CORPORATE CRIME in the pharmaceutical industry

By the same author I n e q u a l i t y , C r i m e and P u b l i c Policy

CORPORATE CRIME in the pharmaceutical industry

John Braithwaite

Routledge & Kegan Paul
L o n d o n , B o s t o n , M e l b o u r n e and Henley

First published in 1984 by Routledge & Kegan Paul pic 39 Store Street, London WC1E7DD, England 9 Park Street, Boston, Mass. 02108, USA 464 St Kilda Road, Melbourne. Victoria 3004, Australia and Broadway House, Newtown Road, Henley-on-Thames, Oxon RG91EN, England Photoset in 10 on 12 Times Roman by Kelly Typesetting Ltd, Bradford-on-Avon, Wiltshire and printed in Great Britain by Billing and Sons, Worcester ©John Braithwaite 1984 No part of this book may be reproduced in any form without permission from the publisher, except for the quotation of brief passages in criticism Library of Congress Cataloging in Publication Data Braithwaite, John.

Corporate crime in the pharmaceutical industry. Bibliography: p. Includes index. 1. Commercial crimes - Case studies. 2. Corporations Corrupt practices - Case studies. 3. Drug trade - United States - Employees - Corrupt practices - Case studies. 4. Professional ethics. 5. White collar crimes. I. Title. [DNLM: 1. Drug industry-Standards. 2. Crime. QV773B814cJ HV6769.B7 1983 364.1'68 83-11149 ISBN 0-7102-0049-8

Contents

Preface 1 2 3 4 5 6 7 8 9 I n t r o d u c t i o n : an i n d u s t r y c a s e study of c o r p o r a t e c r i m e Bribery Safety t e s t i n g of d r u g s : from n e g l i g e n c e to fraud Unsafe manufacturing practices Antitrust T h e c o r p o r a t i o n as p u s h e r D r u g c o m p a n i e s and t h e T h i r d W o r l d Fiddling S t r a t e g i e s for c o n t r o l l i n g c o r p o r a t e c r i m e A p p e n d i x G e t t i n g i n t e r v i e w s with c o r p o r a t e e x e c u t i v e s Notes Bibliography Index

vii 1 11 51 110 159 204 245 279 290 384 389 408 428

V

Preface

T h i s b o o k is an i n d u s t r y c a s e study of c o r p o r a t e c r i m e . It a t t e m p t s t o d e s c r i b e t h e w i d e v a r i e t y o f t y p e s o f c o r p o r a t e c r i m e which occur w i t h i n o n e i n d u s t r y . W h e n I t a u g h t a c o u r s e on c o r p o r a t e c r i m e at t h e U n i v e r s i t y of C a l i f o r n i a , I r v i n e , in 1979 I found that s t u d e n t s had a n a m o r p h o u s u n d e r s t a n d i n g o f t h e subject a s a n i n c o m p r e h e n s i b l e evil p e r p e t r a t e d by the p o w e r f u l . They w e r e at a loss to d e s c r i b e p a r t i c u l a r e x a m p l e s . P a r t o f t h e p u r p o s e o f this b o o k i s t o fill this g a p b y d e s c r i b i n g m a n y e x a m p l e s o f c o r p o r a t e c r i m e , e x a m p l e s w h i c h s h o w t h e d e p t h a n d s e r i o u s n e s s o f the c r i m e p r o b l e m in the p h a r m a c e u t i c a l industry. T h e b o o k also has a n a n a l y t i c a l p u r p o s e w h i c h i s m o r e i m p o r t a n t t h a n its d e s c r i p t i v e function. This is to use t h e p h a r m a c e u t i c a l i n d u s t r y ' s e x p e r i e n c e t o t e n t a t i v e l y e x p l o r e t h e effectiveness o f different t y p e s o f m e c h a n i s m s for t h e c o n t r o l o f c o r p o r a t e c r i m e . M o s t of t h e c h a p t e r s h a v e a first s e c t i o n w h i c h d e s c r i b e s several c o r p o r a t e c r i m e s , followed b y a n i n t e r p r e t i v e section which uses i n f o r m a t i o n g a i n e d from i n t e r v i e w s with c o r p o r a t e e x e c u t i v e s and o t h e r s to cast light on p o s s i b l e policy i m p l i c a t i o n s from t h e s e case studies. S o m e of my i n f o r m a n t s will not be p l e a s e d with t h e way I have w r i t t e n t h e b o o k . T h e y will think it a o n e - s i d e d a c c o u n t which f o c u s e s a t t e n t i o n o n p h a r m a c e u t i c a l i n d u s t r y a b u s e s t o the exclusion of all t h e w o r t h w h i l e t h i n g s t h e i n d u s t r y has a c h i e v e d for m a n k i n d . A f t e r all, t h e p h a r m a c e u t i c a l i n d u s t r y has b e e n r e s p o n sible for r e m o v i n g t u b e r c u l o s i s , g a s t r o e n t e r i t i s , and d i p h t h e r i a from a m o n g t h e ten l e a d i n g c a u s e s o f d e a t h i n d e v e l o p e d c o u n t r i e s . U n f o r t u n a t e l y , it is t h e j o b of c r i m i n o l o g i s t s to e x p l o r e the s e a m y vii

Preface side of h u m a n e x i s t e n c e . If a c r i m i n o l o g i s t u n d e r t a k e s a study of m u g g i n g or m u r d e r , no o n e e x p e c t s a ' b a l a n c e d ' a c c o u n t which g i v e s d u e c r e d i t to t h e fact t h a t m a n y m u g g e r s are good family m e n , l o v i n g f a t h e r s w h o p r o v i d e their c h i l d r e n w i t h a C h r i s t i a n u p b r i n g i n g , o r p e r h a p s g e n e r o u s p e o p l e w h o h a v e s h o w n a willingness t o h e l p n e i g h b o u r s i n t r o u b l e . Y e t c r i m i n o l o g i s t s are e x p e c t e d t o p r o v i d e such ' b a l a n c e ' w h e n t h e y s t u d y c o r p o r a t e c r i m i n a l s . T h e fact t h a t I h a v e not e m p h a s i s e d their good d e e d s d o e s not m e a n t h a t I am not g r e a t l y a p p r e c i a t i v e of t h e a s s i s t a n c e and hospitality afforded me by i n f o r m a n t s from t h e i n d u s t r y . I o w e an intellectual debt to many w h o have d o n e previous research on the p h a r m a c e u t i c a l i n d u s t r y . It w o u l d be i m p o s s i b l e to m e n t i o n all by n a m e . P a r t i c u l a r l y useful, h o w e v e r , h a v e b e e n the i n v e s t i g a t i v e j o u r n a l i s m of M o r t o n M i n t z of t h e Washington Post, t h e work on t h a l i d o m i d e of t h e I n s i g h t T e a m of The Sunday Times of L o n d o n , a n d t h e s c h o l a r s h i p o f M i l t o n S i l v e r m a n and G a r y Gereffi. D i s c u s s i o n s and c o r r e s p o n d e n c e with B r e n t Fisse and Bud Loftus w e r e influential in c h a n g i n g t h e d i r e c t i o n of my t h i n k i n g on key d i l e m m a s . I a m also i n d e b t e d t o D a v i d B i l e s , R i c h a r d G a v e n , Bill G i b s o n , R o y H a r v e y , K a t h e r i n e P i t t , Ivan P o t a s , P e t e r R h e i n s t e i n , B r u c e S w a n t o n and G r a n t W a r d l a w for critical c o m m e n t s o n e a r l i e r drafts o f t h e m a n u s c r i p t . V a l e r i e B r a i t h w a i t e and Gil G e i s p r o v i d e d great a s s i s t a n c e d u r i n g t h e A m e r i c a n f i e l d w o r k stage o f t h e r e s e a r c h . A p p r e c i a t i o n i s a l s o d u e t o J a n i n a B u n c and A n n e t t e W a t e r s for their p a i n s t a k i n g and a c c u r a t e t y p i n g of t h e m a n u s c r i p t . I am grateful to the A u s t r a l i a n - A m e r i c a n E d u c a t i o n a l F o u n d a t i o n for s u p p o r t with a F u l b r i g h t F e l l o w s h i p t o c o n d u c t t h e fieldwork and t o t h e A u s t r a l i a n I n s t i t u t e of C r i m i n o l o g y for s u p p o r t i n g t h e project in A u s t r a l i a .

vm

1

Introduction: an industry case study of corporate crime

T h e m a j o r i t y o f p e o p l e w h o w o r k i n t h e p h a r m a c e u t i c a l industry s u b s c r i b e to high s t a n d a r d s of integrity and do e v e r y t h i n g in their p o w e r to stay w i t h i n t h e c o n s t r a i n t s of the law. In the c o u r s e of this r e s e a r c h , I m e t p h a r m a c e u t i c a l e x e c u t i v e s w h o i m p r e s s e d me with t h e s i n c e r i t y o f t h e i r c o m m i t m e n t t o t h e p u b l i c welfare m u c h m o r e t h a n m a n y o f t h e i n d u s t r y ' s critics i n p o l i t i c s , r e g u l a t o r y a g e n c i e s , t h e p u b l i c i n t e r e s t m o v e m e n t , and a c a d e m i a . Valerie B r a i t h w a i t e accompanied me to many pharmaceutical c o m p a n i e s , forever c o n s t r a i n i n g m e from d r i v i n g o n t h e w r o n g side o f t h e r o a d . O n e d a y , a s w e d r o v e back t o N e w Y o r k , she said: 'But t h e s e p e o p l e a r e s o n i c e , J o h n . D o you think they really are c o r r u p t ? ' M y initial r e s p o n s e w a s : "You've s p e n t the day being s h o w n a r o u n d and t a k e n t o lunch b y the c o m p a n y ' s public r e l a t i o n s staff. T h e y ' r e paid to be n i c e . S o m e p e o p l e in t h e s e c o m p a n i e s get paid a lot of m o n e y b e c a u s e t h e y ' r e g o o d at being r u t h l e s s b a s t a r d s , and o t h e r s get big m o n e y t o e n t e r t a i n p e o p l e like you b e c a u s e t h e y ' r e g o o d a t b e i n g n i c e . ' But really t h a t w a s a n i n a d e q u a t e a n s w e r . I r r e s p e c t i v e of w h a t t h e y ' r e paid to b e . m o s t o f t h e m in fact are principled p e o p l e . T h e r e a r e t h r e e t y p e s o f p r i n c i p l e d p e o p l e i n the p h a r m a c e u t i c a l i n d u s t r y . F i r s t , t h e r e a r e t h o s e w h o directly p a r t i c i p a t e i n c o m p a n y a c t i v i t i e s w h i c h d o p u b l i c h a r m , but w h o sincerely believe the c o m p a n y p r o p a g a n d a w h i c h tells t h e m that they are c o n t r i b u t i n g t o t h e i m p r o v e m e n t o f c o m m u n i t y h e a l t h . S e c o n d , t h e r e are p e o p l e w h o p e r c e i v e t h e c o m p a n y t o b e e n g a g i n g i n c e r t a i n socially harmful p r a c t i c e s and fight t o o t h and nail w i t h i n t h e o r g a n i s a t i o n to s t o p t h o s e p r a c t i c e s . T h i r d , t h e r e are p e o p l e w h o have n o direct I

Introduction:

an

industry

case

study

of corporate

crime

c o n t a c t with socially harmful c o r p o r a t e p r a c t i c e s . T h e j o b t h e y d o w i t h i n t h e o r g a n i s a t i o n p r o d u c e s social benefits, and they do that j o b with integrity and dedication. Most of the principled people in p h a r m a c e u t i c a l c o m p a n i e s are in this last c a t e g o r y . C o n s i d e r , for e x a m p l e , t h e quality c o n t r o l m a n a g e r w h o i s e x a c t i n g i n e n s u r i n g t h a t no d r u g l e a v e s t h e plant w h i c h is i m p u r e or o u t s i d e specificat i o n s . It m i g h t be t h a t t h e d r u g itself c a u s e s m o r e h a r m t h a n good b e c a u s e o f side-effects o r a b u s e ; b u t t h e quality c o n t r o l m a n a g e r d o e s t h e j o b of e n s u r i n g that at least it is not a d u l t e r a t e d . In h a s t e n i n g to p o i n t o u t t h a t not all p h a r m a c e u t i c a l e x e c u t i v e s a r e nice g u y s , I am r e m i n d e d of o n e g e n t l e m a n w h o had a sign, ' G o for t h e j u g u l a r ' , on t h e wall b e h i n d his desk. A n o t h e r r e s p o n d e n t , a r g u a b l y o n e o f t h e m o s t powerful h a l f - d o z e n m e n i n t h e A u s t r a l i a n p h a r m a c e u t i c a l i n d u s t r y , e x c u s e d his o w n r u t h l e s s n e s s with: i n b u s i n e s s y o u can c o m e up a g a i n s t a dirty s t i n k i n g b u n c h of c r o o k s . T h e n you h a v e to b e h a v e like a c r o o k yourself, o t h e r w i s e you get d o n e like a d i n n e r . " N e v e r t h e l e s s , m o s t c o r p o r a t e c r i m e s i n the p h a r m a c e u t i c a l i n d u s t r y c a n n o t be e x p l a i n e d by the p e r v e r s e p e r s o n a l i t i e s of their p e r p e t r a t o r s . O n e m u s t q u e s t i o n t h e proclivity i n a n individualistic c u l t u r e to l o c a t e t h e s o u r c e of evil d e e d s in evil p e o p l e . I n s t e a d we s h o u l d "pay a t t e n t i o n to t h e factors t h a t lead o r d i n a r y m e n to do e x t r a o r d i n a r y things' ( O p t o n . 1971: 51). R a t h e r than think of c o r p o r a t e a c t o r s a s i n d i v i d u a l p e r s o n a l i t i e s , they should b e viewed a s a c t o r s w h o a s s u m e c e r t a i n r o l e s . T h e r e q u i r e m e n t s o f t h e s e roles a r e defined by t h e o r g a n i s a t i o n , not by t h e a c t o r ' s p e r s o n a l i t y . U n d e r s t a n d i n g h o w ' o r d i n a r y m e n are led t o d o e x t r a o r d i n a r y t h i n g s ' can b e g i n with r o l e - p l a y i n g e x p e r i m e n t s . A r m s t r o n g (1977) a s k e d a l m o s t t w o t h o u s a n d m a n a g e m e n t s t u d e n t s from t e n c o u n t r i e s to play t h e roles of b o a r d m e m b e r s of a t r a n s n a t i o n a l p h a r m a c e u t i c a l c o m p a n y . T h e decision facing the b o a r d w a s a real-life s i t u a t i o n which had c o n f r o n t e d t h e U p j o h n c o m p a n y : ' s h o u l d it r e m o v e from t h e m a r k e t a drug which had b e e n found t o e n d a n g e r h u m a n life? S e v e n t y - n i n e p e r cent o f the m a n a g e m e n t s t u d e n t b o a r d s o f d i r e c t o r s not only refused t o withd r a w t h e d a n g e r o u s d r u g , but also u n d e r t o o k legal o r political m a n o e u v r e s to forestall efforts of t h e g o v e r n m e n t to ban it.* This w a s t h e s a m e a c t i o n a s t h e U p j o h n b o a r d itself t o o k , a n action w h i c h 97 p e r cent o f a s a m p l e o f 7 1 r e s p o n d e n t s classified as 'socially i r r e s p o n s i b l e ' ( A r m s t r o n g , 1977: 197). U s i n g d e l a y i n g tactics t o k e e p a d a n g e r o u s but profitable drug on t h e m a r k e t is s o m e t h i n g 2

Introduction:

an

industry

case

study

of corporate

crime

t h a t o r d i n a r y p e o p l e a p p e a r willing t o d o w h e n a s k e d t o play the role of i n d u s t r y d e c i s i o n - m a k e r s . H e n c e , w h e n p e o p l e die as a result of t h e k i n d s of socially i r r e s p o n s i b l e m a n o e u v r e s of the U p j o h n b o a r d in this c a s e , to s u g g e s t t h a t it h a p p e n e d b e c a u s e the U p j o h n b o a r d i s m a d e u p o f evil m e n d o e s little t o a d v a n c e e x p l a n ation of the p h e n o m e n o n . The unquestionable artificiality of l a b o r a t o r y role-playing e x p e r i m e n t s m a y n e v e r t h e l e s s share s o m e o f t h e very artificiality w h i c h is t h e stuff from w h i c h i m m o r a l c o r p o r a t e d e c i s i o n s are made: [ T ] h e usual r e s t r a i n t s on a n t i s o c i a l b e h a v i o r o p e r a t e t h r o u g h a s e l f - i m a g e : T c a n ' t see m y s e l f d o i n g that' In an institutional s e t t i n g , h o w e v e r , that isn't b e i n g d o n e by me but through me as an a c t o r , a role p l a y e r in an u n r e a l ' g a m e ' t h a t e v e r y o n e is ' p l a y i n g ' ( S t o n e . 1975: 2 3 5 ) . P e o p l e in g r o u p s b e h a v e in w a y s t h a t w o u l d be i n c o n c e i v a b l e for any o f t h e m a s i n d i v i d u a l s . G r o u p t h i n k ( J a n i s , 1971) and w h a t A r e n d t ( 1 9 6 5 ) r e f e r r e d to as 'rule by n o b o d y ' are i m p o r t a n t in c o r p o r a t e d e c i s i o n - m a k i n g w h i c h results i n h u m a n suffering. B a n d u r a ( 1 9 7 3 : 213) e x p l a i n e d the basic p s y c h o l o g y o f 'rule b y nobody'. [ O n e ] b u r e a u c r a t i c p r a c t i c e for r e l i e v i n g s e l f - c o n d e m n a t i o n for a g g r e s s i o n is to rely on g r o u p d e c i s i o n - m a k i n g , so that no single i n d i v i d u a l feels r e s p o n s i b l e for w h a t is e v e n t u a l l y d o n e . I n d e e d , social o r g a n i s a t i o n s go to g r e a t l e n g t h s to d e v i s e s o p h i s t i c a t e d m e c h a n i s m s for o b s c u r i n g r e s p o n s i b i l i t y for d e c i s i o n s that affect o t h e r s a d v e r s e l y . . . . T h r o u g h division of l a b o r , division of d e c i s i o n - m a k i n g , a n d c o l l e c t i v e a c t i o n , p e o p l e can b e c o n t r i b u t o r s t o cruel p r a c t i c e s and b l o o d s h e d w i t h o u t feeling p e r s o n a l l y r e s p o n s i b l e or s e l f - c o n t e m p t u o u s for their part in it. T h e r e a r e a large n u m b e r o f p s y c h o l o g i c a l s t u d i e s d e m o n s t r a t i n g t h a t m e m b e r s of a g r o u p will risk m o r e as g r o u p m e m b e r s t h a n they will as i n d i v i d u a l s ( S t o n e r . 1968; W a l l a c h et al.. 1964; Bern et al.. 1 9 6 5 ; W a l l a c h a n d K o g a n . 1965; B u r n s t e i n and V i n o k u r . 1973; C a r t w r i g h t , 1 9 7 3 ; M u h l e m a n e t a l . . 1976; S h a w . 1976). P s y c h o l o gists call this t e n d e n c y for c a u t i o u s i n d i v i d u a l s to s u p p o r t m o r e h a z a r d o u s g r o u p d e c i s i o n s t h e ' g r o u p risky shift p h e n o m e n o n ' . T h e p h e n o m e n o n i s far from u b i q u i t o u s , h o w e v e r . W h e n c a u t i o u s c h o i c e s a r e m o r e socially d e s i r a b l e , g r o u p p r e s s u r e s can actually
3

3

Introduction:

an

industry

case

study

of corporate

crime 1968; F r a s e r et a l . .

p r o d u c e a c a u t i o u s shift ( M a d a r a s and B e r n . 1971).

A n o t h e r v a r i a b l e w h i c h d i s t i n g u i s h e s individual from c o r p o r a t e d e c i s i o n - m a k i n g is t h e d i s t a n c e in s p a c e and t i m e b e t w e e n the h a z a r d o u s d e c i s i o n - m a k e r and the victim of t h e decision. W h e n a N e w York board meeting decides to continue marketing a dangero u s d r u g in a T h i r d W o r l d c o u n t r y , t h e victims could h a r d l y be m o r e r e m o t e from t h e killers. M i l g r a m ' s ( 1 9 6 5 ) e x p e r i m e n t s s h o w e d t h a t p e o p l e w e r e m o r e willing t o a d m i n i s t e r electric s h o c k s w h e n t h e y w e r e less likely to see or be seen by the victim of t h e shock. A n o t h e r e x p e r i m e n t i n a s o m e w h a t m o r e n a t u r a l i s t i c setting ( T u r n e r et a l . . 1975) found t h a t victim visibility inhibited a g g r e s s i o n . W h i l e e x t r a p o l a t i o n from t h e r e s e a r c h o f p s y c h o l o g i s t s t o the real w o r l d of t r a n s n a t i o n a l c o r p o r a t i o n s is p r o b l e m a t i c in the e x t r e m e , such w o r k lays a f o u n d a t i o n for u n d e r s t a n d i n g h o w it is p o s s i b l e for d e c e n t p e o p l e to do i n d e c e n t d e e d s . W i t h o u t offering e x p l a n a t i o n s o f p r e d i c t i v e v a l u e , t h e p s y c h o l o g i c a l l i t e r a t u r e at least s u c c e e d s in r e n d e r i n g s e e m i n g l y i m p l a u s i b l e e v e n t s plausible. T h i s b o o k d o c u m e n t s a b o m i n a b l e h a r m which g r o u p d e c i s i o n m a k i n g i n t h e p h a r m a c e u t i c a l i n d u s t r y has caused o n m a n y o c c a s i o n s . T h e ' c o l l e c t i v e evil' o f m a n y p h a r m a c e u t i c a l c o m p a n i e s i s m a n i f e s t e v e n t h o u g h s o m a n y 'nice p e o p l e ' w o r k for t h e m . H o e c h s t and B a y e r , t h e l a r g e s t and third largest c o m p a n i e s i n world pharm a c e u t i c a l sales r e s p e c t i v e l y , and b o t h a m o n g the w o r l d ' s largest t h i r t y c o r p o r a t i o n s , are d e s c e n d e d from G e r m a n y ' s I . G . F a r b e n c o m p a n y . I . G . F a r b e n r a n k s with the S t a n d a r d Oil Trust a s o n e o f t h e t w o g r e a t e s t c a r t e l s i n w o r l d h i s t o r y . After the S e c o n d W o r l d W a r , t h e A l l i e s b r o k e u p I . G . into effectively t h r e e c o m p a n i e s : H o e c h s t , B A S F and B a y e r . T w e l v e t o p I . G . F a r b e n e x e c u t i v e s w e r e s e n t e n c e d t o t e r m s o f i m p r i s o n m e n t for slavery and m i s t r e a t m e n t offences a t t h e N u r e m b e r g w a r c r i m e s trials. I . G . built and o p e r a t e d a m a s s i v e c h e m i c a l p l a n t at A u s c h w i t z with slave l a b o u r : t h e I . G . facilities a t A u s c h w i t z w e r e s o e n o r m o u s that they used m o r e e l e c t r i c i t y t h a n t h e e n t i r e city o f B e r l i n . A p p r o x i m a t e l y 300,000 concentration-camp workers passed through I.G. A u s c h w i t z . A t least 2 5 , 0 0 0 o f t h e m w e r e w o r k e d t o d e a t h ( B o r k i n , 1978: 127). O t h e r s d i e d i n I . G . ' s d r u g t e s t i n g p r o g r a m . T h e following p a s s a g e in a l e t t e r from t h e c o m p a n y to the c a m p at A u s c h w i t z d e m o n s t r a t e s t h e a t t i t u d e o f I . G . F a r b e n t o the subjects o f its d r u g testing:
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industry

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crime

In c o n t e m p l a t i o n of e x p e r i m e n t s with a n e w soporific d r u g , we w o u l d a p p r e c i a t e y o u r p r o c u r i n g for us a n u m b e r o f w o m e n . . . . We r e c e i v e d y o u r a n s w e r but c o n s i d e r the price of 200 m a r k s a w o m a n e x c e s s i v e . We p r o p o s e to pay not m o r e t h a n 170 m a r k s a h e a d . I f a g r e e a b l e , w e will t a k e p o s s e s s i o n o f t h e w o m e n . W e n e e d a p p r o x i m a t e l y 150. . . . R e c e i v e d t h e o r d e r of 150 w o m e n . D e s p i t e t h e i r e m a c i a t e d c o n d i t i o n , t h e y w e r e found satisfactory. W e shall k e e p y o u p o s t e d o n d e v e l o p m e n t s c o n c e r n i n g this e x p e r i m e n t . . . . T h e t e s t s w e r e m a d e . All subjects died. We shall c o n t a c t you s h o r t l y on t h e subject of a n e w load ( G l o v e r . 1977: 5 8 ) . B o r k i n ( 1 9 7 8 ) has d o c u m e n t e d i n horrifying detail h o w t o d a y ' s l e a d e r s i n t h e i n t e r n a t i o n a l p h a r m a c e u t i c a l i n d u s t r y b r u t a l i s e d its slave l a b o u r force in t h e i r q u e s t to build an industrial e m p i r e to m a t c h H i t l e r ' s political e m p i r e . After t h e w a r , t h e A l l i e s insisted t h a t n o n e o f t h e c o n v i c t e d w a r c r i m i n a l s b e a p p o i n t e d t o the b o a r d s o f t h e n e w I . G . c o m p a n i e s . O n c e A l l i e d c o n t r o l l o o s e n e d , howe v e r , H o e c h s t i n J u n e 1955 a p p o i n t e d F r i e d r i c h J a e h n e , o n e o f the twelve war criminals sentenced to imprisonment at N u r e m b e r g , to its s u p e r v i s o r y b o a r d . In S e p t e m b e r of t h a t y e a r he w a s elected C h a i r m a n . B a y e r a p p o i n t e d Fitz ter M e e r , s e n t e n c e d t o seven y e a r s at N u r e m b e r g , as C h a i r m a n of its b o a r d in 1956. L a t e r it will be seen h o w a n o t h e r of t h e t o p five c o m p a n i e s , S w i t z e r l a n d ' s H o f f m a n - L a R o c h e , built u p o n m a s s i v e profits i t m a d e b e t w e e n t h e t w o w o r l d w a r s from sales o f h e r o i n and m o r p h i n e t o t h e u n d e r w o r l d . I t will also b e d e m o n s t r a t e d h o w five o f A m e r i c a ' s largest p h a r m a c e u t i c a l c o m p a n i e s laid t h e foundat i o n s for t h e i r i n d u s t r i a l e m p i r e s by i n t e r n a t i o n a l price-fixing a r r a n g e m e n t s t h r o u g h o u t t h e 1950s w h i c h k e p t t h e new ' w o n d e r d r u g s ' , the broad spectrum antibiotics, beyond the financial reach of most of the world's population. C o n t e m p o r a r y o b s e r v e r s o f p h a r m a c e u t i c a l c o r p o r a t i o n s offer little s o l a c e t h a t t h e i n d u s t r y ' s p r e s e n t is m u c h less sordid t h a n its r e c e n t p a s t . C l i n a r d et al.'s ( 1 9 7 9 : 104) c o m p r e h e n s i v e study of c o r p o r a t e c r i m e i n A m e r i c a n b u s i n e s s found p h a r m a c e u t i c a l c o m p a n i e s to have more than three times as many serious or m o d e r a t e l y s e r i o u s law v i o l a t i o n s p e r firm a s o t h e r c o m p a n i e s i n the s t u d y . I n d e e d , it will be a r g u e d t h a t t h e p h a r m a c e u t i c a l i n d u s t r y has a w o r s e r e c o r d of i n t e r n a t i o n a l b r i b e r y and c o r r u p t i o n t h a n any o t h e r i n d u s t r y ( C h a p t e r 3 ) , a history of fraud in t h e safety testing of
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d r u g s ( C h a p t e r 4 ) , and a d i s t u r b i n g r e c o r d of criminal n e g l i g e n c e in the unsafe m a n u f a c t u r e of drugs ( C h a p t e r 5). T h i s b o o k is not d i r e c t e d at h o w to c h a n g e p e o p l e in o r d e r to p r e v e n t such c r i m e , but a t t r a n s f o r m a t i o n s t o institutional a r r a n g e m e n t s and t h e law a s c r i m e - r e d u c t i o n s t r a t e g i e s . T h e unfort u n a t e reality w i t h w h i t e - c o l l a r c r i m e i s t h a t c o u r t s , and s o m e t i m e s t h e p u b l i c , t e n d to e x c u s e it b e c a u s e t h e i n d i v i d u a l s involved are s i n c e r e a n d e l o q u e n t i n justifying t h e i r b e h a v i o u r . T h e y are often e x c u s e d b e c a u s e they are p a r a g o n s o f s u c c e s s , pillars o f respecta b i l i t y w h o m a y be p r o m i n e n t in c h a r i t y w o r k or t h e c h u r c h . W h i l e such r e a c t i o n s d e s e r v e c o n d e m n a t i o n b e c a u s e o f their class b i a s , q u e s t i o n s of i n d i v i d u a l b l a m e w o r t h i n e s s will not loom large here until t h e c o n c l u d i n g c h a p t e r of t h e b o o k . T h e focus will be on the s t r u c t u r a l p r e c o n d i t i o n s for the c r i m e r a t h e r t h a n on the c r i m i n a l . F o l l o w i n g S u t h e r l a n d ( 1 9 4 9 ) , I t a k e t h e view t h a t to e x c l u d e civil v i o l a t i o n s from a c o n s i d e r a t i o n of w h i t e - c o l l a r c r i m e is an a r b i t r a r y o b f u s c a t i o n b e c a u s e for m a n y of t h e t y p e s of illegal activities disc u s s e d in t h i s b o o k p r o v i s i o n exists in law for b o t h civil and c r i m i n a l p r o s e c u t i o n o f t h e s a m e c o n d u c t . " M o r e o v e r , while s o m e o f the p r a c t i c e s d i s c u s s e d a r e civil m a t t e r s in s o m e p a r t s of t h e w o r l d , they a r e c r i m i n a l in o t h e r s . In g e n e r a l , t h e civil-criminal d i s t i n c t i o n is a d o u b t f u l o n e ( F r i e b e r g , 1981). T h u s , c o r p o r a t e c r i m e i s defined h e r e as c o n d u c t of a c o r p o r a t i o n , or of e m p l o y e e s acting on behalf of a c o r p o r a t i o n , w h i c h is p r o s c r i b e d and p u n i s h a b l e by law. T h e c o n d u c t c o u l d b e p u n i s h a b l e b y i m p r i s o n m e n t , p r o b a t i o n , fine, r e v o c a t i o n o f l i c e n c e , c o m m u n i t y service o r d e r , i n t e r n a l discipline o r d e r o r o t h e r c o u r t - i m p o s e d p e n a l t i e s discussed i n this b o o k . T y p e s o f c o n d u c t w h i c h are subject only t o d a m a g e s a w a r d s w i t h o u t a n y a d d i t i o n a l p u n i s h m e n t ( e . g . f i n e , p u n i t i v e d a m a g e s ) are not w i t h i n t h e d e f i n i t i o n o f c o r p o r a t e c r i m e a d o p t e d h e r e . M o s t o f the c o r p o r a t e c r i m e s d i s c u s s e d in this b o o k w e r e not punished by law e v e n t h o u g h t h e y w e r e punishable. I f o n e m e a s u r e s t h e s e r i o u s n e s s o f c r i m e a c c o r d i n g t o public i n d i g n a t i o n a g a i n s t t h e offence in t h e c o m m u n i t y at l a r g e , t h e n this b o o k is a b o u t s e r i o u s c r i m e . This view is c o n f i r m e d by a c r o s s n a t i o n a l s t u d y of a t t i t u d e s to t h e s e r i o u s n e s s of c r i m e a m o n g 1,909 r e s p o n d e n t s from eight c o u n t r i e s ( S c o t t and A l - T h a k e b , 1977). A d r u g c o m p a n y e x e c u t i v e allowing his c o m p a n y t o m a r k e t a d r u g " k n o w i n g t h a t it m a y p r o d u c e harmful side-effects for most indiv i d u a l s ' w a s r a t e d in t h e U n i t e d S t a t e s as c o m m i t t i n g a c r i m e m o r e s e r i o u s t h a n all of t h e F B I index offences e x c e p t m u r d e r and r a p e . 6

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crime

T h a t i s , m a r k e t i n g a d r u g with harmful side-effects w a s j u d g e d to be a crime deserving longer t e r m s of imprisonment than robbery, a g g r a v a t e d a s s a u l t , b u r g l a r y , larceny and a u t o m o b i l e theft. T h e finding is s u r p r i s i n g b e c a u s e m a r k e t i n g a d r u g with d a n g e r o u s sideeffects is not e v e n an offence unless t h e p r o d u c t is actually b a n n e d or there has been criminal negligence. A l s o i n t e r e s t i n g w a s the f i n d i n g t h a t U S r e s p o n d e n t s w e r e r e l a t i v e l y less p u n i t i v e t o w a r d this c o n d u c t t h a n r e s p o n d e n t s from all of t h e r e m a i n i n g seven c o u n t r i e s . T h e US w a s the only c o u n t r y in w h i c h m a r k e t i n g a d r u g with harmful side-effects w a s j u d g e d a s d e s e r v i n g less p u n i s h m e n t t h a n r a p e . I n S w e d e n , e v e n m u r d e r w a s j u d g e d as d e s e r v i n g less p u n i s h m e n t t h a n selling a d r u g with harmful side-effects. O n a v e r a g e , U S r e s p o n d e n t s favoured o v e r five y e a r s ' i m p r i s o n m e n t for d r u g c o m p a n y e x e c u t i v e s w h o p e r p e t r a t e d this ' o f f e n c e ' . F o r t h o s e w h o s u p p o r t a 'just d e s e r t s ' m o d e l of c r i m i n a l s e n t e n c i n g , and 1 am not o n e of t h e m , t h e r e is r e a s o n to f a v o u r a lot of d r u g - c o m p a n y e x e c u t i v e s b e i n g put b e h i n d bars. T h i s b o o k is an i n d u s t r y case study of c o r p o r a t e c r i m e which a t t e m p t s t o u n d e r s t a n d t h e m e c h a n i c s o f t h e r a n g e o f types o f c o r p o r a t e c r i m e c o m m o n in o n e i n d u s t r y sector. Such a study w a s c a l c u l a t e d a s t h e sort m o s t likely t o a d v a n c e o u r u n d e r s t a n d i n g o f c o r p o r a t e c r i m e as a social p h e n o m e n o n . Social science passes t h r o u g h w h a t m i g h t be r o u g h l y classified as four s t a g e s after a p r o b l e m s e r i o u s l y g r a b s t h e a t t e n t i o n o f s c h o l a r s for t h e first t i m e . At first, s c h o l a r s h i p is limited to a r m c h a i r c o n c e p t u a l i s i n g of and theorising about the p h e n o m e n o n . Then empirical work begins: first w i t h q u a l i t a t i v e case s t u d i e s ; t h e n with statistical s t u d i e s (which t h e m s e l v e s see r e f i n e m e n t t h r o u g h d e s c r i p t i v e t o c o r r e l a t i o n a l t o c a u s a l a n a l y s e s ) ; a n d f i n a l l y , r i g o r o u s e x p e r i m e n t a l s t u d i e s are a t t e m p t e d i n w h i c h key v a r i a b l e s a r e strictly c o n t r o l l e d . It h a r d l y n e e d s to be a r g u e d t h a t we are not yet r e a d y for e x p e r i m e n t a l s t u d i e s as we c o u l d not begin to g u e s s w h i c h w o u l d be the key v a r i a b l e s t o c o n t r o l . M o s t o b s e r v e r s w o u l d a g r e e , h o w e v e r , t h a t t h e o r i s i n g a b o u t c o r p o r a t e c r i m e c a n n o t a d v a n c e m u c h further until it b e c o m e s b e t t e r i n f o r m e d by e m p i r i c a l w o r k . T h e q u e s t i o n is w h e t h e r r e s e a r c h e r s s h o u l d b e j u m p i n g a h e a d t o statistical s t u d i e s of c o r p o r a t e crime or if research resources should be concentrated in q u a l i t a t i v e c a s e s t u d i e s . My view is t h a t statistical studies are p e r h a p s a s p r e m a t u r e t o d a y a s they w e r e w h e n S u t h e r l a n d (1949) u n d e r t o o k t h e first statistical study of c o r p o r a t e c r i m e . W i t h o u t a 7

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of corporate

crime

q u a l i t a t i v e u n d e r s t a n d i n g o f t h e c o n t o u r s o f c o r p o r a t e c r i m e s and h o w t h e y u n f o l d , w e c a n n o t begin t o c o m p r e h e n d w h a t lies b e h i n d t h e q u a n t i t a t i v e d e s c r i p t i o n s . M o r e o v e r , the liberal use o f q u o t e s from p h a r m a c e u t i c a l e x e c u t i v e s t h r o u g h o u t the text will a t t e m p t to i l l u m i n a t e t h e social c o n s t r u c t i o n o f t h e p h e n o m e n o n b y the a c t o r s themselves. A n i n d u s t r y - w i d e case s t u d y o f c o r p o r a t e c r i m e has b e e n c h o s e n in p r e f e r e n c e to a m o r e d e t a i l e d study of a p a r t i c u l a r offence or a p a r t i c u l a r c o m p a n y partly b e c a u s e t h e latter are m o r e v u l n e r a b l e t o w i t h d r a w a l o f c o - o p e r a t i o n b y vital i n f o r m a n t s . M o r e i m p o r t a n t l y , at this stage of t h e i n t e l l e c t u a l d e v e l o p m e n t of the field, a f a l t e r i n g a t t e m p t to p a i n t a b r o a d e r c a n v a s is justified so t h a t the w o r k m i g h t h a v e r e l e v a n c e t o the i m p o r t a n t c o n c e p t u a l g r o u n d w o r k b e i n g laid by j u r i s t s w o r k i n g from their a r m c h a i r s . H a v i n g c o m p l e t e d t h e s t u d y , I am m o r e c o n v i n c e d t h a n ever t h a t a s u p e r i o r u n d e r s t a n d i n g of a p a r t i c u l a r c r i m e in a p a r t i c u l a r firm is g a i n e d w h e n t h e r e s e a r c h e r h a s a g r a s p of h o w t h e industry w o r k s as a whole. The present work is international in scope. Meaningful research on t r a n s n a t i o n a l c o r p o r a t i o n s is difficult w i t h i n o n e set of n a t i o n a l b o u n d a r i e s . D i s p r o p o r t i o n a t e e m p h a s i s will be p l a c e d on d a t a from t h e U n i t e d S t a t e s , w h i c h , i n a d d i t i o n t o being the largest m a n u f a c t u r e r of p h a r m a c e u t i c a l p r o d u c t s , is t h e d o m i c i l e for half of the w o r l d ' s t o p fifty p h a r m a c e u t i c a l c o r p o r a t i o n s . P r i n c i p a l s o u r c e s o f d a t a w e r e i n t e r v i e w s w i t h i n f o r m a n t s , b o t h within t h e industry and o u t s i d e it, a n d p u b l i c d o c u m e n t s ( t r a n s c r i p t s o f e v i d e n c e a t t r i a l s , c o m p a n y d o c u m e n t s l o d g e d with r e g u l a t o r y a g e n c i e s , t r a n s c r i p t s o f g o v e r n m e n t investigations of the industry). In the United States, 1 had t h e p l e a s u r e o f w a d i n g t h r o u g h s o m e 100,000 p a g e s o f C o n g r e s sional oversight hearings. These were goldmines of information. Particularly valuable were the K e n n e d y S u b c o m m i t t e e transcripts. I am i n d e b t e d to S e n a t o r K e n n e d y ' s staff for a l l o w i n g me full access t o t h e S e n a t e J u d i c i a r y C o m m i t t e e files d u r i n g m y m o n t h i n W a s h i n g t o n . S c o u r i n g t h e s e files, i n c o m b i n a t i o n with t h e interviews, e n a b l e d me to piece t o g e t h e r the organisational decisionm a k i n g p r o c e s s e s lying b e h i n d s o m e o f t h e a b u s e s r e v e a l e d i n the Senate hearings. T h e o r i g i n a l s t r a t e g y for i n t e r v i e w s with e x e c u t i v e s w a s to m e e t w i t h p e o p l e at t h e level of chief e x e c u t i v e officer or s e c o n d in c o m m a n d of Australian subsidiaries of A m e r i c a n transnationals, and t h e n t o i n t e r v i e w i n t h e U n i t e d S t a t e s the h e a d q u a r t e r s

Introduction:

an

industry

case

study

of corporate

crime

e x e c u t i v e s t o w h o m t h e A u s t r a l i a n s a n s w e r e d . O n e r e s e a r c h goal w a s to e x p l o r e t h e diffusion of a c c o u n t a b i l i t y for law v i o l a t i o n s b e t w e e n h e a d q u a r t e r s and s u b s i d i a r i e s i n t r a n s n a t i o n a l c o r p o r a t i o n s . In t h e e n d , h o w e v e r , I t o o k i n t e r v i e w s w h e r e I could get t h e m . I n s o m e c a s e s , t h e h e a d q u a r t e r s i n t e r v i e w s w e r e d o n e first, and s u b s i d i a r y i n t e r v i e w s later. A total of 131 i n t e r v i e w s w e r e c o n d u c t e d - 75 in t h e U n i t e d S t a t e s , 15 in A u s t r a l i a , 10 in M e x i c o , 9 in G u a t e m a l a a n d 2 in t h e U n i t e d K i n g d o m . A l m o s t half of these i n t e r v i e w s w e r e with e x e c u t i v e s at t h e level of chief e x e c u t i v e officer of a s u b s i d i a r y or a m o r e s e n i o r p e r s o n at h e a d q u a r t e r s . R e s e a r c h e r s t e n d t o o v e r e s t i m a t e t h e difficulties o f g e t t i n g interv i e w s w i t h t o p e x e c u t i v e s a b o u t c o r p o r a t e c r i m e . O n e o f the significant i n f o r m a n t s in this study w a s t h e p r e s i d e n t of a major t r a n s n a t i o n a l w h o e n j o y e d a n a n n u a l r e m u n e r a t i o n from t h e c o m p a n y o f o v e r U S $ 7 0 0 , 0 0 0 . M o s t i n t e r v i e w s w e r e longer t h a n a n h o u r in d u r a t i o n , but 13 lasted for less t h a n thirty m i n u t e s . T a b l e 1.1 lists t h e l o c a t i o n s o f t h e formal i n t e r v i e w s w i t h e x e c u t i v e s . I n a d d i t i o n t o t h e s e formal i n t e r v i e w s , a t t e m p t s w e r e m a d e t o ask e x e c u t i v e s q u e s t i o n s after they had given e v i d e n c e b e f o r e t h e R a l p h E n q u i r y i n t o t h e p h a r m a c e u t i c a l industry held i n A u s t r a l i a d u r i n g 1978. T h e s e fleeting q u e s t i o n and a n s w e r sessions p r o v i d e d n o i n f o r m a t i o n o f v a l u e . M u c h m o r e v a l u a b l e w e r e t h e i n t e r v i e w s with i n f o r m a n t s w h o had left t h e i n d u s t r y , officers in t h e P h a r m a c e u t i c a l M a n u f a c t u r e r s A s s o c i a t i o n s [ P M A s ] i n e a c h c o u n t r y visited ( e x c e p t G u a t e m a l a ) , p u b l i c i n t e r e s t a c t i v i s t s , and officers i n r e g u l a t o r y a g e n c i e s i n t h e U n i t e d S t a t e s , A u s t r a l i a and t h e U n i t e d K i n g d o m . T h e s e s u p p l e m e n t a r y i n t e r v i e w s t o g e n e r a t e leads from o t h e r s o u r c e s w e r e a l m o s t e q u a l i n n u m b e r t o t h e formal i n d u s t r y interv i e w s . N e v e r t h e l e s s , t h e industry i n t e r v i e w s w e r e t h e m o r e i m p o r t a n t s o u r c e o f i n f o r m a t i o n . A n a p p e n d i x sets out t h e s t r a t e g i e s w h i c h w e r e used i n soliciting and c o n d u c t i n g t h e s e i n t e r v i e w s . N o n e of t h e i n f o r m a n t s is identified by n a m e . W i t h c o r p o r a t e c r i m e r e s e a r c h , it is w r o n g to a s s u m e that all o n e m u s t do is get s e n i o r e x e c u t i v e s to ' c o m e c l e a n ' . T h e full story must b e p i e c e d t o g e t h e r and c r o s s - c h e c k e d from m u l t i p l e s o u r c e s . N o e x e c u t i v e , no m a t t e r h o w s e n i o r , k n o w s a n y t h i n g like the full story o f illegal b e h a v i o u r i n t h e p h a r m a c e u t i c a l i n d u s t r y . E x e c u t i v e s often m a k e i t t h e i r b u s i n e s s not t o k n o w a b o u t c e r t a i n t h i n g s g o i n g on b e l o w t h e m in t h e o r g a n i s a t i o n . Often it is part of the j o b of l o w e r - l e v e l e x e c u t i v e s t o e n s u r e that t h e i r s u p e r i o r s are not t a i n t e d with k n o w l e d g e o f illegal c o n d u c t . M o r e o v e r , s e n i o r e x e c u t i v e s 9

Introduction: TABLE 1.1

an

industry

case

study

of corporate

crime

F o r m a l i n t e r v i e w s with p h a r m a c e u t i c a l e x e c u t i v e s . 1978-80
World rank in No. of interviews 2 4 6 1 5 2 1 3 12 2 6 5 2 7 2 12 5 2 1 3 3 9 3 1 3 4 6 6 7 4 1 1 TOTAL = 131 ( Duntries in which interviews conducted Guat. US. Mex.. Aust. US. Guat. Aust. US. Aust. US. Aust. Aust. US US, Mex. Guat.. Aust. Aust. US. Guat.. Aust. US US. Aust. UK US. Guat.. Aust. US. Guat.. Aust. US. Aust. Aust. US Guat.. Aust. US. Mex..Aust. US. Aust. US US, Aust. Aust. US. Mex. US. Aust. US US. Aust. US

Company Hocchst-Rousscl Merck Bayer C'iba-Geigy Hoffman-La Roche Warner-Lambert Pfizer Sandoz Lilly Upjohn Squibb Bristol-Myers Takeda Schering-Plough Glaxo Abbott Johnson & Johnson Cvanamid ICI SmithKline Wellcome G. D. Searle Baxter-Travenol 3M Richardson-Merrell Sterling D r u g Syntex A. H. R o b i n s American Hospital Supply Allergan Anabolic ICL

pharmaceutical sales, 1977 ( G e r e f f i . 1979) Domicile 1 2 3 4 5 7 8 9
III

11 13 14 15 17 18 19 21 23 26 27 28 29 in 38 4(1 41 43 44
1 nr.inked

Germany US Germany Switzerland Switzerland US US Switzerland US IS I s us Japan US UK US

us us
UK US UK US

us us us us us us us us us us

Unranked Unranked Unranked

us

h a v e n e i t h e r the t i m e nor m u c h i n c e n t i v e t o s n o o p a r o u n d trying t o find out a b o u t c r i m i n a l b e h a v i o u r within o t h e r c o m p a n i e s . H e n c e , this b o o k s e e k s to inform not only the g e n e r a l public but also pharmaceutical executives.

HI

2

Bribery

A w o r l d l y - w i s e m o r a l relativism s e e m s to h a v e b e e n the r e a c t i o n from m a n y following t h e L o c k h e e d scandal of t h e m i d - 1 9 7 0 s . If the a c c e p t e d p r a c t i c e in S a u d i A r a b i a is to give t h e royal family a piece of t h e a c t i o n w h e n t h e y buy s o m e aircraft from y o u , then w h o are A m e r i c a n s or B r i t o n s to say that t h e i r w a y s of d o i n g b u s i n e s s are m o r a l l y s u p e r i o r ? I n any c a s e , A m e r i c a n s p e r c e i v e the high p u r p o s e s of A m e r i c a n foreign policy and n a t i o n a l security as a d v a n c e d if fighters a r e b o u g h t from L o c k h e e d r a t h e r t h a n from a foreign p o w e r . B r i b e r y has a less a c c e p t a b l e gloss if its p u r p o s e is to p e r s u a d e a h e a l t h official to a l l o w a d a n g e r o u s d r u g on to the m a r k e t ; or, failing t h a t , to e n t i c e a c u s t o m s officer to allow t h e b a n n e d p r o d u c t into the c o u n t r y . B r i b i n g an i n s p e c t o r to t u r n a blind eye to an u n s a n i t a r y d r u g - m a n u f a c t u r i n g plant can hardly be r a t i o n a l i s e d as in the n a t i o n a l i n t e r e s t . It will be s h o w n t h a t t h e s e types of b r i b e r y are c o m m o n in the international pharmaceutical industry. Bribery is defined as t h e giving of r e w a r d s b e y o n d t h o s e allowed by law to e n t i c e a p e r s o n w i t h a duty of trust to p e r v e r t , c o r r u p t or c o m p r o m i s e t h a t t r u s t . E x t o r t i o n is defined as t h e soliciting of a b r i b e . T h e c o n c e r n o f this c h a p t e r will not b e with m i n o r ' g r e a s e ' p a y m e n t s to get b u r e a u c r a t s to do t h e j o b t h e y are paid for. but with what R e i s m a n ( 1 9 7 9 : 75) h a s called "variance b r i b e s ' . M a n y of t h e p a y m e n t s to m i n i s t e r s and officials by p h a r m a ceutical c o m p a n i e s are extorted by the recipients. Conversely, r e s p o n d e n t s told o f m a n y s i t u a t i o n s w h e r e i t w a s the c o m p a n y w h i c h initiated t h e illegal t r a n s a c t i o n . I r r e s p e c t i v e o f t h e a l l o c a t i o n o f guilt b e t w e e n t h e t w o p a r t i e s , the point r e m a i n s t h a t h e r e w e are 11

Bribery d e a l i n g with c o n d u c t w h i c h c a n n o t b e b e n i g n l y t o l e r a t e d a s 'cust o m a r y b u s i n e s s p r a c t i c e i n foreign c o u n t r i e s ' . N o t all forms of b r i b e r y s e e m e d to b o t h e r e x e c u t i v e s in the p h a r m a c e u t i c a l i n d u s t r y . It w a s g e n e r a l l y a c c e p t e d that paying off h e a l t h i n s p e c t o r s i n c e r t a i n Third W o r l d c o u n t r i e s w a s n o r m a l and a c c e p t a b l e business practice. H o w e v e r , there was considerable c o n c e r n o v e r t h e b r i b i n g of g o v e r n m e n t officials to get t r a d e secrets c o n c e r n i n g m a n u f a c t u r i n g p r o c e s s e s . Such secrets arc necessarily m a d e a v a i l a b l e t o g o v e r n m e n t s for n e w p r o d u c t a p p r o v a l . Italy was f r e q u e n t l y m e n t i o n e d as the c o u n t r y w h e r e such b r i b e s , often of o n l y a few t h o u s a n d d o l l a r s , w e r e passed to t h e Ministry of H e a l t h . M a n y p i r a t e m a n u f a c t u r e r s are a l l o w e d to o p e r a t e in Italy in violation of international patent a g r e e m e n t s . ' G u a t e m a l a n executives a l s o said it w a s c o m m o n t h e r e for g o v e r n m e n t officials to hand o v e r n e w d r u g r e g i s t r a t i o n d'Kumentation to local firms in e x c h a n g e for a 'few h u n d r e d q u e t z a l s [ d o l l a r s ] ' . T h e local firm t h e n s u b m i t s exactly t h e s a m e r e s e a r c h d a t a on t h e safety of t h e d r u g in o r d e r to h a v e its p r o d u c t a p p r o v e d . T h e p r o d u c t it m a n u f a c t u r e s , possibly in a bath t u b , m a y b e a r little r e s e m b l a n c e t o t h e p r o d u c t t o which the subm i t t e d s a f e t y - t e s t i n g d a t a r e l a t e s . A n y set of d a t a w h i c h carefully m e e t s all t h e legal r e q u i r e m e n t s will suffice to get a p e r m i t n u m b e r to p r i n t on all b o t t l e s . In G u a t e m a l a no o n e is going to c h e c k w h e t h e r the c o n t e n t s of the bottle c o r r e s p o n d to the information in t h e p r o d u c t r e g i s t r a t i o n d o c u m e n t s . T o begin w i t h , t h e g o v e r n m e n t d o e s not have a testing laboratory.
2

T h e n o f c o u r s e t h e r e i s t h e m o r e s t r a i g h t f o r w a r d kind o f i n d u s trial e s p i o n a g e w h e r e e m p l o y e e s sell secrets directly t o their c o m p a n y ' s c o m p e t i t o r . On some occasions the crime is in response to a b r i b e to t h e spy. a n d on o t h e r o c c a s i o n s t h e e m p l o y e e initiates t h e e s p i o n a g e . A d i s g r u n t l e d e m p l o y e e of M e r c k stole the p r o c e s s for m a k i n g a l p h a m e t h y l d o p a ( ' A l d o m e t ' ) , a n a n t i - h y p e r t e n s i v e d r u g . T h e c o m p e t i t o r w h o w a s offered t h e p l a n s t u r n e d t h e m d o w n a n d notified M e r c k . M o s t n o t o r i o u s a m o n g t h e p h a r m a c e u t i c a l s p i e s w a s Dr S i d n e y M a r t i n F o x , a f o r m e r e m p l o y e e of L e d e r l e L a b o r a t o r i e s , t h e C y a n a m i d s u b s i d i a r y . He set up a spy ring which sold m i c r o f i l m c o p i e s of secret d o c u m e n t s and stolen c u l t u r e s of m i c r o - o r g a n i s m s to six Italian d r u g firms ( D a v i e s , 1976). F o x and h i s a s s o c i a t e s a r e b e l i e v e d to have b e e n paid £ 3 5 , 0 0 0 by o n e firm a l o n e . A l o n g w i t h f i v e c o n f e d e r a t e s . Fox w a s c o n v i c t e d and imp r i s o n e d u n d e r t h e F e d e r a l Stolen P r o p e r t y s t a t u t e b y a N e w Y o r k c o u r t in J a n u a r y 1966.
12

Bribery C y a n a m i d c l a i m e d t h a t F o x ' s d e f e c t i o n h a s cost it 100 m. dollars in lost sales a n d t h a t it s p e n t 30 m. d o l l a r s to d e v e l o p the stolen p r o c e s s and c u l t u r e s . In 1962 C y a n a m i d had w o n a d a m a g e s suit a g a i n s t F o x , and t h e N e w Y o r k C o u r t a t t h e criminal h e a r i n g a s s e s s e d t h e firm's l o s s e s at f 1.78 m. ( D a v i e s , 1976: 131). T h e c o n s e q u e n c e s o f t h e s e c o m p a n y - a g a i n s t - c o m p a n y c r i m e s are less s e r i o u s t h a n w h e n c o n s u m e r s are t h e v i c t i m s . I t i s t h e latter t y p e of b r i b e r y w h i c h will be t h e c o n c e r n of this c h a p t e r .

Talking to executives about bribery
I had m o r e difficulty in g e t t i n g e x e c u t i v e s to talk a b o u t b r i b e r y t h a n any o t h e r s u b j e c t . T h e r e w e r e a c o u p l e o f s p e c t a c u l a r i n s t a n c e s o f b e i n g e v i c t e d from offices w h e n I p u s h e d t o o hard on this sensitive i s s u e . T h e first p r o b l e m w a s t h a t m o s t r e s p o n d e n t s g e n u i n e l y k n e w n o t h i n g about the subject. A quality assurance manager or medical d i r e c t o r in A u s t r a l i a or t h e U n i t e d S t a t e s typically leads a s h e l t e r e d life, m o v i n g from office to l a b o r a t o r y to office, with o c c a s i o n a l v e n t u r e s i n t o t h e m a n u f a c t u r i n g p l a n t . W h e n I tried to talk to t h e s e p e o p l e a b o u t b r i b e r y all I a c h i e v e d w a s a loss of r a p p o r t for t h e t h i n g s w h i c h t h e y c o u l d tell m e s o m e t h i n g a b o u t . E x p e r i e n c e t h e r e fore t a u g h t m e t o limit d i s c u s s i o n s o f b r i b e r y t o t o p m a n a g e m e n t , f i n a n c e , m a r k e t i n g a n d legal p e r s o n n e l . T h e p u b l i c r e l a t i o n s staff w e r e also n o t p a r t i c u l a r l y effusive o n t h e subject. E v e n w i t h i n this s e l e c t s u b s a m p l e I frequently d e c i d e d not to r a i s e t h e ugly issue lest a fragile r a p p o r t be s h a t t e r e d . In t h e early i n t e r v i e w s , t h e s u b j e c t w a s b r o a c h e d w i t h a s t a n d a r d line: 'I've read a lot in t h e n e w s p a p e r s a b o u t L o c k h e e d and b r i b i n g foreign g o v e r n m e n t officials. D o y o u t h i n k m a n y o f y o u r c o m p e t i t o r s i n the p h a r m a c e u t i c a l i n d u s t r y e n g a g e in t h a t sort of a c t i v i t y ? ' A n d I w o u l d get a fairly s t a n d a r d a n s w e r : ' T h e p h a r m a c e u t i c a l industry d e a l s with s e r v i n g t h e p u b l i c m o r e t h a n any o t h e r i n d u s t r y . W e ' r e i n t h e b u s i n e s s o f saving h u m a n lives, and t h a t leads t o h i g h e r ethical s t a n d a r d s t h a n y o u ' l l find i n any o t h e r i n d u s t r y . ' A l t e r n a t i v e l y : ' L o o k I w o n ' t d e n y t h a t t h e r e w a s a t i m e w h e n b r i b e r y did go o n , but n o t any m o r e , not t h e r e p u t a b l e c o m p a n i e s . ' E n d o f d i s c u s s i o n . So I followed a different a p p r o a c h , essentially a 'no b a b e in the w o o d s ' s t r a t e g y , i k n o w t h a t m o s t o f t h e major p h a r m a c e u t i c a l c o m p a n i e s , i n c l u d i n g y o u r o w n . h a v e d i s c l o s e d t o the S E C [Securit i e s and E x c h a n g e C o m m i s s i o n ] t h e m a k i n g o f c o r r u p t p a y m e n t s i n
13

Bribery m a n y p a r t s o f t h e w o r l d . I've s p o k e n t o p e o p l e a t the S E C w h o i n t e r v i e w c o m p a n i e s o n such m a t t e r s and they tell m e t h a t the p r a c t i c e s a r e still w i d e s p r e a d . W h y do large c o r p o r a t i o n s feel that t h e y h a v e to do this sort of t h i n g ? " In o t h e r w o r d s , "I'm no b a b e in t h e w o o d s . I k n o w y o u d o it, but w h y ? ' ' T h e a p p r o a c h almost never failed to elicit a l e n g t h y and r e v e a l i n g d i s c u s s i o n . A m o n g t h e 27 US e x e c u t i v e s on w h o m I tried t h e "no b a b e in t h e w o o d s ' a p p r o a c h , n o n e d e n i e d t h a t b r i b e r y had b e e n w i d e s p r e a d i n the past a m o n g A m e r i c a n p h a r m a c e u t i c a l c o m p a n i e s , and only 6 d e n i e d that b r i b e r y w a s still c o m m o n t o d a y a m o n g A m e r i c a n p h a r m a c e u t i c a l c o m p a n i e s . Of t h e 21 w h o felt t h a t b r i b e r y still w a s c o m m o n , h o w e v e r , only 1 felt t h a t it w a s as c o m m o n t o d a y as it had b e e n in t h e past. As we shall see later, t h e r e a r e g r o u n d s for s u s p e c t i n g that o n t h e l a t t e r p o i n t t h e o t h e r 2 0 e x e c u t i v e s may h a v e b e e n d e s c r i b i n g the situation accurately. T h e g r e a t a d v a n t a g e o f t h e "no b a b e i n the w o o d s ' a p p r o a c h was t h a t it g a v e r e s p o n d e n t s little to lose by s p e a k i n g truthfully. So long as 1 did n o t select an o v e r l y sensitive m a r k , I found that it did not e n g e n d e r aggression so much as respect: here was someone on w h o m t h e y w e r e not w a s t i n g their t i m e , s o m e o n e w h o k n e w a little a b o u t t h e s u b j e c t . T h e usual public r e l a t i o n s b l u r b w o u l d be a w a s t e of t i m e , a n d t h a n k G o d for that! R e l i e v e d of the b u r d e n of having to e x p r e s s t h e c o m p a n y l i n e , s o m e o f t h e m g e n u i n e l y enjoyed t h e rare o p p o r t u n i t y t o talk s e r i o u s l y a b o u t a d i l e m m a w h i c h t r o u b l e d t h e m w i t h a p e r s o n from o u t s i d e .

The extent of bribery
T h e offices o f t h e U S S e c u r i t i e s and E x c h a n g e C o m m i s s i o n ( S E C ) are g o l d m i n e s of information about "questionable p a y m e n t s ' by A m e r i c a n c o r p o r a t i o n s . V a l e r i e B r a i t h w a i t e and I spent a n u m b e r o f d a y s r e a d i n g and p h o t o c o p y i n g d o c u m e n t s i n the W a s h i n g t o n , N e w Y o r k a n d L o s A n g e l e s offices o f t h e S E C a s well a s i n t e r v i e w ing s e v e r a l officers. T h e m o s t c e n t r a l d o c u m e n t s relating t o each c o m p a n y a r e listed i n T a b l e 2.1 (p. 3 1 ) , but i n s o m e c a s e s t h e s e w e r e s u p p o r t e d b y a large n u m b e r o f a d d i t i o n a l c o m p a n y d o c u m e n t s . R e a d e r s m a y r e q u e s t further i n f o r m a t i o n a b o u t t h e s e d o c u m e n t s b y writing to me. T h e w e a l t h of i n f o r m a t i o n arises largely from the S E C ' s volunt a r y d i s c l o s u r e p r o g r a m m e . C o m p a n i e s which p a r t i c i p a t e d i n this p r o g r a m m e w e r e led t o u n d e r s t a n d that such p a r t i c i p a t i o n would
14

Bribery l e s s e n t h e l i k e l i h o o d t h a t t h e o v e r l o a d e d S E C staff w o u l d p r o c e e d w i t h e n f o r c e m e n t a c t i o n a g a i n s t t h e m . N o formal g u a r a n t e e against p r o s e c u t i o n was given, however. U n d e r the voluntary p r o g r a m m e , the c o m p a n y conducts a detailed investigation of corrupt payments by e m p l o y e e s u n d e r t h e a u s p i c e s of ' p e r s o n s not involved in the a c t i v i t i e s i n q u e s t i o n ' , and t h e n m a k e s a v a i l a b l e t o the S E C staff'all details c o n c e r n i n g the questionable practices uncovered' (Herlihy a n d L e v i n e , 1976: 5 8 5 ) . I n t h e p u b l i c d i s c l o s u r e s t h e S E C g e n e r a l l y a l l o w e d c o m p a n i e s t o p r o t e c t their b u s i n e s s c o n t a c t s b y d e s c r i b i n g e v e n t s w h i l e w i t h h o l d i n g t h e n a m e s o f t h e r e c i p i e n t s and the countries where corrupt payments were m a d e . A b o u t t h i r t y o t h e r c o m p a n i e s which S E C i n v e s t i g a t i o n found t o h a v e a p a r t i c u l a r l y bad r e c o r d on q u e s t i o n a b l e p a y m e n t s w e r e forced into c o n s e n t d e c r e e s . A m a j o r r e q u i r e m e n t of the c o n s e n t d e c r e e s w a s a n e x t r a o r d i n a r i l y d e t a i l e d d i s c l o s u r e o f the c i r c u m s t a n c e s s u r r o u n d i n g s u s p e c t e d c o r r u p t p a y m e n t s . I n e x c h a n g e for such d e t a i l e d d i s c l o s u r e and c e r t a i n r e f o r m s of the c h e c k s and b a l a n c e s w i t h i n t h e c o m p a n y for the p r e v e n t i o n o f b r i b e r y , t h e S E C a g r e e d n o t to p r o s e c u t e for any c r i m i n a l a c t i o n . To this end it is a g r e e d t h a t t h e d i s c l o s u r e s i n t h e c o n s e n t d e c r e e are not t o b e t r e a t e d as e v i d e n c e of any criminal act. As G e i s ( 1 9 7 9 : 23) has r e m a r k e d , t h e c o r p o r a t i o n in e s s e n c e says: T d i d n ' t do it, but I w o n ' t do it a g a i n . ' "Burglars m i g h t wish t h e y had it so g o o d ' , G e i s p l e a d s . I n e q u i t a b l e t h o u g h i t c e r t a i n l y is, t h e reality i s that t h e S E C d o e s n o t h a v e t h e r e s o u r c e s t o i n v e s t i g a t e every c o m p a n y s u s p e c t e d of b r i b e r y in t h e s a m e w a y as p o l i c e d e p a r t m e n t s are able to investig a t e m o s t o f f e n d e r s c a u g h t in t h e act of or s u s p e c t e d of b u r g l a r y . T h e v o l u n t a r y d i s c l o s u r e and c o n s e n t d e c r e e p r o g r a m m e s w e r e m e a n s o f m a k i n g t h e m o s t o f t h e s e limited r e s o u r c e s . T h e y a t least p e r m i t t e d a c r u d e c h e c k on the e x t e n t of c o r r u p t p a y m e n t s by all of t h e l a r g e s t A m e r i c a n c o r p o r a t i o n s . T h e S E C a t o n e t i m e looked a t t h e foreign b u s i n e s s p r a c t i c e s of all t h e F o r t u n e 500 c o m p a n i e s . R e s e a r c h e r s w h o h a v e e n g a g e d i n d e t a i l e d scrutiny o f t h e c o r r u p t i o n r e v e a l e d b y t h e S E C d i s c l o s u r e p r o g r a m m e s all a g r e e t h a t the p h a r m a c e u t i c a l i n d u s t r y is r e v e a l e d as h a v i n g o n e of t h e w o r s t records. Of t h e 32 i n d u s t r i e s t h a t spent m o r e t h a n SI million in i m p r o p e r o v e r s e a s p a y m e n t s , h a l f w e r e i n aircraft, oil, food and d r u g s . Seven were in d r u g s , which was the most c o m m o n (Clinard et al., 1979: 199). 15

Bribery . . . t h e t w o l a r g e s t identifiable g r o u p s w e r e drug m a n u f a c t u r e r s and c o m p a n i e s e n g a g e d i n p e t r o l e u m refining and r e l a t e d s e r v i c e s ( S E C , 1976). . . . t w e l v e [ p h a r m a c e u t i c a l ] c o m p a n i e s had m a d e v o l u n t a r y d i s c l o s u r e s , which w a s the h i g h e s t n u m b e r for any industry equal only to t h e oil i n d u s t r y ( K u g e l and G r u e n b e r g , 1977: 7 8 ) . It s e e m s t h a t c e r t a i n i n d u s t r i e s are p a r t i c u l a r l y p r o n e to e n g a g e in o v e r s e a s p a y m e n t s . H e a v y capital g o o d s i n d u s t r i e s , such a s a e r o s p a c e , a r m s , o r t h o s e i n d u s t r i e s that are closely r e g u l a t e d b y foreign g o v e r n m e n t a g e n c i e s , such a s p h a r m a c e u t i c a l c o m p a n i e s , a r e s u b j e c t to u n u s u a l l y h e a v y p r e s s u r e s for payoffs ( H e r l i h y and L e v i n e , 1976: 5 6 6 ) . S i m i l a r l y , K e n n e d y and S i m o n ( 1 9 7 8 ) , in a classification of c o m p a n i e s d i s c l o s i n g c o r r u p t p a y m e n t s a c c o r d i n g t o i n d u s t r y , found " d r u g s ' to t o p t h e list with 10 e n t r i e s . A d a m s and R o s e n t h a l ( 1 9 7 6 ) . in t h e i r b r e a k d o w n by i n d u s t r y , classified 22 u n d e r "drugs and h e a l t h c a r e " , m o r e t h a n i n any o t h e r c a t e g o r y . All o f t h e s e r e v i e w s u n d e r e s t i m a t e t h e p r o p o r t i o n o f d o c u m e n t e d d i s c l o s u r e s w h i c h are a t t r i b u t e d t o p h a r m a c e u t i c a l c o m p a n i e s . E i t h e r t h r o u g h less t h a n e x h a u s t i v e search of S E C files, or because the disclosures a p p e a r e d l a t e r t h a n t h e i r d e a d l i n e s for p u b l i c a t i o n , all t h e a b o v e reviews have m i s s e d a c o n s i d e r a b l e n u m b e r of s u b s t a n t i a l d i s c l o s u r e s by pharm a c e u t i c a l c o m p a n i e s . T a b l e 2. 1 lists d i s c l o s u r e s of q u e s t i o n a b l e p a y m e n t s m a d e by 29 pharmaceutical c o m p a n i e s . Of the 20 US c o m p a n i e s w i t h t h e highest w o r l d w i d e sales i n p h a r m a c e u t i c a l p r o d u c t s , 19 have disclosed substantial questionable payments. No o t h e r i n d u s t r y g r o u p has a n y t h i n g a p p r o a c h i n g this record o f d o c u mented corrupt payments. T h e q u a l i t a t i v e and q u a n t i t a t i v e e v i d e n c e p r e s e n t e d i n this c h a p t e r s u s t a i n s t h e c o n c l u s i o n t h a t t h e p h a r m a c e u t i c a l i n d u s t r y i s m o r e p r o n e t o b r i b e r y t h a n any o t h e r i n i n t e r n a t i o n a l b u s i n e s s . P o s s i b l y this i s b e c a u s e , like a e r o s p a c e c o m p a n i e s , p h a r m a c e u t i c a l firms deal with big win or lose s i t u a t i o n s t h e n e w billion d o l l a r p r o d u c t t o b e a p p r o v e d , the ten million d o l l a r h o s p i t a l s u p p l y c o n t r a c t t o b e w o n . M o r e o v e r , the m u l t i t u d e o f r e g u l a t o r y d e c i s i o n s t o w h i c h p h a r m a c e u t i c a l c o m p a n i e s are s u b j e c t e d c r e a t e s m a n y o p p o r t u n i t i e s for b u y i n g off r e g u l a t o r s . T h e c o m p a n y a m o n g t h e t o p 2 0 U S p h a r m a c e u t i c a l firms which did not d i s c l o s e any q u e s t i o n a b l e p a y m e n t s w a s Eli Lilly. The amounts involved in corrupt payments disclosed by

16

Bribery p h a r m a c e u t i c a l c o m p a n i e s are s t a g g e r i n g especially c o n s i d e r i n g t h a t m a n y of t h e s e a m o u n t s do not consist of o n e or t w o huge p a y m e n t s . A u s t r a l i a n e x e c u t i v e s told m e t h a t i n s o m e A s i a n c o u n t r i e s d r u g r e g i s t r a t i o n s c o u l d be s e c u r e d for quite small c o r r u p t p a y m e n t s . "Slip t h e m $100 and y o u ' r e r i g h t , ' a s one e x p l a i n e d . I n c l u d e d in t h e m i l l i o n s of d o l l a r s d i s c l o s e d by m a n y of the c o m p a n i e s might be some hundreds or t h o u s a n d s of bribes. T h e c o r r u p t i o n often r e a c h e s t h e h i g h e s t levels o f g o v e r n m e n t . T h e following i n c i d e n t ( w h i c h d o e s not a p p e a r i n t h e S E C disc l o s u r e d o c u m e n t s ) w a s r e p o r t e d in the New York Times. In Italy, according to a former c o m p a n y executive w h o worked t h e r e for y e a r s , a d o z e n d r u g m a n u f a c t u r e r s , i n c l u d i n g s o m e A m e r i c a n c o m p a n i e s , o n c e b a n d e d t o g e t h e r t o back a n industrys p o n s o r e d bill in t h e Italian P a r l i a m e n t t h a t w o u l d have allowed m a n u f a c t u r e r s to sell their n o n p r e s c r i p t i o n p r o d u c t s in s u p e r m a r k e t s a n d o t h e r retail o u t l e t s . T h e r e , they would n o l o n g e r b e s u b j e c t t o price c o n t r o l . The c o m p a n i e s were assessed $80,000 each, according to the s o u r c e , w i t h t h e $1 million to be put into a war chest o f t h e Christian Democratic Party. T h e G o v e r n m e n t fell before the bill could be e n a c t e d , and it c o u l d not b e d e t e r m i n e d definitely w h e t h e r the m o n e y actually c h a n g e d h a n d s . B u t t h e i n f o r m a n t said it ' u n d o u b t e d l y had' (New York Times, 21 M a r c h , 1976). L e t u s n o w r e v i e w t h e d i s c l o s u r e s m a d e b y t h e largest c o m p a n i e s .

