Posted on September 21, 2018 at 12:16 AM
by Craig Klugman, Ph.D.
“I think it is a moral requirement to make money when you can…to sell the product for the highest price” Nirmal Mulyeto the Financial Times
I have been haunted by the above quote, first reported in the Financial Times on September 11. Mulye, CEO of Nostrom Laboratories, raised the price of an old (1953), formerly inexpensive, antibiotic by 404 percent to nearly $2,400 per bottle (from about $475). Mulye explains his rationale at first by saying that the drug’s only competitor raised their price to $2,800, so his move is really a bargain. He also claims that he has a duty to his stockholders to give them a return for their investment, thus the need to raise the fees.
Condemnation was swift. FDA Commissioner Scott Gottlieb tweeted, “There’s no moral imperative to price gouge and take advantage of patients.” Psychiatrist and bioethicist Robert Klitzman wrote for CNN “Mulye is wrong for many reasons. Drug companies deserve reasonable return on their investment in research and development, but some of these companies are abusing the system.”
I am interested in the moral argument here: What belief system would say that charging significantly more and thus pricing many away from a needed medication is an act of morality? Morality is a system of belief that states what is right and what is wrong. Morality refers to a person’s character. Some philosophies believe that moral acts need to come from good intentions, but others are more concerned with the act than its motivation.
Beyond the dictionary definition, words often have a common usage. In this case, lay moralityis less about having a formal theory of right and wrong in the world (such as belonging to a religion, or following a particular moral theory), and is more about how we treat one another: “Lay morality refers to how people should treat others and be treated by them, matters that are important for their subjective and objective well‐being. It is a first person evaluative relation to the world (about things that matter to people).”Clearly, neither of the uses of the term would condone price gouging.
As much as I might disagree with Mr. Mulye’s statement, there is a theory of capitalist morality that supports his statement. In a 1970 New York Times Magazinearticle, economist Milton Friedman wrote that the moral duty of a business is to make profit, not to increase social welfare. Friedman believed that focusing on social welfare would undermine the very system of capitalism and disturb Adam Smith’s market. Thus, the sole motivation of a business manager, according to Friedman, must be to increase shareholder wealth. Friedman held that good and evil was simply a matter of perspective: “In a free society, it is hard for “evil” people to do “evil,” especially since one man’s good is another’s evil.”In other words, what is actually moral for the business might look like an evil act from an individual.
Friedman was not alone. Political philosopher Matt Zwolinski (2015) believed that “price gouging” could be moral when it stimulated the economy, led to innovation, and created changes in supply and demand: “Moreover, price gouging can serve morally admirable goals by promoting an efficient allocation of scarce and needed resources, and by creating economic signals which will lead to increases in the supply of needed goods available to desperate populations.”
Even bioethicist Ezekiel Emmanuel believed that high prices would be an incentive for companies to create new drugs, especially antibiotics. Raising prices and providing government incentives could make creating new antibiotics profitable.
Friedman and Zwolinski place moral agency in the corporation where employees and executives exist for the good of that entity. Emmanuel is not suggesting that corporate profits are more important than social welfare, but rather he is trying to manipulate a capitalist pharmaceutical system to work for a social world by dangling a profit-carrot in front of them. In none of these ideas, however, is the assumption made that corporations owe anything to society (other than taxes and creating jobs). These ideas follow a consequentialist notion of morality—that what is best is what achieves the greatest outcome. In this case the outcome (or utilityin the language of Bentham and Mill) is profit.
Sociology tells us that the simple presence of money changes our notion of what is moral. In a series of experiments, organizational psychologists showed that “mere exposure to money can trigger unethical intentions and behavior and that decision frame mediates this effect.” Money can distort one’s sense of right and wrong. Perhaps an exposure to money has distorted pharma executives sense of right and wrong. Perhaps they are so focused on the idea of a “business morality” that they have lost touch with lay morality (being a good person; doing good in the world).
Or Mulye might be drawing from a Nietzschean sense of morality—that the people in power get to decide what is moral (“might makes right”). Since Mulye is currently in power, he is telling us that it is moral to make obscene profits. In a sense, this is the theory behind business morality—whatever makes the company bigger and more profitable is “right.” Mulye may be following this Nietzschean view of morality (duty to investors), but he is violating lay morality of the individual.
The problem with Friedman’s view, though, is that it ignores the people victimized by this system. There must be limits to business morality when its choices harm the health and well-being of the community (Mill’s harm principle). In this case, there are people who will suffer because they cannot afford a drug whose prices were raised for one reason, greed. No, businesses do not have moral obligations to give away their products (although many pharmaceutical companies do offer subsidies to help those without the means to access their products). But lay morality states people do have obligations to help others, or at the very least, not to make other people’s lives worse. The price gouging of recent years leaves me with a question: Does being a good pharma leader necessitate being a bad person?