PharmaCARE Company: Legal and Ethical Considerations


Over the past two decades, there have been numerous cases of pharmaceutical companies engaging in unethical conduct regarding their marketing strategies, product safety, and intellectual property. It is apparent that some companies have been using compounding companies to market their products illegally, and to bypass the thorough scrutiny associated with the FDA. Additionally, some of the pharmaceutical companies have been associated with selling drugs that are yet to meet the required safety standards.

The regulatory agencies for the safety of drugs call for the associated companies to develop safety tests to ensure that there are minimal undesirable side effects of the drugs. It is apparent that some of the drugs that have been banned by the FDA had the potential to heal some illnesses, but their side effects were serious and quite possibly, life threatening. While the FDA has mounted an active campaign against pharmaceutical companies operating unethically, there are still some companies that are engaging in the unethical processes in disguise.

The pharmaceutical industry is a multibillion industry that has influenced the enhancement of the quality of life for people when the associated companies operate ethically, but the unethical conduct almost always results in health complications for the consumers, and in the worst case scenarios, death occurs. This paper evaluates the ethical considerations regarding marketing, product safety, and intellectual property at the PharmaCARE Company.

Ethical Issues

PharmaCARE engaged in various unethical conducts regarding marketing, product safety, and intellectual property. First, the company engaged in unethical conduct when it developed the CompCARE subsidiary to evade scrutiny from the FDA. The FDA is keen on evaluating the safety of the products developed by pharmaceutical companies; hence, PharmaCARE used its wholly owned subsidiary to compound the inadequately tested AD23 drug. Secondly, when CompCARE developed the enhanced AD23 drug, it adopted a Direct-to-Customer (DTC) marketing of the drug, which is prohibited by the U.S. law for safety purposes.

DTC increases the risk of wrong prescription or over-prescription, and it undermines the authority of the physicians. Additionally, it places the health of the consumers in danger. Since compounding companies are not allowed to sell drugs in bulk for general use, CompCARE lured doctors into sending names of fictitious patients requiring the AD23, which was highly unethical, and since the company was still under the PharmaCARE Company, the company was responsible for the conduct.

Thirdly, PharmaCARE sold CompCARE to WellCo just before the AD23 was reported to have caused more than 200 cardiac deaths. It is apparent that PharmaCARE was aware that the drug had not been tested adequately, and there is a possibility that the company sold the CompCARE to avoid the legal claims that would ensue when the public realized that the drug was not safe for consumption. An ethical pharmaceutical company would be compelled to halt the distribution of a drug associated with adverse side effects such as cardiac deaths, but PharmaCARE overlooked this responsibility.

The Fourth unethical issue revolves around the fact that John was involved in the development of intellectual property regarding the formulation of the new AD23. It is debatable that John may have rightfully owned the reformulated drug because he was actively involved in developing a new compound that had an enhanced potential to slow the progression of Alzheimer’s. Under the intellectual property laws, John can claim to have owned the new formula if he developed it independently and the company should compensate him.

Direct-to-Customer (DTC) Marketing

Compounding companies in the United States are not authorized to sell drugs in bulk for general use; hence, they have to wait for doctors to order the specific units of drugs based on their prescriptions and the demand from patients. This implies that it would be highly unethical for the associated companies to use DTC marketing as a method to increase the consumption of prescription drugs.

One of the issues that would arise from DTC marketing is that doctors would be compelled to prescribe drugs to patients even when the patients do not require the drugs. Doctors would also be compelled to over-prescribe the associated drugs to increase sales on the part of the companies producing the drugs. CompCARE demonstrated that willingness to engage in unethical marketing through DTC. When companies market prescription drugs directly to the consumers, they influence the consumers to pressure the prescribers to recommend the associated drugs, and this may lead to wrong prescriptions.

