This document summarizes a case study involving the pharmaceutical company PharmaCARE and its marketing and sale of a new Alzheimer's drug called AD23. It discusses various legal and ethical issues surrounding PharmaCARE's actions, including deceptive marketing, lack of proper safety testing and regulatory approval, intellectual property violations, and the deaths of hundreds of patients who took the drug. The document analyzes PharmaCARE's potential liability and the arguments that could be made that one of its researchers, John, should be protected as a whistleblower.

1. Running head: ASSIGNMENT 4 1
Legal and Ethical Considerations in Marketing, Product Safety, and Intellectual Property
Latianna Wilson
Strayer University
Professor Lateefah A. Muhammad
August 28, 2015

2. ASSIGNMENT 4 2
Legal and Ethical Considerations in Marketing, Product Safety, and Intellectual Property
Introduction
Execution of business functions under the conditions of coexistence with other economic
entities raises the question of social responsibility, orderliness, and the code of ethics. These
aspects have appeared in the areas of marketing, product safety, and intellectual property. Special
place was occupied by the pharmacies compounding as it significantly influences on consumers’
health, brand name, and social vulnerability to irresponsible business behavior.
Promotion of new compounding drugs by PharmaCARE was concerned with both legal
and ethical issues. Consideration of the business conduct should be performed through the prism
of violation of legislation and the code of ethics.
Ethical Issues Related to Marketing and Advertising, Intellectual Property, and Regulation
of Product Safety
Examination of the PharmaCARE’s Violation of the Issues
Ethical issues of marketing. The marketing ethics determines the relationships between
both parties of market relationships and the peculiarities of interaction. The behavioral standards
may not be prescribed only, but also unwritten. Nevertheless, the society of all countries expect
for the implementation of quality standards in the marketing activity. The ethical issues are
strongly important in the case of drugs marketing, as it impacts on the accuracy of utilization and
the consumers’ well-being. Special international code of ethics is applied in the pharmaceutical
area in order to satisfy social and individual needs with fair and honest marketing information.
Proper presentation of a product in a market should be accompanied with the right on its
production and promotion, fair treatment, and reasonable price. Deceptive or selective marketing

3. ASSIGNMENT 4 3
negatively influences on the public relations of the company, its brand reputation, and
customers’ backlash. The core origin of ethical issues of marketing comes from disagreements,
conflicts, and the willing of a company to pose a product as that which possesses required quality
and safety and is produced according to a license, legal frames, and standards. Aggressive
marketing with offensive-dominated peculiarities and dispensing selection occur to expand and
gain control of a new market segment to make more profits. Marketing reflects the common
ethical business and may be related to the following ethical issues: corruption, diversified
customers’ needs, selection of customers, stereotyping, marketing pressure on customers,
disregard of risks followed by the product consumption, concealment of product composition,
politically motivated marketing, ethical values of sellers, etc. (Schlegelmilch, & Öberseder,
2010).
Ethical decisions of PharmaCare were unethical, because active business behavior of the
company did not hide the lack of correspondence with legal framework of production of AD23
only, but also ignored the negative consequences of the used drugs linked to over two hundred
cardiac deaths. The carrying out of the marketing campaign and promotion of CompCare even
after own complicacy to this crime case and the huge compensation fulfillment were unethical
and disapproving.
PharmaCare violated the issue of fair treatment in marketing, corrupted the doctors to get
the fictitious patients for CompCare, committed offensive marketing actions towards clinics,
physician offices, hospitals, and concealed the changed composition of the drug. Overall
marketing efforts of PharmaCare were not striving to research and satisfy the consumers’ needs,
but were directed on making a profit by the promotion of the dangerous and unlicensed drugs.

4. ASSIGNMENT 4 4
Advertising ethical issues. Ads of PharmaCare were consolidated along with the
demand growth. That was the aim that directed advertising measurements of the company.
Nevertheless, business behavior in the market might be far away from ethical consideration of
own actions and their impact on the consumers’ health. Unfair presentation of a product due ads’
material occurred through the asymmetry and distortion of the given marketing information.
Inequality in informational awareness related to product functionality, consequences, and
probable risks led to the easy guiding of non-sophisticated customers by slight reticence. Ethical
advertisement reflected the morality of business and society and was based on the expectations
of both parties for fair treatment and truthful information about a product. The ethical issues
belonging to advertisement are data disclosure, drug pricing, drug safety, puffery, usage of legal
advertising methods, sexual innuendo, advertisement of particular risky products, disregard of
competition, etc. (Arnold, & Oakley, 2013).
PharmaCare made a failure of ethical advertisement by promoting dysfunctional drugs
with noncompliance to the guiding standards for ethical conduct and DFA’s permission for
AD23 issue. Their directly-to-consumers advertising approach affected the normal perception of
the drugs by non-qualified patients without doctors’ prescription.
Ethical issues of intellectual property. Intellectual property relates to the issue of
copyright. The abuse of legislation on intellectual property is motivated by the initiative to own
the creative work, namely medical compounding, and pose this product as a new one in the
market. Creation of a work makes the author a copyright owner. The ethics of this area concerns
the fair use of a copyright object without any commercial aim, stealing, or concealed
exploitation. Fair treatment, moral obligation to reveal the originator, and the compensation for
exploitation of the work are related to the ethical side of intellectual property. The legislation

