will d e s e r v e a b e t t e r
h e a r i n g w h e n t h e y a r e p r e p a r e d t o a p p l y their t e c h n i q u e s t o situ-
a t i o n s i n w h i c h t h e r e a r e identifiable v i c t i m s .
It c a n be a r g u e d t h a t p o l i t i c i a n s effectively put a dollar value on
h u m a n lives w h e n t h e y d e c i d e t h e v o l u m e o f t a x e s t h e y will raise t o
fund r e g u l a t o r y a g e n c i e s . B u t civil s e r v a n t s really do not h a v e to
m a k e t h i s kind o f j u d g m e n t . W h a t they m u s t d o , h o w e v e r , i s use
t h e i r finite r e g u l a t o r y b u d g e t to save as m a n y lives and p r e v e n t as
m u c h i l l - h e a l t h a s p o s s i b l e . S o m e t i m e s this will m e a n r e j e c t i n g
c o s t l y p r o g r a m m e s w h i c h will p r e v e n t suffering in favour of an
a l t e r n a t i v e d e p l o y m e n t of funds which will p r e v e n t g r e a t e r suffer-
ing e l s e w h e r e . R e g u l a t o r s c o n c e r n e d t o a c h i e v e t h e g r e a t e s t good
for t h e g r e a t e s t n u m b e r n e e d not c a l c u l a t e h o w m a n y d o l l a r s a life is
w o r t h ; b u t t h e y m u s t m a x i m i s e t h e n u m b e r o f lives saved for the
dollar.
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Strategies for controlling corporate crime
298
Strategies for controlling corporate crime
an old r e a l i t y , b u t o n e w h i c h has e x t e n d e d to n e w d i m e n s i o n s in t h e
late c a p i t a l i s t era. Critics of r e g u l a t o r y a g e n c i e s which sign up t o p
p l a y e r s from t h e o t h e r side are fixed at a n o s t a l g i c n i n e t e e n t h -
c e n t u r y view o f t h e p e r m a n e n c y o f l o y a l t i e s .
T h e a d v a n t a g e s o f e m p l o y i n g p e o p l e with e x p e r i e n c e i n the
o p p o s i t i o n i s t r a n s p a r e n t e n o u g h . C o r p o r a t i o n s have c o m p l i a n c e
g r o u p s w h i c h t h e y wish t o h a v e r o u t i n e c o m m i t m e n t t o d o i n g their
j o b w e l l . W h a t i n t e r n a l r e g u l a t o r s do is not very different from
g o v e r n m e n t r e g u l a t o r s , and t h e r e f o r e g o v e r n m e n t e x p e r i e n c e i s
useful. ' I ' m d o i n g basically t h e s a m e t h i n g inside t h e c o m p a n y t h a t I
w a s d o i n g a s a r e g u l a t o r . T h e y view u s a s t h e i n t e r n a l F D A . ' T h e
s a m e i n f o r m a n t t h e n e x p r e s s e d a view on w h a t he could c o n t r i b u t e
if he w e n t t h r o u g h t h e r e v o l v i n g d o o r a g a i n : 'If I w e n t b a c k n o w I'd
be a b l e to do a m u c h b e t t e r j o b . I get to k n o w t h e inside story on
t h i n g s t h a t I w o u l d h a v e b e e n frozen o u t from as a r e g u l a t o r . '
B e f o r e i n d u s t r y signs up a n e w p l a y e r they go to c o n s i d e r a b l e
l e n g t h s to e n s u r e t h a t he or she will be a loyal and d e d i c a t e d player.
E q u a l l y , r e g u l a t o r y a g e n c i e s s h o u l d not e m p l o y industry p e o p l e
w h o d o n o t h a v e t h e i r h e a r t i n t h e right p l a c e . T h e r e v o l v i n g d o o r
u n d o u b t e d l y h a s a d v e r s e c o n s e q u e n c e s . R e g u l a t o r s and r e g u l a t e d
c o m e to share a c o m m o n b u r e a u c r a t i c mentality whereby the
g e n e r a l p u b l i c a r e v i e w e d a s a n h y s t e r i c a l and i r r a t i o n a l m o b w h o
s h o u l d b e p r o t e c t e d from any s u g g e s t i o n o f p r o d u c t h a z a r d s .
P r o b l e m s c a n b e s o r t e d o u t a m i a b l y b e t w e e n t h e official a d v e r s a r i e s
w i t h o u t p u b l i c p a r t i c i p a t i o n . I t i s r a t h e r like t h e c o n d e s c e n d i n g
a t t i t u d e s to c l i e n t s s n a r e d by o p p o s i n g c o u n s e l in law c o u r t s
( B l u m b e r g , 1967). L a t e r I will a r g u e t h a t it is not d e s i r a b l e to
exclude public participation in health regulatory matters. There
a r e , t h e n , u n d e s i r a b l e c o n s e q u e n c e s from t h e r e v o l v i n g d o o r .
H o w e v e r , g i v e n t h a t it w o u l d be difficult to s t o p t h e traffic b e t w e e n
g o v e r n m e n t and i n d u s t r y , to s t o p traffic in t h e o t h e r d i r e c t i o n would
b e t o h a m s t r i n g g o v e r n m e n t efforts t o get t h e m o s t e x p e r i e n c e d
p e o p l e for c e r t a i n j o b s .
E v i d e n c e t h a t t h e p h a r m a c e u t i c a l i n d u s t r y has g r e a t influence
o v e r h e a l t h r e g u l a t o r y a u t h o r i t i e s i s o v e r w h e l m i n g . A n official o f
the A s s o c i a t i o n of the British P h a r m a c e u t i c a l Manufacturing
I n d u s t r y told m e t h a t m a n y B r i t i s h g o v e r n m e n t r e g u l a t i o n s w e r e
w r i t t e n i n t h e i r offices. S i m i l a r l y , J o s e p h S t e t l e r , former p r e s i d e n t
o f t h e A m e r i c a n P M A o n c e c o m m e n t e d : "As I l o o k back o v e r t h r e e
o r four y e a r s , w e h a v e c o m m e n t e d o n 6 0 different p r o p o s e d r e g u -
l a t i o n s . At least a t h i r d w e r e n e v e r p u b l i s h e d in final form. A n d
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Strategies for controlling corporate crime
I n d e e d , all m a n n e r o f r e l e v a n t c o n s t i t u e n c i e s c o m e within t h e
p a y o f t h e p h a r m a c e u t i c a l i n d u s t r y . I r e m e m b e r sharing a lift with a
g r o u p of p h a r m a c e u t i c a l e x e c u t i v e s after a h e a r i n g of t h e R a l p h
e n q u i r y i n t o A u s t r a l i a ' s P h a r m a c e u t i c a l Benefits S c h e m e . S o m e
d o c t o r s h a d j u s t testified t h a t t h e P B S w a s t o o slow t o a d m i t c e r t a i n
n e w d r u g s . A n e x e c u t i v e from a c o m p a n y which m a n u f a c t u r e d
t h e s e d r u g s b o a s t e d t o his c o l l e a g u e s from t h e o t h e r c o m p a n i e s :
' T h e d o c t o r s h a v e d o n e a g o o d j o b t o d a y . ' A n o t h e r ruefully r e p l i e d :
' W e s h o u l d h a v e lined up a d o c t o r to say t h a t b e t a - b l o c k e r s are
d i s a d v a n t a g e d b y t h e P B S ' (see also H e m m i n k i and P e s o n e n ,
1977b).
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F D A has b e e n m a n a g e d , d u r i n g t h e p e r i o d i n q u e s t i o n , b y
i n d i v i d u a l s w h o h a v e m a d e a c o n s c i o u s d e t e r m i n a t i o n that t h e
a g e n c y shall b e c o o p e r a t i v e w i t h , r a t h e r t h a n a d v e r s a r i a l
t o w a r d s , t h e p h a r m a c e u t i c a l i n d u s t r y . W i t h that d e c i s i o n f i r m l y
m a d e , m a n a g e m e n t asserted control over a group of medical
officers w h o s e a p p r o a c h to i n d u s t r y w a s m o r e a d v e r s a r i a l in a
m a n n e r w h i c h c o u l d aptly b e d e s c r i b e d a s 'political h a r d b a l l ' . T h e
d i s s e n t e r s w e r e effectively s u p p r e s s e d , p r i m a r i l y b y resort t o
involuntary transfers. M o r e o v e r , m a n a g e m e n t ' s execution ofthis
policy w a s often u n t r u t h f u l , usually u n k i n d , s o m e t i m e s unlawful,
and consistently unprofessional (Review Panel on New Drug
R e g u l a t i o n , 1977).
T h e D o r s e n c o m m i t t e e r e p o r t i s t h e r e f o r e a r a t h e r schizoid
d o c u m e n t , c l a i m i n g a n a b s e n c e o v e r a l l o f agency d o m i n a t i o n b y
i n d u s t r y , yet pointing to abuses which would seem to indicate the
o p p o s i t e . I r r e s p e c t i v e o f t h e p e r v a s i v e n e s s o f i n d u s t r y influence
o v e r g i v e n r e g u l a t o r y a g e n c i e s , i t i s u n d e n i a b l e t h a t t h e r e are t i m e s
w h e n civil s e r v a n t s sell o u t t h e p u b l i c i n t e r e s t t o p h a r m a c e u t i c a l
i n d u s t r y p r e s s u r e . T h e r e is a d a n g e r to be g u a r d e d against by
s t r i n g e n t l y e n f o r c e d conflict o f i n t e r e s t r u l e s , and b y o m b u d s m e n
w h o c a n e i t h e r e n c o u r a g e m o r e a d v e r s a r i a l officers t o lodge c o m -
p l a i n t s o f s t a n d o v e r t a c t i c s quietly a n d w i t h o u t r e p e r c u s s i o n , o r
e v e n e n c o u r a g e p u b l i c w h i s t l e b l o w i n g . A t t e n t i o n should b e d r a w n
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Strategies for controlling corporate crime
t o t h e r o l e t h e K e n n e d y s u b c o m m i t t e e p l a y e d i n p r o v i d i n g a forum
for t h e e l e v e n w h i s t l e b l o w e r s w h o set i n t r a i n the c o n s t r u c t i v e
examination of industry-agency relationships.
T o t h e e x t e n t t h a t r e g u l a t o r y a g e n c i e s a r e c a p t i v e s o f industry
i n t e r e s t s , a c t i v e p u b l i c i n t e r e s t m o v e m e n t s p r o v i d e vital safe-
g u a r d s . In one area in particular, the control of carcinogens, public
interest groups have provided a greater stimulus to regulation than
g o v e r n m e n t a g e n c i e s . Wolfe (1977) c o n c l u d e s that of 26 US regu-
l a t o r y actions on c a r c i n o g e n s in the w o r k p l a c e or in c o n s u m e r
p r o d u c t s , unions or public interest groups were the initiators o f t h e
a c t i o n in 22 c a s e s . In only 4 c a s e s w a s g o v e r n m e n t classified as t h e
i n i t i a t o r (see also E p s t e i n , 1978: 4 1 6 ) .
T h e w a t c h d o g e f f e c t i v e n e s s o f c o n s u m e r g r o u p s has not b e e n a s
g r e a t i n o t h e r c o u n t r i e s a s i n t h e U n i t e d S t a t e s . P a r t l y this i s b e c a u s e
t h e y h a v e not had t h e t o o l s t o d o so. T h e U n i t e d S t a t e s i s t h e only
c o u n t r y h a v i n g a F r e e d o m o f I n f o r m a t i o n A c t with any b i t e . I n
m a n y c o u n t r i e s c o n s u m e r g r o u p s are not a c c o r d e d t h e legal s t a n d -
ing t o c h a l l e n g e r e g u l a t o r y d e c i s i o n s i n c o u r t . E v e n i n the U n i t e d
S t a t e s , p u b l i c p a r t i c i p a t i o n n e e d s t o b e o p e n e d u p further. A s
a r g u e d i n C h a p t e r 3 , r e s u l t s o f r e s e a r c h o n t h e safety t e s t i n g o f n e w
d r u g s s h o u l d n o t b e t r e a t e d a s t r a d e s e c r e t s . Such results should b e
a v a i l a b l e t o a n y o n e i n t h e scientific c o m m u n i t y w h o w i s h e s t o bring
t h e i r critical faculties t o b e a r o n t h e q u a l i t y o f t h e d a t a . Scientific
a d v a n c e in all a r e a s is f o s t e r e d by t h e p u b l i c clash of ideas in l e a r n e d
j o u r n a l s . U n d e r c o n d i t i o n s o f secrecy i t w i t h e r s .
T h e r e a r e e l e m e n t s o f t r u t h i n all t h e s e v i e w p o i n t s . I n p a r t i c u l a r ,
o n e m u s t s h a r e s y m p a t h y w i t h t h e c o n c e r n o f i n d u s t r y and g o v e r n -
m e n t s c i e n t i s t s a t t h e w a y t h a t t h e m a s s m e d i a oversimplify and
s e n s a t i o n a l i s e scientific d i s p u t e s . O n t h e o t h e r h a n d , scientific
i s s u e s d o not e n t e r t h e political a r e n a u n l e s s ( a ) t h e y are i m p o r t a n t
a n d ( b ) t h e r e i s significant d i s a g r e e m e n t a m o n g scientists o v e r
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Strategies for controlling corporate crime
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a v o i d e d b e i n g s e e n with t h e m a t c o n f e r e n c e s lest t h a t b e i n t e r p r e t e d
as e v i d e n c e of b e i n g in bed with i n d u s t r y . O t h e r s c o m p l a i n e d of
r e g u l a t o r s w h o had a ' g o t c h a ' a t t i t u d e , w h o w e r e 'only i n t e r e s t e d
i n n o t c h e s o n t h e i r g u n ' . T h e e x e c u t i v e s b e l i e v e d that t h e s e
r e g u l a t o r s , rather than forewarn t h e m , would allow them to go
a h e a d and m a k e m i s t a k e s s o they could c a t c h t h e m i n c o n t r a v e n t i o n
o f t h e r e g u l a t i o n s . T h e r e w e r e s o m e F D A officers w h o m i t w a s
i m p o s s i b l e t o t e l e p h o n e a n d p r e c l e a r a p r a c t i c e before p r o c e e d i n g .
To do so w o u l d be to 'tip t h e m off: in any case t h e official w o u l d be
u n w i l l i n g to give t h e g r e e n light, in case a n o t h e r official might
subsequently come to a different c o n c l u s i o n following an
inspection.
It is not d e s i r a b l e for i n s p e c t o r s to see their role as primarily
s a n c t i o n i n g r a t h e r t h a n p r i m a r i l y p r o b l e m - s o l v i n g . T h e r e is a need
for m o r e f r e q u e n t p r o s e c u t i o n s of flagrant v i o l a t i o n s of r e g u l a t i o n s
in t h e p h a r m a c e u t i c a l i n d u s t r y . B u t t h e i n s p e c t o r should be able to
say: T j u s t w r o t e up t h e facts in my r e p o r t and t h e g e n e r a l c o u n s e l
p i c k e d it up and d e c i d e d to p r o s e c u t e . It w a s not my d e c i s i o n . '
T h e i n s p e c t o r n e e d s a store of g o o d w i l l to p e r s u a d e a m a n u -
f a c t u r e r t o g o t h e e x t r a mile w i t h safety i m p r o v e m e n t s . T h a t g o o d -
will can be w o n by a p r e t e n c e of i n t e r c e d i n g on b e h a l f of the
m a n u f a c t u r e r a g a i n s t p r o s e c u t i o n in a case that w a s clearly a
m i s t a k e r a t h e r t h a n a flagrant v i o l a t i o n . To p r o s e c u t e v i o l a t i o n s
w h i c h a r e m i n o r m i s t a k e s i s t o foster r e s e n t m e n t and dissipate
m o t i v a t i o n to o b e y t h e r e g u l a t i o n s . E v e r y local police officer or
s c h o o l t e a c h e r knows the psychology of building motivation to obey
t h e r u l e s by telling a m i s c r e a n t of basically r e p u t a b l e c h a r a c t e r that
s/he will give him a s e c o n d c h a n c e . E q u a l l y , t h e y k n o w h o w
c o u n t e r p r o d u c t i v e such g e s t u r e s can be w h e n d i r e c t e d at less
r e p u t a b l e i n d i v i d u a l s w h o s h o w no signs of m o t i v a t i o n to follow the
r u l e s . T h e fact t h a t such d i s c r e t i o n is in t h e i n t e r e s t s of c r i m e c o n t r o l
i s o f c o n c e r n t o legalists p r e o c c u p i e d w i t h e q u i t a b l e e n f o r c e m e n t o f
t h e law. T h e e q u i t y issue will be t a k e n up in t h e next section.
T h e final w a y t h a t r e g u l a t o r s can m a i n t a i n t h e requisite goodwill
from i n d u s t r y is to c o u n t e r b a l a n c e t h e i n c r e a s e d use of p r o s e c u t i o n
with r e c o u r s e to positive sanctions. Stone has been an advocate of
such an a p p r o a c h .
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o c c a s i o n of a high c e r e m o n y , at w h i c h g o v e r n m e n t r e p r e s e n t a -
t i v e s , e x e c u t i v e s , and w o r k e r s j o i n e d . T h e c o m p a n y w o u l d get a
f l a g , and e a c h o f t h e w o r k e r s a n ' E ' pin. W h y should not t h e
E n v i r o n m e n t a l P r o t e c t i o n A g e n c y , for e x a m p l e , b e a u t h o r i z e d
t o g i v e out its o w n E n v i r o n m e n t a l P r o t e c t i o n ' E ' s t o c o m p a n i e s
that accelerate beyond their 'cleanup' timetables, or come up
with ingenious new environment-protecting methods? (Stone,
1975: 2 4 3 ) .
In t h e p h a r m a c e u t i c a l i n d u s t r y it w o u l d not be difficult to a l l o c a t e
a w a r d s for o u t s t a n d i n g a c h i e v e m e n t i n c o m p l i a n c e with G M P s o r
G L P s o r for o u t s t a n d i n g a d v a n c e s i n safety i n n o v a t i o n .
R a d i c a l critics o f c r i m i n a l ( i n ) j u s t i c e s y s t e m s c o r r e c t l y p o i n t out
t h a t w h i l e p o o r p e o p l e get long p r i s o n s e n t e n c e s for m i n o r p r o p e r t y
c r i m e s , c o m p a n y e x e c u t i v e s can fix p r i c e s , defraud c o n s u m e r s o f
m i l l i o n s , and kill and m a i m w o r k e r s w i t h i m p u n i t y . Social j u s t i c e
w o u l d s e e m t o d e m a n d that w e p u r s u e and p r o s e c u t e c o r p o r a t e
c r i m i n a l s w i t h at least as m u c h v i g o u r as t r a d i t i o n a l c r i m i n a l s .
C e r t a i n l y i f t h e law w e r e e n f o r c e d e q u i t a b l y , t h e r e w o u l d b e m o r e
w h i t e - c o l l a r c r i m i n a l s in prison t h a n t h e r e w o u l d be of the blue-
c o l l a r v a r i e t y ( s e e B r a i t h w a i t e , 1979b: 1 7 9 - 2 0 1 ; B r a i t h w a i t e , 1982).
M a n y c r i m i n o l o g i s t s , i n c l u d i n g t h e a u t h o r , favour r e s o l v i n g this
i n e q u i t y by l e t t i n g m o s t of t h e b l u e - c o l l a r offenders o u t of prison
a n d p u n i s h i n g t h e i r c r i m e s with less c o u n t e r p r o d u c t i v e s a n c t i o n s
t h a n a r e c u r r e n t l y a p p l i e d . But for p e o p l e w h o d o not favour that
s o l u t i o n t h e r e is a difficult m o r a l c h o i c e to be m a d e . C a n society
afford t h e u n i m a g i n a b l e cost o f i n v e s t i g a t i n g , p r o c e s s i n g t h r o u g h
t h e c o u r t s and i n c a r c e r a t i n g c o r p o r a t e c r i m i n a l s with t h e same
d e g r e e o f c e r t a i n t y and severity t h a t w e apply t o t r a d i t i o n a l
offenders? Because o f t h e greater complexity of corporate cases,
t h e cost w o u l d b e g r e a t e r t h a n t h e w h o l e a p p a r a t u s o f criminal
justice that we have at the m o m e n t . But the choice is more than
s i m p l y a m a t t e r of cost.
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L e t us e x a m i n e s o m e o f t h e difficulties in a p p l y i n g legal s o l u t i o n s to
m a n y o f t h e p r o b l e m s which occur in the pharmaceutical industry.
As will be c o n s i d e r e d in m o r e detail l a t e r , t h e p r o b l e m of locating
c u l p a b l e i n d i v i d u a l s i s p a r t i c u l a r l y difficult b e c a u s e o f t h e t e n d e n c y
to scapegoat. O n e executive explained that in pharmaceutical com-
p a n i e s . T h e r e ' s a M u r p h y ' s L a w of a kind: If s o m e o n e else can be
b l a m e d , t h e y will."
To my a m a z e m e n t , two A m e r i c a n executives I interviewed
e x p l a i n e d t h a t t h e y h a d held t h e p o s i t i o n o f "vice-president r e s p o n -
sible for g o i n g to j a i l ' and I w a s told of this p o s i t i o n existing in a third
c o m p a n y . L i n e s o f a c c o u n t a b i l i t y had b e e n d r a w n i n t h e o r g a n i s -
a t i o n s u c h t h a t i f t h e r e w e r e a p r o b l e m a n d s o m e o n e ' s h e a d had t o
go on t h e c h o p p i n g b l o c k , it w o u l d be t h a t of the ' v i c e - p r e s i d e n t
r e s p o n s i b l e for going to jail". As will be seen in the next s e c t i o n ,
s t r u c t u r i n g a c c o u n t a b i l i t y in t h i s w a y is m u c h m o r e difficult in t h e
U n i t e d S t a t e s since t h e Park c a s e . Of c o u r s e the c h a n c e s of the
v i c e - p r e s i d e n t a c t u a l l y g o i n g to j a i l , or e v e n b e i n g p r o s e c u t e d for an
o f f e n c e , a r e very slim i n d e e d . T h e s e e x e c u t i v e s p r o b a b l y w o u l d not
h a v e b e e n p r o m o t e d t o v i c e - p r e s i d e n t had they not b e e n willing t o
act as s c a p e g o a t s . If t h e y p e r f o r m w e l l , p r e s u m a b l y they w o u l d be
shifted s i d e w a y s to a safer v i c e - p r e s i d e n c y . C o r p o r a t i o n s can t h e r e -
fore pay s o m e o n e to be t h e i r fall guy. T h i s can be d o n e in v a r i o u s
w a y s . I n r e t u r n for t a k i n g the r a p , g e n e r o u s s e v e r a n c e pay may b e
f o r t h c o m i n g . T h e g e n e r a l p o i n t i s t h a t with c o r p o r a t e c r i m e ,
d e c i s i o n s as to w h i c h i n d i v i d u a l s will be called to a c c o u n t h a v e little
to do w i t h e q u i t y , j u s t i c e or guilt.
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U n d o u b t e d l y , h o w e v e r , t h e v a g u e n e s s o f n o t i o n s such a s
" i n s a n i t y ' a n d ' i n a d e q u a t e quality c o n t r o l s y s t e m ' c a r r i e s d a n g e r s o f
s t a t e a b u s e o f t h i s lack o f definition. Such a b u s e has b e e n a m p l y
d e m o n s t r a t e d with t h e civil c o m m i t m e n t o f t h e ' i n s a n e ' . O n e
w o n d e r s , h o w e v e r , h o w m a n y o f t h e p e o p l e w h o are i n v o l u n t a r i l y
c o m m i t t e d to m e n t a l i n s t i t u t i o n s w o u l d suffer that fate if t h e y could
call on t h e legal r e s o u r c e s a large c o r p o r a t i o n w o u l d use to defend
its i n v o l u n t a r y r e o r g a n i s a t i o n .
In s u m m a r y , t h e n , we are willing to use far g r e a t e r o p p r e s s i o n to
r e g u l a t e i n d i v i d u a l s for w h a t t h e y a r e t h a n w e w o u l d d a r e apply t o
c o r p o r a t i o n s for w h a t t h e y a r e . Y e t t h e justification for e m p h a s i s on
w h a t c o r p o r a t i o n s a r e r a t h e r t h a n w h a t they d o i s g r e a t e r t h a n with
i n d i v i d u a l s . It h a s b e e n seen that o n e specific c o r p o r a t e act might
n o t be so e g r e g i o u s on its o w n , but m i g h t a s s u m e g r e a t i m p o r t a n c e
as p a r t o f a p a t t e r n of c o n d u c t . M o r e o v e r , w h i l e it is often difficult
to s a n c t i o n c o m p a n i e s for w h a t they do ( e . g . c o n s p i r e to fix p r i c e s ) it
is often m o r e s t r a i g h t f o r w a r d to r e g u l a t e t h e m for w h a t t h e y are
( p a r t of an o l i g o p o l y ) .
It is i m p o s s i b l e to o v e r e s t i m a t e t h e e x t e n t to which existing law
h a s failed to deal with c o r p o r a t e c r i m e . Surely n o t h i n g could be
m o r e s t a g g e r i n g t h a n t h e fact t h a t (to my k n o w l e d g e at least) t h e
t h a l i d o m i d e d i s a s t e r led t o n o t o n e successful p r o s e c u t i o n nor one
successful p r i v a t e suit in a c o u r t of law a n y w h e r e in t h e w o r l d .
A l l o w i n g t h a t kind of s i t u a t i o n to c o n t i n u e is t h e price we will pay
for c o n t i n u i n g to a p p l y legal p r e c e p t s fixed in t h e i d e o l o g y of
i n d i v i d u a l i s m to c o l l e c t i v i t i e s . In t h e U n i t e d S t a t e s , w i t h the in-
c r e a s i n g a p p l i c a t i o n o f t h e R I C O ( R a c k e t e e r Influenced and
C o r r u p t O r g a n i s a t i o n s ) s t a t u t e ( S c h m i d t , 1980) t o o r g a n i s e d c r i m e
a n d s o m e t y p e s of w h i t e - c o l l a r c r i m e t h e r e is a g r o w i n g r e a l i s a t i o n
that creative statutes a p p r o p r i a t e to the patterns of conduct of
collectivities are n e e d e d . Putting aside the wider debate about the
s o u n d n e s s of R I C O as a statute, what is heartening about R I C O is
t h a t it m a n i f e s t s a r e c o g n i t i o n of t h e n e e d for radically different
legal t o o l s for n e w e c o n o m i c r e a l i t i e s .
T h e q u e s t i o n m u s t b e r a i s e d w h e t h e r for m a n y o f t h e legal p r o b l e m s
in t h e p h a r m a c e u t i c a l i n d u s t r y an i n q u i s i t o r i a l system in w h i c h
s c i e n t i s t s d o m i n a t e o v e r l a w y e r s w o u l d b e p r e f e r a b l e t o a n adver-
s a r i a l s y s t e m . T h i s s e e m s t o b e t h e view o f F D A G e n e r a l C o u n s e l ,
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legal m e a n i n g o f t h e rule r a t h e r t h a n o v e r w h e t h e r i t i s a p p r o p r i a t e
(scientifically) t o a p p l y t h e rule t o t h e p a r t i c u l a r c a s e . D e b a t e
s h o u l d not b e o v e r t h e m e a n i n g o f w o r d s but o v e r the s u b s t a n c e o f
s c i e n c e . P e r h a p s t h e r e a r e g o o d scientific r e a s o n s for a p p l y i n g a rule
t o m o s t c a s e s s u b s u m e d u n d e r it. B u t the rule h a v i n g b e e n w r i t t e n ,
i n d i v i d u a l c a s e s are t h e n d e c i d e d a c c o r d i n g t o the rule r a t h e r than
a c c o r d i n g t o t h e s c i e n c e w h i c h g e n e r a t e d t h e r u l e . T h e legal codifi-
c a t i o n of s c i e n c e has p e r h a p s a l r e a d y g o n e t o o far in t h e r e g u l a t i o n
o f t h e p h a r m a c e u t i c a l i n d u s t r y . It is a d e v e l o p m e n t to be r e g r e t t e d
t h a t m o s t r e g u l a t o r y affairs d i r e c t o r s of large US c o m p a n i e s are
t o d a y l a w y e r s , w h e n o n c e t h e y w e r e scientists. Surely m o r e r a t i o n a l
d e c i s i o n s on r i s k - b e n e f i t q u e s t i o n s are likely to c o m e out of n e g o t i -
a t i o n b e t w e e n s c i e n t i s t s t h a n from litigation b e t w e e n l a w y e r s .
L o n F u l l e r ( 1 9 6 4 : 3 3 ) s u g g e s t s t h a t only t w o t y p e s o f p r o b l e m s are
s u i t e d to a full j u d i c i a l - l e g a l p r o c e s s : ' y e s - n o q u e s t i o n s ' (Did he do
it? W a s t h e r e a b r e a c h o f c o n t r a c t ? ) , and ' m o r e o r less q u e s t i o n s '
( H o w m u c h s h o u l d b e paid i n d a m a g e s ? ) , o r s o m e m i x t u r e o f t h e s e
t w o q u e s t i o n s . P o l a n y i ( 1 9 5 1 : 174-84) d i s t i n g u i s h e s ' p o l y c e n t r i c '
p r o b l e m s from t h e s e . P o l y c e n t r i c p r o b l e m s are not well suited t o
t h e j u d i c i a l m o d e l . T h e y r e q u i r e r e c o n c i l i a t i o n o f c o m p l e x inter-
a c t i n g c o n s e q u e n c e s of a m u l t i f a c e t e d policy. W h e t h e r , and if so
h o w , I B M s h o u l d be b r o k e n up is a p o l y c e n t r i c p r o b l e m . It has
interdependent consequences for inflation, unemployment,
e c o n o m i c g r o w t h and A m e r i c a ' s e c o n o m i c p o w e r i n t h e w o r l d
s y s t e m . T h e i m p l i c a t i o n s of a ' y e s ' or ' n o ' d e c i s i o n d e p e n d on ' h o w '
a n d ' w h e n ' . D e c i d i n g w h e t h e r , and if so h o w , to recall a drug is a
p o l y c e n t r i c p r o b l e m i n v o l v i n g t h e c o s t s o f t h e r e c a l l , the d a n g e r t o
p a t i e n t s w h o use t h e d r u g , t h e d a n g e r t o p a t i e n t s from w h o m the
d r u g m i g h t b e w i t h h e l d , c o m m u n i t y p a n i c , possible u n e m p l o y m e n t
i n t h e c o m p a n y affected, and d e t e r r e n c e o f c o m p a n i e s with i n a d e -
q u a t e q u a l i t y c o n t r o l s . D e g r e e of p o l y c e n t r i s m is clearly a con-
t i n u u m . H o w e v e r , it is a useful c o n s t r u c t for a n a l y s i n g t h e c i r c u m -
stances in which the judicial-legal model is viable.
W i t h polycentric p r o b l e m s it might be more a p p r o p r i a t e to sub-
s t i t u t e w h a t J o w e l l ( 1 9 7 3 : 216) calls ' s u b s t a n t i v e d u e p r o c e s s '
(affecting t h e q u a l i t y o f t h e d e c i s i o n r e a c h e d ) for ' p r o c e d u r a l due
p r o c e s s ' (affecting t h e p r o p r i e t y o f t h e p r o c e d u r e involved i n r e a c h -
ing a d e c i s i o n ) . W h i l e t h e j u d i c i a l i n t e r p r e t a t i o n of laws m i g h t not
be a c o n s t r u c t i v e w a y of d e c i d i n g h o w to deal with a d a n g e r o u s
p r o d u c t , it m i g h t n e v e r t h e l e s s be r e g a r d e d as i m p o r t a n t to insist on
a p u b l i c d e c i s i o n - m a k i n g p r o c e s s in w h i c h all affected p a r t i e s are
312
Strategies for controlling corporate crime
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Strategies for controlling corporate crime
A p r o l i f e r a t i o n of laws m e a n s a p r o l i f e r a t i o n of l o o p h o l e s o v e r
w h i c h legal a r g u m e n t is p o s s i b l e . I n d e e d , "The m o r e precise a rule
i s , t h e m o r e likely it is to o p e n up l o o p h o l e s - to p e r m i t by implica-
t i o n c o n d u c t t h a t t h e rule w a s i n t e n d e d t o forbid' ( P o s n e r , 1977:
4 2 5 ) . T h e a p p l i c a b i l i t y o f t h e s e a r g u m e n t s t o a r e a s such a s tax law i s
314
Strategies for controlling corporate crime
t r a n s p a r e n t . H o w e v e r , t h e i r force w i t h r e s p e c t t o t h e r e g u l a t i o n o f
a r e a s like G M P s i s l i m i t e d . I n p r a c t i c e , c o m p a n y l a w y e r s find i t
difficult to use t h e d o c t r i n e s implicit in o n e p a r t o f t h e food and drug
law in t h e U n i t e d S t a t e s as justification for a c t i o n s t h a t e v a d e o t h e r
p a r t s o f t h e s a m e b o d y o f law.