Merck & Co.
US r a n k in p h a r m a c e u t i c a l sales: 1. S o m e o f t h e e x e c u t i v e s w h o i n i n t e r v i e w e x p r e s s e d a worldly-wise a b s e n c e o f s u r p r i s e a t t h e e v i d e n c e o f w i d e s p r e a d bribing o f h e a l t h officials b y p h a r m a c e u t i c a l c o m p a n i e s w e r e n e v e r t h e l e s s s h o c k e d t o find M e r c k a m o n g t h o s e c o m p a n i e s with t h e worst r e c o r d s o f q u e s t i o n a b l e p a y m e n t s . M e r c k , like Lilly, is a c o m p a n y frequently held up by p e o p l e in t h e i n d u s t r y as a m o d e l of e x c e l l e n c e in quality and a p a r a g o n o f p r o p r i e t y . W h e n I a s k e d e x e c u t i v e s from o t h e r c o m p a n i e s w h e r e I s h o u l d go to learn a b o u t effective self-regulatory s y s t e m s , I w o u l d be told ' G o to M e r c k ' or ' G o to Lilly'. M e r c k has r e p o r t e d $3.6 million in q u e s t i o n a b l e p a y m e n t s in 39
17

Bribery foreign c o u n t r i e s , S2.3 million of it to third p a r t i e s w h o 'may have p a s s e d m o n e y o n t o g o v e r n m e n t e m p l o y e e s ' . M e r c k w a s o n e o f the few c o m p a n i e s w h i c h d i s c l o s e d p a y m e n t to a c a b i n e t - l e v e l official. N e i t h e r t h e n a m e o f t h e p e r s o n nor t h e c o u n t r y w a s specified, but the a m o u n t was $12,500. In one country, in which it was customary 'not t o a c k n o w l e d g e o r disclose c o r p o r a t e political c o n t r i b u t i o n s ' , the c o m p a n y admits that some contributions 'were made through t h e C o m p a n y ' s Swiss s u b s i d i a r y [ M e r c k , S h a r p e & D o h m e A . G . ] and recorded as promotional expenses'. M e r c k c l a i m e d its q u e s t i o n a b l e p a y m e n t s a s tax d e d u c t i o n s and c o n s e q u e n t l y has a g r e e d t o pay the U S I n t e r n a l R e v e n u e Service a d d i t i o n a l tax o f $ 2 6 4 , 0 0 0 . T h e I R S , h o w e v e r , i s c o n t i n u i n g investig a t i o n s for f u r t h e r v i o l a t i o n s o f t h e I n t e r n a l R e v e n u e C o d e . T h e c o r p o r a t i o n b l a m e d its a u d i t o r for failing to follow up on i n f o r m a t i o n a b o u t t h e q u e s t i o n a b l e p a y m e n t s . A special c o m m i t t e e of o u t s i d e e x p e r t s set up by t h e M e r c k b o a r d to i n v e s t i g a t e t h e m a t t e r c r i t i c i s e d t h e c h a i r m a n o f t h e b o a r d for i g n o r i n g w a r n i n g signals. The M e r c k p a y m e n t s were therefore notable in that there w a s e v i d e n c e o f t h e seniority o f b o t h r e c i p i e n t s and c o m p a n y officials w h o had t h e k n o w l e d g e to p u t a s t o p to t h e b u s i n e s s . T h e c o m m i t t e e r e a c h e d t h e following c o n c l u s i o n s a b o u t its c h a i r m a n a n d c h i e f e x e c u t i v e officer, H e n r y W . G a d s d e n . M r G a d s d e n w a s a w a r e t h a t p a y m e n t s o f t h e kind u n d e r investigation were rather c o m m o n in the conduct of business in s o m e foreign c o u n t r i e s , but stated t h a t p r i o r t o t h e i n v e s t i g a t i o n he did not b e l i e v e t h a t t h e C o m p a n y or its e m p l o y e e s w e r e i n v o l v e d in any such p a y m e n t s , e x c e p t for m i n o r g r a t u i t i e s . B a s e d on all t h e e v i d e n c e it r e c e i v e d d u r i n g t h e c o u r s e of the i n v e s t i g a t i o n , t h e C o m m i t t e e b e l i e v e s this i s a n a c c u r a t e s t a t e m e n t . The C o m m i t t e e was advised, however, that in two i n s t a n c e s p o s s i b l e w a r n i n g signals may h a v e b e e n s o u n d e d i n M r G a d s d e n ' s p r e s e n c e w h i c h could h a v e p r o m p t e d him t o p r o b e into t h e m a t t e r s n o w i n q u e s t i o n . M r G a d s d e n did not recall one o f t h e s e i n c i d e n t s . H e did not p u r s u e t h e s e c o n d which o c c u r r e d in A p r i l 1 9 7 5 ; h o w e v e r , he w a s i n f o r m e d at that t i m e t h a t line e x e c u t i v e s had g i v e n a s s u r a n c e t h e r e w e r e and w o u l d b e n o p r o b l e m s o f this n a t u r e a t M e r c k . M r G a d s d e n w a s a w a r e o f and a p p r o v e d t h e m a k i n g of a s u b s t a n t i a l foreign political c o n t r i b u t i o n , d i r e c t i n g t h a t t h e c o n t r i b u t i o n be m a d e only if it w a s legal to do so. 18

Bribery T h e c o m m i t t e e also r e a c h e d t h e s e c o n c l u s i o n s a b o u t R a y m o n d E . S n y d e r ( E x e c u t i v e Vice P r e s i d e n t , A d m i n i s t r a t i o n ) : Mr S n y d e r s t a t e d t h a t he w a s not i n v o l v e d in the a u t h o r i z a t i o n , a p p r o v a l o r r e c o r d i n g o f any o f the i m p r o p e r p a y m e n t s t o foreign g o v e r n m e n t e m p l o y e e s . F u r t h e r m o r e , h e stated that a l t h o u g h h e b e l i e v e d t h e C o m p a n y ' s foreign s u b s i d i a r i e s c o n f o r m e d to a g e n e r a l i n d u s t r y p r a c t i c e i n s o m e foreign c o u n t r i e s o f m a k i n g p a y m e n t s of m o d e s t s u m s of this t y p e , he k n e w of no specific major disbursement or improper documentation. There were r e c o l l e c t i o n s a m o n g o t h e r s i n t e r v i e w e d that [there w e r e ] o n s e v e r a l o c c a s i o n s t r a n s a c t i o n s i n v o l v i n g possible i m p r o p e r p a y m e n t s by foreign s u b s i d i a r i e s . . . [ a n d ] no c o r r e c t i v e s t e p s w e r e t a k e n a t t h a t t i m e . M r S n y d e r did not r e m e m b e r such specific d i s c u s s i o n s p r i o r to t h e w i d e publicity given to such g e n e r a l i n d u s t r y p r a c t i c e s in 1975, a l t h o u g h he t h o u g h t it p o s s i b l e t h a t s o m e such t r a n s a c t i o n s may h a v e b e e n involved i n r e v i e w s o f a n u m b e r of u n u s u a l a c c o u n t i n g i t e m s , i n c l u d i n g p a y m e n t s for w h i c h d o c u m e n t a t i o n did not a p p e a r t o b e c o m p l e t e . The c o m m i t t e e drew three general conclusions as to the nature and d e g r e e o f m a n a g e m e n t ' s a w a r e n e s s o f t h e p a y m e n t s and p r a c tices under investigation: (i) t h e r e w a s a n a t m o s p h e r e o f a c c e p t a n c e c r e a t e d b y t h o s e r e s p o n s i b l e for d i r e c t i n g and s u p e r v i s i n g the i n t e r n a t i o n a l and t h e financial affairs o f t h e C o m p a n y ; (ii) t h e r e w a s an effort by i n t e r n a t i o n a l line and c o n t r o l l e r p e r s o n n e l to k e e p d e t a i l s with r e s p e c t to such p a y m e n t s from c o m i n g to top m a n a g e m e n t attention on the assumption that, d e s p i t e t h e a t m o s p h e r e o f a c c e p t a n c e , t o p m a n a g e m e n t did not want to be involved; (iii) t h e r e w a s an a b s e n c e of effective p r o b i n g by t o p m a n a g e m e n t , d e s p i t e s o m e i n d i c a t i o n s t h a t such p r o b i n g w a s i n order. I n t h e s t a t e m e n t s t o t h e S E C , M e r c k e x c u s e d t h e b e h a v i o u r o f its p e r s o n n e l b y p o i n t i n g o u t that: T h e s e p a y m e n t s w e r e m a d e b e c a u s e t h e e m p l o y e e s involved g e n e r a l l y b e l i e v e d t h a t i) t h e y w e r e b e i n g p r e s s u r e d by foreign g o v e r n m e n t e m p l o y e e s t o m a k e such p a y m e n t s , ii) m a n a g e m e n t 19

Bribery a c c e p t e d t h e s e p r a c t i c e s as n e c e s s a r y to a c h i e v e sales goals in s o m e c o u n t r i e s a b r o a d , and iii) t h e y w e r e acting in t h e best interests of the C o m p a n y .

American Home Products
US r a n k in p h a r m a c e u t i c a l sales: 2 A m e r i c a n H o m e P r o d u c t s is a much larger company than Merck, b u t s m a l l e r in p h a r m a c e u t i c a l s , only 39 p e r cent of its sales being of d r u g s ( G e r e f f i . 1979: 13). A total of S3.4 million in q u e s t i o n a b l e p a y m e n t s w a s m a d e in 41 different c o u n t r i e s . A p p r o v a l s for g o v e r n m e n t p u r c h a s e s w o r t h S40.5 million w e r e o b t a i n e d b e t w e e n 1971 a n d 1975 by p a y i n g g o v e r n m e n t officials a c o m m i s s i o n r a n g i n g b e t w e e n 1 per c e n t and 15 p e r cent of the value of the sale. O t h e r p a y m e n t s w e r e m a d e "to o b t a i n action o n n e c e s s a r y g o v e r n m e n t c l e a r a n c e s ' . A m e r i c a n H o m e P r o d u c t s disclosed that: N o n - c o m m i s s i o n type p a y m e n t s were m a d e in a n u m b e r of c o u n t r i e s t o foreign g o v e r n m e n t e m p l o y e e s primarily i n c o n n e c t i o n with the granting of required g o v e r n m e n t a p p r o v a l s . . . . T h e t o t a l s do not i n c l u d e o c c a s i o n a l n o m i n a l g r a t u i t i e s and tips t o p e r s o n s p e r f o r m i n g r o u t i n e m i n i s t e r i a l d u t i e s (8K form l o d g e d with S E C : F e b . 7 6 : 4 ) . In a d d i t i o n to t h e a b o v e , t h e c o m p a n y a d m i t t e d to a legal charita b l e c o n t r i b u t i o n of $ 3 8 , 0 0 0 for an ' e s s e n t i a l l y political p u r p o s e " w h i c h w a s f a v o u r e d by a high g o v e r n m e n t official. A t t e n t i o n is d r a w n to this only to s h o w s o m e of t h e a c t i v i t i e s which are e x c l u d e d from t h e a g g r e g a t e f i g u r e s o n q u e s t i o n a b l e p a y m e n t s r e p o r t e d h e r e .

Warner-Lambert
US r a n k in p h a r m a c e u t i c a l s a l e s : 3 W a r n e r - L a m b e r t and its s u b s i d i a r y P a r k e - D a v i s disclosed S2.6 m i l l i o n in q u e s t i o n a b l e p a y m e n t s in 14 c o u n t r i e s . A bank a c c o u n t n o t o n t h e c o r p o r a t e b o o k s w a s used t o pay c o m m i s s i o n s o n g o v e r n m e n t sales i n s o m e c a s e s , w h i l e o t h e r c o m m i s s i o n s w e r e b o o k e d a s m a r k e t i n g e x p e n s e s . E r r o n e o u s tax d e d u c t i o n s from t h e s e paym e n t s w e r e m a d e t o t h e point w h e r e t h e c o m p a n y w a s obliged t o pay $ 3 2 5 , 8 3 9 i n a d d i t i o n a l t a x . T u c k e d a w a y i n t h e d o c u m e n t s l o d g e d with t h e S E C i s the a d m i s sion t h a t p a y m e n t s w e r e m a d e t o get n e w p r o d u c t s a p p r o v e d for 20

Bribery m a r k e t i n g : ' O t h e r p a y m e n t s w e r e m a d e t o foreign g o v e r n m e n t e m p l o y e e s to e x p e d i t e a variety of g o v e r n m e n t a l a c t i o n s with r e s p e c t t o p r i c e s , p r o d u c t r e g i s t r a t i o n s , d i v i d e n d s , t a x e s , and o t h e r m a t t e r s . ' (8K: M a r . 7 6 ) .

Pfizer
US r a n k in p h a r m a c e u t i c a l sales: 4 C o m p a r e d w i t h t h e t h r e e largest c o m p a n i e s . Pfizer disclosed t h e r e l a t i v e l y m o d e r a t e total o f $ 2 6 4 , 0 0 0 i n p a y m e n t s t o g o v e r n m e n t e m p l o y e e s i n t h r e e c o u n t r i e s . A n a d d i t i o n a l p a y m e n t o f $22,500 h a d b e e n m a d e t o a foreign t r a d e a s s o c i a t i o n 'which p a y m e n t had b e e n solicited with t h e i n d i c a t i o n t h a t it w o u l d be used to m a k e c o n t r i b u t i o n s to v a r i o u s political p a r t i e s in that foreign country". Pfizer also said t h a t it paid a further $ 2 1 , 0 0 0 as a 'professional fee', ' t h e r e c i p i e n t o f w h i c h i n d i c a t e d s o m e p o r t i o n m i g h t b e used t o m a k e a p a y m e n t t o foreign g o v e r n m e n t e m p l o y e s [sic]' (8K: M a r , 76).

Upjohn
US r a n k in p h a r m a c e u t i c a l sales: 6 U p j o h n has d i s c l o s e d t h e s e c o n d largest a m o u n t o f q u e s t i o n a b l e p a y m e n t s - an a g g r e g a t e of $4.2 million. An initial d i s c l o s u r e of $2.7 m i l l i o n in 22 c o u n t r i e s w a s soon followed by an a d m i s s i o n that e v i d e n c e for t h e l a r g e r sum of $4.2 million in 29 c o u n t r i e s w a s a v a i l a b l e . A n u n u s u a l e l e m e n t i n U p j o h n ' s d i s c l o s u r e i s the large s u m w h i c h i s c o n c e d e d a s h a v i n g b e e n paid t o n o n - g o v e r n m e n t hospital e m p l o y e e s - $474,000. No outside directors knew o f t h e p a y m e n t s but i n s i d e d i r e c t o r s e i t h e r k n e w o f t h e p a y m e n t s o r actually approved them.

Squibb
US r a n k in p h a r m a c e u t i c a l sales: 7 T h e d o c u m e n t e d h i s t o r y o f b r i b e r y w i t h S q u i b b goes back further than with most of the transnational pharmaceutical corporations. D u r i n g t h e 1960s S q u i b b w a s a s u b s i d i a r y of t h e O l i n M a t h i e s o n C h e m i c a l C o r p o r a t i o n . T h e illegal p a y m e n t s c o n c e r n e d $1.5 m i l l i o n w o r t h o f a n t i b i o t i c s m a n u f a c t u r e d b y S q u i b b and sent t o C a m b o d i a a n d V i e t n a m b e t w e e n 1958 and 1963 u n d e r t h e U S
21

Bribery f o r e i g n aid p r o g r a m m e . I t w a s s h o w n t h a t the c o m p a n y ' s a g e n t had p a i d b e t w e e n $ 3 0 , 0 0 0 and $ 4 0 , 0 0 0 into a Swiss a c c o u n t for the benefit of a Dr A r n a u d . t h e major s h a r e h o l d e r in a C a m b o d i a n drug-importing firm. The a g e n t , the Phillip B a u e r C o . of N e w York, was convicted on 29 c o u n t s and fined a total of $ 2 9 , 0 0 0 . On 28 O c t o b e r , 1966 the U n i t e d S t a t e s C o u r t o f A p p e a l s affirmed t h e c o n v i c t i o n s . U S foreign aid r e g u l a t i o n s p r o h i b i t c o m m i s s i o n s and p r o m o t i o n a l a l l o w a n c e s to i m p o r t e r s for p l u g g i n g b r a n d n a m e s , and for o t h e r i m p r o p e r benefits i n c l u d i n g k i c k b a c k s . After p r o t r a c t e d legal conflict O l i n p l e a d e d guilty to c o n s p i r a c y to m a k e false certificat i o n s a n d d e f r a u d t h e U n i t e d S t a t e s , plus t w o o t h e r c o u n t s . A l s o c o n v i c t e d o f c o n s p i r a c y w e r e H e r b e r t G . Wolf. O l i n ' s former r e g i o n a l v i c e - p r e s i d e n t i n H o n g K o n g and the F a r E a s t Intern a t i o n a l C o r p . , o f w h i c h W o l f s wife w a s p r e s i d e n t and sole stockh o l d e r . T h e f o r m e r w a s fined $ 7 , 5 0 0 , t h e l a t t e r $ 2 1 , 0 0 0 .
4

O n 2 3 S e p t e m b e r , 1965 O l i n r e c e i v e d t h e m a x i m u m s e n t e n c e o f $ 1 0 , 0 0 0 o n e a c h c o u n t . M i n t z ( 1 9 6 7 ) has p r o v i d e d a m o r e c o m p l e t e a c c o u n t of this legal b a t t l e . He also d e s c r i b e s one i n t e r e s t i n g sidelight o f O l i n ' s c o n v i c t i o n . It h a p p e n e d t h a t t h e r e w a s a law w h i c h said in e s s e n c e t h a t a p e r s o n w h o had b e e n c o n v i c t e d of a felony could not t r a n s p o r t a w e a p o n in i n t e r s t a t e c o m m e r c e . T h i s c r e a t e d a legal p r o b l e m for O l i n , b e c a u s e it had b e e n c o n v i c t e d o f a felony, w a s in the e y e s of t h e law a p e r s o n a n d had a division t h a t m a d e w e a p o n s for use by the a r m e d forces. C o n g r e s s resolved the dilemma by enacting a law t h a t , in effect, got O l i n off t h e h o o k ( M i n t z , 1967: 3 8 3 j ) . In 1976 S q u i b b , h a v i n g cut its ties w i t h O l i n . disclosed q u e s t i o n a b l e p a y m e n t s of $1.9 million in 8 c o u n t r i e s b e t w e e n 1971 and 1976.

Bristol-Myers
US r a n k in p h a r m a c e u t i c a l sales: 8 Bristol-Myers have disclosed $3.0 m i l l i o n in questionable paym e n t s . A n i n v e s t i g a t i o n c o m m i t t e e a p p o i n t e d b y the B r i s t o l - M y e r s b o a r d p r o v i d e s s o m e i n t e r e s t i n g insights i n its r e p o r t a b o u t h o w t h e p a y m e n t s , which were generally made in cash, were concealed. T h e c a s h w a s g e n e r a t e d in t w o p r i n c i p a l w a y s : a third party would s u b m i t a false i n v o i c e for s e r v i c e s not actually r e n d e r e d , r e c e i v e

22

Bribery p a y m e n t , r e t a i n a p o r t i o n to c o v e r tax liability and p e r h a p s c o m p e n s a t i o n , and d e l i v e r t h e b a l a n c e in cash e i t h e r back to a C o m p a n y r e p r e s e n t a t i v e or to t h e i n t e n d e d b e n e f i c i a r y ; or a C o m p a n y check would be drawn to an individual employee who w o u l d h a v e it c a s h e d . In a few i n s t a n c e s a C o m p a n y c h e c k d r a w n to t h e o r d e r of a C o m p a n y e m p l o y e e w a s d e p o s i t e d in that e m p l o y e e ' s personal bank account. The e m p l o y e e thereafter d r e w funds from his a c c o u n t for t h e p u r p o s e of m a k i n g p a y m e n t s to a g o v e r n m e n t official or his i n t e r m e d i a r y . T h e t r a n s f e r s of funds involved w e r e all r e c o r d e d in the C o m p a n y ' s b o o k s , but t h e e n t r i e s did not fully disclose the u n d e r l y i n g n a t u r e o f t h e t r a n s a c t i o n s . C o m m i s s i o n s paid t o c o m m i s s i o n a g e n t s w e r e a c c u r a t e l y r e c o r d e d i n the C o m p a n y ' s b o o k s , but t h e e n t r i e s did not disclose t h o s e i n s t a n c e s in w h i c h it w a s a s s u m e d t h a t a p o r t i o n of t h e c o m m i s s i o n w o u l d u l t i m a t e l y go to a g o v e r n m e n t official (8K: A u g 7 6 ) . T h e i n v e s t i g a t i o n c o n c l u d e d t h a t n o m e m b e r o f the b o a r d o f d i r e c t o r s , e m p l o y e e or n o n - e m p l o y e e , knew that payments were being made. H o w e v e r , A t I n t e r n a t i o n a l D i v i s i o n h e a d q u a r t e r s i n N e w Y o r k and R o m e , e x e c u t i v e s i n c l u d i n g financial p e r s o n n e l had varying d e g r e e s o f k n o w l e d g e o f t h e m a k i n g o f p a y m e n t s t o o b t a i n sales and o f facilitating p a y m e n t s . I n t h o s e c o u n t r i e s w h e r e p a y m e n t s w e r e m a d e , t h e g e n e r a l m a n a g e r s w e r e a w a r e o f and a u t h o r i z e d t h e m a k i n g o f t h e p a y m e n t s . A r e a vice p r e s i d e n t s and r e g i o n a l d i r e c t o r s g e n e r a l l y had s o m e k n o w l e d g e o f p a y m e n t s m a d e i n t h e i r t e r r i t o r i e s (8K: A u g 7 6 ) . T h e c o m m i t t e e r e p o r t e d o n the following d e c i s i o n o f t h e B r i s t o l M y e r s B o a r d , a d e c i s i o n w h i c h t h e S E C w a s a p p a r e n t l y willing t o accept. W h i l e this investigation was u n d e r w a y , the B o a r d was informed t h a t p a y m e n t s o f a p p r o x i m a t e l y S148,(KX) w e r e c o n t e m p l a t e d i n four c o u n t r i e s w h e r e t h e g e n e r a l m a n a g e r s b e l i e v e d that the failure t o m e e t ' p r i o r c o m m i t m e n t s ' i n c o n n e c t i o n with past sales w o u l d p l a c e e m p l o y e e s i n d a n g e r o f physical h a r m . T h e B o a r d , after i n q u i r y , d e c i d e d t h a t this c o n c e r n o f t h e local m a n a g e r s w a s r e a s o n a b l e and a c q u i e s c e d i n p a y m e n t s not t o e x c e e d t h e f o r e g o i n g a m o u n t . T h e s e p a y m e n t s are i n c l u d e d i n the f i g u r e s g i v e n e a r l i e r i n this r e p o r t (8K: A u g 7 6 ) . 23

Bribery

Schering-Plough
US r a n k in p h a r m a c e u t i c a l sales: 9 S c h e r i n g - P l o u g h r e p o r t e d q u e s t i o n a b l e p a y m e n t s o f $1.1 million b e t w e e n 1971 and 1976. E a r l y d i s c l o s u r e s of $0.8 million had to be s u p p l e m e n t e d in 1977 with further r e v e l a t i o n s . T h e s e i n c l u d e d explicit reference to p a y m e n t s to secure product registrations: 2 . I n a n o t h e r foreign c o u n t r y , p a y m e n t s o f a p p r o x i m a t e l y $ 2 2 0 , 0 0 0 w e r e m a d e d u r i n g t h e y e a r s 1972 t h r o u g h 1976 to private consultants engaged to secure product registrations, or r e n e w a l s thereof, i n t h a t c o u n t r y . I n a d d i t i o n , i n t h a t s a m e c o u n t r y , p a y m e n t s t o t a l l i n g a p p r o x i m a t e l y $ 17,000 w e r e m a d e in the y e a r s 1972, 1975 and 1976 to c o n s u l t a n t s e n g a g e d to settle p r o p o s e d i n c o m e t a x a s s e s s m e n t s . S e n i o r m a n a g e m e n t has b e e n a d v i s e d t h a t all or a p o r t i o n of t h e a f o r e s a i d p a y m e n t s may have b e e n p a s s e d on to p u b l i c officials r e s p o n s i b l e for p r o c e s s i n g the r e g i s t r a t i o n s or tax a s s e s s m e n t s a l t h o u g h it has no direct k n o w l e d g e o f any such p a y m e n t s . 3 . I n a n o t h e r foreign c o u n t r y , p a y m e n t s i n the a m o u n t o f a p p r o x i m a t e l y $ 3 7 , 0 0 0 w e r e m a d e d u r i n g t h e y e a r s 1972 t h r o u g h 1976, in c o n n e c t i o n with a p p l i c a t i o n s for p r o d u c t r e g i s t r a t i o n s in that c o u n t r y , to individuals who w e r e part-time consultants to a g o v e r n m e n t a g e n c y r e s p o n s i b l e for issuing such r e g i s t r a t i o n s (8K: A p r , 77).

Companies not ranked in the top 20
R a t h e r t h a n e x h a u s t i v e l y list the m i s d e e d s of all of the s m a l l e r t r a n s n a t i o n a l s , only four of the m o r e r e v e a l i n g case s t u d i e s will be discussed: those of the A m e r i c a n Hospital Supply C o r p o r a t i o n , R o r e r - A m c h e n , S y n t e x and M e d t r o n i c .

American Hospital Supply Corporation
A m e r i c a n H o s p i t a l S u p p l y ( A H S ) , a r e l a t i v e l y small c o r p o r a t i o n c o m p a r e d w i t h s o m e o f t h o s e a b o v e ( c o n s o l i d a t e d net e a r n i n g s for five y e a r s to J u n e 1976 w e r e $208 m i l l i o n ) , s u r p a s s e d all o t h e r p h a r m a c e u t i c a l c o m p a n i e s with questionable p a y m e n t s a m o u n t i n g to a s t a g g e r i n g $ 5 . 8 million. T h i s figure d o e s not i n c l u d e q u e s t i o n a b l e p a y m e n t s b y c o m p a n i e s i n w h i c h A H S has m i n o r i t y i n t e r e s t s ( u p t o 5 0 p e r c e n t ) . I t w a s c o n c e d e d that A H S ' h a s b e e n only
24

Bribery p a r t i a l l y successful in i n d u c i n g t h e s e foreign c o m p a n i e s to c o r r e c t p r a c t i c e s w h i c h v i o l a t e its P o l i c i e s ' . A H S specialises i n c o n t r a c t s t o s u p p l y h o s p i t a l s w i t h a w i d e r a n g e of r e q u i r e m e n t s from syringes to drugs. T h e A H S p a y m e n t s w e r e t h e subject o f a n S E C c o n s e n t d e c r e e , w h i c h , a m o n g o t h e r t h i n g s , m a n d a t e d a hefty a u d i t c o m m i t t e e r e p o r t i n t o t h e i n t e r n a l affairs o f t h e c o r p o r a t i o n . T h e a u d i t c o m m i t t e e r e p o r t o f 2 5 F e b r u a r y 1977 r e v e a l e d that q u e s t i o n a b l e p a y m e n t s , mainly c o m m i s s i o n s t o hospital a d m i n i s t r a t o r s who gave the c o m p a n y c o n t r a c t s , were m a d e in Australia. Austria, Belgium, Brazil, Chile, France, G r e e c e , Guatemala, India, Iran, Israel, Italy, Japan, Mexico, Norway, Peru, P h i l i p p i n e s , Q a t a r , S a u d i A r a b i a , S o u t h K o r e a , S p a i n , T u r k e y and V e n e z u e l a . M a n y o f t h e p a y m e n t s d i r e c t e d t o i n d i v i d u a l s i n these c o u n t r i e s w e r e l a u n d e r e d t h r o u g h Swiss b a n k a c c o u n t s . O t h e r intermediaries t h r o u g h w h i c h funds p a s s e d included public r e l a t i o n s c o n s u l t a n t s , law firms and an a r c h i t e c t u r a l firm o w n e d by hospital board m e m b e r s .

King

Faisal

Specialist

Hospital

T h e w o r s t a l l e g a t i o n set d o w n in t h e c o n s e n t d e c r e e c o n c e r n e d a m a j o r p r o j e c t t o e q u i p t h e n e w K i n g Faisal Specialist H o s p i t a l a t R i y a d h , S a u d i A r a b i a , b e t w e e n 1972 and 1976. T h e c o n s e n t o r d e r a l l e g e s t h a t S4.6 million w a s p a i d , mostly t h r o u g h a L i e c h t e n s t e i n t r u s t , 'for t h e benefit o f p e r s o n s i n c h a r g e o f t h e p r o j e c t , p e r s o n s i n a n affected M i n i s t r y o f t h e S a u d i g o v e r n m e n t and p e r s o n s o f p o w e r and i n f l u e n c e with t h e Saudi g o v e r n m e n t ' . T h e c o n s e n t d e c r e e p r o v i d e s a fascinating illustration of h o w the b o a r d of d i r e c t o r s can be p r o t e c t e d from t h e taint of k n o w l e d g e e v e n in a r e l a t i v e l y small c o m p a n y w h i c h is d i s p o s i n g of a very large amount of money. A p r o - f o r m a financial e a r n i n g s s t a t e m e n t p r o j e c t e d for t h e H o s p i t a l c o n t r a c t , i n c l u d i n g a n e x p e n s e item identified a s ' C o m m i s s i o n s - SI,506[,000],' was submitted to A m e r i c a n H o s p i t a l ' s board of directors by m a n a g e m e n t at the time board a p p r o v a l for t h e e q u i p p i n g c o n t r a c t w a s s o u g h t . A l t h o u g h A m e r i c a n H o s p i t a l policy r e q u i r e d b o a r d a p p r o v a l o f all c o n s u l t i n g a g r e e m e n t s t h a t e x c e e d e d $ 2 5 , 0 0 0 i n fees, n o b o a r d a p p r o v a l to e n t e r i n t o fee or c o m m i s s i o n a r r a n g e m e n t s in
25

Bribery c o n n e c t i o n w i t h t h e subject c o n t r a c t w a s sought o r o b t a i n e d b y m a n a g e m e n t . A m e r i c a n Hospital maintains that the personnel w o r k i n g on t h e p r o p o s e d c o n t r a c t failed to inform t h e highest c o r p o r a t e officers and d i r e c t o r s o f A m e r i c a n H o s p i t a l o f t h e m a t t e r a l l e g e d i n P a r a g r a p h 1 1 h e r e i n a b o v e (p. 4 ) . A p a r t from its H o s p i t a l D e v e l o p m e n t E x p e n s e s , the t e r m used by A H S to d e s c r i b e p a y m e n t s to h o s p i t a l officials to secure sales of their p r o d u c t s , many o t h e r types of questionable payments were m e n t i o n e d in the report of the audit c o m m i t t e e .

Union

payments"

In 1973 a n d 1974, A H S / M e x i c o r e l o c a t e d a factory to a n o t h e r m a j o r city r e s u l t i n g in a layoff of w o r k e r s in its f o r m e r l o c a t i o n . In c o n j u n c t i o n with t h a t r e l o c a t i o n , A H S / M e x i c o paid $21,600 i n c a s h to u n i o n officials to p e r s u a d e t h e m to p r e v e n t strikes or d e m a n d s b y u n i o n m e m b e r s for h i g h e r s e v e r a n c e pay. T h e s e p a y m e n t s , a c c o r d i n g t o A H S / M e x i c o officials, w e r e essentially b r i b e s t o u n i o n officials r a t h e r t h a n p a y m e n t s going t o the u n i o n to benefit t h e u n i o n as a w h o l e ( p p . 4 3 - 4 ) . I t w o u l d a p p e a r t h a t tax i m p l i c a t i o n s o f A H S ' s u n i o n p a y m e n t s w e r e a s o u r c e o f g r e a t e r c o n c e r n t h a n their p r o p r i e t y . In J u l y 1976 a w a r e h o u s e e m p l o y e e of A H S / M e x i c o w a s fired. The e m p l o y e e p e r s u a d e d a union to picket the w a r e h o u s e in p r o t e s t of his firing. In o r d e r to e n d t h e p i c k e t i n g , the p e r s o n n e l m a n a g e r o f A H S / M e x i c o n e g o t i a t e d with the u n i o n official i n c h a r g e of t h e p i c k e t s . T h a t u n i o n official offered to s t o p t h e p i c k e t i n g in r e t u r n for a cash p a y m e n t to him. T h e A H S / M e x i c o p e r s o n n e l m a n a g e r refused t o m a k e t h e d i r e c t p a y m e n t i n cash b u t m a d e a $ 6 0 0 p a y m e n t to t h e p i c k e t i n g u n i o n in t h e form of a c h e c k m a d e p a y a b l e to t h e u n i o n in r e t u r n for a receipt from the u n i o n so t h a t t h e p a y m e n t could be d e d u c t e d for tax p u r p o s e s . T h e r e c e i p t did not m e e t all t h e r e q u i r e m e n t s of M e x i c a n tax law and A H S / M e x i c o ' s i n d e p e n d e n t accountants determined it to be a nondeductible expense (pp. 45-6).

Payments The 26

to

physicians offered personal financial

c o n s e n t d e c r e e alleges that A H S

Bribery r e w a r d s t o d o c t o r s w h o used c e r t a i n i m p l a n t a b l e A H S medical devices in preference to c o m p e t i n g b r a n d s . An example of an i m p l a n t a b l e d e v i c e w o u l d be a heart p a c e m a k e r . I n c l u d e d in a list of q u e s t i o n a b l e p a y m e n t s , w e find i n t h e c o n s e n t d e c r e e : c) In a t h i r d c o u n t r y , i m p r o p e r p a y m e n t s to p h y s i c i a n s or o t h e r d e s i g n a t e d r e c i p i e n t s a m o u n t i n g t o $ 1 5 1 , 0 0 0 i n c o n n e c t i o n with t h e p r e s c r i p t i o n by such p h y s i c i a n s for i m p l a n t s of an A m e r i c a n H o s p i t a l subsidiary's device to meet what the c o m p a n y c o n t e n d s w e r e p r e v i o u s l y e s t a b l i s h e d c o m p e t i t i v e p r a c t i c e s ( p . 6.).

Payments

to

health

inspectors

The report o f t h e audit committee states: A H S / M e x i c o in 1974 and 1975 paid a p p r o x i m a t e l y $5,000 to h e a l t h i n s p e c t o r s w h o i n s p e c t e d A H S / M e x i c o facilities. Officials o f t h e s u b s i d i a r y stated that t h e s e p a y m e n t s w e r e m a d e t o c o n v i n c e t h e h e a l t h i n s p e c t o r s not t o r e p o r t the s u b s i d i a r y ' s violations o f t h e Mexican Health Code (p. 43).

Payments

to

customs

officials

W i t h r e s p e c t t o p h a r m a c e u t i c a l p r o d u c t s and m e d i c a l d e v i c e s , p a y m e n t s to c u s t o m s officials can be a s e r i o u s m a t t e r if t h e y are m a d e t o facilitate t h e i m p o r t o f p r o d u c t s which a r e not a p p r o v e d a s safe a n d effective by t h e c o u n t r y c o n c e r n e d . T h e r e is insufficient i n d i c a t i o n i n t h e a u d i t c o m m i t t e e r e p o r t a s t o w h e t h e r this w o u l d b e t h e c a s e with A H S p a y m e n t s . T h e r e p o r t simply states that A H S m a d e p a y m e n t s to M e x i c a n c u s t o m s officials in 1975, inter alia, to 'misclassify g o o d s t o p e r m i t t h e i r i m p o r t a t i o n ' . P a y m e n t s w e r e a l s o m a d e t o M e x i c a n c u s t o m s officials w h o e x t o r t e d the p a y m e n t s by threats of confiscation. O t h e r p a y m e n t s w e r e m a d e t o ' i m p o r t A H S C g o o d s a t a l o w e r c u s t o m s rate t h a n t h a t m a n d a t e d b y M e x i c a n law for t h o s e p r o d u c t s ' .
1

Gifts

to police

officers

The audit c o m m i t t e e report states: E a c h y e a r a few c u s t o m e r s affiliated w i t h the M e x i c a n g o v e r n m e n t w e r e g i v e n C h r i s t m a s o r b i r t h d a y gifts o f several 27

Bribery h u n d r e d d o l l a r s c a s h . T h e s e c u s t o m e r s r a n g e d from g o v e r n m e n t officials a n d c u s t o m s officials to o r d i n a r y city p o l i c e m e n (p. 4 4 ) .

Rorer-Amchen
T h e R o r e r - A m c h e n d i s c l o s u r e d o c u m e n t s are v a g u e c o n c e r n i n g h o w m u c h w a s a c t u a l l y involved i n q u e s t i o n a b l e p a y m e n t s . Cert a i n l y , a sum of $ 8 3 7 , 0 0 0 in p a y m e n t s for several specific p u r p o s e s w a s m e n t i o n e d . T h e a d d i t i o n a l 8 K R e p o r t for M a r c h 1976 says that ' T h e g r e a t e s t p o r t i o n o f the p a y m e n t s t o g o v e r n m e n t officials and e m p l o y e e s d e s c r i b e d in P a r a g r a p h A [$336,000 in an u n n a m e d s u b s i d i a r y b e t w e e n 1971 and 1976] w a s m a d e to e x p e d i t e the regist r a t i o n of n e w p r o d u c t s . // appears that such payments were made in connection with the registration of all products registered during the period covered by the investigation' (p. 7, e m p h a s i s a d d e d ) . We a r e also told t h a t 'a p a y m e n t of a p p r o x i m a t e l y $49,(KX) to a t r a d e a s s o c i a t i o n , a p p a r e n t l y w i t h the u n d e r s t a n d i n g that t h e p a y m e n t , a l o n g w i t h p a y m e n t s from o t h e r c o m p a n i e s i n t h e s a m e b u s i n e s s , w o u l d be paid to o n e or m o r e political p a r t i e s in recogn i t i o n o f p r i o r g o v e r n m e n t a l a c t i o n a l l o w i n g price i n c r e a s e s ' ( p . 4 - 5 ) . ' O t h e r p a y m e n t s w e r e m a d e t o o b t a i n f a v o r a b l e and e x p e d i t i o u s tax s e t t l e m e n t s for 1972 a n d 1973 and to c a u s e the t e r m i n a t i o n of a fiscal i n s p e c t i o n ' (p. 8 ) . In a n o t h e r e x a m p l e : T h e p a y m e n t t o p e r m i t t h e use o f j o i n t p r o d u c t i o n facilities e n a b l e d t h e s u b s i d i a r y t o m o v e its o p e r a t i o n s t o a n o t h e r plant w i t h o u t c o m p l y i n g with g o v e r n m e n t a l r e g u l a t i o n s r e l a t i n g t o such m o v e ( p . 8 ) . T h e R o r e r - A m c h e n d i s c l o s u r e t o t h e S E C e x p l a i n s h o w its slush fund w a s m a i n t a i n e d : T h e w i t h d r a w a l of t h e funds w a s a c c o u n t e d for e i t h e r by f i c t i t i o u s e n t r i e s on t h e b o o k s of t h e s u b s i d i a r y or as t h e p a y m e n t of i n v o i c e s p r o v i d e d b y third p e r s o n s w h o p r o v i d e d n o g o o d s o r s e r v i c e s t o t h e s u b s i d i a r y . C h a r g e s w e r e m a d e o n the b o o k s o f t h e s u b s i d i a r y for t h e g o o d s or services d e s c r i b e d on the i n v o i c e s and t h e a m o u n t s d e d u c t e d for local i n c o m e tax p u r p o s e s . U p o n p a y m e n t the supplier o f t h e invoice d e d u c t e d a commission ( w h i c h a p p e a r s t o h a v e r a n g e d from 6 % t o 15%) and a p p l i c a b l e t a x e s , and r e t u r n e d the balance to a senior executive o f t h e s u b s i d i a r y (8K A l : M a r . 7 6 : 4 ) . 28

Bribery

Syntex
W h i l e S y n t e x d i s c l o s e d only t h e relatively small a m o u n t o f $225,000 i n q u e s t i o n a b l e p a y m e n t s , s o m e o f t h e q u a l i t a t i v e i n f o r m a t i o n i n its 6 K r e p o r t a b o u t o t h e r p r a c t i c e s i s i n t e r e s t i n g . T h e d o c u m e n t tells o f a r e g i o n a l sales m a n a g e r in a s u b s i d i a r y w h o left t h e c o m p a n y to w o r k a s a n i n d e p e n d e n t sales a g e n t . I n his ' i n d e p e n d e n t ' s t a t u s S y n t e x w a s 'his p r i m a r y i f not his only principal". B e t w e e n J a n u a r y 1974 and J u n e 1976 he w a s paid $ 2 2 1 , 0 0 0 in c o m m i s s i o n s by S y n t e x . an e x t r a o r d i n a r y a m o u n t for a m a n w h o had been e a r n i n g b e t w e e n $ 1 1 , 5 0 0 and $ 1 6 , 5 0 0 in t h e y e a r s p r e c e d i n g his d e p a r t u r e from t h e company. Further: D u r i n g t h e p e r i o d o f his e m p l o y m e n t b y t h e s u b s i d i a r y , t h e p e r s o n is u n d e r s t o o d to have p r o v i d e d gifts to and e n t e r t a i n m e n t for g o v e r n m e n t officials w h o p a r t i c i p a t e d in p u r c h a s i n g d e c i s i o n s , and t o h a v e m a d e c e r t a i n p a y m e n t s t o e x p e d i t e g o v e r n m e n t p a y m e n t o f i n v o i c e s for p r o d u c t s p u r c h a s e d (6K: Oct, 76). T h e S y n t e x r e p o r t also tells of an official of a g o v e r n m e n t agency h a v i n g r e g u l a t o r y a u t h o r i t y o v e r S y n t e x p r o d u c t s from w h o m t h e c o m p a n y r e n t e d a 'small facility". S u d d e n l y in O c t o b e r 1975 t h e m o n t h l y r e n t a l w a s i n c r e a s e d by t h e c o m p a n y from $120 to $920. ' $ 1 2 0 w a s paid in r e n t and a c c o u n t e d for as s u c h , the b a l a n c e having b e e n paid to s u p p l i e r s of g o o d s and services to the o w n e r and i m p r o p e r l y classified a s m a i n t e n a n c e and corporate accounting records.' T h e r e p o r t also s t a t e s t h a t : D u r i n g t h e five y e a r s e n d e d July 3 1 , 1976, a foreign s u b s i d i a r y of t h e C o m p a n y p a i d a p p r o x i m a t e l y $6,500 i n costs o f t r a n s p o r t a t i o n and l o d g i n g for r e p r e s e n t a t i v e s of a g o v e r n m e n t o w n e d m a r k e t i n g o r g a n i z a t i o n i n a foreign c o u n t r y . T h e p u r p o s e o f such p a y m e n t w a s t o a l l o w t h e s e r e p r e s e n t a t i v e s t o visit d i s t r i b u t i o n and m a n u f a c t u r i n g facilities o f t h e C o m p a n y and s o far a s i s k n o w n t o m a n a g e m e n t , t h e r e w a s n o t h i n g i m p r o p e r w i t h r e s p e c t t o t h e s e a r r a n g e m e n t s (6K: O c t . 7 6 ) . The practice o f o v e r i n v o i c i n g and p a y i n g t h e s u r p l u s price t o repair charges on the

p e o p l e w h o m a d e t h e p u r c h a s i n g d e c i s i o n w a s also u n c o v e r e d i n the Syntex investigation.

29

Bribery D u r i n g t h e c o u r s e o f t h e r e v i e w i t w a s also n o t e d t h a t , a t t i m e s d u r i n g t h e five y e a r s e n d e d July 3 1, 1976, with r e s p e c t to c e r t a i n n o n - g o v e r n m e n t c u s t o m e r s l o c a t e d o u t s i d e the W e s t e r n h e m i s p h e r e in s u b s t a n t i a l l y all c a s e s , v a r i o u s p r a c t i c e s w e r e used w h i c h i n v o l v e d i n v o i c i n g i n a m o u n t s h i g h e r t h a n actual sales p r i c e s a n d s u b s e q u e n t l y refunding t h e difference a s r e q u e s t e d and d i r e c t e d b y t h e c u s t o m e r s (6K: O c t . 7 6 ) .

Medtronic
M e d t r o n i c is a m e d i c a l d e v i c e c o m p a n y which is t h e largest m a n u f a c t u r e r o f h e a r t p a c e m a k e r s i n the w o r l d . T h e c o m p a n y i s i n c l u d e d h e r e b e c a u s e o f t h e c o n s i d e r a b l e a t t e n t i o n d e v o t e d t o the p a c e m a k e r i n d u s t r y i n this b o o k and b e c a u s e o f t h e e v i d e n c e from M e d t r o n i c o f d i r e c t e n t i c e m e n t s being offered t o p h y s i c i a n s t o use t h e i r p r o d u c t . A t o t a l of $ 3 2 3 , 5 6 3 in q u e s t i o n a b l e p a y m e n t s w a s d i s c l o s e d . All b u t $ 6 7 , 0 0 0 of this w a s d i r e c t e d to p h y s i c i a n s : I n o n e c o u n t r y c e r t a i n p r a c t i c e s w e r e found that w e r e q u e s t i o n a b l e o r i m p r o p e r u n d e r t h e laws o f t h a t c o u n t r y c o n s i s t i n g of p a y m e n t of e x p e n s e s for t r i p s for p h y s i c i a n s not r e l a t e d to b u s i n e s s p u r p o s e ; p a y m e n t of e x p e n s e s of t h e wife or family of a p h y s i c i a n to a c c o m p a n y him w h e n on M e d t r o n i c r e i m b u r s e d t r a v e l ; and t h e d o n a t i o n o f e q u i p m e n t t o p h y s i c i a n s (8K: F e b . 77: 3). I n t h i s s a m e c o u n t r y , p a y m e n t s o f $8,262 w e r e m a d e t o two physicians who in return provided research papers of no substance. In a n o t h e r c o u n t r y , a sales c o m m i s s i o n o f 2 5 % w a s paid to an individual who was characterized as a distributor. H e , in turn, p a s s e d on a m a j o r p o r t i o n of this c o m m i s s i o n to t h e p h y s i c i a n p l a c i n g o r d e r s . P a y m e n t s , t o t a l i n g $ 4 8 , 5 0 0 , r e l a t e d t o $194,000 o f sales over a p p r o x i m a t e l y two y e a r s , which was approximately 1 5 % o f t h e total sales i n t h a t c o u n t r y (8K: F e b . 7 7 : 4 ) .

Summary of SEC disclosures and related documents
T h e w e l t e r o f d o c u m e n t s a v a i l a b l e i n t h e offices o f t h e S E C confirm t h e c o n c l u s i o n from t h e i n t e r v i e w s w i t h i n d u s t r y e x e c u t i v e s : b r i b e r y is r o u t i n e and w i d e s p r e a d in the international pharmaceutical 30

Bribery T A B L E 2.1 S u m m a r y o f q u e s t i o n a b l e p a y m e n t s disclosed t o the S E C in the 1970s by US p h a r m a c e u t i c a l c o m p a n i e s
US rank in pharmaceutical sales, 1977 ( G e r e f f i , 1979) 1 Amount of questionable payments disclosed $3,603,635

Company M e r c k <& Co.

Years of payments 1968-75

Major sources 8K: D e c . 75 F e b . 76 Apr. 76 10K: 76 10K: 77 8K: F e b . 76 8K: M a r . 76 8K: Mar. 76 8K: Mar. 7 6 8 K A 1 : M a r . 76 8K: Jul. 76 8K: A u g . 76 8K: F e b . 76 Jul. 76 A p r . 77 S7 (No. 2-56852) 8K: F e b . 76 8K: F e b . 76 8K: M a y . 76 8K: J a n . 7 6 8K: F e b . 76 8K: M a y . 76 Sept. 76 S07 R e g s t . 2-58671, Apr. 77 8K: N o v . 75 P r o x y : Sept. 7 6 8K: F e b . 7 6 D e c . 76 6K: O c t . 76 8K: D e c . 7 6 10K: D e c . 75 All 8 K s : 7 6 - 7 8 Litigation: Feb. 77 8 K A 1 : M a r . 76 8K: A p r . 77 Kennedy & Simon (1978:27) 8K: S e p t . 76 8K: O c t . 76 8K: M a r . 76 8K: F e b . 77

American Home Products Warner-Lambert Pfizer Upjohn Squibb Bristol-Myers Schering-Plough

2 3 4 6 7 8 9

$3,442,000 $2,256,200 $307,000 $4,245,949 $1,919,000 $3,034,570 $1,094,702

1971 -5 1971 -5 1971 -5 1 9 7 1 -6 1 9 7 1 -6 1971 -6

Abbott

Laboratories

Johnson & Johnson Cyanamid SmithKline G. D. Searle Baxter-Travenol Revlon Dow 3M Richardson-Merrell Sterling D r u g Syntex A. H. R o b i n s Miles American Supply Hospital

10 11 12 13 14 15 16 17 18 19 21) 22 23 24 Unranked Unranked Unranked Unranked Unranked Unranked Unranked

$774,000 $990,000 $1,225,000 $712,700 $1,303,000 $2,160,220 $189,600 $197,000 $3,127,341 $1,243,000 $1,806,000 $225,OCX) $228,000 $400,000

1 9 7 3 -6 1 9 7 1 -5 1971 -5 1 9 7 1 -6 1 9 7 3 -5 1 9 7 0 -6 1 9 7 1 -6 1970-6 1970-5 1971-5 1970-5 1972-6 1972-5 1971-5 -6

$5,800,000 over$837,000 $245,000 $631,150 $182,000 $359,933 $51,899 $323,563

1971

Rorer-Amchen Morton-Norwich Carter-Wallace Becton-Dickinson Alcon Allergan Medtronic

1 9 7 1 -6 1 9 7 1 -6

— 1971-6 1971-5 1973-7

31

Bribery i n d u s t r y , and large a m o u n t s o f m o n e y are involved. A l m o s t every t y p e o f p e r s o n w h o can affect t h e i n t e r e s t s o f t h e industry has b e e n the subject of bribes by pharmaceutical companies: doctors, hospital a d m i n i s t r a t o r s , c a b i n e t m i n i s t e r s , health i n s p e c t o r s , c u s t o m s officers, tax a s s e s s o r s , d r u g r e g i s t r a t i o n officials, factory i n s p e c t o r s , p r i c i n g officials, and political p a r t i e s . O b v i o u s l y , the matter of greatest concern is the widespread p r a c t i c e of q u e s t i o n a b l e p a y m e n t s to m i n i s t e r s or officials to secure t h e r e g i s t r a t i o n or a p p r o v a l for sale of p r o d u c t s . In a d d i t i o n to t h e d i s c l o s u r e s o f this t y p e d o c u m e n t e d a b o v e , C y a n a m i d , R i c h a r d s o n M e r r e l l , S e a r l e , S t e r l i n g , A . H . R o b i n s and A l c o n r e v e a l e d p a y m e n t s t o s e c u r e g o v e r n m e n t p e r m i s s i o n for the m a r k e t i n g o f p r o d u c t s . A Washington Post r e p o r t of 8 F e b r u a r y 1976 c l a i m e d t h a t S e a r l e a s s u r e d c o n t i n u e d g o v e r n m e n t a p p r o v a l o f its birth c o n t r o l pills in I r a n by giving gifts to t h e r e l a t i v e s o f t h e d e c i s i o n m a k i n g official. A l m o s t e q u a l l y d i s t u r b i n g i s t h e kind o f p a y m e n t r e v e a l e d b y B e c t o n - D i c k i n s o n w h e r e "a r e p r e s e n t a t i v e of a local g o v e r n m e n t h e a l t h official w a s paid $ 1 2 , 0 0 0 in cash to forestall the t h r e a t o f t h e g o v e r n m e n t official t o close o n e o f t h e C o m p a n y ' s p l a n t s ' (8K: Sept 7 6 : 2 ) . T h e r e is a sad s e q u e l to the A m e r i c a n H o s p i t a l Supply d i s c l o s u r e t h a t M e x i c a n h e a l t h i n s p e c t o r s w e r e paid off 'not to r e p o r t the subsidiary's violations o f t h e Mexican H e a l t h C o d e ' . In 1979, n i n e M e x i c a n w o m e n died i n t h e M o n t e r e y h o s p i t a l m a t e r n i t y w a r d after b e i n g g i v e n c o n t a m i n a t e d i n t r a v e n o u s solution m a n u f a c t u r e d b y A H S M e x i c o . T h e c a u s e o f d e a t h w a s ' t r a u m a t i c shock' d u e t o viral c o n t a m i n a t i o n . T h e A H S i n t r a v e n o u s solution w a s f o u n d t o b e ' c o n t a m i n a t e d with g r a m n e g a t i v e b a c t e r i a s , staphyl o c o c c u s , a n d p r o b a b l y m o l d ' (La Prensa, 25 O c t o b e r 1979). C r i m i n a l c h a r g e s a g a i n s t A H S e x e c u t i v e s are p r o c e e d i n g . E n g l i s h - s p e a k i n g p e o p l e s s o m e t i m e s t o o readily a s s u m e that t h e i r s t a n d a r d s of c o r r u p t i b i l i t y are far h i g h e r t h a n t h o s e of nonW e s t e r n c o u n t r i e s w h i c h have a t t r a c t e d m o s t a t t e n t i o n i n t h e b r i b e r y s c a n d a l s . W i t h i n t h e U n i t e d S t a t e s t h e state o f N e v a d a fulfils a s i m i l a r r o l e to s o m e T h i r d W o r l d c o u n t r i e s which are h a v e n s from p h a r m a c e u t i c a l r e g u l a t i o n . A Los Angeles Times article on the free a v a i l a b i l i t y o f t h e ' y o u t h d r u g ' G e r o v i t a l i n N e v a d a m a d e the following points.

F o r e x a m p l e , t h e s a m e bill t h a t legalized G e r o v i t a l legalized l a e t r i l e , a s c r i b e d by m a n y p e r s o n s as a c a n c e r t r e a t m e n t , and it 32

Bribery w a s d i s c l o s e d t h a t t h e bill's a u t h o r w a s r e n t i n g a c o n d o m i n i u m at T a h o e from a m a n on trial for s m u g g l i n g l a e t r i l e . A N e v a d a i n v e s t i g a t i o n is p e n d i n g a g a i n s t t h e chief s t o c k h o l d e r of R o m - A m e r P h a r m a c e u t i c a l C o . , the Las Vegas-based c o m p a n y t h a t m a k e s G e r o v i t a l , a n d t w o o t h e r m e n for allegedly b r i b i n g a s t a t e a s s e m b l y m a n to push a bill last M a y t h a t w o u l d h a v e m a d e G e r o v i t a l a v a i l a b l e i n t h e state w i t h o u t a p r e s c r i p t i o n (Los Angeles Times, 13 N o v . 1979; P a r t I, 2 0 ) . I t i s t r u e t h a t U S F o o d and D r u g A d m i n i s t r a t i o n i n s p e c t o r s have a r e m a r k a b l e r e p u t a t i o n for i n t e g r i t y . In spite of this they are offered b r i b e s from t i m e t o t i m e . F u l l e r ( 1 9 7 2 : 3 0 0 - 1 ) r e c o u n t s t h e s t o r y of an F D A i n s p e c t o r w h o w a s offered $10,000 by a small d r u g m a n u f a c t u r e r w h o he w a s t r y i n g to close d o w n . T h i s w a s a case of b o t h a t t e m p t e d b r i b e r y and b l a c k m a i l . T h e m a n u f a c t u r e r had o p e n e d a savings a c c o u n t for t h e i n s p e c t o r , w i t h o u t t h e i n s p e c t o r ' s k n o w l e d g e , a n d had b e e n r e g u l a r l y d e p o s i t i n g several h u n d r e d d o l l a r s a m o n t h in t h e a c c o u n t . T h e m a n u f a c t u r e r a t t e m p t e d to give t h e i n s p e c t o r a c h o i c e b e t w e e n t a k i n g t h e $ 1 0 , 0 0 0 quietly and not p r o s e c u t i n g , o r h a v i n g t o e x p l a i n t h e b a n k a c c o u n t t o his s u p e r i o r s . T a k i n g his c h a n c e s o n t h e l a t t e r o p t i o n , t h e i n s p e c t o r successfully convicted the m a n u f a c t u r e r . O n e F D A e m p l o y e e told o f a n i n s t a n c e o f a k i c k b a c k w i t h i n the US p h a r m a c e u t i c a l i n d u s t r y w i t h very s e r i o u s i m p l i c a t i o n s . A p h a r m a c e u t i c a l c o m p a n y e m p l o y e e with r e s p o n s i b i l i t y for a n i m a l t o x i c o l o g y s t u d i e s w a s r e c e i v i n g illegal c o m m i s s i o n s from an o u t s i d e t e s t i n g l a b o r a t o r y t o which h e w a s s e n d i n g w o r k . T h e t e s t i n g l a b o r a t o r y w a s said by my F D A i n f o r m a n t to be o n e of n o t o r i o u s l y low s t a n d a r d s . T o t h e c r e d i t o f the p h a r m a c e u t i c a l c o m p a n y , i t r e p o r t e d t h e b e h a v i o u r o f its e m p l o y e e t o the F D A . T h e F D A successfully p r o s e c u t e d t h e c o n t r a c t t e s t i n g l a b o r a t o r y a n d w o u l d h a v e a l s o p r o s e c u t e d t h e d r u g c o m p a n y e m p l o y e e had h e not d i e d s o o n after i n v e s t i g a t i o n s b e g a n . The extent of the d o c u m e n t a t i o n of questionable payments by US c o m p a n i e s a s s e m b l e d in this c h a p t e r is a t r i b u t e to t h e relative o p e n n e s s o f U S g o v e r n m e n t a l p r o c e s s e s . T h i s should not lead t o the a s s u m p t i o n that A m e r i c a n c o m p a n i e s are more corrupt than comp a n i e s o f o t h e r n a t i o n a l i t i e s . O n t h e c o n t r a r y , m o s t o f t h e execut i v e s o f U S c o m p a n i e s i n t e r v i e w e d w e r e o f t h e o p i n i o n that their c o l l e a g u e s w e r e less p r o n e t o b r i b e r y t h a n E u r o p e a n p h a r m a ceutical executives. N o n e ofthe E u r o p e a n executives, in contrast.
33

Bribery m a i n t a i n e d t h a t t h e y w e r e less c o r r u p t t h a n the A m e r i c a n s . A n d o f c o u r s e b o t h A m e r i c a n and E u r o p e a n t r a n s n a t i o n a l e x e c u t i v e s m a i n t a i n e d t h a t t h e i r r e l u c t a n c e t o b r i b e w a s m u c h g r e a t e r t h a n that of indigenous pharmaceutical companies in Third-World countries. P e r h a p s t h e s e o p i n i o n s b e a r s o m e r e l a t i o n s h i p t o the reality; p e r h a p s they do not. T w o g o v e r n m e n t p h a r m a c e u t i c a l b u y e r s have b e e n i m p r i s o n e d i n K e n y a after c o n v i c t i o n for a c c e p t i n g b r i b e s of $14,000 from H o f f m a n - L a R o c h e , t h e Swiss d r u g c o m p a n y , for allegedly favouring t h e i r p r o d u c t s w h e n s p e n d i n g the g o v e r n m e n t ' s m e d i c i n e b u d g e t ( H e l l e r , 1977: 5 6 ) . Y u d k i n ( 1 9 7 8 : 811) claims that t h e t w o h e a l t h officials had b o u g h t sufficient q u a n t i t i e s of an a n t i b a c t e r i a l a g e n t a n d a t r a n q u i l l i s e r from H o f f m a n - L a R o c h e to last the n a t i o n for m o r e t h a n ten y e a r s - n o t a h e a l t h y s i t u a t i o n with p r o d u c t s h a v i n g a shelf-life of only a c o u p l e of y e a r s .

How bribes are passed
T h e S E C d i s c l o s u r e s manifest c o n s i d e r a b l e differences b e t w e e n c o m p a n i e s i n t h e e x t e n t t o w h i c h t o p m a n a g e m e n t i n the U S had d e t a i l e d k n o w l e d g e o f t h e p a y m e n t s . I n s o m e they clearly did: i n o t h e r s t h e r e w a s no way of k n o w i n g . W h a t is clear is that in most c a s e s t h e t o p p e r s o n i n t h e s u b s i d i a r y had d e t a i l e d k n o w l e d g e . This fits w i t h e v i d e n c e from my i n t e r v i e w s . T h e S E C d i s c l o s u r e s give a m i s l e a d i n g p i c t u r e of t h e n a t u r e of b r i b e r y in the i n t e r n a t i o n a l p h a r m a c e u t i c a l i n d u s t r y with r e s p e c t to the s e n i o r i t y of t h e r e c i p i e n t s o f p a y m e n t s . M e r c k w a s t h e only p h a r m a c e u t i c a l c o m p a n y w h i c h d i s c l o s e d a p a y m e n t to a c a b i n e t - l e v e l official. It is c o m m o n knowledge that in Latin A m e r i c a ministers responsible for h e a l t h are a l m o s t i n v a r i a b l y rich with w e a l t h which c o m e s l a r g e l y from t h e i n t e r n a t i o n a l p h a r m a c e u t i c a l i n d u s t r y . F o r this r e a s o n such m i n i s t r i e s a r e a m o n g t h e most avidly s o u g h t b y p o l i t i c i a n s . A p a y m e n t to a m i n i s t e r is often quite a s t r a i g h t f o r w a r d m a t t e r . O n e i n f o r m a n t w h o had left t h e industry to w o r k with an i n t e r n a t i o n a l a g e n c y after m a n y y e a r s i n several Latin A m e r i c a n countries explained what happens. T h e g e n e r a l m a n a g e r o f t h e L a t i n A m e r i c a n subsidiary t a k e s t h e h e a l t h m i n i s t e r - usually he is called a m i n i s t e r for social s e c u r i t y t o d i n n e r . M a y b e h e gets 1 5 p e r c e n t . T h e g e n e r a l m a n a g e r gives him an e n v e l o p e w i t h $ 1 0 , 0 0 0 or $ 1 5 , 0 0 0 in it and say 'My 34

Bribery c o m p a n y will be l o d g i n g a p e r m i t to m a r k e t a n e w drug next w e e k . I h o p e t h a t you will be able to see t h a t the a p p l i c a t i o n is considered speedily."

T h e g e n e r a l m a n a g e r would not ask t h e m i n i s t e r to m a k e sure a n e w p r o d u c t w a s a p p r o v e d . T h e i n t e r a c t i o n i s m o r e subtle t h a n t h a t . C e r t a i n l y i t w o u l d b e u n w i s e t o m e n t i o n that t h e r e w e r e s o m e p r o b l e m s , t h a t s o m e p e o p l e had d o u b t s a b o u t t h e safety o f t h e d r u g . The m i n i s t e r w o u l d r a t h e r not k n o w , p e r h a p s i n s o m e cases b e c a u s e it a v o i d s u n c o m f o r t a b l e feelings of guilt. I s p o k e to o n e former L a t i n A m e r i c a n h e a l t h m i n i s t e r , w h o , w h i l e not a d m i t t i n g t h a t h e h i m s e l f had a c c e p t e d such p a y m e n t s , c o n f i r m e d that the a b o v e d e s c r i p t i o n m a t c h e d his u n d e r s t a n d i n g o f h o w i t w a s d o n e . G e t t i n g m o n e y to put in t h e e n v e l o p e w i t h o u t leaving a scent for a u d i t o r s r e q u i r e s i n g e n u i t y . S E C d i s c l o s u r e s a r e rich with information w h i c h s h o w s t h e v a r i e t y of w a y s this can be d o n e . If t h e s e c r e t a r y of a h o s p i t a l b o a r d o w n s an a r c h i t e c t u r a l firm, a law firm, or a p u b l i c r e l a t i o n s firm t h e n you can hire h i s / h e r firm, p e r h a p s e v e n get s o m e g e n u i n e s e r v i c e s from it, but pay e x t r a v a g a n t l y for such s e r v i c e s . Y o u can e v e n rent a p r o p e r t y from t h e p e r s o n concerned at an unusually remunerative rental. O n e e x e c u t i v e told me of a s c h e m e for g e t t i n g cash for a slush fund w h i c h w a s beautiful in its simplicity. A c o n s i d e r a b l e q u a n t i t y of t i m b e r g r o w i n g on t h e c o m p a n y ' s p r o p e r t y w a s sold for cash w h i c h w e n t i n t o t h e secret a c c o u n t . Since d e a l i n g i n t i m b e r w a s not p a r t of t h e c o m p a n y ' s n o r m a l b u s i n e s s t h e r e w a s little risk in not e n t e r i n g t h e m o n e y s o n t h e b o o k s . W i t h small p a y m e n t s , for e x a m p l e t o h e a l t h i n s p e c t o r s , e x e c u t i v e s can have their e x p e n s e a c c o u n t s i n c r e a s e d o n t h e u n d e r s t a n d i n g t h a t t h e s e m o n e y s will b e u s e d for b r i b e s . T h e p h a r m a c e u t i c a l d i s c l o s u r e s s h o w t h a t p a y i n g o n a n invoice t o t h e c o m p a n y for s e r v i c e s not actually r e n d e r e d , or o v e r i n v o i c i n g by t h e c o m p a n y so t h a t an e x c e s s can be put a s i d e for the recipient of t h e b r i b e h a v e b e e n t h e m o s t c o m m o n l y r e p o r t e d p r a c t i c e s i n the p h a r m a c e u t i c a l i n d u s t r y . W h e n a m o u n t s are large i t has often b e e n f o u n d n e c e s s a r y to s u b s t i t u t e a n u m b e r e d Swiss b a n k a c c o u n t for the plain e n v e l o p e . In G u a t e m a l a I w a s not told any s t o r i e s of g e n e r a l m a n a g e r s m e e t i n g with m i n i s t e r s t o get p r o d u c t s a p p r o v e d . W h e r e a s i n M e x i c o t h e a t t i t u d e s e e m s t o b e t h a t foreign b u s i n e s s should pay for e v e r y t h i n g i t g e t s , i n G u a t e m a l a t h e a t t i t u d e o f t h e military r e g i m e 35

Bribery is r a t h e r ' w h a t ' s g o o d for foreign b u s i n e s s is good for G u a t e m a l a ' . T h u s , t r a n s n a t i o n a l s g e n e r a l l y get w h a t t h e y w a n t w i t h o u t p a y i n g , or e v e n a s k i n g for t h a t m a t t e r . A b u r e a u c r a t w h o put t o o m a n y o b s t a c l e s in t h e way of an A m e r i c a n c o m p a n y might well b e c o m e a v i c t i m o f t h e h a p p y n e x u s a m o n g A m e r i c a n b u s i n e s s , t h e C I A . and t h e G u a t e m a l a n m i l i t a r y r u l e r s . ' P h a r m a c e u t i c a l c o m p a n i e s d o not h a v e to buy off p l a n t i n s p e c t o r s b e c a u s e t h e r e are no i n s p e c t i o n s . D u r i n g its first five y e a r s of m a n u f a c t u r i n g in G u a t e m a l a a t r a n s n a t i o n a l d o e s not n e e d to pay tax a s s e s s o r s b e c a u s e t h e r e is no tax. D u r i n g t h e s e c o n d five y e a r s half t h e n o r m a l c o m p a n y tax rate a p p l i e s . W h e n e v e r a n e w m a c h i n e is p u r c h a s e d its total value is d e d u c t i b l e , and in e a c h o f t h e s u c c e e d i n g 10 years a 10 p e r c e n t d e p r e c i a t i o n can be d e d u c t e d . At t h e end of a d e c a d e 200 p e r c e n t of t h e v a l u e o f t h e m a c h i n e has b e e n d e d u c t e d . C o m b i n e this with a n u n r e s t r a i n e d c a p a c i t y t o split i n c o m e a m o n g m a n y different h o l d i n g c o m p a n i e s , and t o c h a r g e w h a t e v e r transfer prices i t w i s h e s , and the n e e d t o r e g a r d tax a s s e s s o r s a s a d v e r s a r i e s d i s a p p e a r s . T h e c o n t r a s t b e t w e e n M e x i c o and G u a t e m a l a i s also vivid o n the n e e d to pay social s e c u r i t y officials to e x p e d i t e price i n c r e a s e s . In M e x i c o this form of b r i b e r y s e e m s to have involved t h e largest sums and attracted the greatest public o u t r a g e . Companies in G u a t e m a l a , h o w e v e r , can e x p e c t a l m o s t a u t o m a t i c i n c r e a s e s each y e a r to k e e p p r i c e s up to a 20 per cent e x c e s s o v e r p r o d u c t i o n costs ( w i t h p r o d u c t i o n c o s t s s u p p l i e d b y t h e c o m p a n i e s , and n e v e r , i n the r e c o l l e c t i o n of my i n f o r m a n t s , b e i n g s u b j e c t e d to critical scrutiny by t h e g o v e r n m e n t ) . T h e a p p r o v a l p r o c e s s b e c o m e s less t h a n a u t o m a t i c o n l y w h e n t h e c o m p a n y a s k s for m o r e . P r e s u m a b l y b r i b e r y m i g h t t h e n b e c o m e a possibility. To s u g g e s t t h a t t h e plain e n v e l o p e is less a feature of G u a t e m a l a n t h a n M e x i c a n r e g u l a t o r y i n s t i t u t i o n s is not to say that dirty m o n e y n e v e r g e t s i n t o t h e h a n d s o f G u a t e m a l a n r e g u l a t o r s . D r u g regist r a t i o n a p p l i c a t i o n s a r e m a d e t h r o u g h a g e n t s w h o m u s t b e regist e r e d G u a t e m a l a n p h a r m a c i s t s . O n e A m e r i c a n c o m p a n y told m e t h a t its o u t s i d e p h a r m a c i s t w a s on a m o n t h l y r e t a i n e r of U S S 3 0 0 to p e r f o r m p e r f u n c t o r y d u t i e s i n p u t t i n g his n a m e o n the r e g i s t r a t i o n d o c u m e n t and l o d g i n g it. N o n e of t h e c o m p a n i e s I i n t e r v i e w e d c o u l d recall a p r o d u c t of t h e i r s not b e i n g a p p r o v e d , nor could t h e y r e c a l l any o t h e r t r a n s n a t i o n a l h a v i n g a p r o d u c t r e g i s t r a t i o n r e j e c t e d . O n e d o e s w o n d e r , t h e r e f o r e , w h e t h e r s o m e o f this U S S 3 0 0 . a lot in a p o o r c o u n t r y , finds its way into the h a n d s o f t h e a p p r o v i n g officer. 36

Bribery O n e of the most interesting aspects of reading through the docum e n t s o n q u e s t i o n a b l e p a y m e n t s a t t h e S E C i s t h e length t o w h i c h s o m e c o m p a n i e s h a v e g o n e in o r d e r to s e c u r e tax d e d u c t i b i l i t y for their questionable payments. American Home Products, Merck, W a r n e r - L a m b e r t , S q u i b b , B r i s t o l - M y e r s . J o h n s o n and J o h n s o n , C y a n a m i d . S t e r l i n g , a n d C a r t e r - W a l l a c e all t r e a t e d q u e s t i o n a b l e p a y m e n t s as d e d u c t i b l e expenses. In defence ofthe pharmaceutical i n d u s t r y , h o w e v e r , i t m u s t b e p o i n t e d out that i t c a n n o t m a t c h s o m e o f t h e l e n g t h s t o r e d u c e tax liability o f o t h e r i n d u s t r i e s . O n e c o m p a n y , r e p o r t e d l y t h e subject o f a n I R S i n v e s t i g a t i o n , c a r r i e d its slush fund on its b o o k s as an i n v e s t m e n t in a L i b y a n l e a s e . H a v i n g u s e d t h e m o n e y i t t h e n r e p o r t e d t h e e x p r o p r i a t i o n o f t h e lease b y t h e L i b y a n g o v e r n m e n t and c l a i m e d a loss on its tax r e t u r n ( H e r l i h y a n d L e v i n e , 1976: 5 9 6 - 7 ) ! T h e a c c o u n t in t h i s s e c t i o n and in the f o r e g o i n g e x t r a c t s from d o c u m e n t s lodged with the SEC on how bribery is executed is u n d o u b t e d l y o v e r s i m p l i f i e d . F i n d i n g the right p e r s o n t o give t h e p l a i n e n v e l o p e to is often not as simple as m a k i n g a d i n n e r a p p o i n t m e n t w i t h t h e m i n i s t e r . T h i s p r o b l e m i s delightfully i l l u s t r a t e d b y R e i s m a n ( 1 9 7 9 : 140). R e i s m a n tells of a n o w - d e c e a s e d US s e n a t o r w h o e x p l o d e d in fury w h e n a y o u n g m a n from his h o m e s t a t e , s e e k i n g a f a v o u r , offered an o u t r i g h t p a y m e n t . ' Y o u n g m a n , I o u g h t to kick you right out o f m y office. I o u g h t to kick y o u t h r o u g h t h e hall and right d o w n t h e stairs. Y o u k n o w , I've got a m i n d to kick you right a c r o s s P e n n s y l v a n i a A v e n u e . W h a t a n e r v e . I o u g h t to kick you to - M a s s a c h u s e t t s A v e n u e and u p t o r o o m 4 0 6 , w h e r e m y old law p a r t n e r w o r k s . N o w get o u t b e f o r e I really get a n g r y . '

A Mexican crusade against bribery
T h e early m o n t h s o f 1977 saw i n M e x i c o t h e m o s t d r a m a t i c c r u s a d e a g a i n s t c o r r u p t i o n i n t h e history o f t h e i n t e r n a t i o n a l p h a r m a c e u t i c a l i n d u s t r y . O n e night m a n y of the m o s t powerful figures in the M e x i c a n p h a r m a c e u t i c a l i n d u s t r y c a m e h o m e t o find their h o m e s , a s o n e i n f o r m a n t d r a m a t i c a l l y d e s c r i b e d it, ' s u r r o u n d e d b y soldiers w i t h m a c h i n e g u n s ' . E i g h t w e r e a r r e s t e d and t h r o w n into jail while m a n y o t h e r s w h o w e r e t i p p e d off after t h e e a r l i e r a r r e s t s a v o i d e d c a p t u r e b y not r e t u r n i n g t o t h e i r h o m e s . A m o n g t h o s e j a i l e d w a s t h e m o s t powerful i n d i v i d u a l i n t h e i n d u s t r y , J u a n L o p e z S i l a n e s , 37

Bribery the P r e s i d e n t of the National Industrial C h a m b e r of Chemical a n d I n d u s t r i a l L a b o r a t o r i e s ( t h e C a m a r a ) . T h e C a m a r a has a u n i q u e l y powerful role in t h e M e x i c a n political and e c o n o m i c s y s t e m . M e m b e r s h i p of t h e C a m a r a is o b l i g a t o r y in law for any c o m p a n y which wishes to undertake chemical or pharmaceutical p r o d u c t i o n in t h e c o u n t r y , and t h e g o v e r n m e n t is r e q u i r e d to i n c l u d e it in c e r t a i n of its d e c i s i o n - m a k i n g p r o c e s s e s . A n u m b e r of g e n e r a l m a n a g e r s o f large t r a n s n a t i o n a l p h a r m a c e u t i c a l c o m p a n i e s w e r e a l s o j a i l e d , i n c l u d i n g the g e n e r a l m a n a g e r o f Lilly, t h e only m a j o r U S c o m p a n y not t o disclose q u e s t i o n a b l e p a y m e n t s t o t h e SEC. T h e a r r e s t s w e r e t h e b e g i n n i n g s of a c r u s a d e by the newly e l e c t e d P o r t i l l o g o v e r n m e n t a g a i n s t c o r r u p t r e l a t i o n s h i p s b e t w e e n the p h a r m a c e u t i c a l i n d u s t r y and officers of its I n s t i t u t e of Social S e c u r i t y ( I M S S ) . A n u m b e r of s e n i o r officials with r e s p o n s i b i l i t y for a p p r o v i n g p r i c e i n c r e a s e s for p h a r m a c e u t i c a l sales t o t h e g o v e r n m e n t w e r e d i s m i s s e d by t h e n e w D i r e c t o r of Social Security amid a flurry of a l l e g a t i o n s t h a t they had b e e n a c c e p t i n g b r i b e s from the i n d u s t r y . A f t e r a m a t t e r of only d a y s , w e e k s in a c o u p l e of c a s e s , the i m p r i s o n e d d e f e n d a n t s w e r e r e l e a s e d on bail. Bail w a s set at t h e s t a g g e r i n g figure of a l m o s t o n e million p e s o s (SO.44 m i l l i o n ) e a c h . T h e C a m a r a held a m e e t i n g with P r e s i d e n t P o r t i l l o on 15 M a r c h 1977, in w h i c h it u p b r a i d e d t h e P r e s i d e n t t h a t "the d e n o u n c i n g and t h e o p i n i o n s a r o u n d i t had w i t h o u t r h y m e o r r e a s o n c a u s e d great h a r m t o t h e e n t i r e p h a r m a c e u t i c a l i n d u s t r y ' . S o m e m o n t h s later t h e g o v e r n m e n t d r o p p e d t h e c h a r g e s a g a i n s t t h e eight d e f e n d a n t s .
1

T h e s e c r e t a r y o f t h e C a m a r a , and o t h e r industry e x e c u t i v e s t o w h o m I s p o k e , w e r e o f t h e view t h a t t h e g o v e r n m e n t n e v e r b e l i e v e d it had t h e e v i d e n c e to convict t h e d e f e n d a n t s of b r i b e r y , or "fraud, falsification o f d o c u m e n t s and a t t e m p t s a g a i n s t the p u b l i c e c o n o m y ' as t h e c h a r g e r e a d , and n e v e r i n t e n d e d to c o n s u m m a t e its legal t h r e a t s a g a i n s t such powerful f i g u r e s . P r o b a b l y they w e r e right. A s t h e 1977 A n n u a l R e p o r t o f t h e C a m a r a a r g u e d : ' T h i s raid w a s i n r e a l i t y a i m e d at l a u n c h i n g a m o r a l i z i n g c a m p a i g n to t u r n into reality t h e a i m s set forth by t h e n e w G o v e r n m e n t of the R e p u b l i c at Inauguration Day.' A n u n d e r s t a n d i n g o f t h e g o v e r n m e n t ' s p u r p o s e can b e g a i n e d from t h e a c c o u n t b y t h e g e n e r a l m a n a g e r o f o n e t r a n s n a t i o n a l c o n c e r n i n g w h a t h a p p e n e d w h e n h e and t h e g e n e r a l m a n a g e r s o f t h e o t h e r l a r g e c o r p o r a t i o n s , w e r e called t o g e t h e r b y t h e n e w D i r e c t o r o f Social S e c u r i t y . 38

Bribery He told t h e m . . . in so m a n y w o r d s . . . t h a t if they could afford to pay 10 p e r c e n t to his officials on Social Security c o n t r a c t s , t h e n all c o n t r a c t s from t h e n on w o u l d be subject to a 10 per cent special d e d u c t i o n , a n d t h e y should s t o p p a y i n g b r i b e s . T o this day we still pay t h e 10 p e r cent d e d u c t i o n . N o w t h e y pay 20 p e r c e n t 10 p e r cent d e d u c t i o n and 10 p e r cent b r i b e , [ l a u g h t e r ] N o t r e a l l y . O n l y s o m e o f t h e c o m p a n i e s still pay t h e b r i b e s . T h r o w i n g t h o s e powerful p e o p l e in jail w a s not for d e t e r r e n c e , i n c a p a c i t a t i o n , r e t r i b u t i o n , r e h a b i l i t a t i o n , o r any o t h e r r e c o g n i s e d a i m o f c r i m i n a l law. B u t w h a t h a p p e n e d w a s c e r t a i n l y b o u n d u p w i t h c r i m e p r e v e n t i o n . ' It w a s an a t t e m p t to signal a new m o r a l i t y , t o a n n o u n c e w i t h a s m u c h d r a m a a s possible that what had b e e n a c c e p t e d in t h e past m i g h t no l o n g e r be a c c e p t a b l e in t h e future. W h e t h e r it w a s a successful a t t e m p t is difficult to say. T h e t e n t a c l e s o f c o r r u p t i o n are s o d e e p l y e m b e d d e d i n M e x i c a n c u l t u r e t h a t any a t t e m p t t o root t h e m o u t i s b o u n d t o m e e t with m i x e d s u c c e s s . T h e r e are s o m e small signs o f i m p r o v e m e n t , h o w e v e r . O n e M e x i c a n q u a l i t y a s s u r a n c e d i r e c t o r said: 'It used t o b e s t a n d a r d t o b r i b e t h e m [ i n s p e c t o r s ] . B u t not any m o r e . M a n y now go to t h e F D A for t r a i n i n g and c o m e b a c k w i t h a m o r e professional attitude.' A n o t h e r q u a l i t y a s s u r a n c e d i r e c t o r t h o u g h t t h a t t h e s i t u a t i o n had i m p r o v e d m a r g i n a l l y since P o r t i l l o c a m e t o p o w e r , especially b e c a u s e P o r t i l l o , u n l i k e f o r m e r p r e s i d e n t s , did not h a v e a long h i s t o r y of g o v e r n m e n t office d u r i n g w h i c h he was c o r r u p t e d by the M e x i c a n system of patronage. P e o p l e b r o u g h t u p i n t h e g o v e r n m e n t are i n c o m p e t e n t and c o r r u p t . But t h i n g s are c h a n g i n g . T h e y are n o w getting s o m e p e o p l e [inspectors] w i t h 10 y e a r s or m o r e p h a r m a c e u t i c a l i n d u s t r y e x p e r i e n c e . T h e s e p e o p l e k n o w their stuff. T h e y k n o w w h a t q u e s t i o n s t o ask. T h e y k n o w w h e r e t o look. A l s o b e c a u s e t h e y a r e not b r o u g h t up in t h e g o v e r n m e n t they have not l e a r n t so much corrupt ways. I r r e s p e c t i v e of w h a t t h e effect on c r i m e of this M e x i c a n c r u s a d e w a s , i t d o e s t h r o w u p a n a p p r o a c h t o t h e p r o b l e m unfamiliar, and perhaps abhorrent, to Western reformers. This approach r e c o g n i s e s t h a t in t h e a p p l i c a t i o n of law to t h e i n t e r n a t i o n a l pharm a c e u t i c a l i n d u s t r y in a c o u n t r y like M e x i c o t h e r e is no j u s t i c e . If t h e s t a t e a t t e m p t s to use law as a tool of j u s t i c e , p o w e r and m o n e y

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Bribery
will s u b v e r t t h e a t t e m p t . But the s t a t e can effectively use the a p p a r a t u s of law e n f o r c e m e n t for d r a m a t i c g e s t u r e s , to d e l i v e r a s h o r t s h a r p s h o c k in w h i c h no o n e is d o n e t e r r i b l e h a r m . Such g e s t u r e s c a n n o t b e s u s t a i n e d for long b e c a u s e o n c e the i n t e r n a t i o n a l b u s i n e s s c o m m u n i t y recoils from t h e s h o c k and r e g r o u p s , it is a w o r t h y a d v e r s a r y t o t h e state i n i n s t i t u t i o n a l p o w e r . T h e p o i n t , h o w e v e r , is not to sustain t h e s h o c k , but simply to jolt the b u s i n e s s c o m m u n i t y into a c c e p t i n g n e w , m o r e l a w - a b i d i n g r e l a t i o n s h i p s with government.