5. ASSIGNMENT 4 5
protects intellectual property by stating the following regimes: the law on trade secret, patent,
copyright, secrecy, trademarks or natural IP.
The ethical issues of intellectual property in the PharmaCare’s case discover the
renovation, reformulating the drug, as the object of intellectual property. Nevertheless, its
noncompliance to DFA’s standards made this copyright illegal. Renovation was researched and
developed to maximize the effect of AD23 on the slowdown of the progression of Alzheimer’s
disease. The functioning of a new subsidiary in order to sell the new product was carried out on
prescription basis before the stunning success in the market. Nevertheless, there was no
information about official registration of AD23’s renewal that makes the intellectual property
unripe. In addition, the personal authorship of John or the common copyright of his team of
pharmacists was lost in the light of CompCare activity.
The ethical issue of product safety regulation. The companies, produced new product
of medical area, are obliged to get an approval from the special administration. By this step,
business attests to the product examination by independent qualified authority, preceding tests,
and product safety and quality. Therefore, marketing new AD23 with stronger composition
without the evidence of its proven safety and inconsistence with standards was not ethical
towards the customers, including medical establishments, patients, and other individuals. The
proper regulation of product safety should be performed through the compliance to consumer
legislation and quality standards. The cases of the products of low quality are always related to
the violation of appropriate legislation, international standards, and the code of ethics.

6. ASSIGNMENT 4 6
Argue For or Against Direct-to-Consumer (DTC) Marketing by Drug Companies
Business development faced the companies with new challenges to strengthen marketing
efforts. Despite the specifics of medical activity, drug companies practice direct-to-consumer
(DTC) approach in marketing. The usage of direct communication with the customers has
rapidly increased during the last decades. Critics of this communication concern its unacceptable
relaxed rules and inadequate enforcement (Ventola, 2011). The facts of detrimental and
beneficial consequences balance the argumentation of DTC marketing. However, the difficulties
with FDA regulations concerning DTC practice and necessity to implement rules for online DTC
show the inability of the government to resist business motives of pharmaceutical companies
particularly distributing the income in favor of taxes. Along with this inhibitory factor, the
potential risks to make decease worse with newly approved medicine with unknown effects are
raised. Encouraging the customers to buy a drug, the pharmaceutical companies stimulate the
purchase of preparation without prescription and risky self-medication.
Determination the Parties’ Responsibilities for Regulating Compounding Pharmacies
under the Current Regulatory Scheme, the Actions that either These Parties or the FDA
Could / Should Have Taken In This Scenario, and Whether Pharmacare Could Face Legal
Exposure Surrounding Its Practices
The supervision of PharmaCare is responsible for the negative consequences caused by
usage of renewal AD23. The aim of the executives of the company was rather the profit making
than ethical presence of the pharmaceutical business. The role of PharmaCare in this scenario
was slighting disregard of the company towards the future well-being of the customers. Even the
research team was responsible for the new drug issue with such significant defect to cause a

7. ASSIGNMENT 4 7
death in numerous cases. New formulation of the drug was not approved by FDA, because the
company might knew about probable scrutiny. The new subsidiary’ establishment was devoted
to marketing and selling of AD23 on prescription basis. Functionality of CompCare
demonstrated the commercial success. The mentioned complexities related to the drug regulation
motivated the pharmaceutical company to search the way to earn from new developments and
overcome the legal frames. Particular responsibility in this scenario lied on the research team
neglected the preventive measurements and the risks occurred after a certain time. The team
carried out particular researches to reformulate the drug, but did not foresee the negative
consequences and indications for its specific exploitation. Therefore, the scientific base of total
business fault should be shared among all participants in compounding of AD23.
The action of FDA might be the consideration of business expansion and diversification
as the evidence of widening of new product line that could be illegal. The emergence of negative
side effects of AD23’s compounding should be prevented by periodical examination of the
business recipes and the pharmaceutical license.
The Analysis of the Manner in Which PharmaCARE Used U.S. Law to Protect Its Own
Intellectual Property and the Probable John’s Claim to Being the True “Inventor” of AD23
The reason of PharmaCARE used U.S. law to protect its own intellectual property is that
the legislation of intellectual property protects the right on intellectual work. The performance of
the business operations above the U.S. borders means that the company is applied by
international laws on intellectual property. Establishment of CompCare as the subsidiary
formulating the new medicine preparation and selling it on prescription basis was done to protect