DTC marketing should be prohibited because it influences unethical conduct on the part of the doctors. For instance, CompCARE influenced doctors to send prescriptions from fictitious patients for the company to sell AD23 in bulk. In essence, DTC marketing undermines the role of physicians as learned intermediaries between the pharmaceutical companies and the patients.

Regulating Compounding Companies

Compounding companies are regulated by the State Boards of Pharmacy and federal legislation (Greene & Herzberg, 2010). The FDA has also recently been actively involved in regulating the compounding processes in pharmaceuticals. However, the FDA is yet to gain the legislative power to look into the activities of the compounding companies because it is involved in evaluating the development of the drugs at the pharmaceutical level (Lindon 2016).

For instance, the FDA would have been actively involved in ensuring the relevant tests of the AD23 drug if it was being compounded by PharmaCARE, but since the drug was being compounded by CompCARE, it should have been regulated by the state board of pharmacy and the federal legislations (Compounding and the FDA, 2016). These entities should have ensured that the associated reformulated AD23 was tested for potency and safety.

CompCARE should have been compelled to develop the required safety procedures to ensure the consumers were safe from adverse side effects. Additionally, the state board of pharmacy should have ensured that the prescription drug was not marketed directly to the consumers by keeping track of the marketing activities in the company. Under the current regulatory scheme, PharmaCARE could have faced legal exposure for compounding a drug that was not adequately tested for safety and promoting its sale through the fraudulent DTC marketing activities assumed by the CompCARE Compounding Company. The company endangered the lives of the consumers of the AD23 drug knowingly, which led to the death of many patients.

PharmaCARE’s use of U.S. Law to protect its Intellectual Property

According to the U.S. Law of Intellectual property, an employer owns the intellectual property developed by the employees if the employees are contracted to develop the intellectual property. For instance, PharmaCARE can use the U.S. law to claim that the intellectual property developed by John and the researching team belongs to the company because the associated human assets were employed to work specifically on developing the intellectual property that led to the discovery of the AD23 drug. Since this was the case at PharmaCARE, the company used the U.S. law to ensure that it had control over the intellectual property developed by its employees.

The research team had the obligation to develop intellectual property for the company; hence, the company had the right to determine how it would use the property. However, John may have a valid claim of being the true inventor of the AD23 if he developed the formulation outside the workplace. Additionally, he may also claim to be the true inventor if he provided the company if he had developed the idea independently before being employed by PharmaCARE and provided the idea to the company upon employment. He may also claim that the intellectual property belongs to him if his employment contract does not indicate that his role in the company is to develop such intellectual property.

Compensating John for the use of his Intellectual Property

Under the Patents Law, an inventor should offer his or her patent rights to the employer if the idea is conceived as work for hire (Intellectual Property Law, 2016). However, if the inventor proves that the patent has been of outstanding benefit to the employer, he or she is entitled to compensation for the invention. Since the invention of the AD23 was of significant benefit to the company, John should be compensated.

One of the ways of compensating him would be naming the drug after him to recognize his work as the true inventor. The company may also give him the right to develop the drug and improve it if he chooses to continue working as an independent producer of the drug. PharmaCARE should also be obliged to compensate John financially by giving him a reasonable share of the value of the patent. Additionally, the company could include John in gaining from the licensing process of the patent or the sale of the patent altogether.

Summary of Intellectual Theft Cases

In September 2015, the court awarded the Brewer Science $10 million in damages after an ex-employee stole the company’s secrets in business and development of equipment. Hai Xuan and his family were accused of intellectual property theft, which led to the formation of their company, Best Tools, LLC. Mr. Xuan had worked at Brewer Science for many years before he quit and he established his company, which utilized the secrets owned by his previous employer.

According to the evidence provided to the court, Mr. Xuan had managed to develop counterfeit products, which he sold to the customers stolen from Brewer Science, including the U.S. Navy. It was apparent that the products resembled those produced by the Brewer Science Company, but their quality was significantly lower. Brewer Science was awarded $8.4 million to cover the punitive damages and $1.6 million to cover the loss in market share and the associated profits. The court also entered a permanent injunction against Mr. Xuan’s company (Wallis, 2016).