T h e r e are a n u m b e r o f r e a s o n s for t h i s . F i r s t , m a n y o f t h e F D A
r e g u l a t i o n s a r e i n h e r e n t l y s i m p l e , a l m o s t o f the w e i g h t s and
m e a s u r e s v a r i e t y . S e c o n d , t h e l e n g t h y p r o c e s s o f c o n s i d e r i n g all
i n d u s t r y o b j e c t i o n s t o n e w r e g u l a t i o n s w h e n they are first
a n n o u n c e d b y t h e F D A i n t h e F e d e r a l R e g i s t e r forces industry t o
s h o w its h a n d o v e r any o b j e c t i o n s i t h a s . T a x p a y e r s d o not write t h e
tax laws, but in c o n s i d e r a b l e m e a s u r e drug c o m p a n i e s write the
drug r e g u l a t i o n s . H e n c e , if a c o m p a n y a t t e m p t s to challenge the
a u t h o r i t y of a r e g u l a t i o n in c o u r t on t h e g r o u n d s of its i n c o n s i s t e n c y
w i t h o t h e r F o o d , D r u g a n d C o s m e t i c A c t r e g u l a t i o n s , the q u e s t i o n
c a n b e a s k e d : ' W h y did y o u not raise this s u p p o s e d i n c o n s i s t e n c y
w i t h t h e o t h e r r e g u l a t i o n s d u r i n g t h e i n d u s t r y c o n s u l t a t i o n s o n the
r e g u l a t i o n ? ' T h i r d , t h e p r o l i f e r a t i o n of laws on the b o o k s is limited
by t h e fact t h a t w h e n a n e w set of r e g u l a t i o n s is e n a c t e d , t h e slate is
w i p e d c l e a n o f t h e old r e g u l a t i o n s and m o s t o f t h e case law associ-
a t e d w i t h it. F o o d a n d d r u g law d o e s not p r o c e e d by an i n c r e m e n t a l
p l u g g i n g o f g a p s t o t h e e x t e n t w h i c h s e e m s typical o f m a n y o t h e r
a r e a s o f c o r p o r a t e r e g u l a t i o n . F i n a l l y , a c c o r d i n g t o c e r t a i n dis-
g r u n t l e d l a w y e r s from large c o m p a n i e s , t h e F D A c o n t r o l s the case
law effectively by t a k i n g on small c o m p a n i e s in the early cases u n d e r
a n e w r e g u l a t i o n . A c a s e law f a v o u r a b l e to t h e a g e n c y is e s t a b l i s h e d
a g a i n s t u n f o r m i d a b l e a d v e r s a r i e s . T h a t case law can t h e n b e used
later against the larger companies.
N e v e r t h e l e s s , at a c o m p l e t e l y different l e v e l , it can be a r g u e d t h a t
t h e r e is an overspecification of drug regulations. Even though the
p r o l i f e r a t i o n of r e g u l a t i o n s d o e s not u l t i m a t e l y m a k e it easier for
p h a r m a c e u t i c a l c o m p a n i e s t o e v a d e t h e law, t h e c o m p a n i e s m a k e
efforts t o find l o o p h o l e s i n t h e r e g u l a t i o n s . W h e n the c o m p a n i e s are
s e e n b y t h e r e g u l a t o r s a s a l w a y s t r y i n g t o find l o o p h o l e s , t h e
r e s p o n s i b i l i t y o f t h e r e g u l a t o r i s seen t o b e t o plug t h o s e l o o p h o l e s
a h e a d o f t i m e . S p e c i f i c a t i o n s can p r o l i f e r a t e w h e n c o m p a n i e s are
s e e n as likely to be i n n o v a t i v e in finding l o o p h o l e s . B u t w h e n the
specifications have reached myriad p r o p o r t i o n s , the c o m p a n i e s
attack the regulatory agency over the tedious regulatory burden. In
1
t u r n , t h e r e g u l a t o r s p l e a d t h a t they h a v e n o a l t e r n a t i v e .
T h e r e is an a l t e r n a t i v e : to step b a c k from the w h o l e g a m e of cat
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Strategies for controlling corporate crime
N o w I w a s b o r n , I t h i n k , to be a p r o t r a c t o r . . . . I quickly r e a l i z e d
in my e a r l y d a y s at t h e bar t h a t I c o u l d t a k e t h e simplest a n t i t r u s t
c a s e t h a t J u d g e H a n s e n [ A n t i t r u s t D i v i s i o n chief] could t h i n k o f
316
Strategies for controlling corporate crime
D e l a y w a s a l s o t h e o r d e r o f t h e d a y , a s s h o w n i n C h a p t e r 5 , with
t h e t e t r a c y c l i n e class a c t i o n s . Y e t this case study is a lesson in h o w ,
w i t h a j u d g e w h o will r e s o r t to p r o c e d u r a l i n n o v a t i o n , it is possible
t o o v e r c o m e t h e d e l a y i n g t a c t i c s , t h e c o m p l e x i t y o f t h e facts and the
law to r e a c h a s o l u t i o n . W i t h c a s e s of such m a g n i t u d e ( w h e r e the
cost o f t h e l i t i g a t i o n itself b e g i n s t o h a v e significant e c o n o m i c con-
s e q u e n c e s ) J u l i u s S t o n e ' s m a x i m , t h a t it may be b e t t e r t h a t a
q u e s t i o n be settled t h a n it be settled r i g h t , g a i n s force. It w o u l d be
u n r e a l i s t i c , h o w e v e r , t o e x p e c t m o s t j u d g e s t o s h o w t h e virtuosity o f
a J u d g e L o r d . In a d d i t i o n to his u n u s u a l skill and e n e r g y , he
e n j o y e d a special m a n d a t e from t h e C h i e f J u s t i c e o f t h e U n i t e d
States to clean up the tetracycline mess. W h e n one considers that
m o s t c o m p l e x c o r p o r a t e cases m u s t b e d e a l t w i t h b y a v e r a g e j u d g e s
o f a v e r a g e c o n s e r v a t i s m o n e c a n n o t but b e pessimistic a b o u t the
limits o f legal s o l u t i o n s .
A c e n t r a l c o n c l u s i o n of this b o o k is t h a t t h e r e g u l a t i o n of t h e
p h a r m a c e u t i c a l i n d u s t r y has b e c o m e m o r e a n e g o t i a t i o n g a m e t h a n
a legal g a m e a n d t h a t t h i s will b e c o m e e v e n m o r e t r u e in the future.
F i g u r e 9.1 s u m m a r i z e s h o w in spite of an e n o r m o u s i n c r e a s e in
e n f o r c e m e n t e x p e n d i t u r e o v e r t h e last forty y e a r s , the n u m b e r o f
c a s e s t a k e n t o c o u r t b y t h e F D A has steadily d e c l i n e d . T h e d r o p i n
criminal p r o s e c u t i o n s b y F D A has b e e n e v e n m o r e d r a m a t i c , falling
from a p e a k of 550 in 1947 to fewer t h a n 50 a y e a r in t h e late 1970s
( H e a v i s i d e , 1980: 7 8 ) . A t o p official in t h e A u s t r a l i a n H e a l t h
D e p a r t m e n t e x p l a i n e d w h a t h a p p e n e d w h e n t h e d e p a r t m e n t first
a s k e d c o m p a n i e s t o p r o v i d e t h e m with i n f o r m a t i o n o n transfer
p r i c e s t o assist P B S p r i c i n g d e c i s i o n s . M a n y o f t h e c o m p a n i e s said:
' W e ' l l g i v e y o u t h i s i n f o r m a t i o n w h e n y o u r laws d e m a n d it.' B u t
t h e s e c o m p a n i e s s o o n found t h a t i t w a s i n t h e i r i n t e r e s t s t o p r o v i d e
the transfer pricing information when they confronted interminable
d e l a y s i n g e t t i n g t h e i r P B S listing. I n A u s t r a l i a , m u c h m o r e t h a n t h e
U n i t e d S t a t e s , b o t h sides find i t c h e a p e r i n t i m e and m o n e y t o play
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Strategies for controlling corporate crime
40001
3500
in 3000
c
2500
1 2000
o
1500
S
2 1000
500
fiscal year
n e g o t i a t i n g r a t h e r t h a n legal g a m e s . W h e n o n e c o m p a n y t o o k t h e
A u s t r a l i a n H e a l t h D e p a r t m e n t t o c o u r t t o c h a l l e n g e one o f its
r e g u l a t o r y d e c i s i o n s , a s e n i o r H e a l t h D e p a r t m e n t official p o i n t e d
o u t to t h e c o m p a n y in a t e l e p h o n e c o n v e r s a t i o n c e r t a i n activities
w h i c h w o u l d justify a p r o s e c u t i o n of t h e c o m p a n y by the g o v e r n -
m e n t . T h e lesson w a s l e a r n e d . T w o could play the legal g a m e . I t w a s
b e t t e r t h a t b o t h sides limit t h e m s e l v e s t o t h e n e g o t i a t i o n g a m e .
T h e r e is a f u n d a m e n t a l historical reality u n d e r l y i n g t h e a b o v e .
N e g o t i a t i o n is n o t t h e n o r m a l w a y for a s o v e r e i g n state to c o n t r o l
p r i v a t e u n i t s . O r g a n i s a t i o n s w h i c h are m u c h m o r e powerful t h a n
t h e i r a d v e r s a r i e s d o n o t g e n e r a l l y h a v e t o resort t o n e g o t i a t i o n . B u t
a s t h e a d v e r s a r y b e c o m e s m o r e e q u a l i n p o w e r t o the c o n t r o l l e r ,
control t h r o u g h negotiation increasingly b e c o m e s the preferred
o p t i o n . W e h a v e s e e n t h i s sociological reality with r e l a t i o n s
b e t w e e n e m p l o y e r s and u n i o n s . E a r l i e r this c e n t u r y u n i o n s w e r e
c o n t r o l l e d b y e m p l o y e r s t h r o u g h t h e m e c h a n i s m s o f law. A s late a s
1936, the S u p r e m e C o u r t of the United States d e t e r m i n e d a
m i n i m u m w a g e act a s a n u n c o n s t i t u t i o n a l i n t e r f e r e n c e with the
f r e e d o m o f p r o p e r t y . T r a d e u n i o n activities w e r e a t t a c k e d using t h e
l a w o f c o n s p i r a c y . B u t a s t r a d e u n i o n s b e c a m e m o r e o r g a n i s e d and
powerful, n e g o t i a t i o n rather than prosecution became the more
viable way of resolving disputes. E m p l o y e r - e m p l o y e e relations
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Strategies for controlling corporate crime
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Strategies for controlling corporate crime
U n f o r t u n a t e l y , h o w e v e r , this policy is i n t e r p r e t e d in p r a c t i c e to
s u b s u m e very few c a s e s a s a p p r o p r i a t e for p r o s e c u t i o n . C o n s e -
q u e n t l y , t h e d e t e r r e n t and h a b i t - f o r m i n g functions o f U S food and
d r u g law a r e b e i n g e r o d e d . T h e case for m o r e p r o s e c u t i o n s hardly
n e e d s t o b e l a b o u r e d . W h o o r w h a t s h o u l d b e t h e subject o f the
s h o w c a s e p r o s e c u t i o n s t h e n b e c o m e s t h e key q u e s t i o n . S h o u l d i t b e
c u l p a b l e i n d i v i d u a l s w i t h i n the c o r p o r a t i o n o r the c o r p o r a t i o n
itself, o r b o t h ?
T h e a r g u m e n t a g a i n s t i n d i v i d u a l liability has m o s t frequently
b e e n , as d i s c u s s e d e a r l i e r , t h a t t h e i n d i v i d u a l s found c u l p a b l e will
b e j u n i o r s c a p e g o a t s w h i l e t h e m a n i p u l a t o r s a t t h e t o p o f the
o r g a n i s a t i o n g o free. W i t h c o r p o r a t e p r o s e c u t i o n s n o individual
m i g h t be t e r r i b l y a d v e r s e l y affected, y e t it is g e n e r a l l y the m o r e
s e n i o r p e o p l e i n t h e c o r p o r a t i o n w h o feel m o s t t h e stigma associ-
a t e d w i t h t h e p r o s e c u t i o n . S o m e w o u l d say t h a t in t h e food and drug
a r e a this w h o l e a r g u m e n t has b e e n t u r n e d a r o u n d b y the Park
decision.
J o h n P a r k w a s t h e C h i e f E x e c u t i v e Officer o f A c m e M a r k e t s , a
n a t i o n a l food r e t a i l e r w i t h 3 6 , 0 0 0 e m p l o y e e s . H e w a s c h a r g e d with
v i o l a t i n g t h e F o o d , D r u g and C o s m e t i c A c t b y a l l o w i n g food t o b e
s t o r e d in a B a l t i m o r e w a r e h o u s e w h i c h w a s r o d e n t infested. T h e
c r u c i a l q u e s t i o n w a s h o w r e s p o n s i b l e c o u l d P a r k be for a r o d e n t
p r o b l e m in B a l t i m o r e w h e n his office was in P h i l a d e l p h i a . In 1972
P a r k had r e c e i v e d a l e t t e r from t h e F D A c o m p l a i n i n g of c o n d i t i o n s
in t h e B a l t i m o r e w a r e h o u s e . P a r k c a l l e d in his v i c e - p r e s i d e n t for
legal affairs w h o i n f o r m e d him that t h e B a l t i m o r e division vice-
p r e s i d e n t "was i n v e s t i g a t i n g t h e s i t u a t i o n i m m e d i a t e l y and w o u l d be
t a k i n g c o r r e c t i v e a c t i o n and w o u l d b e p r e p a r i n g a s u m m a r y o f t h e
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Strategies for controlling corporate crime
T h e Park d e c i s i o n w a s c o n t r o v e r s i a l b e c a u s e it e s t a b l i s h e d the
p r i n c i p l e t h a t i n d i v i d u a l s c a n be held c r i m i n a l l y liable for acts they
did not c o m m i t , a n d of w h i c h they had no k n o w l e d g e . F o r an
offence w h i c h is t h e s u b j e c t of only a relatively small fine, p e r h a p s
this c a n be justified for t h e s a k e of a s t a n d a r d of e x t r a o r d i n a r y care
t o p r o t e c t h u m a n h e a l t h . B u t t h e r e i s p r o v i s i o n for i m p r i s o n m e n t
u n d e r t h e F o o d , D r u g a n d C o s m e t i c A c t . S o t h e Park d e c i s i o n
c o u l d be used to i m p r i s o n an e x e c u t i v e in similar c i r c u m s t a n c e s ,
t h o u g h , as y e t , it has not b e e n so u s e d . T h e i m p r i s o n m e n t of p e o p l e
w h o lack c r i m i n a l i n t e n t s e e m s a s o u n d way of u n d e r m i n i n g public
c o m m i t m e n t t o t h e m o r a l force o f t h e c r i m i n a l law. A t t h e o t h e r
e x t r e m e , w h e n o r d i n a r y c i t i z e n s see u n e m p l o y e d p e o p l e going t o
p r i s o n for m i n o r theft and large c o r p o r a t i o n s e n d a n g e r i n g t h e
p u b l i c h e a l t h with r o d e n t - i n f e s t e d w a r e h o u s e s going u n p u n i s h e d ,
this also u n d e r m i n e s r e s p e c t for t h e law.
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Strategies for controlling corporate crime
H o w e v e r , a s t a n d a r d of e x t r a o r d i n a r y c a r e is not i n h e r e n t l y o b j e c -
t i o n a b l e if it is a p p l i e d to the c o r p o r a t i o n as a w h o l e , or if the
s a n c t i o n s w h i c h can be i m p o s e d on i n d i v i d u a l s do not run to
d e p r i v a t i o n of liberty.
T h e s t r e n g t h o f t h e Park d e c i s i o n is t h a t it sheets h o m e r e s p o n -
sibility to t h e p e o p l e w h o can m a k e a difference. P e r h a p s t h e most
r e c u r r e n t t h e m e from m y i n t e r v i e w s with p h a r m a c e u t i c a l e x e c u -
t i v e s w a s t h a t t h e a t t i t u d e of a c o r p o r a t i o n to the law filters d o w n
from t h e c h i e f e x e c u t i v e officer. If he or she d e m a n d s high stan-
d a r d s , t h e c o r p o r a t i o n will o b s e r v e high s t a n d a r d s . I n t h e w o r d s o f
one interviewee:
M r B r u c e B r e n n a n , v i c e - p r e s i d e n t and g e n e r a l c o u n s e l o f the
P h a r m a c e u t i c a l M a n u f a c t u r e r s Association, was even prepared to
c o n c e d e t h a t since Park F D A i n s p e c t o r s have b e g u n d r o p p i n g
n o t i c e s o f s u s p e c t e d o r p o t e n t i a l v i o l a t i o n s with t h e c h a i r m a n o r
p r e s i d e n t : 'So t h e s e n i o r officials s t a r t e d b e c o m i n g m o r e a w a r e i n
t h a t r e g a r d , b u t t h e y k n e w o f t h e i r r e s p o n s i b i l i t y right a l o n g ' ( S u b -
c o m m i t t e e on H e a l t h , 1978: 1 6 3 0 ) . ' Of c o u r s e if a virtual strict
liability s t a n d a r d can fairly be a p p l i e d to a n y o n e it is. as in Park, the
c h i e f e x e c u t i v e . T h e chief e x e c u t i v e has b o t h a special duty of care
by v i r t u e o f t h e e x t r e m e l y r e s p o n s i b l e p o s i t i o n he or she v o l u n t a r i l y
t a k e s o n a n d has t h e p o w e r t o p r e v e n t o r c o r r e c t d a n g e r o u s con-
d i t i o n s . D e f e n d e r s o f t h e Park s t a n d a r d a g a i n s t t h o s e w h o w o u l d
p r e f e r to see a r e t u r n to a n e g l i g e n c e s t a n d a r d also point out that no
o n e has e v e r a l l e g e d t h a t t h e r e is a history of a b u s e flowing from t h e
Park d e c i s i o n . T h e F D A has not s h o w n a w i l l i n g n e s s to i m p o s e
c r i m i n a l s a n c t i o n s on c o m p a n y p r e s i d e n t s and has n e v e r a r g u e d for
t h e i m p r i s o n m e n t o f a n y o n e u n d e r t h e Park s t a n d a r d .
I r r e s p e c t i v e o f w h e t h e r o n e a p p r o v e s o r d i s a p p r o v e s o f t h e Park
d e c i s i o n , it m u s t be seen as h e a l t h y at least in r e s p e c t of b e i n g part of
a l a r g e r t h r u s t to r e n d e r t h e chief e x e c u t i v e officer m o r e legally
v u l n e r a b l e . T h e ability o f t h e chief e x e c u t i v e officer to k e e p his or
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Strategies for controlling corporate crime
h e r o w n h a n d s c l e a n w h i l e h a v i n g u n d e r l i n g s d o the dirty w o r k i s
p r o v e r b i a l . H e n c e , w i t h all t y p e s o f c o r p o r a t e c r i m e i t i s i m p o r t a n t
t h a t wilful b l i n d n e s s be a c c e p t e d as e q u i v a l e n t to k n o w l e d g e ( F i s s e ,
1973: 2 5 5 - 7 ) .
W h i l e t h e law is g e n e r a l l y r e l u c t a n t to i m p o s e criminal liability
for k n o w i n g o f a c r i m e and failing to p r e v e n t it. this p r i n c i p l e should
not b e c a r r i e d o v e r t o t h e c o n t e x t o f t h e c o r p o r a t i o n . W h e n the
c h i e f e x e c u t i v e officer k n o w s of (or is wilfully blind t o ) a c r i m e and
fails to s t o p it, s/he l e n d s his or h e r a u t h o r i t y tacitly to a p p r o v e t h e
c r i m e . C o m m a n d differs from a u t h o r i s a t i o n only i n t e r m s o f w h i c h
1 0
p a r t y - t h e s u p e r i o r or t h e s u b o r d i n a t e - i n i t i a t e s t h e c r i m e . T h u s ,
it w o u l d often not be u n r e a s o n a b l e to a s c r i b e criminal intent to the
c h i e f e x e c u t i v e officer w h o says: T w a n t t h e j o b d o n e , but I d o n ' t
w a n t t o k n o w h o w y o u d o it.'
In o t h e r a r e a s , t h e law quite h a p p i l y i m p o s e s a duty to k n o w .
O l i v e r W e n d e l l H o l m e s has justified t h e p r i n c i p l e that i g n o r a n c e o f
law s h o u l d be no e x c u s e by a r g u i n g t h a t ' t o a d m i t t h e e x c u s e at all
w o u l d be to e n c o u r a g e i g n o r a n c e . . . and j u s t i c e to the individual is
r i g h t l y o u t w e i g h e d by t h e larger i n t e r e s t s on t h e o t h e r side of t h e
s c a l e s ' ( F l e t c h e r , 1978: 7 3 2 ) . F o r c o r p o r a t i o n p r e s i d e n t s , m u c h
m o r e so t h a n for o r d i n a r y c i t i z e n s , t h e law c a n n o t afford to en-
c o u r a g e i g n o r a n c e . T h e real s t r e n g t h o f t h e Park d o c t r i n e , with all
its a s s o c i a t e d w e a k n e s s e s , is t h a t it i m p o s e s a duty to k n o w .
W h i l e it m i g h t not be a l t o g e t h e r u n r e a s o n a b l e to i m p o s e a virtual
strict liability s t a n d a r d on t h e chief e x e c u t i v e officer, it clearly
w o u l d be u n r e a s o n a b l e to i m p o s e such a s t a n d a r d on those lower-
level officers w h o d o n o t h a v e c o m p a r a b l e d u t i e s o r p o w e r s .
H o w e v e r , t h e sad history o f c o r p o r a t e law e n f o r c e m e n t s h o w s that
p r o v i n g b e y o n d r e a s o n a b l e d o u b t t h e n e g l i g e n c e o f a n individual i n
t h e c o n t e x t of a c o m p l e x o r g a n i s a t i o n is e x t r e m e l y difficult. It is
a l w a y s p o s s i b l e t o b l a m e s o m e o n e e l s e . T h e d e f e n d a n t , X , says h e
w a s a c t i n g u n d e r o r d e r s from Y; Y says he w a s acting on o r d e r s from
Z, b u t Z says t h a t Y m i s c o n s t r u e d his o r d e r s . In any c a s e , Z
c o n t e n d s , p o o r little Y w a s simply following S O P s w h i c h w e r e
w r i t t e n by a c o m m i t t e e c h a i r e d by t h e f o r m e r p r e s i d e n t , w h o died
five y e a r s a g o . ' S t r u c t u r a l c r i m e s ' , i n w h i c h the c o r p o r a t i o n
c o m m i t s a c r i m i n a l offence but no c r i m i n a l l y c u l p a b l e individual
c a n be identified a r e c o m m o n e n o u g h (Yale Law Journal, 1979:
3 5 8 ) . E v e n w h e n t h e r e are c u l p a b l e i n d i v i d u a l s , d e f e n d a n t s enjoy
infinite r e s o u r c e f u l n e s s a t b a m b o o z l i n g c o u r t s with d e m o n s t r a t i o n s
of w h y it really w a s o t h e r s w h o w e r e to b l a m e . In C h a p t e r 4 we saw
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Strategies for controlling corporate crime
t h a t t h e p r e s u m e d diffusion of a c c o u n t a b i l i t y in a c o m p l e x o r g a n i s -
a t i o n s o m e t i m e s can be a h o a x that t h e c o r p o r a t i o n plays on the rest
o f t h e w o r l d , e s p e c i a l l y c o u r t s and s o c i o l o g i s t s !
I t w a s a r g u e d i n t h a t c h a p t e r that c o m p a n i e s have t w o k i n d s o f
r e c o r d s : t h o s e d e s i g n e d t o a l l o c a t e guilt (for i n t e r n a l p u r p o s e s ) , and
t h o s e for o b s c u r i n g guilt (for p r e s e n t a t i o n to the o u t s i d e w o r l d ) .
W h e n c o m p a n i e s w a n t clearly defined a c c o u n t a b i l i t y t h e y can
g e n e r a l l y get it. Diffused a c c o u n t a b i l i t y is not a l w a y s i n h e r e n t in
o r g a n i s a t i o n a l c o m p l e x i t y ; it is in c o n s i d e r a b l e m e a s u r e the resultof
a d e s i r e to p r o t e c t i n d i v i d u a l s w i t h i n t h e o r g a n i s a t i o n by p r e s e n t i n g
a c o n f u s e d p i c t u r e t o t h e o u t s i d e w o r l d . O n e m i g h t say t h a t c o u r t s
s h o u l d be able to p i e r c e this c o n s p i r a c y of confusion. W i t h o u t
s y m p a t h e t i c w i t n e s s e s from w i t h i n the c o r p o r a t i o n w h o are willing
to h e l p , this is difficult. In the p h a r m a c e u t i c a l i n d u s t r y , at least, the
i n d i c t m e n t o f s e n i o r e x e c u t i v e s for c o r p o r a t e c r i m e s has almost
i n v a r i a b l y b e e n followed b y their a c q u i t t a l , e v e n w h e n the c o r p o r -
a t i o n is c o n v i c t e d .
T h i s p r o c e d u r e will victimise s c a p e g o a t s j u s t a s d o c o u r t a c t i o n s
a g a i n s t i n d i v i d u a l s . T h e h o p e is, h o w e v e r , t h a t b e c a u s e t h e cor-
p o r a t e goal will be to p e r s u a d e t h e c o u r t t h a t a g o o d j o b has been
d o n e o f identifying t h e m o s t guilty i n d i v i d u a l s ( r a t h e r t h a n t o a r g u e
t h a t t h e s i t u a t i o n is so c l o u d e d that no o n e is to b l a m e for the
' a c c i d e n t ' ) , t h e r e m i g h t b e m o r e j u s t i c e i n w h o i s singled out. T h i s
h o p e m i g h t b e c o m e m o r e realistic i f o n e o r t w o a s t u t e o u t s i d e r s
w e r e included on the c o m m i t t e e of insiders w h o investigate the
a l l o c a t i o n of i n d i v i d u a l guilt.
T h e o t h e r j u s t i f i c a t i o n i s cost. W h e n t h e i n s i d e r s a r e n o t inten-
t i o n a l l y i n j e c t i n g c o n f u s i o n into t h e s t r u c t u r e s o f a c c o u n t a b i l i t y , the
i n v e s t i g a t i o n a n d a d j u d i c a t i o n of i n d i v i d u a l r e s p o n s i b i l i t y will be
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Strategies for controlling corporate crime
F i r s t l y it is t h e b u s i n e s s t h a t m a k e s any profit w h e n an e m p l o y e e
c o m m i t s an offence. In g e n e r a l t e r m s , t h e result of a p r o s e c u t i o n
is s i m p l y to d e p r i v e t h e b u s i n e s s of t h i s w r o n g l y a c q u i r e d profit,
a l t h o u g h i n p a r t i c u l a r c a s e s t h e b u s i n e s s may b e fined a n a m o u n t
g r e a t e r t h a n t h e profit m a d e o r t h e p u b l i c i t y s u r r o u n d i n g t h e
p r o s e c u t i o n may c a u s e financial loss in e x c e s s o f t h e profit.
S e c o n d l y , it is socially u n d e s i r a b l e for e m p l o y e e s to be p u n i s h e d
for such offences w h i c h they c o m m i t not for t h e i r benefit but in
the course of their e m p l o y m e n t . W h y should they be b l a m e d ?
T h e y a r e l o c k e d i n t o a s y s t e m w h e r e t h e y h a v e to carry out a
c o m p a n y ' s m a r k e t i n g s c h e m e ; in the case of j u n i o r e m p l o y e e s ,
for low w a g e s in an u n c r e a t i v e e n v i r o n m e n t .
T w o general types of c o r p o r a t e crime in the pharmaceutical
i n d u s t r y c a n b e a b s t r a c t e d from t h e c a s e s t u d i e s w h i c h h a v e
b e e n d i s c u s s e d . O n e is t h e offence a r i s i n g from defective or non-
existent S O P s (e.g. t h e C o r d i s case study in C h a p t e r 4 ) ; the other an
offence a r i s i n g from a d e c i s i o n to c o m p r o m i s e S O P s ( e . g . t h e
d e c i s i o n t o r e p l a c e t h e blind m o n k e y i n t h e M E R / 2 9 c a s e s t u d y ) .
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Strategies for controlling corporate crime
I a m not a r g u i n g t h a t c o u r t s s h o u l d not i m p o s e i n d i v i d u a l
c r i m i n a l liability w h e n t h i s s e e m s c l e a r - c u t a n d j u s t . H o w e v e r , talk
o f ' v i c e - p r e s i d e n t s r e s p o n s i b l e for g o i n g t o j a i l ' d o e s give c a u s e for
p e s s i m i s m t h a t c o u r t s c a n n o t a v o i d s c a p e g o a t i n g i n a large p r o p o r -
tion o f c a s e s . This is one o f t h e r e a s o n s I f a v o u r c o u r t s specialising in
the ( m o r e j u s t ) c o r p o r a t e allocations of guilt, while c o r p o r a t i o n s
s p e c i a l i s e i n t h e (less j u s t ) i n d i v i d u a l a l l o c a t i o n s o f guilt. W i t h t h e
l a t t e r , I am not p r o p o s i n g a n e w r o l e for t h e c o r p o r a t i o n . E v e r y day
l a r g e c o m p a n i e s d i s m i s s a n d d e m o t e p e o p l e for r e a s o n s t h a t m i g h t
o r m i g h t not b e j u s t . T h e s t i g m a o f t h e c r i m i n a l l a b e l , h o w e v e r ,
s h o u l d b e used with g r e a t e r g u a r a n t e e s o f j u s t i c e . L e t u s n o w m o v e
o n from t h e s e f u n d a m e n t a l i s s u e s t o t h e specific t y p e s o f s a n c t i o n s
which are available.
W h i l e a m i n o r i t y o f c r i m i n o l o g i s t s a d v o c a t e c a p i t a l p u n i s h m e n t for
c e r t a i n blue-collar c r i m e s , no o n e s e r i o u s l y suggests it as a sanction
for w h i t e - c o l l a r c r i m e s . C a p i t a l p u n i s h m e n t of a s o r t c a n be a p p l i e d
t o c o r p o r a t i o n s a s well a s i n d i v i d u a l s . W e saw i n t h e I B T c a s e s t u d y
of C h a p t e r 3 t h a t a de facto c o r p o r a t e d e a t h s e n t e n c e w a s i m p o s e d
via b a n k r u p t c y . S o m e c o m m e n t a t o r s s u g g e s t t h a t n a t i o n a l i s a t i o n i s
an a p p r o p r i a t e s a n c t i o n for c o r p o r a t i o n s w i t h a h i s t o r y of flagrant
l a w v i o l a t i o n . T h i s s o l u t i o n will b e d i s c u s s e d l a t e r .
W e h a v e s e e n t h a t the U n i t e d S t a t e s h a s t h e t o u g h e s t laws for
r e g u l a t i n g c o r p o r a t e crime in the p h a r m a c e u t i c a l industry. Yet an
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Strategies for controlling corporate crime
e x e c u t i v e o f a m a j o r p h a r m a c e u t i c a l c o m p a n y has n e v e r b e e n im-
p r i s o n e d for a v i o l a t i o n of t h e F o o d , D r u g and C o s m e t i c A c t . A
h a n d f u l o f o f f e n d e r s h a v e b e e n i m p r i s o n e d i n the history o f t h e A c t ,
b u t t h e s e h a v e all b e e n i n d i v i d u a l ' q u a c k s ' , p h a r m a c i s t s , o r
m e r c h a n t s . I t i s well d o c u m e n t e d i n t h e s t u d y o f c o r p o r a t e c r i m e
a c r o s s all i n d u s t r i e s t h a t i m p r i s o n m e n t of e x e c u t i v e s is most
u n u s u a l , a n d , e v e n w h e r e i t d o e s o c c u r , s e n t e n c e s are s h o r t . T h e 1 6
officers w h o had b e e n i m p r i s o n e d from t h e 582 c o r p o r a t i o n s i n
C l i n a r d e t a l . ' s ( 1 9 7 9 : xxii) s t u d y served a v e r a g e s e n t e n c e s o f 3 7 . 1
days. C o r p o r a t i o n s themselves, of course, cannot be imprisoned.