The US crusade against bribery
T h e U S c r u s a d e a g a i n s t b r i b e r y b e g a n i n e a r n e s t with the L o c k h e e d s c a n d a l . It led to t h e F o r e i g n C o r r u p t P r a c t i c e s A c t of 1977. which p r o h i b i t s U S c o m p a n i e s from p a y i n g b r i b e s e v e n w h e n t h e paym e n t s a r e m a d e o u t s i d e t h e U n i t e d S t a t e s . Such e x t r a t e r r i t o r i a l a p p l i c a t i o n of US law is not e x t r a o r d i n a r y , having p r e c e d e n t s in tax, a n t i t r u s t , t r a d e m a r k and t r a d i n g w i t h t h e e n e m y laws. A b o u t thirty c o n s e n t d e c r e e s h a v e also b e e n struck b e t w e e n the S E C and comp a n i e s d i s c l o s i n g q u e s t i o n a b l e p a y m e n t s . I n t h e case o f t h e A m e r i c a n H o s p i t a l S u p p l y c o n s e n t d e c r e e discussed e a r l i e r , t h e c o m p a n y , inter alia, a g r e e d to p u b l i s h t h e results of a d e t a i l e d i n v e s t i g a t i o n into its affairs by an audit c o m m i t t e e , to refrain in future from any political c o n t r i b u t i o n s , legal or illegal, and only r e a c h w r i t t e n a r r a n g e m e n t s w i t h c o n s u l t a n t s w h o must have a n e s t a b l i s h e d p l a c e o f b u s i n e s s and o t h e r clients o r c u s t o m e r s , [be] i n d e p e n d e n t o f t h e p r o s p e c t i v e A H S C c u s t o m e r and its m a n a g e m e n t p e r s o n n e l , a n d r e n d e r b o n a fide s e r v i c e s t o A H S C ' .
1 0

C r i t i c s o f t h e c r u s a d e a r g u e t h a t it has had the effect of h a m s t r i n g ing A m e r i c a n b u s i n e s s w h i l e G e r m a n c o m p e t i t o r s , for e x a m p l e , c a n c o n t i n u e t o m a k e c o r r u p t p a y m e n t s and claim t h e m a s tax d e d u c t i b l e e v e n w h e r e t h e y violate foreign laws. O t h e r c r i t i c s , most n o t a b l y R e i s m a n ( 1 9 7 9 ) , have a r g u e d t h a t t h e c r u s a d e has not c h a n g e d c o r r u p t b u s i n e s s p r a c t i c e s . B e q u a i ( 1 9 7 6 ) tells u s that the S E C h a s b e e n firing b l a n k s : W h o g e t s hurt in c o n s e n t s e t t l e m e n t s ? T h e S E C gets a n o t c h in its g u n . T h e law firm gets m o n e y , t h e p u b l i c i s h a p p y b e c a u s e they r e a d ' f r a u d ' i n t h e n e w s p a p e r and t h i n k c r i m i n a l i t y right a w a y . T h e c o m p a n y n e i t h e r a d m i t s n o r d e n i e s a n y t h i n g . It's t h e perfect a c c o m m o d a t i o n . A n d it's all o n e big c h a r a d e . 40

Bribery W h i l e B e q u a i ' s view is not w i t h o u t a grain of t r u t h , t h e value of c o n s e n t d e c r e e s for i n c a p a c i t a t i n g t h e offending c o r p o r a t i o n should n o t be f o r g o t t e n . W h e n I s p o k e to l a w y e r s at t h e A m e r i c a n H o s p i t a l S u p p l y C o r p o r a t i o n , I w a s p l e a s e d not to be in their s h o e s . If, a n y w h e r e in t h e w o r l d , A H S r e t a i n s a c o n s u l t a n t w h o is not "indep e n d e n t o f t h e p r o s p e c t i v e A H S C c u s t o m e r and its m a n a g e m e n t p e r s o n n e l ' t h e c o m p a n y can be c o n v i c t e d c r i m i n a l l y for b r e a c h of t h e d e c r e e . T h e U S g o v e r n m e n t d o e s not have t o p r o v e that the c o n s u l t a n t did a n y t h i n g i m p r o p e r . V a r i o u s p r o v i s i o n s o f t h i s sort i n t h e c o n s e n t o r d e r m a k e it a relatively s t r a i g h t f o r w a r d m a t t e r for the S E C to c o n v i c t t h e c o m p a n y on any future o c c a s i o n w h e n it has g r o u n d s to s u s p e c t t h a t a b r i b e has b e e n paid. Of course corrupt practices continue among many A m e r i c a n c o r p o r a t i o n s w h i c h are not u n d e r c o n s e n t d e c r e e s . A u s t r a l i a n p h a r m a c e u t i c a l e x e c u t i v e s r e p e a t e d l y told me t h a t a c o m p a n y cannot do business in Indonesia without making corrupt payments. A n A u s t r a l i a n e x e c u t i v e o f a n A m e r i c a n c o m p a n y with respons i b i l i t i e s for this r e g i o n said: ' T h e y m a k e all of these rules which c a n ' t really be a d h e r e d to but if we b r e a k t h e m w e ' r e on o u r own a n d t h e y will c o m e d o w n u p o n u s . ' A p e r s o n to w h o m this A u s t r a l i a n a n s w e r s at US h e a d q u a r t e r s of the same company made a s i m i l a r c o m m e n t , w h i l e t a k i n g a m o r e c h a r i t a b l e view of t h e p r o t e c t i o n s afforded t h e individual b y t h e c o m p a n y : "Subsidiary m a n a g e r s m u s t sign a d o c u m e n t saying no law v i o l a t i o n s o c c u r r e d to his k n o w l e d g e . B u t e v e r y o n e u n d e r s t a n d s that signing this d o c u m e n t i s o n e o f t h e r i s k s you t a k e . T h e c o r p o r a t i o n will try t o s t a n d b e h i n d y o u if it can. But t h e r e ' s a c h a n c e t h a t it w o n ' t be able to.' Yet a n o t h e r senior h e a d q u a r t e r s executive of the corporation d i s p l a y s t h e g a m e o f cat a n d m o u s e t h a t i s p l a y e d b e t w e e n the U S a n d t h e p e r i p h e r y o n this q u e s t i o n . I've only o n c e had o n e o f t h e s u b s i d i a r i e s c o m e to me with the q u e s t i o n of w h e t h e r a b r i b e should be paid to a g o v e r n m e n t official. He said to me t h a t it will t a k e 18 m o n t h s to get the d r u g r e g i s t e r e d if we d o n ' t pay t h e b r i b e and 6 m o n t h s i f w e d o . Of c o u r s e I had to a d v i s e him not to pay it. P r o b a b l y he had no i n t e n t i o n of p a y i n g it b u t w a s l o o k i n g to be a b l e to b l a m e h e a d q u a r t e r s for not g e t t i n g t h e d r u g r e g i s t e r e d quick e n o u g h . I f he h a d any i n t e n t i o n to pay t h e b r i b e he n e v e r would have m e n t i o n e d it to me in t h e first p l a c e .
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Bribery M o s t of the A m e r i c a n executives interviewed believed that the F o r e i g n C o r r u p t P r a c t i c e s A c t had s o m e , t h o u g h not necessarily a t o t a l , i n h i b i t i n g effect on t h e w i l l i n g n e s s of e m p l o y e e s to pass c o r r u p t p a y m e n t s , and t h a t i t t h e r e f o r e d i s a d v a n t a g e d A m e r i c a n b u s i n e s s i n c o m p e t i t i o n with E u r o p e a n a n d i n d i g e n o u s c o m p a n i e s . O n e c o n t r a r y view on t h e l a t t e r w a s e x p r e s s e d by a m a n a g e r in the Mexican subsidiary of an American corporation: O u r c o m p a n y policy i s not t o pay b r i b e s . B u t s o m e t i m e s i f you w a n t a p r i c e i n c r e a s e it is n e c e s s a r y . S o m e of t h e m they do ask for e x t r a m o n e y . T h i s is an unofficial p o s i t i o n , b u t the p h a r m a c e u t i c a l i n d u s t r y has t o pay b r i b e s like e v e r y o n e e l s e . J. B.: Do you think that American companies are disadvantaged compared to local firms! N o , i t i s local c o m p a n i e s which are d i s a d v a n t a g e d b e c a u s e they do n o t h a v e so m u c h m o n e y to pay b r i b e s . W i t h a large c o m p a n y it is e a s i e r to h a v e large a m o u n t s of m o n e y floating a r o u n d which is not r e c o r d e d in t h e b o o k s . E v e n in t h e m o s t c o r r u p t of e n v i r o n m e n t s it is p o s s i b l e , with d e t e r m i n a t i o n , t o resist c o r r u p t p a y m e n t s . M a n y e x e c u t i v e s c a n n o t , h o w e v e r , b e b o t h e r e d w i t h such d e t e r m i n a t i o n . I w o r k e d in M e x i c o for y e a r s and I l e a r n e d that you d o n ' t have to pay t h e i n f a m o u s m o r d i t a . Y o u m a k e t h e g r o u n d - r u l e s clear with t h e b u r e a u c r a t s from t h e b e g i n n i n g . Y o u tell t h e m t h a t you w o n ' t pay t h e m a n d hold firm to that line a l w a y s . Y o u k e e p ringing t h e m u p a b o u t w h a t you w a n t d o n e . Y o u k e e p o n their b a c k s until t h e y ' r e so fed up t h a t t h e y a g r e e to get you out of their hair so that t h e y h a v e m o r e t i m e t o w o r k o n p e o p l e w h o will pay. O n e executive explained an even more arduous alternative to c o r r u p t p a y m e n t s i n M e x i c o . W h e n w o r d w a s out that a n i n s p e c t o r w a s on his way to d e m a n d a p a y m e n t or t h e c l o s u r e of t h e p l a n t , e v e r y o n e w o u l d go h o m e for t h e a f t e r n o o n so that no o n e w a s t h e r e to t a l k to h i m . A M e x i c a n e x e c u t i v e of Lilly, w h i c h , we have s e e n , d o e s s e e m t o h a v e m a n a g e d t o avoid c o r r u p t p a y m e n t s m o r e t h a n m o s t A m e r i c a n c o m p a n i e s , e x p l a i n e d a third a l t e r n a t i v e . T h e y k n o w w e a r e f o r b i d d e n t o pay b r i b e s . I n s t e a d w e h a v e t o rely on f r i e n d s h i p with t h e m . We t a k e t h e m to the very best r e s t a u r a n t s . . . . A n d good w i n e . We h o p e t h a t they will g r a n t us a p p r o v a l s b e c a u s e w e are friends. 42

Bribery T h e r e is no q u e s t i o n t h a t in the five c o u n t r i e s w h e r e this study w a s c o n d u c t e d - G u a t e m a l a , M e x i c o , A u s t r a l i a , G r e a t B r i t a i n and t h e U n i t e d S t a t e s - c o r r u p t i o n can be successfully resisted. W h e t h e r t h i s w o u l d be t r u e of I n d o n e s i a , t h e P h i l i p p i n e s , Saudi A r a b i a , or a n u m b e r of o t h e r c o u n t r i e s i n f a m o u s for t h e i r c o r r u p t i o n is a m o r e difficult q u e s t i o n . W h a t n e e d s to be o v e r c o m e is t h e sense of nihilism c o n v e y e d by w r i t e r s such a s R e i s m a n (1979) a b o u t t h e impossibility o f cont r o l l i n g c o r r u p t i o n . We often lose sight of the fact t h a t b u s i n e s s p e o p l e do not g e n e r a l l y like to pay b r i b e s . C e r t a i n l y , m i n o r "facilit a t i n g p a y m e n t s ' m i g h t often be seen as t h e only way o f t u r n i n g the w h e e l s o f s o m e h o p e l e s s l y clogged b u r e a u c r a c i e s . B u t a s well a s p r o d u c i n g c e r t a i n b e n e f i t s , bribery e n t a i l s definite costs. I n m a n y c i r c u m s t a n c e s it is p o s s i b l e for p u b l i c policy i n t e r v e n t i o n s to m a r g i n a l l y i n c r e a s e t h e costs o f b r i b e r y t o the point w h e r e t h e s e c o s t s a r e no l o n g e r p e r c e i v e d as less t h a n the benefits. I n d e e d in s o m e c i r c u m s t a n c e s this has a l r e a d y h a p p e n e d . First, let us c o n s i d e r t h e s e c o s t s . R e i s m a n (1979) himself has c o n c e d e d t h a t c o n t r a c t s w o n b y b r i b e s are less secure t h a n t h o s e h o n e s t l y w o n b e c a u s e a n e w r e g i m e s w e p t to p o w e r in a c a m p a i g n a g a i n s t t h e c o r r u p t i o n of its p r e d e c e s s o r m i g h t feel justified in r e n e g i n g . S o m e p h a r m a c e u t i c a l c o m p a n i e s will find i t very m u c h h a r d e r t h a n o t h e r s t o r e s t a r t o p e r a t i o n s i n I r a n , and s o m e may n e v e r get in. T h e s e a r e m a t t e r s o f g r e a t m o m e n t t o the c o m p a n i e s . T h e r e h a v e e v e n b e e n s u g g e s t i o n s t h a t c o r r u p t i o n i n the pharm a c e u t i c a l i n d u s t r y w a s a c o n t r i b u t i n g factor, albeit a m i n o r o n e , to t h e r e v o l u t i o n i n I r a n . P r i o r t o t h e r e v o l u t i o n , I r a n ' s former M i n i s t e r o f H e a l t h , D r S h a i k o l E s l a m i z a d e h , t o g e t h e r with his d e p u t y - m i n i s t e r and p e r s o n a l a s s i s t a n t , w a s a r r e s t e d o n c h a r g e s o f c o r r u p t i o n . T h e i n t e r n a t i o n a l p h a r m a c e u t i c a l industry n e w s h e e t S C R I P r e p o r t e d a t t h e t i m e (23 S e p t e m b e r 1978): T h e f o r m e r m i n i s t e r , w h o r e s i g n e d several m o n t h s a g o , i s said t o h a v e h e l p e d c o n t r i b u t e t o t h e c o u n t r y ' s r e c e n t social d i s c o n t e n t b y his h a n d l i n g o f t h e n a t i o n a l h e a l t h i n s u r a n c e s c h e m e . A c c o r d i n g t o n e w s p a p e r r e p o r t s , h e i s a l l e g e d t o have a c c e p t e d b r i b e s in r e t u r n for limiting t h e r a n g e of d r u g s which d o c t o r s c o u l d p r e s c r i b e , and p u b l i c i n d i g n a t i o n a t this alleged c o r r u p t i o n is r e p o r t e d to be o n e o f t h e c a u s e s o f t h e r e c e n t riots in T e h e r a n . M o r e s i m p l y , b r i b e s eat into profits, e v e n p e r s o n a l e x p e n s e a c c o u n t s , in t h e s a m e way as any cost of d o i n g b u s i n e s s . In the
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Bribery p h a r m a c e u t i c a l i n d u s t r y we h a v e seen that b r i b e s can be as high as 20 p e r c e n t of t h e total price for a c o n t r a c t . T h i s is not a trivial c o n s i d e r a t i o n c o n s i d e r i n g that tax is (or s h o u l d be) also paid on the a m o u n t . If d i s c o v e r e d , b r i b e s can t a r n i s h the p u b l i c image of a c o r p o r a t i o n , not j u s t in a small T h i r d - W o r l d m a r k e t w h e r e the bribe is p a i d , but i n t e r n a t i o n a l l y , and most i m p o r t a n t l y , in the biggest m a r k e t o f t h e m all. t h e U n i t e d S t a t e s . I t i s r i d i c u l o u s t o a r g u e that t r a n s n a t i o n a l c o r p o r a t i o n s are not c o n c e r n e d a b o u t their public i m a g e s , b e c a u s e t h e y all s p e n d small f o r t u n e s on a t t e m p t s to e n h a n c e t h e m . W e see t h e e x t r e m e m a n i f e s t a t i o n o f t h i s with Lilly, w h i c h has s h u n n e d c e r t a i n c o r r u p t m a r k e t s i n the T h i r d W o r l d r a t h e r t h a n risk c o m p r o m i s i n g that r e p u t a t i o n for p r o p r i e t y and e x c e l l e n c e w h i c h i n m a n y y e a r s has m a d e i t n u m b e r o n e o r n u m b e r t w o i n p h a r m a c e u t i c a l sales within t h e U S . " F o r t h e e x e c u t i v e w h o has b e e n t r a i n e d t o find t h e m o s t efficient, l e a s t risky w a y of a c h i e v i n g a g o a l , b r i b e r y is, for all o f t h e r e a s o n s c o n s i d e r e d a b o v e , a distasteful last r e s o r t . Little w o n d e r that w h e n Fortune Magazine ( O c t . 1977: 128-96) p u b l i s h e d an 'investability i n d e x ' for A s i a n c o u n t r i e s o n e o f t h e n e g a t i v e factors i n t h e index w a s a five-point scale e s t i m a t i n g d e g r e e of c o r r u p t i o n . B e c a u s e t h e c o s t s o f c o r r u p t i o n are s u b s t a n t i a l w h e n m e a s u r e d a g a i n s t its b e n e f i t s , t h e F o r e i g n C o r r u p t P r a c t i c e s A c t of 1977 p e r h a p s has i n s o m e m a r k e t s t i p p e d t h e b a l a n c e o f costs o v e r b e n e f i t s . N o c o r p o r a t i o n w a n t s t h e publicity o f a n early s h o w c a s e p r o s e c u t i o n u n d e r t h e A c t . P e r h a p s t h e risk o f t h i s i s s m a l l , but i t still l o o m s large in t h e subjective cost-benefit c a l c u l a t i o n s of e x e c u t i v e s . M o r e i m p o r t a n t has b e e n t h e i m p a c t o n i n d i v i d u a l s w h o h a v e b e e n r e n d e r e d v u l n e r a b l e by the r e q u i r e m e n t t h a t they sign a s t a t e m e n t e a c h y e a r t h a t n o p a y m e n t s have b e e n m a d e . T h e y k n o w t h i s sets t h e m up as s c a p e g o a t s for t h e c o r p o r a t i o n , so that e v e n w h e r e t h e benefits o f b r i b e r y for t h e c o r p o r a t i o n e x c e e d the c o s t s , t h e s u b s i d i a r y m a n a g e r m i g h t well d e c i d e t h a t for him or her pers o n a l l y t h e b e n e f i t s d o not e x c e e d the c o s t s . O f c o u r s e m a n a g e r s can only afford this ' i r r a t i o n a l ' c h o i c e if t h e i r o w n sales p e r f o r m a n c e is h e a l t h y a n d not u n d e r q u e s t i o n b y h e a d q u a r t e r s . A s u b s i d i a r y m a n a g e r t h r e a t e n e d w i t h d i s m i s s a l , loss of a p e r f o r m a n c e b o n u s , or m i s s i n g a p r o m o t i o n m i g h t d e c i d e t h a t a bribe is w o r t h the risk p e r s o n a l l y , e v e n t h o u g h for t h e c o r p o r a t i o n the benefit d o e s not justify this risk. B u t e v e n in this l a t t e r situation t h e s t a t e m e n t to be s i g n e d is still likely to be s o m e d i s i n c e n t i v e against t a k i n g such a c o u r s e . E v e r y e x e c u t i v e with w h o m I d i s c u s s e d this m a t t e r felt
12 1 2

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Bribery signing that piece of paper increased their personal vulnerability to some extent. P e o p l e in t h e i n t e r n a t i o n a l d i v i s i o n s of b o t h an A m e r i c a n and a E u r o p e a n c o m p a n y , w h o s e j o b i t i s t o k e e p i n t o u c h with such m a t t e r s , told m e t h a t i n c e r t a i n m a r k e t s w h e n the E u r o p e a n c o m p a n i e s had seen t h e A m e r i c a n s begin to refuse to pay b r i b e s w i t h o u t d r a s t i c c o n s e q u e n c e s , they had struck a g r e e m e n t that for c e r t a i n t y p e s of p a y m e n t s all t h e t r a n s n a t i o n a l s w o u l d a d o p t a uniform s t a n d in refusing to pay b r i b e s . O n e w o u l d have to go to t h e s e c o u n t r i e s and c h e c k t h e s i t u a t i o n o n t h e g r o u n d before a c c e p t i n g t h a t this really w a s h a p p e n i n g . N e v e r t h e l e s s , even in M e x i c o , I w a s told t h a t w h e n s o m e A m e r i c a n c o m p a n i e s t o o k a stand against c e r t a i n p a y m e n t s , such a s t o i n s p e c t o r s , s o m e E u r o p e a n c o m p a n i e s followed suit. T h e g e n e r a l m a n a g e r o f o n e t r a n s n a t i o n a l i n M e x i c o e x p r e s s e d c y n i c i s m , h o w e v e r , a b o u t o v e r t u r e s which had b e e n m a d e t o h i m c o n c e r n i n g t h e a d o p t i o n o f a n o r g a n i s e d front a g a i n s t bribery by the transnationals. P e o p l e will a l w a y s b r e a k r a n k s . We all a g r e e d h e r e in M e x i c o not to sell to t h e g o v e r n m e n t at less t h a n cost. T h a t s e e m s to be in e v e r y o n e ' s i n t e r e s t . B u t I had t h r e e t o n s of [a c e r t a i n d r u g ] w h i c h w a s d u e for e x p i r y . I had to u n l o a d it by selling b e l o w cost or d e s t r o y it. T h e o t h e r c o m p a n i e s got very a n g r y with me for b r e a k i n g t h e r u l e s . B u t w h a t could I d o . I w o u l d have had to destroy the three tons. I give y o u a n o t h e r e x a m p l e . I sell [a c e r t a i n d r u g ] at b e l o w cost to t h e g o v e r n m e n t s o g o v e r n m e n t d o c t o r s will p r e s c r i b e o u r [ p r o d u c t ] for t h e i r p a t i e n t s . I f t h e p a t i e n t feels t h e drug helps him to get b e t t e r he will ask for o u r t r a d e n a m e a g a i n from t h e p h a r m a c i s t or t a k e t h e b o t t l e to the p h a r m a c i s t . Y o u see I w a s selling b e l o w cost for p r o m o t i o n . In a s t a t e m e n t w h i c h w a s also i n t e r e s t i n g from an a n t i t r u s t viewp o i n t , he w e n t on to a r g u e t h a t no m a t t e r h o w strongly in the i n t e r e s t s o f t h e c o m p a n i e s a uniform stand is, t h e r e will a l w a y s be i n d i v i d u a l c o m p a n i e s w h o will have e v e n s t r o n g e r c o m m e r c i a l r e a s o n s for b r e a k i n g t h e a g r e e m e n t . In c o n c l u s i o n , t h e US c r u s a d e against b r i b e r y in the 1970s must be j u d g e d t o have had s o m e positive effects. T h e claims o f s o m e W a s h i n g t o n l o b b y i s t s t h a t t h e c r u s a d e has lost A m e r i c a n industry m a n y billions of dollars to overseas c o m p e t i t o r s is exaggerated because:
45

Bribery ( a ) T h e d e t e r r e n t effects o f t h e c r u s a d e w e r e r e a l , but not a s great as that. (b) A g r e a t p r o p o r t i o n o f t h e d o c u m e n t e d cases o f b r i b e r y i n v o l v e d b r i b e s b y o n e A m e r i c a n t r a n s n a t i o n a l t o take b u s i n e s s a w a y from a n o t h e r A m e r i c a n t r a n s n a t i o n a l . (c) M a n y o t h e r p a y m e n t s w e r e not t o a t t r a c t b u s i n e s s from o n e c o m p a n y t o a n o t h e r but t o get g o v e r n m e n t a p p r o v a l s , bribe p o l i t i c i a n s , r e d u c e t a x e s , etc. I n d e e d , t h e r e h a v e b e e n m a n y c a s e s w h e r e A m e r i c a n and E u r o p e a n c o m p a n i e s have p o o l e d t h e i r b r i b e s to a c h i e v e s o m e collective p u r p o s e for the i n d u s t r y as a w h o l e . " (d) To the extent that A m e r i c a n c o m p a n i e s have adopted new s t a n d a r d s , E u r o p e a n c o m p a n i e s have a t least i n s o m e m e a s u r e followed t h e i r lead. ( e ) T h e v a r i o u s costs o f b r i b e r y discussed i n this c h a p t e r m e a n t h a t in m a n y c a s e s b r i b e s c o n f e r only a m a r g i n a l benefit on t h e c o m p a n y . I n s o m e cases b r i b e s which w o u l d not have b e e n i n t h e l o n g - t e r m i n t e r e s t o f t h e c o m p a n y may e v e n have b e e n d e t e r r e d . All c o m p a n i e s h a v e an i n t e r e s t in not h a v i n g to pay b r i b e s . I t s h o u l d also b e p o i n t e d out that t r a n s n a t i o n a l c o m p a n i e s , and t h a t m e a n s A m e r i c a n c o m p a n i e s m a i n l y , h a v e a peculiar interest i n s t r e n g t h e n i n g t h e w h o l e w o r l d e c o n o m y . B r i b e r y w e a k e n s econo m i e s . I t t e n d s t o k e e p c o r r u p t b u r e a u c r a t s and p o l i t i c i a n s i n p o w e r a h e a d o f c o m p e t e n t o n e s . " I t confers b u s i n e s s a d v a n t a g e t o the c o m p a n y w h i c h pays t h e biggest b r i b e r a t h e r t h a n t o the c o m p a n y w h i c h is m o s t efficient. To t h e e x t e n t that efficiency r e p l a c e s c o r r u p t n e s s as t h e c r i t e r i o n of success in b o t h b u s i n e s s and g o v e r n m e n t a d m i n i s t r a t i o n , e c o n o m i c g r o w t h will result. This may b e one r e a s o n w h y t h e m o s t c o r r u p t c o u n t r i e s o f t h e world r e m a i n a m o n g the most impoverished.'" T h e U S c r u s a d e a g a i n s t b r i b e r y has p r o m p t e d m o r e stringent s c r u t i n y of s t a n d a r d s of c o r p o r a t e p r o p r i e t y in a wide r a n g e of a r e a s b e y o n d j u s t b r i b e r y . T h i s influence has also b e e n w o r l d w i d e r a t h e r t h a n limited t o t h e U n i t e d S t a t e s . T h e s e t w o p o i n t s w e r e b o r n e o u t in t h e following c o m m u n i c a t i o n I r e c e i v e d from a s e n i o r m a n a g e r in one of A u s t r a l i a ' s largest c o m p a n i e s : T h e s t r o n g e s t s u p p o r t t h a t i n t e r n a l audit has r e c e i v e d i n r e c e n t t i m e s has b e e n t h e e n a c t m e n t i n the U S o f t h e F o r e i g n C o r r u p t P r a c t i c e s A c t of 1977. T h i s A c t , which I am sure you have 46

Bribery studied, requires a m o n g other things that companies maintain a s y s t e m o f i n t e r n a l c o n t r o l s and that t h e r e are m e c h a n i s m s i n place t o e n s u r e t h a t d i r e c t o r s are able t o a s s u r e t h e m s e l v e s t h a t r e g u l a t i o n s for w h i c h they a r e r e s p o n s i b l e a r e , in fact, being carried out. T o m e e t any o b l i g a t i o n s u n d e r this A c t , m o s t U S c o m p a n i e s h a v e , on a c o s t / b e n e f i t b a s i s , d e c i d e d to s t r e n g t h e n their internal a u d i t f u n c t i o n s and e n s u r e g r e a t e r c o - o p e r a t i o n b e t w e e n t h e i n t e r n a l a u d i t and e x t e r n a l a u d i t o r s . T h i s has m e a n t t h a t internal a u d i t o r o r g a n i s a t i o n s have had to look to i n c r e a s i n g their standards of professional practice.

The UN crusade against bribery
T h e U S and S w e d e n are e n t i t l e d t o feel s o m e r e s e n t m e n t t h a t they a p p l y t h e i r laws a g a i n s t c o r r u p t i o n e x t r a t e r r i t o r i a l l y while t h e rest o f t h e w o r l d d o e s n o t . " T h e U n i t e d N a t i o n s r e s p o n s e has b e e n t o try to p r e v e n t t h e US from r e t r e a t i n g from its p o s i t i o n of l e a d e r s h i p a g a i n s t c o r r u p t i o n b y a t t e m p t i n g t o p u s h t h e s t a n d a r d s o f t h e rest o f t h e w o r l d u p t o t h o s e o f t h e U S . H e n c e w e have seen t h e c u r i o u s a l l i a n c e o f t h e T h i r d W o r l d , w h o c o r r e c t l y see t h e m s e l v e s a s t h e m a j o r v i c t i m s o f c o r r u p t i o n , being s u p p o r t e d b y t h e U S a g a i n s t o p p o s i t i o n from E u r o p e a n n a t i o n s in its efforts to i n s t i t u t e a m e a n i n g f u l i n t e r n a t i o n a l A g r e e m e n t o n Illicit P a y m e n t s . W o r k o n t h e a g r e e m e n t has b e e n t h e r e s p o n s i b i l i t y o f t h e U n i t e d Nations Commission on Transnational Corporations ( E C O S O C , 1979; A s a n t e , 1979). J o i n t l y with t h i s , t h e C o m m i s s i o n i s w o r k i n g o n a w i d e r ' C o d e o f C o n d u c t for T r a n s n a t i o n a l C o r p o r a t i o n s ' which will p r o b a b l y i n c l u d e p r o v i s i o n s on n o n - i n t e r f e r e n c e in internal p o l i t i c a l affairs, a b s t e n t i o n from c o r r u p t p r a c t i c e s , transfer p r i c i n g , r e s t r i c t i v e b u s i n e s s p r a c t i c e s , c o n s u m e r p r o t e c t i o n and e n v i r o n mental protection (UN Commission on Transnational Corporations, 1978,1979). A crucial q u e s t i o n is w h e t h e r t h e s e i n t e r n a t i o n a l a g r e e m e n t s can d o m u c h m o r e t h a n d e p e n d o n i n d i v i d u a l n a t i o n s t o e n f o r c e the a g r e e m e n t . T h e y c a n , o f c o u r s e , foster m u t u a l assistance i n investig a t i o n , e x t r a d i t i o n , a n d o t h e r m e a s u r e s t o e n s u r e t h a t every act o f i n t e r n a t i o n a l b r i b e r y is p u n i s h a b l e u n d e r s o m e set of n a t i o n a l laws r a t h e r t h a n b e i n g a l l o w e d t o fall b e t w e e n t h e i n t e r s t i c e s a m o n g t h e m . M a n y h o p e , h o w e v e r , particularly with the broader Code of 47

Bribery C o n d u c t , t h a t p r o v i s i o n will be m a d e for a c t i o n by the i n t e r n a t i o n a l c o m m u n i t y as a w h o l e against a t r a n s n a t i o n a l c o r p o r a t i o n in violation o f t h e c o d e . T h e r e has b e e n significant s u p p o r t for t h e p r o p o s i t i o n that s t a t e s , t r a d e u n i o n s , c o n s u m e r g r o u p s and o t h e r b o d i e s should b e able t o b r i n g c o m p l a i n t s a g a i n s t a t r a n s n a t i o n a l c o r p o r a t i o n to a U n i t e d N a t i o n s p a n e l . U n d e r the w e a k e s t o p t i o n , t h e panel w o u l d simply r e a c h a d e t e r m i n a t i o n on the c o m p l a i n t . If it w e r e d e c i d e d that the t r a n s n a t i o n a l c o r p o r a t i o n had v i o l a t e d t h e c o d e , t h e panel w o u l d w i d e l y p u b l i c i s e this fact in t h e h o p e t h a t such a d v e r s e publicity w o u l d act as a d e t e r r e n t . T h e p a n e l could issue a call for the b l a c k l i s t i n g ' o f c e r t a i n activities o r p r o d u c t s o f t h e c o r p o r a t i o n b y m e m b e r states, the international trade union m o v e m e n t or the i n t e r n a t i o n a l c o n s u m e r m o v e m e n t . A call could be issued for t h e d e n i a l of t h e validity of all c o n t r a c t s of a c e r t a i n form with the t r a n s n a t i o n a l . P a r t i e s w h i c h r e n e g e d o n such c o n t r a c t s could t h e n p o s s i b l y be e x e m p t e d from liability. U n d e r s t r o n g e r o p t i o n s n a t i o n a l a u t h o r i t i e s could b e asked b y the p a n e l t o i m p o s e s a n c t i o n s w h i c h w o u l d r a n g e from "penal s a n c t i o n s , t o w i t h d r a w a l o f g o v e r n m e n t p r i v i l e g e s ( n o c o n t r a c t i n g , e t c . ) . t o tax and regulatory m e a s u r e s ' ( U N Commission on Transnational C o r p o r a t i o n s , D e c e m b e r 1978).
H

A n a p p r o p r i a t e legal link w o u l d h a v e t o b e e s t a b l i s h e d b e t w e e n t h e d e c i s i o n at the i n t e r n a t i o n a l level and its e x e c u t i o n ( a d m i n i s t r a t i o n of s a n c t i o n s ) at t h e n a t i o n a l level. A legally b i n d i n g u n d e r t a k i n g b y t h e S t a t e s a d o p t i n g t h e C o d e would b e t h e m o s t effective such link. An u n d e r t a k i n g on a n o n - b i n d i n g b a s i s w o u l d p r o b a b l y be h o n o u r e d by S t a t e s in a large n u m b e r of c a s e s , b u t t h e c e r t a i n t y o f t h e link b e t w e e n decision and s a n c t i o n would diminish (UN Commission on Transnational C o r p o r a t i o n s , D e c e m b e r 1978: 2 3 ) . I n m a n y s i t u a t i o n s s t a t e s a d o p t i n g t h e c o d e w o u l d i g n o r e nonb i n d i n g u n d e r t a k i n g s . H o w e v e r , i t i s not u n r e a l i s t i c t o e x p e c t that p o l i t i c a l l y a s t u t e r e c o m m e n d a t i o n s for s a n c t i o n w o u l d be acted u p o n . I m a g i n e , for e x a m p l e , i f U n i t e d B r a n d s had b e e n b r o u g h t b e f o r e a UN p a n e l in c o n n e c t i o n with its a g r e e m e n t to pay a S2.5 million bribe to the H o n d u r a n Finance Minister. The purpose of t h i s c e l e b r a t e d c o r r u p t p a y m e n t w a s t o e n t i c e the F i n a n c e M i n i s t e r t o u n d e r c u t t h e tax r a t e o n b a n a n a s p r e v a i l i n g a m o n g the U n i o n d e P a i s e s E x p o r t a d o r e s d e B a n a n o ( U P E B ) . O n e w o u l d expect that a 48

Bribery r e c o m m e n d a t i o n by a UN panel that the U P E B countries ( H o n d u r a s , C o s t a R i c a , P a n a m a , G u a t e m a l a , and C o l o m b i a ) s a n c t i o n U n i t e d B r a n d s by all i n c r e a s i n g their b a n a n a tax by a c e r t a i n p e r c e n t a g e w o u l d have b e e n well r e c e i v e d b y t h o s e count r i e s . S a n c t i o n s w h i c h m a k e m o n e y for g o v e r n m e n t s are b o u n d t o b e m o r e a t t r a c t i v e t h a n t r a d e b a n s w h i c h only hurt the victim further. R e i s m a n ( 1 9 7 9 : 157) reflects t h e cynicism a b o u t the U N c r u s a d e w h i c h i s w i d e s p r e a d a m o n g W e s t e r n i n t e l l e c t u a l s w h e n h e says: A n i n t e r n a t i o n a l p r o s e c u t o r and a n i n t e r n a t i o n a l court w h o s e writ ran t o all c o r n e r s o f t h e w o r l d could m a k e a n i n t e r n a t i o n a l a g r e e m e n t e f f e c t i v e ; but n e i t h e r exists n o r is likely to be c r e a t e d . . . . ' S u r e l y it c a n n o t b e a c c e p t e d t h a t i n t e r n a t i o n a l initiatives against A p a r t h e i d or acts of a g g r e s s i o n are i n e v i t a b l y ineffective if they fall short of "a c o u r t w h o s e writ ran to all c o r n e r s of t h e w o r l d ' . I n t e r n a t i o n a l affairs is such a c o m p l e x b u s i n e s s t h a t it is naive to limit the possib i l i t i e s for c o n s t r u c t i v e i n t e r v e n t i o n to w h o l e s a l e legal h e g e m o n y . A UN p a n e l c o n s t i t u t e d as a c o u n t e r v a i l i n g force against the o c c a s ional v i o l a t i o n s of a c o d e by t r a n s n a t i o n a l c o r p o r a t i o n s c o u l d , if its m e m b e r s w e r e s o p h i s t i c a t e d d i p l o m a t s , c o n s t r u c t i v e l y affect the c o u r s e of e v e n t s . T h e n e e d for such a p a n e l is part of a w i d e r n e e d for an i n t e r n a t i o n a l i s a t i o n of t r a d e u n i o n i s m and an i n t e r n a t i o n a l i s a t i o n of c o n s u m e r i s m as c o u n t e r v a i l i n g forces against t h e intern a t i o n a l i s a t i o n of c a p i t a l . It is of c o u r s e foolish to expect that such i n t e r n a t i o n a l i n s t i t u t i o n s o f c o u n t e r v a i l i n g p o w e r w o u l d significantly turn the course o f t h e world e c o n o m i c system. N e v e r t h e l e s s , s u b t l e and small c o n t a i n m e n t s o f t h e a b u s e o f e c o n o m i c p o w e r might be achieved. A UN p a n e l w h i c h had only t h e p o w e r of publicity w o u l d have v a l u e . I n d e e d a c a s e can be s u s t a i n e d t h a t a d v e r s e publicity is a m o r e effective c o n s t r a i n t o n c o r p o r a t e a b u s e s than law (see F i s s e , 1 9 7 1 ; B r a i t h w a i t e , 1979a). C e r t a i n l y this i s t h e view o f b u s i n e s s p e o p l e t h e m s e l v e s . In a s u r v e y of 531 t o p and m i d d l e US m a n a g e r s , t h e O p i n i o n R e s e a r c h C o r p o r a t i o n found that 9 2 per cent o f t h e r e s p o n d e n t s did not b e l i e v e t h a t legislation w o u l d effectively stop b r i b e r y of foreign officials, b u t t h e r e w a s c o n s i d e r a b l e s u p p o r t for t h e p r e v e n t a t i v e e f f e c t i v e n e s s o f publicity ( O p i n i o n R e s e a r c h Corp o r a t i o n . 1975; A l l e n . 1976). A Harvard Business Review survey of r e a d e r s ( B r e n n e r and M o l a n d e r . 1977) found t h a t a m o n g r e s p o n d e n t s w h o t h o u g h t that e t h i c a l s t a n d a r d s in b u s i n e s s had i m p r o v e d o v e r the past fifteen 49

Bribery y e a r s , t h e t h r e e factors which w e r e most often higher standards were, in order of importance: listed as c a u s i n g

P e r c e n t a g e of respondents listing factor Public disclosure: publicity; media coverage; better communication Increased public c o n c e r n ; public a w a r e n e s s , c o n s c i o u s n e s s , and s c r u t i n y ; b e t t e r informed p u b l i c ; societal p r e s s u r e s G o v e r n m e n t r e g u l a t i o n , l e g i s l a t i o n , and i n t e r v e n t i o n ; federal c o u r t s 10 31

20

F o r m e r F o r d P r e s i d e n t , Arjay M i l l e r o n c e a r g u e d that the calcul a t i n g , p r o f i t - m a x i m i s i n g b u s i n e s s m a n w o u l d be irrational to be o v e r l y w o r r i e d a b o u t t h e c o n s t r a i n t s i m p o s e d b y t h e law w h e n h e offered t h e a d v i c e ; ' D o t h a t w h i c h you w o u l d feel c o m f o r t a b l e e x p l a i n i n g o n t e l e v i s i o n ' ( q u o t e d b y B y r o n . 1977). W h a t the U n i t e d N a t i o n s C o m m i s s i o n o n T r a n s n a t i o n a l C o r p o r a t i o n s can realistically h o p e t o a c h i e v e i s p u t t i n g t r a n s n a t i o n a l c o r p o r a t e c r i m e o n world television.

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SOME CASE STUDIES
E a c h y e a r in t h e U n i t e d S t a t e s a q u a r t e r of a million p e o p l e and m a n y m i l l i o n s o f a n i m a l s a r e e x p e r i m e n t e d u p o n with new d r u g s ( S u b c o m m i t t e e on H e a l t h , 1976a: P a r t I I , 3 3 6 ) . T h e great cost of t h i s e x p e r i m e n t a t i o n in suffering and m o n e y can only be justified if d a t a c o l l e c t i o n and i n t e r p r e t a t i o n a r e h o n e s t and o b j e c t i v e . R e g r e t t a b l y , r e s e a r c h e r s r e t a i n e d b y t h e p h a r m a c e u t i c a l industry have not a l w a y s m e t t h e s e s t a n d a r d s . All o f f o r m e r F D A C o m m i s s i o n e r G o d d a r d ' s s u c c e s s o r s have r e p e a t e d before C o n g r e s s i o n a l h e a r i n g s t h e c o n c e r n s o v e r r e s e a r c h e r d i s h o n e s t y first e x p r e s s e d b y G o d d a r d at a P h a r m a c e u t i c a l M a n u f a c t u r e r s A s s o c i a t i o n M e e t i n g in 1966 ( S u b c o m m i t t e e o n H e a l t h , 1976: P a r t I I , 157). I h a v e b e e n s h o c k e d at t h e m a t e r i a l s that c o m e in. In a d d i t i o n to t h e p r o b l e m o f q u a l i t y , t h e r e i s t h e p r o b l e m o f d i s h o n e s t y i n the i n v e s t i g a t i o n a l n e w d r u g u s a g e . I will a d m i t t h e r e are grey a r e a s i n t h e I N D s i t u a t i o n , but t h e c o n s c i o u s w i t h h o l d i n g o f u n f a v o r a b l e a n i m a l clinical d a t a is not a grey m a t t e r . T h e d e l i b e r a t e c h o i c e o f clinical i n v e s t i g a t o r s k n o w n t o b e m o r e c o n c e r n e d a b o u t i n d u s t r y friendships t h a n i n d e v e l o p i n g good d a t a is not a grey a r e a m a t t e r . T h e p l a n t i n g in j o u r n a l s of articles t h a t b e g i n to c o m m e r c i a l i z e w h a t is still an i n v e s t i g a t i o n a l n e w d r u g is not a grey m a t t e r a r e a . T h e s e a c t i o n s run c o u n t e r to the law a n d t h e efforts [sic] g o v e r n i n g d r u g i n d u s t r y . Dr Ley. G o d d a r d ' s i m m e d i a t e successor at the helm o f t h e F D A . told h e a r i n g s before t h e U S S e n a t e ( U S S e n a t e . 1969) o f o n e spot
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c h e c k w h i c h t u r n e d up the c a s e of an a s s i s t a n t professor of m e d i c i n e w h o had r e p u t e d l y t e s t e d t w e n t y - f o u r d r u g s for nine different c o m p a n i e s . " P a t i e n t s w h o died while o n clinical trials w e r e not r e p o r t e d to the sponsor', an audit revealed. 'Dead people were listed as s u b j e c t s of t e s t i n g . P e o p l e r e p o r t e d as subjects of t e s t i n g w e r e not in t h e h o s p i t a l at t h e t i m e of t h e t e s t s . P a t i e n t c o n s e n t f o r m s b o r e d a t e s i n d i c a t i n g t h e y w e r e signed b y t h e subjects after t h e s u b j e c t s d i e d . ' A c o m m e r c i a l d r u g - t e s t i n g firm which had o s t e n s i b l y w o r k e d on 82 d r u g s for 28 s p o n s o r s was the subject of a n o t h e r audit. P a t i e n t s w h o d i e d , left t h e h o s p i t a l o r d r o p p e d out o f t h e study w e r e r e p l a c e d by o t h e r p a t i e n t s in t h e tests w i t h o u t notification in the records. Forty-one patients reported as participating in s t u d i e s w e r e d e a d or not in t h e h o s p i t a l d u r i n g the s t u d i e s . . . . R e c o r d - k e e p i n g , s u p e r v i s i o n and o b s e r v a t i o n o f p a t i e n t s i n g e n e r a l w e r e grossly i n a d e q u a t e . L e t t e r s from clinical i n v e s t i g a t o r s t o their s p o n s o r i n g drug c o m p a n i e s r e v e a l s o m e t h i n g o f t h e way c o m m e r c i a l factors i n t r u d e into w h a t s h o u l d b e i n d e p e n d e n t o b j e c t i v e r e s e a r c h . T h e following l e t t e r w a s sent by a d r u g - t e s t i n g d o c t o r to Dr N e l s o n C a n t w e l l of Merck: Dear Nelson, T h e e n c l o s e d l e t t e r is from a very fine p a t i e n t . I t h o u g h t y o u w o u l d be i n t e r e s t e d in h e r very vivid and a r t i c u l a t e d e s c r i p t i o n o f t h e a d v e r s e s y m p t o m s she e n c o u n t e r e d with Indomethacin. I w o u l d e m p h a s i z e t h a t t h e s e do not a l a r m me nor i n d i c a t e any e v i d e n c e of o r g a n i c d a m a g e but 1 am afraid t h e y will offer s o m e p r a c t i c a l p r o b l e m s i n m a r k e t i n g this d r u g . N e e d l e s s to say, I am very grateful for all o f y o u r kind efforts in r e g a r d to my trip to J a p a n . I'll look f o r w a r d to s e e i n g y o u on my r e t u r n . I think we m u s t get t o g e t h e r and p l a n o n p u b l i s h i n g s o m e o f t h e d a t a which w e h a v e c o l l e c t e d . B e s t r e g a r d s a l w a y s ( U S S e n a t e , 1969: P a r t 8 , 3453). T h e f o l l o w i n g d o c t o r , with his 'fingers c r o s s e d ' h o p i n g for results f a v o u r a b l e to t h e c o m p a n y , also s e e m s to manifest a b i a s e d a t t i t u d e in his l e t t e r to M e r c k :
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I r e c e i v e d y o u r l e t t e r this m o r n i n g and w a n t to t h a n k you for s u g g e s t i n g a g r a n t for t h e r h e u m a t o l o g y s e c t i o n at t h e U n i v e r s i t y [a large s t a t e u n i v e r s i t y ] . Since you w e r e h e r e we h a v e s t a r t e d a n u m b e r of n e w p a t i e n t s o n i n d o m e t h a c i n ( t h e L X c a p s u l e s ) . A t least t h r e e o f t h e p a t i e n t s c o m p l a i n e d of s e v e r e e p i g a s t r i c d i s t r e s s within 30 m i n u t e s after t a k i n g t h e c a p s u l e . T h e r e f o r e , in t h e next few subjects we started t h e m o u t on 1 c a p s u l e twice a day i n c r e a s i n g 1 c a p s u l e daily until t h e y r e a c h e d t h e m a x i m u m 6 c a p s u l e s and b e l i e v e it or not we e n c o u n t e r e d no d i s t r e s s . This is t h e m e t h o d we will follow for t h e t i m e b e i n g , w i t h o u r f i n g e r s c r o s s e d (US S e n a t e , 1969: P a r t II. 461). D r S t a n l e y W . J a c o b o f t h e U n i v e r s i t y o f O r e g o n M e d i c a l School w a s h i r e d b y R e s e a r c h I n d u s t r i e s I n c . t o m o n i t o r t w o safety tests o n a n e w d r u g for i n f l a m m a t i o n o f t h e b l a d d e r . In 1979, w h e n t h e F D A i n v e s t i g a t e d i r r e g u l a r i t i e s in t h e d a t a c o l l e c t e d in t h e s e s t u d i e s , it was found that Dr J a c o b owned about $600,000 w o r t h of R e s e a r c h I n d u s t r i e s stock ( M c T a g g a r t , 1980: 176). I n t h e t h r e e y e a r s 1977-80 t h e F D A c l a i m s t o h a v e d i s c o v e r e d a t least 6 2 d o c t o r s w h o had s u b m i t t e d m a n i p u l a t e d o r d o w n r i g h t falsified clinical d a t a . Dr R o n a l d C. S m i t h , a p s y c h i a t r i s t , w a s hired by six p h a r m a c e u t i c a l c o m p a n i e s b e t w e e n 1971 and 1978, i n c l u d i n g S a n d o z , U p j o h n a n d C y a n a m i d , t o test a t least a d o z e n p s y c h o t r o p i c d r u g s . A n F D A scientist s a y s , ' W e l e a r n e d from a n office a s s i s t a n t . . . t h a t t h e way t h e d o c t o r got t h e pill c o u n t to c o m e out c o r r e c t w a s t o c o u n t t h e c o r r e c t n u m b e r o f pills the p a t i e n t should h a v e t a k e n and t h e n t o flush t h e m d o w n t h e t o i l e t ' ( M c T a g g a r t , 1980: 177). An F D A c h e c k found t h a t only 3 or 4 out of 60 p a t i e n t s listed as h a v i n g b e e n t e s t e d by S m i t h had actually b e e n given t h e drugs. S o m e p h y s i c i a n s h a v e b e e n t h e subject o f t e r r i b l e m i s f o r t u n e s o n t h e e v e o f F D A i n v e s t i g a t i o n s into t h e q u a l i t y o f t h e d a t a they have c o l l e c t e d for s u b m i s s i o n to t h e a g e n c y in s u p p o r t of n e w d r u g a p p l i c a t i o n s . Dr J a m e s Scheiner, an o r t h o p e d i c surgeon of Fairfax, V i r g i n i a , w h o had d o n e several e x p e r i m e n t s for J o h n s o n and J o h n s o n , had his office v a n d a l i z e d t h e n i g h t before an F D A audit of his r a w d a t a . T h e m i n d l e s s v a n d a l s d u m p e d all t h e r e c o r d s r e l a t i n g to t h e s t u d i e s to be a u d i t e d into a w h i r l p o o l b a t h . J u s t before his n e x t s c h e d u l e d F D A audit Dr S c h e i n e r had a fire in his office. A n d
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t h e n i g h t b e f o r e t h a t i n s p e c t i o n w a s r e s c h e d u l e d , D r S c h e i n e r was v i c i o u s l y m u g g e d by an a s s a i l a n t w h o w i e l d e d a p a p e r w e i g h t from his office. A n o t h e r d o c t o r , F r a n c o i s S a v e r y , w h o had e a r n e d a f o r t u n e t e s t i n g e x p e r i m e n t a l d r u g s for H o f f m a n - L a R o c h e and o t h e r l e a d i n g c o m p a n i e s , suffered t h e m i s f o r t u n e o f a c c i d e n t a l l y d r o p p i n g his d a t a o v e r b o a r d w h i l e out in a r o w b o a t . A US court did n o t b e l i e v e h i m ; he w a s s e n t e n c e d to five y e a r s ' p r o b a t i o n for felony fraud. T h e p r o b l e m is t h a t m o s t fraud in clinical trials is unlikely to e v e n b e d e t e c t e d . M o s t c a s e s which d o c o m e t o public a t t e n t i o n only d o so b e c a u s e of e x t r a o r d i n a r y c a r e l e s s n e s s by the criminal p h y s i c i a n , as in t h e following i l l u s t r a t i o n : In e a r l y July 1978, an a m b u l a n c e r u s h e d J u n e F r o m a n to a hospital in N e w York City. F r o m a n , a patient of Dr J e r o m e R o t s t e i n , had b e e n t r e a t e d for a s e v e r e case of a r t h r i t i s with an e x p e r i m e n t a l d r u g called S u d o x i c a n , m a n u f a c t u r e d b y Pfizer C o m p a n y . R o t s t e i n w a s s u p p o s e d t o b e m o n i t o r i n g F r o m a n ' s use of S u d o x i c a n carefully in late J u n e and early J u l y , and w a s s u p p o s e d to r e p o r t any u n u s u a l r e a c t i o n s to federal officials. I n s t e a d o f c o n d u c t i n g m o n i t o r i n g t e s t s , h o w e v e r , R o t s t e i n went o n v a c a t i o n i n E u r o p e . B y t h e t i m e h e r e t u r n e d , F r o m a n had a l r e a d y b e e n a d m i t t e d t o t h e h o s p i t a l , her liver dissolved b y S u d o x i c a n . 'In no w a y could she be s a v e d , no m a t t e r w h a t we did for h e r , ' R o t s t e i n told F D A officials later. B u t R o t s t e i n p o i n t e d t h e finger of b l a m e for h e r d e a t h at Pfizer C o m p a n y officials, c l a i m i n g t h e y hid t h e d r u g ' s s e r i o u s a d v e r s e side effects from him and t r i e d t o c o n v i n c e him not t o r e p o r t t h e d e a t h t o F e d e r a l a u t h o r i t i e s , it is a killer d r u g , ' R o t s t e i n said, i killed a p a t i e n t b e c a u s e I d i d n ' t k n o w t h e d r u g c a u s e d h e p a t i c toxicity. I was led d o w n a blind alley by p e o p l e w h o s h o u l d have k n o w n b e t t e r . ' . . . A l e r t e d by news of F r o m a n ' s d e a t h , F D A investigators reviewed r e p o r t s t h a t Pfizer had s u b m i t t e d t o t h e F D A . S t r a n g e l y , t h e s e r e p o r t s i n c l u d e d r e s u l t s , p u r p o r t e d l y from F r o m a n ' s c a s e , r e c o r d e d u p t o several d a y s before her h o s p i t a l i z a t i o n , t h a t s h o w e d ' e s s e n t i a l l y n o r m a l clinical s t u d i e s ' . After i n v e s t i g a t o r s e x a m i n e d t h e clinical s t u d i e s closely t h e y found t h a t R o t s t e i n had b e e n o u t o f t h e c o u n t r y and had n e v e r d o n e any o f t h e s t u d i e s . I f F r o m a n had n o t d i e d , t h e F D A m i g h t well h a v e a c c e p t e d t h e falsified S u d o x i c a n t e s t s , and millions of A m e r i c a n s could have b e e n e x p o s e d to h e r fate (Mother Jones, J u n e 1982, p. 4 7 ) .

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T h e r e a r e an infinite v a r i e t y of w a y s s h o r t of o u t r i g h t falsification w h i c h can be used by an i n v e s t i g a t o r w h o is a c a p t i v e of industry i n t e r e s t s . A s o n e B r i t i s h e x p e r t has n o t e d : T h e p r o b l e m of s u p p r e s s i o n of facts is w i d e s p r e a d . A typical c a s e o c c u r s a l o n g t h e following l i n e s ; a t o x i c o l o g i c a l study has b e e n c o n d u c t e d and gives an e q u i v o c a l r e s u l t , or a result u n f a v o u r a b l e to t h e p r o d u c t . A s e c o n d s t u d y is c o n d u c t e d and at t i m e s e v e n a t h i r d in w h i c h t h e d o s e levels are adjusted or the p r o t o c o l s modified in such a way that e v e n t u a l l y a result f a v o u r a b l e t o t h e a p p l i c a n t ' s p r o d u c t i s o b t a i n e d . O n l y the result f a v o u r a b l e t o t h e a p p l i c a n t ' s p r o d u c t i s s u b m i t t e d t o the r e g u l a t o r y a u t h o r i t y . . . . M i c r o s c o p i c a l e x a m i n a t i o n s of h i s t o p a t h o l o g i c a l slides m a y b e m a d e b y m o r e t h a n o n e p a t h o l o g i s t e a c h o f w h o m m a y h a v e c o m e t o different c o n c l u s i o n s , yet only the c o n c l u s i o n s f a v o u r a b l e t o t h e d r u g are submitted to the regulatory authority. On one occasion where such a s i t u a t i o n has b e e n d e t e c t e d t h e a p p l i c a n t w i t h a dismissive g e s t u r e said ' t h a t i n v e s t i g a t o r gives t h e w r o n g r e s u l t s , w e will not use him a g a i n ' . [This a t t i t u d e r e v e a l s t h e c o m m e r c i a l p r e s s u r e t h a t can be b r o u g h t to b e a r on an i n v e s t i g a t o r by t h e t h r e a t of loss o f f u t u r e w o r k . ] . . . A case can be cited w h e r e s o m e d r a m a t i c falls in h a e m o g l o b i n o f t h e o r d e r of 3-4 g/100 ml in t w o a n i m a l s w e r e a t t e m p t e d to be hidden by p r e s e n t i n g the haematological d a t a a s m e a n s and s t a n d a r d e r r o r s and c o m m e n t i n g i n the text t h a t o v e r a l l t h e m e a n h a e m o g l o b i n levels w e r e only slightly r e d u c e d w h e n b e f o r e a n d after t r e a t m e n t v a l u e s w e r e c o m p a r e d (Griffin, 1 9 7 7 : 2 9 , 3 1 ) . T h e b o u n d a r i e s b e t w e e n fraud, c r i m i n a l n e g l i g e n c e and civil negligence are obviously blurred. Concealing unfavourable e v i d e n c e on t h e safety of a d r u g h a s rarely b e e n t h e subject of c r i m i n a l a c t i o n , t h o u g h in civil p r o d u c t liability m a t t e r s it often b e c o m e s a central issue. The charges of involuntary manslaughter against e x e c u t i v e s of G r u n e n t h a l in G e r m a n y concerning the s u p p r e s s i o n of d a n g e r o u s effects of t h a l i d o m i d e is o n e e x c e p t i o n to t h e p a t t e r n o f civil r a t h e r t h a n c r i m i n a l a c t i o n s . ' This p a t t e r n w o u l d also h a v e c h a n g e d i n t h e U n i t e d S t a t e s i f C o n g r e s s m a n C o n y e r s and his S u b c o m m i t t e e on C r i m e had s u c c e e d e d in its bid to have failure to r e p o r t k n o w n d a n g e r o u s effects of c o n s u m e r p r o d u c t s a specific criminal offence.
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m i s r e p r e s e n t i n g d a n g e r o u s effects o f d r u g s n o t e d b y their own s c i e n t i s t s . In 1959 W a l l a c e and T i e r n a n put a n e w t r a n q u i l l i s e r , D o r n w a l , o n t h e m a r k e t d e s p i t e t h e s t r e n u o u s o b j e c t i o n s o f its own m e d i c a l d i r e c t o r . O t h e r c o m p a n y e x p e r t s w a r n e d that D o r n w a l c o u l d c a u s e s e r i o u s a n d p o s s i b l y fatal b l o o d d a m a g e . T h e y w e r e r i g h t . W a l l a c e and T i e r n a n failed to s e n d to t h e F D A r e p o r t s of side-effects w h i c h i n c l u d e d nine c a s e s o f b o n e m a r r o w d i s e a s e and t h r e e d e a t h s from using the d r u g ( J o h n s o n , 1976). T h e c o m p a n y w a s f o u n d guilty on c r i m i n a l c h a r g e s and fined $40,000 ( S i l v e r m a n a n d L e e , 1974: 9 7 ) . O n e c o u l d list a n u m b e r of similar t y p e s of c a s e s . J o h n s o n and J o h n s o n ' s s u b s i d i a r y , M c N e i l L a b o r a t o r i e s , w a s d e n o u n c e d b y the F D A for c o n c e a l i n g i n f o r m a t i o n on side-effects of Flexin which a c c o r d i n g t o J o h n s o n ( 1 9 7 6 ) i n c l u d e d the drug being a s s o c i a t e d w i t h 1 5 d e a t h s from liver d a m a g e . S u c h m o r e b l a t a n t cases are m e r e l y t h e tip of an i c e b e r g of selective m i s i n f o r m a t i o n . T h e m o s t d r a m a t i c r e c e n t case has b e e n the d i s c l o s u r e s i n t h e B r i t i s h P a r l i a m e n t and U S C o n g r e s s t h a t Eli Lilly and C o . k n e w o f t h e d a n g e r s o f O p r e n , a n a n t i - a r t h r i t i c d r u g a s s o c i a t e d with 7 4 d e a t h s i n B r i t a i n a l o n e , 1 5 m o n t h s before t h e d r u g was w i t h d r a w n (Sunday Times, 27 F e b r u a r y 1983). M o r e o v e r , a l m o s t a year before t h e d r u g w a s w i t h d r a w n from t h e w o r l d m a r k e t , a n i n v e s t i g a t o r with t h e F D A ' s Clinical I n v e s t i g a t i o n s office had r e c o m m e n d e d c r i m i n a l p r o s e c u t i o n of Lilly for failing to r e p o r t a d v e r s e r e a c t i o n s to four of its d r u g s , i n c l u d i n g O p r e n . A c c o r d i n g to t h e i n v e s t i g a t o r , 65 of 173 a d v e r s e r e a c t i o n s s u b m i t t e d to Lilly by d o c t o r s had not b e e n r e p o r t e d to F D A at all, and not all o f t h e side effects m e n t i o n e d in a n initial a p p l i c a t i o n t o F D A w e r e m e n t i o n e d i n its f i n a l s u b m i s s i o n , a n d n o t all o f t h e side effects m e n t i o n e d in its final s u b m i s s i o n had b e e n m e n t i o n e d i n t h e initial a p p l i c a t i o n . T h e alleged c o m b i n e d effect w a s t o h a v e e a c h d o c u m e n t grossly u n d e r s t a t i n g t h e p r o b l e m (Wall Street Journal, 4 A u g u s t 1982). T h e p r o b l e m i s not r e s t r i c t e d t o A n g l o - S a x o n c o u n t r i e s . I n November 1982, a J a p a n e s e c o m p a n y , N i p p o n C h e m i p h a r , a d m i t t e d to p r e s e n t i n g bogus data to the J a p a n e s e G o v e r n m e n t w i t h its a p p l i c a t i o n to m a r k e t a p a i n - k i l l e r and a n t i - i n f l a m m a t i o n drug u n d e r the brand n a m e of N o r v e d a n . The company submitted c o o k e d up data to the G o v e r n m e n t in the name of Dr H a r c i o S a m p e i , c h i e f o f plastic s u r g e r y a t N i p p o n U n i v e r s i t y . T h e good d o c t o r had a c c e p t e d 2.4 million Y e n in cash from the c o m p a n y in r e t u r n for p e r m i s s i o n t o use his n a m e . M o r e d i s t u r b i n g are similar
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allegations on a n o t h e r N i p p o n C h e m i p h a r product. The company d e n i e s c o o k i n g d a t a o n this s e c o n d p r o d u c t . But t h e w o r r y i n g a s p e c t o f t h e s e c o n d s c a n d a l is t h a t a f o r m e r c o m p a n y r e s e a r c h e r c l a i m s to h a v e s u b m i t t e d a w r i t t e n r e p o r t a l l e g i n g fraud in d r u g t e s t i n g by N i p p o n C h e m i p h a r t o t h e J a p a n e s e H e a l t h and W e l f a r e M i n i s t r y : M i n i s t r y officials, he a l l e g e s , c h o s e to i g n o r e the r e p o r t (Japan Times, 2 3 , 2 4 , 2 5 N o v e m b e r 1982). D a t a f a b r i c a t i o n is so w i d e s p r e a d in t h e p h a r m a c e u t i c a l industry as to s u p p o r t an a r g o t - t h e p r a c t i c e is called ' m a k i n g ' in t h e J a p a n e s e i n d u s t r y , ' g r a p h i t i n g ' o r 'dry l a b e l l i n g ' i n t h e U n i t e d States.