8. ASSIGNMENT 4 8
new production with the U.S. laws. As the parent company, PharmaCare was able to patent the
updated AD23 and function under the protection of the laws on patent and trademarks in the U.S.
Being the employee of PharmaCare and developing the drug researches under the
corporate conditions, John could not be solely an inventor of updated AD23. Therefore, his
participation was limited only by applied labor efforts to assist to the company in new product’
research and development. Moreover, he worked within the research team that has already made
the formulation the object at least of common copyright.
Suggestion about the Ways the Company Could Compensate John for Usage of His
Intellectual Property
To compensate John’s intellectual property, the company might make him a co-founder
of the new drug after preceding registration or legalization of renewed AD23. PharmaCare might
also promote his career growth and inclusion his name in the list of scientific partners. The part
of business profit had to be shared among the business and research group, including John, who
has founded the new peculiarities of the top-selling drug. Moreover, the company should make
compensative payments in the case of the death of John’s wife. As AD23 belonged to the
intellectual property of the company, it is responsible for the side effects of AD23’s
consumption.
Summarization of Current Example of Intellectual Property Theft, and Examination of the
Effect on the Company’s Brand
The intellectual property theft faced the Microsoft Corp. accusing the China-based
Sichuan Changhong Electric Co. of illegal exploitation of the products (numbers and letters)

9. ASSIGNMENT 4 9
activated Microsoft software (Tu, 2013). Microsoft Corp. confirmed that the items were stolen
from the licensed organizations, including educational establishments, engineering company, and
the Asian manufacturer. The keys were assumed to be stolen during the discovery operations
and used to activate particular software of Microsoft Corp. The brand reputation was not
affected significantly, as the attempts of the persons accused in such cybercrime were not
succeeded during a long time due to certainly protected algorithms of Microsoft software. Such
situation demonstrated uneasy attempts to hack the Microsoft programs and their certain
relatively stable protection from appropriate computer fraud.
The Analysis of the Potential Issue Surrounding the Death of John’s Wife and Other
Potential Litigants against PharmaCARE as a Result of AD23
The negative effects of the drug using were the deaths of many customers, including the
John's wife. However, the deaths of several hundred patients and the health deterioration of other
consumers were not a depressing fact for the company, which paid substantial sums of
compensation, but continued marketing the product. The company could foresee the results of
AD23’s use, if it studied the functionality of the drug for long term and worked out more
carefully the indications for its use. PharmaCare would not hunt for profit and instead would
provide universal and safe release of the drug. Thus, AD23 would provide long-term commercial
success and avoid the death of its consumers. An alternative to unethical behavior of the
company after the negative effects occurrence might be the withholding of the drug’s release and
the detailed study of its side effects. The potential issue includes unethical and illegal conduct of
PharmaCare and the ensuring the security for its employees and customers.

10. ASSIGNMENT 4 10
Specification of both the Major Arguments that John Can Make to Claim that He is a
Whistleblower and the Type of Protections that He Should be Afforded
The whistleblower’s protection identifies the treatment of a company and government
with a person reporting a dishonest or illegal activity towards one party of socioeconomic
relationships that can be investigated and proved the fault of accused party. John could be a
whistleblower if he applied for protection in his supervision, the HR executive director, labor
union, DFA, or other legal establishment. They are obliged to ensure his confidentiality and non-
retaliation. John knew about the negative after-effects of AD23, but he was not aware of the
following numerous deaths, including the death of his wife. It gave him a reason to address the
law firm of Dewey, Chetum, and Howe. He was guided by his experience of working for
PharmaCare, awareness of their business plans to “roll the dice”, and internal memo of the
company that described the potential problems with AD23. Therefore, John was free from any
responsibilities for the fault determination and could ask for appropriate protection as a
whistleblower.
Conclusion
The case of PharmaCare concerned the ethical and legal issues followed by the actions of
the companies in the pharmaceutical market and the effects of the consumption of its new
product. New drug that was expected to be a new top-selling product and impede the progression
of Alzheimer’s disease. The company carried out unethical marketing and advertisement to
stimulate the demand. The results demonstrated the sharp growth of sales. The negative
consequences appeared as the deaths of numerous customers. Instead of ethical fix of emerged

11. ASSIGNMENT 4 11
problems, the company continued to market AD23 and faced with ethical and legal issues of its
business conduct.

12. ASSIGNMENT 4 12
References
Arnold, D. G., & Oakley, J. L. (2013). The politics and strategy of industry self-regulation: the
pharmaceutical industry's principles for ethical direct-to-consumer advertising as a
deceptive blocking strategy. Journal of health politics, policy and law, 38(3), 505-544.
Schlegelmilch, B. B., & Öberseder, M. (2010). Half a century of marketing ethics: Shifting
perspectives and emerging trends. Journal of Business Ethics,93(1), 1-19.
Tu, J.I. (2013). Microsoft security unit files first theft case. The Seattle Times. Retrieved August
30, 2015 from http://www.seattletimes.com/business/microsoft-security-unit-files-first-
theft-case/.
Ventola, C. L. (2011). Direct-to-consumer pharmaceutical advertising: therapeutic or
toxic?. Pharmacy and Therapeutics, 36(10), 669.