T h e r e a r e r e a s o n s w h y i t m i g h t b e a r g u e d that i m p r i s o n m e n t
should be used m o r e with c o r p o r a t e offenders than traditional
c r i m i n a l s . T h e P o l i s h c r i m i n a l c o d e p r o v i d e s for h e a v i e r s e n t e n c e s
for s e n i o r m a n a g e r s c o n v i c t e d o f e c o n o m i c c r i m e s t h a n for j u n i o r
officers c o n v i c t e d o f t h e s a m e c r i m e s . T h e r a t i o n a l e i s that t o p
m a n a g e m e n t e n j o y g r e a t e r p r i v i l e g e s , s o t h e y should also bear
m o r e p r o f o u n d d u t i e s o f i n t e g r i t y . S o m e n o n - l i t e r a t e s o c i e t i e s also
p r o v i d e for h e a v i e r p e n a l t i e s o n powerful t h a n o n p o w e r l e s s
o f f e n d e r s ( N a d e r and T o d d , 1978: 2 0 ) . T h e r e i s also a d e t e r r e n c e
r a t i o n a l e for s u c h s e e m i n g l y i n e q u i t a b l e s e n t e n c i n g . Since it is an
i n e s c a p a b l e r e a l i t y t h a t p o w e r f u l o f f e n d e r s will be able to m a n i p u -
l a t e t h e legal s y s t e m t o a g r e a t e r e x t e n t t h a n p o w e r l e s s o f f e n d e r s ,
c e r t a i n t y of p u n i s h m e n t will a l w a y s be less for t h e powerful. D e t e r -
r e n c e is a f u n c t i o n of b o t h c e r t a i n t y a n d s e v e r i t y of p u n i s h m e n t .
T h e r e f o r e o n e w a y t o e q u a l i s e t h e d e t e r r e n c e o f t h e powerful and
p o w e r l e s s is to i n c r e a s e t h e severity of t h e p u n i s h m e n t of t h e
powerful.
M o r e o v e r , i t h a s b e e n a r g u e d t h a t i m p r i s o n m e n t i s a m o r e effect-
ive d e t e r r e n t w i t h w h i t e - c o l l a r t h a n w i t h t r a d i t i o n a l offenders
b e c a u s e t h e s t i g m a of p r i s o n is m o r e i n t e n s e l y felt by r e s p e c t a b l e
middle- and upper-class people (Geis, 1972; C o f f e e , 1980).
B u s i n e s s e x e c u t i v e s a l s o h a v e m o r e t o l o s e , b o t h financially a n d i n
d i m i n u t i o n o f t h e q u a l i t y o f t h e i r e n v i r o n m e n t , b y m o v i n g from
their n o r m a l situation into prison.
T h e s e a r g u m e n t s a r e all s o u n d as far as t h e y g o . T h e y beg t h e
q u e s t i o n , h o w e v e r , w h e t h e r i m p r i s o n m e n t i s a p a r t i c u l a r l y desir-
a b l e w a y o f d e a l i n g w i t h e i t h e r t r a d i t i o n a l o r w h i t e - c o l l a r offenders.
P r i s o n s a r e c o s t l y , d e h u m a n i s i n g i n s t i t u t i o n s which g e n e r a l l y turn
o u t p e o p l e w h o a r e w o r s e liabilities t o society t h a n w h e n they w e n t
in. I m p r i s o n m e n t , for any t y p e of o f f e n d e r , s h o u l d be used as a last
r e s o r t w h e n i t w o u l d s e e m t o p r o v i d e t h e only way o f p r o t e c t i n g
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Strategies for controlling corporate crime
The fine
I n o l i g o p o l i e s , c o r p o r a t i o n s t h e r e f o r e typically h a v e t o a b s o r b
t h e cost o f f i n e s . A d m i t t e d l y , o u t and o u t m o n o p o l i s t s o r p r i c e
l e a d e r s m a y be able to p a s s on fines to c o n s u m e r s in the way
indicated by the critics. E v e n with t h e m , courts can impose on the
c o r p o r a t i o n i n j u n c t i o n s f o r b i d d i n g this ( M c A d a m s , 1978: 9 % ) .
A real c o n c e r n in t h e US with t h e t r a n s m i s s i b i l i t y of fines on
i n d i v i d u a l s i s t h a t t h e y will b e b o r n e b y i n s u r a n c e c o m p a n i e s . N a d e r
et al. ( 1 9 7 6 : 107) found t h a t 80 p e r cent of F o r t u n e 500 c o m p a n i e s
i n d e m n i f i e d t h e i r e x e c u t i v e s a g a i n s t fines arising from t h e p e r f o r m -
a n c e o f t h e i r d u t i e s (see also M c A d a m s and T o w e r , 1978: 8 0 ) .
C o m p a n i e s r e g i s t e r e d i n D e l a w a r e enjoy t h e r i g h t t o insure
e m p l o y e e s a g a i n s t any civil o r c r i m i n a l liability i n c u r r e d i n t h e i r
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Strategies for controlling corporate crime
c a p a c i t i e s a s officers o f t h e c o r p o r a t i o n . D e l a w a r e has b e e n t h e
w i n n e r in a ' r a c e to the b o t t o m ' to see w h i c h state can a t t r a c t the
g r e a t e s t n u m b e r o f i n c o r p o r a t i o n s with t h e m o s t p e r m i s s i v e cor-
p o r a t i o n s t a t u t e s . C l e a r l y , it is d e s i r a b l e , as in E n g l a n d and
A u s t r a l i a , t h a t t h e law forbid i n s u r i n g a g a i n s t p u n i s h m e n t s i m p o s e d
by c o u r t s .
N a g e l ( 1 9 7 9 : 104), in his ' p r o g r a m m e d a p p r o a c h to the fine as a
sanction against c o r p o r a t i o n s ' has suggested two sentencing guide-
l i n e s t o d e a l w i t h the t r a n s m i s s i b i l i t y p r o b l e m :
(i) T h e o f f e n d i n g c o r p o r a t i o n m u s t s t i p u l a t e the m a n n e r i n
w h i c h it p r o p o s e s the loss o c c a s i o n e d by a fine to be b o r n e .
(ii) T h e c o u r t m a y , b y o r d e r , r e q u e s t t h a t the offending
c o r p o r a t i o n furnish such i n f o r m a t i o n as n e c e s s a r y to
d e m o n s t r a t e t h a t the loss o c c a s i o n e d by the fine w a s b o r n e in
t h e m a n n e r by w h i c h it s t i p u l a t e d .
A f t e r 40 y e a r s of e x p e r i e n c e I am s u r e t h a t , w h e n it c o m e s to a
333
Strategies for controlling corporate crime
334
Strategies for controlling corporate crime
Publicity sanctions
T h e F D A is p r o b a b l y the leading regulatory agency in the world in
its use o f p u b l i c i t y s a n c t i o n s against c o r p o r a t e w r o n g d o e r s ( M o r e y ,
1 9 7 5 ; P i n e s , 1976). All successful c o u r t a c t i o n s are publicised in its
g l o s s y m a g a z i n e , FDA Consumer. T h e F o o d , D r u g and C o s m e t i c
A c t explicitly p r o v i d e s for a d v e r s e p u b l i c i t y : ' T h e S e c r e t a r y shall
c a u s e to be p u b l i s h e d from t i m e to t i m e r e p o r t s s u m m a r i z i n g all
j u d g m e n t s , d e c r e e s , a n d c o u r t o r d e r s w h i c h have b e e n r e n d e r e d
u n d e r t h i s A c t , i n c l u d i n g t h e n a t u r e o f t h e c h a r g e a n d t h e dis-
position t h e r e o f (Section 705a).
In C h a p t e r 6 it w a s a r g u e d t h a t the use of r e m e d i a l a d v e r t i s e -
m e n t s by t h e F D A is a powerful a n d efficient s a n c t i o n . It i m p o s e s a
cost o n t h e c o r p o r a t i o n from a d v e r s e publicity w h i c h should b e
s o m e w h a t c o m m e n s u r a t e with t h e illegal gain from t h e o v e r s t a t e d
a d v e r t i s e m e n t s which are c o r r e c t e d . The sanction is constructive in
t h a t i t sets o u t t o u n d o t h e h a r m i n v o l v e d i n t h e c r i m e . G e n e r a l
d e t e r r e n c e is f o s t e r e d m u c h m o r e explicitly t h a n with a fine b e c a u s e
o t h e r c o r p o r a t i o n s i n t h e i n d u s t r y i n v a r i a b l y see t h e r e m e d i a l
advertisement.
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Strategies for controlling corporate crime
T h e p r i n c i p a l c r i t i c i s m of a d v e r s e publicity s a n c t i o n s is t h a t t h e y
a r e n o t c e r t a i n i n t h e i r i m p a c t s , t h o u g h o t h e r s w o u l d suggest that
t h i s v e r y u n c e r t a i n t y is precisely why t h e y are feared ( F i s s e , 1 9 7 1 ;
Y o d e r , 1978: 5 2 ) . S o m e t i m e s t h e p u b l i c i t y will i m p o s e a c o n s i d e r -
a b l e cost o n t h e c o r p o r a t i o n . T h e r e will e v e n b e s o m e o c c a s i o n s
21
w h e n 'any p u b l i c i t y is g o o d p u b l i c i t y ' and the offender will b e n e f i t .
T h i s d r a w b a c k m u s t b e placed i n t h e c o n t e x t o f t h e total a r g u m e n t
of t h i s b o o k t h a t it is not in t h e p u b l i c i n t e r e s t to h a v e e q u i t a b l e and
c e r t a i n p u n i s h m e n t of c o r p o r a t e crimes in the pharmaceutical
i n d u s t r y . T h a t i s , it is p r e f e r a b l e in most cases to n e g o t i a t e
r e m e d i e s , w h i l e s i n g l i n g o u t c e r t a i n c a s e s for e x e m p l a r y p r o s e c u -
tions.
Seizure
336
Strategies for controlling corporate crime
. . . [ A ] s e i z u r e r e p r e s e n t s a s u b s t a n t i a l e x p e n d i t u r e of
g o v e r n m e n t a l r e s o u r c e s . It b e g i n s with t h e i n s p e c t o r finding a
p r o b l e m , i s c l e a r e d t h r o u g h t h e D i s t r i c t a n d R e g i o n a l Offices, i s
t h e n c o n s i d e r e d b y t h e A g e n c y B u r e a u i n v o l v e d , from t h e r e i s
p r o c e s s e d b y [the G e n e r a l C o u n s e l ' s ] office, r e q u i r e s t h e
c o n c u r r e n c e o f t h e U . S . A t t o r n e y a n d a c t i o n b y the U . S .
M a r s h a l , a n d u l t i m a t e l y i n v o l v e s a U . S . district j u d g e e v e n i n the
s i m p l e s t c a s e . M a n y s e i z u r e s , involving relatively m i n o r
v i o l a t i o n s , i n c l u d e only a small a m o u n t o f t h e total g o o d s
i n v o l v e d . D u r i n g t h e past ten y e a r s 1 3 % o f our s e i z u r e
r e c o m m e n d a t i o n s w e r e n e v e r e x e c u t e d b e c a u s e the p r o d u c t had
been moved or consumed during the time taken to complete
t h e s e p r o c e d u r e s . . . . O n e p a r t i c u l a r l y d i s t u r b i n g aspect is t h a t ,
as a n y food a n d d r u g l a w y e r k n o w s , t h e i m p a c t of a single s e i z u r e
of a small a m o u n t of a p r o d u c t can be effectively b l u n t e d simply
by filing a c l a i m a n d e n g a g i n g in t h e usual pre-trial d i s c o v e r y . T h e
i n v e n t o r y o f t h e offending p r o d u c t can t h e n b e r e l a b e l e d , o r
e x h a u s t e d w i t h o u t c h a n g e , and a t t h a t p o i n t a c o n s e n t d e c r e e c a n
be a c c e p t e d or t h e claim w i t h d r a w n and t h e c a s e forfeited. In t h e
m e a n w h i l e , t h e p u b l i c i s s u b j e c t e d t o t h e illegal p r o d u c t and the
e n t i r e p u r p o s e o f t h e s e i z u r e i s s u b s t a n t i a l l y d e l a y e d and
subverted.
Interventionist sanctions
A r a n g e of w a y s t h a t p h a r m a c e u t i c a l c o r p o r a t i o n s can effectively
s e l f - r e g u l a t e will b e d i s c u s s e d later. C o m p a n i e s which have s h o w n
by t h e i r c r i m e s an u n w i l l i n g n e s s to s e l f - r e g u l a t e can be r e q u i r e d by
c o u r t s to put c e r t a i n internal compliance systems in place. Com-
p a n i e s w h i c h h a v e i n a d e q u a t e s y s t e m s for e n s u r i n g the quality and
a c c u r a c y of d a t a p r o v i d e d by clinical i n v e s t i g a t o r s could be o r d e r e d
to p r o d u c e a r e p o r t on h o w such c o n t r o l s could be i m p l e m e n t e d ,
h a v e t h e r e c o m m e n d a t i o n s o f t h e r e p o r t a p p r o v e d b y t h e c o u r t , and
t h e n have the i m p l e m e n t a t i o n of the proposals monitored.
T h e r e is a v a r i e t y of m e c h a n i s m s w h e r e b y such i n t e r v e n t i o n in
337
Strategies for controlling corporate crime
t h e i n t e r n a l affairs o f t h e c o r p o r a t i o n c o u l d b e a c h i e v e d . I n C h a p t e r
2 it w a s s e e n h o w in m a n y c a s e s t h e S E C has a c h i e v e d reforms to
S O P s ( a n d t h e i n s t i t u t i o n of g u a r a n t e e s that S O P s will not be
2 2
c o m p r o m i s e d ) by consent decree. On occasions the US Federal
T r a d e C o m m i s s i o n h a s also s u c c e e d e d a t i n t e r n a l r e s t r u c t u r i n g b y
c o n s e n t o r d e r ( S o l o m o n and N o w a k , 1980). A n o t h e r m e c h a n i s m i s
to place the c o r p o r a t i o n on p r o b a t i o n under the supervision of an
a u d i t o r , quality control expert or other relevant authority who
would ensure that an order to restructure certain compliance
s y s t e m s w a s c a r r i e d o u t ( s e e Yale Law Journal. 1979; C o f f e e , 1980:
5 6 3 - 4 ; cf. M i t c h e l l C o m m i t t e e , 1977: 3 5 9 - 6 1 ) . P e r h a p s t h e simplest
m e c h a n i s m is for t h e c o n v i c t e d c o r p o r a t i o n to have its s e n t e n c e
w i t h h e l d until such t i m e as it p r o d u c e s a r e p o r t on t h e w e a k n e s s e s of
2 1
its old c o m p l i a n c e s y s t e m and i m p l e m e n t s a new o n e .
T h e last o p t i o n i s m o r e a t t r a c t i v e t h a n t h e o n e before b e c a u s e t h e
c o s t o f b r i n g i n g i n o u t s i d e e x p e r t s t o study a n d m o n i t o r t h e n e e d e d
o r g a n i s a t i o n a l r e f o r m s i s b o r n e b y t h e offender r a t h e r than t h e
state. No matter how implemented, court mandated intervention in
t h e i n t e r n a l affairs of a guilty c o m p a n y will cost m o r e o f t h e c o u r t ' s
t i m e t h a n a fine. C l e a r l y t h e n , i n t e r v e n t i o n i s t s a n c t i o n s w o u l d have
t o b e u s e d m o r e s e l e c t i v e l y t h a n fines ( F i s s e , 1980).
O n e can q u e s t i o n w h e t h e r a n o r d e r t o r e s t r u c t u r e S O P s i s a
s a n c t i o n . P e r h a p s i t i s m o r e a p p r o p r i a t e l y viewed a s c o m p u l s o r y
corporate rehabilitation. Nevertheless, 'because corporate
m a n a g e r s perceive compliance with outside supervision as an
u n p l e a s a n t t a s k , such m e a s u r e s i m p o s e p e r s o n a l b u r d e n s that
d i r e c t l y d e t e r c o r p o r a t e m a n a g e r s w h o m i g h t play a part in future
c o r p o r a t e o f f e n s e s ' (Yale Law Journal. 1979: 3 6 6 ) .
F i n a l l y , a s w a s a m p l y i l l u s t r a t e d i n t h e A m e r i c a n H o s p i t a l Supply
c a s e s t u d y o f C h a p t e r 2 , such c o u r t o r d e r s can have a n i n c a p a c i -
t a t i v e effect. W h i l e it is so often difficult to p e n e t r a t e t h e m a z e of
c o m p l e x c o r p o r a t e e v e n t s t o p r o v e c r i m i n a l i t y , court o r d e r s can b e
c o n s t r u c t e d to r e n d e r proving breach of provisions of the order
r e l a t i v e l y s t r a i g h t f o r w a r d . N o t w i t h s t a n d i n g t h e c o m p l e x i t y of a
s u b s e q u e n t c r i m e , i f i n c o m m i t t i n g i t t h e c o r p o r a t i o n neglects t o
follow c o u r t - m a n d a t e d S O P s , such a failure could be p u n i s h e d for
its o w n s a k e .
Interventionist court o r d e r s c o u l d c o m b i n e r e s t i t u t i v e with
rehabilitative functions. A r e q u i r e m e n t t h a t victims be r e s t i t u t e d
could be included in the o r d e r , a s could c e r t a i n c o m m u n i t y service
activities. An example of the latter was when Allied Chemical
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Strategies for controlling corporate crime
funded e n v i r o n m e n t a l p r o t e c t i o n p r o g r a m m e s i n the c o m m u n i t i e s
affected b y t h e K e p o n e p o l l u t i o n d i s a s t e r i n lieu o f a c o u r t - i m p o s e d
f i n e . " P a r t i c u l a r l y a p p r o p r i a t e c o m m u n i t y s e r v i c e o r d e r s for con-
v i c t e d p h a r m a c e u t i c a l c o r p o r a t i o n s w o u l d involve t h e d e v e l o p m e n t
o f ' s e r v i c e d r u g s ' for victims of rare d i s e a s e s ( i . e . d r u g s which are
n o t p r o f i t a b l e b e c a u s e o f low d e m a n d ) . C o m m u n i t y s e r v i c e o r d e r s
a l s o h a v e c o n s i d e r a b l e p o t e n t i a l as a s a n c t i o n a g a i n s t individual
c o r p o r a t e e x e c u t i v e s ( F i s s e , 1981).
V a r i o u s g u a r a n t e e s c r e a t e z o n e s of p r i v a c y . . . . T h e F o u r t h
A m e n d m e n t explicitly affirms t h e 'right o f t h e p e o p l e t o b e secure
i n t h e i r p e r s o n s , h o u s e s , p a p e r s , and effects against u n r e a s o n a b l e
s e a r c h e s and s e i z u r e s ' . T h e Fifth A m e n d m e n t in its Self-
i n c r i m i n a t i o n C l a u s e e n a b l e s the citizen to c r e a t e a z o n e of
2
p r i v a c y w h i c h g o v e r n m e n t m a y n o t force him t o s u r r e n d e r . '
W h i l e t h e U n i t e d S t a t e s d e n i e s c o r p o r a t i o n s t h e privilege against
2
s e l f - i n c r i m i n a t i o n , " t h e t r a d i t i o n a l view in E n g l i s h law has b e e n
t h a t t h e p r i v i l e g e a p p l i e s t o b o t h i n d i v i d u a l s and c o r p o r a t i o n s . "
Trial by jury is a n o t h e r relevant procedural protection. In
c o m p l e x c o r p o r a t e c a s e s j u r i e s often c a n n o t b e e x p e c t e d t o u n d e r -
s t a n d t h e m a z e o f s e c u r i t i e s m a n i p u l a t i o n s , scientific d a t a o r
o r g a n i s a t i o n a l c h a r t s which s p r e a d a c r o s s n a t i o n a l b o r d e r s . A m o r e
r a t i o n a l , r a p i d and j u s t d e c i s i o n i n t h e s e cases w o u l d c o m e from
a j u d g e w i t h e x p e r i e n c e in t h e a r e a sitting a l o n e , or from a p a n e l
o f e x p e r t j u r o r s . Y e t c o r p o r a t i o n s t e n d t o insist o n their right t o
a j u r y t r i a l . T h e US S u p r e m e C o u r t has e x p l a i n e d t h e r e a s o n s for
t r i a l b y j u r y i n t e r m s o f p r o t e c t i o n from t h e a r b i t r a r y p o w e r o f t h e
state:
A right to j u r y trial is g r a n t e d to c r i m i n a l d e f e n d a n t s in o r d e r to
prevent o p p r e s s i o n by the G o v e r n m e n t . Those w h o wrote our
c o n s t i t u t i o n s k n e w from history a n d e x p e r i e n c e that i t w a s
n e c e s s a r y t o p r o t e c t a g a i n s t u n f o u n d e d criminal c h a r g e s b r o u g h t
t o e l i m i n a t e e n e m i e s and a g a i n s t j u d g e s t o o r e s p o n s i v e t o t h e
v o i c e of h i g h e r a u t h o r i t y . . . . P r o v i d i n g an a c c u s e d with t h e right
to be t r i e d by his p e e r s gave him an i n e s t i m a b l e safeguard a g a i n s t
t h e c o r r u p t o r o v e r z e a l o u s p r o s e c u t o r and against t h e c o m p l i a n t ,
biased, or eccentric judge.™
W h e r e t h e p o w e r d i s p a r i t y b e t w e e n s t a t e and d e f e n d a n t i s r e d u c e d
or r e v e r s e d o n e w o n d e r s w h e r e this l e a v e s t h e r a t i o n a l e for trial by
j u r y . The d o u b l e j e o p a r d y protection is a n o t h e r which is grounded
in the a s s u m p t i o n of a state with more resources and p o w e r than the
d e f e n d a n t . Justice Black in the US S u p r e m e Court:
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Strategies for controlling corporate crime
A n d so t h e r e is a n e e d to q u e s t i o n w h e t h e r all t h e t r a d i t i o n a l
p r o t e c t i o n s afforded to i n d i v i d u a l s should also be a v a i l a b l e to
c o r p o r a t i o n s ( F r i e d m a n , 1979). C o n s i d e r e n t r a p m e n t . I n C h a p t e r 3
i t w a s s e e n h o w t h e N a t i o n a l C a n c e r I n s t i t u t e o c c a s i o n a l l y slips its
o u t s i d e t e s t i n g l a b o r a t o r i e s a c o m p o u n d w i t h certain clearly e s t a b -
lished effects t o test t h e i r c o n t r o l s t a n d a r d s , and h o w o n e quality
c o n t r o l m a n a g e r o c c a s i o n a l l y ' s p i k e s ' p r o d u c t s for t e s t i n g t o c h e c k
t h a t his staff a r e f i n d i n g i m p u r i t i e s . S h o u l d g o v e r n m e n t s also be
a b l e to do t h i s a n d use t h e f i n d i n g s as e v i d e n c e against c o r p o r -
a t i o n s ? A t p r e s e n t , such e n t r a p m e n t i s not p e r m i s s i b l e u n d e r
A m e r i c a n law, but would be possible under English or Australian
law.
A p a r t from t h e p o w e r d i s p a r i t y r a t i o n a l e , t h e m a i n r e a s o n for
e x t r e m e p r o t e c t i o n s , h i s t o r i c a l l y , w a s t h e severe n a t u r e o f t h e
s a n c t i o n s . E x t r a o r d i n a r y c i r c u m s p e c t i o n i s essential w h e n t h e issue
is w h e t h e r an i n d i v i d u a l will lose his or her right to life or liberty.
P a c k e r s e e s i m p r i s o n m e n t a s t h e o p p r e s s i v e m e a s u r e which sets
a p a r t t h e n e e d for d u e p r o c e s s p r o t e c t i o n s .
T h e full p a r a p h e r n a l i a o f t r a d i t i o n a l p r o c e d u r a l p r o t e c t i o n s
s h o u l d be a v a i l a b l e w h e n t h e r e is any possibility of i m p r i s o n m e n t .
C o r p o r a t i o n s can n e i t h e r b e i m p r i s o n e d nor e x e c u t e d (in t h e literal
s e n s e ) . So this s e c o n d m a j o r r a t i o n a l e for t h e h i s t o r i c s a f e g u a r d s is
also not relevant to t h e m .
341
Strategies for controlling corporate crime
342
Strategies for controlling corporate crime
r e q u i r e m e n t will be to a b o l i s h for t h o s e c r i m e s t h e s a n c t i o n of
imprisonment.
g u i l t y p e o p l e , b u t t h a t it w o u l d h e l p lift t h e lid on d a n g e r o u s
p r o d u c t s before t h e y did any h a r m . It is c o n c e i v a b l e t h a t the
e x i s t e n c e of s u c h a law in G e r m a n y could have p r e v e n t e d the
t h a l i d o m i d e d i s a s t e r , r e m e m b e r i n g t h a t i t t a k e s only o n e t o blow
the w h i s t l e . "
Product liability
t h a t e v e r y t h i n g p o s s i b l e w a s d o n e t o p r e v e n t t h e sale o f i m p u r e
product."
O b v i o u s l y t h e r e is an e l e m e n t of injustice in r e q u i r i n g m a n u -
f a c t u r e r s w h o h a v e t h e best quality c o n t r o l system possible with
c u r r e n t t e c h n o l o g y t o pay c o m p e n s a t i o n w h e n that system fails.
T h e r e is an e c o n o m i c justification for strict liability, h o w e v e r .
C o m p a n i e s benefit financially from the social gains from the use of
t h e i r p r o d u c t s , and so t h e y s h o u l d lose f i n a n c i a l l y from the social
h a r m s o f t h e p r o d u c t s . I f c o m p a n i e s can r a k e i n t h e benefits w h i l e
h a v i n g o t h e r s pay t h e c o s t s , m a r k e t forces can n e v e r put t h e m out o f
b u s i n e s s i f t h e i r p r o d u c t i o n has social c o s t s w h i c h e x c e e d t h e social
b e n e f i t s . It is n o r m a l l y in t h e p u b l i c i n t e r e s t for a c o m p a n y with t h e
b e s t q u a l i t y c o n t r o l s y s t e m p o s s i b l e to c o n t i n u e p r o d u c i n g a p r o d u c t
w h i c h , i n spite o f t h a t s y s t e m , i m p o s e s costs o n injured c o n s u m e r s
w h i c h e x c e e d t h e a g g r e g a t e price t h a t c o n s u m e r s are willing t o pay
to o b t a i n t h e b e n e f i t s o f t h e p r o d u c t . W i t h strict liability it is not
p r o f i t a b l e for c o m p a n i e s t o c o n t i n u e p r o d u c i n g such p r o d u c t s .
T h e o t h e r e c o n o m i c r a t i o n a l e w h i c h cuts a c r o s s t h e injustice
o b j e c t i o n c o n c e r n s p r o d u c t safety i n n o v a t i o n s . U n d e r a n e g l i g e n c e
s t a n d a r d , a c o m p a n y w h i c h has t h e best quality c o n t r o l system
c u r r e n t l y a v a i l a b l e has n o i n c e n t i v e t o d i s c o v e r a n e v e n b e t t e r
s y s t e m . So long as t h e c o m p a n y is not n e g l i g e n t , victims will pay the
c o s t s from t h e unsafe p r o d u c t s p r o d u c e d . U n d e r a strict liability
s t a n d a r d , a m a n u f a c t u r e r with the best s y s t e m possible is still losing
m o n e y from t i m e to t i m e in c o m p e n s a t i o n for victims of unsafe
p r o d u c t s . T h e m a n u f a c t u r e r t h e r e f o r e has a n i n c e n t i v e t o d e v e l o p
an e v e n b e t t e r q u a l i t y c o n t r o l s y s t e m . Strict liability t h u s fosters
i n n o v a t i o n i n p r o d u c t safety m e a s u r e s . "
T o t h e e x t e n t t h a t m a n u f a c t u r e r s i n s u r e against p r o d u c t liability
s u i t s , t h i s a r g u m e n t loses force; but not e n t i r e l y , since p r o d u c t
safety i n n o v a t i o n s m a y r e d u c e t h e p r e m i u m s paid t o i n s u r e r s .
M o r e o v e r , p o l i c i e s w h i c h p l a c e a n u p p e r limit o n the a m o u n t
i n s u r e d , o r w h i c h r e q u i r e t h e c o m p a n y t o m e e t the first s o m a n y
t h o u s a n d s o f t h e c o m p e n s a t i o n c l a i m , r e t a i n limited safety incen-
tives.
C e r t a i n c o u n t r i e s w h o s e p r o d u c t liability laws fall short of strict
liability h a v e n e v e r t h e l e s s r e v e r s e d t h e b u r d e n o f p r o o f from t h e
plaintiff t o t h e d e f e n d a n t . W e s t G e r m a n y and the N e t h e r l a n d s are
e x a m p l e s ( P e a r s o n C o m m i s s i o n , 1978: v o l u m e 3 ) . T h e r a t i o n a l e i s
t h a t t h e scientifically and o r g a n i s a t i o n a l l y u n i n f o r m e d c o n s u m e r i s
n o t in as g o o d a p o s i t i o n to p r e s e n t a c a s e a b o u t the a d e q u a c y o f t h e
345
Strategies for controlling corporate crime
Class actions
I n m o s t c o u n t r i e s , b u t e s p e c i a l l y t h e U n i t e d S t a t e s , p r o d u c t liability
l a w r a t h e r t h a n c r i m i n a l law h a s p r o v i d e d most o f the d e t e r r e n c e
a g a i n s t c o r p o r a t e c r i m e i n the p h a r m a c e u t i c a l i n d u s t r y . C o m p e n -
s a t i o n , n o t d e t e r r e n c e , i s t h e r e c o g n i s e d function o f p r o d u c t liability
law. Yet t h e c o n c l u s i o n from m y i n t e r v i e w s w a s that p h a r m a -
c e u t i c a l e x e c u t i v e s r e p o r t fear of p r o d u c t - l i a b i l i t y suits as a r e a s o n
for o b e y i n g t h e F o o d , D r u g a n d C o s m e t i c A c t o f i m m e n s e l y g r e a t e r
i m p o r t a n c e t h a n fear of c r i m i n a l p r o s e c u t i o n or any o t h e r regu-
l a t o r y a c t i o n . T h e y w o u l d b e i r r a t i o n a l t o think o t h e r w i s e . M E R / 2 9
c o s t R i c h a r d s o n - M e r r e l l an $ 8 0 , 0 0 0 c r i m i n a l fine; b u t it is e s t i m a t e d
t h a t t h e p r o d u c t liability s e t t l e m e n t s t o t a l l e d a b o u t $200 million.
T h e r e a l i t y t h a t it is civil d a m a g e s which p r o v i d e t h e g r e a t e s t
d e t e r r e n c e m u s t c a u s e a q u e s t i o n i n g of t h e h e a v y use of nolo
contendere p l e a s for c o r p o r a t e c r i m e in t h e U n i t e d States ( S a x o n ,
1980: 5 3 - 4 ) . A nolo contendere or ' n o c o n t e s t ' p l e a , a l t h o u g h
t h e o r e t i c a l l y t h e s a m e as a guilty p l e a , d o e s not force t h e offender to
a d m i t guilt. C o n s e q u e n t l y , victims o f t h e crime c a n n o t use t h e plea
346
Strategies for controlling corporate crime
347
Strategies for controlling corporate crime
L a w s c a n n o t b e w r i t t e n t o c o v e r all t h e t y p e s o f social r e s p o n s i b i l i t y
we w o u l d like to see a p h a r m a c e u t i c a l c o m p a n y m a n i f e s t . No rule
can m a k e a scientist l o o k h a r d i n s t e a d of c u r s o r i l y w h e n c h e c k i n g
for t u m o u r s in a l a b o r a t o r y a n i m a l . An a t t e m p t w a s m a d e at t h e end
o f t h e M E R / 2 9 c a s e s t u d y o f C h a p t e r 3 t o illustrate that the a c c u m u -
l a t i o n o f m a n y m i n o r acts o f social i r r e s p o n s i b i l i t y c a u s e s g r e a t e r
h a r m t h a n explicitly illegal a c t s . W h i l e law c a n n o t r e g u l a t e s u b t l e -
t i e s , t h e e t h o s of social r e s p o n s i b i l i t y in a c o m p a n y can.