The pioneering work of Morton Mintz
M o r t o n M i n t z , in his m o n o g r a p h The Therapeutic Nightmare, later r e v i s e d as By Prescription Only ( 1 9 6 7 ) , w a s t h e first to p r o v i d e a d e t a i l e d c a s e - s t u d y a p p r o a c h to fraud in drug t e s t i n g . T h e first c a s e s t u d y w a s of R e g i m e n t a b l e t s , a n o n - p r e s c r i p t i o n ' r e d u c i n g pill' o n w h i c h A m e r i c a n s spent $16 million b e t w e e n 1957 and 1963. S l o g a n s such as i lost 25 p o u n d s in 30 days t a k i n g R e g i m e n T a b l e t s w i t h o u t d i e t i n g ' w e r e t h e basis o f these sales. I n 1962 t h e F o o d and D r u g A d m i n i s t r a t i o n m a d e m u l t i p l e seizures of R e g i m e n Tablets on charges of misbranding. In c o n n e c t i o n w i t h t h i s , t h e g o v e r n m e n t t o o k d e p o s i t i o n s from t w o p h y s i c i a n s w h o had b e e n e n g a g e d t o c o n d u c t clinical t e s t s with t h e d r u g ( p h e n y l p r o p a n o l a m i n e h y d r o c h l o r i d e ) , which i s n o longer on the m a r k e t . Dr Ernest C. Brown of Baltimore, whose fee w a s $ 1 0 0 0 , a d m i t t e d in his d e p o s i t i o n , F D A said in a l e t t e r t o S e n a t o r H u m p h r e y , t h a t 3 0 o f t h e 4 3 c h a r t s h e had s u b m i t t e d on 50 patients 'were fabricated'. Dr Kathleen E. R o b e r t s of San F r a n c i s c o a n d later T o l e d o , w h o w a s paid $ 4 0 0 0 , a c k n o w l e d g e d in h e r d e p o s i t i o n t h a t her r e p o r t w a s ' u n t r u e in its entirety'. Her charts on 57 of 75 patients 'were complete f a b r i c a t i o n s ' , t h e a g e n c y told H u m p h r e y . O f t h e r e m a i n d e r , 'only t h e p a t i e n t s ' initials a n d s t a r t i n g w e i g h t s w e r e c o r r e c t ' ( M i n t z 1967: 3 2 6 ) . In J a n u a r y 1964 a B r o o k l y n g r a n d j u r y r e t u r n e d an i n d i c t m e n t a g a i n s t t h e R e g i m e n a d v e r t i s i n g a g e n c y for p r e p a r i n g false copy for a d r u g p r o d u c t at t h e d i r e c t i o n of a client.
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An u n n a m e d p h y s i c i a n w a s said in t h e i n d i c t m e n t to have b e e n i n d u c e d to ' c h a n g e t h e c o n c l u s i o n of a clinical test he had p e r f o r m e d w i t h t h e t a b l e t s ' . E n d o r s e r s o f t h e pills, t h e i n d i c t m e n t a s s e r t e d , w e r e s h o w n b e i n g w e i g h e d each w e e k , the scales r e g i s t e r i n g w e i g h t losses e a c h t i m e . A c t u a l l y , t h e b e f o r e - a n d after m o d e l s w e r e on strict diets a n d . said the i n d i c t m e n t , had b e e n t a k i n g p r e s c r i p t i o n d r u g s u n d e r s u p e r v i s i o n of a physician ( M i n t z , 1967: 3 2 7 ) .

K a s t o r , H i l t o n , C h e s l e y , Clifford and A t h e r t o n . the R e g i m e n a d v e r t i s i n g a g e n c y , w a s fined $ 5 0 , 0 0 0 . J o h n A n d r e , sole stockh o l d e r in the D r u g R e s e a r c h C o r p o r a t i o n , marketer of R e g i m e n , w a s also fined $ 5 0 , 0 0 0 and s e n t e n c e d to e i g h t e e n m o n t h s in p r i s o n . T h e c o r p o r a t i o n itself was fined $53,(XK). On 1 S e p t e m b e r , 1966, the U n i t e d S t a t e s C o u r t o f A p p e a l s i n N e w Y o r k City affirmed the c o n v i c t i o n s . A p e t i t i o n of r e v i e w w a s s u b s e q u e n t l y d e n i e d by the Supreme Court.
3

I n J u n e 1964 D r B e n n e t t A . R o b i n w a s c o n v i c t e d o n five c o u n t s o f c a u s i n g p h a r m a c e u t i c a l firms t o s u b m i t e r r o n e o u s r e p o r t s o n new d r u g s b y s u p p l y i n g t h e m with f r a u d u l e n t clinical r e s u l t s . T h e g o v e r n m e n t successfully a r g u e d that R o b i n had n e v e r e x a m i n e d p a t i e n t s o n w h o m h e p u r p o r t e d l y w a s t e s t i n g the five p r o d u c t s m e n t i o n e d in the indictment. One product which was released to t h e m a r k e t b y t h e F D A , p a r t l y o n t h e basis o f e v i d e n c e from R o b i n , w a s H o f f m a n - L a R o c h e ' s T i g a n ( t r i m e t h o b e n z a m i d e ) . I n the December 1960 issue of t h e Maryland State MedicalJournal, R o b i n h a d r e p o r t e d on a c o m p a r i s o n b e t w e e n Tigan and a p l a c e b o with r e s p e c t t o n a u s e a and v o m i t i n g . ' T i g a n ® effectively relieved the s y m p t o m s . . . w i t h i n an a v e r a g e of 80 m i n u t e s in 94 of % p a t i e n t s ' , he said. T h e R o b i n c a s e study w a s s t a g g e r i n g b e c a u s e m a n y o f t h e most r e p u t a b l e c o m p a n i e s i n t h e p h a r m a c e u t i c a l industry had used him for clinical t r i a l s at s o m e s t a g e . R o b i n had ' t e s t e d ' 45 p r o d u c t s for 22 firms, p u r p o r t e d l y on a total of 6,400 p a t i e n t s . E x p o s u r e of R o b i n c a n be t r a c e d to a statistical analysis of his p a p e r s by Dr J o h n N e s t o r , a n F D A scientist. I n a n i n t e r n a l F D A c o m m u n i c a t i o n N e s t o r said t h a t his a n a l y s i s ' i n d i c a t e s t h a t , in g e n e r a l , his results a r e i m p o s s i b l e ' , and t h a t he 'is a fraud'. T h i s led S e n a t o r H u m p h r e y to r a i s e a n u m b e r of q u e s t i o n s in t h e S e n a t e at t h e t i m e as to why the d r u g c o m p a n i e s had not also found t h e r e s u l t s ' i m p o s s i b l e ' . A n o t h e r c a s e w a s that o f D r L e o J . C a s s , d i r e c t o r o f t h e H a r v a r d

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L a w S c h o o l H e a l t h S e r v i c e . F D A s u s p i c i o n s w e r e first a r o u s e d b y t h e e x t r a o r d i n a r i l y large n u m b e r o f i n v e s t i g a t i o n s ' that C a s s R e s e a r c h A s s o c i a t e s had m a d e 'in a short p e r i o d of t i m e ' . M o s t of t h e m a j o r c o m p a n i e s had r e t a i n e d C a s s ' s c o m p a n y . H e had u n d e r t a k e n 84 r e s e a r c h p r o j e c t s for t e s t i n g i n v e s t i g a t i o n a l d r u g s and 25 p r o j e c t s for p r o d u c t m a r k e t i n g a p p l i c a t i o n s . On M a y 6, 1966, t h e F D A initiated a c t i o n to halt the sale of N o r g e s i c . In C a m b r i d g e , Cass R e s e a r c h acknowledged 'certain deficiencies' in r e c o r d - k e e p i n g , blamed them on the observers [the c o m p a n y ] r e t a i n e d " , and said i t w a s n o w out o f t h e d r u g - t e s t i n g b u s i n e s s . T h e ' c e r t a i n d e f i c i e n c i e s ' w e r e spelled out l a t e r b y F D A i n t h e F e d e r a l R e g i s t e r w h e n i t acted t o t a k e M e a s u r i n a n d S t e n d i n off t h e m a r k e t . It t u r n e d out that C a s s R e s e a r c h had b e e n quick with t h e d e a d : A n u m b e r of p a t i e n t s r e p o r t e d to h a v e b e e n t r e a t e d in its s t u d i e s , t h e agency said, 'in fact w e r e not so t r e a t e d . . . t h e s e p e r s o n s w e r e d e c e a s e d or not h o s p i t a l i z e d at t h e i n s t i t u t i o n [ L o n g I s l a n d H o s p i t a l in B o s t o n ] w h e r e t h e i n v e s t i g a t i o n s w e r e a l l e g e d l y c o n d u c t e d . ' F D A said C a s s R e s e a r c h also had s u p p l i e d i t with o t h e r ' u n t r u e s t a t e m e n t s ' , i n c l u d i n g c l a i m s t h a t t r e a t e d p a t i e n t s had c e r t a i n m e d i c a l c o n d i t i o n s w h i c h i n v e s t i g a t i o n s h o w e d they did not h a v e ( M i n t z , 1967: 3 3 8 d ) . I n his p e r s u a s i v e d o c u m e n t a t i o n o f t h e w i d e s p r e a d fraud i n t h e clinical t e s t i n g o f d r u g s , M i n t z also relied o n t h e r e v e a l i n g c o n t e n t s o f c o n f i d e n t i a l d o c u m e n t s such a s t h e following internal F D A m e m o r a n d u m ( M i n t z . 1967: 3 3 4 ) . For many years Dr ' c o l l a b o r a t e d ' with D o c t o r s and in 'clinical s t u d i e s ' w h i c h we s t r o n g l y suspect w e r e c o n d u c t e d by t h e " g r a p h i t e ' m e t h o d [that is, by i n v e n t i o n with a p e n c i l , r a t h e r t h a n b y actual t e s t i n g ] . W i t h Dr 's d e a t h a y e a r or so a g o . we had h o p e s that t h e c o m b i n a t i o n had b e e n d i s r u p t e d for g o o d . We have learned recently, h o w e v e r , that has gained new a l l i e s , and t h e c o m b i n a t i o n is b a c k in t h e 'clinical s t u d y ' b u s i n e s s . T h e s e allies a r e : ,M.D. N e w Y o r k C i t y , N . Y . , and , M.D. Brooklyn, N.Y. 59

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I n q u i r i e s , s t u d i e s , d a t a , etc. from t h e s e m e n should r e c e i v e extremely careful c o n s i d e r a t i o n and s c r u t i n y . R. C. B R A N D E N B U R G A n o t h e r f a s c i n a t i n g c o m m u n i c a t i o n is from a p h y s i c i a n to a m a n u f a c t u r e r . T h e p h y s i c i a n s e e m s t o b e h a p p y t o have t h e d r u g c o m p a n y w r i t e his p a p e r for him w i t h o u t so m u c h as seeing t h e d a t a . I had a talk w i t h Dr [ n a m e of clinical i n v e s t i g a t o r ] , and w h i l e he g a v e m e t h e i m p r e s s i o n t h a t h e had a l r e a d y d o n e e n o u g h w o r k o n t h e n e w s u b j e c t to i n d i c a t e t h a t t h e study w o u l d be f a v o r a b l e , t h e p u b l i c a t i o n o f t h e r e s u l t s b o t h e r s him. He c a n ' t s e e m to figure o u t h o w he can write such a p a p e r w i t h o u t a p p e a r i n g r i d i c u l o u s . D o you h a v e i d e a s o n it? I f s o , why d o n ' t you w r i t e a p a p e r t h a t w o u l d fit t h e c o n c e p t and let me go on from t h e r e . I am not a s k i n g you to do my w o r k . I j u s t w a n t to be s u r e t h a t t h e m a n u s c r i p t will c o m e as close to w h a t y o u w a n t as p o s s i b l e ( M i n t z , 1967: 3 3 6 ) .

MER/29
T h e m o s t s h o c k i n g c a s e of fraud in t h e safety testing of d r u g s w a s w i t h M E R / 2 9 ( t r i p a r a n o l ) , a n a g e n t i n t e n d e d t o r e d u c e blood c h o l e s t e r o l levels. The sponsoring c o m p a n y was William S. Merrell, a subsidiary o f t h e Richardson-Merrell transnational. An e s t i m a t e d 3 0 0 , 0 0 0 A m e r i c a n s used M E R / 2 9 d u r i n g its first twelve m o n t h s on t h e m a r k e t in 1960-61 ( S i l v e r m a n , 1976: 9 1 ) . Soon after r e l e a s e t o t h e m a r k e t r e p o r t s b e g a n flooding i n a b o u t side-effects w h i c h i n c l u d e d b a l d n e s s , skin d a m a g e , c h a n g e s i n the r e p r o d u c t i v e o r g a n s a n d t h e b l o o d , and s e r i o u s eye d a m a g e i n c l u d i n g the p r o d u c t i o n of c a t a r a c t s . On 12 A p r i l t h e d r u g was w i t h d r a w n from t h e m a r k e t . B u t t h a t w a s only t h e b e g i n n i n g o f t h e M E R / 2 9 story. M r s B e u l a h J o r d a n had quit M e r r e l l , w h e r e she had w o r k e d a s a l a b o r a t o r y t e c h n i c i a n o n t h e safety t e s t i n g o f M E R / 2 9 , after b e i n g dissatisfied a t t h e i n t e g r i t y o f t h e scientific w o r k u n d e r t a k e n b y t h e c o m p a n y . W h e n i n early 1962 t h e d a n g e r s o f M e r r e l l ' s a n t i c h o l e s t e r o l drug was in the n e w s p a p e r s , Mrs J o r d a n ' s husband m e n t i o n e d h e r d o u b t s t o a m e m b e r o f his car pool w h o h a p p e n e d t o b e a n F D A i n s p e c t o r . T h i s led t o a n F D A i n s p e c t i o n w h i c h unc o v e r e d t h e s o r d i d d e t a i l o f t h e M E R / 2 9 affair. C r u c i a l M E R / 2 9 t e s t i n g had b e e n d o n e o n m o n k e y s . M r s J o r d a n ' s a t t e n t i o n w a s d r a w n t o t h e d e t e r i o r a t i n g c o n d i t i o n o f her 60

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•pet' l a b o r a t o r y m o n k e y . A f t e r a few m o n t h s on M E R / 2 9 , it w a s u n a b l e to j u m p o n t o the w e i g h i n g p a n , a simple trick all t h e m o n k e y s had b e e n t r a i n e d t o p e r f o r m . A c c o r d i n g t o M r s J o r d a n , t h e m o n k e y 'got very m e a n , t h e r e w a s a loss of w e i g h t , and it c o u l d n ' t see well e n o u g h t o hit t h e pan . . . i n o u r o p i n i o n , this m o n k e y w a s sick d u e to a r e a c t i o n from this d r u g . ' M r s J o r d a n r e p o r t e d this t o h e r s u p e r v i s o r , ' D r ' W i l l i a m King (it w a s later d i s c o v e r e d t h a t he had not yet b e e n a w a r d e d his m e d i c a l d e g r e e ) , w h o i n t u r n informed M e r r e l l ' s d i r e c t o r o f biological s c i e n c e s , D r E v e r t van M a a n e n : D r van M a a n e n , w i t h t h e c o n c u r r e n c e o f D r K i n g , then d e c i d e d t o t h r o w o u t t h e sick male drug m o n k e y m e n t i o n e d a b o v e from the e x p e r i m e n t a n d s u b s t i t u t e a n o t h e r c o n t r o l m o n k e y i n his p l a c e w h i c h had n e v e r b e e n o n M E R / 2 9 . A f t e r this d e c i s i o n , D r van M a a n e n called M r s J o r d a n into his office a n d i n s t r u c t e d her to m a k e this s u b s t i t u t i o n in w o r k i n g up t h e w e i g h t c h a r t s . . . . M r s J o r d a n r e s e n t e d b e i n g a s k e d to . . . r e n d e r a false r e p o r t , and refused to sign her c h a r t s . Dr K i n g o r d e r e d h e r t o n e v e r m e n t i o n t h e s u b s t i t u t i o n . She w a s told t h a t this w a s t h e w a y t h e C o m p a n y w a n t e d it and to forget it. She w a s told t h a t t h i s o r d e r had c o m e from h i g h e r u p and t h e r e w a s n o t h i n g she c o u l d do a b o u t it but obey t h e o r d e r and do as t h e ' h i g h e r - u p s ' w a n t e d ( R i c e , 1969). Invoking the authority of a n o n y m o u s 'higher-ups' made it difficult for M r s J o r d a n to go o v e r K i n g ' s head to r e p o r t the fraud up the line. H e n c e , no c o m p a n y directors b e c a m e aware of the fraud. I n t o t a l M r s J o r d a n w a s told t o c h a n g e t h e f i g u r e s o n eight m o n k e y s . I t w a s also r e v e a l e d t h a t o t h e r e m p l o y e e s had b e e n i n s t r u c t e d t o r e v i s e c h a r t s w h i c h did not i n d i c a t e t h e d e s i r e d r e s u l t s - to ' s m o o t h o u t d a t a ' as this r e v i s i o n p r o c e s s w a s called at Merrell. V a r i o u s b l o o d d y s c r a s i a s w e r e n o t e d i n b l o o d s m e a r s t a k e n from m o n k e y s t h a t had b e e n t e s t e d o n M E R / 2 9 ; n o n e w e r e o b s e r v e d i n t h e c o n t r o l m o n k e y s . ' M e r r e l l had tried t o c h a n g e t h e r e c o r d s s o t h a t i t a p p e a r e d t h a t all m o n k e y s w e r e s u p p o s e d t o have had t h e s e a n o m a l i e s ' ( F u l l e r , 1972: 9 0 ) . S o m e o f t h e test m o n k e y s had b e e n o n M E R / 2 9 for only eight m o n t h s , a l t h o u g h they w e r e listed i n t h e s u b m i s s i o n s to t h e F D A as h a v i n g t a k e n t h e d r u g for a full c o u r s e of 1 6 m o n t h s a n d d o n e well.

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T h e l e n g t h s t o w h i c h R i c h a r d s o n had b e e n p r e p a r e d t o g o t o get t h e d r u g o n t h e m a r k e t are r e v e a l e d i n the c h a r g e s . C o u n t t h r e e , for e x a m p l e , d e a l t w i t h R i c h a r d s o n - M e r r e l l ' s r e p o r t s of a c h r o n i c t o x i c i t y s t u d y i n m o n k e y s . T h e c o m p a n y had r e p o r t e d that m o n k e y N o . 51 w a s given M e r 29 at o n e d o s e level for six m o n t h s a n d at a l o w e r d o s e level for a further ten m o n t h s , but w h a t the F D A i n s p e c t o r s u n c o v e r e d was t h a t t h e h i g h e r d o s e o f M E R 2 9 had n e v e r b e e n a d m i n i s t e r e d t o m o n k e y 5 1 and t h e lower d o s e had b e e n a d m i n i s t e r e d for a s h o r t e r t i m e t h a n c l a i m e d . In toto, t h e e x p e r i m e n t had lasted for 7 m o n t h s and 26 days and not t h e 16 m o n t h s s t a t e d i n t h e a p p l i c a t i o n t o t h e F D A . M o n k e y 3 5 , o n the o t h e r h a n d , had b e e n d e s i g n a t e d a c o n t r o l for t h e '16 m o n t h s t u d y , ' a l t h o u g h in fact for t h e first 6 m o n t h s . N o . 35 had b e e n g i v e n a d r u g similar to M e r 29 and had not b e e n used as a c o n t r o l a t all. T h e c o m p a n y ' s a p p l i c a t i o n t o t h e F D A c l a i m e d that m o n k e y s had not lost b o d y w e i g h t w h e n in fact t h e y h a d , and t h a t a m o n k e y had suffered no liver or gall b l a d d e r d a m a g e w h e n in fact it had ( K n i g h t l e y et a l . , 1979: 6 7 ) . T h e r e w e r e a b u s e s in o t h e r s t u d i e s . In a dog s t u d y , a n i m a l s which d i e d w e r e r e p l a c e d with t h r e e a d d i t i o n a l d o g s t o i m p r o v e the f i g u r e s . ' A m o n g b e a g l e d o g s , M e r r e l l c o v e r e d u p the fact that p o r t i o n s o f t h e g o n a d s had u n d e r g o n e " m a r k e d t u b u l a r and interstitial a t r o p h y " ' ( F u l l e r , 1972: 9 0 ) . T h e r e w a s also a c o v e r - u p of i r r e p a r a b l e eye d a m a g e t o the lab a n i m a l s . I n s o m e cases the lenses o f t h e e y e s w e r e c l o u d e d s o m u c h t h a t t h e retina could not b e o b s e r v e d . T h e s e a n d o t h e r eye i n f e c t i o n s led o n e p a t h o l o g i s t t o c o m m e n t in his r e p o r t t h a t he had ' n e v e r seen such an i n v o l v e m e n t o f t h e l e n s ' ( F u l l e r , 1972: 9 0 ) . M e r r e l l s t a t e d t h a t all t h e female rats i n v o l v e d in o n e e x p e r i m e n t had s u r v i v e d , w h e n in fact they had all died. D a t a s u b m i t t e d on t h e i r w e i g h t and b l o o d v a l u e s w e r e totally fabricated. M e r r e l l , foolishly a s i t t u r n e d o u t , had e n c o u r a g e d o t h e r c o m p a n i e s t o d o c o m p a r a t i v e s t u d i e s o n M E R / 2 9 . B o t h M e r c k and U p j o h n r e p o r t e d t o M e r r e l l t h a t t h e d r u g had c a u s e d eye d a m a g e t o its e x p e r i m e n t a l a n i m a l s . T h e s e findings w e r e not p a s s e d o n t o the F D A b y M e r r e l l . T h e c o v e r - u p on a n i m a l t e s t i n g w a s followed by a c o v e r - u p on h u m a n t e s t i n g . U n g a r ( 1 9 7 3 : 101-2) has d o c u m e n t e d the c a l c u l a t e d nature ofthis deceit. M c M a s t e r [ A s s o c i a t e D i r e c t o r o f Clinical R e s e a r c h ] had r e s p o n d e d to a d o c t o r in O m a h a w h o had c o m p l a i n e d t h a t his

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p a t i e n t s o n M E R / 2 9 suffered from eye d i s c h a r g e and swelling: ' M o s t o f t h e side effects you h a v e r e p o r t e d have b e e n u n u s u a l o n e s i n t h a t t h e y h a v e not b e e n r e p o r t e d b y o t h e r i n v e s t i g a t o r s . . . . I s i t p o s s i b l e t h a t [ t h e y ] could have b e e n c o i n c i d e n t a l with t h e a d m i n i s t r a t i o n o f d r u g s o t h e r t h a n M E R / 2 9 c o n c u r r e n t l y ? ' T h i s same line o f r e b u t t a l w a s n o w r e c o m m e n d e d t o M e r r e l l ' s e n t h u s i a s t i c d r u g s a l e s m e n a s well. O n e m e m o r a n d u m issued to t h e m a d v i s e d : "When a d o c t o r says y o u r d r u g c a u s e s a side effect, t h e i m m e d i a t e reply is: " D o c t o r , w h a t o t h e r d r u g i s t h e p a t i e n t t a k i n g ? " E v e n i f you k n o w y o u r drug can c a u s e t h e side effect m e n t i o n e d , c h a n c e s a r e e q u a l l y g o o d t h e s a m e side effect is b e i n g c a u s e d by a s e c o n d d r u g ! Y o u let y o u r d r u g t a k e t h e b l a m e w h e n you c o u n t e r with a defensive a n s w e r . ' O n t h e very day t h a t D r T a l b o t o f t h e F D A issued his a p p r o v a l of M E R / 2 9 , M c M a s t e r learned of a California doctor whose r e s u l t s with M E R / 2 9 , w e r e ' r a t h e r e q u i v o c a l i f not c o m p l e t e l y n e g a t i v e . ' T h e C a l i f o r n i a n w a s not r e a d y t o give u p , h o w e v e r , a n d s o u g h t M e r r e l l ' s financial s u p p o r t for an e x t e n s i o n of his s t u d i e s t o o t h e r p a t i e n t s . ' A l t h o u g h i t b e g i n s t o a p p e a r that any r e p o r t from this s t u d y m a y be a n e g a t i v e o n e , ' M c M a s t e r w r o t e to a c o l l e a g u e at M e r r e l l , 'we m a y find t h a t we are m o n e y a h e a d to k e e p Dr E n g e l b e r g busy at it for a w h i l e l o n g e r r a t h e r than to take a c h a n c e on his r e p o r t i n g n e g a t i v e l y on so few p a t i e n t s . . . . My p e r s o n a l r e c o m m e n d a t i o n is t h a t t h e [S500] g r a n t - i n - a i d be a p p r o v e d only to k e e p Dr E n g e l b e r g o c c u p i e d for a while l o n g e r . ' A M e r r e l l i n t e r d e p a r t m e n t a l m e m o r a n d u m noted t h a t a p a p e r s i g n e d by a N e w J e r s e y p h y s i c i a n - ' p r e p a r e d for t h e most part by u s ' - had b e e n a c c e p t e d by t h e Journal of the Medical Society of New Jersey. A n o t h e r internal m e m o r a n d u m r e c o m m e n d e d continued p a y m e n t of a p e r s o n a l c o n s u l t a t i o n fee to a p h y s i c i a n , mainly on the g r o u n d s t h a t t h e c o m p a n y could not afford t o risk a l i e n a t i o n o f t h e d o c t o r at t h a t t i m e . ' P e r h a p s ' , it w a s o p t i m i s t i c a l l y noted by a M e r r e l l e m p l o y e e , i s h o u l d n ' t r e g a r d this a s b l a c k m a i l ' (US S e n a t e , 1969: P a r t 1 0 3 9 7 2 ) . A n early a p p r o a c h t o military h o s p i t a l s w a s justified as follows: ' W e w e r e not t h i n k i n g h e r e so m u c h of h o n e s t clinical w o r k as we w e r e of a p r e - m a r k e t i n g softening prior t o t h e i n t r o d u c t i o n o f t h e p r o d u c t ' ( U S S e n a t e , 1969: P a r t 1 0 , 3 9 7 1 ) . B y M a r c h o f l 9 6 1, M c M a s t e r - a l t h o u g h still w r i t i n g o t h e r w i s e to d o c t o r s w h o c o m p l a i n e d - c o n c l u d e d p r i v a t e l y t h a t ' t h e r e can b e n o d o u b t o f t h e a s s o c i a t i o n o f M E R / 2 9 t h e r a p y with [hair]
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c h a n g e s . ' He drafted a p r o p o s e d a d d i t i o n to t h e w a r n i n g on the d r u g p a c k a g e , citing ' c h a n g e s i n c o l o r , t e x t u r e o r a m o u n t ' o f hair as p o s s i b l e side effects. T h a t w o r d i n g w a s v e t o e d on its way t h r o u g h the c o r p o r a t e power s t r u c t u r e , however, as 'rather frightening.' "After a l l , ' o b j e c t e d D r R o b e r t T . S t o r m o n t , w h o v e t o e d the l a n g u a g e , ' n o n e o f t h o s e c a s e s d e v e l o p e d g r e e n , pink o r l a v e n d e r hair, I h o p e . ' T h e w a r n i n g w a s e d i t e d t o say simply ' t h i n n i n g o f t h e hair' ( U n g a r , 1973: 103). T h e u p s h o t o f t h e i n v e s t i g a t i o n w a s t h a t M e r r e l l , the p a r e n t R i c h a r d s o n - M e r r e l l , ' D r ' K i n g , D r V a n M a a n e n and M e r r e l l vicep r e s i d e n t W e r n e r all p l e a d e d 'no c o n t e s t ' to a variety of c r i m i n a l fraud c o u n t s . I n t h e w o r d s o f M a t t h e w F . M c G u i r e , t h e n Chief J u d g e o f t h e U S D i s t r i c t C o u r t for t h e District o f C o l u m b i a , t h e p l e a s w e r e ' t a n t a m o u n t to a plea of g u i l t y ' . F i n e s of $60,000 and $20,000 were levied against M e r r e l l and R i c h a r d s o n - M e r r e l l respectively. The three individual defendants were each sentenced t o m e r e l y six m o n t h s ' p r o b a t i o n . I f c o r p o r a t i o n s are r a t i o n a l , profitm a x i m i s i n g c r e a t u r e s , a total fine of $80,000 w o u l d have to be r e g a r d e d as a j u s t i f i a b l e risk given t h a t R i c h a r d s o n - M e r r e l l estim a t e d t h e p o t e n t i a l m a r k e t for M E R / 2 9 as $4.25 billion a year ( K n i g h t l e y et a l . , 1979: 6 5 ) . T h e m a i n r e a s o n for t h e n o - c o n t e s t p l e a s w a s t h a t M e r r e l l w a s w o r r i e d t h a t t h e trial r e c o r d c o u l d be used to a d v a n t a g e by victims of M E R / 2 9 in civil s u i t s . R e g a r d l e s s , t h e civil suits did follow, a l m o s t 500 of t h e m . R i c h a r d s o n - M e r r e l l is believed to h a v e paid out a b o u t $200 m i l l i o n in d a m a g e s mostly settled out of c o u r t . T h i s has b e e n a s e v e r e b u r d e n , e v e n for a F o r t u n e 500 c o m p a n y . B e f o r e leaving t h e M E R / 2 9 case study it is w o r t h m e n t i o n i n g s o m e o f t h e m o r e trivial a b u s e s w h i c h t e n d t o b e forgotten w h e n c o m p a r e d w i t h t h e s e r i o u s c r i m e s m e n t i o n e d a b o v e . A s discussed earlier i t i s t h e m o r e s u b t l e a b u s e s w h i c h are p r o b a b l y m o r e w i d e s p r e a d and c o n s e q u e n t l y d o m o r e h a r m . C o n s i d e r t w o perfectly legal acts o f social i r r e s p o n s i b i l i t y u n c o v e r e d b y t h e M E R / 2 9 i n v e s t i g a t i o n s . W h e n d o c t o r s a t t h e M a y o C l i n i c i n M i n n e s o t a a s k e d for t h e n e c e s s a r y f o r m s to r e p o r t to C i n c i n n a t i a b o u t side effects, M c M a s t e r sent a l o n g only t w o ; t h e d o c t o r s a t M a y o w r o t e b a c k a s k i n g for a t least t h r e e m o r e . ' Y o u have u n d e r - e s t i m a t e d u s , ' t h e y told M c M a s t e r j o k i n g l y ( U n g a r , 1973: 103).
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G i v e n w h a t is k n o w n a b o u t h o w easy it is to d i s c o u r a g e d o c t o r s from m a k i n g a d v e r s e d r u g r e a c t i o n r e p o r t s , * this m i n o r act of social i r r e s p o n s i b i l i t y c a n be a small part of a p a t t e r n of neglect. T h e same c o u l d be said o f t h e following perfectly legal, and on its own trivial, abuse. At about the same t i m e , the name o f t h e man who supervised M e r r e l l ' s s a l e s m e n in t h e field b e g a n to be d e l e t e d from t h e list of p e o p l e r e c e i v i n g interoffice c o r r e s p o n d e n c e a l l u d i n g t o t h e p o s s i b l e harmful c o n s e q u e n c e s o f M E R / 2 9 . T h e M e r r e l l official w h o left t h e n a m e off said he did so b e c a u s e t h e i n f o r m a t i o n ' m i g h t be a little d i s c o u r a g i n g ' to t h e sales s u p e r v i s o r ( U n g a r , 1 9 7 3 : 104).

Thalidomide
A b o u t 8000 t h a l i d o m i d e c h i l d r e n are alive t o d a y i n 4 6 c o u n t r i e s a r o u n d t h e w o r l d . P e r h a p s twice t h a t n u m b e r died at birth as a result o f t h e d r u g . S o m e o f t h e t h a l i d o m i d e c h i l d r e n h a v e n o a r m s , j u s t flippers from t h e s h o u l d e r s ; o t h e r s are w i t h o u t legs as well l i m b l e s s t r u n k s , j u s t a h e a d and a b o d y . T h e physical h o r r o r of t h a l i d o m i d e was in some ways matched by horrible impacts on the social fabric of so m a n y families. M o t h e r s in p a r t i c u l a r w e r e tragic v i c t i m s . O n e h u s b a n d told his wife: i f you bring t h a t m o n s t e r h o m e , I l e a v e . ' She d i d , and he left h e r , like m a n y o t h e r thalid o m i d e fathers. ' T h e y d i d n ' t a l l o w me to see h i m , b e c a u s e they said I w a s t o o ill,' says F l o r e n c e E v a n s , w h o s e son L i a m is blind and has no a r m s . " W h e n t h e y gave him to m e , his face w a s split, h a n g i n g a p a r t like on a b u t c h e r ' s s l a b . T h e d o c t o r w a s crying and said my baby w o u l d n ' t live. B u t h e d i d , and t w o w e e k s later t h e y sent him h o m e w i t h his face s t i t c h e d u p . He w a s my o w n flesh and b l o o d and had to be c a r e d for. I d i d n ' t cry o u t w a r d l y , b u t inside I s c r e a m e d . E v e n e v e r left t h e h o u s e on my own from t h a t day s i n c e ' ( K n i g h t l e y et a l . , 1979: 114). T h e l e s s o n s from t h a l i d o m i d e a r e m a n y . T h e m o s t i m p o r t a n t o f all c o n c e r n s t h e n e e d for i n t e r n a t i o n a l e x c h a n g e of i n f o r m a t i o n on a d v e r s e r e a c t i o n and t h e a b o l i t i o n o f t r a d e n a m e s for d r u g s . I n t h e early 1960s w h e n t h e a d v e r s e effects of t h a l i d o m i d e w e r e b e i n g discussed, so i n a d e q u a t e was the international c o m m u n i c a t i o n
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a m o n g d r u g r e g u l a t o r y a g e n c i e s t h a t c o m p a n i e s could for s o m e t i m e i s o l a t e bad n e w s a b o u t a d r u g to t h e c o u n t r y w h e r e t h e u n t o w a r d r e s e a r c h a p p e a r e d . H e n c e several h u n d r e d t h a l i d o m i d e b a b i e s w e r e b o r n in J a p a n d u r i n g t h e p e r i o d of o v e r a y e a r w h e n sales c o n t i n u e d t h e r e after t h e p r o d u c t had b e e n w i t h d r a w n from t h e m a r k e t i n E u r o p e . I n Italy t h a l i d o m i d e r e m a i n e d o n the m a r k e t for ten m o n t h s after w i t h d r a w a l in t h e rest of E u r o p e , and in C a n a d a for t h r e e m o n t h s . T h e m o r e t h a n fifty different t r a d e n a m e s u n d e r w h i c h thalid o m i d e w a s m a r k e t e d i n different c o u n t r i e s w a s the single most i m p o r t a n t factor in d e l a y i n g an i m m e d i a t e halt to sales ( T a u s s i g , 1963). Dr P e r O l a v L u n d b e r g w r o t e in an article in t h e Swedish Medical Journal, 1965: At t h e e n d o f N o v e m b e r 1961 s o m e of my c o l l e a g u e s at t h e A c a d e m i c H o s p i t a l ( U p p s a l a ) w e r e sitting r e a d i n g a small notice in a S t o c k h o l m n e w s p a p e r c o n c e r n i n g a G e r m a n drug called C o n t e r g a n , w h i c h at a r e c e n t c o n g r e s s had b e e n r e p o r t e d to have a p o s s i b l e t e r a t o g e n i c a c t i o n . We n a t u r a l l y w a n t e d to k n o w if this w a s s o m e t h i n g to r e m e m b e r and if t h e d r u g in q u e s t i o n existed in S w e d e n . A t e l e p h o n e call to a c h e m i s t r e s u l t i n g in an i n t e n s i v e s t u d y o f t h e l i t e r a t u r e gave u s t h e a n s w e r : n e i t h e r C o n t e r g a n nor any s i m i l a r d r u g s e e m e d t o exist i n o u r c o u n t r y . U n f o r t u n a t e l y , this w a s not t r u e ( S j o s t r o m and N i l s s o n , 1972: 132). T h a l i d o m i d e , w h i c h had b e e n m a r k e t e d a s C o n t e r g a n i n G e r m a n y , w a s sold i n S w e d e n a s N e u r o s e d y n and N o x i d y n . W h e n t h a l i d o m i d e w a s w i t h d r a w n i n S w e d e n , t h e a u t h o r i t i e s did not w a r n m o t h e r s a g a i n s t using pills a l r e a d y r e l e a s e d . C o n s e q u e n t l y a t least five b a b i e s w e r e b o r n n e e d l e s s l y c r i p p l e d . T h e S w e d i s h m a n u f a c t u r e r of t h a l i d o m i d e a l l o w e d t h e p r o d u c t to be sold in A r g e n t i n a for t h r e e m o n t h s after it had b e e n w i t h d r a w n in S w e d e n . In a b o o k p u b l i s h e d in July 1976 T e f f a n d M u n r o r e p o r t e d that as r e c e n t l y as M a r c h 1976 thirty t h a l i d o m i d e t a b l e t s had t u r n e d up in a West Sussex c a m p a i g n to return unused medicines. Investigative j o u r n a l i s t s p l a y e d a m o r e i m p o r t a n t role t h a n h e a l t h r e g u l a t o r y a u t h o r i t i e s in m a n y p a r t s of the w o r l d in saving c h i l d r e n from thalidomide. A n a l e r t B r a z i l i a n r e p o r t e r had a s u s p i c i o n t h a t t h a l i d o m i d e w a s b e i n g sold in p h a r m a c i e s in his o w n large city, Sao P a u l o , b e c a u s e h e h a d s u d d e n l y b e c o m e a w a r e o f n u m b e r s o f limbless n e w b o r n s .

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U p o n i n q u i r y , h o w e v e r , h e w a s told b y a u t h o r i t i e s t h a t t h a l i d o m i d e w a s n o t b e i n g sold in Sao P a u l o . He p e r s i s t e d in his q u e s t i o n i n g , a n d d i s c o v e r e d that t h a l i d o m i d e w a s i n d e e d b e i n g w i d e l y sold b u t t h a t it w a s k n o w n to t h e p u b l i c and t h e ' a u t h o r i t i e s ' only b y its b r a n d n a m e s : Slip®. O n d a s i l ® . V e r d i l ® . S e d i n ® . a n d S e r a l i s ® . W h e n this w a s m a d e k n o w n , 2.5 million t a b l e t s c o n t a i n i n g t h a l i d o m i d e i n p h a r m a c i e s and p h a r m a c e u t i c a l factories in Sao P a u l o w e r e confiscated by officials. C o u n t l e s s c h i l d r e n and t h e i r p a r e n t s m u s t a l w a y s be grateful to that i n q u i s i t i v e r e p o r t e r ( B u r a c k , 1976: 7 0 - 1 ) . L e t u s r e t u r n t o t h e b e g i n n i n g o f t h e t h a l i d o m i d e story. T h e d r u g w a s d i s c o v e r e d i n t h e 1950s b y t h e G e r m a n c o m p a n y , C h e m i e G r u n e n t h a l . T h a l i d o m i d e w a s basically t o b e used a s a n h y p n o t i c ( s l e e p i n g pill) a n d t r a n q u i l l i s e r . E a r l y clinical trials w e r e u n s a t i s factory a n d t h e r e w e r e n o d o u b l e blind t e s t s ( w h e r e n e i t h e r d o c t o r nor p a t i e n t k n o w s w h a t d r u g t r e a t m e n t t h e p a t i e n t i s r e c e i v i n g ) . I n s t e a d i t s e e m s t h a t t h e c o m p a n y relied o n w h a t w e r e i m p r e s s i o n istic t e s t i m o n i a l s from clinicians such as Dr J u n g : Dr J u n g w a s on a r e t a i n e r of a b o u t DM 2 0 0 a m o n t h ( t h e n a b o u t $ 6 0 ) from G r u n e n t h a l . In a clinic in C o l o g n e , he had given t h a l i d o m i d e to t w e n t y p a t i e n t s , for only four w e e k s . Yet his a d m i r a t i o n for t h e d r u g a p p e a r e d o v e r w h e l m i n g . He h a d , for e x a m p l e , used it on four y o u t h s w h o w e r e suffering from m o r a l t e n s i o n as t h e result of m a s t u r b a t i o n . In confidential c h a t s , t h e y had r e v e a l e d t o him t h a t after t a k i n g t h a l i d o m i d e their d e s i r e t o m a s t u r b a t e had d e c r e a s e d , t h e i r m o r a l t e n s i o n had e v a p o r a t e d , and t h e y felt m u c h b e t t e r . A l s o , said D r J u n g , t h a l i d o m i d e had cured p r e m a t u r e ejaculation in a n u m b e r of married patients w h o s e wives were reported to have expressed g r e a t s a t i s f a c t i o n w i t h t h e r e s u l t s . On t h e basis of his t r i a l s , Dr J u n g r e p o r t e d t o G r u n e n t h a l a t t h e b e g i n n i n g o f J u n e 1955 t h a t he c o n s i d e r e d t h a l i d o m i d e ready to be m a r k e t e d (Knightley et al., 1979:26). Y e t , as G r u n e n t h a l g a t h e r e d its g l o w i n g t e s t i m o n i a l s from s u b s e r v i e n t d o c t o r s , o t h e r p h y s i c i a n s w e r e informing t h e c o m p a n y , e v e n b e f o r e t h e d r u g w a s p l a c e d o n t h e m a r k e t , o f side-effects which included giddiness, nausea, constipation, a 'hangover', w a k e f u l n e s s a n d an allergic r e a c t i o n . In spite of t h i s , G r u n e n t h a l l a u n c h e d t h a l i d o m i d e with a n a d v e r t i s i n g c a m p a i g n a i m e d a t selling
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it over the c o u n t e r in p h a r m a c i e s rather than by prescription. P r o m o t i o n a l m a t e r i a l p o i n t e d out t h a t t h a l i d o m i d e w a s "completely n o n - p o i s o n o u s . . . safe . . . a s t o n i s h i n g l y safe . . . n o n - t o x i c . . . fully h a r m l e s s . . .' a n d e v e n that it c o u l d be t a k e n in h i g h e r d o s e s t h a n r e c o m m e n d e d w i t h o u t any d a n g e r ( K n i g h t l e y e t a l . , 1 9 7 9 : 2 8 ) . It w a s G r i i n e n t h a l ' s claim to h a v e m a d e a scientific b r e a k t h r o u g h in p r o d u c i n g a ' c o m p l e t e l y safe* s e d a t i v e w h i c h p r o d u c e d s t a g g e r i n g s a l e s . N o s e d a t i v e had e v e r b e e n called ' c o m p l e t e l y safe'. C o m p a n y s a l e s staff w e r e i n s t r u c t e d to use lines such as in h o s p i t a l s , r e g u l a r t e s t s on p a t i e n t s of t h a l i d o m i d e are s u p e r f l u o u s . ' B e t w e e n 1958 and 1960 d o c t o r s b e g a n r e p o r t i n g a m u c h m o r e s e r i o u s side-effect of t h a l i d o m i d e - p e r i p h e r a l n e u r i t i s . G n i n e n t h a l scientists lied in t h e i r r e p l i e s t o p h y s i c i a n s w h o w r o t e i n with r e p o r t s o f p e r i p h e r a l n e u r i t i s . T o D r G u s t a v S c h m a l t z i n D e c e m b e r 1958 the c o m p a n y r e p l i e d , ' W e feel o b l i g e d to say that this is t h e first t i m e such side effects h a v e b e e n r e p o r t e d to us. . . . ' T o Dr Ralf V o s s in O c t o b e r 1959, ' H a p p i l y we can tell you t h a t such d i s a d v a n t a g e o u s effects h a v e n o t b e e n b r o u g h t t o our n o t i c e ' ( K n i g h t l e y e t al., 1 9 7 9 : 2 8 - 3 0 ) .
5

By e a r l y 1960 t h e v o l u m e of c o m p l a i n t s from p h y s i c i a n s and sales r e p r e s e n t a t i v e s in t h e field w a s such t h a t G r i i n e n t h a l w a s c o m i n g to g r i p s w i t h t h e fact t h a t the a d v e r s e effects w o u l d have to be r e s p o n d e d t o i n a m o r e formal w a y . A n i n t e r n a l m e m o r a n d u m w a r n e d : ' S o o n e r or l a t e r we will not be able to stop p u b l i c a t i o n of t h e side effects of C o n t e r g a n . We are t h e r e f o r e a n x i o u s to get as many positive pieces ofwork as possible.' O n M a r c h 3 0 , 1960, a G r i i n e n t h a l r e p r e s e n t a t i v e r e p o r t e d that initial a p p r o a c h e s to a d o c t o r in I r a n had b e e n unsuccessful. ' H o w e v e r , since t h e I r a n i a n d o c t o r is very m a t e r i a l i s t i c in his o u t l o o k , c o n c r e t e r e s u l t s should b e f o r t h c o m i n g s o o n . ' . . . w h a t G r i i n e n t h a l w a n t e d a b o v e all w a s quick r e s u l t s . T h e c o m p a n y s p e l l e d o u t its policy on trials in a letter to t h e P o r t u g u e s e l i c e n s e e , F i r m a P a r a c e l s i a , o f O p o r t o : ' T o b e quite clear a b o u t it: a q u i c k p u b l i c a t i o n , p e r h a p s in t h r e e m o n t h s , with the r e p o r t s of fifteen t o t w e n t y successful c a s e s w h o h a v e t o l e r a t e d the d r u g w e l l , is m o r e i m p o r t a n t to us t h a n a b r o a d l y b a s e d , large w o r k t h a t will not a p p e a r for eight t o t w e l v e m o n t h s . F r o m t h i s , you can see w h a t kind of t e s t e r s we h a v e in m i n d . ' T h e e x p e r i e n c e o f t h e d o c t o r i n c a r r y i n g out clinical trials s e e m e d t o m a t t e r little. O n e , D r K o n r a d L a n g , had n e v e r p r e v i o u s l y t e s t e d a d r u g before it c a m e on t h e m a r k e t but
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u n d e r t o o k to try t h a l i d o m i d e on c h i l d r e n at t h e U n i v e r s i t y C l i n i c , B o n n . F o r t y c h i l d r e n , m o s t o f w h o m had brain d a m a g e , w e r e g i v e n t h e d r u g u n d e r Dr L a n g ' s s u p e r v i s i o n for p e r i o d s of up to n i n e w e e k s without the permission or knowledge of their parents. The doses w e r e ten to twenty times higher than Griinenthal's r e c o m m e n d e d d o s e for a d u l t s . O n e child had a c i r c u l a t o r y c o l l a p s e , o n e child died from a c o n g e n i t a l h e a r t d e f e c t , a t w e n t y o n e - m o n t h - o l d b a b y w i t h c o n v u l s i v e d i s o r d e r s lost her vision t e m p o r a r i l y , and a t h r e e - m o n t h - o l d baby died from h e a r t failure. D r L a n g c o n s i d e r e d i t very q u e s t i o n a b l e t h a t any o f t h e s e r e a c t i o n s w a s c o n n e c t e d with t h a l i d o m i d e , and r e p o r t e d t o t h e c o m p a n y : in g e n e r a l t e r m s C o n t e r g a n could be d e s c r i b e d as a r a p i d - a c t i n g s e d a t i v e p a r t i c u l a r l y suited for use with c h i l d r e n ' ( K n i g h t l e y e t a l . , 1979: 3 4 - 5 ) . V e r y different t r e a t m e n t a w a i t e d d o c t o r s w h o p l a n n e d t o publish unfavourable reports about thalidomide. One company memora n d u m s h o w e d h o w a r e p o r t o n p e r i p h e r a l n e u r i t i s from t h a l i d o m i d e s u b m i t t e d b y o n e d o c t o r w a s held u p : ' T h e friendly c o n n e c t i o n w i t h [ t h e e d i t o r o f t h e j o u r n a l ] c o n t r i b u t e d t o t h e delay i n t r e a t m e n t o f t h e s u b m i t t e d m a n u s c r i p t . ' W h e n t h e possibility o f legal c o n s e q u e n c e s from t h e p r o m o t i o n o f t h e i r ' c o m p l e t e l y safe' d r u g b e c a m e c l e a r , t h e g a m e o f h a r a s s i n g clinicians w h o p r o d u c e d u n f a v o u r a b l e r e p o r t s b e g a n in e a r n e s t . G r i i n e n t h a l hired a p r i v a t e d e t e c t i v e to r e p o r t on hostile physicians. The detective m a d e notes on the p r i v a t e lives a n d family c i r c u m s t a n c e s o f c e r t a i n p h y s i c i a n s . O n e r e p o r t says: ' T h e father o f D r B . i s a n e x - c o m m u n i s t and n o w a d a y s a m e m b e r o f S E D ' ( S j o s t r o m and N i l s s o n , 1972: 6 9 ) . D i s t i l l e r s b o u g h t t h e licence t o m a r k e t t h a l i d o m i d e i n G r e a t B r i t a i n . T h e c o m p a n y w a s p r i m a r i l y a h u g e spirits and liquor m a n u f a c t u r e r . K n o w l e d g e o f side-effects from t h a l i d o m i d e c a m e later t o D i s t i l l e r s ' a t t e n t i o n t h a n with G r i i n e n t h a l . B u t w h e n a n a w a r e n e s s did b e g i n , it w a s s u p p r e s s e d , j u s t as in t h e c a s e of G r u n e n t h a l . By F e b r u a r y 1961 d o z e n s o f c a s e s o f p e r i p h e r a l n e u r i t i s had b e e n b r o u g h t to Distillers' attention. The company began to consider p u t t i n g 'a little m 6 r e e m p h a s i s ' on t h e risk of p e r i p h e r a l n e u r i t i s 'in t h e h o p e t h a t t h e n u m b e r o f cases will d i m i n i s h i f d o c t o r s are a w a r e o f t h e p o s s i b i l i t y ' . D i s t i l l e r s ' sales p e o p l e w e r e not a l t o g e t h e r e n t h u s i a s t i c a b o u t this idea. O n e sales e x e c u t i v e , J . P a t o n , w r o t e : it is not o u r j o b to e d u c a t e t h e m e d i c a l p r o f e s s i o n how to look out for v a r i o u s c o n d i t i o n s . F r o m a sales p r o m o t i o n point of v i e w , t h e
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m o r e we w r i t e on this side effect, the m o r e it is likely to get out of p e r s p e c t i v e . ' S o t h e sales r e p r e s e n t a t i v e s w e r e i n s t r u c t e d : ' [ T h e ] p o s s i b l e o c c u r r e n c e of p e r i p h e r a l n e u r i t i s is a r e m o t e o n e and in no way d e t r a c t s from t h e m a i n selling p o i n t of D i s t a v a l . . . . It has a t o x i c effect of w h i c h you s h o u l d be a w a r e . . . but t h e r e is no need to a l a r m t h e m e d i c a l p r o f e s s i o n or d i s c u s s t h e m a t t e r unless it is raised.' It w a s in t h e A u s t r a l i a n subsidiary of D i s t i l l e r s t h a t the g r e a t e s t o p p o r t u n i t y t o curtail t h e t h a l i d o m i d e d i s a s t e r w a s m i s s e d . B y early 1961 a y o u n g S y d n e y o b s t e t r i c i a n , Dr W i l l i a m M c B r i d e , w a s conv i n c e d of a c o n n e c t i o n b e t w e e n t h a l i d o m i d e and bizarre birth d e f e c t s . By July 1961 at least t w o and possibly six A u s t r a l i a n Distillers' e m p l o y e e s knew that Dr M c B r i d e suspected thalidomide of causing deformed births. Yet no word ofthis reached the L o n d o n h e a d office o f D i s t i l l e r s until 2 1 N o v e m b e r , m o r e t h a n four m o n t h s l a t e r . I n t e r e s t i n g l y , o n e o f t h e six A u s t r a l i a n D i s t i l l e r s ' e m p l o y e e s w h o k n e w a b o u t t h e M c B r i d e findings w a s J o h n B i s h o p , a sales r e p r e s e n t a t i v e in S o u t h A u s t r a l i a . B i s h o p had b e e n told by o n e of his s u p e r i o r s in m i d - 1 9 6 1 t h a t ' W e ' v e had a r e p o r t from a d o c t o r in S y d n e y a b o u t D i s t a v a l a b n o r m a l i t i e s i n t h e f o e t u s . ' B i s h o p recalls t h a t his s u p e r i o r ' w a s clearly w o r r i e d . H e w a s not t a k i n g the m a t t e r l i g h t l y ' ( K n i g h t l e y e t a l . , 1979: 9 0 ) . N o r w a s B i s h o p t a k i n g t h e m a t t e r lightly, b e c a u s e h e had given t h a l i d o m i d e t o calm the n e r v e s of his p r e g n a n t wife. A m o n t h l a t e r B i s h o p ' s child w a s b o r n w i t h six digits on o n e h a n d . B o t h h a n d s w e r e a t a n u n e v e n angle a t t h e wrist j o i n t , t u r n i n g i n w a r d s a c r o s s t h e b o d y . B i s h o p m a d e t h e link b e t w e e n t h a l i d o m i d e a n d t h e d e f o r m i t i e s w h e n h e r e c a l l e d t h e earlier c o n v e r s a t i o n w i t h his s u p e r i o r . T h e child later b e c a m e a r e c i p i e n t of c o m p e n s a tion from D i s t i l l e r s . In spite o f t h i s kind of p e r s o n a l i n t e r e s t , h e a d q u a r t e r s w a s not i n f o r m e d for four m o n t h s . W h e n w o r d o f t h e M c B r i d e f i n d i n g s finally did g o t o L o n d o n i n N o v e m b e r 1 9 6 1 , t h e r e c i p i e n t o f t h e bad n e w s a t h e a d q u a r t e r s w a s a n e x p o r t m a n a g e r for A u s t r a l i a , J o h n F l a w n . F l a w n also had given his p r e g n a n t wife t h a l i d o m i d e t o h e l p h e r s l e e p . A l e x a n d e r F l a w n , b o r n o n J a n u a r y 9 , 1962, w a s o n e o f t h e w o r s t - d a m a g e d t h a l i d o m i d e c h i l d r e n in B r i t a i n . He had a d e f o r m e d and s h o r t e n e d a r m w i t h a h a n d w i t h o u t a t h u m b . T h e o t h e r h a n d had o n e e x t r a finger. H i s p a l a t e had a g a p i n g hole in it. H i s face w a s p a r a l y s e d o n o n e side. O n e ear w a s c o m p l e t e l y 70

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m i s s i n g , t h e o t h e r grossly d e f o r m e d . F o r t h e first e i g h t e e n m o n t h s of his life, he v o m i t e d his food a c r o s s t h e r o o m with p r o j e c t i l e - l i k e f o r c e . It soon b e c a m e c l e a r that his brain w a s d a m a g e d , t h a t he w a s d e a f and d u m b , and had p o o r vision in his left e y e . ' W h e n A l e x w a s b o r n , I was frightfully b r a v e , ' said J u d i t h F l a w n . i cut off all my feelings. T h i s w a s a t e r r i b l e m i s t a k e b e c a u s e I d i d n ' t c o m e alive a g a i n for s e v e n y e a r s ' ( K n i g h t l e y et a l . , 1979: 112). That certain organisational actors in the events which delayed the w i t h d r a w a l of t h a l i d o m i d e were personal victims o f t h e tragedy is i n s t r u c t i v e . I n d i v i d u a l s in t h e i r o r g a n i s a t i o n a l r o l e s can be part of a w h o l e , w h i c h t h e y w o u l d in no way c h o o s e to p a r t i c i p a t e in w e r e that whole apparent to them. T h e m a n y h u n d r e d s o f f o e t u s e s d a m a g e d d u r i n g the second half of 1961 m i g h t h a v e b e e n saved w e r e it not for a n o t h e r u n f o r t u n a t e c i r c u m s t a n c e . M c B r i d e ' s crucial p a p e r o n t h a l i d o m i d e and birth d e f o r m i t i e s had b e e n s u b m i t t e d t o t h e p r e s t i g i o u s British j o u r n a l . The Lancet. In S e p t e m b e r t h e p a p e r w a s r e t u r n e d - by surface mail! (a discourtesy A u s t r a l i a n academics frequently have to tolerate from i n t e r n a t i o n a l j o u r n a l s . ) 'A c o v e r i n g l e t t e r d a t e d July 13 and s i g n e d b y t h e a s s i s t a n t e d i t o r said t h a t a l t h o u g h M c B r i d e ' s t h e o r y about t h a l i d o m i d e was interesting, pressure to publish important p a p e r s w a s such t h a t t h e r e w a s no s p a c e for this c o n t r i b u t i o n . . . ( M c B r i d e ' s p a p e r w a s e v e n t u a l l y p u b l i s h e d , a s part o f a n o t h e r , i n 1963 in t h e Medical]ournal ofAustralia.X ( K n i g h t l e y et a l . , 1979: 91). O n t h e o t h e r side o f t h e w o r l d , P r o f e s s o r L e n z o f H a m b u r g U n i v e r s i t y had r e a c h e d t h e s a m e c o n c l u s i o n s a s M c B r i d e . O n 2 6 N o v e m b e r 1961 t h e m a s s c i r c u l a t i o n n e w s p a p e r Welt am Sonntag t o o k u p L e n z ' s f i n d i n g s with t h e h e a d l i n e : M A L F O R M A T I O N S F R O M T A B L E T S - A L A R M I N G SUSPICION OF PHYSICIAN'S GLOBALLY DISTRIBUTED DRUG. Grunenthal a t t a c k e d L e n z a n d t h e Welt am Sonntag article as s e n s a t i o n a l i s t , yet w i t h d r e w t h a l i d o m i d e from t h e G e r m a n m a r k e t ' B e c a u s e press r e p o r t s h a v e u n d e r m i n e d t h e basis of scientific d i s c u s s i o n . . . .' T h a l i d o m i d e w a s n e v e r a p p r o v e d for m a r k e t i n g i n t h e U n i t e d S t a t e s t h a n k s t o t h e c a u t i o n o f F D A scientist D r F r a n c e s K e l s e y , w h o w a s h o n o u r e d b y P r e s i d e n t K e n n e d y for saving t h e n a t i o n from t h e d i s a s t e r . C a u t i o u s r e g u l a t o r s in F r a n c e and Israel also refused to a p p r o v e the drug.
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In spite of t h e fact t h a t t h a l i d o m i d e was not a p p r o v e d in the U n i t e d S t a t e s , t h e A m e r i c a n c o m p a n y w h i c h w a s licensed b y G r i i n e n t h a l Richardson-Merrell of M E R / 2 9 fame, distributed two a n d a half million t a b l e t s to 1,267 d o c t o r s , w h o gave t h e m to s o m e 20.(MX) p a t i e n t s . T h i s w a s s u p p o s e d l y all part of R i c h a r d s o n M e r r e l l ' s clinical t e s t i n g p r o g r a m m e i n t h e U n i t e d S t a t e s . A l t h o u g h t h e m e d i c a l d e p a r t m e n t had t h e right o f v e t o , t h e d o c t o r s t o b e offered t h a l i d o m i d e w e r e c h o s e n b y t h e sales r e p r e s e n t a t i v e s . S a l e s m e n w e r e told not to offer p l a c e b o s , only to p r o v i d e t h e m if t h e d o c t o r r e q u e s t e d t h e m . W h a t this a d d s u p t o i s t h a t R i c h a r d s o n M e r r e l l w a s not i n t e r e s t e d in g e n u i n e clinical t e s t i n g but in softening up t h e m a r k e t by i n t e r e s t i n g influential p h y s i c i a n s in t h e p r o d u c t . T h e s t r a t e g y w a s t o flatter key d o c t o r s b y telling t h e m that t h e y had b e e n specially selected to pilot the m i r a c l e new p r o d u c t . T h e y w e r e told t h a t it really did not m a t t e r very m u c h if they did not k e e p r e c o r d s o f t h e i r clinical trials. A t least t e n t h a l i d o m i d e c h i l d r e n w e r e b o r n i n the U n i t e d S t a t e s . The m o r e sophisticated Richardson-Merrell pharmacologists were guilty of m a n y sins of o m i s s i o n . T h e y k n e w that a drug like thalid o m i d e c o u l d c r o s s the p l a c e n t a l b a r r i e r . "Yet k n o w i n g that thalid o m i d e might affect t h e f o e t u s , R i c h a r d s o n - M e r r e l l did no a n i m a l r e p r o d u c t i o n t e s t s o r c o n t r o l l e d clinical trials o n m o t h e r s d u r i n g t h e s e n s i t i v e p e r i o d of p r e g n a n c y to see w h e t h e r in fact it did' ( K n i g h t l e y et a l . , 1979: 7 2 ) . T h e r e w e r e sins of c o m m i s s i o n as well. T h e clinical d a t a w h i c h w e r e p r e s e n t e d to F D A in its s u b m i s s i o n for a p p r o v a l of t h a l i d o m i d e w e r e m i s l e a d i n g and c o n c o c t e d in a variety o f w a y s . O n e crucial p a p e r w r i t t e n b y i n d e p e n d e n t p h y s i c i a n , D r R a y O. N u l s e n of O h i o , w a s in fact w r i t t e n by t h e m e d i c a l d i r e c t o r of R i c h a r d s o n - M e r r e l l . By D e c e m b e r 1 9 6 1 , t h e law, so it s e e m e d , had b e g u n to catch up w i t h G r u n e n t h a l . T h e public p r o s e c u t o r ' s office i n A a c h e n . G e r m a n y , b e g a n a n i n v e s t i g a t i o n w h i c h lasted four y e a r s , t o d e t e r m i n e w h e t h e r c r i m i n a l c h a r g e s should be laid. On 2 S e p t e m b e r 1965 t h e p r o s e c u t o r d r e w up a p r e l i m i n a r y bill of i n d i c t m e n t c h a r g i n g n i n e G r u n e n t h a l e x e c u t i v e s with i n t e n t t o c o m m i t bodily h a r m and i n v o l u n t a r y m a n s l a u g h t e r . T h e full bill of i n d i c t m e n t t o o k a n o t h e r two years to compile. On 27 M a y 1968 t h e trial b e g a n w i t h G r u n e n t h a l d e f e n d i n g its e x e c u t i v e s b y a r g u i n g t h a t u n d e r G e r m a n law a n u n b o r n baby had no legal p r o t e c t i o n e x c e p t in c o n n e c t i o n with c r i m i n a l a b o r t i o n . P r e d i c t a b l y , it w a s also able to p r o d u c e a string of e x p e r t w i t n e s s e s
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w h o a r g u e d t h a t t h e r e w a s n o c o n c l u s i v e p r o o f that t h a l i d o m i d e c a u s e d birth deformities. T h e trial a n d its a t t e n d a n t publicity w a s bitter. On 26 M a y 1970 t h e p r o s e c u t i o n c o m p l a i n e d t o t h e c o u r t t h a t five j o u r n a l i s t s had b e e n t h r e a t e n e d w i t h ' r e p r i s a l s ' b y G r u n e n t h a l for w r i t i n g stories w h i c h did not m e e t with the c o m p a n y ' s a p p r o v a l . I t b e g a n t o a p p e a r t h a t t h e trial w o u l d go on for ever. T h i s suited G r u n e n t h a l . T h e i r t a c t i c w a s t o s u g g e s t ( c o r r e c t l y ) that the p r o t r a c t e d criminal proceedings were holding up out-of-court settlement of compensation c l a i m s for t h e t h a l i d o m i d e families. G r u n e n t h a l d e c l a r e d : i f w e w a i t to see w h e r e t h e trial gets us, we shall still be sitting here in ten y e a r s ' t i m e a n d t h e c h i l d r e n will h a v e n o t h i n g . I f w e are forced t o , we shall fight to t h e e n d , and t h a t , of c o u r s e , will diminish the r e s o u r c e s a v a i l a b l e for any p a y m e n t b y t h e c o m p a n y . " A m i d a t t a c k s from t h e p r e s s o f ' j u s t i c e for sale", on 18 D e c e m b e r 1970, t w o y e a r s a n d s e v e n m o n t h s after t h e trial had b e g u n , a b a r g a i n w a s s t r u c k . T h e c o u r t , w i t h t h e explicit a g r e e m e n t o f t h e p r o s e c u t i o n , s u s p e n d e d t h e c r i m i n a l h e a r i n g and G r u n e n t h a l a g r e e d to pay $31 million in c o m p e n s a t i o n to the G e r m a n thalid o m i d e c h i l d r e n . T h e c o m p a n y and its officers had b e e n n e i t h e r a c q u i t t e d nor found guilty. T h e G e r m a n s e t t l e m e n t set t h e p a t t e r n for t h e rest o f t h e w o r l d . In spite of all t h e w r o n g d o i n g a s s o c i a t e d with t h e t h a l i d o m i d e affair, n o t h i n g a n y w h e r e i n t h e w o r l d w a s e v e r , t o this w r i t e r ' s k n o w l e d g e , s e t t l e d in a c o u r t of c r i m i n a l or civil j u r i s d i c t i o n . No o n e could put a figure o n t h e m a n y h u n d r e d s o f millions o f d o l l a r s w h i c h h a v e b e e n p a i d a r o u n d t h e w o r l d i n o u t - o f - c o u r t s e t t l e m e n t s . O n e r e a s o n for t h i s i s t h a t p h a r m a c e u t i c a l c o m p a n i e s often i m p o s e d the c o n d i t i o n t h a t t h e s e t t l e m e n t r e m a i n s e c r e t . T h e p u r p o s e o f such a c o n d i t i o n w a s to k e e p o t h e r victims in the dark about what was possible. In Q u e b e c R i c h a r d s o n - M e r r e l l s e e m e d t o have a c h i e v e d a great v i c t o r y t h r o u g h its i m p o s i t i o n of a s e c r e t i v e n e s s c o n d i t i o n u p o n all s e t t l e m e n t s . T h e p a r e n t s o f 2 6 t h a l i d o m i d e victims i n Q u e b e c did n o t b e c o m e a w a r e of t h e possibility of civil action against the c o m p a n y until after t h e t w e l v e m o n t h s ' s t a t u t e o f l i m i t a t i o n s o n p e r s o n a l - i n j u r y c a s e s i n Q u e b e c had e x p i r e d . F o r t u n a t e l y , h o w e v e r , s o m e i n t e r n a t i o n a l legal m a n o e u v r e s by a lawyer r e p r e s e n t i n g t h e s e c l i e n t s e n t i c e d R i c h a r d s o n - M e r r e l l t o settle with them. It would seem that the c o m p a n i e s ' strategy of quiet, out-of-court s e t t l e m e n t has b e e n p r u d e n t . I n t h e only t h a l i d o m i d e case e v e r t o 73

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go to a j u r y d e c i s i o n , R i c h a r d s o n - M e r r e l l w a s found negligent and t h e j u r y a w a r d e d t h e plaintiff $ 5 5 0 , 0 0 0 m o r e t h a n her lawyers had a s k e d for." R i c h a r d s o n - M e r r e l l set in train an a p p e a l , and ultimately t h i s c a s e w a s also r e s e t t l e d o u t - o f - c o u r t for an u n d i s c l o s e d s u m . T h e c o m p a n i e s i n v o l v e d h a v e suffered significant s e t b a c k s as a r e s u l t o f t h e i r i n v o l v e m e n t with t h a l i d o m i d e . C h e m i e G r u n e n t h a l has n e v e r r e c o v e r e d t h e i m p o r t a n t p o s i t i o n i t had i n the G e r m a n p h a r m a c e u t i c a l i n d u s t r y p r i o r t o t h e t r a g e d y . Distillers pulled out o f t h e p h a r m a c e u t i c a l b u s i n e s s in 1962. selling its a s s e t s to Eli Lilly. R i c h a r d s o n - M e r r e l l s t o c k s p l u m m e t e d o n the N e w Y o r k stock e x c h a n g e a t t h e t i m e o f t h e M E R / 2 9 and t h a l i d o m i d e c r i s e s , and b e t w e e n 1961 and 1964 its profit levels r e m a i n e d on a p l a t e a u . But from 1965 o n w a r d s it e x p e r i e n c e d t h e steady rise in profitability w h i c h it had e n j o y e d p r i o r to t h e crisis. F o r a F o r t u n e 500 c o m p a n y p e r h a p s any legal s e t b a c k is likely to be o v e r c o m e in t h e long t e r m . B u t for R i c h a r d s o n - M e r r e l l the s e t b a c k did last for a n u m b e r of y e a r s . D u r i n g 1962 t h e c o m p a n y ' s stock prices w e r e m o r e t h a n h a l v e d (from $98 in F e b r u a r y and M a r c h to $44 in S e p t e m b e r and O c t o b e r ) . R i c h a r d s o n - M e r r e l l s t o c k s did not r e t u r n to the prices of e a r l y 1962 until m o m e n t a r i l y in S e p t e m b e r 1967 and p e r m a n e n t l y in O c t o b e r 1968. T h e story o f M o r a g M c C a l l u m i l l u s t r a t e s t h a t w h a t e v e r the t h a l i d o m i d e s e t t l e m e n t s could b e c o n s t r u e d a s c o n s t i t u t i n g , i t w o u l d not b e called j u s t i c e . F o r M o r a g M c C a l l u m n o sum o f m o n e y could give h e r t h e world she will n e v e r k n o w . She is b l i n d , deaf, and d u m b . O n e side o f h e r b o d y is p a r a l y s e d so t h a t she c a n n o t smile. She is severely r e t a r d e d , and t h e r e i s little h o p e o f b r e a k i n g t h r o u g h t o her d a r k , silent m i n d . She b o a r d s at a special school for t h e deaf, fifty miles from w h e r e she lives in S t i r l i n g s h i r e , S c o t l a n d , but she will soon b e s i x t e e n . T h e n t h e e d u c a t i o n a l a u t h o r i t i e s will n o l o n g e r b e r e s p o n s i b l e for h e r , and her m o t h e r has not b e e n able to find a p l a c e w i l l i n g t o a c c e p t her. M r s M c C a l l u m s a y s , " S o m e b o d y has to be w i t h h e r all t h e t i m e . Y o u n e v e r k n o w what will h a p p e n . S h e ' s j u s t a wild a n i m a l . T h e r e is no c o m m u n i c a t i o n with her at all.' M o r a g ' s s a v a g e , d i s t u r b i n g p r e s e n c e d i s r u p t s all family life and d e m a n d s g r e a t e n d u r a n c e from her p a r e n t s , b r o t h e r , and two s i s t e r s . M o r a g w a s b o r n as a n o n - i d e n t i c a l twin (her b r o t h e r suffered n o d a m a g e ) . ' F o r t h e first t h r e e y e a r s n o o n e c a m e t o 74

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h e l p us," says M r s M c C a l l u m . ' T h e n w h e n a d o c t o r did c o m e , he had a p i e c e of p a p e r w h i c h I could sign to put M o r a g a w a y into a m e n t a l h o s p i t a l . 1 refused." A l e x a n d e r M c C a l l u m . a n a c c i d e n t - r e p a i r m e c h a n i c for b u s e s , has b e e n e v e n m o r e upset by his d a u g h t e r ' s fate. A f t e r her b i r t h , he b e c a m e a p s y c h i a t r i c o u t p a t i e n t and n o w , after further health p r o b l e m s , is an invalid and never likely to w o r k again. T h e M c C a l l u m s are b o t h angry for having a g r e e d to t h e low s e t t l e m e n t in 1968. ' M o r a g got only £ 1 6 . 0 0 0 and yet a boy with s h o r t a r m s but n o r m a l i n t e l l i g e n c e and likely to be able to e a r n his living got £ 2 . 0 0 0 m o r e ' ( K n i g h t l e y et a l . , 1979: 2 1 9 ) . O n e c o u p l e from L i e g e . B e l g i u m , p o i s o n e d t h e i r e i g h t - d a y - o l d t h a l i d o m i d e d a u g h t e r . T h e y w e r e c h a r g e d with m u r d e r , but a c q u i t t e d to t h e wild a c c l a i m of a t h o u s a n d p e o p l e w h o had c r u s h e d i n t o t h e c o u r t r o o m for t h e w e e k - l o n g trial. H a d they b e e n c o n v i c t e d w h i l e s o m a n y c u l p a b l e c o m p a n y e x e c u t i v e s r o a m e d free, w e would h a v e w i t n e s s e d o n e of the m o r e t e r r i b l e ironies in t h e history of criminal justice.

