I am writing to urge you to reconsider your position on price increases that Nostrum Pharmaceuticals, LLC may apply to future medications – these pricing decisions can have a detrimental impact on patients, as these treatments often constitute a matter of life or death.
Nostrum Pharmaceuticals LLC is engaged in the formulation and commercialization of specialty pharmaceutical products and controlled-release, orally administered, branded, and generic drugs.
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The impact that Nostrum can make towards the advancement of drug research and treatment of patients is immense, and as such, ethical and just pricing should be taken into more consideration.
This is in light of the recent price increase for a generic antibiotic that was first approved by the FDA in 1953. A report in the Financial Times states that Nostrum Pharmaceuticals “more than quadrupled the price of a bottle of nitrofurantoin from $474.75 to $2,392, according to Elsevier’s Gold Standard drug database.” This was a result of decreased competition in the market allowing you to make this sudden price adjustment. As liquid versions of antibiotics are already complicated to produce and inaccessible to patients, raising the price of oral nitrofurantoin makes it even more difficult for those in need to obtain this medication. Moreover, this was an established antibiotic that required no additional investment in innovation or research, not to justify any price increase.
I am most troubled by your response to the reasoning behind the sharp price increase, hence why I am writing to implore you to reconsider your judgment for future product developments. You stated that you have a “moral requirement to sell the product at the highest price” and that it is your moral duty to benefit your investors. Through this letter, I hope to show you that morality extends beyond shareholder activity and that price increases, both unethical and counterproductive, move society away from an ideal economy.
To begin, utilitarianism and deontology are two of the most prominent ethical frameworks that exist regarding morality, and the act of price increases for medication does not comply with either. From a utilitarian standpoint, the best course of action to take would be to choose the alternative that is likely to produce the greatest overall good – aka the happiness of the greatest number of people in a society or group. Increasing the price of antibiotics such as nitrofurantoin does not do so, as the price hikes produce more consequences than benefits. More people are harmed, public health is threatened, and substantial amounts of taxpayer money that could have been used for other issues are depleted. This is evident in the allocation of capital by the U.S. government, as the U.S. spends significantly more on drugs than any other country and on any other single segment of the federal budget. Despite this level of spending on healthcare, the United States still ranks 26th in the world in life expectancy – according to a survey conducted by the Kaiser Family Foundation, over 20% of Americans have difficulty affording their prescribed medications, 24% say they or a family member has not filled a prescription, cut pills in half or skipped due to high costs, and 80% say the cost of prescription drugs is unreasonable. Not only has this unreasonable amount of government spending on healthcare not produced ideal results, but it has also taken away capital that could have been allocated towards other programs in need like infrastructure repair, enhancement of education, and the creation of jobs. It is clear that price hikes do not produce the greatest overall good and are therefore unethical and immoral from a utilitarian standpoint.
Deontological ethics are marked by moral principles that can be universalized and how doing the right thing should be guided by certain overriding rights and duties. You say that your moral duty is to benefit your investors; however, this cannot be universalized, as it would lead to widescale market failure. Market failure is when a market left to itself does not allocate resources efficiently, and there are four causes: monopoly/monopsony, externalities, public goods, and asymmetric information. If all companies were to only act solely in favor of their shareholders, an ideal economy would not be reached. Regarding how Nostrum specifically contributes to market failure, it is evident that inefficiencies exist due to all four causes. By increasing drug prices without substantial reason, Nostrum is practicing the abuse of market power by exerting significant influence over the prices. Doing so also causes a negative economic side-effect as seen from above since less government spending is allocated towards other crucial segments. Beyond that, by prohibiting patients from accessing the medication they need as easily and quickly, less human capital is available within society, bringing down the overall potential productivity in the nation. Healthcare should be a public good accessible to all, and with immense price hikes, only the wealthy can afford their proper treatment. Lastly, there is immense asymmetric information between the suppliers and the consumers, as the suppliers are the only ones who have the treatment, distorting their incentives when conducting business. Through examining all the ways Nostrum is contributing to market failure resulting in significant inefficiencies in the economic system, it is evident that price increases are not ethical or moral from a deontological perspective as well.
Other than ethical frameworks like utilitarianism and deontology, there are important historical figures who have provided ideas of morality including Gandhi and Ruskin. Gandhi does not look to draw a line between ethics and economics and promotes moving beyond egocentric goals. Reducing access to medication for personal financial gain does not fall in line with Gandhi’s idea of economic equality, as Gandhi believes in giving back and the equalization of status – “the bulk of his greater earnings must be used for the good of the State.” An ideal economy stands for social justice and promotes the good of all equally, and any economics that promotes inequality and hurts the well-being of an individual or a nation is immoral. The increase in prices for medication hurts the well-being of both individuals and the nation as a whole and is therefore sinful. Though Nostrum should provide a reasonable return to shareholders, it should come out of voluntary recognition from consumers, not compulsory obedience as a result of financial incentives.
Ruskin, on the other hand, focuses on the maximization of social affection within the economy. He believes that wealth can only be acquired under certain moral conditions, such as honesty and justice. I acknowledge that Nostrum’s impact on society in acting unethically is hard to measure and can be easily overlooked if it means further financial gain to shareholders, but Ruskin believes in the development of the individual conscience first. He believes that society can only be transformed when the individuals are reformed, and personal honesty will lead to social honesty. He promotes the theory that the economy should be based on an ethical code of life and that an ethical basis should be the core of all social and financial endeavors. Nostrum can and should take that first leap in the larger pharmaceutical industry towards displaying more social affection through providing widespread access to medication.
Given that the United States is the only developed country that does not have government regulation on drug prices, it is only a matter of time before the law intersects with morality regarding healthcare issues for this nation, as the law is the external deposit of morality. In the meantime, I implore you to have Nostrum act as a socially responsible company by re-examining pricing decisions to be ethical, fair, and just. Drug pricing at pharmaceutical companies no longer reflects only innovation and research expenses but is more so dictated by marketing expenditures. The industry needs to restore a social contract that is built on a value-based system in which pricing is reflective of the health improvement that a drug can deliver. Through this letter, I hope it is evident that morality extends beyond simply benefiting shareholders, and that there should be a moral commitment to prioritize patients’ well-being above all else, as our individual and nation’s health is at stake.
I would be keen to hear your perspective on this matter, and you can reach me at cindy.li@stern.nyu.edu. I hope you heavily consider re-evaluating Nostrum’s role as a pharmaceutical company in society and the negative impact unethical drug pricing makes towards moving the nation further away from an ideal economy.
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