E v e n w h e r e law i s a n effective tool o f c o n t r o l , t h e r e h a v e b e e n
m a n y e x a m p l e s i n this b o o k w h e r e s e l f - r e g u l a t o r y s y s t e m s p r o v i d e d
t o u g h e r protections than g o v e r n m e n t control systems. R e m e m b e r ,
for e x a m p l e , t h e B r i t i s h c o n t r a c e p t i v e p l a n t which w a s d e f e n d e d a s
a c c e p t a b l e b y B r i t i s h g o v e r n m e n t i n s p e c t o r s , but criticised a s
u n s a f e by c o m p l i a n c e staff from h e a d q u a r t e r s in t h e U n i t e d S t a t e s
( C h a p t e r 4 ) . T h e fact t h a t s e l f - r e g u l a t o r y c o n t r o l s afford the p u b l i c
g r e a t e r p r o t e c t i o n s t h a n e x t e r n a l l y i m p o s e d c o n t r o l s d o e s not m e a n
t h a t t h e s o l u t i o n lies w i t h g e t t i n g c o r p o r a t i o n s t o w r i t e i n t e r n a l
c o d e s of ethics. O n e businessman suggested that relying on a code
o f e t h i c s w a s 'like society issuing t h e T e n C o m m a n d m e n t s but not
b o t h e r i n g to h a v e a p o l i c e force'. F o r m e r Shell I n t e r n a t i o n a l
D i r e c t o r , G e o f f r e y C h a n d l e r , has a n a p p r o p r i a t e l y cynical v i e w o f
such pieces of paper: ' C o d e s of conduct tend to be placebos which
a r e likely to be less t h a n a r e s p o n s i b l e c o m p a n y will do of its own
v o l i t i o n a n d m o r e t h a n a n i r r e s p o n s i b l e c o m p a n y will d o w i t h o u t
c o e r c i o n ' ( q u o t e d i n M e d a w a r , 1979: 70)
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Strategies for controlling corporate crime
S O P s w h i c h a r e s o u n d with r e s p e c t t o c r i m e p r e v e n t i o n are
i m p e r a t i v e . H o w e v e r , not only a r e S O P s m o r e fluid t h a n w o u l d
a p p e a r from t h e c o r p o r a t e o p e r a t i n g m a n u a l s , but e x e c u t i v e s are
f o r e v e r e n c o u n t e r i n g n e w e n v i r o n m e n t a l c i r c u m s t a n c e s for which
t h e c o r p o r a t e rule b o o k offers little g u i d a n c e . A senior e x e c u t i v e of
o n e o f A u s t r a l i a ' s t o p c o m p a n i e s (not a p h a r m a c e u t i c a l c o m p a n y )
r e c e n t l y t o o k me to task w h e n I c o m m e n t e d favourably on E x x o n ' s
fairly d e t a i l e d c o r p o r a t e rules t o p r e v e n t l a w - b r e a k i n g . H i s view
w a s t h a t t h e i m p o r t a n t t h i n g w a s not s o m u c h t h e ' c o r p o r a t e
s t a t u t e s ' as t h e ' c o r p o r a t e case law'. R u l e s could not be codified to
c o v e r t h e e v e r - c h a n g i n g s i t u a t i o n s w h i c h confront e x e c u t i v e s with
e t h i c a l d i l e m m a s . S o his c o m p a n y w a s b e g i n n i n g t o a t t e m p t t o put
t h e ' c o r p o r a t e case law' on a m o r e formal basis. T h e f u n d a m e n t a l
r e q u i r e m e n t i s t h a t w h e n e x e c u t i v e s e n c o u n t e r a n ethical d i l e m m a ,
the p r o b l e m should be written down. It should then be passed up
t h e line until it r e a c h e s a p e r s o n w h o k n o w s the existing case law
w i t h r e s p e c t to t h i s class of p r o b l e m . If t h e p r o b l e m readily fits
w i t h i n t h e p a r a m e t e r s e s t a b l i s h e d by existing case law, it goes no
f u r t h e r . B u t if it h o l d s out t h e possibility of e s t a b l i s h i n g an
i m p o r t a n t p r e c e d e n t , i t could g o t o t h e s u p r e m e court o f t h e chief
e x e c u t i v e officer.
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Strategies for controlling corporate crime
o p p o r t u n i t i e s as s o o n as t h e y p r e s e n t t h e m s e l v e s . H e n c e it is essen-
tial t h a t c o r p o r a t e c a s e law b e p r o a c t i v e r a t h e r t h a n simply r e a c t i v e .
F o r m a l i s e d c o r p o r a t e c a s e law i s o b v i o u s l y m o r e a m e n a b l e t o
critical scrutiny and evaluation than s p o k e n (and u n s p o k e n ) under-
standings. It renders corporate decision-making processes more
v u l n e r a b l e to c r i t i c i s m . T h i s is its very s t r e n g t h . If c o r p o r a t i o n s
c o m e to h a v e p u b l i c i n t e r e s t d i r e c t o r s , a p r o p o s i t i o n to be discussed
l a t e r , t h e s e p e o p l e w o u l d b e able t o d o t h e i r j o b infinitely b e t t e r i f
t h e y c o u l d criticise t h e way l e a d i n g c a s e s o f ethical d i l e m m a s have
b e e n s e t t l e d . C r i t i c i s i n g r u l e s , t h e i n t e r p r e t a t i o n of which is un-
e x p l i c a t e d , o b v i o u s l y i s o f m o r e limited v a l u e . Similarly, g o v e r n -
m e n t i n s p e c t o r s w o u l d b e m o r e effective g u a r d i a n s o f t h e public
i n t e r e s t if t h e y had a c c e s s to a c o m p r e h e n s i v e b o d y of c o r p o r a t e
c a s e law.
T o p m a n a g e m e n t h a s a n i n t e r e s t i n t h e formalising o f c o r p o r a t e
c a s e law in t h a t it t i g h t e n s m a n a g e m e n t c o n t r o l and r e d u c e s the risk
of wild i d i o s y n c r a t i c d e c i s i o n s . T h e i m p o r t a n t benefit of enforcing
the r e c o r d i n g and systematising of ethical d i l e m m a s , however, is
t h a t it fosters s e l f - r e g u l a t i o n , a n d , to t h e e x t e n t that the c a s e s are
m a d e available to outsiders, government regulation. Costs would
n o t b e g r e a t . E x e c u t i v e s d o not e n c o u n t e r e t h i c a l d i l e m m a s every
d a y o f t h e w e e k , a n d o n m o s t o c c a s i o n s w h e n t h e y d o , t h e y will b e
d i l e m m a s w h i c h g e n e r a t e a n i m m e d i a t e r e s o l u t i o n from a m o r e
s e n i o r p e r s o n w h o has e n c o u n t e r e d p r o b l e m s o f this t y p e b e f o r e .
T h e p o i n t of view w h i c h I h e a r d a g a i n a n d a g a i n in the i n t e r v i e w s
w a s t h a t t h e ethical c l i m a t e of a c o r p o r a t i o n b e g i n s w i t h , and is
f u n d a m e n t a l l y d e t e r m i n e d by, the chief e x e c u t i v e officer:"
T h i s c o n c l u s i o n i s c o n s i s t e n t with o t h e r e v i d e n c e . B a u m a r t (1968)
f o u n d t h a t e x e c u t i v e s r a n k e d t h e b e h a v i o u r o f their s u p e r i o r s i n the
c o m p a n y as t h e p r i n c i p a l d e t e r m i n a n t of u n e t h i c a l d e c i s i o n s . In a
f i f t e e n - y e a r f o l l o w - u p o f B a u m a r t ' s w o r k , B r e n n e r and M o l a n d e r
( 1 9 7 7 ) found s u p e r i o r s still r a n k e d as t h e p r i m a r y influence on
u n e t h i c a l d e c i s i o n - m a k i n g . H a l f o f t h e 1977 s a m p l e o f e x e c u t i v e s
b e l i e v e d t h a t s u p e r i o r s often d o n o t w a n t t o k n o w h o w r e s u l t s a r e
o b t a i n e d , so long as t h e d e s i r e d o u t c o m e is a c h i e v e d .
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Strategies for controlling corporate crime
S u c h e v i d e n c e p r o v i d e s a c r i m e - p r e v e n t i o n r a t i o n a l e for t h e Park
d e c i s i o n . T h e law s h o u l d a t t e m p t t o m a k e the chief e x e c u t i v e officer
u n i q u e l y susceptible to individual criminal responsibility because
s/he is u n i q u e l y a b l e to p r e v e n t c o r p o r a t e c r i m e t h o u g h o u t his or
h e r o r g a n i s a t i o n . T h e e v i d e n c e also s u s t a i n s a c a s e for r e n d e r i n g
c h i e f e x e c u t i v e officers e s p e c i a l l y v u l n e r a b l e t o s o m e o f t h e quite
effective informal a d v e r s e publicity s a n c t i o n s which can ginger up
t h e c o m p l i a n c e efforts o f c o m p a n i e s . H e n c e , c o n g r e s s i o n a l and
p a r l i a m e n t a r y c o m m i t t e e s s h o u l d m a k e special efforts t o get chief
e x e c u t i v e officers i n front o f t h e c a m e r a s w h e n q u e s t i o n s a r e being
a s k e d a b o u t t h e e t h i c o - l e g a l s t a n d a r d s o f their c o r p o r a t i o n .
W h e n D o n a l d R u m s f e l d w a s a p p o i n t e d chief e x e c u t i v e officer o f
S e a r l e i n 1977 f o l l o w i n g t h e c o m p a n y ' s s a f e t y - t e s t i n g c r i s e s , t h e
a p p o i n t m e n t w a s criticised b e c a u s e R u m s f e l d had held s e n i o r
c a b i n e t p o s i t i o n s i n t h e N i x o n a d m i n i s t r a t i o n . H o w e v e r , one o f
R u m s f e l d ' s first a c t s w a s t o c o u n t e r S e a r l e ' s p o o r c o m p l i a n c e r e c o r d
w i t h an edict t h a t staff w e r e to be e v a l u a t e d for p r o m o t i o n and
i n c e n t i v e p a y m e n t s o n t h e basis o f t h e i r c o m p l i a n c e r e c o r d i n
a d d i t i o n to the usual c r i t e r i a . "
M o v i n g d o w n t h e o r g a n i s a t i o n a l h i e r a r c h y , i t i s i m p o r t a n t that
p r o - p u b l i c i n t e r e s t c o n s t i t u e n c i e s w i t h i n t h e c o r p o r a t i o n a r e given
o r g a n i s a t i o n a l c l o u t . T h e g r e a t m i s t a k e w h i c h m a n y critics o f big
b u s i n e s s m a k e i s t h a t c o r p o r a t i o n s are u n i t a r y e n t i t i e s w h e r e every
a c t i v i t y is g u i d e d by t h e goal of profit m a x i m i s a t i o n .
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Strategies for controlling corporate crime
O n c e a c o m p l i a n c e g r o u p is e s t a b l i s h e d in a t r a n s n a t i o n a l c o r p o r -
a t i o n , it will t e n d to p u s h for w h a t is best for c o m p l i a n c e , e v e n in
m a n y s i t u a t i o n s w h e n t h i s i s not i n t h e profitability i n t e r e s t s o f t h e
3
c o m p a n y . " T h e performance and p r o m o t i o n prospects of people in
t h e g r o u p will b e a s s e s s e d i n t e r m s o f t h e goals o f c o m p l i a n c e r a t h e r
t h a n c o n t r i b u t i o n to profits. To t h e e x t e n t t h a t c o m p l i a n c e staff
p e r c e i v e t h e m s e l v e s a s h a v i n g a c a r e e r line a s c o m p l i a n c e e x p e r t s ,
t h e y h a v e a s e l f - i m a g e a n d a s e c u r e b a s e from which to r e s t r a i n the
e x c e s s e s o f t h e c o n s t i t u e n c i e s w h o a r e c o m m i t t e d t o 'profits a t any
c o s t ' , ' p r o d u c t i o n t a r g e t s at any c o s t ' , 'sales q u o t a s at any c o s t ' ,
' g r o w t h a t any c o s t ' , ' n e w p r o d u c t r e g i s t r a t i o n a t any c o s t ' .
O n e o f t h e w a y s t o foster this kind o f self-image i s t h r o u g h
granting professional status to certain types of compliance experts.
C h a p t e r 4 d e v e l o p e d a r g u m e n t s for q u a l i t y c o n t r o l b e i n g a pro-
f e s s i o n , w i t h u n i v e r s i t y d e g r e e s b e i n g offered i n q u a l i t y c o n t r o l .
P r o f e s s i o n a l s o c i a l i s a t i o n w o u l d hopefully c o m e t o i n c o r p o r a t e
c e r t a i n e t h i c a l t r a d i t i o n s with at least a m o d i c u m of force. P r o -
f e s s i o n a l a s s o c i a t i o n s w o u l d h a v e t h e p o w e r t o strike off m e m b e r s
w h o v i o l a t e p r o f e s s i o n a l e t h i c s , and t h e t h r e a t of being struck off
c a n be u s e d by e m p l o y e e s to resist u n e t h i c a l d e m a n d s from
e m p l o y e r s . N a d e r e t al. ( 1 9 7 2 ) h a v e f o r m u l a t e d a n i m p o r t a n t role
for p r o f e s s i o n a l a s s o c i a t i o n s in d e f e n d i n g t h e e m p l o y e e rights of
whistle b l o w e r s . As argued in C h a p t e r 4, professionalism is no
p a n a c e a , but i t m i g h t h e l p .
I t h a s b e e n s h o w n t h a t large p h a r m a c e u t i c a l c o m p a n i e s set
u p g r o u p s w h o s e j o b i t i s t o e n s u r e i n t e g r i t y , q u a l i t y , and
safety in t h e c o m p a n y ' s o u t p u t . T h e y do this b e c a u s e it is in the
i n t e r e s t s o f profit t o h a v e g r o u p s totally c o m m i t t e d t o t h e s e g o a l s .
Y e t it is also in t h e i n t e r e s t s of profit to have o t h e r g r o u p s like
r e g u l a t o r y affairs, p u b l i c r e l a t i o n s and t o p m a n a g e m e n t itself w h o
can take matters out o f t h e hands o f t h e pro-public-interest groups
w h e n i n t e g r i t y will cost t o o m u c h m o n e y . P h a r m a c e u t i c a l c o m -
p a n i e s d o not w a n t t h e i r scientists t o d o d i s h o n e s t r e s e a r c h .
T h e y w a n t s c i e n t i s t s u n c o m p r o m i s i n g l y c o m m i t t e d t o scientific
i n t e g r i t y . H o w e v e r , t h e y also w a n t to be a b l e to use t h a t scientific
integrity selectively: to ignore it w h e n they want, to have studies
r e p e a t e d w h e n r e s u l t s a r e not f a v o u r a b l e , t o have t h e public
353
Strategies for controlling corporate crime
w h e r e line s u p e r v i s o r s r e g a r d safety o r q u a l i t y a s t h e r e s p o n s i b i l i t y
of safety or q u a l i t y staff. B o t h line and staff m u s t be held a c c o u n t -
a b l e for p r o b l e m s w i t h i n t h e i r s p h e r e o f r e s p o n s i b i l i t y . T h e costs o f
r e c a l l s or i n d u s t r i a l a c c i d e n t s can be e x t e r n a l i t i e s to t h e e c o n o m i c
c a l c u l a t i o n s o f p r o d u c t i o n s u b u n i t s . P e t e r s e n ( 1 9 7 8 : 4 9 - 5 1 ) has
suggested that t h e s e costs be sheeted back to the subunit by
c h a r g i n g a c c i d e n t c o s t s to t h e profit and loss s t a t e m e n t s of s u b u n i t s .
p r o r a t i n g i n s u r a n c e p r e m i u m s a c c o r d i n g t o s u b u n i t safety p e r f o r m -
a n c e and p u t t i n g safety i n t o t h e s u p e r v i s o r ' s a p p r a i s a l .
T h e n e x t r e q u i r e m e n t for effective s e l f - r e g u l a t i o n is that t h e r e be
p r o v i s i o n t o e n s u r e t h a t ' b a d n e w s ' g e t s t o the t o p o f t h e cor-
p o r a t i o n . T h e r e a r e t w o r e a s o n s for t h i s . F i r s t , w h e n t o p m a n a g e -
m e n t g e t s t o k n o w a b o u t a c r i m e w h i c h a c h i e v e s c e r t a i n subunit
g o a l s , but which is not in the overall interests ofthe c o r p o r a t i o n , top
m a n a g e m e n t will s t o p t h e c r i m e . S e c o n d , w h e n t o p m a n a g e m e n t i s
forced t o k n o w a b o u t a c t i v i t i e s w h i c h i t w o u l d r a t h e r not k n o w
a b o u t , it will often be forced to ' p r o t e c t its ass' by p u t t i n g a s t o p to it.
G r o s s has e x p l a i n e d h o w c r i m i n o g e n i c o r g a n i s a t i o n s frequently
b u i l d i n a s s u r a n c e s t h a t t h e taint o f k n o w l e d g e d o e s not t o u c h t h o s e
at t h e t o p .
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Strategies for controlling corporate crime
A s i m i l a r p r o c e s s w a s at w o r k in t h e M E R / 2 9 case study w h e n
M r s J o r d a n w a s told t h a t t h e i n s t r u c t i o n t o t h r o w out her pet
m o n k e y h a d c o m e from a n o n y m o u s ' h i g h e r - u p s ' .
T h e s o l u t i o n to this p r o b l e m is a free r o u t e to t h e t o p . T h e lowly
d i s i l l u s i o n e d scientist w h o can see t h a t p e o p l e could b e d y i n g while
m i d d l e m a n a g e r s e q u i v o c a t e a b o u t w h a t sort o f m e m o will g o u p
s h o u l d be a b l e to b y p a s s line m a n a g e m e n t and send his i n f o r m a t i o n
t o a n o m b u d s m a n , a n s w e r a b l e only t o t h e b o a r d o r chief e x e c u t i v e ,
w h o s e j o b i t i s t o r e c e i v e bad n e w s . G e n e r a l E l e c t r i c , D o w
C h e m i c a l , I B M , a n d A m e r i c a n A i r l i n e s all h a v e such s h o r t - c i r c u i t -
ing m e c h a n i s m s t o a l l o w e m p l o y e e s a n o n y m o u s l y t o get their
m e s s a g e a b o u t a m i d d l e m a n a g e m e n t c o v e r - u p to the top.
T h e o m b u d s m a n s o l u t i o n is simply a specific e x a m p l e of the
g e n e r a l p r o p o s i t i o n t h a t i f t h e r e are t w o lines t o t h e t o p , a d v e r s e
i n f o r m a t i o n will get up m u c h m o r e q u i c k l y t h a n if t h e r e is only o n e .
For e x a m p l e , if an i n d e p e n d e n t compliance group answering to a
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Strategies for controlling corporate crime
s e n i o r v i c e - p r e s i d e n t p e r i o d i c a l l y a u d i t s a l a b o r a t o r y , scientists in
the l a b o r a t o r y have a n o t h e r channel up the organisation through
t h e a u d i t g r o u p . N a t u r a l l y , t h e m i d d l e m a n a g e r s r e s p o n s i b l e for t h e
l a b o r a t o r y w o u l d prefer t h a t t h e y , r a t h e r t h a n t h e c o m p l i a n c e
g r o u p , give s e n i o r m a n a g e m e n t t h e bad n e w s .
T h e r e a r e a l s o w a y s of c r e a t i n g de facto a l t e r n a t i v e c h a n n e l s up
the organisation. E x x o n have a r e q u i r e m e n t that employees who
s p o t a c t i v i t i e s which c a u s e t h e m t o s u s p e c t illegality must r e p o r t
t h e s e s u s p i c i o n s to t h e g e n e r a l c o u n s e l . Say a financial a u d i t o r
n o t i c e s in t h e c o u r s e of his or her w o r k a m e m o which suggests an
a n t i t r u s t offence. I n m o s t c o m p a n i e s , a u d i t o r s w o u l d i g n o r e such
e v i d e n c e b e c a u s e it is not t h e i r r e s p o n s i b i l i t y and b e c a u s e of the
r e a s o n a b l e p r e s u m p t i o n t h a t they a r e not e x p e c t e d t o b e e x p e r t s i n
a n t i t r u s t law. E x x o n i n t e r n a l a u d i t o r s , h o w e v e r , w o u l d b e i n hot
w a t e r if t h e y did n o t r e p o r t t h e i r g r o u n d s for suspicion to s o m e o n e
w h o i s a n e x p e r t o n a n t i t r u s t (the g e n e r a l c o u n s e l ) . T h e m o r e
c h a n n e l s , e i t h e r defacto or formal, w h i c h can s h o r t - c i r c u i t n o r m a l
line r e p o r t i n g , t h e b e t t e r .
I n d e e d , this i s p a r t o f a n e v e n m o r e g e n e r a l p r i n c i p l e t h a t t h e
m o r e p e o p l e w h o a r e i n v o l v e d in a d e c i s i o n , t h e h a r d e r it is to k e e p
t h e lid on an illegality. W i t n e s s t h e a r g u m e n t of C h a p t e r 3 that in a
research team organised under matrix-management principles, it is
m u c h m o r e difficult to fudge d a t a t h a n in a t e a m o r g a n i s e d on
traditional hierarchical line-reporting principles. U n d o u b t e d l y ,
m i d d l e - m a n a g e m e n t c o v e r - u p s in c o m p a n i e s like Lilly, which has a
c o m m i t t e e d e c i s i o n - m a k i n g p r o c e s s , a r e m o r e difficult t h a n i n o t h e r
c o m p a n i e s . T h i s p r i n c i p l e i s r e l e v a n t t o g o v e r n m e n t a s well. S o m e
T h i r d W o r l d c o u n t r i e s h a v e t a k e n c e r t a i n sensitive d e c i s i o n s which
a r e s u s c e p t i b l e t o b r i b e r y o u t o f t h e h a n d s o f i n d i v i d u a l s and into
t h e k e e p i n g of c o m m i t t e e s . It is h a r d e r to b r i b e a c o m m i t t e e t h a n an
i n d i v i d u a l . Of c o u r s e , t h e r e can be a trade-off b e t w e e n c r i m e p r e -
v e n t i o n a n d efficiency h e r e .
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Strategies for controlling corporate crime
W h e n c o m p a n i e s h a v e effective s e l f - r e g u l a t o r y s y s t e m s , cog-
n i s a n c e s h o u l d be t a k e n of this by r e g u l a t o r y a g e n c i e s . Unfor-
tunately, situations occur where regulatory agencies provide
d i s i n c e n t i v e s for effective s e l f - r e g u l a t i o n . S m i t h K l i n e e x e c u t i v e s
c o m p l a i n e d of a s i t u a t i o n in 1979 w h e n t h e c o m p a n y c o n d u c t e d a
d e t a i l e d i n - h o u s e e x a m i n a t i o n w h i c h d i s c o v e r e d c o n t a m i n a n t s i n its
n a s a l s p r a y s (Sine-off a n d C o n t a c M i s t ) . I n c o n t r a s t t o m a n y o f t h e
' b a d n e w s ' s t o r i e s in this b o o k , S m i t h K l i n e b e h a v e d as a self-
r e g u l a t i n g c o m p a n y and t r e a t e d t h e e m p l o y e e w h o d i s c o v e r e d the
c o n t a m i n a n t as s o m e t h i n g of a h e r o . H e r efforts w e r e held up as an
e x a m p l e of t h e kind of vigilance r e q u i r e d for t h e s a k e of p r o d u c t
p u r i t y . S m i t h K l i n e notified t h e F D A t h a t 1.2 million b o t t l e s of nasal
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Strategies for controlling corporate crime
s p r a y w e r e b e i n g r e c a l l e d from d r u g s t o r e s a n d s u p e r m a r k e t s
a r o u n d the c o u n t r y . A c c o r d i n g to the executives, the F D A then
i s s u e d a p r e s s r e l e a s e w h i c h c r e a t e d t h e i m p r e s s i o n that it had
d i s c o v e r e d t h e p r o b l e m and forced S m i t h K l i n e into t h e recall. T o
b a l a n c e t h e a c c o u n t , o t h e r i n t e r v i e w e e s p r a i s e d t h e F D A for not
p r o v i d i n g d i s i n c e n t i v e s for s e l f - r e g u l a t o r y initiatives and o p e n n e s s :
W e h a v e a g o o d r e l a t i o n s h i p with o u r s e c t i o n o f F D A . W e can b e
o p e n w i t h t h e m i n telling t h e m o f o u r p r o b l e m s . T h e y are going t o
listen t o o u r p r o p o s a l s for s t r a i g h t e n i n g t h e p r o b l e m o u t . I f t h e y
w e r e g o i n g to j u m p on us like a ton o f b r i c k s every t i m e , we w o u l d
c o v e r up a lot of t h i n g s .
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Strategies for controlling corporate crime
T h e r e is s o m e t h i n g in it for t h e c o m p a n i e s . F o r c o m p a n i e s w h o do
n o t see it this w a y , g o v e r n m e n t can m a n d a t e t h a t c e r t a i n self-
r e g u l a t o r y m e c h a n i s m s be p u t in p l a c e . T h i s is exactly w h a t t h e
F D A did with t h e Q u a l i t y A s s u r a n c e U n i t r e q u i r e m e n t s o f t h e
G L P s ( C h a p t e r 3 ) . I n o r d e r t o e n s u r e t h a t the Q A U r e p o r t s and
r e c o m m e n d a t i o n s a r e frank and b i t i n g , F D A d o e s n o t inspect t h e
r e p o r t s . G o v e r n m e n t c a n n o t h a v e its c a k e and eat i t w h e n passing
on t h e c o s t s of c e r t a i n t y p e s of r e g u l a t i o n to i n d u s t r y .
If a f u n d a m e n t a l reality is, as I h a v e a r g u e d , t h a t c o r p o r a t i o n s
h a v e c l e a r l y defined a c c o u n t a b i l i t y for i n t e r n a l p u r p o s e s and
diffused a c c o u n t a b i l i t y for e x t e r n a l e x p o s u r e , t h e n it is a m i n o r
i m p o s i t i o n for g o v e r n m e n t t o r e q u i r e c e r t a i n t y p e s o f n o m i n a t e d
a c c o u n t a b i l i t y . A f t e r d i s c u s s i n g t h e a p p a r e n t l y diffused r e s p o n s i -
bility o v e r t h e safety p r o b l e m s o f G e n e r a l M o t o r s ' C o r v a i r , S t o n e
concludes:
G o v e r n m e n t i m p o s e d n o m i n a t e d a c c o u n t a b i l i t y for specific
i m p o r t a n t r e s p o n s i b i l i t i e s is a s i m p l e , i n e x p e n s i v e reform. T h e
p r o f o u n d p s y c h o l o g i c a l c o n n e c t i o n b e t w e e n p e o p l e and their
n a m e s g i v e s s o m e v a l u e to t h e m e r e fact of r e q u i r i n g a p e r s o n to sign
a s t a t e m e n t t h a t no unsafe effects of a p r o d u c t h a v e b e e n found.
T h e r e c a n b e n o m i n a t e d a c c o u n t a b i l i t y for p r e p a r i n g e n v i r o n -
m e n t a l i m p a c t s t a t e m e n t s , for s u p e r v i s i n g t h e i m p l e m e n t a t i o n o f
r e s e a r c h p r o t o c o l s , for e n s u r i n g t h a t any r e g u l a t o r y w a r n i n g s o f a
p a r t i c u l a r t y p e are b r o u g h t t o the a t t e n t i o n o f t h e b o a r d . W h e n
specific p e o p l e k n o w t h a t t h e y will b e p r o s e c u t e d , fired, o r t h e focus
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R e a d e r s will h a v e n o t i c e d t h a t i n all o f t h e d i s c u s s i o n t o d a t e , t h e
r o l e o f t h e b o a r d o f d i r e c t o r s has b e e n c u r i o u s l y a b s e n t . L a r g e l y this
is b e c a u s e in all o f t h e c a s e s t u d i e s of c o r p o r a t e c r i m e a n a l y s e d in
the b o o k , the board of directors played an inconsequential role.
M u c h p r i n t e r ' s ink i n t h e U n i t e d S t a t e s has b e e n d e v o t e d t o t h e
i m p o r t a n c e o f h a v i n g o u t s i d e r s o n t h e b o a r d s o f major c o r p o r -
2
a t i o n s , " e v e n t h o u g h t h e U n i t e d S t a t e s has h i g h e r p r o p o r t i o n s o f
n o n - e x e c u t i v e d i r e c t o r s o n its b o a r d s t h a n i n any o t h e r c o u n t r y
( V a n D u s e n W i s h a r d , 1 9 7 7 : 2 2 8 ) . Y e t , w i t h all t h e c o m p a n i e s from
m a n y i n d u s t r i e s w h i c h d i s c l o s e d foreign b r i b e r y t o the S E C , i n not
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Strategies for controlling corporate crime
o n e c a s e w a s i t d i s c o v e r e d t h a t a n o u t s i d e d i r e c t o r had b e e n
a p p r i s e d o f t h e p r o b l e m . " I n c o n t r a s t , i n o v e r 4 0 per cent o f t h e
S E C foreign p a y m e n t s d i s c l o s u r e s , i t w a s r e v e a l e d t h a t s e n i o r
m a n a g e m e n t w a s a w a r e o f t h e p a y m e n t s and t h e s u r r o u n d i n g
c i r c u m s t a n c e s ( C o f f e e , 1977: 1105). W h i l e m o s t law s c h o o l s
e d u c a t e t h e i r s t u d e n t s a b o u t t h e b o a r d a s t h e f u n d a m e n t a l decision-
m a k i n g unit o f t h e c o r p o r a t i o n and o f t h e d u t i e s o f d i r e c t o r s ,
e m p i r i c a l o b s e r v e r s o f c o r p o r a t e reality c o n t i n u e t o c o n c l u d e t h a t
t h e b o a r d ' s influence i s feeble ( M a c e , 1 9 7 1 ; E i s e n b e r g , 1976).
Coffee ( 1 9 7 7 : 1148) has p o s i t e d a m e t a p h o r w h i c h c a p t u r e s the
i r r e l e v a n c e of the board to most c o r p o r a t e crime in the pharma-
c e u t i c a l i n d u s t r y . C o n v e n t i o n a l l y , t h e b o a r d i s viewed a s t h e cor-
p o r a t i o n ' s ' c r o w ' s n e s t ' . A s s u c h , i t can spot i m p e n d i n g p r o b l e m s o n
t h e h o r i z o n , b u t can hardly d i s c o v e r or c o r r e c t t r o u b l e in t h e ship's
b o i l e r r o o m b e l o w . C o r p o r a t e c r i m e o c c u r s i n t h e boiler r o o m and
w o u l d r a r e l y be n o t i c e d by d i r e c t o r s w h o s e j o b it is to scout the
h o r i z o n l o o k i n g for n e w i n v e s t m e n t o p p o r t u n i t i e s , s o u r c e s o f
f i n a n c e , p o s s i b l e m e r g e r s , j o i n t v e n t u r e s , and t h e like.
O r , in the w o r d s of one informant:
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U n d o u b t e d l y , b o t h w o u l d b e d e s i r a b l e . B u t since b o t h b o a r d and
c h i e f e x e c u t i v e officer typically suffer from an i n f o r m a t i o n over-
l o a d , c h o i c e s m u s t b e m a d e . Since t h e chief e x e c u t i v e c u r r e n t l y
a l r e a d y h a s t h e g r e a t e r ability t o k n o w a b o u t and c o r r e c t law-
b r e a k i n g , m e a s u r e s t o i m p o s e a s s u r a n c e s that t h e t o p will k n o w ,
a n d m e a s u r e s to define r e s p o n s i b i l i t i e s to act, should also be
d i r e c t e d a t t h e chief e x e c u t i v e .
O b v i o u s l y , t h e r e are e x c e p t i o n s to t h e d e s i r a b i l i t y of such a
p r i n c i p l e . It is surely p r e f e r a b l e for t h e b o a r d , or an a u d i t c o m -
mittee c o m p o s e d of outside directors, to review matters which
t o u c h o n t h e p e r s o n a l financial i n t e r e s t s o f t h e chief e x e c u t i v e
officer, such as l o a n s to c o m p a n i e s in w h i c h t h e latter has an interest
or t h e c h o i c e of a c c o u n t i n g s y s t e m s w h i c h influence b o n u s e s to be
paid to the chief e x e c u t i v e . "
A f u n d a m e n t a l p r o b l e m in W e s t e r n s o c i e t i e s g e n e r a l l y is a split
b e t w e e n p o w e r and accountability. Under Westminster-style
g o v e r n m e n t s civil s e r v a n t s often wield t h e real p o w e r w h i l e
m i n i s t e r s a r e held a c c o u n t a b l e for d e c i s i o n s they m i g h t not e v e n
k n o w a b o u t . S i m i l a r l y , t h e o u t d a t e d legal t r a d i t i o n s o f c o m p a n y law
p r i m a r i l y hold d i r e c t o r s r a t h e r t h a n m a n a g e r s a c c o u n t a b l e . Prin-
c i p l e s of p u b l i c a c c o u n t a b i l i t y need to be b r o u g h t b e t t e r in line with
t h e r e a l i t i e s o f secret p o w e r . S o m e e x e c u t i v e s i n this study a r g u e d
t h a t a t t e m p t s t o place r e s p o n s i b i l i t y for c o m p l i a n c e m o r e s q u a r e l y
i n t h e h a n d s o f t h e b o a r d w o u l d only serve t o e x a c e r b a t e t h e split
b e t w e e n p o w e r and accountability.
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Strategies for controlling corporate crime
T h e s e efficiency d e b i t s o f t h e p u b l i c - i n t e r e s t d i r e c t o r c o n c e p t a r e
n o t fully a n s w e r e d b y s u p p o r t e r s such a s S t o n e ( 1 9 7 5 ) . S t o n e
s u g g e s t s t h a t p u b l i c i n t e r e s t d i r e c t o r s and t h e i r staffs should be part
o f t h e c o r p o r a t e t e a m in most normal respects. The public-interest
d i r e c t o r s h o u l d a l s o be a d i r e c t o r / o r t h e c o r p o r a t i o n in t h e sense of
a s s i s t i n g w i t h g e n e r a l c o r p o r a t e g o a l s such a s profit and g r o w t h .
A l t h o u g h the public-interest director is appointed by g o v e r n m e n t ,
n o o n e s h o u l d b e a p p o i n t e d w h o i s not a c c e p t a b l e t o t h e b o a r d .