G. D. Searle
T h e t h a l i d o m i d e d i s a s t e r r e s u l t e d in a g e n e r a l t i g h t e n i n g of drug r e g u l a t o r y laws i n m o s t d e v e l o p e d c o u n t r i e s a r o u n d t h e g l o b e . A n o t h e r fiasco in t h e m i d - 1 9 7 0 s i n v o l v i n g t h e G. D. Searle corp o r a t i o n p r o d u c e d d r a m a t i c r e g u l a t o r y c h a n g e i n t h e m o r e specific a r e a o f t h e safety t e s t i n g o f d r u g s . S e a r l e , o n e o f t h e largest A m e r i c a n p h a r m a c e u t i c a l c o m p a n i e s w a s s u b j e c t e d to a b a r r a g e of a l l e g a t i o n s before S e n a t o r E d w a r d K e n n e d y ' s S u b - c o m m i t t e e on Health of the Senate Judiciary C o m m i t t e e b e t w e e n 1975 and 1977. K e n n e d y and t h e F D A w e r e c o n v i n c e d t h a t b o t h fraud and i n c o m p e t e n c e w e r e w i d e s p r e a d i n t h e S e a r l e safety t e s t i n g p r o g r a m m e . F D A h e a d S c h m i d t testified t o p a r t i c u l a r c o n c e r n o v e r t h e testing o f w h a t w a s t o b e c o m e S e a r l e ' s top-selling line, A l d a c t o n e . T h i s r e p o r t clearly i n d i c a t e d a d o s e - r e l a t e d i n c r e a s e in the f r e q u e n c y o f liver and t e s t i c u l a r t u m o r s and r e c o m m e n d e d that t h e s e findings be a n a l y z e d for statistical significance. Although F D A regulations require 'alarming findings'to be s u b m i t t e d t o t h e A g e n c y p r o m p t l y , this had not b e e n d o n e . I n t h e c o u r s e o f o u r r e v i e w o f t h e 7 8 - w e e k study o n r a t s , w e
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h a v e found a variety of o t h e r p r o b l e m s and q u e s t i o n a b l e practices. F o r e x a m p l e , tissue m a s s e s w e r e e x c i s e d from t h r e e live a n i m a l s d u r i n g t h e s t u d y , a n d t h e a n i m a l s w e r e a l l o w e d t o c o n t i n u e i n the s t u d y . T w o o f t h e s e t u m o r s w e r e m a l i g n a n t and w e r e not r e p o r t e d t o F D A ( S u b c o m m i t t e e o n H e a l t h . 1976a: Part I I , 9 ) . It is d i s c o n c e r t i n g t h a t e v e n t o d a y , after t h r e e s e p a r a t e r e v i e w s b y S e a r l e p e r s o n n e l o f t h e s a m e d a t a from the 7 8 - w e e k rat s t u d y , w e a r e c o n t i n u i n g t o d i s c o v e r e r r o r s t h a t c o m p l i c a t e review o f this study. R e v i e w of a 104-week rat study on A l d a c t o n e c o n d u c t e d at H a z l e t o n L a b o r a t o r i e s [ a c o n t r a c t l a b o r a t o r y ] also r e v e a l e d p r o b l e m s . O n l y 7 0 p e r c e n t o f t h e t i s s u e s s c h e d u l e d for h i s t o p a t h o l o g i c a l e x a m i n a t i o n i n t h e p r o t o c o l w e r e actually e x a m i n e d . I n a d d i t i o n , s o m e a n i m a l s with gross lesions w h i c h , a c c o r d i n g to the study protocol, required histopathological e x a m i n a t i o n , w e r e not s o e x a m i n e d . A n o t h e r t o p seller, F l a g y l , which had b e e n t h e subject of a c o n c e r t e d c a m p a i g n b y N a d e r ' s H e a l t h R e s e a r c h G r o u p for withd r a w a l from t h e m a r k e t o n g r o u n d s o f alleged c a r c i n o g e n i c i t y , had its t e s t i n g d a t a s u b j e c t e d to stinging criticism by C o m m i s s i o n e r S c h m i d t . O n e c r i t i c i s m i l l u s t r a t e s nicely h o w a c o m p a n y can use s e l e c t i v i t y of scientific i n f o r m a t i o n to a d v a n t a g e . A m o n g a d d i t i o n a l m a j o r findings o f t h e i n v e s t i g a t i o n o f this study a r e : (1) F o r s e v e r a l o f t h e a n i m a l s , i t w a s noted that the m i c r o s c o p i c e x a m i n a t i o n of tissue slides had b e e n c o n d u c t e d by t w o different p a t h o l o g i s t s a t S e a r l e w h o r e p o r t e d different findings. R a t h e r t h a n s u b m i t t i n g b o t h r e p o r t s , or having a third p a t h o l o g i s t r e v i e w slides o n w h i c h t h e first two d i s a g r e e d , Searle s u b m i t t e d only t h e s e c o n d p a t h o l o g i s t ' s r e p o r t , which i n our view a p p e a r s s u b s t a n t i a l l y m o r e f a v o r a b l e t o t h e d r u g : and (2) S e a r l e e m p l o y e e s w e r e u n a b l e t o explain m a n y o f t h e p r o c e d u r e s b y w h i c h m i c r o s c o p i c f i n d i n g s w e r e r e c o r d e d , e d i t e d and verified p r i o r to t h e i n c l u s i o n in t h e r e p o r t of this s t u d y ; most r e c o r d s of o b s e r v a t i o n s of m i c r o s c o p i c f i n d i n g s w e r e not d a t e d or signed. T h e y w e r e a l s o u n a b l e t o a c c o u n t for t h e differences i n r a w d a t a a n d t h e final r e p o r t s s u b m i t t e d t o F D A ( S u b c o m m i t t e e o n H e a l t h . 1976a: P a r t I I . 1 3 - 1 4 ) . S i m i l a r a l l e g a t i o n s w e r e m a d e by S c h m i d t with r e s p e c t to the sweetening ingredient. Aspartame.
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O n e final e x a m p l e with r e g a r d t o A s p a r t a m e : O u r i n v e s t i g a t o r s found t h a t a p a t h o l o g i s t ' s s u m m a r y w a s e d i t e d in such a m a n n e r as to a l t e r , g e n e r a l l y in a f a v o r a b l e d i r e c t i o n , s o m e o f t h e p a t h o l o g i s t ' s s u m m a r i z e d f i n d i n g s . T h e original r e p o r t w a s not s u b m i t t e d ( S u b c o m m i t t e e o n H e a l t h . 1976a: P a r t I I , 15). F u r t h e r , on t h e q u e s t i o n of s e l e c t i v i t y , t h e S e a r l e case study gives an i n d i c a t i o n o f t h e p o s s i b i l i t i e s for c o m p l e t e l y rejecting a study for r e a s o n s w h i c h m i g h t or m i g h t not be l e g i t i m a t e . A 4 6 - w e e k h a m s t e r s t u d y o n A s p a r t a m e w a s ' d i s c o n t i n u e d b e c a u s e o f "wet t a i l " , ( a d i s e a s e o f h a m s t e r s ) but n o n e o f t h e s y m p t o m s o f t h e d i s e a s e are reflected i n daily o b s e r v a t i o n r e c o r d s ' ( S u b c o m m i t t e e o n H e a l t h , 1976a: P a r t I I . 3 5 ) . O n e c o u l d g o o n and o n listing t h e m y r i a d o f F D A a l l e g a t i o n s s p r e a d o v e r t h o u s a n d s o f p a g e s o f t e s t i m o n y b e f o r e the S e n a t e . I n a 52-rat study of N o r p a c e there were alleged to be ' i n a d e q u a t e antem o r t e m o b s e r v a t i o n s : e.g. a n i m a l s r e p o r t e d i n good c o n d i t i o n w e r e a c t u a l l y d e a d , i n a d e q u a t e r e p o r t i n g o f tissue m a s s e s ' ( S u b c o m m i t t e e o n H e a l t h , 1976a: P a r t I I , 3 9 ) . T h e m o s t s e r i o u s t y p e o f p r o b l e m w h i c h t h e F D A c l a i m e d w a s c o m m o n t o m a n y Searle studies was: 'Because ofthe perfunctory nature ofthe observations, t i s s u e m a s s e s c o m e and g o and a n i m a l s die m o r e t h a n o n c e ' ( S u b c o m m i t t e e on H e a l t h , 1976a: P a r t I I , 4 1 ) . In fact s o m e rats listed a s d e a d l a t e r w e r e r e c o r d e d a s a l i v e , t h e n d e a d , t h e n r e s u r r e c t e d o n c e o r e v e n twice m o r e . A n o t h e r bad m o m e n t for S e a r l e w a s w h e n its f o r m e r p r i n c i p a l p a t h o l o g i s t , J o h n W . S a r g a t z , testified t h a t in 1968 and 1969, o v e r his o b j e c t i o n s , he had b e e n i n s t r u c t e d t o w r i t e r e a s s u r i n g c o m m e n t s o n p o s t - m o r t e m s o f rats w h i c h d i e d in 1967, b e f o r e he j o i n e d t h e firm in M a y 1968. F D A G e n e r a l - C o u n s e l ' s office w a s o f t h e view that Searle should be p r o s e c u t e d c r i m i n a l l y for its p a t t e r n of c o n d u c t with r e s p e c t to drug testing. The Justice D e p a r t m e n t , however, was equally s t r o n g l y o f t h e view t h a t a c r i m i n a l c a s e should not p r o c e e d . T h e i r v i e w w a s t h a t t h e scientific c o m p l e x i t y of t h e case w o u l d be an e x c e s s i v e b u r d e n o n limited g o v e r n m e n t p r o s e c u t o r i a l r e s o u r c e s , t h a t w h i l e it m i g h t be p o s s i b l e to c o n v i c t a few low-level c o m p a n y o p e r a t i v e s , guilt on t h e p a r t of s e n i o r e x e c u t i v e s could not be d e m o n s t r a t e d beyond reasonable doubt. Justice was averse to a r e s u l t w h i c h m i g h t lay all b l a m e at t h e d o o r of a c o u p l e of j u n i o r s c a p e g o a t s . M o r e o v e r , t h e J u s t i c e D e p a r t m e n t w a s o f t h e view that S e a r l e ' s a l l e g e d m i s d e e d s w e r e not i n t h e n a t u r e o f clearly definable
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specific a c t s , but r a t h e r a c u m u l a t i v e p a t t e r n o f c o n d u c t . T h e F D A itself had a d m i t t e d t h a t this w a s t h e case t h r o u g h t h e w o r d s of its t a s k force t o i n v e s t i g a t e t h e c o n d u c t o f S e a r l e ' s a n i m a l s t u d i e s . W h i l e a single d i s c r e p a n c y , e r r o r , or i n c o n s i s t e n c y in any given s t u d y m a y not be significant in and of itself, the cumulative f i n d i n g s o f p r o b l e m s w i t h i n and a c r o s s t h e s t u d i e s w e i n v e s t i g a t e d r e v e a l a p a t t e r n of c o n d u c t which c o m p r o m i s e s t h e scientific i n t e g r i t y o f t h e s t u d i e s ( S u b c o m m i t t e e o n H e a l t h , 1976a: Part I I I , 4). L a t e r in this b o o k we will r e t u r n to the t h e m e that o n e of the d e f i c i e n c i e s of e x i s t i n g c r i m i n a l ( a n d civil) law for d e a l i n g with c o r p o r a t e m i s c o n d u c t is t h a t it is g e a r e d to d e a l i n g w i t h a specific act p e r p e t r a t e d at o n e p o i n t of t i m e r a t h e r t h a n with a p a t t e r n of b e h a v i o u r a c r o s s t i m e w h i c h u l t i m a t e l y h a s anti-social effects. It w a s t h e J u s t i c e D e p a r t m e n t ' s v i e w which held sway in a r e p u t e d l y c l o s e G r a n d J u r y d e c i s i o n not t o r e t u r n a n i n d i c t m e n t a g a i n s t S e a r l e or any of its e x e c u t i v e s . T h e c o m p a n y felt v i n d i c a t e d a n d w a s a b l e to c l a i m , as o n e S e a r l e e x e c u t i v e put it to m e : ' W h i l e t h e r e m i g h t h a v e b e e n a little d i s h o n e s t y h e r e and t h e r e , basically it w a s a p r o b l e m o f i n c o m p e t e n c e and p o o r r e c o r d k e e p i n g a m o n g o u r r e s e a r c h staff.' I n spite o f t h e d r o p p i n g o f criminal c h a r g e s , the a d v e r s e publicity from t h e K e n n e d y h e a r i n g s had i m p o r t a n t c o n s e q u e n c e s for S e a r l e . S e v e r a l S e a r l e e x e c u t i v e s with w h o m I s p o k e said t h a t c o m p a n y m o r a l e , a n d h e n c e p r o d u c t i v i t y , w a s at a d e p r e s s e d level d u r i n g t h e i n v e s t i g a t i o n s . In p a r t i c u l a r , S e a r l e r e s e a r c h g r o u n d to a halt b e c a u s e s e n i o r e x e c u t i v e s w e r e d o i n g little else but r e s p o n d t o the o n g o i n g d e m a n d s of t h e i n v e s t i g a t i o n s into their affairs. A total r e o r g a n i s a t i o n o f t h e c o m p a n y was t h e u p s h o t . T h e P r e s i d e n t w a s replaced by Donald Rumsfeld, one-time Defence Secretary, White H o u s e C h i e f of Staff, a n d i n c u m b e n t of o t h e r s e n i o r p o s i t i o n s in the a d m i n i s t r a t i o n s o f N i x o n and F o r d . S e a r l e also g a v e a b l a n k c h e q u e to R i c h a r d H a m i l l from B a x t e r T r a v e n o l to set up a s o p h i s t i c a t e d c o r p o r a t e c o m p l i a n c e g r o u p w h i c h w o u l d t r a v e l t h e w o r l d d o i n g c o m p l i a n c e a u d i t s t o e n s u r e that all s u b s i d i a r i e s in all a r e a s of t h e c o r p o r a t i o n ' s o p e r a t i o n s w e r e m e e t i n g b o t h c o m p a n y and legal s t a n d a r d s . H a m i l l ' s key a p p o i n t m e n t s i n t h e c o m p l i a n c e g r o u p w e r e also from o u t s i d e S e a r l e . A s S e a r l e ' s G r o u p M a n a g i n g D i r e c t o r for the S o u t h - E a s t A s i a n Region complained to me: 7S

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W e h a v e t h r e e b o s s e s t o w o r k for n o w , w h e r e a s local c o m p a n i e s h a v e only o n e . F i r s t l y , we m u s t follow local l a w s , like the local C o r p o r a t e Affairs C o m m i s s i o n . S e c o n d l y , w e have got t o have t h e S e c u r i t i e s and E x c h a n g e C o m m i s s i o n a s a boss. A n d t h i r d l y , w e h a v e t o h a v e t h e i n t e r n a l c o r p o r a t i o n c o n t r o l s which o u r c o m p a n y has set u p since t h e K e n n e d y h e a r i n g s . W i t h t h r e e different k i n d s o f c h e c k s on our b e h a v i o u r t h e r e is far less c h a n c e t h a t a n A m e r i c a n m u l t i n a t i o n a l c o m p a n y will b r e a k the law c o m p a r e d with an A u s t r a l i a n c o m p a n y . It is difficult to a s s e s s t h e e x t e n t o f t h e financial i m p a c t o f t h e bad p u b l i c i t y from t h e K e n n e d y h e a r i n g s . S e a r l e s h a r e v a l u e s w e r e e n j o y i n g c o n s i s t e n t l y rising v a l u e s d u r i n g t h e first four years o f t h e 1970s. T h i s w a s followed by d e c l i n e in t h e m i d - 1 9 7 0 s (the p e r i o d of t h e crisis) and a p l a t e a u at t h e s e l o w e r s h a r e v a l u e s for the r e m a i n d e r o f t h e d e c a d e . S e a r l e profitability b e g a n t o d e c l i n e i n 1973 and s h o w e d a d e c r e a s e e v e r y y e a r until 1977, in which the c o r p o r a t i o n r e c o r d e d a l o s s . ' M o s t o b s e r v e r s s e e m t o a g r e e that the publicity p r o b l e m with which the c o m p a n y was confronted during this period was c o m p o u n d e d by poor m a n a g e m e n t . It would therefore be foolish to a s s u m e t h a t t h e K e n n e d y h e a r i n g s had a d r a m a t i c effect o n t h e c o r p o r a t i o n ' s f i n a n c i a l p e r f o r m a n c e . N e v e r t h e l e s s , t h e r e c a n b e little d o u b t t h a t t h e r e w a s s o m e effect. H a z l e t o n L a b o r a t o r i e s also claim t h a t being n a m e d i n the K e n n e d y h e a r i n g as h a v i n g d o n e w o r k on c o n t r a c t for Searle (work which was q u e s t i o n e d ) cost t h e small c o m p a n y o v e r a million dollars in business. M o s t d r a m a t i c o f all, h o w e v e r , w e r e t h e c o n s e q u e n c e s for the r e g u l a t o r y a p p a r a t u s . T h e F D A set a b o u t d r a w i n g u p a d e t a i l e d c o d e o f G o o d L a b o r a t o r y P r a c t i c e s ( G L P s ) for drug t e s t e r s , violat i o n of w h i c h could c o n s t i t u t e a c r i m i n a l offence. It w o u l d n o w be m u c h e a s i e r t o c o n v i c t a c o m p a n y guilty o f t h e k i n d s o f m i s d e e d s a l l e g e d t o h a v e b e e n p e r p e t r a t e d b y S e a r l e . I n t e r e s t i n g l y , Searlc p l a y e d a c o n s t r u c t i v e role in d r a w i n g up a draft set of G L P regulat i o n s , m u c h o f w h i c h w a s t a k e n u p b y t h e F D A . E v e n m o r e interesting w a s t h e fact t h a t S e a r l e d i s s o c i a t e d itself from all of the o t h e r c o r p o r a t i o n s w h o t h r o u g h the P h a r m a c e u t i c a l Manufacturers A s s o c i a t i o n a r g u e d t h a t t h e G L P s should b e g u i d e l i n e s r a t h e r t h a n s a n c t i o n a b l e r u l e s . S e a r l e insisted t h a t v i o l a t i o n o f G L P s s h o u l d b e a c r i m i n a l m a t t e r . T h e F D A also set up a large B i o r e s e a r c h M o n i t o r i n g b u r e a u c r a c y o f i n s p e c t o r s t o e n s u r e c o m p l i a n c e with the G L P s .

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T h e i m p a c t o f t h e K e n n e d y S e a r l e h e a r i n g s has b e e n intern a t i o n a l , a s m a n y d e v e l o p e d c o u n t r i e s are n o w e n a c t i n g G L P s similar to those o f t h e United States.

Biometric Testing Inc. and Industrial Bio-Test Laboratories
O n e o f t h e issues r a i s e d b y t h e S e a r l e i n v e s t i g a t i o n s w a s t h e relat i o n s h i p b e t w e e n c o n t r a c t l a b o r a t o r i e s and large p h a r m a c e u t i c a l c o m p a n i e s . C a n p h a r m a c e u t i c a l c o m p a n i e s use their c o m m e r c i a l p o w e r to i m p o s e a set of e x p e c t a t i o n s on c o n t r a c t l a b o r a t o r i e s w h e r e b y u n f a v o u r a b l e r e s u l t s c a u s e t h e l a b o r a t o r y t o b e l i e v e that i t will be u n l i k e l y to get future c o n t r a c t s ? C a n a c o m p a n y w h i c h w a n t s to p u s h t h r o u g h a q u i c k and dirty s t u d y , yet which w a n t s to m a i n t a i n its o w n s t a n d a r d s for r e s e a r c h e x c e l l e n c e , get a c o n t r a c t lab to do s h o d d y w o r k for it? T h e o p i n i o n of F D A officers I s p o k e w i t h w a s t h a t c e r t a i n c o n t r a c t labs have f l o u r i s h e d b y u n d e r c u t t i n g r e s p o n sible l a b o r a t o r i e s on price and m a k i n g a profit by fabricating d a t a a n d c u t t i n g c o r n e r s o n scientific r i g o u r . A b r o g a t i o n o f r e s p o n s i b i l i t y i n o n e case ( B i o m e t r i c T e s t i n g I n c . ) d i s c u s s e d i n t h e K e n n e d y h e a r i n g s w a s t w o steps r e m o v e d from the m a n u f a c t u r e r . H e r e t h e c o n t r a c t l a b o r a t o r y had widely used s u b contractors. D R S C H M I D T . M a n y o f t h e laboratory d e t e r m i n a t i o n s are s u b c o n t r a c t e d with l i t t l e , i f a n y , m o n i t o r i n g o f t h e p e r f o r m a n c e o f t h e s e s u b c o n t r a c t o r s . I n this c o n n e c t i o n , i t c a m e t o o u r a t t e n t i o n last w e e k t h a t former e m p l o y e e s o f o n e o f t h e s e s u b c o n t r a c t o r s h a v e c h a r g e d t h a t t h e y w e r e i n s t r u c t e d to falsify d a t a by t h e i r e m p l o y e r . . . . S o m e o f t h e l a b o r a t o r y d e t e r m i n a t i o n s alleged t o have b e e n c a r r i e d o u t w e r e found b y t h e F D A i n v e s t i g a t o r s not t o have b e e n c a r r i e d o u t at all. S E N A T O R K E N N E D Y . W h a t d o e s this m e a n , t h a t n o n e x i s t e n t experiments were reported? D R S C H M I D T . Y e s , sir, i t i s c o m m o n l y called ' d r y - l a b e l i n g ' b y some. ( S u b c o m m i t t e e o n H e a l t h , 1976a: P a r t I I I , 13). L a t e i n 1979 t w o f o r m e r v i c e - p r e s i d e n t s o f B i o m e t r i c T e s t i n g Inc. p l e a d e d guilty to c h a r g e s of c o n s p i r i n g to falsify r e p o r t s of a n i m a l tests on certain drug products in order to show them harmless when
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in fact t h e t e s t s had not b e e n c a r r i e d o u t . In t h e w a k e o f t h e i n c i d e n t the c o m p a n y is now bankrupt. The most c e l e b r a t e d discussion c o n c e r n i n g a contract testing l a b o r a t o r y c e n t r e d o n I n d u s t r i a l B i o t e s t ( I B T ) , o n e o f t h e largest. A g a i n t h e forum for t h e laying of a l l e g a t i o n s a g a i n s t I B T w a s the K e n n e d y h e a r i n g s . T h e most s e r i o u s a l l e g a t i o n m a d e b y the F D A w a s t h a t I B T had p r o v i d e d false i n f o r m a t i o n to t h e m by failing to r e p o r t i n s t a n c e s o f test a n i m a l s w h i c h had d e v e l o p e d t u m o u r s and g e n e r a l l y u n d e r s t a t i n g t h e n u m b e r o f a n i m a l s with t u m o u r s . A s a result o f t h e i r i n v e s t i g a t i o n s the F D A i n s t i t u t e d p r o c e e d i n g s t o r e m o v e N a p r o s y n , t h e largest selling p r o d u c t o f the S y n t e x corp o r a t i o n , from t h e m a r k e t . A m o n g t h e a l l e g a t i o n s o n the I B T testing o f N a p r o s y n were: . . . m a n y a n i m a l w e i g h t s w e r e r e c o r d e d as having b e e n c o l l e c t e d w h i l e t h e a n i m a l s w e r e alive o n d a t e s s u b s e q u e n t t o their d a t e s o f d e a t h ; s e v e r a l a n i m a l s w e r e r e c o r d e d a s having died o n m o r e t h a n o n e d a t e , u s u a l l y with different v e r s i o n s o f gross post m o r t e m findings; e x t r e m e variations in body weight were noted b o t h d u r i n g s u c c e s s i v e w e i g h i n g s o f t h e s a m e a n i m a l s and within a n y g r o u p o f a n i m a l s w e i g h e d a t t h e s a m e t i m e , e v e n t h o u g h all a n i m a l s w e r e r e p o r t e d t o have r e c e i v e d s t a n d a r d care and d r u g a d m i n i s t r a t i o n ( S u b c o m m i t t e e o n H e a l t h , 1977: P a r t I V , 144). F D A officers w e r e a n g e r e d by t h e fact that I B T s h r e d d e d a n u m b e r o f d o c u m e n t s r e q u i r e d for their i n v e s t i g a t i o n . S h r e d d e d d o c u m e n t s i n c l u d e d ' X - r a y s and E K G ' s , a n u m b e r o f b o o k s o f d a t a , and s o m e l o o s e d a t a i n f o l d e r s . ' D r M a r i o n F i n k e l , A s s o c i a t e D i r e c t o r for N e w D r u g E v a l u a t i o n , w r o t e in a r e p o r t on I B T of 14 J a n u a r y 1977:
1

I t t u r n s o u t t h a t n o t only w a s highly m a t e r i a l i n f o r m a t i o n shielded from o u r k n o w l e d g e , a c t u a l l y d o w n r i g h t false i n f o r m a t i o n of an e n o r m o u s e x t e n t w a s s u b s t i t u t e d for it; this w a s d o n e , i n m y view, t o a s s u r e t h e d e l i b e r a t e d e c e p t i o n p r o c e s s i n which I B T a n d / o r its a g e n t s e n g a g e d ( S u b c o m m i t t e e o n H e a l t h , 1977: P a r t I V , 177). F D A h a v e a c c e p t e d a s u b s e q u e n t S y n t e x i n - h o u s e r e p l i c a t i o n for N a p r o s y n a s d e m o n s t r a t i n g t h e safety o f t h e p r o d u c t . A t t h e t i m e o f w r i t i n g , t h e I B T fiasco is still s o m e t h i n g of a legal m u d d l e . A C h i c a g o g r a n d j u r y h a s r e t u r n e d c r i m i n a l i n d i c t m e n t s against four f o r m e r I B T e m p l o y e e s . S e c u r i t i e s class action suits have b e e n filed a g a i n s t S y n t e x to t h e benefit of all p e r s o n s w h o b o u g h t Syntex
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c o m m o n stock or o p t i o n s b e t w e e n 13 O c t o b e r 1975 and 6 A u g u s t 1976. T h e suits a l l e g e t h a t S y n t e x k n e w o r should h a v e k n o w n o f t h e d e f i c i e n c i e s i n t h e 1BT r e s e a r c h and d r a w n t h e c o n t r a c t l a b o r a t o r y ' s a t t e n t i o n t o t h e m . O u t o f c o u r t I B T h a v e a g r e e d t o pay $ 1 , 8 0 0 , 0 0 0 t o w a r d s a s e t t l e m e n t fund for t h e class a c t i o n suits. T h e c o n s e q u e n c e s of the affair for I B T have b e e n c a t a s t r o p h i c . F D A d i s c o n t e n t w i t h I B T w o r k led the a g e n c y t o write t o m o s t o f t h e m a j o r d r u g c o m p a n i e s informing t h e m that any d a t a collected by I B T w o u l d in future be s u b j e c t e d to p e c u l i a r l y careful F D A c h e c k i n g . T h i s b e i n g a n extra b u r d e n which most c o m p a n i e s w e r e not willing t o b e a r , I B T s t o p p e d g e t t i n g b u s i n e s s from major d r u g c o m p a n i e s . A t t h e t i m e o f w r i t i n g , I B T , formerly t h e largest c o n t r a c t l a b o r a t o r y in t h e U n i t e d S t a t e s , is facing b a n k r u p t c y . In effect t h e F D A has d e l i v e r e d it a c o r p o r a t e d e a t h s e n t e n c e w i t h o u t going to court.

Surveys of safety testing violations
As p o i n t e d out in C h a p t e r 1, t h e study of c o r p o r a t e c r i m e is still at t h e c a s e study s t a g e , a n d rarely can w e have r e c o u r s e t o statistical i n f o r m a t i o n on t h e f r e q u e n c y of v i o l a t i o n s of a p a r t i c u l a r t y p e . In t h e a r e a o f G o o d L a b o r a t o r y P r a c t i c e s t w o limited surveys o f levels o f c o m p l i a n c e h a v e b e e n c o n d u c t e d b y t h e F D A ( B l o z a n , 1977; C o o k , 1979). T h e s u r v e y s w e r e o f G L P v i o l a t i o n s u n c o v e r e d b y B i o r e s e a r c h M o n i t o r i n g Staff i n s p e c t o r s i n l a b o r a t o r i e s c o n d u c t i n g safety t e s t i n g o n h u m a n biological p r o d u c t s , food and c o l o u r a d d i t i v e s , and h u m a n and a n i m a l d r u g s . In t h e first study ( B l o z a n , 1977) t h e level of c o m p l i a n c e with different G L P r e g u l a t i o n s v a r i e d from 32 per cent to 98 per cent a m o n g t h e 3 9 l a b o r a t o r i e s i n t h e s t u d y . A s o n e w o u l d p r e d i c t from t h e f o r e g o i n g d i s c u s s i o n of h o w c o n t r a c t labs can be used by s p o n s o r s t o a b r o g a t e r e s p o n s i b i l i t y for quality r e s e a r c h , c o n t r a c t labs w e r e found to h a v e a w o r s e r e c o r d of G L P v i o l a t i o n s t h a n s p o n s o r l a b s . T h e w o r s t r e c o r d o f all, h o w e v e r , w a s with university l a b o r a t o r i e s . O n e m u s t b e e x t r e m e l y c a u t i o u s a b o u t this f i n d i n g s i n c e t h e r e w e r e only five u n i v e r s i t y l a b o r a t o r i e s i n the study. N e v e r t h e l e s s , i t m u s t u n d e r m i n e any a u t o m a t i c a s s u m p t i o n that u n i v e r s i t y r e s e a r c h e r s , with t h e i r s u p p o s e d d e t a c h m e n t from the profit m o t i v e , a r e u n l i k e l y t o cut c o r n e r s o n r e s e a r c h s t a n d a r d s . ' T h e w o r s t a r e a s of c o m p l i a n c e (all with c o m p l i a n c e rate overall) were:
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* QUALITY A S S U R A N C E UNIT G L P r e g u l a t i o n s r e q u i r e that l a b o r a t o r i e s had a quality a s s u r a n c e unit as a s e l f - r e g u l a t o r y c h e c k t h a t s t a n d a r d s are b e i n g m a i n t a i n e d w i t h i n the l a b . M o s t did not have o n e . * RECORD RETENTION M a n y l a b o r a t o r i e s had r e c o r d s w h i c h w e r e s o i n a d e q u a t e t h a t f i n d i n g o u t e x a c t l y w h a t w a s g o i n g o n and d e m o n s t r a t i n g guilt in any c r i m i n a l p r o c e e d i n g a g a i n s t t h e m w o u l d be difficult. * TEST SUBSTANCE CONTROL L a c k of t e s t i n g for e a c h b a t c h of test s u b s t a n c e - c a r r i e r mix for r a t e o f r e l e a s e and h o m o g e n e i t y o f mix w e r e the most p r e v a l e n t problems. * EQUIPMENT L a c k o f w r i t t e n s t a n d a r d o p e r a t i n g p r o c e d u r e s ( S O P s ) for the c l e a n i n g , c a l i b r a t i o n , m a i n t e n a n c e and r e p a i r functions w a s the main problem. T h e C o o k ( 1 9 7 9 ) study o f 2 8 l a b o r a t o r i e s c o n c l u d e d that i n t h e t w o y e a r s b e t w e e n t h e s t u d i e s , a p e r i o d d u r i n g which t h e B i o r e s e a r c h M o n i t o r i n g Staff s w u n g into effective o p e r a t i o n , t h e a v e r a g e c o m p l i a n c e rate over the 86 G L P s c o m m o n to both studies i m p r o v e d from 6 0 p e r cent t o 8 7 p e r c e n t . E v e n t h o u g h t h e r e w e r e p r o b l e m s of comparability b e t w e e n the two studies, three i m p r o v e m e n t s s e e m e d q u i t e clear. * T h e p e r c e n t of labs h a v i n g an o p e r a t i o n a l Q A U [Quality Assurance Unit] i n c r e a s e d from 32 to 79 p e r c e n t o v e r the t w o year period. * T h e p e r c e n t of labs i n c o m p l i a n c e w i t h t h e r e q u i r e m e n t for a r c h i v a l s t o r a g e o f d a t a with a d e q u a t e i n d e x i n g i n c r e a s e d from 58 to 82 p e r c e n t . * F i n a l l y , t h e a v e r a g e lab had 48 p e r c e n t of r e q u i r e d S O P ' s in 1977 c o m p a r e d to 78 p e r c e n t in 1979 ( C o o k , 1979: viii). In spite of t h e s e i m p r o v e m e n t s w h i c h might r e a s o n a b l y be a t t r i b u t e d to the Bioresearch M o n i t o r i n g P r o g r a m , problems r e m a i n e d . O n e lab in t h e 1979 study had as m a n y as 42 G L P v i o l a t i o n s . A d m i t t e d l y , m a n y o f t h e s e w e r e relatively trivial m a t t e r s in t h e m s e l v e s , b u t t h e y do add up to a d i s t u r b i n g p a t t e r n of n e g l i g e n c e . A m a z i n g l y , i n the a f t e r m a t h o f t h e Searle and I B T fiascos, we find in b o t h s t u d i e s a r e l a t i v e l y low level of c o m p l i a n c e with regulations c o n c e r n i n g the 'handling of d e a d / m o r i b u n d
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a n i m a l s ' . T h e c o m p l i a n c e r a t e w a s 68 per cent in 1977 and 78 per c e n t in 1979. E v e n m o r e d i s t u r b i n g , the 1979 s t u d y r e v e a l e d 9 i n s t a n c e s from 5 d i f f e r e n t l a b o r a t o r i e s o f i n a c c u r a t e l y r e p o r t e d study r e s u l t s . I n s o m e c a s e s t h e deficiencies w e r e relatively m i n o r (for e x a m p l e , o n e l a b o r a t o r y r e p o r t e d i n c o r r e c t l y the n u m b e r o f a n i m a l s h o u s e d p e r c a g e ) . H o w e v e r , t h e r e w e r e a n u m b e r o f s e r i o u s deficiencies: * O n e lab i n c o r r e c t l y i n d i c a t e d t h a t clinical o b s e r v a t i o n s w e r e m a d e daily. * T h e s a m e lab i n a c c u r a t e l y r e p o r t e d t h e c o m p o s i t i o n o f t h e control substance. * A n o t h e r lab did not p o i n t out readily a p p a r e n t and statistically significant d i f f e r e n c e s in test and c o n t r o l a n i m a l s . * A n o t h e r lab r e p o r t e d t h a t histological e x a m i n a t i o n s (with p r e s u m a b l y negative findings) were m a d e on specimens, which w e r e in fact not m a d e . * F i n a l l y , a fourth lab did not r e p o r t clinically significant o b s e r v a t i o n s ( e x c e s s i v e salivation of d o g s ) in its final study r e p o r t ( C o o k , 1979: 19). I n spite o f t h e w i d e s p r e a d p r o b l e m s w i t h a n i m a l d a t a , most o b s e r v e r s w o u l d a g r e e w i t h t h e view o f Griffin (1977: 29) that: ' F a b r i c a t i o n of r e s u l t s is not as c o m m o n in toxicity studies [with a n i m a l s ] as it is at t h e clinical trial [with h u m a n s ] s t a g e . ' B e t w e e n 1972 a n d 1974 t h e F D A did a survey of c o m p l i a n c e a m o n g 155 clinical i n v e s t i g a t o r s w o r k i n g for 15 s p o n s o r s , most t r a n s n a t i o n a l s ( S u b c o m m i t t e e o n H e a l t h , 1975). S e v e n t y - f o u r p e r c e n t (115) failed to c o m p l y with o n e or m o r e of t h e r e q u i r e m e n t s of t h e law for clinical i n v e s t i g a t o r s . T h i r t y - f i v e p e r cent o f t h e clinicians in t h e s a m p l e failed to o b t a i n p r o p e r c o n s e n t from t h e i r p a t i e n t s , a n a r e a o f a b u s e w h i c h will be d i s c u s s e d in t h e next s e c t i o n . Fifty p e r cent failed to k e e p a c c u r a t e r e c o r d s o f t h e a m o u n t o f d r u g s r e c e i v e d from t h e s p o n s o r a n d d i s t r i b u t e d to test s u b j e c t s . T h i s is a s e r i o u s m a t t e r , as Mr G r e g o r y A h a r t o f t h e G e n e r a l A c c o u n t i n g Office testified before the Senate. I f t h e i n v e s t i g a t o r d o e s not k e e p t r a c k o f t h e d r u g s , i t i s p o s s i b l e h e has g i v e n t h e m t o p e o p l e w h o a r e not t r a i n e d clinical i n v e s t i g a t o r s o r t h a t h e h a s given t h e m t o p a t i e n t s o u t s i d e t h e control study.
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If he d o e s not k e e p r e c o r d s of w h e r e t h e y w e n t , and t h e r e is any a d v e r s e r e a c t i o n from t h e d r u g , or you n e e d to follow up with p a t i e n t s t h a t r e c e i v e d it so t h e y get p r o p e r m e d i c a l care and m o n i t o r i n g , you c a n n o t t r a c e t h e d r u g t o t h e p a t i e n t s that w e r e s u b j e c t e d to t h e d r u g and give t h e m follow up c a r e ( S u b c o m m i t t e e o n H e a l t h , 1976a: P a r t I I , 3 3 9 ) . T w e n t y - e i g h t p e r cent o f t h e s a m p l e o f c l i n i c i a n s failed t o a d h e r e t o s t u d y p r o t o c o l s . T w e n t y - t h r e e p e r c e n t failed t o m a i n t a i n r e c o r d s w h i c h a c c u r a t e l y reflect t h e c o n d i t i o n s o f the p a t i e n t b e f o r e , d u r i n g a n d after t h e s t u d y , and 22 p e r c e n t did not retain case r e c o r d s as required. T h i s survey did not i n c l u d e s t u d i e s c o n d u c t e d i n - h o u s e by the s p o n s o r and s t u d i e s r e g u l a t e d b y t h e F D A ' s B u r e a u o f B i o l o g i e s . T h e F D A w a s r e q u e s t e d b y t h e G e n e r a l A c c o u n t i n g Office t o d o f u r t h e r s u r v e y s to a s s e s s the levels of c o m p l i a n c e in t h e s e a r e a s . A m o n g 3 5 clinical i n v e s t i g a t i o n s c o n d u c t e d i n - h o u s c b y the s p o n s o r , all 35 failed to c o m p l y with o n e or m o r e of the F D A r e g u l a t i o n s ( S u b c o m m i t t e e o n H e a l t h . 1976a: Part I I , 3 4 2 ) . T h e r e c o r d for s t u d i e s s u b m i t t e d t o t h e B u r e a u o f B i o l o g i e s w a s b e t t e r . T w e n t y - e i g h t of t h e 48 clinical i n v e s t i g a t o r s i n s p e c t e d satisfied all F D A regulations. T h e p r o b l e m c o n t i n u e s . I n t h e 1978 h e a r i n g s before the K e n n e d y S u b c o m m i t t e e t h e f r a u d u l e n t p r a c t i c e s w h i c h had raised such a f u r o r e y e a r s b e f o r e w e r e still a p p a r e n t . Clinical d a t a w e r e still being ' g r a p h i t e d ' ; a c a s e had recently a p p e a r e d of a clinical i n v e s t i g a t o r w i t h a forged m e d i c a l l i c e n s u r e c e r t i f i c a t e ; d a t a c o l l e c t e d on o n e p r o d u c t w a s b e i n g s u b m i t t e d for a n o t h e r ; and s o on. C o m m i s s i o n e r D o n a l d K e n n e d y c a t a l o g u e d a long list of a b u s e s w h i c h r e m a i n e d of major concern. * C a s e r e p o r t s on f i c t i t i o u s s u b j e c t s , and on subjects w h o w e r e n e v e r a d m i n i s t e r e d the i n v e s t i g a t i o n a l d r u g . O b v i o u s l y , d e p e n d e n c e o n such s p u r i o u s d a t a m i g h t result i n e x p a n d e d t e s t i n g o f a d r u g or in t h e p o s s i b l e a p p r o v a l of a drug for use in a c o n d i t i o n w h e r e it w a s , in fact, ineffective. * C a s e r e p o r t s c o n t a i n i n g t h e r e s u l t s of clinical l a b o r a t o r y w o r k w h i c h w a s not a c t u a l l y p e r f o r m e d . T h e p u r p o s e o f such l a b o r a t o r y w o r k is to assess t h e safety o f t h e drug in h u m a n s u b j e c t s - for e x a m p l e , ifa d r u g is toxic to t h e liver, and t e s t s of liver function a r e not p e r f o r m e d , t h e n t h e drug might not be w i t h d r a w n i n t i m e t o p r e v e n t p e r m a n e n t liver d a m a g e o r d e a t h .

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False representation of Institutional Review Board approval of a s t u d y . A layer of subject p r o t e c t i o n is r e m o v e d if u n i n f o r m a t i v e c o n s e n t forms w e r e u s e d , or if a study o f t h e t y p e d o n e s h o u l d not h a v e b e e n d o n e i n t h e i n s t i t u t i o n i n q u e s t i o n . M i s r e p r e s e n t a t i o n o f p a t i e n t d i a g n o s i s and d e m o g r a p h i c data. If a p a t i e n t d o e s not have t h e d i s e a s e to be t r e a t e d with t h e i n v e s t i g a t i o n a l d r u g , t h e n any r e p o r t of efficacy o f t h a t drug is obviously spurious. C o n s e n t o f t h e clinical subject not o b t a i n e d . C o n s e n t m e a n s informed c o n s e n t . L a c k i n g n e c e s s a r y i n f o r m a t i o n , t h e subject m i g h t e n t e r a s t u d y w h i c h he w o u l d not have e n t e r e d if he had b e e n i n f o r m e d o f t h e d a n g e r s as well as the possible benefits. D r u g d o s e s g i v e n , far e x c e e d p r o t o c o l l i m i t a t i o n s . This could be d a n g e r o u s , since p r o t o c o l s often specify d o s e s at the u p p e r limit of w h a t has b e e n j u d g e d to be safe. D r u g s g i v e n t o i n a p p r o p r i a t e s u b j e c t s . T h i s could b e d a n g e r o u s if d r u g s a i m e d at t h e g e n e r a l l y h e a l t h y a d u l t p o p u l a t i o n are g i v e n to c h i l d r e n or t h e aged w h e r e their m e t a b o l i s m might be different. Of p a r t i c u l a r i m p o r t a n c e is t h e a d m i n i s t r a t i o n of d r u g s t o p r e g n a n t w o m e n w h e r e fetal a b n o r m a l i t i e s might b e caused. Serial use of i n v e s t i g a t i o n a l d r u g s to t h e e x c l u s i o n of a c c e p t e d t h e r a p y . T h i s m a k e s t h e subject n o t h i n g but a g u i n e a p i g , and his best i n t e r e s t m i g h t not be s e r v e d . A d m i n i s t r a t i o n to s u b j e c t s of t w o or m o r e i n v e s t i g a t i o n a l d r u g s a t t h e s a m e t i m e a n d t h e a d m i n i s t r a t i o n o f o t h e r significant and p e r h a p s i n t e r f e r i n g d r u g s with t h e i n v e s t i g a t i o n a l d r u g . H e r e t h e i n f o r m a t i o n o b t a i n e d is v a l u e l e s s , a n d the subject has b e e n put at n e e d l e s s risk. I n a d e q u a t e m e d i c a l a t t e n t i o n t o the test p o p u l a t i o n t h r o u g h e x c e s s i v e d e l e g a t i o n of a u t h o r i t y , lack of f o l l o w u p , e t c . O b v i o u s l y , this i s d a n g e r o u s t o t h e s u b j e c t . R e p r e s e n t a t i o n of investigational drugs as marketed p r o d u c t s a n d / o r t h e sale of such d r u g s . In this situation the s u b j e c t c a n n o t h a v e b e e n i n f o r m e d o f t h e n a t u r e o f t h e drug a n d is s o m e t i m e s i n a p p r o p r i a t e l y c h a r g e d for it. T h e i n v e s t i g a t o r m a y profit h u g e l y by his "exclusive franchise' e s t a b l i s h e d by his being an i n v e s t i g a t o r of a p r o d u c t not a v a i l a b l e to all p h y s i c i a n s ( S u b c o m m i t t e e on H e a l t h , 1978: Part V. 76-9). 86

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In spite o f t h e fact t h a t such a b u s e s are w i d e s p r e a d , in the entire h i s t o r y o f t h e F D A only 3 5 clinical i n v e s t i g a t o r s have b e e n disqualified from d o i n g further testing for s u b m i s s i o n s to t h e a g e n c y .

The rights of subjects
M a n y o f t h e p a t i e n t s w h o are e x p e r i m e n t e d o n with u n t r i e d d r u g s suffer t e r r i b l e a d v e r s e r e a c t i o n s . T h e i r suffering is not always n e c e s s a r y . I n d e e d t h e g r e a t m a j o r i t y o f n e w p r o d u c t s which are a p p r o v e d for m a r k e t i n g are not m e d i c a l a d v a n c e s . Wolfe and G o r d o n ( 1 9 7 8 ) p o i n t e d out that of 171 n e w p r o d u c t s marketed b e t w e e n O c t o b e r 1975 and D e c e m b e r 1977 only 6.4 per cent w e r e classified b y F D A a s offering " i m p o r t a n t t h e r a p e u t i c g a i n s ' , and fewer t h a n 1 per c e n t of d r u g s tested on h u m a n s p r o v i d e d i m p o r t a n t t h e r a p e u t i c g a i n . S e v e n t y - s e v e n p e r c e n t o f d r u g s m a r k e t e d had the F D A classification 'little o r n o t h e r a p e u t i c g a i n ' . M o s t new p r o d u c t s a r e m i n o r m o l e c u l a r m a n i p u l a t i o n s o f existing p a t e n t e d d r u g s w h i c h e n a b l e a m a n u f a c t u r e r to have its o w n p a t e n t in a lucrative m a r k e t w i t h o u t offering p a t i e n t s a d v a n t a g e s o v e r existing t h e r a p i e s . A d m i t t e d l y , a c o m p a n y which sets o u t to get a slice of a good m a r k e t b y a n a p p a r e n t l y i n c o n s e q u e n t i a l m a n i p u l a t i o n o f the m o l e c u l a r structure of an existing product can occasionally produce a result w h i c h d o e s h a v e s o m e t h e r a p e u t i c a d v a n t a g e s over its parent. " T h e q u e s t i o n is w h e t h e r it is t o l e r a b l e to subject p a t i e n t s to risk w h e n t h e goal i s m e r e l y t o r e p l i c a t e s o m e t h i n g a l r e a d y a v a i l a b l e , e v e n t h o u g h o n o c c a s i o n s s o m e t h i n g s u p e r i o r t o existing t h e r a p i e s m i g h t r e s u l t . Is it not a r e a s o n a b l e p r i n c i p l e to subject p e o p l e to risk only w h e n t h e goal is explicitly to p r o d u c e s o m e t h i n g b e t t e r for p e o p l e ? T h i s is t h e p o s i t i o n i m p l i e d in C l a u s e 5 o f t h e D e c l a r a t i o n of Helsinki on ethics in biomedical research: ' 5 . Every biomedical r e s e a r c h project involving h u m a n subjects should be preceded by careful a s s e s s m e n t of p r e d i c t a b l e risks in c o m p a r i s o n with fores e e a b l e b e n e f i t s to t h e subject or to o t h e r s . . . .' U n f o r t u n a t e l y , v i c t i m s of drug t e s t i n g are not a w e l l - k n i t p r e s s u r e g r o u p a n d such d e c l a r a t i o n s a r e r h e t o r i c yet t o b e t r a n s l a t e d into r e a l i t y . T h e issues are difficult. In F r a n c e t h e r e is a r e l u c t a n c e to find j u s t i f i a b l e t h e t r e a t m e n t of any p a t i e n t w h o has a g e n u i n e h e a l t h p r o b l e m w i t h a p l a c e b o (an inert p i l l ) . " O n e can accept t h e use of p l a c e b o s for t h e a d v a n c e m e n t of m e d i c a l s c i e n c e , but not for a s t u d y u n d e r t a k e n to h e l p a c o r p o r a t i o n get a r o u n d p a t e n t laws.

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M o s t o f t h e suffering o f p a t i e n t s w h o a r e g i v e n e x p e r i m e n t a l d r u g s , or w h o a r e given a p l a c e b o w h e n t h e y m i g h t have b e e n t r e a t e d by o t h e r m e a n s , i s w a s t e d , i n the 1960s F o o d and D r u g C o m m i s s i o n e r G o d d a r d e s t i m a t e d t h a t only one i n t e n d r u g s t h a t w e r e investig a t i o n a l l y s t u d i e d w o u l d e v e n t u a l l y b e a p p r o v e d for m a r k e t i n g ' ( S h a p o , 1979: 4 8 ) . T h e law has a role to play in c u t t i n g u n n e c e s s a r y suffering to a m i n i m u m . One reported decision (Hyman v. Jewish Chronic Disease Hospital)'" i l l u s t r a t e s h o w a w e s o m e t h e m o r a l q u e s t i o n s can be. Dr C h e s t e r S o u t h a m , a p r e s t i g i o u s c a n c e r r e s e a r c h e r , had u n d e r t a k e n t o build u p o n p r e v i o u s r e s e a r c h w h i c h had s h o w n that h e a l t h y p e o p l e w i t h o u t c a n c e r reject foreign c a n c e r cells w h i c h are injected into t h e m m u c h m o r e quickly t h a n c a n c e r p a t i e n t s . S o u t h a m now w o n d e r e d w h e t h e r p e o p l e w h o w e r e d e b i l i t a t e d but not suffering from c a n c e r w o u l d r e a c t with t h e s p e e d of rejection of h e a l t h y p e o p l e , o r o f p e o p l e with existing c a n c e r s . T w e n t y - t w o aged p e r s o n s from t h e J e w i s h C h r o n i c D i s e a s e H o s p i t a l w e r e selected for a s t u d y to a n s w e r this q u e s t i o n . T h e p a t i e n t s w e r e n o t told that t h e i r injections c o n t a i n e d c a n c e r c e l l s . R a t h e r , t h e i n j e c t i o n s w e r e p o r t r a y e d as a skin test for i m m u n i t y or r e s p o n s e . The researchers predicted that a lump would a p p e a r and then gradually disappear doing no harm to the patients. H e n c e t h e y d e c i d e d not t o stir u p w h a t t h e y t h o u g h t w o u l d b e unnecessary anxiety. S o u t h a m had d e c l a r e d t h a t t h e r e w a s essentially 'no risk' i n the p r o c e d u r e . I t s h o u l d b e n o t e d , h o w e v e r , that h e w a s q u o t e d a s e x p l a i n i n g his o w n r e l u c t a n c e to v o l u n t e e r for c a n c e r cell i n j e c t i o n s on a n o t h e r o c c a s i o n by saying t h a t a l t h o u g h he 'did not r e g a r d t h e e x p e r i m e n t as d a n g e r o u s . . . [ljet's face it, t h e r e are r e l a t i v e l y few skilled c a n c e r r e s e a r c h e r s , and it s e e m e d stupid to t a k e e v e n t h e little risk' ( S h a p o , 1979: 3 5 - 6 ) . M o r e o v e r , t h e r e w a s a t least s o m e m e d i c a l o p i n i o n that i n c e r t a i n c a s e s c a n c e r o u s t u m o u r s w o u l d form and s p r e a d . A s i t t u r n e d o u t , t h e y did n o t . T h e e l d e r l y p a t i e n t s t h r e w off t h e injected cells as p r o m p t l y a s h e a l t h y p a t i e n t s . T h i s result had i m p o r t a n t m e d i c a l i m p l i c a t i o n s . It s u g g e s t e d t h e possibility t h a t t h e b o d y might possess d e f e n c e m e c h a n i s m s a g a i n s t c a n c e r w h i c h could b e a r o u s e d t o fight t h e d i s e a s e . T h e r i g h t s and w r o n g s o f t h e r e s e a r c h e r ' s b e h a v i o u r are t r o u b l i n g p r e c i s e l y b e c a u s e t h e e x p e r i m e n t w a s not a trivial o n e . B u t it m u s t be p o i n t e d o u t that in spite o f t h e intrinsic difficulties of
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d r a w i n g m o r a l b o u n d a r i e s i n this a r e a , t h e r e are certain r e c u r r e n t a b u s e s w h i c h are b e y o n d any s t a n d a r d o f a c c e p t a b l e b e h a v i o u r . O n e e x a m p l e i n v o l v e d t h e purposeful w i t h h o l d i n g of a beneficial d r u g in t h e P h i l i p p i n e s ( L a n t i n et a l . , 1963). C h l o r a m p h e n i c o l is of d e m o n s t r a t e d v a l u e i n the t r e a t m e n t o f t y p h o i d . T h e c o n c e r n o f t h e researchers was to discover whether relapses were more c o m m o n a m o n g t h o s e t r e a t e d w i t h c h l o r a m p h e n i c o l . O f 4 8 0 t y p h o i d cases i n t h e c a r e of t h e r e s e a r c h e r s , 251 w e r e given t h e a n t i b i o t i c and 157 had i t w i t h h e l d . A m o n g t h e t r e a t e d g r o u p 2 8 ( 6 8 % ) had a r e l a p s e , n o n e of t h e m s e r i o u s , while in t h e n o n - t r e a t e d g r o u p only six ( 3 . 8 % ) had a r e l a p s e , a g a i n , n o n e b e i n g s e r i o u s . H e n c e i t was d e m o n s t r a t e d t h a t a n o n - s e r i o u s c o m p l i c a t i o n w a s m o r e likely to o c c u r in p a t i e n t s t r e a t e d w i t h t h e a n t i b i o t i c . ' B u t the price paid for t h i s i n f o r m a t i o n w a s t h a t w h e r e a s t h e m o r t a l i t y w a s only t w e n t y ( 7 . 9 7 % ) in t h e t r e a t e d series it w a s thirty six ( 2 2 . 9 3 % ) in the u n t r e a t e d . I n o t h e r w o r d s , a b o u t t w e n t y p e o p l e died t o d e m o n s t r a t e a c o m p a r a t i v e l y m i n o r d i s a d v a n t a g e of c h l o r a m p h e n i c o l t h e r a p y i n t y p h o i d ' ( P a p p w o r t h , 1967: 181). T h e U n i t e d S t a t e s d o e s not h a v e a g o o d historical r e c o r d on subjecting powerless groups to d a n g e r o u s medical experimentat i o n . T h e r e a r e m a n y e x a m p l e s t o m a t c h the infamous denial o f p e n i c i l l i n to A l a b a m a b l a c k s suffering from syphilis to o b s e r v e the l o n g - t e r m effects of t h e d i s e a s e . O f t e n they have involved p r i s o n e r s . I t i s t e l l i n g t h a t s o m e o f t h e G e r m a n d o c t o r s o n trial a t N u r e m b e r g a t t e m p t e d to defend t h e m s e l v e s by citing a n u m b e r of A m e r i c a n s t u d i e s o n p r i s o n e r s . A m o n g t h o s e cited w a s the w o r k o f Colonel Strong (later Professor of Tropical Medicine at Harvard). W i t h o u t t h e k n o w l e d g e o f t h e victims he infected with plague a g r o u p of p r i s o n e r s c o n d e m n e d to d e a t h . L a t e r he did an e x p e r i m e n t in w h i c h p r i s o n e r s w e r e r e w a r d e d with t o b a c c o for being given berib e r i . O n e died as a result o f t h e e x p e r i m e n t ( P a p p w o r t h , 1967: 6 1 ) . Time m a g a z i n e on 12 J u l y , 1963 d e s c r i b e d a n u m b e r of horrifying c a s e s o f t h e use o f p r i s o n e r s i n m e d i c a l e x p e r i m e n t a t i o n . B e l o w i s one example. T h u s t h e O h i o S t a t e P e n i t e n t i a r y i n C o l u m b u s has p r o v i d e d v o l u n t e e r s for c a n c e r r e s e a r c h e x p e r i m e n t s . T h e s e men w e r e g i v e n i n j e c t i o n s o f live c a n c e r cells. ( N o n e o f t h e m d e v e l o p e d c a n c e r . ) A t C o o k C o u n t y jail i n C h i c a g o p r i s o n e r - v o l u n t e e r s w e r e i n j e c t e d w i t h b l o o d from p a t i e n t s w h o had l e u k e m i a . ( N o n e of these c o n t r a c t e d the disease either.) W h a t is important. 89

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however, is the purpose ofthe experiment, which was to see whether either disease could be transmitted to others.Be/bre these experiments the possibility that they could have been was quite definite. Gettinger and Krajick (1979) also provided a variety of examples of questionable pharmacological experimentation on prisoners. Here are two examples: * In 1963 at the Kansas State Penitentiary, 43 men were injected with a radioactive substance and their brains were X-rayed, a procedure that is generally reserved for emergencies. * From 1963 to 1971. the Atomic Energy Commission sponsored tests on scores of inmates in Oregon and Washington in which prisoners* testicles were exposed to massive doses of X-rays. In 1964. eight inmates at the Oregon State Penitentiary who previously had had vasectomies had their testicles implanted with steroids and sex hormones to see what effect these substances had on sperm production (Gettinger and Krajick, 1979: 11). Finally the Kennedy hearings in 1975 (Subcommittee on Health. 1975) received affidavits from prisoners who were told by doctors that dangerous drugs had no side-effects, who were allowed to continue taking the experimental drug for a considerable time after serious side-effects had appeared, who were left unsupervised in a prison with no medical staff over a weekend while suffering from such side-effects. The prisoners were enticed into the experiments with small financial rewards. One could tell almost equally unsavoury stories of institutionalised children and mental retardates in drug testing, going back to Queen Caroline, wife of George IV. who used "half a dozen ofthe charity children belonging to St James' parish' to experiment with a smallpox vaccination before submitting her own children to it (Sloane, 1755). The situation has improved everywhere, particularly in the United States. The doctrine of informed consent in FDA regulations today affords patients many protections they did not previously have. The subject's consent may be obtained only while he or she is so situated as to be able to comprehend fully the information presented, and the subject's consent must be obtained under
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circumstances that minimize the possibility of undue influence or coercion. In addition, the information given must be in the primary language of either the subject or the subject's legal representative. No exculpatory language may be included in either written or oral consent (Federal Register, v. 44 (158). Aug 14, 1979, p. 47720). Influential in the formulation of the FDA principles of informed consent were the deliberations of the New York Board of Regents following the Southam cancer injection case mentioned above. The Board of Regents recognised the right of a patient to refuse to participate in an experiment no matter how 'irrational' or •emotional' the reasons for such refusal might seem to be. Moreover, 'the physician, when he is acting as experimenter, cannot claim those rights of doctor-patient relationships that do permit him. in a therapeutic situation, to withhold information when he judges it to be in the best interests of his patient' (Human Experimentation Hearings on s.9741 93d Cong., lstscss., 1138(1973)). An FDA survey of compliance with informed consent requirements in 238 clinical studies found that in the majority of cases there was at least one violation of informed consent regulations: Violations disclosed by the inspections included failure to obtain consent and the use of forms containing exculpatory language. In addition, some forms were deficient in that they: Failed to provide the subject with a fair explanation of pertinent information as to what or how long additional tests or examinations would be required in connection with the use ofthe experimental drug. Failed to inform the subject ofthe results of pertinent animal and/or previous clinical studies with the drug to enable the subject to exercise free power of choice. Failed to state what steps would be taken to prevent or minimize the possible risks and hazards associated with the drug. Failed to use simple language rather than medical terminology when explaining the details concerning the proposed study. Failed to inform the subjects that some would serve as inoculated control subjects who would receive either a placebo substance or an alternative drug, rather than the investigational new drug under study (Subcommittee on Health. 1976a: Part II. 350). 91

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N o t w i t h s t a n d i n g the i m p r o v e m e n t s , the problems of medical e x p e r i m e n t a l a b u s e s will n e v e r g o a w a y . T h e locus o f a b u s e s has p e r h a p s shifted from p r i s o n s t o l o c k e d - d o o r nursing h o m e facilities for t h e a g e d . I n s t i t u t i o n a l R e v i e w B o a r d s are c e r t a i n l y p r o t e c t i o n s in t h a t t h e y s u b j e c t clinicians to p e e r r e v i e w of their t r e a t m e n t of i n s t i t u t i o n a l i s e d p a t i e n t s . ' But the w o r s t a b u s e s have o c c u r r e d i n i n s t i t u t i o n s w h i c h h a v e flouted the legal r e q u i r e m e n t s for Institutional Review Boards. More fundamentally, knowledge is power in a clinical s i t u a t i o n . F o r m a l r e g u l a t i o n s c a n n o t c o n c e i v a b l y cover all t h e s u b t l e w a y s t h a t a p h y s i c i a n can r e p r e s e n t an e x p e r i m e n t a l d r u g as m o r e safe and efficacious t h a n it is in fact k n o w n to be. D o c t o r - p a t i e n t i n t e r a c t i o n i s simply not a m e n a b l e t o r i g o r o u s regulation.
3

AN INTERPRETATION OF THE CASE STUDIES The sources of fraud
W h e n t h e officers of a c o m p a n y e n g a g e in a fraud which victimises c o n s u m e r s t h e e x p l a n a t i o n usually i n v o k e d i s the profit m o t i v e . T r u e , fraud in t h e t e s t i n g of d r u g s u n d o u b t e d l y is often the result of c o m p a n i e s s t r i v i n g to get a profitable p r o d u c t on the m a r k e t r e g a r d less of its safety or efficacy. Since scientific p r o o f of h a z a r d s is a l w a y s a difficult a n d p r o t r a c t e d p r o c e s s , the e c o n o m i c risks of u n s c r u p u l o u s c o n d u c t t o get t h e p r o d u c t m a r k e t e d are often less t h a n t h e e c o n o m i c b e n e f i t s . T h e q u e r y : ' W h y w o u l d they d o i t w h e n t h e y k n o w t h e m a r k e t will e v e n t u a l l y c a t c h up with t h e m ? ' can be a naive question. N o t all a c t o r s w h o c o n t r i b u t e to t h e fraud, h o w e v e r , do so with t h e i n t e n t o f serving t h e i n t e r e s t s o f profit. M a n y lower-level o r g a n i s a t i o n a l a c t o r s p e r f o r m their r e s e a r c h r e s p o n s i b i l i t i e s with g r e a t i n t e g r i t y and h o n e s t y only to h a v e t h e i r w o r k used for d i s h o n e s t p u r p o s e s b y p e o p l e m o r e s e n i o r i n t h e o r g a n i s a t i o n . Several r e s e a r c h p e r s o n n e l i n t e r v i e w e d for this study c o m p l a i n e d o f i n s t a n c e s w h e r e t h e i r s u p e r i o r s had e i t h e r i g n o r e d o r twisted r e s e a r c h f i n d i n g s w h i c h reflected badly on a c o m p a n y p r o d u c t . M o s t p h a r m a c e u t i c a l c o m p a n i e s w a n t their r e s e a r c h e r s t o cond u c t r e s e a r c h h o n e s t l y and r i g o r o u s l y . I f t h e r e a r e p r o b l e m s , t h e n t h e c o m p a n y g e n e r a l l y will w a n t t o k n o w a b o u t t h e m . A d r u g w h i c h p r o d u c e s a flood of p r o d u c t liability suits is less likely to be c o m m e r c i a l l y v i a b l e . Safety is t h e r e f o r e a factor in a rational m a r k e t i n g 92

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d e c i s i o n . T h e r e will b e c a s e s , h o w e v e r , w h e r e the i n d e t e r m i n a t e risk of a legal b a c k l a s h from lack of safety is far o u t w e i g h e d by t h e e x t r a o r d i n a r y sales p r o s p e c t s for a d r u g . In t h e s e cases senior e x e c u t i v e s m a y c h o o s e t o i g n o r e o r d i s t o r t the a d v i c e o f p e o p l e w h o m t h e y pay t o give t h e m o b j e c t i v e d a t a o n d r u g s . C o m p a n i e s m a y . a s i n t h e S e a r l e a n d t h a l i d o m i d e case s t u d i e s , seek i n f o r m a t i o n from a n u m b e r of scientists but only r e p o r t to the h e a l t h a u t h o r i t i e s t h e f i n d i n g s o f t h o s e w h o say good t h i n g s a b o u t t h e p r o d u c t . U S c o m p a n i e s often c o m m i s s i o n clinical s t u d i e s i n m a n y c o u n t r i e s , but only r e p o r t t o t h e F D A t h e d a t a from t h o s e c o u n t r i e s which p r o d u c e f a v o u r a b l e r e s u l t s . T h e r e s e a r c h e r s involved may b e h o n e s t and o b j e c t i v e , in no way c o n n i v i n g to satisfy t h e c o m p a n y ' s p r o f i t - m a k i n g i n t e r e s t s . It is j u s t t h a t t h e i r d a t a are used selectively for t h a t p u r p o s e . T h e r e is a r a n g e of w a y s t h a t fraud can o c c u r . S e n i o r e x e c u t i v e s c a n set o u t to be d i s h o n e s t by h a v i n g d i s h o n e s t r e s e a r c h e r s w o r k for t h e m , or t h e y can be d i s h o n e s t by t w i s t i n g t h e w o r k of h o n e s t r e s e a r c h e r s . T h e n t h e r e i s t h e p r o b l e m o f c o m p a n i e s which set out t o b e h o n e s t , but w h i c h p e r p e t r a t e fraud b e c a u s e , u n b e k n o w n t o t h e m , t h e y h a v e d i s h o n e s t r e s e a r c h e r s w o r k i n g for t h e m . Possibly t h e l a t t e r is t h e m o s t c o m m o n kind of fraud, b u t it is unlikely to b e c o m e p u b l i c l y k n o w n b e c a u s e a c o m p a n y which d i s c o v e r s that o n e of its officers had b e e n fudging d a t a will be e m b a r r a s s e d by its failure t o p r e v e n t this from h a p p e n i n g u n d e r its n o s e . T h r e e research directors interviewed were open enough to admit t h a t t h e y had found i n s t a n c e s o f p e o p l e w h o w o r k e d for t h e m fudging d a t a . I n n o n e o f t h e s e cases had t h e p r o b l e m g o n e p u b l i c . W h y do e m p l o y e e s p r o d u c e d i s h o n e s t d a t a for a c o m p a n y w h i c h d e m a n d s honesty of them? T o b e g i n t o a p p r e c i a t e the a n s w e r t o this q u e s t i o n w e must h a v e a n u n d e r s t a n d i n g o f t h e i n t e n s i t y o f c o m m i t m e n t o f m a n y scientists t o t h e i r w o r k . T h e a b s o r p t i o n ' s y m b o l i z e d b y t h e idealized p o r t r a i t o f t h e scientist g r a b b i n g c a t n a p s i n his l a b o r a t o r y while p u r s u i n g t h e n e w e s t l e a d , rival t h e i m a g e s o f t h e g r e a t a r t i s t s ' ( S h a p o , 1979: 9 ) . O n e A m e r i c a n e x e c u t i v e c h a r a c t e r i s e d t h e a t t i t u d e o f his scientists as follows: ' T h e c h e m i s t w h o s y n t h e s i s e s a new c o m p o u n d is very p o s s e s s i v e a b o u t it. It is his offspring, and he d e f e n d s it like a son or d a u g h t e r . A l s o t h e p h a r m a c o l o g i s t w h o s h o w s t h a t this new c o m p o u n d has c e r t a i n effects of t h e r a p e u t i c v a l u e sees it as his b a b y . It is n o t so m u c h t h a t t h e y will lie and c h e a t to defend it, but t h e y will be b i a s e d . ' T h e line b e t w e e n bias and fraud is of c o u r s e a fine o n e , and

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t h e s a m e s e n s e o f o v e r c o m m i t m e n t which p r o d u c e s bias can lead t o fraud. S u c h p r e s s u r e s for fraud are likely to be g r e a t e s t w h e r e a s c i e n t i s t h a s b e e n p r o m o t e d or has built his or her prestige as "the p e r s o n w h o d i s c o v e r e d X ' . P e r h a p s a scientist has m a d e p r e d i c t i o n s a b o u t t h e safety of a d r u g b a s e d on early d a t a and t h e c o m p a n y has i n v e s t e d a l a r g e a m o u n t of m o n e y on t h e s t r e n g t h of this p r e d i c t i o n . F u r t h e r d a t a w h i c h s h o w t h e p r e d i c t i o n to be in e r r o r might be seen as t h r e a t e n i n g a f o r t h c o m i n g d e c i s i o n on the p r o m o t i o n of the scientist. It is difficult to i m a g i n e h o w d e p r e s s i n g it m u s t be for scientists to h a v e s p e n t m a n y y e a r s of their lives and m i l l i o n s of their c o m p a n y * s m o n e y on a p r o d u c t to find t h a t it has b e e n a c o m p l e t e w a s t e . A p a r t from this p s y c h o l o g i c a l p r e s s u r e , t h e r e is often a p r e s s u r e d e r i v i n g from o r g a n i s a t i o n a l g o a l - s e t t i n g . T a k e the s i t u a t i o n of R i k e r , a p h a r m a c e u t i c a l s u b s i d i a r y o f t h e 3 M c o r p o r a t i o n . I n o r d e r t o foster i n n o v a t i o n , 3M i m p o s e s on R i k e r a goal t h a t e a c h y e a r 25 per cent of g r o s s sales s h o u l d be of p r o d u c t s i n t r o d u c e d in t h e last five y e a r s . N o w if R i k e r ' s r e s e a r c h division w e r e to have a long dry spell t h r o u g h no fault of its o w n , but b e c a u s e all of its c o m p o u n d s had t u r n e d o u t t o h a v e toxic effects, t h e o r g a n i s a t i o n w o u l d b e u n d e r p r e s s u r e t o c h u r n s o m e t h i n g o u t t o m e e t t h e goal i m p o s e d b y h e a d q u a r t e r s . R i k e r w o u l d not h a v e t o yield t o this p r e s s u r e . I t c o u l d p r e s u m a b l y go to 3M and e x p l a i n t h e r e a s o n s for its run o f b a d luck. T h e fact t h a t such goal r e q u i r e m e n t s do put r e s e a r c h d i r e c t o r s u n d e r p r e s s u r e was well illustrated b y o n e A m e r i c a n e x e c u t i v e w h o e x p l a i n e d t h a t r e s e a r c h d i r e c t o r s often forestall criticism of long dry spells by s p r e a d i n g out d i s c o v e r i e s - s c h e d u l i n g t h e p r o g r a m m e so that s o m e t h i n g new is always on the horizon. S o m e t i m e s t h e goal p e r f o r m a n c e c r i t e r i o n w h i c h c r e a t e s p r e s s u r e for f r a u d / b i a s is not for t h e p r o d u c t i o n of a c e r t a i n n u m b e r of w i n n e r s but s i m p l y for c o m p l e t i n g a p r e d e t e r m i n e d n u m b e r of e v a l u a t i o n s in a given y e a r . O n e m e d i c a l d i r e c t o r told me t h a t o n e of his staff had run 10 trials which s h o w e d a d r u g to be clear on a c e r t a i n t e s t , t h e n f a b r i c a t e d d a t a o n t h e r e m a i n i n g 9 0 trials t o s h o w t h e s a m e r e s u l t . T h e fraud had b e e n p e r p e t r a t e d by a scientist w h o w a s falling b e h i n d in his w o r k l o a d and w h o had an o b l i g a t i o n to c o m p l e t e a c e r t a i n n u m b e r of e v a l u a t i o n s for t h e y e a r . T h e p u r p o s e of this s e c t i o n has b e e n to s h o w that it is an overly s i m p l i s t i c m o d e l o f c o r p o r a t e m i s c o n d u c t w h i c h a s s u m e s that all fraud is m o t i v a t e d by t h e d e s i r e for profit. F r a u d can be an illegitim a t e m e a n s to a c h i e v i n g any o n e of a w i d e r a n g e of o r g a n i s a t i o n a l 94

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a n d p e r s o n a l g o a l s w h e n l e g i t i m a t e m e a n s t o goal a t t a i n m e n t are b l o c k e d ( G r o s s , 1978).