In 2015, Ford was also sued by one of its partners in software development, Versata. Versata claimed that Ford had stolen its intellectual property after terminating their partnership. According to the claims forwarded by Versata, Ford developed a replica of Versata’s software and patented it. Ford had continually denied Versata the chance to review the software developed to replace its own (Bunkley, 2015). The complex case is yet to be decided by the court because the associated parties are still gathering the required evidence and negotiating on the issue. However, most consumers associated with the Ford brand claim that they are embarrassed by the actions of the company, and they are hoping that the claims are false. It is apparent that if Ford loses the case, it will also face potential losses of loyal customers.

Potential Issue Following John’s Wife Death

It is apparent that PharmaCARE and its subsidiary developed a drug that had the potential to manage diabetes and to slow down the effects of Alzheimer’s disease, but the drug has been associated with causing cardiac death. John and other litigants on the issue of cardiac death caused by the drug to their relatives should mount a campaign against CompCARE and PharmaCARE as the parent company.

PharmaCARE should have ensured that the drug was tested sufficiently to reveal the potential undesirable side effects. The consumers should have been informed about the risks of cardiac death associated with the drug. Many companies have faced legal claims after releasing drugs that are not adequately tested, and it is ethical for PharmaCARE and CompCARE to compensate the affected parties.

According to the U.S. law, patients have the right to sue pharmaceutical companies that fail to provide sufficient information about the warnings associated with the use of specific drugs. In this case, PharmaCARE had failed to provide the relevant information because it did not test the drug appropriately. It is also apparent that the drug might have been defectively designed and manufactured; therefore, the litigants should sue the associated companies.

John as a Whistleblower

John can be viewed as a whistleblower because he has provided information about the unethical conduct associated with the production of the AD23 drug. The information provided against CompCARE reveals that PharmaCARE has been operating unethically, and the evidence should prompt the authorities to scrutinize other operations of the company. It is apparent that John is a whistleblower because he was once a stakeholder in the company and it is likely that the associated drug is his intellectual property.

As the owner of the intellectual property, John might be highlighting the defects associated with its design and manufacturing process, which he no longer controls. John’s actions are utilitarian, and he is looking to ensure that PharmaCARE and CompCARE do not continue placing the lives of innocent consumers of the associated medications in danger. John may also be viewed as a whistleblower by WellCo, which bought CompCARE without the knowledge about the unethical business processes that the company had assumed. John has provided information regarding the side effects of AD23, and the unethical marketing strategies associated with CompCARE, which could assist WellCo to pursue the relevant legal measures against PharmaCARE.

If the litigants in this case and WellCo choose to sue PharmaCARE and CompCARE, John will be an instrumental part of their lawsuits because he is the whistleblower. The Whistleblower Protection Act of 1989 has provisions that grant John the right to voluntarily disclose the information against PharmaCARE (Goza, Tyner & Johnson, 2013). According to the law, John is also entitled to protection by the authorities against any harm by PharmaCARE because he holds sufficient information to incriminate the company.


Bunkley, N. (2015). Ford accused by software maker of intellectual property theft. Web.

Compounding and the FDA: Questions and Answers. (2016). Web.

Goza, R., Tyner, L., & Johnson, J. B. (2013). Whistleblower Laws: State or Federal Protection?. Journal of Workplace Rights, 17(3), 319-346.

Greene, J. A., & Herzberg, D. (2010). Hidden in plain sight marketing prescription drugs to consumers in the twentieth century. American journal of public health, 100(5), 793-803.

Intellectual Property Law. (2016). Web.

Lindon, J. L. (2012). Who Regulates Compounding Pharmacies?. Web.

Wallis, L. (2015). Brewer Science wins landmark intellectual property theft case. Web.

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