S t o n e s u g g e s t s t h a t p u b l i c - i n t e r e s t d i r e c t o r s should not t u r n o v e r
information u n c o v e r e d in the course of their investigations to public
a u t h o r i t i e s . Only if the company indicates an unwillingness to
i m p l e m e n t the reforms suggested by the public-interest director to
rectify a s i t u a t i o n s h o u l d s/he go p u b l i c or r e p o r t t h e situation to t h e
government.
C e r t a i n l y t h e r e is a difficult c h o i c e to be m a d e . C o n s u m e r s can
h a v e a d i r e c t o r r e p r e s e n t i n g their interests w h o is no longer
a c c o u n t a b l e t o t h e p u b l i c , sufficiently t a m e t o b e a c c e p t a b l e t o
m a n a g e m e n t , and therefore in considerable danger of co-optation.
O r t h e y can h a v e a n a g g r e s s i v e p u b l i c - i n t e r e s t d i r e c t o r w h o i s
c o n s e q u e n t l y frozen o u t o f i n t e r n a l d e c i s i o n - m a k i n g and w h o
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Strategies for controlling corporate crime
P u t t i n g p e o p l e i n s i d e may h a v e less p u n c h t h a n m a n d a t i n g o r g a n -
i s a t i o n a l r e f o r m s w h i c h m a k e i t m u c h m o r e difficult t o hide a b u s e s
from t h e o u t s i d e . G o v e r n m e n t r e g u l a t i o n m i g h t b e b e t t e r served b y
r e q u i r i n g c o m p a n i e s t o h a v e effective c o m p l i a n c e g r o u p s r e p o r t i n g
t o t h e c h i e f e x e c u t i v e , n o m i n a t e d a c c o u n t a b i l i t y , free c h a n n e l s o f
c o m m u n i c a t i o n and c o r p o r a t e o m b u d s m e n to ensure the spread of
t h e t a i n t o f k n o w l e d g e . I n o t h e r w o r d s , g o v e r n m e n t might audit the
c o m p l i a n c e s y s t e m s b u t not t h e s u b s t a n c e o f c o r p o r a t e d e c i s i o n -
m a k i n g . I t w o u l d t h e n k e e p its ear t o t h e g r o u n d and w h e n e v i d e n c e
g a t h e r e d t h a t a p a r t i c u l a r c o r p o r a t i o n w a s i g n o r i n g its own c o m -
p l i a n c e w a r n i n g s , g o v e r n m e n t i n s p e c t o r s w o u l d s w o o p o n that cor-
p o r a t i o n i n g r e a t n u m b e r s . T h e n they w o u l d a u d i t t h e s u b s t a n c e o r
c o r p o r a t e d e c i s i o n s - t h e c o r p o r a t e case law.
C r i t i c s of p u b l i c - i n t e r e s t d i r e c t o r s h i p s h a v e l i k e n e d t h e idea to
p u t t i n g virgins into b r o t h e l s . " Since t h e b o a r d i s n e v e r i n c h a r g e o f
t h e m o d e r n c o r p o r a t i o n , a m o r e a p p r o p r i a t e a n a l o g y might b e
a p p o i n t i n g a pacifist as an a d v i s o r to t h e g e n e r a l on h o w t h e t r o o p s
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Strategies for controlling corporate crime
a r e p e r f o r m i n g . W h i l e it d o e s a p p e a r in s o m e w a y s to be a struc-
t u r a l l y n a i v e s o l u t i o n , it is o n e w h i c h s h o u l d be piloted on a few
c o m p a n i e s a n d e v a l u a t e d . " T h e a r m c h a i r e v a l u a t i o n indulged i n
a b o v e is no s u b s t i t u t e for e m p i r i c a l o b s e r v a t i o n of w h a t h a p p e n s in
a c o m p a n y w h e n t h e p u b l i c - i n t e r e s t d i r e c t o r i n t e r v e n e s . T h e reform
has n o t b e e n tried and found w a n t i n g , but found w a n t i n g for lack of
having been tried.
Socialism
A p a r t from t h e U S S R a n d o t h e r socialist e n c l a v e s , m a n y c o u n t r i e s
have established state-owned pharmaceutical companies. A m o n g
t h e m are Australia,"* C a n a d a , F r a n c e , Italy, N o r w a y , Sweden,
B u r m a , E g y p t , I n d i a , I n d o n e s i a , I r a n , M e x i c o , B r a z i l , and Sri
L a n k a . C o u n t r i e s such a s E g y p t and M e x i c o h a v e seen a b o r t i v e
a t t e m p t s to nationalise the industry completely. The latter option
h a s b e e n f o u n d a t t r a c t i v e b y few c o u n t r i e s b e c a u s e t h e hard reality
r e m a i n s t h a t m o s t o f t h e r e s e a r c h t a l e n t w h i c h p r o d u c e s major
t h e r a p e u t i c b r e a k t h r o u g h s is employed in the transnational com-
p a n i e s . F e w c o u n t r i e s can afford to c o m p l e t e l y cut off t h e i r ties with
the t r a n s n a t i o n a l s .
T r a n s n a t i o n a l s d e f e n d t h e c a p i t a l i s t way as best by p o i n t i n g out
t h a t few t h e r a p e u t i c b r e a k t h r o u g h s o f any i m p o r t a n c e have
e m e r g e d from t h e socialist c o u n t r i e s . T h e y prefer to live off the
t h e r a p e u t i c a d v a n c e s made in the capitalist world, while devoting
t h e i r scientific i n v e s t m e n t t o o t h e r p r i o r i t i e s (like d e v e l o p i n g m o r e
sophisticated nuclear s u b m a r i n e s and better ways of training
O l y m p i c a t h l e t e s ! ) . T h a t t h e Soviet U n i o n c h o o s e s not t o invest
h e a v i l y i n d r u g r e s e a r c h says n o t h i n g a b o u t t h e i n h e r e n t scientific
inefficiency o f s o c i a l i s m . T h e r e a r e a r e a s o f science w h e r e t h e
U S S R l e a d s t h e w o r l d . W i t n e s s t h e following p r o x y s t a t e m e n t from
the C o n t r o l D a t a C o r p o r a t i o n defending trade with Russia: 'The
S o v i e t U n i o n i s c r e a t i n g m o r e basic t e c h n o l o g y [ k n o w l e d g e ] t h a n
t h e U n i t e d S t a t e s b e c a u s e they h a v e m o r e scientists e n g a g e d i n
r e s e a r c h ' ( q u o t e d i n P u r c e l l . 1979: 4 4 ) .
A s t r o n g c a s e c a n be m a d e t h a t socialist e n t e r p r i s e s investing
p r o p o r t i o n s o f t h e i r sales r e c e i p t s i n r e s e a r c h e q u i v a l e n t t o t h e
i n v e s t m e n t s o f p r i v a t e c o m p a n i e s could b e m u c h m o r e efficient
s e r v a n t s o f t h e c o m m u n i t y ' s h e a l t h t h a n t h e latter. T o t h e e x t e n t
t h a t socialist e n t e r p r i s e s w e r e d r i v e n b y t h e goal o f i m p r o v i n g
h e a l t h r a t h e r t h a n m a k i n g profits, fewer r e s o u r c e s w o u l d g o t o
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Strategies for controlling corporate crime
c r e a t i n g artificial n e e d s a n d fostering o v e r m e d i c a t i o n ( p a r t i c u l a r l y
w i t h p s y c h o t r o p i c d r u g s ) , fewer r e s o u r c e s w o u l d g o t o d e v e l o p i n g
m e - t o o drugs and m o r e to genuine i m p r o v e m e n t s in therapy. Many
o f t h e e c o n o m i c w i n n e r s a r e t h o s e t h a t offer little o r n o t h e r a p e u t i c
g a i n , w h i l e t h e r e i s n o p r o f i t t o b e m a d e from d r u g s t o cure s o m e o f
t h e h o r r e n d o u s d i s e a s e s w h i c h t a k e such a heavy toll o n t h e p o v e r t y -
s t r i c k e n s e g m e n t s of T h i r d W o r l d p o p u l a t i o n s . "
The justification f o r e s t a b l i s h i n g most of the national p h a r m a -
c e u t i c a l c o m p a n i e s h a s b e e n m o r e b a s i c . P h a r m a c e u t i c a l s are highly
p r o f i t a b l e , a n d d o n o t r e q u i r e g r e a t a m o u n t s o f c a p i t a l . M u c h o f the
p h a r m a c e u t i c a l s ' p r o f i t s a r e paid b y g o v e r n m e n t s w h i c h subsidise
h e a l t h c a r e . T h u s t h e r e i s a d o u b l e e c o n o m i c justification for
g o v e r n m e n t s t o get a p i e c e o f t h e a c t i o n . T h e r e are s u b s i d i a r y
r a t i o n a l e s — i m p r o v i n g b a l a n c e - o f - p a y m e n t s difficulties, and gain-
ing i n s i d e k n o w l e d g e o f r a w m a t e r i a l t r a n s f e r p r i c e s s o t h a t b a r g a i n -
ing w i t h t r a n s n a t i o n a l s o v e r t r a n s f e r p r i c e s can be g r o u n d e d in a
firmer knowledge b a s e .
S o c i a l i s t c r i m i n o l o g i s t s t e n d t o a r g u e t h a t since profit i s t h e
m o t i v e for c o r p o r a t e c r i m e , socialism w o u l d r e d u c e t h e p r o b l e m .
T o t h e e x t e n t t h a t p r o f i t i s t h e m o t i v e for offences, i t p r o b a b l y
w o u l d . B u t w h a t h a s b e e n s h o w n i n this b o o k i s t h a t m a x i m i s i n g
c o r p o r a t e profit i s n o t t h e m o t i v e for m a n y c o r p o r a t e c r i m e s . I t i s
i m p o s s i b l e t o say w h a t p r o p o r t i o n i s m o t i v a t e d b y profit, w h a t
proportion by corporate growth, subunit growth, personal
a m b i t i o n , and other f a c t o r s .
I n b o t h c a p i t a l i s t a n d s o c i a l i s t s o c i e t i e s , c o r p o r a t i o n s (or t h e i r
s u b u n i t s ) b r e a k r u l e s b e c a u s e t h e y a r e set c e r t a i n i m p o r t a n t goals
w h i c h t h e y m u s t a c h i e v e ( G r o s s , 1978). I n a c a p i t a l i s t s o c i e t y , a n
o r g a n i s a t i o n m i g h t be s e t t h e goal of a c h i e v i n g a c e r t a i n level of
profit; in a s o c i a l i s t s o c i e t y , t h e goal m i g h t be m e e t i n g a p r o d u c t i o n
t a r g e t set b y t h e s t a t e . U n d e r b o t h s y s t e m s t h e r e will b e o c c a s i o n s
w h e n o r g a n i s a t i o n a l a c t o r s are unable t h r o u g h legitimate means t o
a c h i e v e t h e g o a l . T h e y will t h e n b e u n d e r p r e s s u r e , a s M e r t o n
( 1 9 5 7 ) first p o i n t e d o u t , t o r e s o r t t o i l l e g i t i m a t e m e a n s o f goal
a t t a i n m e n t . T h e s o c i a l i s t m a n a g e r m u s t m e e t p e r f o r m a n c e stan-
d a r d s , j u s t as m u s t t h e c a p i t a l i s t . If a socialist m a n a g e r is told to cut
c o s t s , s/he m a y b e u n d e r a s m u c h t e m p t a t i o n a s the capitalist, for
5 0
i n s t a n c e , t o r e d u c e c o s t s b y c u t t i n g c o r n e r s o n quality c o n t r o l .
O n e would expect a s o c i a l i s t researcher who must meet a deadline
for t h e c o m p l e t i o n of c e r t a i n t e s t s to be no less likely t h a n a
c a p i t a l i s t s c i e n t i s t t o d o s o b y ' g r a p h i t i n g ' s o m e trials. O n the o t h e r
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Strategies for controlling corporate crime
h a n d , t h e g r e a t h o p e of socialism is t h a t it w o u l d see a t r a n s i t i o n to a
less e g o i s t i c society ( B o n g e r , 1916) - o n e w h e r e i n d i v i d u a l s evalu-
ate t h e i r a c t i o n s a c c o r d i n g t o t h e i r c o n t r i b u t i o n t o t h e w h o l e
c o m m u n i t y rather than in terms of narrow personal or peer-group
ambitions.
S u c h a t r a n s i t i o n , h o w e v e r , can n e v e r be c o m p l e t e . I n d e e d , in
e x i s t i n g socialist s o c i e t i e s , t h e r e is little e v i d e n c e of it e v e n begin-
n i n g . I t i s h o p e d , t h e r e f o r e , t h a t m a n y o f t h e lessons o f t h i s b o o k
h a v e a s m u c h r e l e v a n c e t o socialist a s t o c a p i t a l i s t c o r p o r a t i o n s .
In t h e face o f t h e s e e m i n g l y e n d l e s s p o s s i b i l i t i e s for i n t e r n a t i o n a l
l a w e v a s i o n , it is a m i s t a k e to be o v e r l y pessimistic a b o u t t h e
r e g u l a t i o n o f t r a n s n a t i o n a l c o r p o r a t i o n s . C o n s i d e r the e v a s i o n o f
t a x l a w s b y t r a n s f e r p r i c i n g . I n t e r n a l c o m p a n y politics frequently d o
n o t p e r m i t a c o r p o r a t i o n to set t h e o p t i m a l t r a n s f e r p r i c e s s u g g e s t e d
by its c o m p u t e r s i m u l a t i o n s . T h e g e n e r a l m a n a g e r of a powerful
s u b s i d i a r y m i g h t b e u n w i l l i n g t o see h i s / h e r p a p e r profits d i m i n i s h e d
t o b o l s t e r t h e profits o f a n a d v e r s a r y w h o r u n s a n o t h e r s u b s i d i a r y .
S o m e c o m p a n i e s e n t i r e l y i g n o r e t h e i m p a c t o f t a x e s o n transfer
p r i c e s , a r g u i n g t h a t s i m p l e and c o n s i s t e n t pricing p r a c t i c e s t e n d t o
m i n i m i s e t a x - i n v e s t i g a t i o n p r o b l e m s ( S h u l m a n , 1969; H e l l m a n n ,
1977: 5 0 ) .
T h e r e h a v e b e e n s e v e r a l i l l u s t r a t i o n s i n this b o o k o f t h e less t h a n
p e r f e c t c a p a c i t y w h i c h t r a n s n a t i o n a l s h a v e to shift their activities
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Strategies for controlling corporate crime
a r o u n d t h e w o r l d t o e v a d e legal c o n s t r a i n t s . T h e C o s t a R i c a n
e x a m p l e s in C h a p t e r 7 show h o w s t r a t e g i c g o v e r n m e n t action can
t r a n s f o r m l o w e s t - c o m m o n - d e n o m i n a t o r r e g u l a t i o n into highest-
c o m m o n - f a c t o r r e g u l a t i o n . T h e cost o f s u s t a i n i n g m u l t i p l e stan-
d a r d s can often be g r e a t e r t h a n that of m a i n t a i n i n g a uniform h i g h e r
s t a n d a r d . W h e r e a s t r a t e g i c lifting of s t a n d a r d s by a single c o u n t r y is
n o t e n o u g h , r e g i o n a l c o - o p e r a t i o n is often sufficient to t h w a r t
t r a n s n a t i o n a l law e v a s i o n . If all o f t h e c o u n t r i e s in a region lift their
o c c u p a t i o n a l h e a l t h and safety s t a n d a r d s , m a n u f a c t u r e r s may b e
u n l i k e l y t o m o v e e n t i r e l y out o f t h e r e g i o n t o a n o t h e r part o f t h e
w o r l d . T h u s t h e r e a r e m a n y m e c h a n i s m s for t h w a r t i n g i n t e r n a t i o n a l
law e v a s i o n w h i c h do not involve t h e difficulties of perfect inter-
n a t i o n a l h a r m o n i s a t i o n of s t a n d a r d s . If t h e out and out h a v e n s for
p o l l u t i o n a n d o t h e r d a n g e r o u s p r a c t i c e s can b e u p g r a d e d , less
d r a m a t i c differences b e t w e e n the standards of other countries
m i g h t not be so g r e a t as to justify the d i s l o c a t i v e costs of t h e
international evasion game.
C o n s e q u e n t l y , i n t e r n a t i o n a l h a r m o n i s a t i o n o f r e g u l a t o r y stan-
d a r d s only has to be partially successful to be totally effective.
W H O a n d t h e F D A a r e t a k i n g t h e l e a d e r s h i p roles i n m o v i n g
t o w a r d s i n t e r n a t i o n a l harmonisation. W h e n the F D A sends inspec-
t o r s to a s s e s s foreign p l a n t s w h i c h are s e e k i n g p e r m i s s i o n for e x p o r t
to t h e U n i t e d S t a t e s or foreign l a b o r a t o r i e s which wish to use their
d a t a in A m e r i c a n n e w d r u g a p p l i c a t i o n s , this o b v i o u s l y has a signi-
ficant h i g h e s t - c o m m o n - f a c t o r impact on international standards.
N e v e r t h e l e s s , w h e n t h e s e foreign i n s p e c t i o n s t a k e p l a c e , the p a r e n t
c o m p a n y t y p i c a l l y s e n d s out e x p e r t s t o c o a c h t h e subsidiary o n h o w
t o h a n d l e F D A i n s p e c t o r s and g e n e r a l l y t o c h e c k t h a t things are a t
least t e m p o r a r i l y p a t c h e d u p t o A m e r i c a n s t a n d a r d s . T h e crucial
d i f f e r e n c e b e t w e e n t h e foreign i n s p e c t i o n s and local U S i n s p e c t i o n s
i s t h a t w h i l e t h e f o r m e r a r e subject t o i n v i t a t i o n and f o r e w a r n i n g ,
the latter occur without warning.
T h e r e are certain respects in which international harmonisation
of r e g u l a t i o n is also in t h e i n t e r e s t s of m a n u f a c t u r e r s . This is par-
ticularly evident in the area of product registration where meeting
t h e d i s p a r a t e r e q u i r e m e n t s o f different n a t i o n a l s y s t e m s i m p o s e s
g r e a t d u p l i c a t i v e c o s t s o n i n d u s t r y ( I F P M A , 1979). E s s e n t i a l l y t h e
s a m e set of a n i m a l or h u m a n trials m a y have to be r e p e a t e d in a
slightly different f o r m a t to satisfy t h e i d i o s y n c r a t i c r e q u i r e m e n t s of
o n e c o u n t r y . S u c h d u p l i c a t i v e t e s t i n g t a k e s a t e r r i b l e toll in un-
n e c e s s a r y suffering of l a b o r a t o r y a n i m a l s . T h i s might seem a trivial
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Strategies for controlling corporate crime
c o n s i d e r a t i o n t o s o m e . H o w e v e r , not m a n y p e o p l e w h o have
w a l k e d t h r o u g h t h e r o w s u p o n rows of dying a n i m a l s in a large
t o x i c o l o g y l a b o r a t o r y w o u l d feel t h a t w a y . " T h e m o n k e y s w h o
s p e n d a c o n f i n e d e x i s t e n c e h o o k e d up to all m a n n e r of t u b e s and
w i r e s , t h e r a b b i t s i n s t o c k s w i t h c h e m i c a l s being d r o p p e d into their
r o t t e d , e m a c i a t e d e y e s . M o r e m o r a l l y d i s t u r b i n g are t h e d i s e a s e d
h u m a n b e i n g s w h o a r e given p l a c e b o s for t h e s a k e o f a n u n n e c e s -
sarily d u p l i c a t i v e scientific e x p e r i m e n t , w h e n t h e y might have b e e n
g i v e n a n a c t i v e d r u g w h i c h w o u l d h a v e i m p r o v e d their c o n d i t i o n .
S u r e l y t h e w o r l d c o m m u n i t y can a g r e e o n i n t e r n a t i o n a l r e c o g n i t i o n
o f d a t a w h i c h m e e t a p p r o p r i a t e s t a n d a r d s and c e r t a i n uniform t y p e s
of s t u d i e s w h i c h will be r e q u i r e d for r e g i s t r a t i o n in all c o u n t r i e s .
I n d i v i d u a l c o u n t r i e s m u s t , o f c o u r s e , b e able t o i m p o s e a d d i t i o n a l
r e q u i r e m e n t s a b o v e this i n t e r n a t i o n a l l y a g r e e d m i n i m u m .
T h a l i d o m i d e d e m o n s t r a t e d t h e n e e d for efficient i n t e r n a t i o n a l
communication of adverse reactions. International communication
b r e a k d o w n s a r e still c o m m o n e n o u g h t o d a y . O n e m e d i c a l d i r e c t o r
told o f his e m b a r r a s s m e n t w h e n a n F D A officer asked him h o w t h e
c o m p a n y w a s c o p i n g with t h e p r o b l e m s o f t h e baby d e a t h s c a u s e d
by one of their drugs in Australia. The parent company knew
n o t h i n g a b o u t t h e p r o b l e m . W h i l e t h e F D A had b e e n i n f o r m e d o f
t h e b a b y d e a t h s t h r o u g h W H O ' s C e n t e r for M o n i t o r i n g A d v e r s e
R e a c t i o n s t o D r u g s , t h e c o m p a n y ' s newly a p p o i n t e d m e d i c a l
d i r e c t o r i n A u s t r a l i a had n e g l e c t e d t o inform t h e p a r e n t . I n a n o t h e r
c a s e , a p r o d u c t w a s i n a d v e r t e n t l y k e p t on t h e m a r k e t for y e a r s in
A u s t r a l i a after t h e A u s t r a l i a n m a n a g i n g d i r e c t o r n e g l e c t e d t o
a t t e n d to an i n s t r u c t i o n from t h e B r i t i s h p a r e n t to w i t h d r a w
t h e p r o d u c t . A p a r t from n e g l e c t , i f a c o m p a n y i n t e n t i o n a l l y w i s h e s
t o o b s c u r e a d v e r s e r e a c t i o n s from o t h e r p a r t s o f t h e world this i s
e a s i l y d o n e . T h e y can e v e n b e r e p o r t e d t o o t h e r g o v e r n m e n t s , but
in t h e m i d s t of such m a s s e s of o t h e r i r r e l e v a n t d a t a from a r o u n d the
g l o b e t h a t t h e i r significance i s o v e r l o o k e d . T h e s e p r o b l e m s can b e
d e a l t w i t h , i n p a r t , b y e x t e n d i n g t h e a p p l i c a t i o n o f the p r o p o s e d
A m e r i c a n law t o p u n i s h failure t o r e p o r t t o t h e g o v e r n m e n t h a z a r d s
f o u n d to be a s s o c i a t e d w i t h a p r o d u c t . H a z a r d s d i s c o v e r e d by
s u b s i d i a r i e s in o t h e r p a r t s of t h e w o r l d should be i n c l u d e d .
O b v i o u s l y , t h e p o s s i b i l i t i e s for o r c h e s t r a t e d b r e a k d o w n s of inter-
n a t i o n a l i n t r a - c o r p o r a t e c o m m u n i c a t i o n s a r e s o e x t r a o r d i n a r y that
for legal c o m p u l s i o n t o w o r k c o u r t s m u s t c o u n t e n a n c e t h e c o n c e p t
of 'wilful b l i n d n e s s ' as e q u i v a l e n t to k n o w l e d g e ( W i l l i a m s , 1961:
1 5 7 - 9 ) ; W i l s o n , 1979.
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Strategies for controlling corporate crime
T o p r e v e n t d o u b l e s t a n d a r d s i n p r o m o t i o n a l claims for d r u g s i n
different p a r t s o f t h e w o r l d o f t h e kind d e m o n s t r a t e d b y S i l v e r m a n
( 1 9 7 6 ) a n i n t e r n a t i o n a l r e g u l a t o r y s t a t u s d o c u m e n t could b e
r e q u i r e d by individual countries. This d o c u m e n t , prepared by the
c o r p o r a t i o n in a c c o r d a n c e with an internationally agreed format,
w o u l d p r o v i d e an u p - t o - d a t e list o f t h e c o u n t r i e s in w h i c h the drug is
a p p r o v e d , a n d t h e i n d i c a t i o n s , c o n t r a - i n d i c a t i o n s . side-effects and
w a r n i n g s w h i c h a r e r e q u i r e d i n e a c h o f t h o s e c o u n t r i e s . This w o u l d
be a useful r e s o u r c e to t h e i n t e r n a t i o n a l c o n s u m e r m o v e m e n t as
w e l l a s t o c o u n t r i e s w h i c h c a n n o t afford s o p h i s t i c a t e d i n f o r m a t i o n -
gathering systems.
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Strategies for controlling corporate crime
H e a d q u a r t e r s m a y insist t h a t t h e i r s u b s i d i a r i e s m e e t c e r t a i n profit
( o r o t h e r ) g o a l s , w h i l e a t t h e s a m e t i m e m a k i n g i t clear that
h e a d q u a r t e r s can hardly be intimately a c q u a i n t e d with the laws of
f o r e i g n c o u n t r i e s . H e n c e , u n d e r t h e guise o f local a u t o n o m y
( w h i c h m a y be h a i l e d as t h r o w i n g off t h e s h a c k l e s of c o l o n i a l i s m
by local e n t h u s i a s t s ) , t h e s u b s i d i a r y m a y be forced to e n g a g e in
c r i m e for w h i c h t h e y will be held r e s p o n s i b l e by t h e i r
g o v e r n m e n t s ( G r o s s , 1978: 2 0 9 ) .
P e r l m u t t e r s ' s t h i r d m o d e l , g e o c e n t r i s m , c h a r a c t e r i s e s most o f t h e
firms in the transnational p h a r m a c e u t i c a l industry. The geocentric
firm h a s a g l o b a l s t r a t e g y w h e r e b y s u b s i d i a r i e s and h e a d q u a r t e r s
follow a w o r l d w i d e a p p r o a c h w h i c h c o n s i d e r s s u b s i d i a r i e s as
n e i t h e r s a t e l l i t e s n o r i n d e p e n d e n t c i t y - s t a t e s , but a s p a r t s o f a w h o l e
w o r l d p l a n . E a c h part o f t h e system m a k e s its u n i q u e c o n t r i b u t i o n
w i t h its p e c u l i a r c o m p e t e n c e . G e o c e n t r i s m m a k e s possible t h e
synergistic benefits of transnational organisation. The P E R T
d i a g r a m to dictate the sequence in which new product registration
will be s o u g h t in different c o u n t r i e s is a m a n i f e s t a t i o n par excellence
o f t h e g e o c e n t r i c c o r p o r a t i o n . I t i s g e o c e n t r i s m which m a k e s
p o s s i b l e t h e i n t e r n a t i o n a l l a w - e v a s i o n s t r a t e g i e s t o which s o m u c h
373
Strategies for controlling corporate crime
U l t i m a t e l y , i n t e r n a t i o n a l s a n c t i o n i n g m e t h o d s are n e c e s s a r y t o
c o n t r o l a c t i v i t i e s w h i c h e i t h e r fall b e t w e e n t h e c r a c k s o f n a t i o n a l
l a w s or s p r e a d o n e offence a c r o s s a p a t c h w o r k of n a t i o n a l j u r i s -
d i c t i o n s . P l a t i t u d i n o u s c o d e s o f c o n d u c t for t r a n s n a t i o n a l c o r p o r -
a t i o n s have been a d o p t e d by the International C h a m b e r of
C o m m e r c e , " the O E C D " and the Organisation o f A m e r i c a n
S t a t e s . " A m o r e significant h o p e i s t h e U N C o d e o f C o n d u c t for
T r a n s n a t i o n a l C o r p o r a t i o n s d i s c u s s e d a t t h e end o f C h a p t e r 2 . I t
w a s a r g u e d t h e r e t h a t t h e r e are w o r t h w h i l e possibilities for a panel
o f e x p e r t s h e a r i n g c a s e s o n v i o l a t i o n s o f t h e C o d e c r e a t i v e l y t o use
i n t e r n a t i o n a l p u b l i c i t y s a n c t i o n s and s a n c t i o n s t o b e i m p o s e d b y
n a t i o n s (or p e r h a p s t r a d e u n i o n s ) w h i c h are victims o f t h e v i o l a t i o n .
While the history of nations imposing sanctions is discouraging,
p e r h a p s w h e n r e l i a n c e i s p l a c e d specifically o n n a t i o n s w h o a r e
v i c t i m s of a p a r t i c u l a r offence t h e r e a r e g r e a t e r g r o u n d s for
o p t i m i s m . T h i s i s e s p e c i a l l y t r u e w h e r e t h e n a t i o n benefits e c o n o m i -
cally from t h e i m p o s i t i o n o f t h e r e c o m m e n d e d s a n c t i o n ( e . g .
t h r o u g h i n c r e a s e d tax r e c e i p t s ) .
A n i n t e r n a t i o n a l i s a t i o n o f t r a d e u n i o n i s m and a n i n t e r n a t i o n -
a l i s a t i o n o f c o n s u m e r i s m a r e n e e d e d a s c o u n t e r v a i l i n g forces
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Strategies for controlling corporate crime
5
against the internationalisation ofcapital. * Knowledge is power in
n e g o t i a t i o n s w i t h t r a n s n a t i o n a l c o r p o r a t i o n s . A t the m o m e n t ,
k n o w l e d g e i s o n e - s i d e d . T h e t r a n s n a t i o n a l k n o w s exactly w h a t
o c c u p a t i o n a l h e a l t h s a f e g u a r d s it p r o v i d e s for its w o r k e r s in
different p a r t s of t h e w o r l d . If w o r k e r s w h o enjoy few of such
s a f e g u a r d s k n e w o f t h e s u p e r i o r c o n d i t i o n s p r o v i d e d for their p e e r s
i n o t h e r p a r t s o f t h e w o r l d , this k n o w l e d g e could b e used t o d e m a n d
e q u a l p r o t e c t i o n s . H o p e f u l l y , w e m i g h t b e g i n t o see s i t u a t i o n s
w h e r e t r a d e u n i o n s and c o n s u m e r g r o u p s r e g u l a r l y b r i n g g r i e v a n c e s
of this k i n d b e f o r e t h e p a n e l of j u d g e s for t h e C o d e of C o n d u c t for
Transnational Corporations.
T h e facile c o n c l u s i o n w h i c h m u s t be m o s t positively resisted is
t h a t b e c a u s e c a p i t a l i s n o l o n g e r n a t i o n a l but i n t e r n a t i o n a l w e must
t r a n s f e r t h e p o w e r s t o r e g u l a t e t r a n s n a t i o n a l c o r p o r a t i o n s from
national g o v e r n m e n t s to some international regulatory authority. It
m a y be t h a t at s o m e future point in w o r l d history this will be a
w o r k a b l e p o l i c y . B u t t h e fact is t h a t if an agency is to be at all
effective in r e g u l a t i n g an e n t i t y so p o w e r f u l as a t r a n s n a t i o n a l
c o r p o r a t i o n , t h e n it m u s t have b a r g a i n i n g tools at its disposal w h i c h
it c a n use as p o i n t s of l e v e r a g e in n e g o t i a t i o n s o v e r r e g u l a t i o n .
N a t i o n a l s t a t e s h a v e such b a r g a i n i n g t o o l s - they set c o m p a n y t a x e s
a n d tariffs, g i v e i n v e s t m e n t a l l o w a n c e s , influence t h e w a g e - d e t e r -
m i n a t i o n p r o c e s s , a p p r o v e p r o d u c t s for h e a v y g o v e r n m e n t sub-
s i d i e s and h a v e c o n t r o l o v e r m a n y o t h e r a l l o c a t i v e d e c i s i o n s w h i c h
vitally affect t h e i n t e r e s t s of t r a n s n a t i o n a l c o m p a n i e s . It may be that
n a t i o n a l g o v e r n m e n t s d o n o t a l w a y s use t h e s e b a r g a i n i n g t o o l s very
s t r a t e g i c a l l y to limit c o r p o r a t e a b u s e s of p o w e r , but a s u p r a -
national regulatory authority would not even have the potential to
u s e s u c h b a r g a i n i n g i m p l e m e n t s . I t i s h o p e d t h a t i n s o m e future
e p o c h o f w o r l d h i s t o r y t h e r e will exist i n t e r n a t i o n a l b a r g a i n i n g t o o l s
w h i c h can b e u s e d t o further t h e p u b l i c i n t e r e s t s o f t h e w h o l e world
c o m m u n i t y a g a i n s t e x p l o i t a t i v e acts c o m m i t t e d for p r i v a t e g a i n . I n
the context o f t h e c o n t e m p o r a r y world system, h o w e v e r , we must
b e p o l i t i c a l r e a l i s t s a n d s u p p o r t t h e c o n c l u s i o n o f B a r n e t and M u l l e r
(1975:372-3):
R e g u l a t i o n o f g l o b a l c o r p o r a t i o n s b y a n i n t e r n a t i o n a l agency
s o u n d s p l a u s i b l e and p r o g r e s s i v e . W h y not a n i n t e r n a t i o n a l body
t o act a s c o u n t e r p a r t and c o u n t e r w e i g h t t o t h e global
c o r p o r a t i o n ? T h e p r o b l e m , of course, is that present
i n t e r n a t i o n a l a g e n c i e s or any n e w a g e n c y in t h e f o r e s e e a b l e
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Strategies for controlling corporate crime
future a r e t o o w e a k t o r e g u l a t e t h e c o r p o r a t e g i a n t s . T o p r e t e n d
o t h e r w i s e is to settle for the p a t i n a of r e g u l a t i o n instead o f t h e
s u b s t a n c e . I n d e e d , from a c o r p o r a t e s t a n d p o i n t , t h e best way to
e s c a p e r e g u l a t i o n from such o u t m o d e d n a t i o n a l a g e n c i e s a s t h e
I n t e r n a l R e v e n u e S e r v i c e and t h e A n t i - T r u s t D i v i s i o n is to shift
t h e b u r d e n t o a n i n t e r n a t i o n a l a g e n c y with b r o a d u n e n f o r c e a b l e
p o w e r s and a modest budget.