The problem of regulating subtleties
N o r e g u l a t o r y s c h e m e can ever effectively c o n t r o l t h e quality and i n t e g r i t y of s c i e n c e . It is simply not p o s s i b l e to write a rule to p r o h i b i t e v e r y t y p e o f a b u s e o f scientific o b j e c t i v i t y . C o n s i d e r the following s t a t e m e n t by E p s t e i n ( 1 9 7 8 : 67) w h i c h gives an i m p r e s sion o f t h e infinity of sins of o m i s s i o n p o s s i b l e in t e s t i n g for c a n c e r in animals. O n e o f t h e most poorly conducted areas of animal cancer r e s e a r c h i s t h e identification o f t h e c a n c e r i n t h e a n i m a l s ' b o d i e s . T h e p r o c e s s of finding a c a n c e r in t h e fresh c a r c a s s of a m o u s e or rat is different from t h e d i s c o v e r y of c a n c e r in a h u m a n by a d o c t o r . T h e r o d e n t c a n n o t c o m p l a i n o f painful s y m p t o m s before d e a t h . A l s o , since c a r c i n o g e n s may c a u s e c a n c e r in any of a wide r a n g e o f o r g a n s , t h e e n t i r e b o d y o f t h e a n i m a l must b e m e t i c u l o u s l y s e a r c h e d . T h i s is n o t p o s s i b l e if, t h r o u g h n e g l e c t or p o o r h u s b a n d r y , t h e a n i m a l has b e e n a l l o w e d t o die and d e c o m p o s e b e f o r e a n a d e q u a t e a u t o p s y , a s i s often t h e c a s e . E p s t e i n later p o i n t s o u t five specific p l o y s which are a v a i l a b l e to r e s e a r c h e r s w h o d o not w a n t t o find c a n c e r i n a n i m a l s yet w h o w o u l d s h u d d e r a t t h e p r o s p e c t o f o u t r i g h t fraud. 1. U s i n g t o o few a n i m a l s [for a c a n c e r w h i c h t h e r e s e a r c h e r has g r o u n d s to s u s p e c t will have only a low r a t e of i n c i d e n c e in animals]. 2. E x p o s u r e in excess o f t h e maximally tolerated dose, resulting i n p r e m a t u r e a n i m a l d e a t h s before o n s e t o f c a n c e r . 3. D o s e s t o o low for the size o f t h e a n i m a l test g r o u p , r e s u l t i n g in failure to o b t a i n a statistically significant i n c i d e n c e of t u m o r s . 4. D e l i b e r a t e p r e m a t u r e sacrifice of a n i m a l s for o t h e r "studies' d u r i n g t h e c o u r s e o f t h e m a i n t e s t , t h u s d e p l e t i n g the n u m b e r o f a n i m a l s r e m a i n i n g alive and at risk for c a n c e r . 5 . P r e m a t u r e t e r m i n a t i o n o f t h e test before sufficient t i m e has e l a p s e d for t h e a n i m a l s t o d e v e l o p t u m o r s ( E p s t e i n . 1978: 3 0 1 ) . Such abuses c a n n o t be regulated out of existence. The case s t u d i e s i n this c h a p t e r h a v e b e g u n t o i l l u s t r a t e h o w existing criminal l a w , d e s i g n e d to s a n c t i o n specific h e i n o u s a c t s , is at a loss to deal 95

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w i t h a n i r r e s p o n s i b l e p a t t e r n o f c o n d u c t , n o individual e l e m e n t o f w h i c h is s a n c t i o n a b l e in its o w n right. H e a l t h a u t h o r i t i e s can e l i m i n a t e specific g r o s s a b u s e s , but in t h e final analysis the public is a t t h e m e r c y o f t h e s c i e n t i s t ' s i n t e g r i t y . C l e a r l y s o m e scientists and s o m e d r u g c o m p a n i e s h a v e m o r e i n t e g r i t y t h a n o t h e r s . T h e medical d i r e c t o r of an A m e r i c a n c o m p a n y told of an instance w h e n a c o n t r a c t lab had d o n e only r i g h t - a n g l e d s e c t i o n s o n t h e o r g a n s o f sacrificed a n i m a l s . He insisted on o b l i q u e s e c t i o n s as well to i n c r e a s e t h e p r o b a b i l i t y of finding a p r o b l e m w h i c h he had r e a s o n to s u s p e c t m i g h t exist. R e g u l a t i o n s can n e v e r force scientists to go the e x t r a m i l e w h e n t h e r e i s r e a s o n t o d o so. I n d e e d , o n e o f t h e d a n g e r s of o v e r - r e g u l a t i o n is t h a t it can e n g e n d e r an a t t i t u d e t h a t p e o p l e h a v e no r e s p o n s i b i l i t y b e y o n d t h a t w h i c h is set d o w n in the r e g u l a t i o n s . A t least this w a s t h e view o f s o m e r e s p o n d e n t s a b o u t the i m p a c t o f ' o v e r - r e g u l a t i o n ' o n their w o r k a t t i t u d e s and t h o s e o f their employees. S u c h an a t t i t u d e , like o t h e r costs of r e g u l a t i o n , is not an inevita b l e c o n s e q u e n c e of r e g u l a t i o n . It can be a v o i d e d by a b a l a n c e d a p p r e c i a t i o n o f t h e limits o f r e g u l a t i o n , and a n a p p r o p r i a t e mix o f e n f o r c e m e n t o f s t a n d a r d s and e d u c a t i o n a s t o social r e s p o n s i b i l i t i e s . L e t u s c o n s i d e r s o m e o t h e r a v o i d a b l e costs o f r e g u l a t i o n . O n e o f t h e m o s t telling criticisms from i n d u s t r y o f t h e F D A ' s G L P r e g u l a t i o n s w a s t h a t t h e y would stultify m e t h o d o l o g i c a l i n n o v a t i o n in t o x i c o l o g i c a l r e s e a r c h . T h e d a n g e r w a s t h a t a set of rules w o u l d be w r i t t e n w h i c h e m b o d i e d t h e state of t h e art of toxicological e x p e r i m e n t a t i o n in 1978. T h a t state o f t h e art w o u l d be frozen for d e c a d e s b e c a u s e t o e x p e r i m e n t w i t h n e w s t a n d a r d s w o u l d b e illegal. T h e p r o b l e m w a s solved w h e n t h e F D A a g r e e d t o e x c l u d e ' s t u d i e s t o d e v e l o p n e w m e t h o d o l o g i e s for t o x i c o l o g y e x p e r i m e n t a t i o n ' from t h e s c o p e o f t h e G L P r e g u l a t i o n s . A r e a l i s t i c a p p r a i s a l leads to t h e c o n c l u s i o n that t h e F D A . p e r h a p s unlike many other US regulatory agencies, has done more to foster m e t h o d o l o g i c a l i n n o v a t i o n t h a n to stultify it. A n u m b e r of i n t e r v i e w r e s p o n d e n t s p o i n t e d o u t t h a t w h e n a n F D A i n s p e c t o r sees a g o o d n e w idea in t h e c o u r s e of an i n s p e c t i o n , h e / s h e will tell c o l l e a g u e s and o t h e r c o m p a n i e s w h o h a v e not c a u g h t o n t o the i m p r o v e m e n t . S i n c e F D A r e g u l a t i o n s are b a s e d o n the c u r r e n t state o f t h e a r t , t h e i n n o v a t i o n m a y in t i m e c o m e to be r e g a r d e d as such an i m p o r t a n t s a f e g u a r d as to d e s e r v e m a n d a t o r y status as a regulat i o n . T h i s role of t h e F D A in fostering i n n o v a t i o n is a m a t t e r of c o n s i d e r a b l e c o n c e r n t o c o m p a n i e s , and p e r i o d i c a t t e m p t s are 96

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m a d e to pull into line c o m p a n i e s w h i c h m a k e a habit of i n t r o d u c i n g n e w safety m e a s u r e s w h i c h u l t i m a t e l y b e c o m e a n i n d u s t r y - w i d e b u r d e n . T h e R e g u l a t o r y Affairs D i r e c t o r o f a n A m e r i c a n c o r p o r a t i o n justified this n e e d to c o n t r o l safety i n n o v a t i o n by c o m p e t i t o r s b y s a y i n g : ' C o m p a n i e s d o n ' t w a n t t o leap-frog t h e m s e l v e s into bankruptcy.' It is i m p o r t a n t to realise t h a t r e g u l a t i o n s do entail costs. It should b e i n c u m b e n t u p o n r e g u l a t o r y a g e n c i e s t o p r e p a r e cost o f regul a t i o n i m p a c t s t a t m e n t s before r u s h i n g i n w i t h new r e q u i r e m e n t s . A t t h e s a m e t i m e , t h e r e i s n o need t o s u c c u m b t o a s s u m p t i o n s that all such c o s t s a r e i n e v i t a b l e . T h i s is t h e t r a p w h i c h industry i d e o l o g u e s foster. T a k e t h e following s t a t e m e n t i n a n A b b o t t L a b o r a t o r i e s d o c u m e n t o n t h e costs o f r e g u l a t i o n : It is r i d i c u l o u s to try to explain to a l a y m a n i n v e s t i g a t o r from t h e F D A w h y y o u d a r e d to use a p a t i e n t w h o s e urine specific gravity w a s 1.008, b e c a u s e t h e n o r m a l in y o u r lab is 1.010 to 1.025. He p r o b a b l y had a n e x t r a glass o f w a t e r t h a t m o r n i n g that c h a n g e s it." T h e p o i n t is t h a t t h i s d o e s seem so difficult to e x p l a i n . M o r e o v e r , t h e i m p r e s s i o n c o m m u n i c a t e d by m o s t of t h e o p e r a t i n g staff of c o r p o r a t i o n s i n t e r v i e w e d was t h a t t h e great majority o f g o v e r n m e n t i n s p e c t o r s were o p e n to persuasion w h e n they a t t e m p t e d to impose scientifically i r r a t i o n a l r e g u l a t o r y r e q u i r e m e n t s . R e g u l a t o r y Affairs staff, h o w e v e r , fairly c o n s i s t e n t l y e s p o u s e d the view that r e g u l a t i o n s i n e v i t a b l y p r o d u c e d i r r a t i o n a l i t y . R e g u l a t i o n s s o m e t i m e s are i m p o s e d a r b i t r a r i l y and i r r a t i o n a l l y b y c e r t a i n g o v e r n m e n t ins p e c t o r s , b u t a r b i t r a r i n e s s and i r r a t i o n a l i t y are not a n i n e v i t a b l e c o n s e q u e n c e of r e g u l a t i o n per se. T h e s o l u t i o n is not to do away w i t h r e g u l a t i o n , but t o d i s m i s s (or transfer t o o t h e r d u t i e s ) irrational i n s p e c t o r s , a n d to be on g u a r d against r e g u l a t i o n s w h i c h in p r a c t i c e p r o v e c o s t - i n e f f e c t i v e . T h e a n t i - r e g u l a t o r y i d e o l o g y is seen at its worst in the same A b b o t t document: Of course there are going to be rare occasions w h e r e investigators will b e d i s h o n e s t . H u m a n e x p e r i e n c e m a k e s i t perfectly clear t h a t t h e r e a r e p e r s o n s w i t h less t h a n t h e o p t i m u m d e g r e e o f integrity in e v e r y walk of life. T h e q u e s t i o n is w h e t h e r t h e a t t e m p t to t r i p - u p this small g r o u p by an e v e r i n c r e a s i n g n u m b e r of r e g u l a t o r y h u r d l e s is w o r t h t h e price paid. . . . T h e r e are nearly 13,000 i n d i v i d u a l clinical i n v e s t i g a t o r s a c c o r d i n g to t h a t d i v i s i o n ' s
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c o m p u t e r listing, o f w h i c h a total o f 2 8 have b e e n disqualified and a r e n o l o n g e r eligible t o w o r k o n I N D ' s o r N D A ' s . C a n 0 . 2 % o f the clinical i n v e s t i g a t o r s d o e n o u g h h a r m t o w a r r a n t s o m u c h a t t e n t i o n ? It is a l w a y s n e c e s s a r y to h a v e several studies a n d , t h e r e f o r e , more than one investigator working on a candidate d r u g . A r e s t r i n g e n t r e g u l a t i o n s b i n d i n g every i n v e s t i g a t o r t o t e d i o u s and e x p e n s i v e a d m i n i s t r a t i v e p r o c e d u r e s justifiable m e r e l y t o i n c r e a s e t h e c h a n c e o f c a t c h i n g the o n e bad i n v e s t i g a t o r out of500?

T h e i n c i d e n c e o f h o m i c i d e , s e r i o u s a s s a u l t and r o b b e r y a r e all less t h a n o n e i n 500 o f t h e g e n e r a l p o p u l a t i o n . D o e s this m e a n that w e s h o u l d s t o p s p e n d i n g t h e vast p o l i c e , p r i s o n s and c o u r t b u d g e t s t o r e g u l a t e such c r i m e s , b u d g e t s m a n y t i m e s g r e a t e r t h a n t h o s e o f h e a l t h r e g u l a t o r y a u t h o r i t i e s ? A c u r i o u s thing a b o u t t h e A b b o t t s t a t e m e n t is t h a t it t a l k s of an ' o p t i m u m d e g r e e of i n t e g r i t y ' . O n e w o n d e r s w h a t kind o f r e s e a r c h e r A b b o t t w o u l d c o n s i d e r t o have t o o much integrity.
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W h i l e r e j e c t i n g t h e m o r e s w e e p i n g forms o f industry r h e t o r i c a b o u t r e g u l a t i o n , it is n e c e s s a r y to c o m e to grips with t h e fact t h a t r e g u l a t i o n offers less p r o t e c t i o n t o c o n s u m e r s t h a n internal c o m p a n y safety s t a n d a r d s . T h i s i s u n q u e s t i o n a b l y t r u e o f risks p o s e d t o p a t i e n t s i n t h e safety t e s t i n g o f n e w d r u g s . O n e U S R e g u l a t o r y Affairs D i r e c t o r p o i n t e d out s o m e t h i n g which w o u l d b e true of m o s t c o m p a n i e s in t h e i n d u s t r y : 'Since I've b e e n at [my c o m p a n y ] t h e r e h a s not b e e n o n e case w h e r e t h e F D A has r e q u i r e d u s t o stop clinical t r i a l s on a d r u g b e c a u s e t h e r e h a v e b e e n p r o b l e m s with it, but t h e r e h a v e b e e n m a n y cases w h e r e t h e c o m p a n y has d o n e s o . ' O f c o u r s e o n e can a r g u e t h a t c o m p a n i e s often s t o p testing a d a n g e r o u s d r u g only b e c a u s e m a r k e t forces and p o t e n t i a l p r o d u c t liability c o s t s force t h e m to do it. W h a t e v e r t h e r e a s o n , t h e fact is t h a t they m o r e often do it of t h e i r own volition t h a n b e c a u s e of r e g u l a t o r y compulsion. I n e v i t a b l y , t h e c o m p a n y will c o m e t o k n o w o f m o s t p r o b l e m s long b e f o r e t h e r e g u l a t o r s . T h e y h a v e m o r e i n f o r m a t i o n r e p o r t e d t o t h e m , m o r e staff c a p a b l e o f a s s e s s i n g t h a t i n f o r m a t i o n , and m o r e i n t i m a t e k n o w l e d g e of a p r o d u c t w h i c h they c r e a t e d . E x t e r n a l l y i m p o s e d r e g u l a t i o n is t h e r e f o r e not only a m o r e c l u m s y tool than s e l f - r e g u l a t i o n to c o n t r o l t h e s u b t l e t i e s of scientific a b u s e , it is a tool w h i c h will n o r m a l l y only be a p p l i e d after t h e d a m a g e is d o n e . T h e fact t h a t s e l f - r e g u l a t i o n offers m o r e p r o t e c t i o n t h a n e x t e r n a l
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r e g u l a t i o n i s e v e n m o r e o v e r w h e l m i n g l y t h e case i n m a n y c o u n t r i e s , including the d e v e l o p e d e c o n o m i e s of D e n m a r k , Finland, N o r w a y , S p a i n , S w i t z e r l a n d and G e r m a n y , ' " w h e r e g o v e r n m e n t a p p r o v a l i s not r e q u i r e d b e f o r e a c o m p a n y b e g i n s p r e l i m i n a r y safety t e s t i n g of a new drug on h u m a n beings. W h e r e there is no external regulation, s e l f - r e g u l a t i o n p r o v i d e s t h e sole p r o t e c t i o n .

Making self-regulation work
I n t e r n a l c o m p a n y i n s p e c t o r s a r e m o r e likely t o k n o w w h e r e the b o d i e s a r e b u r i e d t h a n g o v e r n m e n t i n s p e c t o r s . T h e medical d i r e c t o r m e n t i o n e d a b o v e w h o b e c a m e s u s p i c i o u s t h a t o n e o f his s c i e n t i s t s had c o n d u c t e d a 100-trial s t u d y by r u n n i n g 10 and fabric a t i n g 9 0 had a v a i l a b l e m a n y w a y s o f c h e c k i n g o u t his d o u b t s . H e c o u l d verify t h e n u m b e r o f a n i m a l s t a k e n from t h e a n i m a l s t o r e , the a m o u n t o f d r u g s u b s t a n c e which had b e e n u s e d , t h e n u m b e r o f s a m p l e s w h i c h had b e e n t e s t e d , and s o o n . H i s familiarity with t h e l a b o r a t o r y m a d e this e a s y . As an i n s i d e r he could do so quietly w i t h o u t r a i s i n g t h e kind of a l a r m w h i c h might lead t h e c r i m i n a l to p o u r a n a p p r o p r i a t e a m o u n t o f d r u g s u b s t a n c e d o w n t h e sink. F o r a g o v e r n m e n t i n s p e c t o r this w o u l d h a v e b e e n m o r e difficult. F D A G o o d L a b o r a t o r y P r a c t i c e s r e g u l a t i o n s have r e c o g n i s e d this f u n d a m e n t a l reality and p l a c e d p r e d o m i n a n t r e l i a n c e on selfregulatory m e c h a n i s m s . Each drug-testing laboratory is required by t h e r e g u l a t i o n s t o h a v e a Q u a l i t y A s s u r a n c e U n i t ( Q A U ) w h i c h will act as an i n t e r n a l p o l i c e m a n of r e g u l a t o r y c o m p l i a n c e . Such a s e l f - r e g u l a t o r y r e q u i r e m e n t shifts t h e financial b u r d e n o f r e g u l a t i o n a w a y from g o v e r n m e n t and on to t h e c o r p o r a t i o n . It is r e a s o n a b l e t h a t a c o m p a n y w h i c h m a k e s a profit b e c a u s e o f t h e benefits of a d r u g s h o u l d also b e a r t h e cost of p r o t e c t i n g the public from its p o t e n t i a l d a n g e r s . " S e c o n d , a s w e shall see later i n the b o o k , e v e n t h e w e a l t h i e s t g o v e r n m e n t s i n t h e w o r l d c a n n o t afford effective i n s p e c t i o n of c o r p o r a t e c o n d u c t as a m a t t e r of sheer b u d g e t a r y p r a c t i c a l i t y . T h e F D A w a s q u i c k t o learn from the S e a r l e investig a t i o n t h a t i n - d e p t h r e t r o s p e c t i v e r e v i e w o f d a t a w a s a n o p t i o n that t h e a g e n c y c o u l d only afford i n e x t r a o r d i n a r y c i r c u m s t a n c e s . The decision to t h r o w the major b u r d e n of regulation on to an internal Q A U raised some thorny issues, however. Industry argued t h a t i f Q A U s had t o m a k e their f i n d i n g s a v a i l a b l e t o t h e F D A , t h e n t h e i r e f f e c t i v e n e s s as a m a n a g e m e n t tool to e n s u r e t h e quality of r e s e a r c h w o u l d b e u n d e r m i n e d . A Q A U w h i c h k n e w t h a t its 99

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c o m m e n t s w o u l d b e read b y F D A officials (and b y c o n s u m e r g r o u p s w h o c o u l d get t h e c o m m e n t s from the F D A u n d e r F r e e d o m o f I n f o r m a t i o n laws) w o u l d be less t h a n frank in its r e p o r t s to m a n a g e m e n t . Q A U r e p o r t s w o u l d b e c o m e a public r e l a t i o n s function of t h e c o m p a n y r a t h e r t h a n a c o m p l i a n c e function. T h e F D A w a s p e r s u a d e d by this a r g u m e n t and d e c i d e d t h a t , as a m a t t e r o f a d m i n i s t r a t i v e p o l i c y , i n s p e c t o r s w o u l d not r e q u e s t r e p o r t s o f f i n d i n g s a n d p r o b l e m s u n c o v e r e d b y t h e Q A U o r r e c o r d s o f corr e c t i v e a c t i o n s r e c o m m e n d e d and t a k e n . F D A i n s p e c t o r s w o u l d still a u d i t t h e Q A U to e n s u r e t h a t it had effective c o m p l i a n c e s y s t e m s i n place and t o c h e c k c e r t a i n o b j e c t i v e c o m p l i a n c e c r i t e r i a . H o w e v e r , t h e s e r e c o r d s a v a i l a b l e for r e g u l a r i n s p e c t i o n would b e s e p a r a t e d from r e p o r t s o f f i n d i n g s and p r o b l e m s and c o r r e c t i v e a c t i o n s r e c o m m e n d e d . W h i l e t h e latter Q A U r e p o r t s w o u l d b e t r e a t e d a s c o n f i d e n t i a l c o m p a n y d o c u m e n t s b y t h e F D A , this d o e s not p r e v e n t a c o u r t r e q u i r i n g the t a b l i n g o f any Q A U r e p o r t , j u s t a s c o u r t s c a n d e m a n d o t h e r t y p e s o f c o m p a n y d o c u m e n t s which are c o n f i d e n t i a l for r o u t i n e i n s p e c t o r i a l p u r p o s e s . We will r e t u r n to this issue in C h a p t e r 9. A n e x e m p l a r y r e q u i r e m e n t o f t h e G L P s i s t h a t Q A U status r e p o r t s m u s t r o u t i n e l y b e p l a c e d before the study d i r e c t o r and m a n a g e m e n t o f t h e c o m p a n y . O t h e r r e g u l a t o r y s c h e m e s tend t o ignore the i m p o r t a n c e of ensuring that people at the top of an o r g a n i s a t i o n k n o w a b o u t r e g u l a t o r y p r o b l e m s b o t h s o t h a t they can be h e l d legally a c c o u n t a b l e for t h e m and so that they might be forced to t a k e rectifying a c t i o n . T h e n e e d for formal m e c h a n i s m s to e n s u r e t h a t ' b a d n e w s ' g e t s t o the t o p w a s a c e n t r a l t h e m e i n S t o n e ' s seminal analysis of corporate crime: First, as to getting to the higher-ups information a d e q u a t e to a p p r e c i a t e t h e legal j e o p a r d y t h e i r c o m p a n y is in, t h e r e is a n a t u r a l t e n d e n c y for ' b a d n e w s ' o f a n y sort not to rise to t h e t o p in an o r g a n i z a t i o n . A s c r e e n i n g p r o c e s s t a k e s p l a c e , such t h a t if a c o m p a n y has b e e n t o u t i n g a n e w d r u g , and t h e drug b e g i n s ' e x p e r i e n c i n g difficulties' i n the l a b , lab e m p l o y e e s and t h e i r s u p e r v i s o r s j u s t ' k n o w ' t h a t i n f o r m a t i o n a b o u t this i s t o b e p a s s e d u p w a r d , if at all, only in t h e v a g u e s t t e r m s . If an a u t o m o b i l e c o m p a n y has r e t o o l e d and i s g e a r e d t o p r o d u c e 500,000 units o f s o m e car, a test d r i v e r or his s u p e r v i s o r k n o w s that i n f o r m a t i o n s u g g e s t i n g t h a t t h e car t u r n s o v e r t o o easily is not g o i n g to be w e l c o m e d ' u p s t a i r s ' . W o r s e still, c e r t a i n sorts o f w r o n g d o i n g o f a 100

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m o r e s e r i o u s sort - for e x a m p l e , price-fixing or o t h e r c r i m i n a l activity - is not j u s t s c r e e n e d o u t c a s u a l l y ; it b e c o m e s the j o b of s o m e o n e , p e r h a p s t h e g e n e r a l c o u n s e l , t o i n t e r c e p t any such i n f o r m a t i o n t h a t c o u l d ' t a i n t ' his p r e s i d e n t o r b o a r d c h a i r m a n , d i v u l g i n g his s u s p i c i o n s only in p r i v a t e , if at all. In this w a y , t h e law n o t o n l y fails to b r i n g a b o u t t h e n e c e s s a r y i n t e r n a l flow of information, it may systematically operate to keep information, o f w r o n g d o i n g a w a y from t h e very p e o p l e w h o m i g h t best d o s o m e t h i n g a b o u t i t ( S t o n e , 1975: 4 4 - 5 ) . T h e s t r u c t u r e d c o m m u n i c a t i o n b l o c k a g e which p r o t e c t e d t h e R i c h a r d s o n - M e r r e l l b o a r d from k n o w l e d g e o f t h e M E R / 2 9 fraud i l l u s t r a t e s S t o n e ' s p o i n t . S t o n e a r g u e s t h a t t h e law h a s a n i m p o r t a n t role t o play i n e n s u r i n g t h a t t r a n s n a t i o n a l c o r p o r a t i o n s h a v e a n effective i n t e r n a t i o n a l c o m m u n i c a t i o n s s y s t e m . F o r a p h a r m a c e u t i c a l c o m p a n y , i n f o r m a t i o n a b o u t t h e safety o f its p r o d u c t s s h o u l d be g a t h e r e d not only from its o w n l a b o r a t o r i e s a r o u n d t h e w o r l d , b u t also from d o c t o r s , h o s p i t a l s , p h a r m a c i s t s , u n i v e r s i t y r e s e a r c h e r s , health regulatory authorities, independent contract l a b o r a t o r i e s , a n d c o m p e t i t o r s i n all c o u n t r i e s . M o r e o v e r , c o l l e c t i n g the information is not e n o u g h . The information, digested in an a p p r o p r i a t e form for a c t i o n , m u s t b e d e l i v e r e d t o t h e ' r i g h t ' d e s k s . T h e t h a l i d o m i d e d i s a s t e r s h o w e d t h a t this i s exactly w h a t d o e s not h a p p e n i n p h a r m a c e u t i c a l c o m p a n i e s . B a d n e w s from o n e p a r t o f t h e w o r l d d o e s n o t t r a v e l quickly e n o u g h t o o t h e r p a r t s o f t h e w o r l d . M o s t r e g u l a t o r y a g e n c i e s only r e q u i r e t h a t a d v e r s e r e a c t i o n s which c o m e to t h e a t t e n t i o n of t h e c o m p a n y within their country be reported. S e l f - r e g u l a t i o n s h o u l d b e m o r e t h a n s e t t i n g u p i n t e r n a l policing s y s t e m s . T h e very s t r u c t u r e of a r e s e a r c h o r g a n i s a t i o n will have i m p l i c a t i o n s for c r i m e p r e v e n t i o n , and p r e v e n t i n g fraud o u g h t to be a c o n s i d e r a t i o n in d e c i s i o n s on o r g a n i s a t i o n a l s t r u c t u r e s . P e r h a p s the most criminogenic research a r r a n g e m e n t is a hierarchical o n e , c e n t r a l l y c o n t r o l l e d by a study d i r e c t o r w h o gives a d i s c r e t e task to each s u b o r d i n a t e . E v e r y m e m b e r of the research organisation r e p o r t s t o j u s t o n e s u p e r i o r . A n y o n e p e r s o n i s a w a r e only o f w h a t s/he a n d t h e p e o p l e w h o a n s w e r t o h i m / h e r are d o i n g . B e y o n d t h i s , e a c h r e s e a r c h e r is in t h e d a r k as to w h a t t h e o t h e r is d o i n g . ' B a d n e w s ' c a n be s t o p p e d by o n e s u p e r i o r w h o d e c i d e s t h a t it will rise no further in the organisational hierarchy. O p p o s e d t o this i s a r e s e a r c h t e a m a p p r o a c h , c o m m o n l y 101

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c h a r a c t e r i s e d i n i n d u s t r y a s m a t r i x m a n a g e m e n t . H e r e t h e study d i r e c t o r is the c o o r d i n a t o r o f a system of inter-relationships among r e s e a r c h e r s . E a c h has a task w h i c h o v e r l a p s with s o m e o n e else's t a s k . It is t h e r e f o r e e s s e n t i a l t h a t e a c h k n o w s w h a t t h e o t h e r is d o i n g . To facilitate this t h e m a t r i x r e s e a r c h t e a m will typically have a w e e k l y m e e t i n g w h e r e e a c h m e m b e r will give a r e p o r t on p r o g r e s s . W h e n different p e o p l e are w o r k i n g o v e r t h e s a m e f i g u r e s it is m o r e difficult to fiddle t h o s e figures. U n d e r a system w h e r e e v e r y o n e k n o w s w h a t e v e r y o n e else is d o i n g it is hard to p r e v e n t bad n e w s from r e a c h i n g t h e t o p . C o n v e r s e l y , it is difficult for s o m e o n e at t h e t o p to q u i e t l y p a s s d o w n an i n s t r u c t i o n to have s o m e dirty work done. The research director of an American transnational w h i c h h a d c h a n g e d from a h i e r a r c h i c a l to a m a t r i x r e s e a r c h o r g a n i s a t i o n e x p l a i n e d : ' U n d e r t h e old system I could go and tell one of my s e c t i o n h e a d s to t h r o w o u t a sick rat and not tell a n y o n e a b o u t it. U n d e r t h e n e w s y s t e m this i s not p o s s i b l e . '
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Financial dependence and scientific independence
T h e p r o b l e m o f t h e financial d e p e n d e n c e o f c o n t r a c t labs i s p o i n t e d l y i l l u s t r a t e d by t h e following view of P e t e r N o e l from o n e of the largest British contract labs, the H u n t i n g t o n Research C e n t r e . N o t u n c o m m o n l y , w e a r e a s k e d : 'Will y o u p l e a s e p r e p a r e a p r o t o c o l and e s t i m a t e of cost for a 3 - ( 6 - e t c . ) m o n t h study in rats ( d o g s , p r i m a t e s , e t c . ) on a d r u g ( p e s t i c i d e , food a d d i t i v e , e t c . ) ? ' W e h a v e l e a r n e d t h a t h o w e v e r p r e c i s e and d e t a i l e d o u r p r o t o c o l s , it is t h e e s t i m a t e o f c o s t a l o n e which is o c c a s i o n a l l y the b a s i s for s e l e c t i n g a t e s t i n g facility. L o w e r costs have n o t i n f r e q u e n t l y b e e n r e a c h e d b y a b b r e v i a t i n g p r o t o c o l s and s o m e t i m e s , s p o n s o r s could not, or would not, appreciate the d i f f e r e n c e s i n t h e c o n t e n t s o f t h e study p r o p o s e d . T h e i n t r o d u c t i o n o f f i n a n c i a l c o n s i d e r a t i o n s leads t o c o m p e t i t i o n ( N o e l , 1977: 112). C o m p e t i t i o n in p r i c e t a k e s place at t h e e x p e n s e of c o m p e t i t i o n in q u a l i t y b e c a u s e w h e r e a s t h e s p o n s o r suffers directly from higher p r i c e s , often it is only t h e c o n s u m e r w h o will suffer from p o o r e r q u a l i t y . W h e n m a r k e t m e c h a n i s m s h a v e a n anti-social effect o f t h i s k i n d , t h e r e is an o b v i o u s n e e d for r e g u l a t i o n s w h i c h set a m i n i m u m s t a n d a r d b e l o w w h i c h no r e s e a r c h o r g a n i s a t i o n is a l l o w e d to fall in r e s p o n s e t o m a r k e t p r e s s u r e s . A further p r o t e c t i o n a g a i n s t b i d d i n g 102

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q u a l i t y a w a y is for t h e s p o n s o r to write into t h e c o n t r a c t a r e q u i r e m e n t t h a t G L P s m u s t b e followed b y t h e l a b o r a t o r y . This p r a c t i c e , n o w followed b y m a n y A m e r i c a n c o m p a n i e s , i s b o t h a n extra legal p r o t e c t i o n for t h e s p o n s o r , and s o m e p r o t e c t i o n for t h e r e s p o n s i b l e c o n t r a c t lab from t h e price c u t t e r w h i c h i s p r e p a r e d t o i g n o r e G L P s . T h e f i n a n c i a l d e p e n d e n c e o f c o n t r a c t l a b o r a t o r i e s has also b e e n a p r o b l e m which has c o n c e r n e d the E n v i r o n m e n t a l Protection A g e n c y i n t h e U n i t e d S t a t e s . T h a t a g e n c y h a s b e e n giving c o n s i d e r ation to limiting the p r o b l e m by m e a s u r e s to ensure that contract labs d o not b e c o m e f i n a n c i a l l y d e p e n d e n t u p o n one o r m o r e p e s t i c i d e m a n u f a c t u r e r s . O n e t e c h n i q u e w o u l d limit the p r o p o r t i o n of its b u s i n e s s t h a t any c o n t r a c t l a b o r a t o r y could h a v e with a part i c u l a r p e s t i c i d e p r o d u c e r . T h i s p r o p o s a l is a clumsy b u r e a u c r a t i c o n e w h i c h p r o v i d e s little real g u a r a n t e e o f g r e a t e r i n t e g r i t y . In this c h a p t e r it has b e e n seen h o w a s p o n s o r can a b r o g a t e its o w n r e s p o n s i b i l i t y for r e s e a r c h s t a n d a r d s t h r o u g h a n u n s p o k e n u n d e r s t a n d i n g with a c o n t r a c t l a b o r a t o r y w h i c h p r o d u c e s the findings i t w a n t s . W h i l e this c e r t a i n l y d o e s h a p p e n , i t d o e s not necessarily m e a n that the contract laboratory a r r a n g e m e n t is i n h e r e n t l y inferior t o i n - h o u s e a r r a n g e m e n t s ( W i l c o x e t a l . , 1978: 1 4 - 5 ) . C o n t r a c t i n g o u t r e s e a r c h d o e s p e r m i t s p o n s o r s w i t h integrity t o d i s t a n c e t h e i r r e s e a r c h p e o p l e from e v a l u a t i o n o f ' t h e i r own b a b y ' . O f t e n it is i m p o r t a n t to give different secret c o d e s to t h e n e w p r o d u c t , an e x i s t i n g p r o d u c t with w h i c h it is to be c o m p a r e d , and a p l a c e b o i n o r d e r t o p r e v e n t u n i n t e n t i o n a l (or i n t e n t i o n a l ) b i a s e s affecting t h e i n t e r p r e t a t i o n o f t h e effects o f t h e t h r e e t r e a t m e n t s . B r e a k i n g t h e s e c r e c y of t h e c o d e is p r o b a b l y less likely to o c c u r b e t w e e n o r g a n i s a t i o n s than within one organisation. On the other h a n d , a s p o n s o r c o m p a n y which has a n o u t s t a n d i n g c o m p l i a n c e s y s t e m is in a b e t t e r p o s i t i o n to apply its s t a n d a r d s of e x c e l l e n c e to i n - h o u s e t h a n t o o u t s i d e w o r k . I n t e r n a l c o r p o r a t e p o l i c e m e n can m o r e r e a d i l y d i s c o v e r t h e s k e l e t o n s i n t h e i r own c o r p o r a t e closets t h a n t h e y can t h o s e o f o t h e r c o m p a n i e s . T h e c o n t r a c t l a b o r a t o r y r e l a t i o n s h i p p e r m i t s c o m p e t i t i v e forces to be for g o o d or ill. B u t t h e r e is no r e a s o n why they c a n n o t be h a r n e s s e d for g o o d . A s t a t e m e n t b y f o r m e r F D A C o m m i s s i o n e r S c h m i d t b e f o r e t h e S e n a t e is a first step to u n d e r s t a n d i n g h o w this can b e d o n e . T h e r e a r e p o w e r f u l e c o n o m i c and legal i n c e n t i v e s for d r u g m a n u f a c t u r e r s t o c a r r y out a d e q u a t e a n i m a l s t u d i e s o f their 103

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p r o d u c t s . S i m i l a r t o x i c o l o g i c a l s t u d i e s are d o n e o n closely related d r u g s b y different d r u g f i r m s , and c o m p e t i t o r s ' p r o d u c t s are not u n c o m m o n l y i n c l u d e d in such s t u d i e s . T h i s c r o s s - c h e c k , a b y - p r o d u c t o f t h e free e n t e r p r i s e s y s t e m , p r o v i d e s a strong s t i m u l u s to i n d i v i d u a l drug firms to have a c c u r a t e d a t a on their o w n p r o d u c t s ( S u b c o m m i t t e e o n H e a l t h , 1976a: P a r t II, 9 2 ) . R e g u l a t o r y a g e n c i e s can foster this c o m p e t i t i v e c h e c k b y r e q u i r i n g t w o c o m p a n i e s s e e k i n g t o e n t e r a m a r k e t with similar p r o d u c t s t o e a c h d o c o m p a r a t i v e s t u d i e s with t h e o t h e r ' s p r o d u c t . F o r a d e c a d e S e n a t o r G a y l o r d N e l s o n a t t e m p t e d t o p e r s u a d e the US C o n g r e s s to a c c e p t a t h i r d - p a r t y t e s t i n g bill. N e l s o n ' s basic a r g u m e n t had b e e n t h a t industry s h o u l d b e n e i t h e r testing t h e safety of its o w n p r o d u c t n o r d e c i d i n g w h o will do t h a t testing for t h e m . T h e cost t o t h e t a x p a y e r o f g o v e r n m e n t d o i n g all d r u g t e s t i n g w o u l d b e b e y o n d t h e p o s s i b l e . I n d u s t r y critics a r g u e that t h e g o v e r n m e n t s h o u l d do t h e t e s t i n g , b u t industry foot the bill. Dr S c h m i d t has p o i n t e d out some o f t h e a r g u m e n t s against a g o v e r n m e n t monopoly o f d r u g testing. It is i n e v i t a b l e t h a t in c a r r y i n g out its a c t i v i t i e s , the G o v e r n m e n t w o u l d c o m e to set r e s e a r c h p r i o r i t i e s . Since I b e l i e v e t h a t all m o n o p o l i e s , w h e t h e r public or private, tend to stagnate, the p r o s p e c t o f a n y single i n s t i t u t i o n g a i n i n g such c o n t r o l o v e r all preclinical drug investigation troubles me. Second, 'disinterest' d o e s n o t in any s e n s e a s s u r e q u a l i t y , a l t h o u g h it may e l i m i n a t e outright bias of certain kinds. W e a t F D A u n f o r t u n a t e l y k n o w , from a n e m b a r r a s s i n g , w e l l - p u b l i c i z e d m i x u p of a n i m a l s in t h e c o u r s e of an F D A study o f R E D N o . 2 , t h a t G o v e r n m e n t t e s t i n g i s v u l n e r a b l e t o the s a m e p r o b l e m s of quality control as testing d o n e by private firms. T h i r d , a fact of life is t h a t m o s t t o x i c o l o g y l a b o r a t o r i e s and t o x i c o l o g i s t s are a l r e a d y e s t a b l i s h e d in p r i v a t e i n d u s t r y , so t h a t n o n i n d u s t r y facilities and p e r s o n n e l for this w o r k simply are not a v a i l a b l e ( S u b c o m m i t t e e o n H e a l t h , 1976a: P a r t I I , 103-4). An a l t e r n a t i v e w h i c h a v o i d s s o m e of t h e s e p r o b l e m s is for the g o v e r n m e n t to a p p r o v e a list of i n d e p e n d e n t 'third p a r t i e s ' to u n d e r t a k e d r u g t e s t i n g . T h e s e w o u l d b e p r i m a r i l y p r i v a t e and u n i v e r s i t y l a b o r a t o r i e s , and p e r h a p s s o m e l a b o r a t o r i e s i n g o v e r n m e n t d e p a r t m e n t s . T h e g o v e r n m e n t could act a s a ' b r o k e r ' a w a r d ing b i d s to c o n d u c t e v a l u a t i o n s paid for by s p o n s o r s on t h e basis of 104

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e c o n o m i c s , q u a l i t y o f p r o t o c o l s , e x p e r i e n c e with t h e e v a l u a t i o n o f t h e t y p e o f p r o d u c t c o n c e r n e d and t e c h n i c a l c o m p e t e n c e . W i t h the e l i m i n a t i o n o f t h e d i r e c t c a s h n e x u s b e t w e e n s p o n s o r and cont r a c t o r , scientific i n d e p e n d e n c e c o u l d b e a s s u r e d . C o n t r a c t s w o u l d be w o n a c c o r d i n g to t h e quality of past r e s e a r c h , not a c c o r d i n g to how pleasing the results were to the sponsor. Even greater guarant e e s w o u l d p r e v a i l w e r e t h e r e a r e q u i r e m e n t t h a t the s t u d i e s b e u n d e r t a k e n by two or more research contractors. Contractors p r o d u c i n g data which the superior m e t h o d o l o g i e s of competitors s h o w e d to be in e r r o r w o u l d lose o u t in t h e c o m p e t i t i v e struggle for research excellence. T h e U S N a t i o n a l C a n c e r I n s t i t u t e t a k e s its g u a r a n t e e s o f t h e intergrity of research u n d e r t a k e n by i n d e p e n d e n t contractors even further. C o n t r a c t o r s are sent c o d e d c o m p o u n d s and r e q u i r e d t o r e t u r n r a w d a t a s h e e t s t o a n o t h e r i n d e p e n d e n t c o n t r a c t o r which d o e s t h e statistical a n a l y s i s . T h e first lab is t h e r e f o r e in no p o s i t i o n to fiddle its r e s u l t s at t h e d a t a analysis s t a g e . To c h e c k that t h e lab is d o i n g its r a w d a t a c o l l e c t i o n p r o p e r l y , N C I will o c c a s i o n a l l y slip it a c o d e d c o m p o u n d w h i c h has c e r t a i n clearly e s t a b l i s h e d effects t o a s c e r t a i n t h a t such effects are r e p o r t e d . T h e s e k i n d s o f c h e c k s are o b v i o u s l y c o s t l y , but t h e r e is no r e a s o n t h a t t h e y could not be used s p a r i n g l y in a r e a s of high sensitivity or i m p o r t a n c e , or w h e r e g r o u n d s for s u s p i c i o n exist. O n e r e a s o n w h y simply r e m o v i n g t h e d i r e c t cash n e x u s b e t w e e n s p o n s o r and c o n t r a c t o r b y h a v i n g t h e g o v e r n m e n t act a s b r o k e r m i g h t not be sufficient for all s i t u a t i o n s is t h a t it d o e s not r e m o v e p r e s s u r e s on c o n t r a c t o r s to a c h i e v e a c e r t a i n s a m p l e size by a d e a d l i n e . W e h a v e s e e n t h a t d a t a can b e fabricated i n o r d e r t o m e e t a d e a d l i n e , j u s t as it c a n be m a n u f a c t u r e d to p r o d u c e favourable r e s u l t s . H e n c e t h e r a t i o n a l e for t h e m o r e s t r i n g e n t r e q u i r e m e n t s o f c o m p e t i t i o n b e t w e e n c o n t r a c t o r s and t h e N a t i o n a l C a n c e r I n s t i t u t e m e a s u r e s . J u s t a s w i t h t o x i c o l o g i c a l s t u d i e s , t h e r e are i n c e n t i v e s for d a t a f a b r i c a t i o n a m o n g clinical i n v e s t i g a t o r s (especially w h e n a s m u c h a s $ 1 , 0 0 0 p e r subject i s paid b y A m e r i c a n c o m p a n i e s , e n a b l i n g s o m e d o c t o r s to e a r n up to $1 million a y e a r from d r u g r e s e a r c h ) . T h e case for N C I t y p e m e a s u r e s h e r e i s t h e r e f o r e also clear. A t least i f clinical t e s t i n g c o n t r a c t s w e r e a w a r d e d b y g o v e r n m e n t , we would no longer have the situation of the Australian Medical D i r e c t o r o f a n A m e r i c a n t r a n s n a t i o n a l w h o could say quite o p e n l y to m e : ' O f c o u r s e we do p a t a d o c t o r on t h e back and c o n g r a t u l a t e 105

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him m o r e if as well as following the p r o t o c o l p r o p e r l y and filling out t h e forms i n d e t a i l h e finds w h a t w e p r e d i c t e d . T h a t ' s only n a t u r a l . ' A n o t h e r r e f o r m w h i c h w o u l d use c o m p e t i t i v e forces t o i m p r o v e t h e q u a l i t y of r e s e a r c h w o u l d be to m a k e findings on the safety of d r u g s a v a i l a b l e u n d e r F r e e d o m o f I n f o r m a t i o n A c t s (see M c G a r i t y and S h a p i r o , 1980). T h i s w o u l d m e a n t h a t t h e quality o f r e s e a r c h w o u l d be s u b j e c t e d to e v a l u a t i o n and r e - a n a l y s i s not only by g o v e r n m e n t s c i e n t i s t s but b y t h e scientists o f c o m p e t i t o r s w h o have a c l e a r v e s t e d i n t e r e s t in u n c o v e r i n g m e t h o d o l o g i c a l w e a k n e s s e s . S i m i l a r l y , c o n s u m e r g r o u p s should b e able t o e v a l u a t e the d a t a w h i c h h a v e led to a d e c i s i o n to set a p r o d u c t loose u p o n c o n s u m e r s . S h a p o ( 1 9 7 9 : 57) incisively a r g u e d : ' A s a m a t t e r of d e m o c r a t i c v a l u e s , t h e r e is a s t r o n g p r e s u m p t i o n in favor of m a k i n g public the facts a b o u t e x p e r i m e n t a t i o n w h o s e s u b j e c t s are t h e p u b l i c ' D r u g c o m p a n i e s s h o u l d not h a v e t h e right to t r e a t as a p r i v a t e c o m m e r c i a l s e c r e t s o m e t h i n g w h i c h has a cost in risk of injury b o r n e by t h e public. In the absence o f t h e more sweeping reforms mentioned above, t h e p u b l i c s h o u l d h a v e a right to c e r t a i n o t h e r t y p e s of i n f o r m a t i o n . T h e p u b l i c , a n d p a r t i c u l a r l y t h e m e d i c a l profession a t l a r g e , should be i n f o r m e d w h e t h e r a r e s e a r c h e r p u b l i s h i n g d a t a a b o u t a p a r t i c u l a r drug was financially supported in that research by the manufacturer o f t h e d r u g . M e d i c a l j o u r n a l s should have a policy o f r e q u i r i n g such d i s c l o s u r e . T h e s e p o l i c i e s could n e v e r b e totally effective b e c a u s e , a s E p s t e i n ( 1 9 7 8 : 82) has p o i n t e d o u t , large c o r p o r a t i o n s are infinitely r e s o u r c e f u l in c h a n n e l l i n g t h e i r funds indirectly to s u p p o r t captive researchers. A n o t h e r a l l e g e d t a c k is for the firm, singly or in c o m b i n a t i o n with like f i r m s , to set up s u p p o s e d l y i n d e p e n d e n t r e s e a r c h i n s t i t u t e s w h o s e s c i e n t i s t s s e e m a l w a y s t o find e v i d e n c e t o s u p p o r t t h e s t a n c e t a k e n b y t h e firm, d e s p i t e m a s s i v e c o n t r a r y e v i d e n c e . T h u s , w h e n some high-sounding institute states that a c o m p o u n d is h a r m l e s s or a p r o c e s s free of risk, it is wise to k n o w w h e n c e the i n s t i t u t e o r t h e s c i e n t i s t s w h o w o r k t h e r e o b t a i n their f i n a n c i a l support. O n e o f t h e m a n y l e s s o n s from t h e t h a l i d o m i d e d i s a s t e r w a s i m p o r t a n c e of giving c o m p a n y officers g u a r a n t e e s of a right p u b l i s h f i n d i n g s p r o m p t l y from t h e r e s e a r c h they do for c o m p a n y . D u r i n g F e b r u a r y and M a r c h o f 1962, D r S o m e r s D i s t i l l e r s g a v e t h a l i d o m i d e t o four p r e g n a n t w h i t e r a b b i t s . O f t h e
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b a b y r a b b i t s b o r n , 1 3 had t h e t e r r i b l e t y p e s o f d e f o r m i t i e s n o w a s s o c i a t e d with t h a l i d o m i d e . S o m e r s w a s a n x i o u s t o publish his f i n d i n g s q u i c k l y . B u t w h e n G r u n e n t h a l l e a r n e d o f t h e r e s u l t s , they w r o t e to D i s t i l l e r s s u g g e s t i n g t h a t p u b l i c a t i o n s h o u l d be d e l a y e d for t h e t i m e b e i n g . S o m e r s , with a n integrity w h i c h m a n y r e s e a r c h e r s w i t h i n i n d u s t r y m i g h t not h a v e s h o w n , p u b l i s h e d his p a p e r in The Lancet of 28 A p r i l 1962. A t least o n e A m e r i c a n c o m p a n y , S c h e r i n g , a l l o w s its s c i e n t i s t s , as a m a t t e r of c o n t r a c t , t h e right to p u b l i s h i n d e p e n d e n t l y in a c a d e m i c j o u r n a l s any f i n d i n g s from t h e i r r e s e a r c h . This i s a n i m p o r t a n t p r o t e c t i o n n o t only b e c a u s e i t e n a b l e s c o m p a n y scientists to b l o w t h e w h i s t l e after a s e r i o u s c o v e r - u p , b u t also b e c a u s e t h e r e is b o u n d to be a p r e v e n t i v e effect from t h e k n o w l e d g e t h a t a c o m p a n y ' s c o v e r c o u l d be b l o w n at any t i m e by a scientist w h o has a c o n t r a c t u a l right to do so.

Deterrence and rehabilitation
The s e r i o u s c o n s e q u e n c e s for t h e thalidomide corporations i n v o l v e d not c r i m i n a l s a n c t i o n s , but civil a c t i o n s c o s t i n g m a n y h u n d r e d s o f million d o l l a r s , civil a c t i o n s w h i c h w e r e u n i v e r s a l l y s e t t l e d o u t of c o u r t . S i m i l a r l y , in t h e o t h e r case studies of this c h a p t e r , c o m p a n i e s have not suffered s e v e r e l y at the h a n d s of c r i m i n a l c o u r t s , if t h e y w e r e d e a l t w i t h by a c r i m i n a l court at all. T h i s i s n o t t o say t h a t t h e c o m p a n i e s w e r e u n t o u c h e d b y t h e e v e n t s d i s c u s s e d h e r e . O n t h e c o n t r a r y , w e h a v e seen t h a t t h e c o m p a n i e s c o n s i d e r e d in t h e m a j o r case s t u d i e s in t h i s c h a p t e r - R i c h a r d s o n M e r r e l l , G r u n e n t h a l , Distillers, G. D. Searle, Biometric Testing I n c . , I B T - suffered at least in t h e s h o r t t e r m on t h e stock m a r k e t or in p r o f i t a b i l i t y . T h e y w e r e set back in t h e m a i n not b e c a u s e of c r i m i n a l s a n c t i o n s b u t from t h e a d v e r s e p u b l i c i t y s u r r o u n d i n g t h e allegations made against them. Executives of these companies c o m m u n i c a t e t h e m e s s a g e t h a t the c a m p a i g n s against t h e m had c o n s e q u e n t i a l d e t e r r e n t effects, but t h a t t h e d e t e r r e n c e b y and large p r e c e d e d r a t h e r t h a n followed from any c r i m i n a l action which might have been t a k e n against them. T h e r e i s e v i d e n c e t h a t t h e c o r p o r a t i o n s i n v o l v e d w e r e not only d e t e r r e d , but also i n s o m e m e a s u r e r e h a b i l i t a t e d . A n o b v i o u s e x c e p t i o n h e r e i s I B T w h i c h , i n effect, w a s s e n t e n c e d w i t h o u t trial to a de facto c o r p o r a t e d e a t h s e n t e n c e . It is unlikely to rise from the d e a d i n r e h a b i l i t a t e d form. W e h a v e s e e n , t h o u g h , the way that 107

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S e a r l e , f o r m e r l y with o n e o f t h e m o s t sloppy internal c o n t r o l s y s t e m s in t h e A m e r i c a n p h a r m a c e u t i c a l i n d u s t r y , set up a t o u g h i n t e r n a t i o n a l i n t e r n a l c o m p l i a n c e s y s t e m . S i m i l a r l y , following its c r i s e s o f t h e e a r l y 1960s. R i c h a r d s o n - M e r r e l l a p p o i n t e d a ' D i r e c t o r of S t a n d a r d s ' to a p o s i t i o n with c o n s i d e r a b l e o r g a n i s a t i o n a l c l o u t . T h e a p p o i n t e e w a s a s t r o n g p e r s o n a l i t y , a former F D A District C o m m i s s i o n e r , w h o s e j o b it w a s to c l e a n up t h e c o m p a n y . A w o r l d wide c o r p o r a t e standards manual was introduced, something u n u s u a l a t t h a t t i m e , t h o u g h c o m m o n p l a c e t o d a y . H e a d office b e g a n s e n d i n g t r o u b l e s h o o t e r s t o s u b s i d i a r i e s a r o u n d the w o r l d t o c h e c k t h a t t h e n e w s t a n d a r d s w e r e being m e t . A n o l d e r R i c h a r d s o n M e r r e l l e x e c u t i v e , w h o saw the t r a n s f o r m a t i o n c l a i m e d t h a t a t t h e t i m e R i c h a r d s o n - M e r r e l l led t h e i n d u s t r y i n w o r l d w i d e a u d i t i n g p r o g r a m m e s o f c o r p o r a t e s t a n d a r d s i n quality o f d r u g t e s t i n g and g o o d m a n u f a c t u r i n g p r a c t i c e s . W h e t h e r o r not this i s t r u e , t h e r e can b e little q u e s t i o n t h a t c o n s i d e r a b l e c o r p o r a t e r e h a b i l i t a t i o n t o o k place. T h e t h a l i d o m i d e a n d S e a r l e crises also r e s u l t e d in a kind of r e g u l a t o r y r e h a b i l i t a t i o n . M E R / 2 9 and t h a l i d o m i d e c o m i n g closely on top of each o t h e r permitted Senator Kefauver to push through s w e e p i n g a m e n d m e n t s t o t o u g h e n t h e U S F o o d , D r u g and C o s m e t i c A c t i n 1962. A l m o s t every d e v e l o p e d c o u n t r y severely t i g h t e n e d its r e g u l a t o r y c o n t r o l s on t h e p h a r m a c e u t i c a l i n d u s t r y in t h e w a k e of t h a l i d o m i d e . S e a r l e ' s fiasco w a s t h e catalyst for t h e i n t r o d u c t i o n o f G o o d L a b o r a t o r y P r a c t i c e s r e g u l a t i o n s for t h e first t i m e . C r i t i c s o f t h e p r o c e s s w o u l d call it legislation by crisis r a t h e r then regulatory rehabilitation. T h e m o s t s t r a i g h t f o r w a r d c o n c l u s i o n o f this c h a p t e r m u s t b e , in t h e face o f t h e w i d e s p r e a d a b u s e s in t h e safety t e s t i n g of d r u g s w h i c h h a v e b e e n d o c u m e n t e d , that t h e following s t a t e m e n t o f w h a t h a s b e e n , a n d a r g u a b l y still is, F D A policy, i s a n u n a c c e p t a b l e position. T h e policy o f t h e F D A n e c e s s a r i l y has b e e n t h a t u n l e s s t h e r e i s a c o m p e l l i n g r e a s o n t o b e l i e v e o t h e r w i s e , w e w o u l d p r o c e e d from t h e a s s u m p t i o n t h a t t h e f o u n d a t i o n w a s i n t a c t , and that the e v i d e n c e s u b m i t t e d t o s u p p o r t a n a p p l i c a t i o n reflected p r o f e s s i o n a l i s m a n d science o f t h e h i g h e s t o r d e r ( G a r d n e r , 1977: 5). A p o s i t i o n m o r e firmly g r o u n d e d in t h e r e a l i t i e s d o c u m e n t e d h e r e has been expressed by Epstein (1978: 300): 108

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C o n s t r a i n t s o n d a t a , from gross i n a d e q u a c y , biased i n t e r p r e t a t i o n , m a n i p u l a t i o n , s u p p r e s s i o n and o u t r i g h t d e s t r u c t i o n , are c o m m o n p l a c e , e s p e c i a l l y w h e n profitable p r o d u c t s o r p r o c e s s e s are i n v o l v e d . E v i d e n c e o f such c o n s t r a i n t s n o w justifies a priori r e s e r v a t i o n s a b o u t t h e validity of d a t a d e v e l o p e d by institutions or individuals whose economic interests a r e affected, e s p e c i a l l y w h e n the d a t a b a s e has b e e n m a i n t a i n e d as c o n f i d e n t i a l at i n d u s t r y ' s i n s i s t e n c e . I n d u s t r y e x e c u t i v e s like to a r g u e t h a t it is n o w t h e 1980s and that t h e a b u s e s o f t h e 1970s and 1960s are p h e n o m e n a o f t h e past. But t h e r e a l i s t i c s t a n c e is still o n e of a priori r e s e r v a t i o n s a b o u t the v a l i d i t y of d a t a s u p p l i e d by i n d u s t r y . C o n s i d e r t h e following interv i e w w h i c h I had in 1980 with a M e d i c a l D i r e c t o r in A u s t r a l i a (a d e v e l o p e d c o u n t r y w i t h a r e p u t a t i o n a s h a v i n g one o f t h e t o u g h e s t regulatory schemes). The Medical D i r e c t o r w o r k e d for a n A m e r i c a n t r a n s n a t i o n a l which c o n c e n t r a t e s a s u b s t a n t i a l p r o p o r t i o n of its clinical t e s t i n g p r o g r a m m e in A u s t r a l i a : J. B . : Do you or the Health Department ever do audits of your doctors to see that the patients on which you have forms actually exist! M e d i c a l D i r e c t o r : N o . A n d I don't think that is necessary. J. B . : But what about the instances which have been proven in the US of doctors providing data on fictitious patients in order to collect more money for clinical testing! M e d i c a l D i r e c t o r : T h e r e are n o i n c e n t i v e s f o r t h i s . I f w e get back t o o f a v o u r a b l e a p i c t u r e on a p r o d u c t , we w o u l d t h e n go and o v e r p r o m o t e it. T h a t w o u l d r e b o u n d a g a i n s t us. J. B . : But presumably an expert fraud would produce neither extremely favourable nor extremely unfavourable results, but pretty average-looking results! M e d i c a l D i r e c t o r : In t h a t case it w o u l d n o t affect o u r r e s u l t s .

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SOME CASE STUDIES
L a w s r e g u l a t i n g t h e safe m a n u f a c t u r e o f d r u g s h a v e b e e n r e s p o n sive to c r i s e s in a w a y very similar to t h e r e g u l a t i o n of t e s t i n g . It will b e s e e n i n this c h a p t e r h o w t h e U S F o o d , D r u g and C o s m e t i c A c t o f 1938 w a s b r o u g h t i n t o b e i n g after o v e r o n e h u n d r e d p e o p l e died i n t h e elixir s u l f a n i l a m i d e d i s a s t e r . T h e B r i t i s h C o m m i t t e e o n Safety o f D r u g s w a s set u p after t h e t h a l i d o m i d e t r a g e d y . T o u g h e r cont r o l l i n g l e g i s l a t i o n e n s u e d in F r a n c e w h e n in 1954 m o r e t h a n a h u n d r e d p e o p l e died after b e i n g g i v e n i n c o r r e c t l y labelled t a b l e t s for t h e t r e a t m e n t of b o i l s . M o s t c o u n t r i e s n o w h a v e r e g u l a t i o n s for G o o d M a n u f a c t u r i n g P r a c t i c e s ( G M P s ) . I n s o m e c o u n t r i e s , such a s the U n i t e d S t a t e s , violations o f t h e regulations are criminal offences, while in o t h e r s , s u c h a s A u s t r a l i a , G M P s are little m o r e t h a n v o l u n t a r y c o d e s . ' T h e k i n d s o f p r o b l e m s w h i c h such c o d e s a d d r e s s r a n g e from unsafe p r a c t i c e s w h i c h i n v o l v e no c r i m i n a l i n t e n t , such as failure to p r o p e r l y c l e a n a m a c h i n e b e t w e e n p r o d u c t i o n r u n s o f different t y p e s o f d r u g s (so t h a t t h e f i r s t p r o d u c t might c o n t a m i n a t e t h e s e c o n d ) t o m o r e u n u s u a l t y p e s o f offences w h i c h n o r m a l l y involve criminal intent. An example o f t h e latter would be where a m a n u f a c t u r e r w a n t o n l y a t t e m p t e d to save m o n e y by s u b s t i t u t i n g a less e x p e n s i v e i n g r e d i e n t for t h e o n e set d o w n in the specifications. T h e F D A has a D r u g P r o d u c t P r o b l e m R e p o r t i n g P r o g r a m which is a m a j o r s o u r c e of l e a d s on G M P v i o l a t i o n s . In t h e year e n d i n g 3 1 M a r c h 1978, F D A had 6,100 d r u g p r o b l e m s r e p o r t e d from

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pharmacists. The most c o m m o n reported problems were c o l o u r e d t a b l e t s , c a p s u l e s , and s o l u t i o n s - a total of 332 c a s e s . O t h e r p r o b l e m s r e p o r t e d w e r e a d v e r s e r e a c t i o n s , visible

p r e c i p i t a t e s or s e d i m e n t s in d r u g s m a i n l y in solution form, c r a c k e d o r c r u m b l e d d o s a g e u n i t s such a s t a b l e t s o r glass a m p u l e s , m i s s i n g o r i m p r o p e r listing o f label e x p i r a t i o n d a t e s , e m p t y o r slack-filled d o s a g e u n i t s , s u s p e c t e d p o t e n c y p r o b l e m s , and a b n o r m a l o d o r o r t a s t e ( H o p k i n s , 1978). T h e F D A e n f o r c e m e n t r e p o r t s i n d i c a t e t h a t b e t w e e n M a r c h 1975 a n d S e p t e m b e r 1977 t h e r e w e r e 687 C l a s s I and II recalls from the m a r k e t o f p r e s c r i p t i o n d r u g s ( P a u l s and K l o e r , 1978: 11). C l a s s III r e c a l l s , for p r o b l e m s w h i c h a r e 'not likely to c a u s e a d v e r s e h e a l t h c o n s e q u e n c e s ' w e r e e x c l u d e d from t h e s e f i g u r e s . M o s t recalls are v o l u n t a r y . T h e F D A , o r t h e c o m p a n y itself, m i g h t d i s c o v e r a p r o b l e m a n d t h e c o m p a n y will a g r e e , p e r h a p s u n d e r t h r e a t o f court a c t i o n , t o recall t h e p r o d u c t from t h e m a r k e t . F o r the p e r i o d J a n u a r y 1974 to D e c e m b e r 1977 t h e r e w e r e 177 court a c t i o n s initia t e d a g a i n s t p h a r m a c e u t i c a l c o m p a n i e s for alleged drug p r o d u c t q u a l i t y p r o b l e m s ( P a u l s and K l o e r , 1978: 17). T h e s e included inj u n c t i o n s , s e i z u r e s and p r o s e c u t i o n s . S o m e recalls h a v e b e e n m a s s i v e . I n 1 9 7 1 , a single drug c o m p a n y had to recall from t h e m a r k e t a total of 957 million digoxin t a b l e t s ( S i l v e r m a n a n d L e e , 1974: 140). S i l v e r m a n and L e e have also d e t a i l e d h o w recalls c a n involve s e r i o u s m a t t e r s : O n e liver p r e p a r a t i o n a p p r o v e d only for v e t e r i n a r i a n use w a s m i s l a b e l l e d and m a r k e t e d for injection into h u m a n b e i n g s . F D A t e s t s p i c k e d up n i t r o g l y c e r i n t a b l e t s (for t h e c o n t r o l of anginal p a i n ) w i t h as little as 16 p e r c e n t o f t h e l a b e l l e d a m o u n t , p r e d n i s o n e (for a r t h r i t i s , a s t h m a , and o t h e r c o n d i t i o n s ) w i t h 3 0 p e r c e n t , r e s e r p i n e (for h y p e r t e n s i o n ) with 2 5 p e r c e n t , and m o r p h i n e w i t h 6 8 p e r c e n t . T h e F D A tests similarly disclosed o p h t h a l m i c o i n t m e n t s c o n t a m i n a t e d with metal particles, i n j e c t a b l e V i t a m i n B c o n t a i n i n g f r a g m e n t s o f m e t a l and g l a s s , s u l f a - d r u g s w i t h m o l d , and h o r m o n e s o l u t i o n s w i t h unidentified f e v e r - p r o d u c i n g c o n t a m i n a n t s . O n e lot o f a n a n t i h i s t a m i n e solution was shipped in bottles that reportedly exploded because o f t h e gas p r o d u c e d by c o n t a m i n a t i n g b a c t e r i a . In a r e p o r t on o n e lot of m o r e t h a n a million digitalis t a b l e t s , an F D A r e p o r t said, ' P o t e n c y c a n n o t be d e t e r m i n e d ; u n k n o w n interfering substance
1 2

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c a u s e d p r e m a t u r e d e a t h s a m o n g test a n i m a l s ' ( S i l v e r m a n and L e e , 1974: 1 4 0 - 1 ) . T h e w o r s t a b u s e s o c c u r i n the T h i r d W o r l d . M a n y " b a t h t u b ' m a n u f a c t u r e r s i n G u a t e m a l a have a n t i b i o t i c s o n t h e m a r k e t with less t h a n half t h e r e q u i r e d s t r e n g t h o f a c t i v e i n g r e d i e n t . Such a n t i b i o t i c s a r e u n l i k e l y to effect a c u r e for a n y t h i n g , but they do build up c o m m u n i t y i m m u n i t y t o t h e a n t i b i o t i c s o t h a t future full-strength a d m i n i s t r a t i o n s are r e n d e r e d ineffective. O n e A u s t r a l i a n g e n e r a l m a n a g e r told of a case in S o u t h - E a s t A s i a w h e r e w a t e r had b e e n s u b s t i t u t e d for i n j e c t a b l e p e n i c i l l i n . In K o r e a recently pills s u p p o s e d l y c o n t a i n i n g a l i f e - a n d - d e a t h d r u g for severe h e a r t d i s e a s e w e r e found to c o n t a i n only flour ( S i l v e r m a n et a l . , 1982: 111). D r u g e x e c u t i v e s w h o h a v e w o r k e d in A s i a are full of s t o r i e s of pirate r e p r o d u c t i o n s of t h e i r p r o d u c t s using forged labels and t a b l e t s of i d e n t i c a l s i z e , s h a p e and c o l o u r t o their o w n . P i r a t e s s o m e t i m e s b r i b e t e c h n i c i a n s to steal p u n c h e s and dies so that the r e p u t a b l e c o m p a n y ' s l o g o can be s t a m p e d on a pill w h i c h might consist of no more than starch. I recall a c a s e of a b o u t ten y e a r s ago [in I n d i a ] which we solved in a m a t t e r of h o u r s . A few w e l l - p l a c e d p e r s o n s r e p o r t e d at a h o s p i t a l w i t h s w o l l e n h a n d s . I t w a s later found t h a t t h e p r o c a i n e b e n z y l p e n i c i l l i n w h i c h had b e e n a d m i n i s t e r e d t o t h e m w a s i n r e a l i t y a s o l u t i o n of c h a l k . On further i n v e s t i g a t i o n s , a most r e m a r k a b l e r a c k e t c a m e t o light. A n e n t e r p r i s i n g c o m p o u n d e r c o l l e c t e d d i s c a r d e d penicillin vials and c a r d b o a r d c o n t a i n e r s with t h e l a b e l s i n t a c t . He filled t h e vials with chalk and p a c k e d t h e m n e a t l y in t h e c a r d b o a r d c o n t a i n e r s . He o p e r a t e d his r a c k e t on a very big scale and w a s able to p a l m off w h o k n o w s h o w m a n y t h o u s a n d s o f s p u r i o u s vials o f t h e so-called p r o c a i n e b e n z y l p e n i c i l l i n before h e w a s n a b b e d and j a i l e d . H e r e chalk w a s u s e d b e c a u s e it w a s i n s o l u b l e in w a t e r ( R a n g n e k a r , 1969: 157). S u c h g r o s s a b u s e s are less c o m m o n i n d e v e l o p e d c o u n t r i e s . H o w e v e r , Bud Loftus, former Director o f t h e F D A ' s Division of D r u g M a n u f a c t u r i n g , p o i n t s out that in the late 1950s and early 1960s i n t h e U n i t e d S t a t e s t h e c o u n t e r f e i t i n g o f d r u g s and p i r a t i n g o f p u n c h e s and dies b e c a m e a big p r o b l e m (see also K r e i g , 1967). O t h e r k i n d s o f s e r i o u s p r o d u c t safety v i o l a t i o n s are frequently p e r p e t r a t e d today by transnational companies in developed c o u n t r i e s . I n 1979 w e saw M e r c k u n d e r t a k e t w o p r o d u c t r e c a l l s , and 112

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W y e t h , t h e A m e r i c a n H o m e P r o d u c t s s u b s i d i a r y , c a s t i g a t e d with a b i t i n g r e g u l a t o r y l e t t e r from t h e F D A . T h e l e t t e r o f 2 1 J u n e alleged 'failure to provide a d e q u a t e ventilation to minimize contamination o f p r o d u c t s b y e x t r a n e o u s a d u l t e r a n t s and d i s s e m i n a t i o n o f m i c r o o r g a n i s m s from o n e a r e a to a n o t h e r . . . failure to m a i n t a i n e q u i p m e n t i n a c l e a n m a n n e r b y r e a s o n o f t h e p r e s e n c e o f m o l d ' , and r e f e r r e d t o ' e q u i p m e n t c o n s t r u c t e d o f w o o d w h i c h d o e s not a s s u r e e x c l u s i o n from d r u g s of c o n t a m i n a n t s from p r e v i o u s b a t c h e s that m i g h t affect safety, quality or p u r i t y . . .'. T h e F D A also told the P r e s i d e n t of A m e r i c a n H o m e P r o d u c t s , John Culligan. that the c o m p a n y had failed 'to subject m a t e r i a l s liable t o m i c r o b i o l o g i c a l c o n t a m i n a t i o n t o m i c r o b i o l o g i c a l tests p r i o r t o u s e ' , and that t h e r e is no a s s u r a n c e of stability of finished d r u g s , in that the stability t e s t i n g p r o g r a m d o e s not i n c l u d e q u a n t i t a t i v e assays o f t h e p r e s e r t a t i v e s y s t e m n o r any m i c r o b i o l o g i c a l t e s t i n g o f A m p h o j e l , A - M - T and O x a i n e - M . ' In 1979 in A u s t r a l i a we saw an e x t r e m e l y h a z a r d o u s p a c k a g i n g m i x - u p i n w h i c h q u i n i n e d i h y d r o c h l o r i d e w a s d i s c o v e r e d i n blister p a c k a g e s of L a s i x a m p u l e s . Lasix injections are often used in e m e r g e n c y s i t u a t i o n s to r e m o v e e x c e s s i v e fluid r a p i d l y from t h e b o d y , as i n t h e t r e a t m e n t o f a c u t e h e a r t failure. Q u i n i n e d i h y d r o c h l o r i d e i s given to patients w h o may have malaria. The Japanese Ministry of H e a l t h a n d W e l f a r e found t h a t as of 31 M a r c h 1979 126 d r u g m a n u f a c t u r i n g p l a n t s , c o m p r i s i n g 9.4 p e r cent of t h o s e in the c o u n t r y , w e r e n o t i n c o m p l i a n c e with t h e M i n i s t r y ' s G M P s t a n d a r d s . T h u s , we a r e not d e a l i n g with a p r o b l e m which is limited to p o o r c o u n t r i e s or d a y s g o n e by. N e v e r t h e l e s s , we shall begin with an e a r l y crisis w h i c h c h a n g e d t h e history of t h e p h a r m a c e u t i c a l industry.

The elixir sulfanilamide disaster
S u l f a n i l a m i d e w a s a p r o d u c t widely in use a r o u n d the world in t h e late 1930s. It w a s only w h e n a T e n n e s s e e c o m p a n y , M a s s e n g i l l & C o , d e c i d e d to m a n u f a c t u r e t h e p r o d u c t in a liquid form that it b e c a m e a killer. T h e a c t i v e i n g r e d i e n t w a s dissolved in d i - e t h y l e n e glycol to form t h e liquid. T h e d i - e t h y l e n e glycol w a s t r a n s f o r m e d in t h e b o d y into k i d n e y - d e s t r o y i n g oxalic acid. T h e result w a s a slow a g o n i s i n g d e a t h for 107 d o c u m e n t e d c a s e s , m a n y o f t h e m c h i l d r e n . T h e m a n u f a c t u r e r told r e p o r t e r s : 'my c h e m i s t s and I d e e p l y regret t h e fatal r e s u l t s , b u t . . . I do not feel t h e r e w a s any r e s p o n s i b i l i t y on 113

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o u r p a r t ' ( S i l v e r m a n a n d L e e , 1974: 8 7 ) . A p p a r e n t l y t h e chief c h e m i s t t o o k a different view: he c o m m i t t e d suicide. M a s s e n g i l l had n o t t e s t e d the elixir form of sulfanilamide for safety o n e i t h e r h u m a n s u b j e c t s o r a n i m a l s . W h e n i t w a s found that t h e law w a s all but p o w e r l e s s to p u n i s h t h e c o m p a n y , the need for a n e w F o o d , D r u g and C o s m e t i c A c t w i t h w i d e - r a n g i n g p r o v i s i o n s w a s c l e a r . P r e s i d e n t R o o s e v e l t signed t h e n e w act into law in J u n e 1938. T h e A c t i n c o r p o r a t e d a v a r i e t y of p r o v i s i o n s to e n s u r e t h a t d r u g s m a n u f a c t u r e d i n t h e U n i t e d S t a t e s w e r e safe. A n era o f s t r i c t e r r e g u l a t i o n of p h a r m a c e u t i c a l s had b e g u n , to be followed after t h e t h a l i d o m i d e d i s a s t e r in 1961 by an e v e n stricter era.

