Business Ethics

Business Ethics

From Boatright (2012)

Case Study: A Whistle-Blower’s Quandary [Chapter 4, Case 4.3, pp. 86-88]

Read the case study as presented, and address the following.

1. Summarize the case, and describe the participants.

2. How are diverse dynamics of ethics in the organization reflected in this case study?

3. Describe at least two ethical theories that can be related to this case study.

4. Define the concept of whistle blower, and research and discuss the lessons of real cases of whistle blower.

5. Discuss the implications of the case with relationship to discrimination and Affirmative Action.

6. Discuss the implications of the case with relationship trade secrets and conflict of interest.

7. Use a minimum of two references from business ethics journals.

8. Submit the paper following APA standards.

9. Use the traditional introduction, body, and conclusion outline.

CASE 4.3 A Whistle-Blower’s Quandary

As a vice-president for Pharmacia (which was acquired by Pfizer in 2003), Dr. Peter Rost was in charge of worldwide marketing for the drug Genotropin, which is a synthetic human growth hormone that is used to treat a limited range of hormonal deficiencies in children and the elderly. 42  Beginning in 1997 and continuing to 2003, Pharmacia aggressively promoted Genotropin for conditions beyond those for which the drug had received approval from the Food and Drug Administration (FDA). Physicians may legally prescribe an FDA-approved drug for such “offlabel” use, but pharmaceutical companies are strictly prohibited from any promotional activities designed to encourage physicians to prescribe a drug for any but approved uses. However, Pharmacia attempted to persuade physicians to prescribe Genotropin for short children without any hormonal deficiency as well as for elderly patients as an antiaging therapy. Among the means used to increase prescriptions were kickbacks to physicians in the form of all-expense-paid company-sponsored conferences, paid participation in drug studies, and lucrative consulting positions. These efforts produced results. During the period 1997 to 2003, approximately 25percent of all prescriptions for children and 60 percent of prescriptions for adults were for off-label use.

Dr. Rost became aware of the illegal promotional activities in his role as head of marketing for Genotropin, and he immediately protested to his superiors. After an investigation by Pharmacia, the off-label promotion activities, including the kickbacks to physicians, were curtailed but not eliminated. Soon after Pfizer’s acquisition of Pharmacia, which occurred on April 16, 2003, Dr. Rost presented evidence to his new superiors of the illegal off-label marketing of Genotropin. Without Dr. Rost’s knowledge, Pfizer conducted its own investigation, and exactly one month after the acquisition, on May 16, 2003, Pfizer voluntarily notified the FDA and the other relevant government agencies of the illegal off-label promotion activities and within a few days provided them with extensive documentation of the kickbacks, as well as information about the corrective actions that were being taken.

Unaware of his employer’s disclosures to the federal government, Dr. Rost decided to file a complaint under the federal False Claims Act (FCA), which he did on June 5. The FCA allows private individuals to aid the federal government in investigating and prosecuting fraud in federal procurement and benefit programs, including Medicare and Medicaid. In return for the service that such whistle-blowers provide in combating fraud—which the federal government cannot practically do on its own—a complainant can receive a percentage of the amount recovered. This percentage varies greatly, depending on circumstances, but can range from roughly 10 percent to 30 percent. The FCA requires that any individual receiving an award must present information that he or she possesses from personal experience that has never been publicly disclosed. That is, a complainant must be the “original” source of the information and have “direct and independent” knowledge. These conditions are necessary in order to prevent an opportunistic use of the law to collect an award based on publicly available information.

Although the promotion of off-label use of a drug is illegal, it is not itself a violation of the FCA. Separately, Pfizer paid $35 million to settle charges of bribery and improper promotion in connection with Genotropin. In a complaint under the FCA, it is necessary to show that the illegal promotional activity caused the submission of a false claim to the government. Evidence that a false claim was submitted must be more specific than arguing that the illegal promotional activity was likely to cause the submission of false claims. The evidence provided by Dr. Rost focused mainly on one physician, Dr. Pamela Clark, who practiced in Louisville, Kentucky. Dr. Clark, who attended several Pharmacia-sponsored conferences in exotic locales and received some compensation for various services rendered to Pharmacia, allegedly wrote Genotropin prescriptions for eight Medicaid patients to treat growth hormone deficiency (GHD), for which Genotropin is an FDA-approved use. However, Dr. Rost maintained that this use is permitted “on-label” only if the diagnosis is based on at least two tests for GHD, and Dr. Clark performed only one test for each patient. Dr. Rost presented no evidence to show that Pharmacia had encouraged doctors to perform only one test for a diagnosis of GHD. As further evidence that false claims were submitted, Dr. Rost cited eight physicians in Indiana who prescribed Genotropin for an off-label treatment of 10 patients for whom Medicaid paid 122 claims, but he could offer no evidence that any of these physicians had ever been targeted by Pharmacia promotional activities.

The FCA further requires that a claim submitted to the federal government contain some falsehood. The Medicaid claims in question were filed by the pharmacies which processed the physicians’ prescriptions. Federal law requires that any kickback in the prescription of a drug be disclosed, and so any party who does not disclose receiving a kickback is in violation of the antikickback law. However, the pharmacies in these cases did not receive a kickback; the physicians did, and the pharmacies in submitting the claims were certifying only that they had not received a kickback. A claim that Medicaid receives for reimbursement for a drug that has been improperly prescribed as the result of a kickback fails to make a required disclosure—and is in that respect false—but the fault lies with the dishonest physicians and not with the pharmacies. Pharmacia, by their illegal promotion of off-label use directed toward physicians, did not cause any pharmacy to submit a false claim.

Faced with many questions, Dr. Rost had to decide whether to proceed with filing an FCA complaint. He had acted as a whistle-blower within the organization, and in so doing he had initiated a chain of events that led Pfizer to voluntarily investigate itself and report the findings to the FDA. In the end, Pfizer ceased the illegal off-label promotional activities and settled with the government at considerable cost. Although a federal investigation continued, the Department of Justice eventually decided, after two and one-half years of consideration, not to take further action. Dr. Rost had performed a valuable service as a courageous employee, for which he suffered some on-the-job retribution 43  and was eventually fired. 44  But should he also be rewarded with millions of dollars as a complainant under the federal False Claims Act?