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Strategies for controlling corporate crime
H o w t h e n d o r e g u l a t o r s n e g o t i a t e c o n t r o l s and s a n c t i o n s ? T h e
b e s t i l l u s t r a t i o n i n this b o o k i s t h e story o f t h e a n o n y m o u s t r a n s -
n a t i o n a l w i t h a sterility p r o b l e m ( C h a p t e r 4 ) . De facto s a n c t i o n s
w e r e n e g o t i a t e d w h i c h cost t h e c o m p a n y m a n y m i l l i o n s o f d o l l a r s
a n d a c o u p l e o f m a n a g e r s t h e i r j o b s . P h a r m a c e u t i c a l e x e c u t i v e s are
full o f ( s o m e t i m e s b i t t e r ) a n e c d o t e s o f h o w F D A p e r s o n n e l use
t h e i r b a r g a i n i n g p o w e r t o lever c o m p l i a n c e . S o m e c o m p a n i e s c o m -
p l a i n e d o f s i t u a t i o n s w h e r e t h e y had r e s i s t e d a n F D A r e q u e s t t o
c o m p l y w i t h a p a r t i c u l a r r e g u l a t i o n and had c o n s e q u e n t l y b e e n
d e l u g e d w i t h w e e k l y F D A i n s p e c t i o n s for a t i m e after, it w a s n ' t
w o r t h it. We w o n t h e b a t t l e but lost t h e war. E v e r y plant in this
c o u n t r y has v i o l a t i o n s t h a t can be d u g up if t h e i n s p e c t o r l o o k s h a r d
e n o u g h . If t h e y a r e after you t h e y can m a k e it very difficult.'
B o t h p a r t i e s t o t h e b a r g a i n i n g g a m e s prefer n e g o t i a t i o n t o litiga-
t i o n . W h e n I a s k e d a B r i t i s h official, with r e s p o n s i b i l i t y for setting
N H S drug prices, what h a p p e n e d w h e n c o m p a n i e s m a d e fraudulent
s t a t e m e n t s o n p r o d u c t i o n and o t h e r c o s t s , h e said: i t m i g h t b e
f r a u d , b u t w e w o u l d n e v e r p r o s e c u t e . I t m i g h t b e found out w h e n
f o r e c a s t s d o not c o m e t r u e . T h e n they had b e t t e r w a t c h o u t next
377
Strategies for controlling corporate crime
378
Strategies for controlling corporate crime
T h i s b e g s t h e q u e s t i o n of w h e t h e r it is a c c e p t a b l e for big g o v e r n -
m e n t to play big b u s i n e s s at its own g a m e . Do we not w a n t to set
h i g h e r s t a n d a r d s of integrity and p u b l i c a c c o u n t a b i l i t y for g o v e r n -
m e n t t h a n for b u s i n e s s ? I t h i n k we s h o u l d .
It is p o s s i b l e to be a political p r a g m a t i s t , to r e c o g n i s e that
effective p r o t e c t i o n of c o n s u m e r h e a l t h c a n only c o m e from giving
m o r e b a r g a i n i n g c l o u t t o g o v e r n m e n t , w h i l e insisting that such
b a r g a i n i n g p o w e r b e e x e r c i s e d m o r e o p e n l y . T h a t is, bigger g o v e r n -
m e n t w h i c h is m o r e s u s c e p t i b l e to critical scrutiny from elected
r e p r e s e n t a t i v e s and affected c o n s u m e r s can b e a d v o c a t e d .
Bureaucrats want a lot of bargaining tools and few checks on how
they are used. T h i s n a t u r a l b u r e a u c r a t i c proclivity for vast secret
p o w e r s i s o b v i o u s l y i n t o l e r a b l e . B u r e a u c r a t s should b e forced t o
m a k e m o r e o f t h e i r d e a l s o u t s i d e smoke-filled r o o m s . M i n u t e s o f
c r u c i a l n e g o t i a t i n g m e e t i n g s b e t w e e n r e g u l a t o r y a g e n c i e s and
c o r p o r a t i o n s s h o u l d be publicly a v a i l a b l e u n d e r freedom of infor-
m a t i o n s t a t u t e s . C o n s u m e r and t r a d e - u n i o n r e p r e s e n t a t i v e s should
h a v e r i g h t s t o a t t e n d formal n e g o t i a t i n g m e e t i n g s b e t w e e n g o v e r n -
m e n t and b u s i n e s s . E l e c t e d r e p r e s e n t a t i v e s s h o u l d step u p their
oversight of the discretionary p o w e r of the bureaucracy through
congressional or parliamentary committees. In other words, we
h a v e i n t h e d e m o c r a t i c political p r o c e s s a n a l t e r n a t i v e t o legal due
p r o c e s s w h i c h , for c e r t a i n p u r p o s e s , is a m o r e efficient and effective
c o n s t r a i n t on the unbridled abuse of discretionary power. The more
m a s s i v e t h e p o w e r o f t h e a d v e r s a r i e s , t h e m o r e viable i s political
( p a r t i c i p a t o r y ) c o n t r o l o f d i s c r e t i o n o v e r legal c o n t r o l o f d i s c r e t i o n .
379
Strategies for controlling corporate crime
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Strategies for controlling corporate crime
for e x a m p l e , d e a l s w i t h p o l l u t i o n p r o b l e m s c r e a t e d b y all
i n d u s t r i e s , and O S H A r e g u l a t e s safety a n d h e a l t h c o n d i t i o n s for
w o r k e r s i n all i n d u s t r i e s . T h e C o n s u m e r P r o d u c t Safety
C o m m i s s i o n c o n t r o l s t h e safety o f virtually every c o n s u m e r
p r o d u c t on t h e m a r k e t , and so i n v o l v e s itself in the design and
m a r k e t i n g o f e v e r y t h i n g from rag dolls t o lawn m o w e r s . T h e n e w
r e g u l a t o r y a g e n c i e s a r e a c c o r d i n g l y r e s i s t a n t t o c o o p t a t i o n b y any
s i n g l e i n d u s t r y . If t h e y a r e v u l n e r a b l e to c o o p t a t i o n at all (and
t h e y a r e ) , it is to c o o p t a t i o n by safety- or e n v i r o n m e n t - o r i e n t e d
g r o u p s , not b y b u s i n e s s o r g a n i z a t i o n s .
381
Strategies for controlling corporate crime
c o n t r o l o f t h e cost o f r e g u l a t i o n e a s i e r t o m o n i t o r . N e e d l e s s t o say,
h o w e v e r , t h e s e v i r t u e s w o u l d not b e sufficient t o e n r a p t u r e industry
w i t h a p r o p o s a l w h i c h w o u l d e n h a n c e r e g u l a t o r y clout.
F o r t h o s e for w h o m a D e p a r t m e n t o f B u s i n e s s R e g u l a t i o n w o u l d
be a socialist A r m a g e d d o n , ' " t h e p r e s e n t analysis might still have
s o m e l e s s o n s . T h e q u i t e m o d e s t r e c e n t initiatives i n the U n i t e d
S t a t e s t o facilitate t h e r e p o r t i n g o f E P A and O S H A offences b y
F D A i n s p e c t o r s , and vice v e r s a , clearly m i g h t increase s o m e w h a t
t h e b a r g a i n i n g c l o u t of i n s p e c t o r s from all t h r e e a g e n c i e s . T h e
p r o p o s a l s of N a d e r et al. (1976) for federal c h a r t e r i n g of g i a n t US
c o r p o r a t i o n s w o u l d also p r o v i d e a useful b e g i n n i n g .
A m o r e r e l e v a n t policy q u e s t i o n t h a n e s t a b l i s h i n g a D e p a r t m e n t
o f B u s i n e s s R e g u l a t i o n c o n c e r n s efforts b y t h e p h a r m a c e u t i c a l
industry to push the bureaucratic organisation of regulation in
exactly the o p p o s i t e direction. This has already happened in Mexico
in a p r e s i d e n t i a l d e c r e e of N o v e m b e r 1978. R e s p o n s i b i l i t y for regu-
l a t i o n o f t h e p h a r m a c e u t i c a l i n d u s t r y has essentially b e e n r e m o v e d
from t h e M i n i s t r i e s of H e a l t h and C o m m e r c e and given to the
M i n i s t r y of P a t r i m o n y . As t h e i n d u s t r y n e w s l e t t e r . Scrip (4 A p r i l
1979) p o i n t e d o u t : ' T h i s is v i e w e d as a positive m o v e , since this
M i n i s t r y i s c o n c e r n e d w i t h t h e industrial d e v e l o p m e n t o f M e x i c o , a s
o p p o s e d to the Ministry of C o m m e r c e whose main concern is to
k e e p p r i c e s d o w n , a n d t o t h e H e a l t h M i n i s t r y , which views t h e d r u g
industry simply as a c o m p o n e n t o f t h e Health System.' In Australia,
c o n c e r t e d l o b b y i n g a t t e m p t s h a v e b e e n m a d e i n the past d e c a d e t o
s t r i p t h e H e a l t h D e p a r t m e n t of s o m e of its n e g o t i a t i n g chips - for
i n s t a n c e , by having them hand control over Pharmaceutical
B e n e f i t s S c h e m e p r i c e s t o t h e i n d e p e n d e n t P r i c e s Justification
Tribunal.
382
Strategies for controlling corporate crime
383
Appendix Getting interviews
with corporate executives
M a n y e x e c u t i v e s w i t h w h o m I s o u g h t i n t e r v i e w s refused t o see m e .
N e v e r t h e l e s s , at t h e end o f t h e d a y , I had r e a s o n to be b o t h pleased
a n d s u r p r i s e d with t h e success r a t e . A m o n g t h o s e w h o w e r e
a p p r o a c h e d , m o r e a g r e e d t o talk t h a n refused.
A l m o s t all o f t h e i n t e r v i e w s w e r e a r r a n g e d b y t e l e p h o n e w i t h o u t
a p r e l i m i n a r y l e t t e r . An e x c e p t i o n to this w a s with t h e i n t e r v i e w s in
M e x i c o and G u a t e m a l a for w h i c h l e t t e r s w e r e sent p r i o r t o m y visit.
Of forty l e t t e r s w r i t t e n to e x e c u t i v e s in M e x i c o and G u a t e m a l a ,
o n l y o n e a t t r a c t e d a r e p l y . Effectively t h e n , t h e s e i n t e r v i e w s w e r e
also arranged by t e l e p h o n e .
T h e f i r s t i n t e r v i e w s i n A u s t r a l i a w e r e t h e m o s t difficult. A u d a c i t y
w a s r e q u i r e d ; yet in t h e early days I w a s lacking in c o n f i d e n c e .
F o r t u n a t e l y , h o w e v e r , I quickly struck u p o n the strategy of m e n -
t i o n i n g s o m e o n e e l s e ' s n a m e . E v e n i f t h a t s o m e o n e w a s not a
f r i e n d , t h e n a m e could still be t u r n e d to a d v a n t a g e . W i t h the early
i n t e r v i e w s , I m e n t i o n e d the n a m e of a powerful H e a l t h D e p a r t m e n t
official (with his a p p r o v a l ) : ' H e gave me t h e g o v e r n m e n t ' s side of
t h e p i c t u r e , a n d he s u g g e s t e d t h a t you w o u l d be a well informed
p e r s o n t o g i v e t h e i n d u s t r y ' s side o f t h e s t o r y . ' M a n y o f t h e m w e r e
k e e n t o set m e straight o n w h a t t h e y t h o u g h t t h e H e a l t h D e p a r t -
m e n t w o u l d h a v e told m e . S i m i l a r l y , c o m p a n i e s w h i c h had b e e n the
s u b j e c t of s o m e p u b l i c vilification in r e c e n t t i m e s w e r e also often
a n x i o u s t o tell t h e i r side o f t h e story.
O n c e t h e ball w a s r o l l i n g , m a i n t a i n i n g t h e m o m e n t u m w a s not s o
difficult. A f t e r an o u t s t a n d i n g l y g o o d i n t e r v i e w , I w o u l d ask t h e
384
Appendix Getting interviews with corporate executives
W h a t did I tell t h e m w h e n I s p o k e to t h e m on t h e t e l e p h o n e ? My
i n t e r e s t , I said, w a s in h a v i n g a chat a b o u t t h e effectiveness of
r e g u l a t i o n i n t h e p h a r m a c e u t i c a l i n d u s t r y and t h e costs o f regula-
t i o n , b e c a u s e m y c o n c e r n was t o use t h e p h a r m a c e u t i c a l i n d u s t r y a s
a c a s e study to d r a w o u t s o m e g e n e r a l p r i n c i p l e s of cost-effective-
n e s s in g o v e r n m e n t r e g u l a t i o n . All t h i s , as is clear from r e a d i n g t h e
b o o k , w a s t r u e . I d e s c r i b e d myself as a sociologist r a t h e r t h a n a
c r i m i n o l o g i s t . F o r t h e A u s t r a l i a n i n t e r v i e w s , I initially d e s c r i b e d
m y s e l f as a F u l b r i g h t s c h o l a r a b o u t to go to t h e U n i t e d S t a t e s to look
at r e g u l a t i o n and w h o w a s i n t e r e s t e d in g e t t i n g a good g r a s p on t h e
A u s t r a l i a n s y s t e m first. O n c e e x e c u t i v e s had a g r e e d t o t h e inter-
v i e w , h o w e v e r , I a l w a y s i n f o r m e d t h e m that I w o r k e d for the
Australian Institute of Criminology.
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Appendix Getting interviews with corporate executives
t h e U n i v e r s i t y of Q u e e n s l a n d . I t h o u g h t it n e i t h e r a d v a n t a g e o u s
n o r a p p r o p r i a t e t o directly a s s o c i a t e t h e A u s t r a l i a n I n s t i t u t e o f
C r i m i n o l o g y w i t h s o m e t h i n g I was d o i n g w h i l e on leave.
O n c e inside
I n t e r v i e w s of fewer t h a n 30 m i n u t e s d u r a t i o n w e r e a w a s t e of t i m e .
In t h e e n d , if p e o p l e w o u l d only offer 15 m i n u t e s of their t i m e , I w a s
t u r n i n g t h e m d o w n . On t h e o t h e r h a n d , I found t h a t a 3 0 - m i n u t e
i n t e r v i e w c o u l d n o r m a l l y run for o v e r an h o u r if o n e m a d e special
efforts t o m a k e t h e d i s c u s s i o n i n t e r e s t i n g t o t h e r e s p o n d e n t . This
w a s e a s i e r late i n t h e r e s e a r c h p r o g r a m m e t h a n i n t h e b e g i n n i n g .
U l t i m a t e l y , i n t e r v i e w s b e c a m e a l m o s t a s v a l u a b l e t o the r e s p o n -
d e n t s as t h e y w e r e to m e , as I w a s able to tell t h e m s o m e t h i n g s they
did n o t k n o w a b o u t w h a t o t h e r c o m p a n i e s w e r e d o i n g t o deal with
t h e p r o b l e m s u n d e r d i s c u s s i o n . O f c o u r s e this w a s d o n e w i t h o u t
b r e a c h i n g confidences or m e n t i o n i n g the n a m e s o f t h e c o m p a n i e s I
w a s t a l k i n g a b o u t . E x e c u t i v e s w e r e also i n t e r e s t e d t o talk t o s o m e -
o n e w h o k n e w a little o f h o w the r e g u l a t o r y a p p a r a t u s w o r k e d i n
other parts o f t h e world.
A c o u p l e of i n t e r v i e w s w e r e t a p e d , b u t I found t h a t the i n h i b i t i o n
of r a p p o r t from a r e q u e s t to t a p e t h e i n t e r v i e w w a s not in t h e
i n t e r e s t s of q u a l i t y d a t a . F o r m o s t o f t h e early i n t e r v i e w s I t o o k a
t a p e r e c o r d e r i n m y b r i e f c a s e , and a s s o o n a s t h e i n t e r v i e w w a s o v e r
I w o u l d go to a p a r k or a toilet and tell t h e t a p e r e c o r d e r e v e r y t h i n g I
could r e m e m b e r . As the research p r o c e e d e d , interviews produced
d i m i n i s h i n g r e t u r n s . I w a s h e a r i n g t h e s a m e t h i n g s a b o u t t h e costs o f
regulation over and over again. F r o m most interviews of an hour's
d u r a t i o n I w o u l d c o m e o u t w i t h only o n e o r t w o s t a t e m e n t s w o r t h
remembering.
I also b e c a m e m o r e e x p e r t at using my n o t e p a d . A s k i n g if I could
t a k e n o t e s often i n h i b i t e d r a p p o r t a t t h e b e g i n n i n g o f a n i n t e r v i e w .
So w h a t I b e g a n to do w a s w a i t until t h e r e s p o n d e n t said s o m e t h i n g
t h a t h e o r s h e w o u l d really like m e t o r e m e m b e r . ' D o you realise
t h a t we did a study which found t h a t this n e w r e g u l a t i o n cost us
$ 5 , 3 0 0 , 0 0 0 to c o m p l y w i t h ? ' ' R e a l l y ' , I w o u l d say, i m u s t write t h a t
figure d o w n b e c a u s e I h a v e a t e r r i b l e m e m o r y for figures.' T h e
n o t e b o o k w o u l d t h e n be out sitting on my k n e e . I w o u l d m a k e an
effort t o w r i t e d o w n t h i n g s t h a t t h e y t h o u g h t w e r e i m p o r t a n t . W h e n
t h e r e s p o n d e n t said s o m e t h i n g i n d i s c r e e t t h a t I t h o u g h t to be
i m p o r t a n t , I w o u l d not w r i t e t h i s d o w n . I n s t e a d I w o u l d r e p e a t the
386
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387
Appendix Getting interviews with corporate executives
388
Notes
389
Notes to pages 6—40
Chapter 2 Bribery
1 'Another industry source said "bribes" of a few thousand dollars were
all that was needed in Rome to get full copies from the Ministry of
Health of new drug registration files. This eased the way for "pirates",
usually small manufacturers, to deal in products based on patent
infringement' (New York Times, 21 March 1976, Section 3, p. 1, p. 6,
'Drugs in Europe: Collision of Interests').
2 To the extent that policing of such 'bath tub' operators does occur, it is
undertaken by the large companies who act to protect their interests by
occasionally collecting evidence of the failure of small competitors to
meet the regulations and placing this before the authorities.
3 Such leading questions of the 'have you stopped beating your wife?" type
have conventionally been regarded as methodologically unsound.
Kinsey's et al.'s (1948) justification for using leading questions to elicit
self-reports of masturbation and other sensitive behaviour provides a
rationale for exceptions from this methodological principle. The
problem is often one of the 'ordinary person' being intimidated into
telling the higher-status researcher what the latter wants to hear. In this
case, senior executives, some of them on a six-figure income, were not
about to be intimidated by a 'snivelling little Australian academic', as
one of them uncharitably referred to me.
4 US v. Olin-Mathieson Chemical Corp.. No. 63 Cr 21.7 (S.D.N.Y., 23
Sept. 1965).
5 Morton-Norwich also disclosed payments to employees' unions.
6 This type of offence has been reported in other countries. 'Again in Italy
according to a source familiar with the situation, one multinational got
authority, after bribing fiscal inspectors, to sell throat lozenges - at
import prices - that it men arranged to make locally at low c o s t The
practice was said to continue for around 15 years in the 1950's and 1960's
before the company decided it would "regularize" its position' (New
York Times, op. cit).
7 For a discussion of the role of the OA in orchestrating the coup which
brought Guatemala its present form of government see Horowitz (1971:
Chapter 10).
8 At the Crossroads of Destiny, 1977, Annual Report of (he Camara
National de la Industria de Laboratories Quimico Farmaceuticos,
Mexico City.
9 It may also have been bound up with a desire of the new regime to get rid
of certain Social Security bureaucrats which it did not like.
10 SEC v. American Hospital Supply Corporation, Unreported Final
Judgment of Permanent Injunction and Ancillary Relief, United States
390
Notes to pages 40-65
District Court for the District of Columbia. 28 Dec. 1976. Herlihy and
Levine (1976: 623) outline some of the other requirements which have
generally been mandated by the consent decrees:
11 Gereffi (1979: 13) lists Lilly as only number 10 among all companies in
worldwide pharmaceutical sales.
12 For a critique of the lack of definition and certainty as to the inter-
pretation of the Foreign Corrupt Practices Act see Gustman (1979).
13 Because of the meaninglessness of subsidiaries' profits in the face of the
artificial transfer prices charged within pharmaceutical transnationals.
performance in many companies tends to be evaluated more in terms of
sales than profits.
14 See New York Times, op. cit., and also many of the oil industry dis-
closures.
15 See Rogow and Lasswell (1963). Wraith and Simpkins (1964), Heiden-
heimer (1978). Scott (1972), Jacoby et al. (1977), Rose-Ackerman
(1978).
16 This relationship may well be a reciprocal o n e , with impoverishment
fostering corruption as well. See Wraith and Simpkins (1964).
17 F o r a discussion of the extraterritoriality of Swedish anti-corruption law
see Bogdan (1979) and for extraterritoriality under the US Foreign
Corrupt Practices A c t see Lashbrooke (1979).
18 S e e , for example, UN Commission on Transnational Corporations
( D e c e m b e r 1978).
6 The case was that of Peggy McCarrick, heard in the Los Angeles County
Court between March and June, 1971. Richardson-Merrell had asked
that if the jury should find them liable, damages should not exceed
$187,000. The jury found Richardson-Merrell negligent and awarded
total general and punitive damages of $2.75 million.
7 I am grateful to James M. Denny. Senior Vice President of G. D. Searle,
for providing data on financial trends at Searle from a number of sources
including Value Line, Standard and Poors and 3-Trend Cycli-Graphs.
8 This was revealed in a letter to Richard D. Wilson, Deputy Assistant
Administrator for General Enforcement Environmental Protection
Agency on 25 August 1977 from A . J . Frisque, President of 1BT.
9 A large part of the problem is the tendency of many busy university
researchers to completely entrust day-to-day administration of their
laboratories to relatively junior and inexperienced staff.
10 Concomitantly, the minor manipulation may have produced some sur-
prising disadvantages over the parent which are not at first apparent
11 The purpose of giving a control group a placebo is to ensure that any
observed effect on the well-being of patients in the study is not simply a
psychological response to a belief that they are being 'given a pill to
make them better'.
12 21 A p p Div. 2d 495,251 N . Y . S . 2d 818. rev'd, 15 N . Y . 2d 317.206 N . E .
2d 3 3 8 , 2 5 8 N . Y . S . 2d 397 (1965).
13 Institutional Review Boards, or Institutional Review Committees as
they used to be called, are committees of professional peers who work in
an institution where clinical testing is being undertaken. The Boards are
rarely subjected to F D A inspection. Between 1971 and 1974, 25 IRBs
were inspected:
392
Notes to pages 92-110
393
Notes to pages 110—34
394
Notes to pages 137-63
Chapter 5 Antitrust
1 In Canada also in 1976. 36 Canadian pharmaceutical companies
expended 21.8 per cent of net sales on advertising and promotion
(Pharmaceutical Manufacturers Association of Canada. Marketing
Expenditures in the Pharmaceutical Industry, Ottawa, Canada, 1977). In
Australia the figure is about 19 per cent (Australian Department of
Health, 1978:67). Slatter( 1977: 102) found promotional expenditure as
a proportion of sales in 12 countries to range between 15 per cent and 22
per cent.
2 Italy is believed to be considering reversing its no-patent policy.
395
Notes to pages 165-86
4 T h e Kefauver hearings showed that in the late 1960s the situation was, if
anything, worse. Serpasil sold for $39.50, while Modern Medical Supply
and Darby sold the product for $0.58 and $0.59 respectively (Subcom-
mittee on Monopoly, 1972: 10-11). Reserpine is an interesting example
of a bulk-supply monopoly. While finished reserpine is offered by at
least sixty suppliers, the sole manufacturer of the active ingredient is S.
B. Penick (Gereffi. 1979: 25).
5 Geis (1967) reported something similar among executives who partici-
pated in the heavy electrical equipment price-fixing conspiracy. They
did not see their illegal behaviour as harmful; they saw it rather as a
beneficial way of 'stabilising prices', a 'duty' to their corporation. See
also McCormick(1977).
6 For example, some have argued that the Australian market is so small
that economies of scale make it appropriate for an industry to be
monopolised by a single firm (e.g. Conlon, 1975; McGuinness, 1975). In
contrast Walker (1976: 571) has argued that ensuring domestic com-
petition through the Trade Practices A c t is more important in Australia
than in comparable countries because its geographic isolation reduces
competition from imports.
7 The Monopolies Commission (1973), Chlordiazepoxide and Diazepam,
H . C . Paper. 197.
8 Regulation of Prices (Tranquillizing Drugs) N o . 3 Order 1973, S. L
397
Notes to pages 213-66
On the average, five times as many people read the headline as read
the body copy (in advertisements). It follows that, if you don'i sell the
product in your headline, you have wasted 80 percent of your money.
That is why most Ogilvy and Mather headlines include the brand
name and the promise (quoted in Medawar. 1979:66).
9 In the past patient labelling has been limited to special cases such as oral
contraceptives.
10 One suspects that the real concern among both the industry and doctors
is that the information in patient labelling might encourage product
liability and malpractice suits against them. On the other hand, some
suits might be avoided by the implied informed consent of the patient
deciding to take the drug having read the warnings and possible side-
effects.
398
Notes to pages 266-86
say. then they will save the expense of clinically testing the drug on
humans in the United States.'
3 Admittedly though. Third World countries have been loath to partici-
pate in the W H O adverse-reaction-reporting scheme partly because it is
perceived as concentrating on newer, 'rich man's drugs'.
4 For example, Egypt, Kuwait, the Sudan and all the Central American
countries require certificates of free sale.
Chapter 8 Fiddling
1 For the most complete of the many accounts of 'Coster's' life, see Keats
(1964).
2 Boyd (1973:137-8) illustrates how this can be done with the 'Confession
of an anonymous mergerer':
'A good merger is like marrying a rich woman and taking her money.
It's as sweet as that, sweeter even, because you can have as many of
these brides as you w a n t . . . Or it's like politics. You can often get
control and speak for the majority with only 10 percent of the voting
stock, because you're organized while the mass of stockholders are
strung out and don't pay much attention. Best of all, you do it with
borrowed money. Never use your own.
'You start out with control of a little fleabag company that's ready
for the receivers. Then you find a fat corporation that's been selling its
assets and is sitting on lots of cash. You send in a spy to find out where
the 'control stock' is; usually it's held by directors of the company.
Y o u bribe them, in a manner of speaking, by offering to buy the
company stock they hold at a price much higher than it's worth; in
return, they agree to resign and appoint your men in their places.
Then you go to your bank, let them in on the deal, offer their key men
personal stock options and other side deals - and they'll loan you all
you need to buy out the directors. Once you're in control of the new
company, you use some of its assets to pay off your bank and divvy up
what's left with your insiders. The only way you can do that legally, of
course, is to merge your new company with the old one you've just
about bankrupted. That way t h e new entity assumes all your old
debts.
'Stockholders? They don't know anything about it, really. You've
already bought out their leaders. All they see is what's on the proxy
statement - and you're the fellow w h o puts it out, because you're the
management now. Hide your old company's debts, doctor up the
figures, hire one of those N e w York evaluating firms to back you up.
and always promise the exact opposite of what you plan to do. Like I
said, it's just like politics.'
3 Overpricing was defined relative to average world prices for the product
4 T h e cost to the patient of most Australian prescription drug sales is
subsidised by the Pharmaceutical Benefits Scheme (PBS). PBS there-
fore has de facto price-fixing power over all companies w h o wish to sell
their products under the scheme.
399
Notes to pages 293-7
T h u s , now that economists have been asked to look for figures, they
are beginning to find that health, safety and environmental
regulations have a sound economic base. To place such benefits on a
more human scale, let me quote examples cited by Dr. Stewart Lee,
chairman of the department of economics at Geneva College. He
finds that in the regulated products groups, safety packaging
requirements have produced a 40 percent drop in ingestion of poisons
by children over a four-year-period. Since the safety standards for
cribs became effective in 1974, crib deaths have fallen by half, and
injuries by 45 percent The Burn Institute in Boston reports that in
1971 - prior to the children's sleepwear standards - 34 percent of its
flamebum injuries involved sleepwear. In 1977 the figure was zero.
According to the U.S government's General Accounting Office,
400
Notes to pages 297-324
28,000 lives were saved between 1966 and 1974 because of federal
motor vehicle safety regulations. The same report showed that in one
state, where a detailed analysis was conducted, there was also a
substantial reduction in the frequency and severity of injuries. With
auto accidents the number one cause of paraplegia in the United
States, these figures are significant (Costle, 1979: 13).
4 One senior F D A official made the following comment on the way 'minor
violations' has been interpreted in practice:
Note that the expression 'minor violations' is not defined. In the
regulatory tradition that I came from, prosecutors always had the
right to use discretion. In US\. Dotterweich, one of the famous F D A
Supreme Court decisions, the Court said we should rely on the good
sense of prosecutors. (I would never rely on the good sense of a
prosecutor -1 use this reference to get across the point mat the
Supreme Court of the United States recognized the right of
prosecutors to not prosecute some violations.) In the FDA which
employed me for 29 years, the agency always used discretion and did
not worry itself about what a 'minor' violation was. If the
Commissioner, or the General Counsel, or a Compliance Chief at
Headquarters decided, for whatever reasons (they had to be ethical)
that a case was not to be prosecuted, it was not prosecuted.
401
Notes to pages 324-7
402
Notes to pages 330—40
16 Coffee (1980) may be correct when he points out that fining a wealthy
person a fixed percentage of his income is a lesser deterrent than fining a
poor person the same fixed percentage of his income even though the
wealthy person pays a larger fine. This is because the poor person is
taken closer to his bottom dollar by the fine and the utility of dollars
increases in inverse proportion to how many of them you have. Another
consideration is that the wealthy may be more adept at insulating them-
selves by securing assets in the hands of others. The more important fact
remains, however, that with wealthy persons we are more likely to be
able to collect a fine which is large enough to deter crimes with low risks
of apprehension and large pay-offs.
17 Not only does the white-collar offender have more to lose, but he or she
also has more to give back as restitution to the victim or reparation to the
community. A doctor convicted of medical benefits fraud can be required
to serve a rural community which has no physician for a specified period.
Such reparation cannot be exacted from an unskilled offender.
18 Because white-collar offenders are more likely to be older family men
with responsibilities for putting children through their education and
other family obligations, a loss of earning capacity may also have wider
social ramifications for them than for young traditional offenders wifh
no dependants. Traditional offenders who do have dependants are,
however, more vulnerable in this way than white-collar offenders
because they generally have lesser financial reserves.
19 The United States, with higher crime rates than any other developed
country, persists in sending its criminological experts to other countries
with low crime rates to show them how to solve their crime problem. The
American solution has been extraordinarily heavy use of imprisonment
by international standards. Most American states have an imprisonment
rate per 100,000 population more than ten times as high as the
Australian jurisdiction in which the author lives. Now we are seeing
American white-collar crime experts touting imprisonment as the means
of controlling white-collar crime.
20 An obvious exception to this is with an antitrust conviction in which all
(or most) members of the oligopoly are fined.
21 Hopkins' (1978: 12-13) conclusion that the conviction of Power
Machinery for false advertising under the Australian Trade Practices
Act produced favourable publicity for the company is an illustration.
22 For a more refined version of this general approach, see Fisse's (1973)
development of the idea of court-imposed 'preventive orders'.
23 Fisse (1980) notes the use of adjournment of sentence as a 'back-door to
enter the internal affairs of a corporate offender' by reference to Trade
Practices Commission v. Pye Industries Sales Pty. Ltd. A.T.P.R. 40-089
(1978).
24 SEC v. Allied Chemical Corp., Civil Action No. 77-0373, at 2 (D.D.C.
filed 4 March 1977).
25 For a thoughtful discussion of this question see Greenawalt and Noam
(1979).
26 US\. Morton Salt Co., 338 US 632,652 (1950); quoted with approval in
California Bankers Association v. Schultz, 416 US 21,65-6 (1974).