The Abbott affair
I n t h e 1960s and 1970s A b b o t t w a s t h e w o r l d ' s largest m a n u f a c t u r e r of sterile i n t r a v e n o u s solutions. Intravenous solutions, of course, a r e c o m m o n l y used on critically ill p a t i e n t s , so high s t a n d a r d s of p r o d u c t quality are i m p e r a t i v e . H o w e v e r , the Council on E c o n o m i c P r i o r i t i e s ( 1 9 7 3 ) found A b b o t t t o have t h e w o r s t p r o d u c t safety r e c o r d i n t h e A m e r i c a n p h a r m a c e u t i c a l i n d u s t r y , w i t h 3 8 recalls i n s e v e n y e a r s , o n e of t h e m i n v o l v i n g 93 different p r o d u c t s . In 1964 it w a s d i s c o v e r e d t h a t 300 b o t t l e s o f s o d i u m c h l o r i d e solution ( c o m m o n salt) w e r e m i s l a b e l l e d as " D e x t r o s e 5% in W a t e r ' . A p a n i c e n s u e d in w h i c h 11,000 b o t t l e s of s o l u t i o n w e r e recalled to t r a c k d o w n t h e salt m a s q u e r a d i n g a s d e x t r o s e . N o s o o n e r had this crisis b e e n d e a l t with w h e n a n o t h e r label m i x - u p w a s found: b o t t l e s o f " D e x t r o s e 1 0 % S a l i n e ' had b e e n e r r o n e o u s l y labelled ' D e x t r o s e 2 7 2 % in Lactated Ringer's Solution'. There were other batches w i t h t h e w r o n g label but t h e c o r r e c t e m b o s s i n g identification o n t h e b o t t l e c a p s . A b b o t t had to send w a r n i n g t e l e g r a m s to p h y s i c i a n s at a cost e s t i m a t e d a t b e t w e e n $ 7 5 0 , 0 0 0 and $ 1 , 0 0 0 , 0 0 0 ( S i l v e r m a n and Lee,1974:142). A b b o t t ' s p r o b l e m s w e r e barely b e g i n n i n g . S o m e b o t t l e s w e r e d i s c o v e r e d t o c o n t a i n m o u l d . F u r t h e r recalls o c c u r r e d b e t w e e n O c t o b e r 1964 a n d A p r i l 1965 after it w a s d i s c o v e r e d that plastic l i n e r s on its s c r e w - t o p caps w e r e d e f e c t i v e and p o s e d a severe risk t h a t b a c t e r i a w o u l d e n t e r t h e i n t r a v e n o u s s o l u t i o n . Such a l e a k a g e of b a c t e r i a c o u l d r e s u l t in s e p t i c a e m i a or b l o o d p o i s o n i n g . T h e n in 1969 F D A d i s c o v e r e d t h a t for s o m e time t h e r e had b e e n a p r o b l e m w i t h t h e a n n e a l i n g o f t h e glass i n the n e c k s o f A b b o t t b o t t l e s o f i n t r a v e n o u s fluid. T h e result w a s m o r e c o n t a m i n a t i o n o f 114

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t h e fluid a n d m o r e recalls t h r o u g h o u t 1969. A n i n s p e c t o r d i s c o v e r e d the problem w h e n he noticed A b b o t t personnel in O r e g o n opening p a c k i n g c a s e s o f s o l u t i o n s sent from C h i c a g o and h o l d i n g the b o t t l e s u p t o t h e light t o d i s c o v e r d e f e c t s . S u b s e q u e n t l y the c o m p a n y stated t h a t a p r o b l e m had e x i s t e d for s o m e m o n t h s , but they a g r e e d to a recall only m o n t h s later w h e n F D A i n s p e c t o r s i n d e p e n d e n t l y disc o v e r e d c o n t a m i n a t e d b o t t l e s . In a s p e e c h to the P h a r m a c e u t i c a l M a n u f a c t u r e r s A s s o c i a t i o n i n M a y 1969, F D A C o m m i s s i o n e r , D r H e r b e r t L e y , had this t o say a b o u t t h e e p i s o d e : W e s u b s e q u e n t l y l e a r n e d t h a t t h e m a n u f a c t u r e r had b e g u n r e c e i v i n g a n u m b e r o f c o m p l a i n t s a b o u t t h e large v o l u m e p a r e n t e r a l s s t a r t i n g i n D e c e m b e r , 1968. T h e c o m p l a i n t s w e r e r u n n i n g at an e v e n h i g h e r level by t h e end o f F e b r u a r y . B u t t h e c o m p a n y did not recall s u s p e c t s t o c k s ; it did not notify F D A . I n s t e a d , i t had its r e p r e s e n t a t i v e s c h e c k i n g o u t s t a n d i n g s t o c k s s i m p l y by visual e x a m i n a t i o n . If t h e r e w a s no visible e v i d e n c e of c o n t a m i n a t i o n , the solutions were to be accepted as satisfactory. N o t only w a s this m e a s u r e i n a d e q u a t e , i t w a s n ' t e v e n a l l o w e d i n all i n s t a n c e s . W e h a v e found u n o p e n e d cases that w e r e m a r k e d with a s y m b o l t h a t t h e firm said i n d i c a t e d c o n t a m i n a t i o n and a p p r o v a l by its field p e r s o n n e l . T h i s e n t i r e c h a i n o f e v e n t s r a i s e s s o m e real q u e s t i o n s . W a s the m a n u f a c t u r e r m o r e c o n c e r n e d a b o u t t h e security o f its r e p u t a t i o n t h a n t h e safety o f its p r o d u c t s ? M o r e c o n c e r n e d a b o u t profits t h a n p a t i e n t s ? It is n o t a story c a l c u l a t e d to build p u b l i c confidence in the drug industry. The c o m p a n y agreed to spend several h u n d r e d thousand dollars to s t r e n g t h e n its q u a l i t y c o n t r o l p r o g r a m m e . T o w a r d s t h e end o f 1970, Morton Mintz, the Washington Post i n v e s t i g a t i v e j o u r n a l i s t , l e a r n e d of a secret c i t a t i o n h e a r i n g into t h e m a t t e r by t h e F D A and a s k e d for a t r a n s c r i p t o f t h i s . M o n t h s later F D A G e n e r a l C o u n s e l W. W. G o o d r i c h r e p l i e d refusing to fulfil t h e M i n t z F r e e d o m of I n f o r m a t i o n request on the g r o u n d s that the d o c u m e n t s requested contained secret c o m m e r c i a l information.

At almost exactly the same time that the F D A counsel was w r i t i n g t h i s r e p l y , a m e d i c a l p a p e r in t h e p r e s t i g i o u s New England Journal of Medicine, t h e F e b r u a r y 4, 1 9 7 1 , i s s u e , d e t a i l e d t h e story of s e p t i c a e m i a , or b l o o d p o i s o n i n g , arising from a new w a v e 115

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o f p a t i e n t s r e c e i v i n g A b b o t t ' s i n t r a v e n o u s fluids. A n d t h e facts s h o w e d t h a t this had n o t h i n g to do w i t h t h e 1969 o u t b r e a k . In o t h e r w o r d s , t h e m e r r y - g o r o u n d w a s s t a r t i n g all o v e r a g a i n , b a r e l y a y e a r after t h e F D A had so g r a c i o u s l y d r o p p e d its criminal charges against A b b o t t . T h e n e w s o f t h e n e w t r o u b l e had b e g u n leaking i n D e c e m b e r . No less t h a n five p a t i e n t s , all o f t h e m in a c o r o n a r y intensive care unit a t t h e U n i v e r s i t y o f V i r g i n i a M e d i c a l H o s p i t a l , w e r e riddled w i t h s e p t i c a e m i a w i t h i n t h e span o f a few days ( F u l l e r . 1972: 53). I n J a n u a r y 1971 t h e r e w e r e further s h a t t e r i n g r e v e l a t i o n s . E i g h t d e a t h s o v e r t h e p r e v i o u s t h r e e m o n t h s w e r e r e p o r t e d from the H e n r y F o r d H o s p i t a l i n D e t r o i t . T h e r e w e r e also 4 5 o t h e r cases o f b l o o d p o i s o n i n g at t h e h o s p i t a l t r a c e d to the A b b o t t fluids. St A n t h o n y ' s hospital in D e n v e r reported 24 cases, including one d e a t h . T h e r e p o r t s m o u n t e d t h r o u g h o u t J a n u a r y and F e b r u a r y . Fifty d e a t h s w e r e b l a m e d o n t h e c o n t a m i n a t i o n b y the U S C e n t e r for D i s e a s e C o n t r o l . It w a s d i s c o v e r e d that the p r o b l e m w a s as it had b e e n in 1964, a r i s i n g from a d e s i g n c h a n g e to a s c r e w - o n c a p . If t h e b o t t l e w a s s h a k e n o r t h e t o p b a n g e d l o o s e , g e r m s w o u l d b e w a s h e d from u n d e r t h e n e w - s t y l e disc lining t h e c a p . A b b o t t w a s e v e n t u a l l y p u s h e d into a m a s s i v e r e c a l l , t h e biggest in F D A h i s t o r y , and its p r o d u c t i o n line s h u t d o w n . T h e F D A w e r e u n d e r s t a n d a b l y h e s i t a n t t o act b e c a u s e A b b o t t s u p p l i e d 4 5 per cent o f t h e m a r k e t for t h e p r o d u c t . W e r e p a t i e n t s g o i n g to die as a result of not b e i n g able to get s u p p l i e s from o t h e r small c o m p a n i e s ? P r o b a b l y n o n e d i d , but t h e r e c e r t a i n l y w e r e p r o b l e m s , a s t h e following d e p r e s s i n g a n e c d o t e i l l u s t r a t e s . O n e h o s p i t a l s u p e r i n t e n d e n t frantically p h o n e d a different p h a r m a c e u t i c a l h o u s e , since his i n t r a v e n o u s supply w a s s h r i n k i n g to z e r o . ' W e ' r e really on a s p o t , ' he told the detail m a n . 'I've got to h a v e at least five or six d o z e n IV b o t t l e s of v a r i o u s s o l u t i o n s h e r e by six o ' c l o c k t o n i g h t , or I d o n ' t k n o w w h a t ' s going to h a p p e n to t h e p a t i e n t s . I c a n ' t use t h e A b b o t t stuff, o b v i o u s l y . C o u l d you possibly help me o u t ? ' ' A b s o l u t e l y , ' c a m e t h e c h e e r y voice o f t h e detail m a n . "Don't w o r r y a b o u t it at a l l . ' T h e s u p e r i n t e n d e n t w a s s t u n n e d and grateful t h a t h e could get t h i s e m e r g e n c y h e l p . "You canT he a s k e d i n c r e d u l o u s l y . ' N o p r o b l e m at all,' said t h e d e t a i l m a n . 'I'll j u s t get t h e o r d e r d o w n on t h e pad a n d have t h e stuff up t h e r e by m i d - a f t e r n o o n . " 116

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i c a n ' t t h a n k you e n o u g h , ' said t h e s u p e r i n t e n d e n t . ' O n l y o n e m i n o r t h i n g and we can c l e a r that up in no t i m e . ' t h e detail man added. ' W h a t ' s t h a t ? ' asked the s u p e r i n t e n d e n t . 'All we n e e d is a t h r e e - y e a r , firm c o n t r a c t , ' w a s t h e r e p l y . ' A s s o o n as y o u sign it, t h e s h i p m e n t is y o u r s ' ( F u l l e r , 1972: 5 7 - 8 ) . I n t h e n e w s r e p o r t s o n t h e n o n - s t e r i l e s o l u t i o n s and their r e p o r t e d 350 v i c t i m s from 21 h o s p i t a l s , A b b o t t ' s long history of delinq u e n c i e s w i t h t h e s o l u t i o n s w a s not r e c o g n i s e d a s a n issue. N e v e r t h e l e s s , this t i m e t h e F D A could not resist t h e p r e s s u r e t o r e c o m m e n d c r i m i n a l p r o s e c u t i o n s t o t h e J u s t i c e D e p a r t m e n t . Five A b b o t t e x e c u t i v e s , as well as t h e c o m p a n y itself, w e r e indicted by a g r a n d j u r y . I t w a s t h e only o c c a s i o n i n the d e c a d e w h e n t h e F D A w e n t to c o u r t w i t h c r i m i n a l c h a r g e s a g a i n s t a major t r a n s n a t i o n a l p h a r m a c e u t i c a l c o m p a n y . A n A b b o t t e x e c u t i v e told m e t h a t the c o m p a n y , o u t o f c o n c e r n t o p r o t e c t its p e o p l e from b e i n g m a d e sacrificial l a m b s , offered to plead guilty if t h e c h a r g e s against indiv i d u a l e x e c u t i v e s w e r e d r o p p e d . B u t t h e offer w a s r e j e c t e d . T h e c o u r t a c q u i t t e d t h e c o m p a n y and its officers of all c h a r g e s . H o s p i t a l p e r s o n n e l w h o used m e t h o d s o f o p e n i n g c a p s o n the b o t t l e s w h i c h t h e c o m p a n y m i g h t n o t h a v e f o r e s e e n w e r e held p a r t i a l l y r e s p o n s i b l e for t h e t r a g e d y . H o w e v e r , the m o r e fundam e n t a l p r o b l e m w a s t h a t t h e r e w a s not t h e e v i d e n c e t o link the specific G M P v i o l a t i o n s r e p o r t e d b y t h e F D A ' s district i n s p e c t o r s a s t h e c a u s e o f t h e sterility p r o b l e m . I t could b e e s t a b l i s h e d t h a t t h e r e w e r e G M P v i o l a t i o n s , t h o u g h t h e r e w a s d i s p u t e a b o u t h o w major t h e y w e r e . T h e e v i d e n c e w a s also c o m p e l l i n g t h a t n o n - s t e r i l e solut i o n s had b e e n p r o d u c e d and t h a t p e o p l e died as a result. E v e n h e r e , t h e r e w e r e e v i d e n t i a r y p r o b l e m s , h o w e v e r . B u d L o f t u s , the F D A ' s D i r e c t o r of D r u g Manufacturing at the t i m e , explains:
2

T h e r e w e r e all k i n d s o f p r o b l e m s with t h e F D A a n a l y s t s ' h a n d l i n g of and actual testing o f t h e samples. W o r k s h e e t s were defective. U S P m e t h o d o l o g y had b e e n not closely followed. T h e s e w e r e all legal p r o b l e m s t h a t F D A w a s a c u t e l y a w a r e o f and t h a t defense counsel exploited. T h e i n s u r m o u n t a b l e difficulty w a s t h a t t h e p r o s e c u t i o n c o u l d not p r o v e a c a u s a l c o n n e c t i o n b e t w e e n t h e alleged G M P v i o l a t i o n s and the alleged non-sterility. I n s p i t e o f t h e a c q u i t t a l , A b b o t t did suffer. T h e cost o f c r i m i n a l 117

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c o n v i c t i o n w o u l d h a v e b e e n n o t h i n g c o m p a r e d with t h e cost t o A b b o t t o f its p l a n t s h u t - d o w n . A b b o t t e x e c u t i v e s c l a i m e d that the c o s t o f t h e 1971 F D A r e g u l a t o r y a c t i o n against t h e m w a s $480 m i l l i o n , p r o b a b l y an e x a g g e r a t e d f i g u r e , but it d o e s give s o m e i m p r e s s i o n o f t h e w a y t h a t r e g u l a t o r y c o s t s can b e h i g h e r t h a n any fine w h i c h a c o u r t c o u l d c o n c e i v a b l y i m p o s e . T h e n t h e r e w e r e p e r s o n a l c o s t s t o t h e A b b o t t e x e c u t i v e s w h o s e r e p u t a t i o n s w e r e put o n t r i a l . T h e y suffered t e r r i b l e p e r s o n a l b a t t e r i n g s u n d e r days o f c r o s s - e x a m i n a t i o n . A s o n e c o l l e a g u e s y m p a t h i s e d : ' T h e guys w h o w e r e d e f e n d a n t s i n t h a t c a s e , s o m e o f t h e m are b a s k e t cases t o d a y . T h e y ' v e never been the same since.'

Evans Medical
A s i m i l a r B r i t i s h d i s a s t e r i n v o l v i n g c o n s i d e r a b l e injury and d e a t h from t h e use o f c o n t a m i n a t e d i n t r a v e n o u s s o l u t i o n s w a s the subject of an official e n q u i r y in 1972 ( C l o t h i e r R e p o r t , 1972). T h e p r o b l e m a r o s e w h e n a b a t c h of p r o d u c t at E v a n s M e d i c a l failed to reach sterilising t e m p e r a t u r e in an autoclave. The government enquiry r e v e a l e d t h a t t h e d i s a s t e r was t h e result o f b o t h t h e i g n o r i n g o f s o m e o f t h e c o m p a n y ' s S t a n d a r d O p e r a t i n g P r o c e d u r e s ( S O P s ) and t h e i n a d e q u a c y o f o t h e r S O P s w h i c h w e r e followed. W h e n t h e c o n t a m i n a t e d b a t c h w a s p r o d u c e d , the r e c o r d i n g t h e r m o m e t e r a t t a c h e d to t h e a u t o c l a v e failed to indicate a rise in t e m p e r a t u r e . This warning was ignored in contravention of SOPs b e c a u s e t h e r e c o r d i n g t h e r m o m e t e r s had a history o f b r e a k i n g d o w n . I t w a s c o m m o n for t h e p e n o f o n e t h e r m o m e t e r t o b e c o m e s t u c k , refusing t o m o v e from the b a s e l i n e . N o r m a l l y , t h e instrum e n t t e c h n i c i a n w o u l d r e p a i r t h e t h e r m o m e t e r and i t w o u l d show that the t e m p e r a t u r e was n o r m a l . H e n c e , an attitude developed w h e r e t e m p e r a t u r e w a r n i n g s w e r e not t a k e n seriously. S O P s afforded w e a k quality g u a r a n t e e s i n t h a t t h e y placed the d e c i s i o n to r e l e a s e a b a t c h of p r o d u c t for sale in t h e h a n d s of p r o d u c t i o n staff i n s t e a d of quality c o n t r o l staff. O b v i o u s l y p r o d u c t i o n staff h a v e a s t r o n g e r i n c e n t i v e to see t h e i r p r o d u c t i o n a p p r o v e d and d e s p a t c h e d . There were other respects in which SOPs c r e a t e d i n c e n t i v e s for p r o d u c t i o n staff to t a k e t h e ' e a s y ' c o u r s e in o v e r s e e i n g t h e q u a l i t y o f t h e i r o w n w o r k : i n t h e a b s e n c e o f firm d i r e c t i o n from q u a l i t y c o n t r o l , s a m p l e s w e r e i n p r a c t i c e selected b y p r o d u c t i o n staff only from t h e t o p layer in e a c h c a g e , no d o u b t b e c a u s e this was the easiest course. It is the C o m m i t t e e ' s opinion 118

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t h a t . . . b o t t l e s in t h e u p p e r t w o l a y e r s of the c a g e s w e r e s t e r i l e , and t h o s e i n t h e lowest layer w e r e not s t e r i l e ' ( C l o t h i e r R e p o r t , 1972: 11). T h e c o m m i t t e e o f e n q u i r y c o n c l u d e d t h a t t h e g e n e r a l l y sloppy a p p r o a c h to S O P s w a s t h e result of a 'lack of v i g o u r ' a m o n g key m i d d l e m a n a g e r s and a w i l l i n g n e s s to p l a c e in r e s p o n s i b l e p o s i t i o n s p e o p l e w h o w e r e i n a d e q u a t e l y t r a i n e d i n quality c o n t r o l p r i n c i p l e s .

The Cordis litigation
A p p r o x i m a t e l y a q u a r t e r of a m i l l i o n h e a r t p a t i e n t s a r o u n d the w o r l d h a v e b a t t e r y - p o w e r e d c a r d i a c p a c e m a k e r s i m p l a n t e d i n their b o d i e s t o n o r m a l i s e h e a r t b e a t . S o m e o f t h e activities o f M e d t r o n i c , t h e l a r g e s t p a c e m a k e r m a n u f a c t u r e r i n t h e w o r l d , w e r e discussed i n t h e c h a p t e r o n b r i b e r y . S e n a t e h e a r i n g s h a v e also w i t n e s s e d a c o n c e r t e d a t t a c k o n M e d t r o n i c b y D r Sidney Wolfe c o n c e r n i n g t h e q u a l i t y of its m a n u f a c t u r i n g . He listed t h e following difficulties: 1) 1970 - R e c a l l of 1000 p a c e m a k e r s b e c a u s e of p r o b l e m with power supply. 2) M a r c h 1973 - R e c a l l o f 3 4 3 e x t e r n a l p a c e m a k e r s b e c a u s e of battery placement problems. 3) M a r c h 1973 - D u e to c a r e l e s s s w i t c h i n g of a t r a n s i s t o r , t h o u s a n d s o f p a c e m a k e r s d e p r i v e d o f signal t o i n d i c a t e b a t t e r y failure ( S u b c o m m i t t e e o n H e a l t h , 1973: 2 8 8 ) . W o l f e a l s o d r e w a t t e n t i o n to a r e p o r t from a M i n n e a p o l i s F D A i n s p e c t i o n t e a m : ' M e d t r o n i c s has i n s t i t u t e d a p r o g r a m of resterilizing p a c e m a k e r s and l e a d s t h a t h a v e b e e n d i s i m p l a n t e d p r i o r t o e x p i r a t i o n o f t h e w a r r a n t y p e r i o d . T h e s e d e v i c e s are t h e n i m p l a n t e d i n t o n e w p a t i e n t s . ' W o l f e w a s c o n c e r n e d a b o u t the "the possibility of b a c t e r i a l and viral infections from such a gross p r a c t i c e as r e u s i n g p a c e m a k e r s ' ( S u b c o m m i t t e e o n H e a l t h , 1973: 2 8 8 ) . Since 1972 i n t h e U n i t e d S t a t e s t h e r e h a v e b e e n a total of 34 v o l u n t a r y recalls of p a c e m a k e r lots m a n u f a c t u r e d b y v a r i o u s c o m p a n i e s . The present case study is concerned with M e d t r o n i c s ' main comp e t i t o r , the second largest m a n u f a c t u r e r of p a c e m a k e r s , the Cordis C o r p o r a t i o n . In 1975 in t h e D i s t r i c t C o u r t for t h e S o u t h e r n D i s t r i c t o f F l o r i d a , t h e F D A s o u g h t a n i n j u n c t i o n t o close d o w n t h e p r o d u c t i o n o f C o r d i s p a c e m a k e r s until satisfactory quality c o n t r o l m e a s u r e s w e r e i n t r o d u c e d . T h e c a s e study p r o v i d e s s o m e invalua b l e l e s s o n s a b o u t t h e limits of legal s o l u t i o n s to m a n u f a c t u r i n g quality p r o b l e m s . 119

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A d e f e c t i v e l y m a n u f a c t u r e d h e a r t p a c e m a k e r is a frightful risk to h u m a n h e a l t h . A car w h i c h runs well 95 p e r c e n t o f t h e t i m e may be r e g a r d e d as a g o o d c a r , but h i g h e r s t a n d a r d s m u s t be e x p e c t e d o f a p a c e m a k e r w h i c h only has to fail o n c e to c a u s e s e r i o u s injury or d e a t h . D r C e n t e r , o n e o f t h e g o v e r n m e n t w i t n e s s e s a t the injunction h e a r i n g , outlined the range of possible medical c o n s e q u e n c e s o f p a c e m a k e r defect. W e l l , t h e w o r s t c o m p l i c a t i o n , of c o u r s e , is d e a t h . If you have a r u n a w a y p a c e m a k e r , w h e r e it's r u n n i n g a t six. eight h u n d r e d times a m i n u t e , that's instant death. If you h a v e a p a c e m a k e r t h a t r u n s at 150 and the p a t i e n t is not a w a r e o f t h e p r o b l e m but j u s t i s not feeling w e l l , t h e s e c a r d i a c p a t i e n t s c a n n o t t o l e r a t e that r a t e for an indefinite p e r i o d of t i m e a n d c o u l d c o n c e i v a b l y go into heart failure and d i e . T h e r e a r e p a c e m a k e r s t h a t fail i n t e r m i t t e n t l y . T h e y might fail for, let's s a y , a few s e c o n d s at a t i m e . It may be sufficient so t h a t t h e p a t i e n t e i t h e r has a s i n k a b l e e p i s o d e , a b l a c k o u t spell a n d falls, or he m i g h t suffer a b r o k e n a r m . b r o k e n leg, fractured skull. If t h e p e r i o d is long e n o u g h , t h e y m a y n e v e r survive that period b e c a u s e t h e h e a r t r a t e d o e s n ' t r e t u r n i n t i m e t o again get their circulation back to normal. T h e r e a r e s y m p t o m s w h i c h are w h e r e e i t h e r t h e h e a r t r a t e slows s l o w e d d o w n or a p e r s o n m a y go t h e r a t e h a s s l o w e d d o w n and t h e m i n i m a l , such a s dizzy spells, down because the p a c e m a k e r is i n t o h e a r t failure a g a i n b e c a u s e p a t i e n t c a n n o t t o l e r a t e it.

T h e r e a r e p a t i e n t s t h a t are not a w a r e o f a n y s y m p t o m s and that on e x a m i n a t i o n o n e can find a d e f e c t i v e p a c e m a k e r . T h e a n s w e r is it can r a n g e a n y w h e r e from n o t h i n g to instant death. F D A i n s p e c t o r s had r e p o r t e d a list of 148 o b j e c t i o n a b l e deviat i o n s from q u a l i t y c o n t r o l s t a n d a r d s at t h e C o r d i s p l a n t . It w o u l d be i m p o s s i b l e to c o v e r all the F D A c i t a t i o n s h e r e , but it is i m p o r t a n t to give s o m e flavour o f t h e n a t u r e o f F D A c o n c e r n s . F D A a l l e g e d that C o r d i s p a c e m a k e r s had a k n o w n failure r a t e o f 5 p e r c e n t , and that o f a s a m p l e o f 9 7 e x p l a n t e d p a c e m a k e r s which had failure r e p o r t s , 60 were made by Cordis. Nine other manufacturers combined a c c o u n t e d for t h e r e m a i n i n g 37 failures. F D A i n s p e c t o r s found t h a t i n t h e C o r d i s plant t h e r e w e r e m a c h i n e s for w h i c h t h e r e w e r e n o w r i t t e n o p e r a t i n g p r o c e d u r e s , n o 120

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s p e c i f i c a t i o n s , n o c a l i b r a t i o n p r o c e d u r e s , and n o m a i n t e n a n c e s c h e d u l e . O n e critical a r e a w h e r e all o f t h e s e deficiencies w e r e r e p o r t e d t o exist w a s with the h e l i u m leak t e s t e r . P a c e m a k e r p r o b l e m s h a v e b e e n s h o w n t o arise from m o i s t u r e leaking into the c o m p o n e n t s , so leak t e s t i n g is critical. I n s o m e c a s e s e m p l o y e e s w e r e found t o b e a s s e m b l i n g p a c e m a k e r p a r t s o n t h e s t r e n g t h o f d i a g r a m s w h i c h had h a n d w r i t t e n , u n d a t e d , u n a u t h o r i s e d c h a n g e s all o v e r t h e m . S o m e t i m e s o p e r a t o r s w e r e a s s e m b l i n g a c c o r d i n g to c h a n g e s to specifications given verbally or t e l e p h o n e d i n from e n g i n e e r i n g . O n e o p e r a t o r w a s e v e n w o r k i n g from a d i a g r a m for a kit different from t h e o n e she w a s w o r k i n g on. W h e n i t e m s failed c e r t a i n t e s t s , t h e y w e r e often r e t e s t e d to see if a p o s i t i v e result w a s p r o d u c e d o n t h e s e c o n d test w i t h o u t a n evalua t i o n of why t h e failure o c c u r r e d on t h e first. V a r i o u s t y p e s of t e s t i n g e q u i p m e n t w e r e alleged t o b e d e f e c t i v e . M a i n t e n a n c e o f e q u i p m e n t w a s b e i n g d o n e o n c e every t w o w e e k s instead o f every week according to requirements. P a c e m a k e r s a r e e n c a p s u l a t e d several t i m e s i n e p o x y . T h e w r i t t e n r e q u i r e m e n t s o f t h e firm w e r e t o s a m p l e and test t h e s q u a r e root o f the n u m b e r of incoming quarts of epoxy. Inspectors observed o p e r a t o r s t o s a m p l e only o n e q u a r t p e r lot. F o r e x a m p l e , w h e n a 964 q u a r t lot c a m e in, 3 2 s a m p l e s should have b e e n c h e c k e d , not o n e . 'Life t e s t i n g ' w a s d o n e t o see h o w the p a c e m a k e r s stood u p t o s t r e s s . H o w e v e r , t h e F D A c o u n s e l s u m m e d u p how i n s p e c t o r s a l l e g e d the life-testing device to be of limited v a l u e : t h e c h a r t used t o r e c o r d t h e t e m p e r a t u r e o f t h a t critical d e v i c e f o c u s e d so strongly in t h e m i d d l e t h a t it c o u l d n ' t be r e a d , and w h e n this w a s p o i n t e d o u t t o m a n a g e m e n t , they put a n o t h e r c h a r t on and t h e p a p e r d i d n ' t m a t c h and t h e r e a d i n g said 140 d e g r e e s , w h e n t h e o v e n s h o u l d have b e e n and p r o b a b l y w a s a t 4 0 . It w a s a l l e g e d t h a t p y r o g e n - f r e e w a t e r for t h e final c l e a n i n g of t h e p a c e m a k e r s w a s left t o stand o v e r n i g h t . F D A c o u n s e l L e v i n e c o m p l a i n e d , 'I d o n ' t e v e n let w a t e r used to b r u s h my t e e t h stand o v e r n i g h t . ' It w a s a l s o c l a i m e d that c e r t a i n p a r t s w e r e not stored in a c l e a n , d r y , lint-free a t m o s p h e r e and t h a t solder w a s b e i n g put o n p a c e m a k e r s w i t h o u t t e s t i n g t h e s o l d e r i n g flux, c l e a n i n g fluid and oil in t h e s o l d e r i n g m a c h i n e for p u r i t y . T h e g o v e r n m e n t a l l e g e d c e r t a i n w a i v e r d e v i a t i o n s . Specifications were established, passed. but when lots failed t o meet them they w e r e
3

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C a p a c i t o r s w e r e being t e s t e d , a c c o r d i n g t o the i n s p e c t o r s , with t e s t i n g e q u i p m e n t d e s i g n e d for c a p a c i t o r s m a d e by a different m a n u f a c t u r e r . C e r t a i n m i x - u p s o f c o n t a i n e r s and labels w e r e a l l e g e d . A c c o r d i n g t o t h e i n s p e c t i o n r e p o r t , t a s k s w e r e being signed off a s c o m p l e t e d b e f o r e t h e y a c t u a l l y w e r e c o m p l e t e d . M o r e o v e r , I n s p e c t o r H o o t e n c l a i m e d : "The Q u a l i t y C o n t r o l r e c o r d s h e e t s , i n d i c a t i n g t h a t t h e p a c e m a k e r had b e e n a p p r o v e d w e r e n ' t being s i g n e d . T h e r e w e r e n o official a u t h o r i z a t i o n s i g n a t u r e s o r d a t e s o n t h e s e s h e e t s r e l e a s i n g t h e p a c e m a k e r s . ' A s the final stage o f t h e a p p r o v a l p r o c e s s , a t r a v e l c a r d w a s p u n c h e d with a h e a r t - s h a p e d p u n c h to i n d i c a t e t h a t t h e p a c e m a k e r had passed all tests and w a s a c c e p t a b l e . H o o t e n : ' T h e r e w e r e t w o o f t h e s e p u n c h e s lying loose on t h e b e n c h . T h e y should have had limited access to t h e s e p u n c h e s , since t h e y d o i n d i c a t e t h a t the p a c e m a k e r i s o k a y . T h e y w e r e lying t h e r e for a n y o n e ' s u s e . ' T h e F D A a r g u e d t h a t t h e w h o l e quality control function was d a n g e r o u s l y s l o p p y and that quality g o a l s w e r e s u b s e r v i e n t t o p r o d u c t i o n g o a l s . M a n u f a c t u r i n g i n s p e c t o r s w e r e used a s quality control inspectors and they reported through a manufacturing i n s p e c t i o n m a n a g e r t o the v i c e - p r e s i d e n t for m a n u f a c t u r i n g . T h e d a n g e r s of having quality control people reporting to production will be d i s c u s s e d later in this c h a p t e r . M a n y m o r e p a g e s could b e filled listing t h e m u l t i t u d e o f specific F D A a l l e g a t i o n s a g a i n s t C o r d i s . This w o u l d serve little p u r p o s e . T h e g o v e r n m e n t c h a r g e d that e v e n w h e n C o r d i s did b e c o m e a w a r e o f p r o b l e m s its r e s p o n s e s w e r e i n a d e q u a t e . F D A Counsel, Levine: Dr S t e r n e r told I n s p e c t o r O g l e s b a y t h a t they had a p r o b l e m with t h e i r C T S 2.7 r a t e resistor. T h e y d e c i d e d t o recall c e r t a i n lots. T h e y did n o t recall o t h e r s , a l t h o u g h t h e s a m e resistor is used in them. T h e firm had p r o b l e m s with C T S r a t e resistors as far back as O c t o b e r . 1972. I w a n t to call t h e C o u r t ' s a t t e n t i o n to G o v e r n m e n t ' s E x h i b i t N o . 5 1 , which on an internal m e m o r a n d u m a Cordis employee h a s w r i t t e n on t h e t o p , it l o o k s like we h a v e a C T S p r o b l e m here.' T h a t w a s in 1972. It w a s not until D e c e m b e r of 1974 t h a t Mr H e r s h e n s o n w e n t b a c k to find out w h a t w a s going on with C T S , a m a j o r s u p p l i e r for t h e d e f e n d a n t s . 122

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C o r d i s had sent a ' D e a r D o c t o r ' l e t t e r a b o u t quality p r o b l e m s w i t h o n e of its p a c e m a k e r s . In p a r t , t h e letter read: . . . we a n t i c i p a t e t h a t only a small p e r c e n t a g e o f t h e listed p a c e r s

will m a l f u n c t i o n . H o w e v e r , w e r e c o m m e n d for c o n s e r v a t i v e m a n a g e m e n t t h a t t h e s e p a t i e n t s be m o n i t o r e d on a m o n t h l y basis t h r o u g h 1 4 m o n t h s after i m p l a n t a t i o n t o d e t e c t e i t h e r o f t h e t w o p o t e n t i a l t y p e s o f m a l f u n c t i o n : T y p e 1 , p r e m a t u r e rate d e c r e a s e f o l l o w e d by c e s s a t i o n of p a c i n g or. T y p e 2, loss of s e n s i n g , r e s u l t i n g in fixed rate of p a c i n g . W h e n Dr C e n t e r w a s a s k e d w h a t it m e a n t to him to be told that ' p a t i e n t s be m o n i t o r e d on a m o n t h l y basis t h r o u g h 14 m o n t h s after i m p l a n t a t i o n ' , h e said: W e l l , realistically s p e a k i n g , t h e r e i s n o way t o a d e q u a t e l y m o n i t o r a p a t i e n t on a m o n t h l y basis. If t h e r e is a p r o b l e m in t h e p a c e m a k e r , you c a n e x a m i n e t h e p a t i e n t a t t w o o'clock and e v e r y t h i n g is p e r f e c t . T h e first e v i d e n c e of failure may o c c u r at 2:15 t h a t s a m e d a y . T h e r e f o r e , i f y o u r a p p o i n t m e n t t o see t h e p a t i e n t is not for a n o t h e r m o n t h and t h e r e is a rapid d e t e r i o r a t i o n , or e v e n a slow d e t e r i o r a t i o n , it's obviously very p o s s i b l e t h a t if n o t h i n g is d o n e in t h e m e a n t i m e , t h e r e n e v e r will be a s e c o n d visit. H e n c e t h e F D A view w a s t h a t a p a t t e r n o f n e g l e c t o f quality w a s c o m p o u n d e d by a r e l u c t a n c e on t h e part of t h e c o m p a n y to t a k e effective a c t i o n to p r o t e c t p a t i e n t s o n c e t h e fruits of this n e g l e c t b e c a m e a p p a r e n t . T h u s t h e n e e d for a n i n j u n c t i o n t o close d o w n C o r d i s until t h e s i t u a t i o n w a s s t r a i g h t e n e d out. T h e c o u r t declined t o g r a n t t h e F D A its i n j u n c t i o n . C o u n s e l for C o r d i s did not d i s p u t e very m a n y o f t h e F D A ' s 148 a l l e g e d d e f i c i e n c i e s . I t w a s c o n c e d e d : ' R e g r e t t a b l y , p a c e m a k e r s are n o t p e r f e c t , t h e p a c e m a k e r i n d u s t r y is not p e r f e c t , and C o r d i s is not p e r f e c t . " N e v e r t h e l e s s , it w a s a r g u e d : ' C o r d i s is at least as good as t h e rest o f t h e p a c e m a k e r i n d u s t r y . ' T h e s e c o n d e l e m e n t o f t h e successful C o r d i s defence w a s that the suffering to p a t i e n t s from g r a n t i n g t h e g o v e r n m e n t its i n j u n c t i o n w o u l d e x c e e d t h e benefits t o t h e m . T h e C o r d i s d e f e n c e attorney: N o w , I t h i n k t h e C o u r t also will h a v e to be a w a r e o f t h e p o t e n t i a l effect of g r a n t i n g t h e g o v e r n m e n t t h e relief w h i c h it s e e k s in 123

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r e m o v i n g C o r d i s , hopefully t h e n only t e m p o r a r i l y , from the market. C o r d i s is the Avis o f t h e p a c e m a k e r industry. A corporation c a l l e d M e d t r o n i c w a s t h e first o n t h e m a r k e t . T h e y h a v e a b o u t 5 0 o r 6 0 p e r c e n t o f t h e m a r k e t . C o r d i s has o n t h e o r d e r o f 2 0 p e r c e n t . T h e rest i s s c a t t e r e d a m o n g a b o u t five d o m e s t i c and four foreign m a n u f a c t u r e r s , none of w h o m is anywhere near either Medtronic or Cordis. If t h e relief r e q u e s t e d by t h e F o o d and D r u g A d m i n i s t r a t i o n is g r a n t e d , w e will s h o w t h a t t h e c u r r e n t d e m a n d for new and r e p l a c e m e n t p a c e m a k e r s c a n n o t b e met and that t h e r e will b e very s e r i o u s p o s s i b l e c o n s e q u e n c e s for p e r s o n s w h o n e e d p a c e m a k e r s initially and for t h o s e w h o a l r e a d y have p a c e m a k e r s i m p l a n t e d i n t h e m and r e q u i r e r e p l a c e m e n t s . F u r t h e r , a s t o t h e p a r t i c u l a r p e r s o n s w h o have C o r d i s p a c e m a k e r s p r e s e n t l y i m p l a n t e d i n t h e m , a p p r o x i m a t e l y forty t o fifty t h o u s a n d t h r o u g h o u t t h e w o r l d , w e will s h o w that t h e r e w o u l d be v a r i o u s a d d i t i o n a l m e d i c a l p r o b l e m s in shifting from a C o r d i s p a c e m a k e r t o s o m e o t h e r p a c e m a k e r , e v e n a s s u m i n g that one would be available. T h e d e f e n c e relied h e a v i l y o n t h e t e s t i m o n y o f one medical practit i o n e r . D r M o r s e , i n e s t a b l i s h i n g this c o n c l u s i o n . Dr M o r s e : Q: Dr M o r s e : I feel t h a t t h e C o r d i s p a c e m a k e r is the most reliable on the m a r k e t today. C o u l d you give us any p a r t i c u l a r r e a s o n for this opinion? Y e s . I h a v e had C o r d i s f i x e d - r a t e p a c e m a k e r s five y e a r s a g o , t h a t e n d e d t h e i r life five y e a r s a g o , that lasted four y e a r s . N o w , this i s really u n u s u a l . T h e a v e r a g e life of p a c e m a k e r s from most c o m p a n i e s at t h a t t i m e w a s a b o u t 18 to 20 m o n t h s . I c o n t i n u e to use C o r d i s p a c e m a k e r s b e c a u s e I feel that they are t h e best d e s i g n e d a n d t h e m o s t versatile p a c e m a k e r and the most reliable p a c e m a k e r that's available at the present time.

D r M o r s e ' s t e s t i m o n y was d i s p a r a g e d b y F D A o n t h e g r o u n d s t h a t he a d m i t t e d to b e i n g a C o r d i s s h a r e h o l d e r . C o r d i s had a p o i n t . If a C o r d i s s h u t d o w n c a u s e d c e r t a i n p a t i e n t s to c h a n g e over to a n o t h e r brand of p a c e m a k e r , medical evidence 124

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i n d i c a t e d that i n c r e a s e d risks of infection could follow from implanting a n e w m o d e l , especially in cases w h e r e the i m p l a n t i n g of a larger m o d e l involved a surgical e n l a r g i n g o f t h e pocket for the d e v i c e . D r M o r s e , i n testifying for the d e f e n c e , also m a d e m u c h o f t h e p s y c h o l o g i c a l i m p a c t on p a t i e n t s of a C o r d i s s h u t d o w n . A s k e d w h a t t h e effect w o u l d b e . M o r s e said:
4

I t h i n k it w o u l d be a c a t a s t r o p h e o f t h e first o r d e r . T h e r e w o u l d be h y s t e r i a a m o n g t h e p a t i e n t s . . . . T h e r e w o u l d be a t r e m e n d o u s r e a c t i o n t h r o u g h o u t t h e c o u n t r y , b e c a u s e this i s t h e s e c o n d largest m a n u f a c t u r e r in the c o u n t r y . It would j u s t s h a k e t h e faith of e v e r y o n e w h o has a p a c e m a k e r in t h e m , and t h e s e p e o p l e a r e c o n c e r n e d , and t h e r e i s o v e r a h u n d r e d t h o u s a n d o f them. T h e third and s t r o n g e s t e l e m e n t o f t h e C o r d i s d e f e n c e w a s that i n t h e m o n t h s b e t w e e n t h e i n s p e c t i o n and t h e c o u r t case t h e c o m p a n y had rectified all o f t h e p r o b l e m s n o t e d b y t h e F D A . C o r d i s c o u n s e l , in s u m m i n g up argued: N o w , t h e real key to o u r c a s e , I s u b m i t , is Mr H e r s h e n s o n ' s t e s t i m o n y t h a t a s o f this d a t e e v e r y t h i n g i s c o r r e c t e d , c e r t a i n l y t o t h e best o f t h e c o m p a n y ' s ability. N o w , M r L e v i n e p o i n t e d out t h a t this w a s r a t h e r c o n c l u s i o n a r y . that we didn't go t h r o u g h item by item. T h a t ' s t r u e . H o w e v e r , t h a t i s simply b e c a u s e I d i d n ' t w a n t t o w a s t e t h e C o u r t ' s t i m e a s k i n g item by i t e m . I can a s s u r e t h e C o u r t a n d t h e F D A t h a t M r H e r s h e n s o n w a s fully p r e p a r e d t o stand c r o s s - e x a m i n a t i o n on e v e r y item and to satisfy e v e r y o n e that each a n d e v e r y o n e w a s , i n fact, d o n e . N e i t h e r side w a s really willing or a b l e to s p e n d m o n t h s in c o u r t a r g u i n g w h e t h e r or not e a c h o f t h e 144 specific deficiencies in turn had b e e n satisfactorily rectified. N o t w i t h s t a n d i n g all of the subs i d i a r y a r g u m e n t s , i t w a s this third m a j o r d e f e n c e which w o n the day. T h e r e is no e v i d e n c e e i t h e r of p r e s e n t v i o l a t i o n of l a w , since the g o v e r n m e n t has not b e e n t h e r e t o see w h a t c o n d i t i o n s are r i g h t n o w , n o r h a v e t h e y p r e s e n t e d any e v i d e n c e o f l i k e l i h o o d o f r e c u r r e n c e , w h i c h I t h i n k is sort of a logical impossibility w h e n you don't k n o w what the situation is right now. H o w e v e r , i f t h e C o u r t has e v e n t h e slightest d o u b t , w e very 125

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r e s p e c t f u l l y s u g g e s t that it o r d e r t h e F D A to inspect C o r d i s and to r e p o r t any significant a d v e r s e f i n d i n g s i m m e d i a t e l y and directly to the Court. F i n a l l y , if t h e m o t i o n should be d e n i e d , as we have a s k e d , we invite and e n c o u r a g e the F o o d and D r u g A d m i n i s t r a t i o n t o i n s p e c t C o r d i s and also t o a s s u r e itself t h a t e v e r y t h i n g has b e e n corrected. J u d g e F a y , in his d e c i s i o n to d e n y t h e m o t i o n for a p r e l i m i n a r y i n j u n c t i o n , s u g g e s t e d that the F D A could t a k e up this offer and s e n d in a t e a m of i n s p e c t o r s to assess t h e c u r r e n t s i t u a t i o n . T h e F D A w a s not t o b e d e t e r r e d a n d t o o k u p the offer. Before d i s c u s s i n g t h e s e further d e v e l o p m e n t s , i t i s w o r t h c o n s i d e r i n g the i m p l i c a t i o n s of w h a t had t r a n s p i r e d up to that point. T h e r e will a l w a y s b e d e l a y s b e t w e e n a n i n s p e c t i o n and court action b a s e d o n t h e r e s u l t s of t h a t i n s p e c t i o n , e s p e c i a l l y given the g e n e r a l policy of t h e F D A ( a n d m o s t o t h e r r e g u l a t o r y a g e n c i e s ) o f giving offenders an o p p o r t u n i t y v o l u n t a r i l y to set their h o u s e in o r d e r before t a k i n g c o u r t a c t i o n . H e n c e , t h e r e i s t h e o p p o r t u n i t y for the c o m p a n y t o i g n o r e F D A w a r n i n g s u p t o t h e p o i n t o f t h e c o u r t h e a r i n g and t h e n a r g u e in c o u r t t h a t it has n o w rectified all s h o r t c o m i n g s . T h e regul a t o r y a g e n c y is t h e n invited to do a n o t h e r i n s p e c t i o n and t h e a d v e r s a r i e s a r e set on t h e r o u n d a b o u t a g a i n . This p r o b l e m is not so a c u t e w i t h c r i m i n a l p r o s e c u t i o n s or civil d a m a g e s a c t i o n s against a c o m p a n y for past a c t i o n s . I t i s w h e n t h e r e g u l a t o r y a g e n c y s e e k s i n j u n c t i v e relief t h a t t h e p r o b l e m is w o r s t . I n j u n c t i o n s to p r e v e n t a d a n g e r o u s p r a c t i c e a r e m o r e i m p o r t a n t t h a n r e t r i b u t i o n against past sins in t e r m s o f t h e i m m e d i a t e p r i o r i t y of a r e g u l a t o r y a g e n c y to save lives and p r e v e n t suffering. It m i g h t be a r g u e d that if the c o m p a n y really d o e s rectify the d e f i c i e n c i e s t h e n t h e p u b l i c h a s b e e n p r o t e c t e d . I n t h e first p l a c e , t h e r e is no way of e s t a b l i s h i n g this w i t h o u t setting t h e d o g on a c o u r s e of c h a s i n g its tail a g a i n . B u t t h e r e is a m o r e f u n d a m e n t a l o b j e c t i o n to this a r g u m e n t , an o b j e c t i o n w h i c h is a r e p e t i t i o n of a p o i n t m a d e i n t h e last c h a p t e r . F D A c o u n s e l L e v i n e e x p r e s s e d i t w h e n he said t h a t t h e g r e a t c o n c e r n w a s not with rectifying t h e 144 specific d e f i c i e n c i e s , but with c u r i n g t h e u n d e r l y i n g c o r p o r a t e m a l a i s e o f w h i c h t h e s e w e r e s y m p t o m s : "Large o r s m a l l , t h e i m p o r t a n t t h i n g i s t h e p a t t e r n o f i n a d e q u a t e q u a l i t y c o n t r o l . ' T h e r e i s little g u a r a n t e e t h a t e l i m i n a t i n g any g i v e n set o f s y m p t o m s which c o m e t o n o t i c e w o u l d also r e m o v e t h e s y s t e m i c c a u s e s . Yet the inbuilt

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t r a d i t i o n of W e s t e r n law is not to a d d r e s s itself to p a t t e r n s of c o n d u c t , but to specific i t e m s of c o n d u c t ; not to deal with d i s e a s e s , b u t w i t h s y m p t o m s . T h a t i s w h y , t o c h o o s e a n o t h e r a r e a o f failure. W e s t e r n law h a s not b e e n a b l e t o deal w i t h p h e n o m e n a like o r g a n ised c r i m e at t h e i r r o o t : Al C a p o n e had to be dealt with by conv i c t i o n for an o b s c u r e tax v i o l a t i o n .
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L e t u s r e t u r n t o t h e C o r d i s saga. O n 2 8 A u g u s t 1975. t h r e e days after t h e F D A c o m p l a i n t for i n j u n c t i o n w a s d e n i e d b y the c o u r t , t w o F D A i n s p e c t o r s revisited t h e C o r d i s p l a n t . Specific deficiencies n o t e d b y t h e i n s p e c t o r s t o t a l l e d 137. and F D A r e t u r n e d t o t h e c o u r t to s e e k i n j u n c t i v e relief for a second t i m e . As C o r d i s had d o n e twice p r e v i o u s l y , i t w r o t e t o t h e F D A i n d i c a t i n g how i t i n t e n d e d t o r e m e d y t h e specific deficiencies. This t i m e , t h e j u d g e , lacking confidence in his c a p a c i t y to deal with t h e highly t e c h n i c a l issues o f t h e c a s e , d e c i d e d to set up a special h e a r i n g to be c o n d u c t e d by Professor Hines. B e f o r e P r o f e s s o r H i n e s t h e C o r d i s c o u n s e l again c e n t r e d their c a s e a r o u n d t h e fact t h a t specific deficiencies had b e e n , and w e r e b e i n g , dealt with. P a r t o f t h e g o v e r n m e n t ' s c a s e i s saying t h a t , w e l l , w h e n w e c a m e b a c k in this m o s t r e c e n t i n s p e c t i o n we saw t h e same t h i n g s we saw i n t h e M a y - J u n e i n s p e c t i o n a n d way back i n t h e F e b r u a r y i n s p e c t i o n , and o b v i o u s l y t h a t w o u l d be very significant, if it w e r e t r u e , t h a t we had d o n e n o t h i n g . I t h i n k t h a t w o u l d be very bad. W e i n t e n d t o d e m o n s t r a t e t h a t w e d i d , i n fact, d o s o m e t h i n g a b o u t e v e r y t h i n g and i n fact n o n e o f t h e later o b s e r v a t i o n s are r e a l l y t h e s a m e . T h e r e a r e s e v e r a l , two o r t h r e e , that the s a m e s i t u a t i o n r e c u r r e d , but we will s h o w t h a t we t o o k significant m e a s u r e s i n t h e i n t e r i m w h i c h u n f o r t u n a t e l y i n t w o o r t h r e e cases o u t of a b o u t 150 did not w o r k well e n o u g h and we have t a k e n more m e a s u r e s since. T h e C o m m i s s i o n e r , P r o f e s s o r H i n e s , t e n d e d t o r e s p o n d i n his r e p o r t t o t h e u n d e r l y i n g reality o f t h e C o r d i s p r o b l e m r a t h e r t h a n t o t h e e x t e n t to w h i c h specific deficiencies had b e e n rectified. He did c o n c l u d e t h a t F D A ' s 137 n e w a l l e g a t i o n s w e r e s u b s t a n t i a l l y c o r r e c t a n d t h a t m a n y o f t h e deficiencies w h i c h existed i n t h e A u g u s t O c t o b e r i n s p e c t i o n w e r e similar t o deficiencies n o t e d i n t h e t w o e a r l i e r i n s p e c t i o n s . C o r d i s c o r r e c t i o n s o f t h e e a r l i e r deficiencies w e r e d e s c r i b e d as 'reactive rather than pro-active'. Professor Hines found that the FDA observations represented 'significant 127

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d e f i c i e n c i e s w h i c h had r e s u l t e d from a lack o f a carefully c o n c e i v e d , c o m p r e h e n s i v e p l a n for p r o d u c t a s s u r a n c e ' , the lack o f c o m p r e h e n s i v e o p e r a t i n g a n d i m p l e m e n t i n g p r o c e d u r e s and 'the lack o f a vigorous internal auditing program to assure compliance with operating p r o c e d u r e s . ' With respect to one model ofCordis p a c e m a k e r s ( t h e K a p p a l i n e ) , t h e C o m m i s s i o n e r found t h a t n o p r o c e d u r e s t o b r i n g t h e i r p r o d u c t i o n u n d e r t h e quality a s s u r a n c e p r o g r a m m e had b e e n d e v e l o p e d a t all. I n s u m . P r o f e s s o r H i n e s c o n c l u d e d that the w h o l e C o r d i s o p e r a t i o n w a s s o l a c k i n g i n s y s t e m a t i s a t i o n and d o c u m e n t a t i o n as to be 'not c o n d u c i v e to n o r c o n s i s t e n t with the p r o d u c t i o n o f high reliability p a c e r s . ' C o r d i s c o u n s e l r e m i n d e d P r o f e s s o r H i n e s that i n spite o f t h e fact t h a t his role w a s defined by the j u d g e as to e x p r e s s a view on t h e t e c h n i c a l q u e s t i o n s , g r e a t p o w e r w a s being placed in his hands. . . . in a d d i t i o n to j u s t settling t e c h n i c a l q u e s t i o n s , you are really h a v i n g a d r a m a t i c , p e r h a p s a final, effect on t h e life o f a very large e n t e r p r i s e . It is on t h e o r d e r of forty-million d o l l a r s a n n u a l sales o r t w o t h o u s a n d e m p l o y e e s , and t h e t e c h n i c a l q u e s t i o n s t h a t you will be d e c i d i n g will be a very significant basis f o r j u d g e E a t o n to m a k e his u l t i m a t e d e c i s i o n a s t o w h e t h e r this o p e r a t i o n r e m a i n s o p e n or is closed d o w n , so t h a t it is m o r e t h a n j u s t t e c h n i c a l q u e s t i o n s as I am sure you a p p r e c i a t e . . . . P e r h a p s P r o f e s s o r H i n e s w a s influenced b y this w a r n i n g w h e n i n his r e p o r t he w a s careful to frame his r e c o m m e n d a t i o n s as reforms w h i c h s h o u l d b e u n d e r t a k e n b y C o r d i s . H e did not r e c o m m e n d that C o r d i s b e shut d o w n o r t h a t F D A s u p e r v i s i o n w a s r e q u i r e d . I n d e e d , t h e d e f e n d a n t s w e r e a b l e t o m a k e m u c h o f t h e fact that m a n y o f t h e c h a n g e s a n d i m p r o v e m e n t s r e q u i r e d p a c e m a k e r production t o b e u n d e r w a y i n o r d e r t h a t t h e n e e d e d i m p r o v e m e n t s could b e effected. T h i s , o f c o u r s e , w a s a p o o r a r g u m e n t for a l l o w i n g C o r d i s t o cont i n u e d i s t r i b u t i n g p a c e m a k e r s w h i l e its o p e r a t i o n s w e r e b e i n g brought under appropriate controls. On the strength of Professor H i n e s ' s report, F D A counsel argued before the convened court: A n i n j u n c t i o n s h o u l d n o w b e issued. T h e t e r m s o f t h e injunction w o u l d b e t h o s e c o n t a i n e d i n the C o m m i s s i o n e r ' s R e c o m m e n d a t i o n s . T h e s e r e q u i r e C o r d i s activity (1) t o e s t a b l i s h a c c e p t a b l e reliability g o a l s , (2) t o e s t a b l i s h d a t a c o l l e c t i o n and 128

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statistical a n a l y s e s of field e x p e r i e n c e in o r d e r to d e v e l o p e s t i m a t e s o f p a c e r r e l i a b i l i t y , (3) t o b r i n g K a p p a pacer m o d e l p r o d u c t i o n u n d e r t h e p r o d u c t a s s u r a n c e system and t o modify p r o m o t i o n a l l i t e r a t u r e t o reflect t h e n e w n e s s o f t h e d e v i c e , (4) t o c o m p l e t e the design of a c o m p r e h e n s i v e pacer assurance system, to i n c l u d e t h e t h i r t e e n a r e a s specified by t h e C o m m i s s i o n e r in o r d e r t o a c h i e v e rigid c o n t r o l , (5) t o i n c r e a s e final p r o d u c t t e s t i n g , (6) to staff t h e i n t e r n a l quality a u d i t g r o u p so that it can be v i g o r o u s [ s i c ] , and (7) to d e v e l o p a high reliability discipline and i n t e g r a t i o n o f m a n a g e m e n t p o l i c i e s . In c o n t r a s t . C o r d i s a r g u e d t h a t ' . . . we fully a c c e p t his [Professor H i n e s ' ] r e c o m m e n d a t i o n s and w e are w o r k i n g a s hard a s possible t o i m p l e m e n t t h e m as soon as p o s s i b l e and that is rapidly b e i n g a c c o m p l i s h e d . ' T h e n c a m e t h e c l i n c h e r . F D A based its w h o l e case in law a g a i n s t C o r d i s on m i s b r a n d i n g . C o r d i s c l a i m e d in the b r o c h u r e s and d i r e c t i o n s - f o r - u s e l i t e r a t u r e w h i c h w e n t t o d o c t o r s t h a t its p a c e m a k e r s w e r e ' m a n u f a c t u r e d u n d e r rigidly c o n t r o l l e d c o n d i t i o n s ' a n d t h a t t h e y p e r f o r m e d with "a high d e g r e e of reliability o v e r a n e x t e n d e d p e r i o d o f t i m e ' . B e c a u s e t h e s e s t a t e m e n t s w e r e i n a c c u r a t e , t h e injunction t o s t o p the d i s t r i b u t i o n o f misb r a n d e d p r o d u c t s s h o u l d b e i s s u e d , t h e F D A a r g u e d . Such a s t r a t e g y w a s n e c e s s a r y b e c a u s e a t t h a t t i m e G M P s applied only t o drugs and not to implantable medical devices. The bombshell was t h a t a c o u p l e of w e e k s before t h e D e c e m b e r 1975 c o u r t h e a r i n g (on 19 N o v e m b e r ) C o r d i s i n s t i t u t e d n e w labelling for all C o r d i s p a c e m a k e r s and sent c o p i e s t o all p h y s i c i a n s w h o c u r r e n t l y used those l a b e l s . 'All p a c e r s b e i n g s h i p p e d from C o r d i s plant as of t o d a y have t h i s n e w l a b e l l i n g . T h e y d o not h a v e any s t a t e m e n t a b o u t rigid control.' L e v i n e a r g u e d : i d o n ' t k n o w w h e t h e r t h e new labelling h e r e will r e m e d y t h e past four o r five y e a r s o f t h e s t a t e m e n t o f rigid c o n t r o l . ' But J u d g e E a t o n immediately intervened here: 'Perhaps we have a n e w l a w s u i t n o w . We all pick up t h e n e w m a t e r i a l and we start o v e r in r e f e r e n c e to t h e l a b e l l i n g . ' T h e F D A had lost t h e b a t t l e . It lost e v e r y b a t t l e a g a i n s t C o r d i s , and the w a r . T h e failure t o close d o w n t h e C o r d i s p l a n t gave i m p e t u s t o F D A efforts to h a v e specific m e d i c a l d e v i c e r e g u l a t i o n s e n a c t e d . It w a s o n e o f t h e few a t t e m p t s by t h e F D A to pull out all legal stops against a m o d e r a t e l y l a r g e c o m p a n y . As s u c h , it w a s also a salutary lesson on t h e limits of law in c o n t r o l l i n g c o r p o r a t e a b u s e s . 129

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A fourth modern case study: an anonymous transnational
T h e C o r d i s c a s e study s e r v e d to i l l u s t r a t e t h e limits of law in r e g u l a t i n g unsafe m a n u f a c t u r i n g p r o b l e m s . T h e following case s t u d y is p r o b a b l y m o r e typical in t h a t it i l l u s t r a t e s h o w c o n t r o l w a s effected t h r o u g h n e g o t i a t i o n w i t h o u t r e c o u r s e t o litigation. I n p a r t , an i n f o r m a l s e t t l e m e n t w a s effected precisely b e c a u s e of a r e a l i s a t i o n by s o m e F D A officers that legal c o n t r o l s did have s e v e r e limits in t h e kind of s i t u a t i o n t h e y w e r e d e a l i n g with. T h e case study concerns an a n o n y m o u s American transnational pharmaceutical c o m p a n y a n d a n o n y m o u s F D A officers. Such a n o n y m i t y arises from t h e fact t h a t my chief i n f o r m a n t , a s e n i o r F D A official, r e q u e s t e d it be t h a t w a y . F D A i n s p e c t o r s b e c a m e a w a r e o f t h e fact t h a t t h e r e had b e e n a m a j o r b r e a k d o w n o n t h e quality s y s t e m a t t h e largest m a n u f a c t u r ing p l a n t o f o n e o f t h e t o p A m e r i c a n c o m p a n i e s . E s s e n t i a l l y the p r o b l e m s w e r e a n u m b e r of s l o p p y p r a c t i c e s which c r e a t e d a risk t h a t u n d e t e c t e d n o n - s t e r i l e p r o d u c t s w e r e going o n t o t h e m a r k e t . T h e d e t a i l s of t h e s e p r a c t i c e s will not be discussed h e r e , but they w e r e of a m a g n i t u d e to c a u s e o n e F D A officer to d e s c r i b e the q u a l i t y b r e a k d o w n as ' o n e o f t h e m o s t s e r i o u s I h a v e seen in 30 years e x p e r i e n c e ' . T h e F D A district d i r e c t o r w a n t e d t o close d o w n the p l a n t and c o m m e n c e c r i m i n a l p r o c e e d i n g s a g a i n s t the c o m p a n y and c e r t a i n of its officers. We have seen t h a t c r i m i n a l p r o s e c u t i o n s of t r a n s n a t i o n a l p h a r m a c e u t i c a l c o m p a n i e s u n d e r t h e F o o d , D r u g and C o s m e t i c A c t a r e virtually n o n - e x i s t e n t . S o t h e F D A w a s clearly not g o i n g t o rush i n t o criminal p r o s e c u t i o n s . H o w e v e r , i m m e d i a t e a c t i o n had t o b e t a k e n a b o u t t h e risk t o t h e p u b l i c . ' W e w e r e t e r r i f i e d ' a b o u t t h i s risk, c l a i m e d t h e F D A h e a d office official w h o s e j o b it was to react to the p r o b l e m . T h e crisis built u p g r a d u a l l y . G o v e r n m e n t c o n t r a c t s for p r o d u c t s from t h e p l a n t w e r e cut off after an initial i n v e s t i g a t i o n by the F D A ' s d i s t r i c t office. E x e c u t i v e s from the firm c o n t a c t e d t h e F D A ' s h e a d office and a s k e d if t h e y could c o m e to W a s h i n g t o n to discuss it. T h e y w e r e told t h a t t h e y c o u l d , but only i f they c a m e with d e c i s i o n m a k i n g a u t h o r i t y . In t h e m e a n t i m e t h e district office had sent head office an i n j u n c t i o n r e c o m m e n d a t i o n for t h e c l o s u r e o f t h e p l a n t . At t h e initial m e e t i n g b e t w e e n F D A and c o m p a n y officers i t was p o i n t e d o u t t o t h e c o m p a n y that t h e injunction r e c o m m e n d a t i o n had b e e n r e c e i v e d . N e v e r t h e l e s s , t h e m e e t i n g w a s n o n - p r o d u c t i v e . F u r t h e r e v i d e n c e e m e r g e d s u b s e q u e n t t o that initial m e e t i n g 130

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c u l m i n a t i n g in a r e c o m m e n d a t i o n by t h e district office for c r i m i n a l p r o s e c u t i o n s . A s t h i s e v i d e n c e e m e r g e d from t h e district office i n v e s t i g a t i o n s , the c o m p a n y b e c a m e m o r e co-operative. A p l a n of a c t i o n to rectify t h e p r o b l e m w a s w o r k e d out at m e e t ings b e t w e e n t h e F D A a n d the c o r p o r a t i o n ' s g e n e r a l c o u n s e l . O n e m e a s u r e w a s a g r a d u a t e d recall of v a r i o u s p r o d u c t s which w a s said t o cost t h e c o m p a n y S 8 - 1 0 million. I t w a s a g r e e d t h a t t h e c o m p a n y w o u l d d i s m i s s its p r o d u c t i o n and quality c o n t r o l m a n a g e r s , w h o w e r e r e g a r d e d as h a v i n g special r e s p o n s i b i l i t y for t h e quality crisis. A h u g e a n d costly p r o g r a m m e to u p g r a d e t h e quality a s s u r a n c e s y s t e m a t t h e p l a n t and i n t h e c o m p a n y g e n e r a l l y w a s i m p l e m e n t e d . M a s s i v e t h i n g s w e r e d o n e h e r e ' , a c c o r d i n g t o t h e key F D A official in t h e n e g o t i a t i o n s . W h i l e t h e c o r p o r a t e g e n e r a l c o u n s e l w o n full s u p p o r t for t h e r e g i m e of r e h a b i l i t a t i o n from his p r e s i d e n t , t h e F D A official did not h a v e such a s m o o t h r i d e . T h e recall p r o g r a m m e w a s a major s o u r c e o f d i s s e n s i o n w i t h i n t h e a g e n c y . I t had b e e n a g r e e d t h a t t h e recalls s h o u l d b e g r a d u a l . P r o d u c t s a l r e a d y o n t h e m a r k e t w o u l d not b e r e c a l l e d until such t i m e a s n e w s t o c k s m a n u f a c t u r e d u n d e r t h e r e f o r m e d q u a l i t y c o n t r o l system had c o m e o u t t h e end o f the p r o d u c t i o n l i n e . O l d stock w o u l d be recalled o v e r four to five m o n t h s a s m o r e and m o r e n e w stock w a s p r o d u c e d . T h e p r o d u c t w a s n e c e s s a r y i n s u r g e r y ; w i t h o u t i t c e r t a i n o p e r a t i o n s could not t a k e p l a c e . B e c a u s e t h e c o m p a n y w a s s o large i n the p r o d u c t lines c o n c e r n e d , i m m e d i a t e recall o f all p r o d u c t s p r o d u c e d u n d e r t h e d e f e c t i v e q u a l i t y c o n t r o l s y s t e m w o u l d have c r e a t e d s h o r t a g e s w h i c h m a y h a v e p u t c e r t a i n p a t i e n t s at risk. T h e o b j e c t i o n to this p a r t o f t h e a g r e e m e n t w a s , h o w e v e r , t h a t illegal d r u g s w e r e out t h e r e on t h e m a r k e t and should be w i t h d r a w n as a m a t t e r of p r i n c i p l e . T o c o m p r o m i s e this p r i n c i p l e w o u l d b e i n t o l e r a b l e . T h e s e a r g u m e n t s w e r e further confused b y t h e fact that F D A did not h a v e e v i d e n c e t h a t any o f the i n v e n t o r y w a s n o n - s t e r i l e . N o a d v e r s e r e a c t i o n s had b e e n r e p o r t e d . M o r e o v e r , it is difficult to test w i t h any c e r t a i n t y t h e sterility of an e n d - p r o d u c t . T h a t is precisely w h y s t r o n g v a l i d a t i o n of i n - p r o c e s s c o n t r o l s for sterility is e s s e n t i a l . T h e r e w a s a lack of a s s u r a n c e o f t h e sterility in all lots w h i c h had been m a n u f a c t u r e d in serious violation of G M P s . The probability t h a t a n u m b e r of lots on t h e m a r k e t w e r e n o n - s t e r i l e could only be g u e s s e d . E v e n if t h e r e w e r e no d r u g s l a c k i n g sterility, it did r e m a i n t r u e t h a t t h e d r u g s w e r e 'illegal' i n t h e sense that they had not b e e n m a d e a n d t e s t e d a c c o r d i n g t o t h e s t a n d a r d s set d o w n i n law. 131

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A l l p r o t a g o n i s t s w i t h i n the a g e n c y s e e m e d sincere i n their d e s i r e t o a s s u r e m a x i m u m p r o t e c t i o n for t h e c o n s u m e r . B u t n e i t h e r side h a d t h e d a t a to be a b l e to show that the risk from p r o d u c t s h o r t a g e s w o u l d b e g r e a t e r o r l e s s e r t h a n t h e risk from unsafe p r o d u c t . T h e w i n n i n g a r g u m e n t o f t h o s e w h o d e f e n d e d t h e g r a d u a l recall w a s that this was part o f a total p a c k a g e o f c o n s e n s u a l measures which, as a w h o l e , w o u l d afford far g r e a t e r p r o t e c t i o n to p a t i e n t s t h a n would r e s u l t i f t h e c o n s e n s u s b r o k e d o w n t h r o u g h legal a c t i o n b y F D A against the c o m p a n y (e.g. seizure, injunction, prosecution). The c o m p a n y m i g h t r e n e g e o n s o m e p a r t s o f its side o f t h e d e a l i f F D A c h a n g e d its t u n e on g r a d u a l recall. T h i s h a v i n g b e e n s e t t l e d , t h e r e w a s n o w t h e q u e s t i o n o f criminal p r o s e c u t i o n s . U l t i m a t e l y , n o r e c o m m e n d a t i o n went from t h e F D A to t h e J u s t i c e D e p a r t m e n t for a c r i m i n a l p r o s e c u t i o n . T h e district d i r e c t o r w a n t e d t o p r o c e e d w i t h c r i m i n a l a c t i o n against t h e c o m p a n y a n d t h e t w o e x e c u t i v e s w h o had b e e n d i s m i s s e d . I n c o n t r a s t , t h e view o f t h e F D A h e a d office official w h o had d o n e the n e g o t i a t i n g w a s t h a t it w o u l d be "vindictive' to p r o s e c u t e t h e "two old m e n ' w h o had suffered e n o u g h from p r o f e s s i o n a l d i s g r a c e and loss o f e m p l o y m e n t . M o r e o v e r , t h e r e w e r e informal i n d i c a t i o n s t h a t t h e y w e r e highly unlikely to ever go b a c k to t h e p h a r m a c e u t i c a l industry and pose a threat to the public again. This senior F D A officer justified his p o s i t i o n as follows:

I s t a t e d my o p i n i o n t h a t t h e g o v e r n m e n t w o u l d win if it w e n t f o r w a r d [on t h e case a g a i n s t t h e c o r p o r a t i o n and two individual d e f e n d a n t s ] . I r e c o m m e n d e d t h a t the case be not p r o s e c u t e d at all b e c a u s e , in my o p i n i o n , t h e p u b l i c h e a l t h and welfare w o u l d n o t be at all s e r v e d . T h e p r o b l e m had b e e n c o r r e c t e d . We had m a g n i f i c e n t (if b e l a t e d ) c o o p e r a t i o n from t h e firm. T h e former p l a n t m a n a g e r a n d p l a n t Q C d i r e c t o r (they had different t i t l e s , b u t I c a n ' t r e m e m b e r t h e m ) w e r e o u t o f t h e i n d u s t r y ; so. any p u n i s h m e n t of t h e m w o u l d be strictly p u n i t i v e . . . . T h e district office s c r e a m e d "Foul. T h e law is t h e l a w . ' T h a t kind of r e a s o n i n g has a l w a y s d i s g u s t e d me b e c a u s e w h e n it is used the tail literally w a g s t h e d o g . T h e stated p u r p o s e o f t h e C o n g r e s s i n e n a c t i n g the A c t w a s "to p r o t e c t t h e p u b l i c h e a l t h and w e l f a r e . . . . ' T o o , F D A t o o k into c o n s i d e r a t i o n its t r a c k r e c o r d with the court j u r i s d i c t i o n i n v o l v e d . T h a t p a r t i c u l a r F D A district office w a s not r e s p e c t e d b y a t least o n e j u d g e u p t h e r e w h o t h o u g h t they w e r e high h a n d e d a n d less t h a n o b j e c t i v e i n a n o t h e r m a t t e r referred t o him. 132