403
Notes to pages 340-52
404
Notes to pages 353-68
41 Coffee (1977: 1142) suggests that the board 'performs the role of a
miniature capital market, rewarding efficient divisions and penalizing
inefficient ones - but thereby also encouraging lower echelons to avoid
sanctions by withholding adverse information from the top.'
42 See, for example, the reviews by Leech and Mundheim (1976) and
Sommer(1977).
43 Banking, Housing and Urban Affairs Committee, US Senate, Report of
the Securities and Exchange Commission on Questionable and Illegal
Corporate Payments and Practices. Washington D C , 94th Cong. 2D
S e s s . , 1976. See also De Mott's (1977) account of how the government
appointed Emergency Loan Guarantee Board failed to become aware of
Lockheed's foreign bribery escapades.
44 Nevertheless, it is worth pointing out that in the Coster-Musica case
study it was the full-time company treasurer w h o tracked down the
president's crimes while the board remained oblivious to them.
45 This is a dilemma comparable to that over Q A U reports being available
to government inspectors.
46 For example, James Q. Wilson, quoted in Demaris (1974:442).
47 Sommer (1977: 131) has made a beginning with an evaluation of such
minor examples of 'public interest directors' as already exist The most
famous instance is the court-mandated appointment of SEC-approved
unaffiliated directors to the board of Mattel, Inc.
48 T h e Australian government sold its pharmaceutical company,
Fawnmac, in late 1980.
49 W e l l c o m e , the British non-profit pharmaceutical enterprise, does
devote a significant proportion of its profits to research on tropical
diseases through the Wellcome Foundation.
405
Notes to pages 368-80
406
Notes to pages 380-2
407
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Index
428
Index
a n t i h i s t a m i n e . c o n t a m i n a t e d , 111 •behavioral drift. 2 0 8 - 9
antihistamine, US market breakdown, behavioural disorders, 249
162 Bern. D . J . . 3 - 4
antihypertensive drugs, 2 4 6 , 2 5 1 B e n n e t t . Sir F r e d e r i c k . 3 0 0
antipyretic analgesics. 250 Bequai. August. 40-1
Antitrust Division o f t h e US Justice beri-beri, prisoners given, 89
D e p a r t m e n t . 1%. 376 Best, William R . . 2 2 2
a n t i t r u s t lavv(s), 4 5 , 159. 1 6 6 . 2 8 7 B i b i l e , S e n a k a , 271
A n t i v e n i n . 169 Biometric T e s t i n g Inc.. 80. 107,308
aplastic anaemia. 2 1 0 . 2 4 7 B i o r e s e a r c h M o n i t o r i n g P r o g r a m , see
Applied Management Sciences, 234 FDA
Arendt. Hannah, 3 Bishop. John. 70
A r m s t r o n g . J. S c o t t , 2 Black. Justice. 340
A r n a u d . Dr. 22 B l a k e s l e e , A l t o n L.. 220
a r t h r i t i s , d r u g s for, 5 4 ; see also blood d a m a g e , drug-caused. 56
antiarthritics Blozan,CarIF.,82
A s a n t e . S . K. B.,47 B l u m b e r g . A b r a h a m S., 2 9 9
a s c o r b i c a c i d , 162 Board of R e g e n t s , N e w York. 91
Aspartame. 76-7 Bobst. Elmer. 206
aspirin, 2 0 7 . 2 1 6 Boehringer-lngelheim. 225.250.251
Asta W e r k e . 2 5 0 . 2 7 2 B o n d . R o n a l d S . . 165
A t o m i c Energy Commission, 90 bone marrow disease, drug-caused. 56
Auschwitz, 4 Bonger, Willem, 369
B o o t s , profits of, 160
A u s t r a l i a n H e a l t h D e p a r t m e n t , see
B o r k i n , J o s e p h , 4-5
Health Department, Australian
Boyd. J. R..241
Australian Law Reform C o m m i s s i o n
D i s c u s s i o n Paper. 347 Braithwaite, John. 4 9 . 1 3 8 . 2 7 6 . 3 0 5 . 3 1 4
Australian National Biological B r a i t h w a i t e . V a l e r i e . 1.14
S t a n d a r d s L a b o r a t o r y . 141 brand n a m e s . 6 6 - 7 . 1 6 5 . 198-9
A v a f o r t a n , 250 B r a z i l , d r u g i n s p e c t i o n s in. 2 7 5
Brandenburg, R . C . , 6 0
A v e n t y l . 208
B r e i t . W i l l i a m . 325
Avery. C. K..229
Brennan. Bruce. 322
A y a n i a n . R o b e r t . 160
Brenner. S. N.. 4 9 . 3 5 1
Brewin. Robert. 2 0 7 . 2 0 9 . 2 2 1 . 2 2 6 . 3 0 0 .
Baldwin. William H.. 281 316
Bandura. Albert, 3
barbiturates. 207 bribery. 1 1 , 1 3
Barnet. R. J.,375 Briloff. A b r a h a m J., 2 7 9
Barofsky, I..241 B r i s t a c y c l i n e , 177
B a r t s h . T h o m a s C , 189 Bristol-Myers: advertising expenditure.
BASF. 4 207; disclosures to S E C . 2 2 - 3 . 3 7 ;
Bass. M.. 243 m e r g e r w i t h M e a d J o h n s o n . 1%; t h e
'bathtub'manufacturers of drugs. 112. t e t r a c y c l i n e price-fixing s t o r y . 1 7 6 - 9 0
390 B r o a d y . J o h n G . . 182
B a u m a r t . R . C , 351 B r o m l e y , B r u c e . 317
B a x t e r - T r a v e n o l , 7 8 , 153 B r o u g h t o n State H o s p i t a l . 2 2 9
B a y e r : a p p o i n t m e n t of war-criminal by, B r o w n , C h a r l e s S., 231
5 ; B r i t i s h M P d i r e c t o r of. 3 0 0 : C u t t e r B r o w n , Dr Ernest C, 57
Laboratories and. 2 8 4 . 3 7 3 ; B r u u n . Kettil. 206
d e s c e n d e d from I . G . F a r b e n , 4 ; B u r a c k . R i c h a r d . 6 7 . 1 6 0 . 172
heroin, marketing, 207; owns Burnstein. E . , 3
Netherlands Antilles holding Burroughs-Wellcome, 250,251
company, 284 Buscopan C o m p o s i t u m , 250
B e a c h , B r e w s t e r S., 281 B u s h . D r V . , 164
Beall, S e n a t o r , 248 B u s i n e s s R e g u l a t i o n . D e p a r t m e n t of,
B e a m i s h . SirTufton H. 300 381-2
Becton-Dickinson. 32 Business Week. 199. 2 8 5
Beecham. 160.300 butazones. 216
429
Index
B u t c h e r . Sir H e r b e r t W . . 3 0 0 Clothier Report. 118-19
B u t t l e s . J o h n S . 11.285 c o c a i n e . 207
Byron. W. J, 50 C o c k s . D o u g l a s L . . 160. 2 9 2
C o d e o f C o n d u c t for T r a n s n a t i o n a l
Calvert. E . J . . 2 4 3 Corporations, 47,374-5
C a m p b e l l . Sir J o h n . 2 0 6 C o f f e e , J o h n C o l l i n s , Jr. 329. 3 3 4 - 5 .
Canadian Health Protection Branch. 338,357.363
137 C o l l i n s . L . J.. 2 6 4
Cancer Institute. US National. 105.341 C o l o m b i a t r a n s f e r pricing. 2 8 5
c a n c e r m o r t a l i t y i n N e w J e r s e y . 135 C o m a n o r . W i l l i a m S.. 169
cancer research experiments: animal. Commission ofthe European
95: human. 88.89 C o m m u n i t i e s . 191
C a n e l l a . J u d g e . 183. 342 C o m p a z i n e . 225
C a n t o n R o a d smuggling case. 206 c o m p l i a n c e staff, c o r p o r a t e . 1 3 7 - 9 .
Cantwell. Dr Nelson, 52-3 357-9
Cappalletti, M a u r o , 347 C o n o v e r p a t e n t , 189
Caroline. Queen, 90 C o n s e r v a t i v e P a r t y . B r i t i s h . 300
Carrtone Laboratories. 228. 229 Console. Dr Dale. 165.224.227.255
c a r t e l s . 180. 1 9 1 - 5 C o n s u m e r P r o d u c t Safety C o m m i s s i o n ,
C a r t e r - W a l l a c e . 3 7 . 160 380-1
Cartwright. D . . 3 Contac Mist, 359
Cass. Dr Leo J. . 5 8 - 9
Contergan (thalidomide). 6 6 . 6 8 , 6 9
Cass Research Associates. 59
c o n t r a c e p t i v e m a n u f a c t u r e , h e a l t h risks
C a t a p r e s . 251
in. 1 3 4 - 5
C e d a r s of L e b a n o n Hospital. 355 c o n t r a c e p t i v e s , oral. 2 4 1 - 2 . 2 4 8 , 2 5 8
C e n t e r . D r , 1 2 0 , 123 Conyers, Congressman, 55
C e n t e r for D i s e a s e C o n t r o l . U S , 116 C o o k C o u n t y Jail, 8 9
Centrafarm, 174-5,200 Cook. Jonathan D. 82,84
Certification S c h e m e on the Quality of C o o p e r . R i c h a r d . 311
Pharmaceutical Products M o v i n g in C o r d i s C o r p o r a t i o n , failure o f q u a l i t y
International C o m m e r c e , 275 c o n t r o l s t a n d a r d s at. 1 1 9 - 2 9 . 3 1 6
C h a n d l e r . Geoffrey, 348 c o r t i c o s t e r o i d s , s y n t h e t i c , 168
C h a s e . J u d g e , 183 c o r t i s o n e . 164
C h a y e s , A b r a m , 313. 314 C o s t a R i c a , high s t a n d a r d s in, 2 7 7 . 3 7 0
C h c m i e G r u n e n t h a l . see G r u n e n t h a l C o s t e l l o . P e t e r M . , 198
chloramphenicol: expired, 260; C o s i e r . D r F . D o n a l d , 2 7 9 - 8 1 . 288
p r o m o t i o n of. 2 1 0 . 2 5 0 ; s i d e - e f f e c t s C o u n c i l o n E c o n o m i c P r i o r i t i e s . 114
of. 2 1 0 . 2 4 7 ; s u b s t i t u t e d for C o u r t o f A p p e a l s , U S , 182. 186
tetracycline, 2 5 3 ; withheld in typhoid C o u r t o f J u s t i c e o f the E u r o p e a n
research. 89 C o m m u n i t i e s . 174
Chloromycetin, 210.222,23 9.248.253 C P S C , see C o n s u m e r P r o d u c t S a f e t y
C h l o r o s t r e p . 248 Commission
C h l o r t e t r a c y c l i n e . 1 7 5 . 185 Cranston, Ross, 3 2 5 , 3 3 3 - 4
Christian D e m o c r a t i c Party. 17 Criminal C o d e Reform Act. 347
Ciba, 222 c r i m i n a l law. see law
Ciba (Switzerland), 300 c r i m i n a l p r o s e c u t i o n , see p r o s e c u t i o n s
Ciba ( U K ) , 3 0 0 C r i m i n o l o g y . A u s t r a l i a n I n s t i t u t e of,
C i b a - G e i g y : clioquinol in diarrhoea 385
treatment. 253; marketing ofanabolic C r o s b y . P h i l i p B . . 140. 149
s t e r o i d s . 2 5 1 ; m e r g e r . 1%: price o f Crouch. David, 300
S e r p a s i l . 166: ' Q u a l i t y S e a l ' P r o g r a m . Ciout. Dr Richard. 209
1 5 3 ; w i t h d r a w a l from P a k i s t a n . 2 7 2 C u b a . N a t i o n a l M e d i c a l Library of. 2 6 3
C l a r k s o n . K e n n e t h W . , 160 C u l l i g a n . J o h n , 113
class actions, 3 4 6 - 8 C u p r i m i n e , 169
C l a y t o n A c t . 1 8 4 . 186 Cutter Laboratories. 2 8 4 . 3 7 3
Clinard. Marshall B.. 5. 15,329 c y c l a m a t e s , 231
clioquinol, 253,346 Cyanamid: disclosures to S E C , 3 2 , 3 7 ;
Clonidine,251 d o m i n a t i n g a n t i b i o t i c m a r k e t . 175; D r
430
Index
Fox and. 12-13: e m p l o y e d Dr Smith. E a t o n . J u d g e . 128. 129
5 3 ; p a t e n t e d C h l o r t e t r a c y c l i n e . 198; ECOSOC.47
the tetracycline price-fixing story. E d e l h e r t z . H e r b e r t . 192
175-90 Ehrlich. E u g c n . 342
Eisenberg. Melvin Aron. 363,365
D a l k o n Shield. 258 Eklund. L. H . . 2 4 3
Darvall, L. W . . 2 3 3 E l d e r , A l b e r t L . , 164
Darvon, 170,20 4.209.216 Elzinga. K e n n e t h , 1%, 325
Davies. Wyndham. 12-13.300 E m p l o y e e Bill o f R i g h t s . 3 4 3
Davis. K e n n e t h C . 306 Engelberg. Dr. 63
D a w e s L a b o r a t o r i e s , 134 Enterovioform. 253
d e a t h s from: c h l o r a m p h e n i c o l . 2 1 0 ; Environmental Defense Fund. 263
contaminated intravenous solutions. E n v i r o n m e n t a l Protection A g e n c y . 103.
3 2 . 116; D a r v o n . 2 0 9 : d i - e t h y l e n e 305.380-2
g l y c o l , 1 1 3 ; D o r n w a l , 5 6 ; elixir E P A . see E n v i r o n m e n t a l P r o t e c t i o n
s u l f a n i l a m i d e . 110; F l e x i n , 56; Agency
i n c o r r e c t l y l a b e l l e d t a b l e t s , 110; E p s t e i n . S a m u e l S.. 9 5 . 1 0 6 , 108, 1 3 4 - 5 ,
Librium, 2 0 9 ; O p r e n , 56; Sudoxican. 302
54; thalidomide. 69; Valium, 209 E r m a n n . D a v i d . 138
D e c a d u r a b o l i n . 250 Eslamizadeh. DrShaikol. 43
Delmas-Marty. Mireille. 284 e s t r a d i o l p r o g y n o n . 162
De L o r e a n . John Z.. 378 European Economic Community. 155.
D e p o - P r o v e r a . 258. 266 174
d e t a i l m e n . 212. 2 2 2 . 2 2 4 - 6 , 250 E u r o p e a n Free Trade Association. 156
Dianabol,251 Evans, Florence, 65
D i a n a v i t , 251 Evans, Liam, 65
d i a z e p a m , 172. 199 Evans Medical, 118-19
d i - e t h y l e n e g l y c o l , 113
digitalis tablets, c o n t a m i n a t e d . I l l Fair D e a l M o t o r s , 2 8 2
digoxin tablets, recalled. Ill Far E a s t I n t e r n a t i o n a l C o r p . . 2 2
d i h y d r o e s t r e p t o m i c i n e , 248 Farben, I . G . , 4 - 5 . 3 8 9
dipyrone, 250 Fay.Judge.126
director, public-interest. 365-6 Federal Register, 91.242.243,315
d i r e c t o r s , r o l e of, 3 6 2 - 7 Federal Trade C o m m i s s i o n , 186.380
Distaval (thalidomide), 70 F D A (Food and Drug Administration):
Distillers' Company. 6 9 - 7 0 , 7 4 , A b b o t t Laboratories and, 115-18;
106-7 advertising controls, 218; anonymous
diuretics. 162. 1 6 5 . 2 5 1 transnational case-history, 130-3;
dogs in laboratories. 6 2 . 8 4 antibiotics division. 220; Bioresearch
D o r s e n , N o r m a n , 301 Monitoring Program. 7 9 . 8 2 - 3 ;
Dotterweich, 321 B r i t i s h labs ask for i n s p e c t i o n by. 156.
D o u g l a s . Justice. 340 277; Bureau o f B i o l o g i e s . 85; Bureau
D o w , 196 of Drugs, 209; chloramphenicol
w a r n i n g , 2 1 0 ; Clinical Investigations
D o w i e , Mark, 257-9
Office of, 5 6 ; C o r d i s p a c e m a k e r s a n d ,
D r u c k e r , Peter F., 3 5 9 , 365
119-29; decisions on drug safety, 2 9 2 ,
drug abuse, 207
349; discovers dishonest doctors, 53;
D r u g A b u s e . N a t i o n a l I n s t i t u t e of. 2 0 9 Division of Drug Advertising. 235;
d r u g r e c a l l s . 148. 1 4 9 , 1 5 3 , 158 D i v i s i o n o f D r u g M a n u f a c t u r i n g , 112;
D r u g R e g u l a t i o n Reform Bills. 2 6 2 - 3 . d o c t r i n e o f ' i n f o r m e d consent"
294 formulated by. 9 0 - 1 ; D r u g A b u s e
Drug Research Corporation, 58 Staff. 2 0 9 ; D r u g P r o d u c t P r o b l e m
drugs: dumping. 2 5 8 - 6 1 , 3 6 9 ; expired, Reporting Program. 110;GLPs
2 6 0 ; m e - t o o , 164, 1 9 1 , 2 9 3 ; d r a w n u p by, 7 9 ; Industrial B i o t e s t
p r e s c r i p t i o n . 1 7 0 ; s e r v i c e , 169; i n v e s t i g a t i o n , 8 1 - 2 ; i n n o v a t i o n , role
s m u g g l i n g . 2 6 1 ; toxic effects. 208 in fostering, 96-7; inspections of
d r u g - t e s t i n g , fraud in, 5 2 , 5 7 t r a n s n a t i o n a l s , 157; i n s p e c t o r s
dry labelling'. 5 7 . 8 0 offered bribes. 3 3 ; M E R / 2 9
D u b o i s . P i e r r e . 152
431
Index
i n v e s t i g a t i o n . 6 0 - 5 ; patient labelling furosemide. 251
requirements. 2 4 2 ; relations with
industry, 3 0 0 - 1 . 3 0 3 - 4 . 3 5 9 - 6 2 . 3 7 7 ; Gabbay. Edmond. 306
role of g u a r d i n g world health. 277, Gadsden, Henry W., 18,216
3 7 0 ; Searle. case against, 7 5 - 8 ; Gaedeke, R. M.,264
seizures of R e g i m e n tablets, 57; Gaffin, B e n , a n d A s s o c i a t e s . 2 1 8
survey of G L P compliance. 82-6; G a l b r a i t h . John K e n n e t h . 332
training i n s p e c t o r s , 3 9 ; use of G a r d n e r . S h e r w i n . 108
i n j u n c t i o n s , 136; u s e o f p r o s e c u t i o n s . G e i g y , see C i b a - G e i g y
3 1 7 . 3 2 0 ; use o f s e i z u r e , 3 3 7 ; use o f Geis, Gilbert, 1 5 , 3 2 9 , 3 5 4
warnings, 307 G e n e r a l A c c o u n t i n g Office, 8 4 , 8 5
FDA Consumer, 335 G e r e f f i . G a r y , 2 0 , 160, 167, 168. 199.
272
fine a s p u n i s h m e n t i n c o r p o r a t e c r i m e ,
321,331-5 Gerovital, 32-3
Fine, Sam, 320 Gettinger, Stephen. 90
Finkel, Dr Marion, 81 Gilley. Dr E. Wayne, 229
Firma Paracelsia, 68 G l a x o , profits of, 160
Fisher, Nigel T.,300 Glover, Jonathan. 5
Fisse, W. B., 4 9 , 1 3 8 , 3 2 7 . 3 3 6 , 3 3 9 G L P s ( G o o d Laboratory Practices):
Flagyl, 76 c r i t i c i s m s of, 9 6 ; d r a w n u p b y F D A .
Flawn, A l e x a n d e r , 70-1 79, 108; F D A study of v i o l a t i o n s ,
Flawn, John, 70 8 2 - 5 ; required in contract labs, 103;
Flawn, Judith, 71 requirement f o r Q A U s , 99-100
Fletcher, G e o r g e , 323 G M P s ( G o o d Manufacturing Practices):
Flexin, 56 Australian, 141; British, 141;
F o e g e , William H., 247 i n t e r n a t i o n a l v a r i a t i o n s in, 110,
F o o d , Drug and Cosmetic Act (1938), 1 5 3 - 7 ; r e g u l a t i o n of, 3 1 5 ; v i o l a t i o n s
1 1 0 , 114 b y A b b o t t . 117; v i o l a t i o n s i n I n d i a ,
F o o d , Drug and Cosmetic Act (1962): 272
effect on n e w drug approvals, 2 9 3 ; Goddard, Commissioner (FDA), 51.88
fear of, 3 4 6 ; i n f l u e n c e o f M E R / 2 9 a n d Goldring. John, 346
t h a l i d o m i d e o n , 108; limits e x p o r t s , G o o d r i c h , W . W . , 115
2 6 0 ; Park d e c i s i o n , 3 2 0 - 1 ; p e n a l t i e s Gordon, Benjamin, 87
for m i s l e a d i n g a d v e r t i s i n g , 2 3 1 - 2 ; Gorring, Pam, 173,204-5,222
prosecutorial discretion in, 306; g o v e r n m e n t p r i c e c o n t r o l s , 171
p r o v i d e s for p u b l i c i t y , 3 3 5 ; g o v e r n m e n t s u b s i d y s c h e m e s , 170
r e g u l a t i o n s , 3 1 5 ; use of, 3 2 9 G r a b o w s k i , H e n r y G., 168, 1 6 9 , 2 6 6 ,
F o o d a n d D r u g A d m i n i s t r a t i o n . U S , see 292
FDA •graphiting', 57, 59
Ford, Betty, 204 G r e e n , Mark J. . 3 1 6 - 1 7
Foreign Corrupt Practices Act (1977), Griffin, J o h n P . , 5 5
40,42,44,46 Griggs, D r B o y c e P . , 2 2 9
Fortune Magazin e, 44 Gross, E., 95, 1 3 8 . 3 5 5 , 3 6 8 , 3 7 3
F o x , Dr Sidney Martin, 12-13 Gruenberg, Gladys W., 16
F r a n c e , i m p r o v i n g s t a n d a r d s in, 156 G r i i n e n t h a l . C h e m i e : c l a i m s for
F r a n k e l , J u d g e M a r v i n , 182 thalidomide, 257; delay publication of
F r a s e r , S., 4 t e s t r e s u l t s , 107; effect o f t h a l i d o m i d e
F r e e d o m of Information Laws, 100,106. c a s e o n c o m p a n y , 7 4 , 107; p r o d u c e
302 t h a l i d o m i d e . 6 7 - 8 ; p r o s e c u t i o n of, 5 5 ,
Frieberg, Arie, 6 7 2 - 3 ; withdraw thalidomide, 71
F r i e d m a n , H o w a r d M . , 341 G r u n s p o o n and Stringer, 222
Friedman, Milton, 294 G u a t e m a l a : ' b a t h t u b ' m a n u f a c t u r e r s in,
Frye, Dr William W., 228 1 1 2 ; b r i b e r y in, 12; l o w m a n u f a c t u r i n g
Froman, June, 54 s t a n d a r d s in, 1 5 3 - 4 ; r e g u l a t i o n s in,
F T C , see F e d e r a l T r a d e C o m m i s s i o n 274
Fuller, John G., 3 3 , 6 1 - 2 , 116-17.223 G w a n d o , 206
Fuller, Lon, 3 0 6 , 3 1 2
Functional B e h a v i o r P r o b l e m s , 222 H a g u e , S u p r e m e C o u r t i n t h e , 174
432
Index
H a l p e r i n , J e r o m e A . . 241 hormone solutions, contaminated. I l l
H a m b e r g , D a n i e l . 198 H o u s e of Lords Special Orders
Hamill, Richard, 78 C o m m i t t e e , 173
H a m m o n d . H o m e r . 179 H o x s e y Cancer Clinic v. F o l s o m , 234
h a m s t e r s , laboratory, 77 Hughes, Richard, 2 0 7 , 2 0 9 , 2 2 1 , 2 2 5 ,
Hansen, Judge, 316 300.316
H a n s e n . R o n a l d W . , 168 H u g s t a d , P a u l S . , 232
H a r r i s , R i c h a r d , 164 Humphrey, Senator. 57,58
Hart. Senator, 2 2 8 . 2 3 0 H u n t i n g t o n R e s e a r c h C e n t r e . 102
Harvard Business Review, 49 Hutt. F D A G e n e r a l - C o u n s e l , 337
Harvard Law Review, 138, 3 3 0 Hutton.E. F.,355
Harvard Law School Health Service, 59
H a r v e y , Sir A r t h u r V e r e , 3 0 0 imprisonment. 305,321-2, 328-30
Hazleton Laboratories, 76,79 I M S c o m p a n y , 195
Health Action International, 254 I n d i a , d r u g c o u n t e r f e i t i n g i n , 112
Health Department, Australian, 238, I n d i a n D r u g s and P h a r m a c e u t i c a l s L t d ,
239,244,286,317-18,384 270
Health Education and Welfare, Inderal, 211
Department of ( U S ) , 300 'Indianisation' of pharmaceutical
H e a l t h and H u m a n S e r v i c e s , industry, 2 7 0 . 2 7 2
Department of (US), 199.381 Indocid25,284
Health Protection Board, Canadian, Indocin.215,216
137 Indomethacin, 52-3
Health Research Group (US), 333 I n d u s t r i a l B i o - T e s t . 8 0 - 2 . 107
H e a l t h and Social Security. D e p a r t m e n t influenza, Haemophilus. 210
o f ( U K ) , 173 i n j u n c t i o n s , use of, 126
H e b e r g e r , A . I . , 179 inspectors, government/internal, 99,
Heller. T o m . 3 4 . 2 6 6 , 2 8 6 137-H), 146-7
H e l l m a n n , Rainer, 369 Institutional Review Boards, 9 2 , 3 7 8 .
H e l s i n k i , D e c l a r a t i o n of, 8 7 392
H e m m i n k i , Elina, 2 2 4 , 2 2 6 . 300 insulin s a m p l i n g . 142
H e n r y F o r d H o s p i t a l , 116 Internal R e v e n u e Service ( U S ) . 18.376
Hentoff,N.,222 International Chamber of Commerce.
H e r b e r t . L . L . . 179 374
H e r l i h y , E d w a r d D . , 15. 1 6 . 3 7 , 3 5 8 intravenous solutions, unsafe, 114-18
heroin, 204-7
I r a n , c o r r u p t i o n in, 4 3
H e r s h e n s o n ( o f C o r d i s ) . 1 2 2 , 125 I r e l a n d , tax a d v a n t a g e s of, 2 8 5
H e y d e n C h e m i c a l C o r p o r a t i o n , 184. Italy, bribery in, 12,17
186
H i n e s , Professor, 127-9 J a c o b , Dr Stanley W . , 53
H o e c h s t : a p p o i n t m e n t of war-criminal Jaehne, Friedrich, 5
b y , 5 ; d e s c e n d e d from I . G . F a r b e n , 4 ; Janis, J., 3
t e t r a c y c l i n e p r i c e - f i x i n g a n d , 181: J a p a n : G M P s t a n d a r d s in, 1 1 3 : N a t i o n a l
t e t r a c y c l i n e i n Sri L a n k a , 2 7 1 Redress Law. 346
H o f f m a n - L a R o c h e : bribery in Kenya, Japan Times, 57
3 4 ; contact with doctors, 226; Dr J a y e s E x p o r t , 281
S a v e r y a n d , 5 4 ; illegal d r u g t r a d e , Jayes H o l d i n g International. 281
i n v o l v e m e n t with. 2 0 6 ; international Jewish Chronic Disease Hospital, 88
standards, 278; manufactures Tigan, Johnson. Anita. 56,263
58; Moroccan executives jailed, 260; J o h n s o n and J o h n s o n : c o n t r a c e p t i v e
price o f L i b r i u m and V a l i u m , 172-4; trials, 2 6 5 ; d i s c l o s u r e s t o S E C , 3 7 ; D r
p r o f i t s from h e r o i n a n d m o r p h i n e , 5 ; Scheiner and, 53-4; McNeil
v i t a m i n C m a n u f a c t u r e r , 162 Laboratories and, 56; marketing of
H o g a n , Brian, 325 oral c o n t r a c e p t i v e s , 2 4 8 - 9 ; s u e s drug
H o o t e n , I n s p e c t o r . 122 c o m p a n i e s , 281
H o p k i n s . A n d r e w , 111 Jordan, Mrs Beulah, 6 0 - 1 , 357
h o r m o n a l products, health risks with, Journal of the American Medical
134-5 Association, 218, 234
433
Index
Journal of the Medical Society of New Lang. Dr Konrad. 68-9
Jersey, 63 Lang. Ronald W . . 3 0 0
J o w c l l . Jeffrey. 312. 313 Lantin.P.T.,Sr.89
Joyce. C. R . B . . 2 4 2 Largactil. 252
Jung. Dr. 67 Lasagna. Louis. 267
L a s i x a m p u l e s m i x u p . 113
Kalos company. 253 law: c o d i f i c a t i o n of. 3 1 0 - 1 9 ; c r i m i n a l ,
K a n a / a w a District Court. 346 2 9 2 . 3 0 8 - 1 0 : e n f o r c e m e n t , 2 9 0 : fines.
Kanouse. D. E.,243 3 2 1 , 3 3 1 - 5 ; prison s e n t e n c e s . 3 0 5 .
Kansas State Penitentiary. 90 321 - 2 . 3 2 8 - 3 0 , 3 4 1 ; reform. 3 7 8 ;
K a p p a m o d e l o f p a c e m a k e r . 128. 129 s u n s e t l e g i s l a t i o n . 2 9 5 - 6 ; use of.
K a s t o r . H i l t o n . C h e s l e y . C l i f f o r d and 2 9 0 - 1 : see also p r o s e c u t i o n s
A t h e r t o n . 58 Law Reform C o m m i s s i o n Discussion
K a t z , M u r r a y S., 241 Paper. Australian. 347
K e f a u v e r , S e n a t o r . 108. 1 6 3 . 3 0 0 League ofNations Opium Advisory
Kefauver hearings, 161.224 Committee. 206
K e f a u v e r investigation into tetracycline L e a n . D a v i d F . . 165
p r i c e - f i x i n g . 1 7 6 , 181 Lederle Laboratories. 12. 179-82
Kelscy. Dr Frances. 7 1 . 298 L e d o g a r . R o b e r t J.. 2 0 8 . 2 5 7
K e n n e d y . Commissioner Donald. 85. L e e , P h i l i p R., o n : A b b o t t c a s e . 1 1 4 ;
293 D o r n w a l case. 5 6 ; drug recalls.
Kennedy. Senator Edward. 2 0 8 . 2 1 1 . 1 1 1 - 1 2 : 1 m l i V i n c a s e . 2 1 5 ; Latin
224.246 America. 2 5 6 ; production costs. 1 6 1 :
Kennedy, Tom, 16 profits in t h e p h a r m a c e u t i c a l i n d u s t r y .
K e n n e d y Subcommittee: allegations 1 6 0 , 165
a g a i n s t G . D . S e a r l e at. 7 5 - 8 0 ; Lenz, Professor, 71
allegations of F D A pro-industry bias. Lepetit. 181.250
300; cross-examination discussed. letters. Dear Doctor. 2 3 2 . 2 3 3 . 2 3 9
3 1 1 : effect on H a z l e t o n Laboratories. Letters, Notice ofViolation. 233
7 9 ; gifts t o d o c t o r s , o n , 2 1 1 : I n d u s t r i a l Levine ( F D A C o u n s e l ) . 1 2 1 . 122. 125.
Biotest and. 8 1 - 2 ; prisoners' 1 2 6 . 129
affidavits t o . 9 0 ; transcripts. 8 L e v i n e . T h e o d o r e A . . 15. 16.37.358
K e p o n e pollution disaster. 339 L e y . D r H e r b e r t . 5 1 . 115
kickbacks. 281 Ley. P.. 242
K i n g C o u n t y H o s p i t a l . 180 liability, c o r p o r a t e / i n d i v i d u a l , 2 9 1 .
King, 'Dr' William. 6 1 . 6 4 3 1 9 - 2 8 ; see also a c c o u n t a b i l i t y .
K i n g Faisal Specialist H o s p i t a l . 25 responsibility
K i n s l o w R e p o r t , 142 liability, p r o d u c t , 3 4 4 - 6
Kline. T e d , 358 A
Librium. 172 ». 2 0 0 - 1 . 2 0 6 . 2 1 4 - 1 5
K l o c r . B a l d w i n E . . 1 1 1 . 158 L i d o f f ( p a t e n t e x a m i n e r ) . 189
Knight. Frank A . . 197-8 Lilly. Eli: A v e n t y l . p r o m o t i o n of. 2 0 8 ;
K n i g h t l e y et al., 6 4 - 7 5 . 257 buy Distillers' pharmaceutical assets.
K o g a n . N. 3
7 4 ; c o m m i t t e e d e c i s i o n - m a k i n g in.
K o r e a , d r u g c o u n t e r f e i t i n g in, 112: 358; D a r v o n . manufacture. 2 0 9 - 1 0 ;
e x a m i n a t i o n o f p r o m o t i o n a l c l a i m s in. Guidelines of Company Policy, 195:
249-50 i m p r o v e m e n t s to labelling. 2 5 6 ;
Krajick. K e v i n , 90 Mexican manager gaoled. 38; model
K r e i g . M a r g a r e t . 112. 2 1 2 , 3 7 6 o f e x c e l l e n c e , 1 7 . 4 4 . 1 5 7 : m u s t a r d gas
Kreisberg. S i m e o n M.. 307 kit. 169; no c o r r u p t p a y m e n t
Kugel. Yerachmiel. 16 d i s c l o s u r e s . 16; o b j e c t i o n s t o F o o d .
kwashiorkor, 250.251 D r u g and C o s m e t i c A c t . 2 6 0 ; O p r e n .
manufacture. 5 6 ; prices o f D a r v o n .
labelling, patient. 2 4 2 - 3 . 254 170; qualified sales reps. 2 2 7 ; strategy
laetrile. 3 2 - 3 in M e x i c o , 4 2 ; study on product
Lall. S a n j a y a . 160, 1 9 1 , 2 7 0 . 2 7 1 r e c a l l s . 158
L a m b e r t . J o h n , 175 liver d a m a g e . d r u g < a u s e d . 5 4 . 5 6 , 2 5 0
L a m b . Fred. 298 liver p r e p a r a t i o n , m i s l a b e l l e d . 111
Lancet, The 7 1 . 107 L o c k h e e d scandal. 11.40
434
Index
L o f t u s . B u d . 112. 1 1 7 . 3 9 4 Melrose. Dianna. 251. 252
L o h r . S t e v e , 153 Merit Pharmaceutical C o m p a n y Inc..
L o n g , S e n a t o r . 181 228
Lord, Judge. 187-9 M E R / 2 9 : fraud i n t e s t i n g , 6 0 - 5 . 2 8 8 :
Los Angeles Times. 32.33 p r o m o t i o n of. 2 2 2 - 3 . 2 2 6 : results o f
Louisiana State University School ol c a s e . 108. 3 4 6 : s t o c k b r o k e r s a w a r e o f
M e d i c i n e . 228 dangers. 355
L S D . 207 M e r c k : A l d o m e t s t o l e n f r o m . 12;
L u n d b e r g . Dr Per O l a v . 66 A u s t r a l i a n s u b s i d i a r y of. 144;
L u n d m a n . R i c h a r d J.. 138 contraceptive testing. 266; Cuprimine
L y d e c k e r , Mia. 256 p r o d u c e r . 169: d i s c l o s u r e s t o S E C .
17-20. 3 4 . 3 7 ; doctors' relationships
Mboya. Tom. 257 w i t h . 5 2 - 3 ; I n d o c i n a d v e r t i s i n g and
M c A d a m s . John P.. 1 3 8 . 3 3 2 p r o m o t i o n . 2 1 5 , 216; labelling
M c A d a m s . Tony. 332 i m p r o v e m e n t s . 2 5 6 ; p r o d u c t recalls
M c B r i d e . Dr William. 70. 71 by. 12; t e s t s M E R / 2 9 . 6 2 : transfer
McCallum. Alexander. 75 p r i c e s . 2 8 4 ; v i t a m i n p r o d u c e r . 162
McCallum. Morag. 74-5 Merck. Sharpe & D o h m e A G . . 18
M c C o y . Alfred W.. 205 M e r r e l l . W i l l i a m S.. 6 0 - 5
M a c D o n a l d and C o . , 206 Merrill. Richard. 316
Mace. M y l e s L . , 363 M e r t o n . R o b e r t K., 3 6 8
M c G a r i t y . T h o m a s O . . 106 m e s o r i d a z i n e . 225
McGuire. Matthew F. 64 M e t h a d o n e . 250
M c K e e . D r J o h n . Jr. 2 2 9 Mexaforma, 253
M c K e s s o n and R o b b i n s . 1 7 6 . 2 7 9 - 8 1 .
M e x i c o : b r i b e r y in. 3 6 - 4 0 , 4 2 ; c r u s a d e
289
a g a i n s t c o r r u p t i o n in, 3 7 - 4 0 : re-
McMaster (Associate Director of o r g a n i s a t i o n o f r e g u l a t i o n in. 3 8 2 :
Clinical R e s e a r c h at W i l l i a m S. t y p h o i d e p i d e m i c in. 2 4 9
Merrell). 62-5 m i g r a i n e . 251
McNeil Laboratories. 56 Migril,251
McTaggart, Lynne, 53 Miller. Arjay, 50
Madaras. G. R . . 4 M i l i t a r y M e d i c a l S u p p l y A g e n c y . 178
M a e s d a v . W a l t e r S.. 160 MIMS (Monthly Index of Medical
Maher.L. W..346 Specialities). 250.251.254.256
M a j o n e . G i a n d o m e n i c o . 310 m i n i s t e r s o f h e a l t h , bribery of. 3 4 - 5
malnutrition. 250 M i n t z . M o r t o n : d o c t o r s ' conflict o f
Mancil, 262 i n t e r e s t , o n , 2 2 8 - 3 0 ; drug p r i c i n g , o n .
Mann. Kenneth. 319.330 1 6 2 ; F D A r e f u s e t r a n s c r i p t s t o . 115:
M a n s f i e l d . E . . 169 Olin case, on the. 22; penicillin, o n .
m a r a s m u s . 251 164; p r o m o t i o n s , on. 2 1 3 . 2 2 0 :
marijuana. 207 t e t r a c y c l i n e c a s e , o n t h e . 182: w o r k
M a r i o n L a b o r a t o r i e s , 160 of. 5 7 - 6 0
Maronde. R. F..213 Mitchell C o m m i t t e e . 3 2 4 . 3 2 8
Marston. M. V..241 Modern Medicine. 22\
Maryland State Medical Journal 58 M o d y . A m r u t V . . 152
Massengill & C o . . 113-14 Molander. E. A.. 49.351
m a t r i x m a n a g e m e n t . 102, 3 5 8 M o n a h a n . John. 354
M a y o Clinic, Minnesota. 64 m o n k e y s , laboratory. 6 0 - 2 , 3 7 1
M e a d J o h n s o n , 169. 196 M o n o p o l i e s C o m m i s s i o n . B r i t i s h , 169.
Measurin. 59 173. 1 7 4 , 2 0 0 - 1
measles. 246 Monopoly. Subcommittee on, 248-9.
Medawar. Charles. 251. 2 6 0 . 2 7 3 . 3 4 8 252
Medicaid. 282-4 M o r e y . Richard S, 335
M e d i n a . J u d g e . 183 morphine. 111,206
M e d t r o n i c . 3 0 . 119. 124 Morris. L. A.. 243
M e e r . Fitz ter. 5 M o r r i s . L o u i s . 241
Mellaril. 225 Morris. N o r v a l . 307
M e l m o n . P r o f e s s o r K e n n e t h L . . 165 M o r s e . Dr. 124-5
435
Index
M o r i o n - N o r w i c h , 143 N y l e n . Stig. 155
Mother Jones. 5 4.2 5 8 - 9
M u h l e m a n . J. T . , 3 O c c u p a t i o n a l Safety and H e a l t h
Muller. Mike, 251. 260, 2 6 5 . 2 7 1 , 2 7 4 Administration. 134.380-2
Muller. R. E . . 375 O E C D , 374
M u n r o , C o l i n . 66. 344 oestrogen replacement therapy, 244
muscle relaxants. 216 O g l e s b a y . I n s p e c t o r . 122
M u s i c a . Phillip. 280 Ohio D e p a r t m e n t of Public Welfare.
Musto. David F.,207 283
Myers. E. D..243 O h i o State Penitentiary. 89
Myers, MavenJ.,230 Olin M a t h i e s o n Chemical Corporation.
M y e r s o n . Bess, 348 21-2
O M a l l e y . P a t , 159
Nader. Laura. 329 Ondasil (thalidomide). 67
N a d e r . R a l p h : e m p l o y e e rights, o n . 3 4 3 . ophthalmic ointments, contaminated.
3 5 3 : federal chartering p r o p o s a l s , Ill
3 8 2 : f i n e s , o n . 3 3 2 . 3 3 3 : profits, o n . Opinion Research Corporation, 49
160; p r o m o t i o n s , o n . 2 2 5 : public- opium. 205. 206
interest director suggestion. 365: O p i u m Advisory C o m m i t t e e . 206
V a l i u m s a l e s , o n . 172 O p p e n h e i m c r and C o . . 2 8 5
Nader's Health Research Group. 76 Opton.N.,2
Nagel. Trevor. 333 O r e g o n State P e n i t e n t i a r y , 9 0
Najman. Jackob M 233 Organisation of American States. 374
Naprosyn. 81 O r g a n o n . 250
nasal s p r a y s , c o n t a m i n a n t s in, 359 O r t h o - N o v u m b i r t h - c o n t r o l pills.
N a t i o n a l C a n c e r I n s t i t u t e ( U S ) . 105 281
National Health Service ( U K ) , 173,238. O S H A . see O c c u p a t i o n a l Safety and
377 Health Administration
N a t i o n a l H i g h w a y Traffic S a f e t y o s t e o p o r o s i s . 250
Administration. 354 O x a i n e - M . 113
N a t i o n a l I n s t i t u t e for O c c u p a t i o n a l o x y t e t r a e y e l i n e . 175
Safety and Health. 354
N e g r a m . 174 p a c e m a k e r s , heart. 2 7 , 3 0 , 119-29
N e l s o n . S e n a t o r G a y lord. 1 0 4 . 2 0 7 . 2 1 9 Packer, Herbert L. 341
N e l s o n S u b c o m m i t t e e . 210 Pan A m e r i c a n Health Organisation.
Nestor. D r J o h n . 58 275,297
N e t h e r l a n d s A n t i l l e s tax h a v e n . 2 8 4 Panalba. 3 1 6 . 3 8 9
Neurosedvn (thalidomide). 66 P a n m y c i n , 177
N e u s t a d t . R i c h a r d M.. 2 0 2 . 2 9 6 . 3 8 1 Pappworth.M. H..89
N e w Drug Regulation. Review Panel Park c a s e . 3 0 8 , 3 2 0 - 2 . 3 5 2
o n . 301 Park. J o h n , 3 2 0 - 1
New England Journal of Medicine, 115 P a r k e - D a v i s : back W e l c h ' s j o u r n a l , 2 2 0 ;
N e w J e r s e y , c a n c e r m o r t a l i t y in, 135 Chloromycetin promotion. 210,219,
New York Times, 221 222, 239, 247-8; chloramphenicol
N e w Y o r k U n i v e r s i t y L a w S c h o o l , 301 sales. 210, 255; cocaine, promoting.
N e w Z e a l a n d p r o d u c t liability c a s e s . 3 4 6 207; contraceptive marketing. 249;
Newsweek. 294 d i s c l o s u r e s t o S E C . 2 0 ; m e r g e r . 196
Nippon Chemiphar. 56-7 P a t e l . B . V . . 140. 148
nitroglycerin tablets. I l l P a t e n t O f f i c e , 186
N o e l . P e t e r , 102 patents, 163-6, 175-6. 183-6. 197-8
Norgesic. 59 patient labelling. 2 4 2 - 3 . 2 5 4
Norpace, 77 Paton. J..69
Norvedan. 56 P a u l s . I \ n i n - M . I l l , 158
N o r w i c h , profits of. 1 5 9 - 6 0 Paulson, P., 243
Novaco. Ray, 354 P D R . see P h y s i c i a n ' s D e s k R e f e r e n c e
N o w a k , N a n c y , 338 P c a r c e , F r a n k , 159
Noxidyn (thalidomide), 66 P e a r s o n C o m m i s s i o n , 345
Nulsen. D r R a y O . , 7 2 Pckkanen,John, 207.214.215,228
436
Index
p e n i c i l l a m i n e . 169 Primobolan D e p o t . 250
p e n i c i l l i n : a l l e r g y t o . 2 3 0 ; m a r k e t for. prisoners, experiments on. 89-90
1 7 5 ; p r o d u c t i o n d u r i n g W o r l d W a r II. p r o c a i n e b e n z y l p e n i c i l l i n . f a k e . 112
1 6 4 . 197; w a t e r s u b s t i t u t e d for. 1 1 2 ; product liability, 3 4 4 - 6
w i t h h e l d in syphilis research, 89 p r o s e c u t i o n s , c r i m i n a l : F D A u s e of,
Pepinsky. Harold E., 327 317; F o o d , D r u g and C o s m e t i c A c t ,
peripheral neuritis, 6 8 - 9 , 392 u n d e r . 1 3 0 , 2 3 1 - 2 ; M e x i c o , in, 1 4 3 ;
Perlmutter. Howard V.. 372-3 M o r t o n - N o r w i c h , of. 1 4 3 ; use of, 126,
P e s o n e n . Terttu, 224. 226. 300 130. 2 9 2 . 3 0 5 , 3 0 7 ; v i o l a t i o n s o f G M P
P e t e r s e n . D a n . 355 r e g u l a t i o n s , for, 136
Pfizer: b a c k s W e l c h ' s j o u r n a l s . 2 2 0 ; p s y c h o s t i m u l a n t d r u g s . 162
B o l i v i a n subsidiary. 2 6 1 ; British M P psychotropic drugs. 5 3 , 2 4 6
d i r e c t o r of, 3 0 0 ; d i s c l o s u r e s t o S E C , P u e r t o R i c o , tax h a v e n . 285
21; Mancil.262;Sudoxican Purcell, T h e o d o r e V . , 367
m a n u f a c t u r e r . 5 4 ; t e t r a c y c l i n e airlift.
2 7 1 ; the tetracycline price-fixing Quality Assurance Unit ( Q A U ) ,
story. 1 7 5 - 9 0 . 1 9 8 ; tranquilliser 99-100,361
advertising, 215; videotape q u a l i t y c o n t r o l as a p r o f e s s i o n , 150—1
p r o m o t i o n . 209; vitamin producer. quality control managers, 2 , 1 3 9 , 143-9,
162 327-8
P f u n d e r . M a l c o l m R . , 196 q u a l i t y c o n t r o l staff, 149; see also
Pharmaceutical Benefits Scheme.'286, c o m p l i a n c e staff
300 Q u e e n ' s University of Belfast. 217
Pharmaceutical Manufacturers q u i n i n e d i h y d r o c h l o r i d e m i x u p , 113
Association(s): Australian. 233,235: Q u i n n e y . R i c h a r d . 150
British, 233. 299; International
F e d e r a t i o n of, 2 5 4 , 2 5 7 ; i n t e r v i e w e d , R a n g n e k a r . M . K., 112
9, 3 8 5 ; links with A M A , 2 1 9 ; lobby in rats, l a b o r a t o r y . 6 2 , 7 5 , 7 7
U S A , 174; s u b c o m m i t t e e structures, r e c a l l i n g d r u g s , 1 4 6 - 9 , 1 5 3 , 158
195 R e e k i e , W . D u n c a n . 169
p h e n o t h i z i n e , 225 Regimen tablets. 57-8
phenylpropanolamine hydrochloride, regulatorv agencies. 2 9 8 - 3 0 5 . 3 7 7 - 8 .
57 380
P h i l a d e l p h i a C o l l e g e of P h a r m a c y and Reisman, W. Michael. 1 1 , 3 7 . 4 0 . 4 3 , 4 9
Science, 230 Research Industries Inc., 53
Phillip Bauer C o . , 22 r c s e r p i n e . I l l , 166
Physician's Desk Reference. 247,248 r e s p o n s i b i l i t y in c o m p a n i e s for law
P h y s i c i a n s ' R a d i o N e t w o r k . 221 v i o l a t i o n s . 1 3 8 - 9 . 3 0 8 . 3 2 2 . 3 2 8 ; see
Pines. W a y n e L.. 335 also a c c o u n t a b i l i t y , liability
placebo(s).87.91,392 restitution to victims. 291
Placidyl. 2 1 2 . 2 1 7 R e v c o M e d i c a i d fraud. 2 8 2 - 4
plague, infecting prisoners with, 89 Rheinstein, Peter H, 2 3 2 , 2 3 5
P l o u g h m e r g e r w i t h S c h e r i n g . 196 Rice. Thomas M., 61
P M A , see P h a r m a c e u t i c a l R i c h a r d s o n - M e r r e l l : cost of M E R / 2 9
Manufacturers Association case. 346; disclosures to S E C , 32;
Polanyi. Michael. 312 d i s t r i b u t o r o f t h a l i d o m i d e for t e s t i n g .
polio. 247 7 2 ; effect o f t h a l i d o m i d e c a s e o n . 7 4 .
P o l y c y c l i n e , 177 1 0 7 , 1 0 8 ; merger with D o w . 1%;
Portillo, President (of M e x i c o ) , 3 8 - 9 . M E R / 2 9 and William S. Merrell.
155 6 0 - 5 . 1 0 1 . 355; promoting M E R / 2 9 .
Posner. Richard A.. 193.195, 196.314 2 2 2 . 2 2 6 ; settlement with thalidomide
P o w e r s ( o f P f i z e r ) , 185 victims. 73-4
p r e d n i s o n e . I l l , 164 R I C O statute. 310
PreeM.T.,233 Riker (pharmaceutical company). 94
Prensa, La, 32 Ritalin. 222
Price. D a v i d E . C . , 300 Roberts, Dr Kathleen E., 57
Price W a t e r h o u s e , 280 Robin. Dr Bennett A., 58
price-fixing, 5, 175-83 Robins, A. H.,32,160,258
437
Index
R o c h e , see H o f f m a n - L a R o c h e 285; Puerto Rico contraceptives
R o h r e r p r o f i t s , 160 trials. 2 6 5
R o n - A m e r Pharmaceutical C o . , 33 S e c u r i t i e s and E x c h a n g e C o m m i s s i o n
Rorer-Amchen, 28 (SEC): consent decrees, 1 5 . 2 5 , 4 0 - 1 ;
R o s e n t h a l , A l e k A . . 169 disclosures to, 1 3 - 1 4 , 1 7 - 2 4 , 3 0 - 2 . 3 4 ,
R o s e n t h a l , Sherri, 16 37; Merck's disclosures to. 17-20;
Rotstein. Dr Jerome. 54 voluntary disclosure p r o g r a m m e .
R o u s s e l . 162 14-17
Rumsfeld, Donald, 78.352 Sedin ( t h a l i d o m i d e ) . 67
s e p t i c a e m i a from i n t r a v e n o u s s o l u t i o n s .
s a b o t a g e , i n d u s t r i a l . 152 114. 115
Sackett, D. L.,241 Seralis ( t h a l i d o m i d e ) . 67
S a f e t y o f D r u g s , British C o m m i t t e e o n , Scrax.217
110 Serentil. 225
Sainsbury C o m m i t t e e , 217 S e r p a s i l . 166
S t A n t h o n y ' s H o s p i t a l , D e n v e r , 116 s e r v i c e d r u g s . 169
sales representatives (pharmaceutical). Sessor. Stanford N. 2 1 6
2 1 3 , 2 2 2 - 7 . 2 5 0; see also d e t a i l m e n Shapiro. Sidney A.. 106.208
S a m m o n s . Dr James H.. 219 S h a p o . M a r s h a l l S.. 8 8 . 9 3 . 106. 2 2 6 .
Sampei. Dr Harcio. 56 241-2
s a m p l e s , free, 212 Shaw. M., 3
Sandoz.53.225.249 S h e r m a n A c t , 1 8 2 , 186
Sanfer c o m p a n y . 253 S h o r t . J a m e s F . . 138
S a r a b h a i C h e m i c a l s . 271 Shulman.J.S..369
Sarett. L e w e i s H . , 2 7 0 s i d e - e f f e c t s , harmful: a t t i t u d e s t o , 6 - 7 ;
Sargatz. John W . . 7 7 failure t o d i s c l o s e , 2 2 3
Savery. Dr Francois. 54 s i d e - e f f e c t s of: A l d a c t o n e . 7 5 - 6 ;
S a x o n . M i r i a m S.. 3 4 6 - 7 , 381 anabolic steroids. 250;
scapegoats, 44,324 chloramphenicol, 210,241-8;
Scheiner, Dr James. 53-4 contraceptives. 241-2. 249,258;
S c h e r i n g - P l o u g h : buy estradiol D o r n w a l . 56; Flexin, 56;
p r o g y n o n . 162; British M P director, Indomethacin, 52-3; M E R / 2 9 , 6 0 - 5 ;
3 0 0 ; c o n t r a c t w i t h s c i e n t i s t s , 107; thalidomide, 65-75
disclosures to S E C . 2 4 ; drug Silanes, Juan Lopez, 37
marketing in Africa. 250; investment Silva. R a f a e l N. 181
a n d profits i n P u e r t o R i c o . 2 8 5 ; Silverman, Milton, on: A b b o t t case,
m e r g e r . 1 % ; profits of, 1 5 9 - 6 0 , 114; d o c t o r s ' p e r k s , 2 1 1 ; D o r n w a l
285 c a s e . 5 6 ; drug r e c a l l s . 1 1 1 . 112; 7Vi«r
schistosomiasis. 262 Drugging of the Americas. 247-50,
s c h i z o p h r e n i a , 225 2 5 3 - 6 , 3 7 2 ; I n d o c i n c a s e . 2 1 5 ; Latin
Schmaltz. D r G u s t a v , 6 8 A m e r i c a , 2 5 2 , 2 5 6 ; production costs,
Schmidt (head of F D A ) . 75. 76. 103-4, 1 6 1 ; profits in p h a r m a c e u t i c a l
300 i n d u s t r y . 160. 165
S c h m i d t . W h i t n e y L., 3 1 0 Simon. Charles E., 16
S c h r a g e r , L a u r a H i l l , 138 Sine-off, 3 5 9
S c h u b e r t , P r o f e s s o r J a c k , 231 Sjostrom and Nilsson, 6 6 , 6 9
S c h w a r t z ( o f B r i s t o l ) , 185 S l a t t e r . Stuart S t P . , 160. 162. 165. 190
S c h w a r t z m a n , D a v i d . 160, 1 6 2 . 2 9 2 Slip ( t h a l i d o m i d e ) . 6 7
S c i e n t i f i c R e s e a r c h . US Office of. 164 S l o a n e . Sir H a n s , 9 0
Scott. Joseph E., 6 smallpox vaccination, 90
SCRIP (newssheet). 43 Smith. D u d l e y . 300
Searle. G. D: Aldactone. 75-6; Smith. J. C. 325
appointment of Rumsfeld. 352; S m i t h K l i n e & F r e n c h . 160
Aspartame. 76-7; contraceptives Smith, Dr R o n a l d C , 53
marketing. 248; disclosures to SEC. SmithKline. 2 2 0 . 2 2 5 . 2 2 8 . 2 8 5 . 300.359
3 2 ; F D A investigation. 99; Flagyl, 76; S M O N , 253
K e n n e d y hearing and, 7 5 - 8 0 , 1 0 7 ,
Snyder. R a y m o n d E . , 19
1 0 8 ; N o r p a c e . 7 7 ; profits of. 1 5 9 - 6 0 ,
S o l o m o n . Lewis D . , 338
438
Index
S o m e r s , D r . 106 Taussig, Helen B., 66
SOPs (Standard Operating tax e v a s i o n . 2 8 4 - 8
Procedures). 118-19.291.325-6.331. Teff. H a r v e y . 66. 3 4 4
348-50 tetanus. 247
Southam, Dr Chester, 88,91 t e t r a c y c l i n e : airlifted, 2 7 1 :
Spellman, M. S..242 c h l o r a m p h e n i c o l s u b s t i t u t e d for, 2 5 3 ;
S q u i b b : B r i t i s h M P d i r e c t o r of, 3 0 0 ; t h e price-fixing s t o r y . 1 7 5 - 9 0 , 192,
d e v e l o p m e n t o f m e - t o o d r u g s , 165; 198.317.342
disclosures to SEC, 2 1 - 2 , 3 7 ; T e t r a c y n , 177
endorsement, obtaining, 227; thalidomide: brand n a m e s problem,
marketing chloramphenicol, 255; 6 5 - 6 . 199; disaster, 6 5 - 7 5 . 1 0 1 , 2 9 4 ;
profits i n P u e r t o R i c o . 2 8 5 ; t h e Dr Somers's e x p e r i m e n t s , 106-7;
tetracycline price-fixing story, 176-90 F D A ' s attitude to, 7 1 , 2 9 3 . 2 9 8 ;
Sri L a n k a . 2 7 1 - 2 prosecution of Grunenthal
S t a t e P h a r m a c e u t i c a l C o r p o r a t i o n (Sri e x e c u t i v e s . 5 5 ; results o f d i s a s t e r . 108.
L a n k a ) . 271 231.344.371
state-owned pharmaceutical companies, thiomidazine,225
367-9 T h o m a s . Dr Joseph A . , 229
S t a u f f e r , T h o m a s R.. 160 T h o r a z i n e . 164
S t e c l i n , 177. 179 3M Corporation. 94
Stelazine, 225 thyroid disease, 252
Stendin, 59 T i e d e m a n n , Klaus. 284
S t e r l i n g , 3 2 . 3 7 . 1 5 9 - 6 0 . 174 Tigan, 58
S t e r n e r . D r . 122 Time m a g a z i n e , 89
steroids, 216, 2 5 0 , 2 5 2 Tocus. Dr Edward. 209
Stetler, J o s e p h , 299 Todd. Harry F . , 3 2 9
Stolley, P. D . . 2 1 3 T o w e r , Buck, 332
S t o n e . C h r i s t o p h e r D . . on: awards. t r a d e n a m e s for d r u g s . 6 5 , 6 6
304-5; communication blockage. tranquillisers: D o r n w a l , 56; Largactil.
1 0 0 - 1 . 3 5 5 - 6 ; diffused responsibility, 2 5 2 ; Librium, 1 7 2 - 1 ; Mellaril, 249;
1 3 8 . 3 6 1 ; public-interest directors, p a r e n t s ' u s e of, 2 0 7 ; U S m a r k e t
365 b r e a k d o w n , 162; Valium. 172-4
Stone, Julius, 317 transfer pricing, 2 8 4 - 8 , 2 8 9
S t o n e r , J a m e s A. F., 3 transnational corporations: abuses in
Stormont, Dr Robert T.. 64 Third W o r l d . 2 4 5 ; G M P compliance
S t r a i n , Dr T . E . . 2 2 9 s y s t e m s . 157; o p p o r t u n i t i e s for l a w -
streptomycin. 248 evasion. 372; UN Centre on. 160-1.
Strong, Colonel, 89 167, 1 9 9 , 2 7 0 , 2 7 5 ; U N C o d e o f
Sudoxican, 54 C o n d u c t for, 3 7 4 - 5 ; U N C o m m i s s i o n
sulfa d r u g s , c o n t a m i n a t e d , 111 on. 4 7 . 4 8 , 5 0
s u l f a n i l a m i d e , elixir, 110, 1 1 3 - 1 4 Treda. 253
S u l i i i n t a b l e t s , 281 trial by j u r y , 3 4 0
Sunday Times. 56 trials, c l i n i c a l , 2 6 5 - 8
sunset legislation. 2 9 5 - 6 t r i m e t h o b e n z a m i d e , 58
S u p r e m e C o u r t i n the H a g u e , 174 t r i p a r a n o l , 60
S u p r e m e Court o f t h e U n i t e d States. 318 Trythall, I. R . , 2 6 1
Sutherland, Edwin H., 6,7 Turner. C. W . , 4
Sutton. A d a m . 314 T u r n e r , D o n a l d F.. 194
S u v e g e s , L.. 243 T u r n e r . J a m e s S.. 1 4 2 . 2 2 0 , 2 3 1
Swedish Medical Journal, 66 typhoid fever, 89, 2 1 0 , 2 4 8
Syntex: c o n t r a c e p t i v e trials. 2 6 5 - 6 ;
disclosures to S E C , 2 9 - 3 0 ; labelling
Udo-Aka.U.,264
improvements, 256; Naprosyn
u l c e r s , t h e r a p y for, 2 2 8
t e s t i n g , 8 1 - 2 ; profits, 160
U N C T A D , 275
U N D P . 275
T a g a m e t , 228 U n g a r . S a n f o r d J.. 6 2 . 6 4
Talbot. Dr (of F D A ) . 63 U N I C E F . 275
T a n z a n i a , p r o m o t i o n o f d r u g s in, 2 5 0 UNIDO.275
439
Index
U n i t e d Nations Centre on 285; marketing contraceptives, 248;
Transnational Corporations, 160-1. m e r g e r w i t h P a r k e D a v i s . 196. 2 1 0 .
167, 1 9 9 , 2 7 0 , 2 7 5 president Elmer Bobst. 206
U n i t e d N a t i o n s C o d e o f C o n d u c t for Washington Post. 3 2 . 115
Transnational Corporations, 374-5 Washington Wholesale Drug Exchange.
United Nations Commission on 281
Transnational Corporations. 47,48. W e a v e r . Paul H . 3 8 0 . 381
50 W e b e r . M i c h a e l H . . 169
University Clinic, B o n n . 69 W e g m a r , Dr. 248
U n i v e r s i t y of California. 385 Weibert. R.,243
University of Oregon Medical School. Weiner, Judge. 189-90
53 W e l c h , Henry, 220
U n i v e r s i t y of Pittsburgh, 231 Welt am Sonntag. 71
University of Q u e e n s l a n d , 386 W e r n e r (Vice-President of William S.
U n i v e r s i t y of S o u t h e r n California Merrell). 64
Medical Center, 213 Wessling, A . . 2 4 3
University of Virginia Medical Hospital. W e s t m e a d H o s p i t a l . 153
116 Whistle Blowers' Protection Act, 343
U p j o h n : backs Welch's journals, 220; W h i t t e n . Ira T a y l o r , 165
D e p o - P r o v e r a and. 258; disclosures W H O . see W o r l d H e a l t h O r g a n i s a t i o n
to S E C , 2 1 ; e m p l o y e d Dr Smith. 53; w h o o p i n g cough. 247
marketing dangerous drug, 2 - 3 , 3 1 6 ; Wiggins, Steven Neil, 292
profits, 160; tests M E R / 2 9 , 6 2 ; the W i l c o x . K. R.. 103
tetracycline price-fixing story, Wild. Ron. 314
176-90 W i l l i a m s . G l a n v i l l e . 371
W i l s o n . F r a n k P . . 181
V a i t s o s , Constantine V., 285 W i l s o n . Larry C. 371
V a l i u m : a d d i c t i o n t o . 2 0 4 , 2 0 6 ; brand W i l s o n ' s d i s e a s e . 169
n a m e of. 1 9 9 ; B r i t i s h M o n o p o l i e s Winkler, R o b i n C . 230.240
C o m m i s s i o n intervention on, 173-4, Winstrol. 250
2 0 0 , 2 0 1 ; p r i c e of, 1 7 2 - 4 ; p r o m o t i o n W i n t h r o p , 1 7 4 . 2 5 0 , 300
of, 2 0 9 , 2 1 4 Wolf. H e r b e r t G.. 2 2
Van Dusen Wishard. W.. 362 W o l f e . D r S i d n e y M . , 87, 1 1 9 , 3 0 2
van M a a n e n . Dr Evert. 6 1 . 6 4 W o l f r a m . C h a r l e s W . . 187, 188. 189
V a u g h a n . D i a n e . 282. 283 W o r l d H e a l t h O r g a n i s a t i o n : C e n t e r for
Verdil (thalidomide). 67 Monitoring Adverse Reactions to
Vernon. John M.. 168.266 D r u g s , 3 7 1 ; Certification S c h e m e ,
Vinokur. A., 3 156; d e v e l o p i n g s i m p l e drug t e s t s ,
Vistaril.215 2 7 5 ; l e a d e r s h i p r o l e , 3 7 0 ; list o f
von Hirsch, A n d r e w , 306 essential drugs, 272; survey on
Voss, Dr Ralph, 68 legislation, 2 2 3 ; Third World access to
drugs, on. 270
W a d e and E l m e s survey, 217 W r i g h t . J. P a t r i c k . 3 7 9
W a l d r o n , Ingrid. 215 W y a t t . J u d g e . 187
Walker. Hugh D.. 197.213.214 Wyeth ( A H P subsidiary). 113. 169.249
W a l k e r ( B r i s t o l c o u n s e l ) . 185
Wall Street Journal, 56 Yakowitz.M. L..275
W a l l a c e L a b o r a t o r i e s , 231 Yale Law Journal. 138,323,338
Wallace andTiernan. 56 Y o d e r , Stephen A., 336
Wallach.M. A.. 3 Y o d o z o n o , 253
W a r P r o d u c t i o n B o a r d . 164 Yudkin, JohnS.. 34.250
Wardell. William M.. 2 6 7 . 2 9 2
W a r n e r - L a m b e r t : charged with Zanartu. J..266
h o m i c i d e . 133; disclosures to S E C . Z a n d e r . P r o f e s s o r a n d M r s . 248
2 0 , 3 7 ; investment in Puerto Rico.
440