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T h e i m m e d i a t e s u p e r i o r of this officer w h o did the n e g o t i a t i n g d i s a g r e e d . He supported criminal prosecution o f t h e corporation, t h e c h a i r m a n o f its b o a r d , and t h e t w o e x e c u t i v e s w h o had b e e n d i s m i s s e d . I n t u r n , his i m m e d i a t e s u p e r i o r , w h o w a s a p e r s o n a l friend o f t h e c h a i r m a n o f t h e a c c u s e d c o r p o r a t i o n , " w a s a g a i n s t any c r i m i n a l a c t i o n . I n t h e e n d , the m a t t e r was r e s o l v e d i n t h e n e g a t i v e a t t h e h i g h e s t d e c i s i o n - m a k i n g levels o f t h e a g e n c y . T h e c o m p a n y , a c c o r d i n g to F D A staff, has had a g o o d G M P r e c o r d since the i n c i d e n t . T h i s c a s e study will b e d r a w n u p o n later t o illustrate t h e difficult c h o i c e s and p r e s s u r e s w h i c h r e g u l a t o r s m u s t confront in d e c i d i n g for or a g a i n s t legal a c t i o n , and to illustrate t h e real possibilities for a c h i e v i n g significant p r o t e c t i o n for t h e public from d e a l s s t r u c k 'in smoke-filled r o o m s ' . '

Unsafe manufacturing practices affecting workers
So far in t h i s c h a p t e r t h e i m p a c t of unsafe m a n u f a c t u r i n g p r a c t i c e s o n c o n s u m e r s h a s b e e n c o n s i d e r e d . B u t w o r k e r s a s well a s cons u m e r s c a n be v i c t i m s . U n f o r t u n a t e l y , w o r k e r s as victims is a t o p i c w h i c h h a s b e e n r e l a t i v e l y n e g l e c t e d in this r e s e a r c h . It is an a r e a that w o u l d justify d e t a i l e d i n v e s t i g a t i o n . T h e p h a r m a c e u t i c a l g i a n t , W a r n e r - L a m b e r t , and four of its e x e c u t i v e s w e r e recently the s u b j e c t of a l a n d m a r k i n d i c t m e n t c h a r g i n g t h e m with h o m i c i d e over an e x p l o s i o n - f i r e in its L o n g Island city c h e w i n g - g u m plant in w h i c h 6 w o r k e r s w e r e killed a n d 55 o t h e r s seriously i n j u r e d . U l t i m a t e l y t h e U . S . C o u r t o f A p p e a l s for t h e S e c o n d Circuit i n N e w Y o r k dismissed the case ( P e o p l e v. W a r n e r L a m b e r t , Ct. a p p . , 434 N . Y . S . at 159). E v e n t h o u g h the c o m p a n y had virtually ignored a w a r n i n g by its i n s u r a n c e c a r r i e r s that t h e r e w a s a severe e x p l o s i o n h a z a r d a t t h e p l a n t , b e c a u s e t h e i m m e d i a t e s o u r c e o f ignition could n o t b e d e t e r m i n e d w i t h c e r t a i n t y after t h e e x p l o s i o n , t h e c h a r g e s w e r e d i s m i s s e d . In o t h e r w o r d s , to get a c o n v i c t i o n for criminally n e g l i g e n t h o m i c i d e , t h e p r o s e c u t i o n w a s r e q u i r e d t o p r o v e that t h e d e f e n d a n t s c o u l d f o r e s e e n o t only t h e fact t h a t t h e r e m i g h t b e a n e x p l o s i o n , but a l s o t h e p r e c i s e c h a i n o f e v e n t s which actually t r i g g e r e d t h e e x p l o s i o n . T h e d e c i s i o n will m a k e c o n v i c t i o n s i n future c a s e s of t h e s a m e kind e x t r a o r d i n a r i l y difficult, if not impossible. O b v i o u s l y , safety p r o b l e m s are not all m a n a g e m e n t ' s fault. In a p h a r m a c e u t i c a l l a b o r a t o r y in w h i c h it is c o m m o n p r a c t i c e for d a n g e r o u s c h e m i c a l s to be m o u t h p i p e t t e d , t h e fault may lie with 133

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staff w h o c h o o s e to do this to save t i m e . E q u a l l y , it could be that m a n a g e m e n t is at fault for failure to w a r n t h e m off such a p r a c t i c e , or e v e n for t r a i n i n g n e w staff i n t o a set of p r a c t i c e s w h i c h a c c e p t s mouth pipetting as normal. An i m p o r t a n t n e e d is for d e t a i l e d i n v e s t i g a t i o n o f t h e health risks t o p e o p l e w h o w o r k with h o r m o n a l p r o d u c t s . B e t w e e n 1968 and 1971 m a n y w o r k e r s a t D a w e s L a b o r a t o r i e s i n C h i c a g o H e i g h t s . I l l i n o i s , c o m p l a i n e d o f sexual i m p o t e n c e . S o m e m e n d e v e l o p e d e n l a r g e d b r e a s t s , i n o n e c a s e r e q u i r i n g surgical r e m o v a l . C o n d i t i o n s a t t h e p l a n t a c c o r d i n g t o E p s t e i n ( 1 9 7 8 : 227) w e r e : "Ventilation w a s p r a c t i c a l l y n o n e x i s t e n t a n d t h e w h o l e i n t e r i o r o f t h e plant w a s c o v e r e d by dust c o n t a i n i n g as high as 10 p e r c e n t D E S [a h o r m o n a l p r o d u c t ] by w e i g h t . " In 1977 an O c c u p a t i o n a l Safety and H e a l t h A d m i n i s t r a t i o n i n s p e c t i o n r e s u l t e d i n t h e c o m p a r a t i v e l y heavy fine of $46,000. which was subsequently reduced under appeal to $ 2 1 , 0 0 0 . E p s t e i n p o i n t e d o u t that a similar i n c i d e n t i s d o c u m e n t e d from an o r a l c o n t r a c e p t i v e p l a n t in P u e r t o R i c o in 1976. F o l l o w i n g c o m p l a i n t s o f e n l a r g e d b r e a s t s i n male e m p l o y e e s and m e n s t r u a l d i s o r d e r s i n f e m a l e s , N I O S H i n v e s t i g a t e d the plant i n M a y , 1976, a n d found e v i d e n c e o f e x c e s s i v e o e s t r o g e n e x p o s u r e . I n t h i s c a s e , m a n a g e m e n t i n s t i t u t e d t h e n e c e s s a r y dust c o n t r o l m e a s u r e s and i m p r o v e d w o r k p r a c t i c e s , w h i c h a p p e a r t o have r e s o l v e d t h e p r o b l e m ( E p s t e i n . 1978: 2 2 8 ) . "
4 0

O n e c o n t r a c e p t i v e m a n u f a c t u r e r c l a i m e d that e x t e n s i v e p r e c a u t i o n s w e r e t a k e n i n t h e i r P u e r t o R i c a n o p e r a t i o n t o r e d u c e t h e risk t o w o r k e r s from o e s t r o g e n i n t h e a t m o s p h e r e . W o r k e r s a r e r o t a t e d i n a n d o u t o f t h a t section o f t h e w o r k e n v i r o n m e n t with the highest risk: t h e c o n t r a c e p t i v e s are m a n u f a c t u r e d in a part of t h e plant w h i c h is p h y s i c a l l y s e p a r a t e d from t h e rest; and o t h e r special m e a s u r e s . H o w e v e r , I w a s told by s e n i o r m a n a g e m e n t of this A m e r i c a n c o m p a n y t h a t t h e high safety s t a n d a r d s o f its P u e r t o R i c a n p l a n t w e r e not m a t c h e d i n its British o p e r a t i o n . E v e n t h o u g h t h e B r i t i s h c o n t r a c e p t i v e p l a n t had b e e n a p p r o v e d b y g o v e r n m e n t i n s p e c t o r s , t h e c o r p o r a t i o n ' s i n t e r n a t i o n a l c o m p l i a n c e unit w a s not satisfied t h a t it met c o r p o r a t e safety s t a n d a r d s . S t r e n g t h e n e d by the a r g u m e n t t h a t his o w n g o v e r n m e n t found the plant safe, the m a n a g i n g d i r e c t o r o f t h e British s u b s i d i a r y w a s f i g h t i n g the a t t e m p t b y h e a d q u a r t e r s c o r p o r a t e c o m p l i a n c e staff t o i m p o s e h i g h e r standards. A h e a d q u a r t e r s c o m p l i a n c e e x e c u t i v e e x p l a i n e d t h e p r o b l e m : 'It 134

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is h a r d to sell t h e n e e d for t w e n t y i m p r o v e m e n t s in a plant to a m a n a g i n g d i r e c t o r w h e n they have had a n i n s p e c t i o n t h e w e e k b e f o r e by t h e i r local r e g u l a t o r s w h o give t h e m full m a r k s . We can a l w a y s find t h i n g s w r o n g , m o r e i m p o r t a n t t h i n g s w r o n g , t h a n t h e local g o v e r n m e n t official.' At t h e t i m e I i n t e r v i e w e d c e r t a i n p a r t i e s t o t h e i n t e r n a l s t r u g g l e o v e r safety s t a n d a r d s , t h e conflict w a s d e a d l o c k e d , with some c h a n c e that the m a t t e r might be resolved by the r e g i o n a l v i c e - p r e s i d e n t for E u r o p e or his s u p e r i o r in the U n i t e d S t a t e s . T h e story is a nice i l l u s t r a t i o n of h o w . e v e n in a d e v e l o p e d c o u n t r y , w o r k e r s a r e often b e t t e r p r o t e c t e d b y w a t c h d o g s o f corp o r a t e s t a n d a r d s w i t h i n the t r a n s n a t i o n a l t h a n they are b y g o v e r n ment inspectors. This b e c o m e s even more true in Third World c o u n t r i e s w h e r e t h e r e are n o g o v e r n m e n t i n s p e c t o r s . P o l i c i e s t o s t r e n g t h e n t h e s e socially r e s p o n s i b l e c o n s t i t u e n c i e s within t h e t r a n s n a t i o n a l c o r p o r a t i o n will b e c o n s i d e r e d later. I n d u s t r i a l safety a r r a n g e m e n t s s u r r o u n d i n g the m a n u f a c t u r e o f c o n t r a c e p t i v e s internationally is an area which warrants detailed p u b l i c i n t e r e s t r e s e a r c h . T h e following s t a t e m e n t b y the quality a s s u r a n c e m a n a g e r o f t h e M e x i c a n subsidiary o f a n o t h e r major t r a n s n a t i o n a l i m p l i e s t h a t , at least at that t i m e ( D e c e m b e r , 1979), industrial safety s t a n d a r d s w e r e unsatisfactory: ' W e do have a bit of dust in t h e air w h i c h can b e d a n g e r o u s w h e n m a k i n g O C s [oral c o n t r a c e p t i v e s ] . We do not h a v e e n o u g h vents in t h e roof. B u t we are building a n e w p l a n t and t h e n w e will b e i n c o m p l i a n c e w i t h t h e r e g u l a t i o n s . ' A further m a t t e r w h i c h r e q u i r e s i n v e s t i g a t i o n is t h e e x t e n t to w h i c h p h a r m a c e u t i c a l m a n u f a c t u r i n g affects the h e a l t h of surr o u n d i n g c o m m u n i t i e s in a d d i t i o n to t h a t of w o r k e r s . By far the g r e a t e s t c o n c e n t r a t i o n o f p h a r m a c e u t i c a l m a n u f a c t u r i n g i n the w o r l d is in t h e s t a t e of N e w J e r s e y in t h e U S . N e w J e r s e y is the A m e r i c a n manufacturing headquarters of Ciba-Geigy, WarnerL a m b e r t , R o c h e , S a n d o z , H o e c h s t - R o u s s e l , J o h n s o n and J o h n s o n . Merck, Ethicon, O r g a n o n , B e e c h a m , Schering-Plough, Squibb. C a r t e r - W a l l a c e , B e c t o n - D i c k i n s o n and m a n y s m a l l e r p h a r m a c e u t i c a l c o m p a n i e s . N e w J e r s e y leads all A m e r i c a n s t a t e s i n overall c a n c e r mortality and in the variety of mortal cancers. W h e t h e r this fact can be a t t r i b u t e d , as E p s t e i n ( 1 9 7 8 : 4 5 1 ) s u g g e s t s , to w a s t e from t h e c o n c e n t r a t i o n of c h e m i c a l i n d u s t r i e s in N e w J e r s e y is b e y o n d t h e c o m p e t e n c e o f t h i s a u t h o r . H o w e v e r , t h e possibility t h a t this could be t h e c a s e a d d s a n o t h e r r e a s o n for s y s t e m a t i c r e s e a r c h on t h e effect on the h e a l t h of p e o p l e from the m a k i n g , in addition to the c o n s u m i n g , of pharmaceuticals. 135

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AN INTERPRETATION OFTHE CASE STUDIES The Limits of Law
T h e C o r d i s c a s e s t u d y i l l u s t r a t e d s o m e o f the p r o b l e m s with i n j u n c t i v e r e m e d i e s to unsafe m a n u f a c t u r i n g p r a c t i c e s . In part it is t h e b y n o w o f t - r e p e a t e d p r o b l e m o f W e s t e r n law not being geared to deal w i t h a p a t t e r n of c o n d u c t but with specific e g r e g i o u s acts. H o w e v e r , it is a l s o a p r o b l e m o f t h e slow r e s p o n s e of legal p r o c e s s e s t o m a t t e r s w h i c h r e q u i r e i m m e d i a t e a c t i o n . T h e c o m p a n y which has a socially d a n g e r o u s p a t t e r n of a d m i n i s t r a t i o n has t i m e to rectify specific c o m p l a i n t s before t h e c o u r t h e a r i n g t a k e s p l a c e , while not d e a l i n g w i t h t h e u n d e r l y i n g m a l a i s e . T h e n , w e h a v e s e e n , a regul a t o r y r o u n d a b o u t c a n b e g i n . It is p e r h a p s for t h e s e r e a s o n s t h a t one s e n i o r F D A official e x p r e s s e d t h e view: ' T h e F e d e r a l j u d i c i a r y has a p r i v a t e c o n t e m p t for a g e n c i e s w h o s e e k i n j u n c t i o n s . T h e y feel t h a t t h e y r e s o r t t o i n j u n c t i o n s w h e n they fail a t d o i n g their own j o b . ' M a n y r e g u l a t o r s h a v e c o m e t o t h e c o n c l u s i o n that they can win m o r e i m m e d i a t e a n d m o r e satisfactory p r o t e c t i o n for the c o n s u m e r t h r o u g h n e g o t i a t i o n r a t h e r t h a n litigation. I t i s i m p o r t a n t , nevert h e l e s s , for g o v e r n m e n t n e g o t i a t o r s t o h a v e t h e b a c k - u p t h r e a t o f i n j u n c t i v e relief, s e i z u r e and p r o s e c u t i o n as n e g o t i a t i n g t o o l s . T h e y a r e t h e n a b l e to w a l k softly while c a r r y i n g a big stick. T h e clums i n e s s of law as a c o n t r o l l i n g d e v i c e d o e s not apply only to injunct i o n s . A n e g o t i a t e d v o l u n t a r y recall of h a z a r d o u s d r u g s will g e n e r a l l y be m o r e effective t h a n s e i z u r e s e n f o r c e d by the c o u r t s . In t h e l a t t e r c a s e , o r d e r s to seize d r u g s m i g h t have to be issued to a l m o s t a h u n d r e d different m a r s h a l s from district c o u r t s a r o u n d the U n i t e d S t a t e s . M o r e o v e r , t h e c o - o p e r a t i v e c o m p a n y i s m o r e able t o t r a c e w h e r e all t h e d r u g s h a v e g o n e t h a n t h e g o v e r n m e n t official w h o h a s t o elicit g r u d g i n g c o - o p e r a t i o n u n d e r c o u r t o r d e r . S i m i l a r c o n s i d e r a t i o n s a p p l y to t h e limits of p r o s e c u t i o n for v i o l a t i o n s o f G M P r e g u l a t i o n s . I n t h e first p l a c e , n o set o f regulat i o n s can specify all t h e t y p e s o f c o n d u c t t h a t a c o m p a n y , following a s o c i a l l y r e s p o n s i b l e p a t t e r n o f m a n u f a c t u r i n g o r g a n i s a t i o n , should a d o p t . R e g u l a t i o n s can e v e n specify t h a t c e r t a i n t y p e s o f c o m p o n e n t s be s a m p l e d for testing from t h e t o p , m i d d l e and b o t t o m of a c o n t a i n e r to e n s u r e t h a t it is not p u r e in o n e section but i m p u r e in a n o t h e r . H o w e v e r , r e g u l a t i o n s c a n n o t r e a s o n a b l y i m p o s e a formal r e q u i r e m e n t t h a t s a m p l e s b e t a k e n from m o r e t h a n t h r e e p a r t s o f t h e c o n t a i n e r w h e n s o m e o n e has a h u n c h t h a t s o m e t h i n g could b e

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w r o n g . R e g u l a t i o n s c a n e n f o r c e m i n i m u m s t a n d a r d s , but they c a n n o t e n f o r c e c o m m o n sense and social r e s p o n s i b i l i t y . A g a i n t o r e p e a t a c o n c l u s i o n from o t h e r c h a p t e r s , g o v e r n m e n t i n s p e c t o r s a r e not in as g o o d a p o s i t i o n as i n s i d e r s to d i s c o v e r w h e n r e g u l a t i o n s h a v e b e e n v i o l a t e d . T h e following s t a t e m e n t from a c o r p o r a t e c o m p l i a n c e e x e c u t i v e w a s not u n c o m m o n : "We've had a s i t u a t i o n w h e r e an F D A i n s p e c t i o n h a s given a plant a clean bill of h e a l t h o n e w e e k , and o u r i n s p e c t o r s have c o m e i n t h e next w e e k t o p o i n t out a d o z e n t h i n g s w h i c h are not up to s t a n d a r d . ' In fact, F D A i n s p e c t o r s c a n n o t give a plant a "clean bill of h e a l t h ' since t h e i r only r e s p o n s i b i l i t y i s t o r e p o r t G M P v i o l a t i o n s w h i c h t h e y n o t i c e . T h e y do not w r i t e a r e p o r t which says that a c e r t a i n a s p e c t of m a n u f a c t u r i n g w a s a p p r o v e d as satisfactory. This differs from t h e g r a d i n g s y s t e m used by t h e i n s p e c t o r a t e of the C a n a d i a n H e a l t h P r o t e c t i o n B r a n c h . O b v i o u s l y , if a p r o b l e m arises in an o p e r a t i o n w h i c h has j u s t b e e n given a positive g r a d i n g by t h e g o v e r n m e n t , t h e n t h e c o m p a n y can defend itself b y p o i n t i n g t o this. S u c h a p o s s i b i l i t y p e r h a p s d o e s put i n s p e c t o r s on their m e t t l e . T h e o t h e r a d v a n t a g e i s t h a t i t e n a b l e s t h e g o v e r n m e n t formally t o use b o t h t h e p s y c h o l o g y of p r a i s e and of criticism in i m p r o v i n g standards. I n s p e c t i o n s by c o r p o r a t e c o m p l i a n c e staff are also m o r e likely to u n c o v e r p r o b l e m s than g o v e r n m e n t inspections because of the g r e a t e r degree of o p e n n e s s with the former. O u r i n s t r u c t i o n s t o officers w h e n d e a l i n g with F D A i n s p e c t o r s i s t o only a n s w e r t h e q u e s t i o n s a s k e d , not t o p r o v i d e any e x t r a i n f o r m a t i o n , not t o v o l u n t e e r a n y t h i n g , and not t o a n s w e r any q u e s t i o n s o u t s i d e y o u r a r e a o f c o m p e t e n c e . O n the o t h e r h a n d w e [the c o r p o r a t e c o m p l i a n c e staff] can ask a n y o n e a n y t h i n g and e x p e c t a n a n s w e r . T h e y are told that w e are part o f t h e s a m e family a n d , u n l i k e t h e g o v e r n m e n t , w e are w o r k i n g for t h e s a m e final o b j e c t i v e s . ' An a d v e r s e r e p o r t from a g o v e r n m e n t i n s p e c t o r in m a n y situa t i o n s will be a m a t t e r of g r e a t e r c o n c e r n to a factory m a n a g e r t h a n a n a d v e r s e r e p o r t from a n i n s p e c t o r from c o r p o r a t e h e a d q u a r t e r s . B u t this n e e d not n e c e s s a r i l y b e t r u e . T h e m a n a g e r ' s s u p e r i o r s may s y m p a t h i s e w h e n he or she is v i c t i m i s e d by ' t h o s e b a s t a r d s from F D A m a k i n g u n r e a s o n a b l e d e m a n d s ' . B u t a n internal a d v e r s e r e p o r t is less likely to elicit social s u p p o r t from s u p e r i o r s . W h e n t h e r e is no o u t - g r o u p to b l a m e , an a d v e r s e r e p o r t m i g h t have a m o r e 137

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n e g a t i v e i m p a c t for the m a n a g e r o n m a t t e r s such a s p r o m o t i o n p r o s p e c t s . A n o t h e r i m p o r t a n t difference b e t w e e n g o v e r n m e n t and i n t e r n a l i n s p e c t o r s i s r e l e v a n t h e r e . T h e t w o serve different p u r p o s e s . W h i l e t h e g o v e r n m e n t i n s p e c t o r sets out t o find G M P v i o l a t i o n s "by t h e c o m p a n y ' , t h e i n t e r n a l i n s p e c t o r s e e k s t o l o c a t e c u l p a b l e i n d i v i d u a l s for p r o b l e m s and to a s s e s s the p e r f o r m a n c e of i n d i v i d u a l s i n m e e t i n g c o r p o r a t e quality g o a l s . H e n c e the impact o f an a d v e r s e g o v e r n m e n t r e p o r t is diffused - in a sense e v e r y o n e is to b l a m e . I n t e r n a l r e p o r t s , p a r t l y b e c a u s e o f their p u r p o s e and p a r t l y b e c a u s e o f t h e i r s u p e r i o r c a p a c i t y t o locate buried b o d i e s , have m o r e t a n g i b l e c o n s e q u e n c e s for p a r t i c u l a r i n d i v i d u a l s . It is an o f t - r e p e a t e d r e a s o n for the failure of c o n t r o l s on c o r p o r a t e c r i m e t h a t in a large c o r p o r a t i o n r e s p o n s i b i l i t y for any law v i o l a t i o n i s diffused ( S t o n e , 1 9 7 5 ; E r m a n n a n d L u n d m a n , 1978; F i s s e , 1978; G r o s s , 1978; M c A d a m s , 1978; S c h r a g e r and S h o r t , 1978; B r a i t h waite, 1979a; Harvard Law Review, 1979; Yale Law Journal, 1979). T h e r e a r e m a n y i n d i v i d u a l a c t o r s e a c h o f w h o m h a s a partial r e s p o n s i b i l i t y for a w h o l e which no o n e of t h e m fully a d m i t s . W h i l e t h i s is u n d e n i a b l e and i n e v i t a b l e , it s h o u l d be c o n s i d e r e d t h a t in some m e a s u r e companies conspire to create an impression of diffusion of r e s p o n s i b i l i t y . All c o r p o r a t e a c t o r s benefit from the p r o t e c t i o n afforded b y p r e s e n t i n g t o o u t s i d e r s a n a p p e a r a n c e o f g r e a t l y diffused a c c o u n t a b i l i t y . Y e t w h e n c o m p a n i e s , for t h e i r o w n p u r p o s e s , w a n t a c c o u n t a b i l i t y , they can g e n e r a l l y get it. O n e q u a l i t y c o n t r o l d i r e c t o r c l a i m e d with p r i d e t h a t his i n f o r m a t i o n s y s t e m w a s so g o o d t h a t ' w h e n a d r u g is p r o d u c e d w h i c h d o e s not m e e t s p e c s , we can find w h o is to b l a m e 95 p e r cent o f t h e t i m e ' . I r e p l i e d : ' T h a t s u r p r i s e s m e . I w o u l d h a v e t h o u g h t t h a t on a p r o d u c t i o n line w i t h such a large n u m b e r of p e o p l e , it would be possible for e v e r y i n d i v i d u a l w h o m i g h t b e b l a m e w o r t h y t o find s o m e o n e e l s e w h o t h e y could b l a m e . ' ' N o . T h e r e c o r d s are s o good that w e c a n p i n p o i n t w h o i t is. E v e r y o n e r e c o r d s w h a t t h e y d o a t every s t a g e . We h a v e a m a n full t i m e on t r a c i n g b a c k t h r o u g h t h e r e c o r d s s o u r c e s of p r o b l e m s . ' C o m p a n i e s have two kinds of records: r e c o r d s d e s i g n e d to a l l o c a t e guilt (such as the a b o v e ) and r e c o r d s d e s i g n e d t o o b s c u r e guilt. I n t e r n a l a u d i t o r s are n o t p r e s e n t e d w i t h a c o n s p i r a c y o f confusion. S u c h w o u l d be i n d i c a t i v e of a bad m a n a g e m e n t c o n t r o l s y s t e m . M a n a g e r s t h e r e f o r e have a c l e a r interest in p r e s e n t i n g t h e s a m e r e a l i t y as o n e of diffused r e s p o n s i b i l i t y to o u t s i d e r s , yet one o f c l e a r l y defined r e s p o n s i b i l i t y t o i n s i d e r s . T h e m a n a g e r w h o 138

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successfully p o r t r a y s diffused r e s p o n s i b i l i t y to t h e o u t s i d e r will be p r a i s e d by h i s / h e r s u p e r i o r s for t h e successful s m o k e s c r e e n . But a m a n a g e r w h o p l e a d e d diffused r e s p o n s i b i l i t y t o insiders w o u l d b e c r i t i c i s e d for not h a v i n g c o n t r o l o f h i s / h e r m a n a g e m e n t s y s t e m . O n e of t h e g r e a t a d v a n t a g e s of i n t e r n a l i n s p e c t i o n s is that t h e internal i n s p e c t o r s h a v e a c c e s s t o p o w e r o v e r o r g a n i s a t i o n a l s y s t e m s for allocating responsibility, w h e r e a s g o v e r n m e n t inspectors do not. W h i l e g o v e r n m e n t law e n f o r c e m e n t officers have limited p o w e r s , t h o s e o f c o r p o r a t e c o m p l i a n c e staff a r e often a l m o s t u n l i m i t e d . O n e q u a l i t y a s s u r a n c e m a n a g e r told of c o n c e r n he had that s o m e of his a s s a y staff w e r e so r o u t i n e l y t e s t i n g a p r o d u c t at 99 per cent or 100 p e r c e n t or 101 p e r cent s t r e n g t h , t h a t w h e n t h e y found a result of 80 p e r c e n t t h e y w o u l d a s s u m e t h a t t h e y had m a d e a m i s t a k e in t h e a s s a y . ' R a t h e r t h a n r e c a l c u l a t e it. t h e y j u s t p u t it d o w n as 101 per c e n t . ' The quality assurance m a n a g e r ' s solution was to periodically ' s p i k e ' s a m p l e s w i t h u n d e r s t r e n g t h p r o d u c t s t o see w h e t h e r his q u a l i t y c o n t r o l staff w o u l d pick u p t h e d e f e c t s . I f not. t h e y c o u l d b e dismissed or sanctioned in some other way. G o v e r n m e n t inspectors do n o t h a v e t h e p o w e r to c o m e into a plant and ' s p i k e ' a p r o d u c t i o n run. G o v e r n m e n t i n s p e c t o r s ' e n s u r e t h e quality o f y o u r r e c o r d s , not t h e q u a l i t y o f y o u r d e e d s ' , a s o n e q u a l i t y c o n t r o l m a n a g e r wryly r e m a r k e d . O n e e x e c u t i v e w h o had b e e n r e c e n t l y t r a n s f e r r e d t o the U n i t e d States recalled that when he was in Australia workers on o c c a s i o n w o u l d w r i t e up r e c o r d s a c o u p l e of w e e k s in a d v a n c e of actually doing the w o r k . It is difficult to s e n d s o m e o n e into an u n f a m i l i a r factory to c h e c k q u a l i t y a s s u r a n c e . S o m e industry i n f o r m a n t s a r g u e d t h a t t o d o s o effectively o n e n e e d s to c h e c k right t h r o u g h from the raw m a t e r i a l s to t h e final p r o d u c t s t a g e s - t o follow a unit of p r o d u c t t h r o u g h each stage. T h i s c a n ' t be d o n e in our plant by s o m e o n e c o m i n g from o u t s i d e b e c a u s e at all s t a g e s we have t h r e e m o n t h s i n v e n t o r y - t h r e e m o n t h s r a w m a t e r i a l , t h r e e m o n t h s o f i n - p r o c e s s p r o d u c t s , and t h r e e m o n t h s i n v e n t o r y o f t h e finished p r o d u c t . S o t o follow p r o d u c t s t h r o u g h all s t a g e s w o u l d t a k e n i n e m o n t h s a n d this i s i m p o r t a n t b e c a u s e , for e x a m p l e , in a lot of p r o d u c t s rigid s t o r a g e c o n d i t i o n s m a y be i m p o r t a n t e v e n t h o u g h a p r o d u c t may be s i t t i n g at t h e t i m e of i n s p e c t i o n in c o n d i t i o n s of c o r r e c t t e m p e r a t u r e s t o r a g e , this may not be t h e case at all t i m e s . 139

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T e s t i n g t h e sterility o f a s a m p l e of end p r o d u c t gives no g u a r a n t e e t h a t all u n i t s in t h e lot are sterile or that s o m e might not b e c o m e n o n - s t e r i l e (for e x a m p l e , b e c a u s e o f a n i n a d e q u a t e p r e s e r v a t i v e s y s t e m ) : T h e q u a l i t y o f a m e d i c i n a l p r e p a r a t i o n i s built i n and not t e s t e d ' ( P a t e l . 1969: 6 8 ) . E v e n with m o t o r v e h i c l e s , i t w o u l d not b e sufficient to c h e c k q u a l i t y by seeing if t h e car starts w h e n it e m e r g e s from t h e end o f t h e p r o d u c t i o n line. S i m i l a r l y , t h e fact that a final p r o d u c t is found to be sterile at o n e point in t i m e is no g u a r a n t e e t h a t lack of sterility will not d e v e l o p later. T h e fact that o n e cont a m i n a n t h a s b e e n t e s t e d for is no a s s u r a n c e that o t h e r types of c o n t a m i n a n t s a r e not p r e s e n t . A s well a s c h e c k i n g final tests and i n - p r o c e s s t e s t s , t h e i n s p e c t o r m u s t certify e q u i p m e n t , v a l i d a t e p r o c e s s e s , a n d e n s u r e t h a t p r o p e r i n s t r u c t i o n s and s u p e r v i s i o n are p r o v i d e d t o w o r k e r s . E x t r a o r d i n a r i l y k n o w l e d g e a b l e p e o p l e are r e q u i r e d for this difficult task. On this final c r i t e r i o n of k n o w l e d g e , it is a l s o t y p i c a l l y t r u e t h a t g o v e r n m e n t i n s p e c t o r s do not c o m p a r e favourably with internal experts. 'Our compliance auditors g e n e r a l l y h a v e P h D s . T h e y are s p e c i a l i s t s , not g e n e r a l i s t s like t h e government people.' A n u m b e r of a r g u m e n t s h a v e n o w b e e n a s s e m b l e d as to h o w , in m a n y w a y s , i n t e r n a l i n s p e c t o r s are b e t t e r able t o find out a b o u t law v i o l a t i o n s a n d are in a b e t t e r p o s i t i o n to h a n d out s a n c t i o n s which will pull i n t o line t h e p e o p l e r e s p o n s i b l e . T h e p r o b l e m is. t h o u g h , t h a t t h e r e is no g u a r a n t e e t h a t this p o w e r will be used by the c o m p a n y . H i g h e r m a n a g e m e n t might choose to ignore inspectors and s u p p o r t p r o d u c t i o n p e o p l e w h o w a n t t o save t i m e and m o n e y b y c u t t i n g c o r n e r s o n q u a l i t y . H o w e v e r , this w o u l d b e a n u n u s u a l c o u r s e for g o o d m a n a g e m e n t to follow. C r o s b y (1979) is r i g h t w h e n he says t h a t ' q u a l i t y is free'. W h a t costs m o n e y are t h e u n q u a l i t y t h i n g s - t h e a c t i o n s t h a t i n v o l v e not d o i n g j o b s right the first t i m e . T h e cost of q u a l i t y is t h e e x p e n s e of d o i n g t h i n g s w r o n g . It is t h e s c r a p , r e w o r k , s e r v i c e after s e r v i c e , w a r r a n t y , i n s p e c t i o n , t e s t s , and s i m i l a r a c t i v i t i e s m a d e n e c e s s a r y b y n o n c o n f o r m a n c e p r o b l e m s . B e t w e e n 1967 and 1977, t h e m a n u f a c t u r i n g cost of q u a l i t y at I T T h a s b e e n r e d u c e d by an a m o u n t e q u i v a l e n t to 5 p e r c e n t of s a l e s . T h a t is a g r e a t deal of m o n e y . T h e savings p r o j e c t e d by t h e c o m p t r o l l e r w e r e $30 million in 1968; $157 m i l l i o n in 1 9 7 1 ; $328 million in 1 9 7 3 ; and in 1 9 7 6 - $ 5 3 0 million! We had e l i m i n a t e d - t h r o u g h defect p r e v e n t i o n - costs a m o u n t i n g to t h o s e dollar figures ( C r o s b y , 1979: 12). 140

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T h e r e can b e little d o u b t t h a t m a n a g e m e n t w h i c h d o e s not have a s t r o n g c o m m i t m e n t t o t h e p r i n c i p l e o f c o n f o r m i t y t o quality stand a r d s is u n s o u n d m a n a g e m e n t . In c o n s i d e r a b l e m e a s u r e , t h e n , the conflict of i n t e r e s t b e t w e e n c o n s u m e r s and b u s i n e s s on the quality q u e s t i o n is illusory. It should be p o s s i b l e to p e r s u a d e s o m e c o m p a n i e s t o i n s t i t u t e m u c h t o u g h e r i n t e r n a l quality a u d i t i n g s y s t e m s on t h e g r o u n d s t h a t this is in their i n t e r e s t s . I n spite o f t h i s , t h e r e will b e o c c a s i o n s w h e n r e p u t a b l e c o m p a n i e s find t h e m s e l v e s in a s i t u a t i o n w h e r e it is e c o n o m i c a l l y r a t i o n a l to t e m p o r a r i l y s u s p e n d t h e i r c o m m i t m e n t to quality and cut a part i c u l a r c o r n e r . ' " W e will discuss s o m e o f t h e s e s i t u a t i o n s later. T h e r e will also be 'fly-by-night' c o m p a n i e s w h o aim for quick profits by o p e r a t i n g on t h e fringe of an i n d u s t r y until such t i m e as cons u m e r s b e c o m e a w a r e of their abysmal standards. For these reasons, government inspectors remain of utmost importance. I t i s simply b e i n g a r g u e d t h a t c o n s u m e r s get m o r e p r o t e c t i o n now from i n t e r n a l t h a n from g o v e r n m e n t i n s p e c t i o n s o f p h a r m a c e u t i c a l c o m p a n i e s , a n d t h a t t h e r e i s also m o r e h o p e for i n c r e a s i n g the p r o t e c t i o n to c o n s u m e r s in t h e future from s t r e n g t h e n i n g internal r a t h e r t h a n e x t e r n a l i n s p e c t i o n . E x p a n d i n g g o v e r n m e n t inspection staffs is also of vital i m p o r t a n c e . H o w e v e r , t h e n u m b e r of A u s t r a l i a n H e a l t h D e p a r t m e n t G M P i n s p e c t o r s could b e d o u b l e d t o m o r r o w and still b e i n a d e q u a t e . A t t h e t i m e o f writing t h e r e are only t h r e e i n s p e c t o r s c o v e r i n g the c o n t i n e n t . O n e M e d i c a l D i r e c t o r d e s c r i b e d t h e i r i n s p e c t i o n s as ' b e n i g n affairs'. T h e y look for d e v i a t i o n s from G M P s t a n d a r d s w h i c h h a v e n o force o f law. A s i n B r i t a i n , " G M P s a r e simply v o l u n t a r y g u i d e l i n e s . M a n y , p e r h a p s m o s t , T h i r d - W o r l d c o u n t r i e s h a v e n o i n s p e c t o r s , n o r any G M P regulations. O n e of t h e A u s t r a l i a n s u b s i d i a r i e s I visited r e c e i v e d a n n u a l H e a l t h D e p a r t m e n t i n s p e c t i o n s of half a day to a d a y ' s d u r a t i o n by o n e i n s p e c t o r . I n s p e c t i o n s b y h e a d q u a r t e r s ' c o m p l i a n c e staff w e r e t w i c e y e a r l y , and n o r m a l l y u n d e r t a k e n b y t h r e e i n s p e c t o r s w h o s p e n t o v e r a w e e k i n t h e plant. W h i l e t h e c o r p o r a t e i n s p e c t i o n s w e r e u n a n n o u n c e d , t h e r e w a s a day o r t w o f o r e w a r n i n g o f g o v e r n ment inspections. T h e t a s k facing t h e small staff of s c i e n t i s t s w h o test s a m p l e s of d r u g b a t c h e s sent t o t h e A u s t r a l i a n N a t i o n a l Biological S t a n d a r d s L a b o r a t o r y i s similarly i m p o s s i b l e . T w o p e r cent o f a n t i b i o t i c s a m p l e s t e s t e d fail t o m e e t g o v e r n m e n t s t a n d a r d s . B u t b y t h e t i m e t h e t e s t i n g has b e e n d o n e and t h e c o m p a n y notified o f t h e failure, 141

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in t h e m a j o r i t y of c a s e s t h e b a t c h has a l r e a d y b e e n sold or partly sold. M o s t c o m m e n t a t o r s have a n u n r e a l i s t i c a p p r e c i a t i o n o f the e n o r m i t y o f t h e task facing r e g u l a t o r s and o f t h e practical impossibility o f t h e i r d o i n g a n y t h i n g a p p r o a c h i n g a n e x h a u s t i v e , t h o r o u g h j o b . C o n s i d e r , for e x a m p l e , t h e following s t a t e m e n t i n which T u r n e r ( 1 9 7 6 : 178-9) c o m m e n t s o n t h e K i n s l o w R e p o r t o n the FDA. T h e r e p o r t ' s g e n e r a l a t t i t u d e o n e n c o u r a g i n g c o m p l i a n c e i n place o f r e g u l a t i o n is i l l u s t r a t e d (in t h e d r u g s e c t i o n o f t h e r e p o r t ) by its r e c o m m e n d a t i o n s for c o n t r o l of insulin and a n t i b i o t i c s : in t h e 1969 fiscal y e a r , only 0.3 p e r cent of insulin s a m p l e s and 1 p e r c e n t of a n t i b i o t i c b a t c h e s w e r e rejected as not m e e t i n g specified s t a n d a r d s . T h e Study G r o u p b e l i e v e s F D A may b e e x p e n d i n g m o r e r e s o u r c e s i n a s s u r i n g t h e quality o f a n t i b i o t i c s a n d insulin b y b a t c h certification t h a n t h e p r o b l e m d i c t a t e s . T h e n e e d for this level of c o n t r o l w a s c e r t a i n l y n e c e s s a r y w h e n a n t i b i o t i c s w e r e first m a r k e t e d . We a r e not sure if it is n e c e s s a r y today. R E C O M M E N D A T I O N : 2 6 . C o n s i d e r a p r o g r a m o f statistical s a m p l i n g for a n t i b i o t i c s and insulin r a t h e r t h a n b a t c h - b y - b a t c h certification.' T h e r e a s o n i n g s u p p o r t i n g this r e c o m m e n d a t i o n w o u l d u n d e r m i n e any effective F D A p r o g r a m t h a t m i g h t d e v e l o p . B a s i c a l l y , it says t h e r e is a p r o g r a m t h a t has b e e n effective in i n s u r i n g t h e q u a l i t y of all insulin and a n t i b i o t i c s that r e a c h t h e m a r k e t . It h a s b e e n so effective, in fact, t h a t it should be discontinued. T h i s s o u n d s like a c o m p e l l i n g a r g u m e n t . Y e t so vast a r e the u n m e t r e s p o n s i b i l i t i e s of r e g u l a t o r y a g e n c i e s and so limited t h e r e s o u r c e s a v a i l a b l e t h a t c o s t - e f f e c t i v e n e s s c o n s i d e r a t i o n s m u s t c o m e into p l a y . P r o g r a m m e s o f g r e a t cost w h i c h deal with p r o b l e m s o f only m o d e r a t e i m p o r t a n c e m u s t b e p u s h e d aside for m a n y c h e a p e r p r o g r a m m e s t o deal w i t h l a r g e r n e e d s . W h e n finite r e s o u r c e s are a v a i l a b l e to deal w i t h an a l m o s t infinite p r o b l e m , to fail to ask c o s t - e f f e c t i v e n e s s q u e s t i o n s is to do less t h a n the best to p r o t e c t t h e public. Such cost-effectiveness problems must also loom large in

d e c i d i n g h o w often p r o s e c u t i o n is used as a m e t h o d of c o n t r o l . We h a v e s e e n from t h e case s t u d i e s i n this c h a p t e r that w e c a n n o t e x p e c t 142

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G M P p r o s e c u t i o n s t o b e s t r a i g h t f o r w a r d m a t t e r s . T h e costs i n t i m e a n d m o n e y o f p r o s e c u t i o n s i n v o l v i n g highly t e c h n i c a l m a t t e r s can be e n o r m o u s . E v e n in w h a t w o u l d seem on t h e surface like t h e less technical matter o f t h e recent US prosecution of Morton-Norwich c o n c e r n i n g t h e sterility o f b a n d a g e s m a n u f a c t u r e d b y t h e c o m p a n y , we saw a trial w h i c h lasted t h r e e y e a r s . In this case u n t a n g l i n g the c o m p l e x i t y w a s not assisted w h e n t h e j u d g e , sitting a l o n e , accid e n t a l l y sent y e a r s of his n o t e s on t h e trial to t h e d u m p .
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O n e c o u l d i m a g i n e t h a t if a p r o s e c u t i o n o f a large p h a r m a c e u t i c a l c o m p a n y w e r e e v e r t o t a k e place i n A u s t r a l i a , t h e e n t i r e A u s t r a l i a n g o v e r n m e n t G M P i n s p e c t o r i a l force could b e tied u p for m o n t h s . W o u l d such a c o n c e n t r a t i o n of r e s o u r c e s on o n e case m a k e for c o s t - e f f e c t i v e e n f o r c e m e n t ? P u t s i m p l y , a c o n s i s t e n t policy of p r o s e c u t i o n of all s e r i o u s G M P offences is a policy w h i c h no g o v e r n m e n t c o u l d afford. T h i s s t a t e m e n t s h o u l d be qualified by p o i n t i n g o u t t h a t i n M e x i c o p r o s e c u t i o n s for G M P offences are fairly r o u t i n e , b u t t h e p e n a l t i e s a r e so low (5 - 5,000 p e s o s ) t h a t the fines a r e effectively a licence fee to v i o l a t e t h e law. O n e M e x i c a n pharmaceutical executive explained: Quality assurance d i r e c t o r : A lot of c o m p a n i e s k n o w i n g l y violate t h e law and pay t h e fine every n o w and t h e n . T h e y run t h e risk. Do companies ever contest the fines in court!

J.B.:

Q u a l i t y a s s u r a n c e d i r e c t o r : N o . I t ' s not w o r t h it for such a small amount.

The place of quality control in the organisation
In t h e last s e c t i o n it w a s p o i n t e d o u t t h a t in any o r g a n i s a t i o n t h e r e are occasions w h e n it is economically rational to temporarily s u s p e n d c o m m i t m e n t t o quality s t a n d a r d s . O n e t y p e o f c i r c u m s t a n c e is w h e r e a p r o d u c t is in short supply and m a j o r c u s t o m e r s are c o m p l a i n i n g t o t h e m a r k e t i n g m a n a g e r b e c a u s e they c a n n o t get s u p p l i e s . I f t h e q u a l i t y c o n t r o l m a n a g e r fails to pass a major b a t c h of t h e p r o d u c t b e c a u s e it falls j u s t s h o r t of specifications t h e quality c o n t r o l m a n a g e r m i g h t c o m e u n d e r p r e s s u r e from t h e m a r k e t i n g m a n a g e r t o p a s s t h e b a t c h a s ' n e a r e n o u g h ' . T h e p r e s s u r e might b e particularly strong w h e n certain major c u s t o m e r s are threatening to 143

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s w i t c h to a c o m p e t i n g b r a n d u n l e s s c o n t i n u i t y of s u p p l i e s is g u a r a n teed. A n o t h e r s i t u a t i o n i s o n e i n w h i c h a n o r g a n i s a t i o n a l s u b - u n i t , but n o t n e c e s s a r i l y t h e w h o l e o r g a n i s a t i o n , sees it as in its i n t e r e s t s to put the quality control m a n a g e r under pressure to reverse a d e c i s i o n . A m a n u f a c t u r i n g plant might h a v e a p r o d u c t i o n t a r g e t set by h e a d q u a r t e r s . A failed b a t c h w o u l d place it in j e o p a r d y of not m e e t i n g t h a t t a r g e t . ' F r o m t h e p u b l i c i n t e r e s t point o f view the s o l u t i o n to this p r o b l e m is to s t r u c t u r e t h e o r g a n i s a t i o n so that the q u a l i t y c o n t r o l m a n a g e r is i n s u l a t e d from p r e s s u r e from m a n u f a c t u r i n g o r m a r k e t i n g . T h i s c e r t a i n l y d o e s not h a p p e n i n m a n y p h a r m a c e u t i c a l c o m p a n i e s w h e r e quality c o n t r o l m a n a g e r s a n s w e r to the manufacturing m a n a g e r or to an executive whose primary r e s p o n s i b i l i t y is for m a r k e t i n g and m a n u f a c t u r i n g .
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O t h e r c o m p a n i e s , e s p e c i a l l y A m e r i c a n t r a n s n a t i o n a l s , have b e e n s e n s i t i v e to t h i s p r o b l e m . T h e y h a v e an a r r a n g e m e n t w h e r e b y a q u a l i t y c o n t r o l d e c i s i o n can only be o v e r r u l e d by the p r e s i d e n t . T h e q u a l i t y c o n t r o l d i r e c t o r m a k e s a n i n d e p e n d e n t w r i t t e n decision o n e a c h b a t c h w h i c h s/he duly signs. I f t h e p r e s i d e n t w i s h e s t o o v e r r u l e a q u a l i t y c o n t r o l d e c i s i o n s/he m u s t do so in writing o v e r h i s / h e r s i g n a t u r e . People b e c o m e corporation presidents in part because t h e y e x h i b i t a m o d i c u m o f c a u t i o n . I m a g i n e the c o n s e q u e n c e s for a p r e s i d e n t o f s e r i o u s injuries t o c o n s u m e r s b e c a u s e s/he o v e r r u l e d i n w r i t i n g a q u a l i t y c o n t r o l d e c i s i o n . No m a t t e r h o w low t h e c h a n c e s of t h i s w e r e p e r c e i v e d to b e , it w o u l d be a foolish risk for a c o r p o r a t i o n p r e s i d e n t t o t a k e for t h e s a k e o f o n e b a t c h o f d r u g s . W h i l e t h e d e s t r u c t i o n of a b a t c h m i g h t be a m a j o r a g g r a v a t i o n to t h e p h a r m a ceuticals m a r k e t i n g or manufacturing m a n a g e r , to the president it is a m i n o r m a t t e r . Effectively t h e n , such a n o r g a n i s a t i o n a l s t r u c t u r e p r e c l u d e s any p o s s i b i l i t y o f quality c o n t r o l b e i n g formally overruled. I n M e r c k ' s A u s t r a l i a n s u b s i d i a r y this i s t a k e n e v e n further. Q u a l i t y c o n t r o l can i g n o r e an i n s t r u c t i o n from t h e c h a i r m a n to cut c o r n e r s on q u a l i t y in v i o l a t i o n of c o r p o r a t e policies. T h e m a t t e r can be r e p o r t e d over the head o f t h e chairman to headquarters. In a t r a n s n a t i o n a l c o r p o r a t i o n , t h e u l t i m a t e p r o t e c t i o n is for quality staff ( a n d all o t h e r t y p e s of a u d i t i n g staff) to have a direct r e p o r t i n g r e l a t i o n s h i p to a h e a d q u a r t e r s c o m p l i a n c e g r o u p a n d only a d o t t e d line r e l a t i o n s h i p w i t h local m a n a g e m e n t . T h e i r c a r e e r line is t h e n b o u n d u p with p e r f o r m a n c e i n e n s u r i n g c o m p l i a n c e , not with perf o r m a n c e i n a s s i s t i n g t h e goals o f t h e s u b s i d i a r y . 144

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I n a d d i t i o n t o e n s u r i n g t h a t quality m a n a g e r s d o not r e p o r t t o m a r k e t i n g o r p r o d u c t i o n m a n a g e r s , t h e f o r m e r must b e i n s u l a t e d from any influence by t h e latter o v e r t h e i r future p r o m o t i o n , salary i n c r e m e n t s , o r p e r f o r m a n c e r e p o r t s . T h e d a n g e r s p r e s e n t h e r e are well i l l u s t r a t e d by t h e following e x c h a n g e with a M e x i c a n plant manager. Plant manager: T h e q u a l i t y a s s u r a n c e d i r e c t o r d o c s not r e p o r t to m e , but we h a v e a good w o r k i n g r e l a t i o n s h i p . He used to be my s e c o n d - i n - c h a r g e w h e n I w a s d i r e c t o r of quality a s s u r a n c e . If he says I should do s o m e t h i n g a n d I d o n ' t w a n t to do it, t h e n I d o n ' t do it. What if he wants to stop the production line on quality grounds that you think are not right? H e c a n n o t stop p r o d u c t i o n . H e has n o a u t h o r i t y to do t h a t . He can w i t h h o l d a p p r o v a l o f t h e final p r o d u c t . If he d o e s t h a t and I do not a g r e e with h i m . t h e n I can g o t o t h e g e n e r a l m a n a g e r a n d s h o w w h y he s h o u l d be o v e r r u l e d - that Social Security n e e d s the product quickly, or whatever r e a s o n . I will do w h a t he s u g g e s t s if it is reasonable.

J. B.: Plant manager:

H e r e we h a v e a s i t u a t i o n w h e r e a m u c h m o r e powerful m a n a g e r ' s d e f i n i t i o n o f ' r e a s o n a b l e n e s s ' will a l w a y s hold sway over t h a t of an o r g a n i s a t i o n a l l y w e a k quality a s s u r a n c e d i r e c t o r . O b v i o u s l y the e x t e n t t o w h i c h p e o p l e w i t h r e s p o n s i b i l i t y for quality s t a n d a r d s h a v e o r g a n i s a t i o n a l c l o u t is a c o n t i n u u m . C o n s i d e r t h e following A m e r i c a n t r a n s n a t i o n a l i n which the corp o r a t e c o m p l i a n c e p o s i t i o n h a s very little c l o u t . H e a d q u a r t e r s has a c o r p o r a t e c o m p l i a n c e g r o u p with a small staff of six. T h e c o m p l i a n c e d i r e c t o r is a r e l a t i v e l y j u n i o r p e r s o n with little e x p e r i e n c e w i t h i n t h e c o m p a n y . T h e d i r e c t o r has only a n a d v i s o r y r o l e , b e i n g u n a b l e to instruct a manufacturing plant to do anything. He reports to a t e c h n i c a l affairs v i c e - p r e s i d e n t w h o is similarly u n a b l e to issue d i r e c t i v e s to a m a n u f a c t u r i n g p l a n t . T h e i n t e r n a t i o n a l influence of t h e c o m p l i a n c e g r o u p e x t e n d s only t o C a n a d a . O t h e r s u b s i d i a r i e s a r e g i v e n a u t o n o m y to set their own s t a n d a r d s w i t h i n t h e limits set b y b r o a d c o m p a n y g u i d e l i n e s . A p a r t from C a n a d a , h e a d q u a r t e r s c o m p l i a n c e staff d o n o t g o o u t t o t h e s u b s i d i a r i e s t o a u d i t c o m p l i a n c e w i t h c o r p o r a t e s t a n d a r d s . E v e n with r e s p e c t t o the 145

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c o m p l i a n c e g r o u p ' s influence i n C a n a d a , t h e v i c e - p r e s i d e n t for i n t e r n a t i o n a l r e g u l a t o r y affairs ( a m o r e senior e x e c u t i v e t h a n the c o m p l i a n c e d i r e c t o r ) w a s critical: " W e ' v e got t o teach [the c o m p l i a n c e d i r e c t o r ] t h a t h e c a n ' t try t o i m p o s e U S s t a n d a r d s o n C a n a d a . H e ' s g o t t o u n d e r s t a n d that w e c a n ' t spend all that m o n e y t o d o u p t h e r e w h a t t h e F D A w a n t s u s t o d o d o w n h e r e . ' W i t h i n the U n i t e d States the inspections u n d e r t a k e n by the compliance g r o u p a r e m o c k F D A i n s p e c t i o n s . T h e goal i s not t o audit c o n f o r m a n c e w i t h i n d e p e n d e n t c o r p o r a t e s t a n d a r d s , but t o p r o v i d e m a n u f a c t u r ing p l a n t s w i t h a dry run to p r e p a r e t h e m for F D A i n s p e c t i o n s . In s h o r t , t h e e x i s t e n c e of t h e c o m p l i a n c e g r o u p fulfils the public r e l a t i o n s function of e n a b l i n g t h e c o m p a n y to claim t h a t it has an i n d e p e n d e n t g r o u p a u d i t i n g quality c o n t r o l staff i n t h e field. I n d e e d it is so i n d e p e n d e n t as to be i m p o t e n t . O r g a n i s a t i o n a l clout is crucial at all levels of quality a s s u r a n c e . In a d d i t i o n t o t h e b i g g e r d e c i s i o n s a b o u t a c c e p t i n g o r rejecting w h o l e b a t c h e s , o n - s i t e q u a l i t y c o n t r o l m a n a g e r s must m a k e and influence many smaller decisions T h e q u a l i t y c o n t r o l d i r e c t o r m a k e s a lot of little d e c i s i o n s e v e r y d a y w h i c h c a n b r i n g him into conflict with the p r o d u c t i o n m a n a g e r . If a s a m p l e o f t e n pills is t e s t e d from the line every thirty m i n u t e s and o n e of t h o s e pills is o u t s i d e specs he has to d e c i d e w h e t h e r t h a t o n e pill w a s an o d d i t y or t h e result of his m i s t a k e , or w h e t h e r he w a n t s to anger the p r o d u c t i o n manager by stopping t h e line until t h e p r o b l e m is s o r t e d out. If he d e c i d e s t h e r e is a q u a l i t y p r o b l e m i n t h e s a m p l e t h e n e v e r y pill p r o d u c e d o n e a c h side of t a k i n g t h a t o n e s a m p l e will have to be r e t r i e v e d . It's not r e a l l y such a big p r o b l e m b e c a u s e t h e y will all have g o n e in one bin. B e c a u s e o f t h e i m m e d i a c y o f such d e c i s i o n s , this c o m p a n y ' s p o l i c y t h a t t h e q u a l i t y c o n t r o l d i r e c t o r ' s d e c i s i o n can only be overr u l e d by t h e p r e s i d e n t is not of g r e a t c o n s e q u e n c e . S o l u t i o n s m u s t b e n e g o t i a t e d w i t h t h e p r o d u c t i o n m a n a g e r t h e n and t h e r e . T h e i n f o r m a n t , t h e e x e c u t i v e v i c e - p r e s i d e n t , c o n t i n u e d : "My quality c o n t r o l d i r e c t o r i s t o o a c a d e m i c . H e h a s n ' t realized yet that it's not p u r e s c i e n c e o u t t h e r e , it's t h e art o f c o m p r o m i s e with the p r o d u c t i o n m a n a g e r - trying to m o v e him t o w a r d s y o u r s t a n d a r d s a bit.' In ' t r y i n g to m o v e him t o w a r d s y o u r s t a n d a r d s a bit', seniority, training a n d e x p e r i e n c e a r e i m p o r t a n t for quality c o n t r o l p e r s o n n e l . M o r e will be said later on t h e p r o f e s s i o n a l i s m of quality c o n t r o l staff.

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T h e a b o v e has p r a c t i c a l i m p l i c a t i o n s for g o v e r n m e n t a c t i o n t o p r o t e c t p a t i e n t s . T h e fact t h a t G M P i n s p e c t i o n t e a m s from c o r p o r a t e h e a d q u a r t e r s can p r o b a b l y d o a b e t t e r j o b t h a n g o v e r n m e n t i n s p e c t o r s i m p l i e s t h a t it is g o o d policy for g o v e r n m e n t to r e q u i r e such i n t e r n a l i n s p e c t i o n s and p e r h a p s c o n c e n t r a t e their efforts m o r e on a u d i t i n g t h e a u d i t o r s . S i m i l a r l y , t h e fact t h a t a quality control m a n a g e r answering to production or marketing is b o u n d to be c o m p r o m i s e d from t i m e to t i m e i m p l i e s t h a t g o v e r n m e n t s s h o u l d p r o h i b i t such o r g a n i s a t i o n a l s t r u c t u r e s . I n d e e d , F D A c o m p l i a n c e staff a r e a b l e t o d o this u n d e r G M P r e g u l a t i o n s , and i n c r e a s i n g l y a r e d o i n g s o , a t least with large c o m p a n i e s . O t h e r g o v e r n m e n t s have n o such p o w e r s . H e n c e , m a n y t r a n s n a t i o n a l s w h i c h s c r u p u l o u s l y s t r u c t u r e their A m e r i c a n o r g a n i s a t i o n s o a s t o i n s u l a t e q u a l i t y c o n t r o l m a n a g e r s from e c o n o m i c p r e s s u r e s d o j u s t t h e o p p o s i t e i n o t h e r p a r t s o f t h e w o r l d . T h e following s t a t e m e n t b y a r e g u l a t o r y affairs d i r e c t o r , w h o w a s formerly a quality c o n t r o l d i r e c t o r w i t h a n o t h e r t r a n s n a t i o n a l , s h o w s h o w effective g o v e r n m e n t i n t e r v e n t i o n in t h e o r g a n i s a t i o n a l form of a c o m p a n y is easier said t h a n d o n e . G o v e r n m e n t i n s p e c t o r s m u s t look b e l o w the surface t o avoid b e i n g s e d u c e d b y a p p e a r a n c e s . If y o u l o o k at t h e o r g a n i z a t i o n a l c h a r t of m a n y c o m p a n i e s you will see t h a t t h e q u a l i t y c o n t r o l d i r e c t o r r e p o r t s directly to t h e p r e s i d e n t . T h e F D A i n s p e c t o r c o m e s a r o u n d and asks w h o t h e q u a l i t y c o n t r o l d i r e c t o r r e p o r t s t o , and w h e n he is told that it's t h e p r e s i d e n t he g o e s a w a y p l e a s e d . T h a t ' s h o r s e s h i t . . . . I w o u l d n ' t tell an F D A i n s p e c t o r t h i s , b u t I'll tell you [If only all i n f o r m a n t s had s h o w n m e such s o l i c i t u d e . ] O k a y , t h e quality c o n t r o l d i r e c t o r d o e s m a k e t h e final d e c i s i o n to recall a p r o d u c t a n d only t h e p r e s i d e n t can o v e r r u l e him. B u t t h e c o m p a n y has s t a n d a r d o p e r a t i n g p r o c e d u r e s c o n c e r n i n g a p o s s i b l e recall. T h e p r o c e d u r e s specify t h a t t h e quality c o n t r o l d i r e c t o r m u s t c o n s u l t c e r t a i n p e o p l e a b o u t his d e c i s i o n - s o m e o f t h e m m o r e senior t h a n h i m , or m o s t of t h e m . A m e e t i n g of m a y b e five p e o p l e will t a k e p l a c e a n d t h e y will m a k e a r e c o m m e n d a t i o n that the quality c o n t r o l d i r e c t o r w o u l d be foolish not to follow - if he w a n t s to k e e p his j o b i n t h e long t e r m , t h a t is. T h e r e will a l w a y s b e s o m e l a w y e r s o n t h e s e c o m m i t t e e s . T h e y h a v e m o s t say. B u t they b e a r n o n e o f t h e r e s p o n s i b i l i t y . T h e quality c o n t r o l d i r e c t o r d o e s t h a t . I h a v e b e e n p r e s s u r e d by t h e l a w y e r s n o t to m a k e a recall in this s i t u a t i o n and it w a s t o u g h . T h e y c o m e at you with h e a r t s and 147

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flowers. ' T h e c o m p a n y will lose $5 million if you do this. Fifty j o b s will g o ' , t h e y say. Overlying the organisation chart is an operational structure,

often f o r m a l i s e d by S O P s . If t h e o p e r a t i o n a l s t r u c t u r e is f o r m a l i s e d , t h e n it is o b v i o u s l y easy e n o u g h for g o v e r n m e n t i n s p e c t o r s to ask to see t h e r e l e v a n t S O P s . I f n o t , t h e n g o v e r n m e n t must e i t h e r r e q u i r e t h e S O P s to be w r i t t e n or be satisfied with an i n t e r v e n t i o n of limited e f f e c t i v e n e s s t o i n s u l a t e quality c o n t r o l m a n a g e r s . P e r h a p s this o v e r s t a t e s the p r o b l e m a little, because a product-recall decision, s u c h as in t h e a b o v e s t a t e m e n t , is a very m a j o r decision in which t o p m a n a g e m e n t is b o u n d to b e c o m e i n v o l v e d . It is a large step r e m o v e d from a d e c i s i o n to fail a b a t c h still sitting in t h e factory. H o p e f u l l y it can be seen as in t h e i n t e r e s t s of b o t h the r e g u l a t o r s and t o p m a n a g e m e n t to put in place m a n a g e m e n t systems which ensure t h a t i n t e g r i t y d e c i s i o n s are m a d e i n all o f t h e m o r e r o u t i n e t y p e s o f c r i s e s w h i c h t a k e p l a c e a t t h e l o w e r levels o f t h e o r g a n i s a t i o n . B u t m o s t c o m p a n i e s will w a n t t o k e e p o p e n t h e o p t i o n o f r e v e r s i n g their n o r m a l c o m m i t m e n t t o integrity w h e n $ 5 million could b e k n o c k e d off t h e i r profits. In t h e s e t o p - l e v e l c r i s e s s e l f - r e g u l a t i o n b r e a k s down. T h e d r u g - r e c a l l d e c i s i o n is t h e classic i l l u s t r a t i o n in t h e p h a r m a c e u t i c a l i n d u s t r y of a d e c i s i o n with such d r a m a t i c financial implic a t i o n s that top m a n a g e m e n t might even have to choose between m a k i n g an i n t e g r i t y d e c i s i o n and k e e p i n g t h e i r j o b s . A saving f e a t u r e of a recall d e c i s i o n for e x e c u t i v e s w h o are c o n c e r n e d for t h e i r skins is t h a t t h e r e are an infinity of w a y s t h a t integrity can be c o m p r o m i s e d i n v a r y i n g d e g r e e s . P a t e l ( 1 9 6 9 : 166-7) gives the f o l l o w i n g e x a m p l e o f a recall n o t i c e w h i c h did not give an i n d i c a t i o n o f t h e dangerous character ofthe goods to be returned. D e a r P h a r m a c i s t : I n k e e p i n g with o u r policy o f p r o v i d i n g you w i t h only t h e h i g h e s t q u a l i t y p h a r m a c e u t i c a l s , we have m a d e a recent i m p o r t a n t change in the formulation of our X Y Z tablets. T h i s has r e s u l t e d i n g r e a t e r stability o f t h e active i n g r e d i e n t s and r e d u c e d t h e h a z a r d of side effects. Y o u will r e c o g n i z e the n e w i m p r o v e d p r o d u c t b y t h e c h a n g e o f design i n t h e labels. All n e w X Y Z t a b l e t s , w h e t h e r 3 0 ' s , 5 0 ' s , o r 100's, b e a r the n e w e y e - a p p e a l i n g b l u e and w h i t e q u a l i t y seal in a d d i t i o n to t h e required labelling. P l e a s e r e t u r n all old s t o c k s o f X Y Z t a b l e t s for i m m e d i a t e c r e d i t or replacement. 148

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The integrity decision here is obviously to prominently mark I M P O R T A N T : D R U G R E C A L L ' o n b o t h t h e e n v e l o p e and l e t t e r - h e a d of a n o t i c e w h i c h fully d i s c l o s e s t h e facts. T h e r e is, t h e n , a difference b e t w e e n t h e n e e d for a c o m m i t m e n t t o i n t e g r i t y and q u a l i t y a t o p e r a t i n g levels o f t h e o r g a n i s a t i o n and t h e n e e d for t o p m a n a g e m e n t t o b e able t o s u s p e n d t h a t c o m m i t m e n t for d e c i s i o n s of m a j o r financial i m p o r t . As will be a r g u e d in C h a p t e r 9, it is this difference w h i c h is e s s e n t i a l for u n d e r s t a n d i n g the limits of self-regulation.

Towards professionalism in quality control
In the previous section, the importance of seniority, c o m p e t e n c e a n d t r a i n i n g o f q u a l i t y c o n t r o l staff t o e q u i p t h e m t o resist p r e s s u r e s to c o m p r o m i s e their standards was emphasised. The importance of c o m p e t e n c e is e v e n m o r e d r a m a t i c a l l y i l l u s t r a t e d by a p a r t i c u l a r k i n d of c i r c u m s t a n c e w h i c h w a s a s o u r c e of a n g u i s h to several quality control managers interviewed. We all try to avoid it, but it s o m e t i m e s h a p p e n s that we only d i s c o v e r t h a t a b a t c h is unsafe w h e n it is on t h e d o c k . No quality c o n t r o l p e r s o n w a n t s t o g o i n and e x p l a i n t o t h e v i c e - p r e s i d e n t t h a t t h e c o m p a n y will h a v e to lose a lot of m o n e y by having p r o d u c t s b r o u g h t back from t h e d o c k , e x p e c i a l l y w h e n it is the fault of q u a l i t y c o n t r o l t h a t it w a s n ' t p i c k e d up earlier. A n d u s u a l l y in t h e s e s i t u a t i o n s you can after t h e e v e n t see h o w you c o u l d h a v e p i c k e d it up earlier. No o n e w a n t s to be in that uncomfortable situation. O b v i o u s l y a n i n c o m p e t e n t quality c o n t r o l m a n a g e r will m o r e often e n d u p i n ' t h a t u n c o m f o r t a b l e s i t u a t i o n ' and t h e r e f o r e b e m o r e t e m p t e d t o c o v e r u p t h e m i s t a k e . A c o m p e t e n t quality c o n t r o l m a n a g e r w h o r a r e l y slips up is m o r e likely to h a v e t h e s e l f - e s t e e m to face t h e m u s i c w h e n e v e r integrity d e m a n d s . Just a s the j u d g m e n t o f c o m p e t e n t q u a l i t y c o n t r o l m a n a g e r s will b e h e e d e d i n crises w h i l e t h a t of i n c o m p e t e n t s will be i g n o r e d , so t h e m i s t a k e s of c o m p e t e n t m a n a g e r s will b e f o r g i v e n . C e r t a i n l y v i c e - p r e s i d e n t s w h o d o not forgive t h e m i s t a k e s o f c o m p e t e n t p e o p l e m a k e a d a n g e r o u s bed t o lie in. A c o m p a n y in w h i c h quality c o n t r o l m a n a g e r s are afraid to r e p o r t h o n e s t m i s t a k e s t o s e n i o r m a n a g e m e n t will lose m o n e y t h r o u g h t u r n i n g m i n o r c r i s e s into m a j o r o n e s . C r o s b y (1979: 84) has e x p r e s s e d this c o m m o n sense forcefully: 149

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D o n ' t b e u n n e r v e d b y all t h e h o r r o r s t o r i e s a b o u t i r r a t i o n a l j u r y v e r d i c t s a n d t h e i n t r i c a c i e s o f t h e law. H a r d l y any o f t h o s e t h i n g s o c c u r r e d because o f t h e original incident. They occurred because s o m e o n e w h o had c o n t r i b u t e d t o t h e p r o b l e m d i d n ' t h a v e e n o u g h s e n s e or c o u r a g e to face up to it early and get a r e a s o n a b l e settlement. I h a v e n e v e r seen a p r o d u c t safety p r o b l e m , real or p o t e n t i a l , t h a t d i d n ' t get itself h a n d l e d with a n a b s o l u t e m i n i m u m o f e x p e n s e w h e n i t w a s faced m a t u r e l y . N o t all difficult s i t u a t i o n s which a q u a l i t y c o n t r o l m a n a g e r must face c a n be c o v e r e d by r e g u l a t i o n s . Q u a l i t y c o n t r o l p e o p l e m u s t be s o c i a l i s e d in a p r o f e s s i o n a l c u l t u r e w h i c h e q u i p s t h e m to deal with p r o b i t y w i t h t h e m a n y s h a d e s - o f - g r e y s i t u a t i o n s they m u s t confront. Society recognises law, e n g i n e e r i n g , m e d i c i n e , p h a r m a c y , as prof e s s i o n s . W h y s h o u l d not quality c o n t r o l be r e c o g n i s e d as a p r o f e s s i o n ? P r o f e s s i o n a l i s m is no g u a r a n t e e of i n t e g r i t y , but it helps. The quality control m a n a g e r s in a pharmaceutical c o m p a n y r e a l l y h a v e only o n e m a s t e r o n e t h i c a l s t a n d a r d s i n their w o r k , and t h a t i s t h e i r e m p l o y e r . L a w y e r s and p h y s i c i a n s i n t h e s a m e c o m p a n i e s h a v e t w o m a s t e r s o n s t a n d a r d s o f e t h i c s . T h e y must a n s w e r to t h e i r p r o f e s s i o n a l a s s o c i a t i o n s as well - the bar associa t i o n o r t h e m e d i c a l a s s o c i a t i o n . P r o f e s s i o n a l a s s o c i a t i o n s are n o t n o t e d for t h e s t r i n g e n c y w i t h w h i c h t h e y enforce their ethical c o d e s . B u t t h e m o r e i m p o r t a n t value o f s t a n d a r d s o f professional e t h i c s i s t h a t t h e y give t h e e m p l o y e e w h o w a n t s t o act w i t h integrity a source of support against the superior p o w e r o f t h e employer. So t h e l a w y e r can r e m o n s t r a t e : 'If I w e r e to do t h a t , I could be struck off by t h e B a r A s s o c i a t i o n , a n d t h a t w o u l d be good for n e i t h e r me n o r t h e c o m p a n y . ' T h e quality c o n t r o l m a n a g e r has n o such recourse. T h e o t h e r r a t i o n a l e for q u a l i t y c o n t r o l being g r a n t e d p r o f e s s i o n a l s t a t u s c o n c e r n s t h e kind o f p r o f e s s i o n a l s o c i a l i s a t i o n w h i c h might go on w i t h a u n i v e r s i t y d e g r e e in q u a l i t y c o n t r o l . G r a d u a t e s would h o p e f u l l y be socialised into c e r t a i n i d e a l s of scientific indep e n d e n c e , o f p u t t i n g p r o f e s s i o n a l s t a n d a r d s a h e a d o f profit. I n t h i s , o n e is e n c o u r a g e d by Q u i n n e y ' s (1963) classic study in which he f o u n d t h a t p h a r m a c i s t s w i t h a p r o f e s s i o n a l i d e o l o g y w e r e less likely to violate laws regulating their work than were pharmacists with a b u s i n e s s i d e o l o g y . Of c o u r s e it is difficult not to be cynical a b o u t h o w m u c h p r o t e c t i o n t h e p u b l i c i s afforded b y c o m m i t m e n t t o the 150

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i d e o l o g y of a p r o f e s s i o n . N e v e r t h e l e s s , it is t r u e t h a t it would be i m p o s s i b l e to w r i t e r u l e s to c o v e r all t h e difficult ethical j u d g m e n t s w h i c h d o c t o r s m u s t face. T h e only p r o t e c t i o n w h i c h p a t i e n t s can rely on in m o s t s i t u a t i o n s is t h e p r o f e s s i o n a l e t h i c s o f t h e d o c t o r . G i v i n g q u a l i t y c o n t r o l p r o f e s s i o n a l s t a t u s and a p r o f e s s i o n a l i d e o l o g y is no p a n a c e a , b u t it is a m e a s u r e w h i c h has m e r i t . F o r t h e s a m e r e a s o n , t h e p r o f e s s i o n a l i s a t i o n o f o c c u p a t i o n a l safety would be a d e s i r a b l e d e v e l o p m e n t .

The social costs of over-regulation
T h e financial c o s t s o f r e g u l a t i o n g e n e r a l l y i n t h e p h a r m a c e u t i c a l i n d u s t r y will be c o n s i d e r e d in C h a p t e r 9. H e r e c e r t a i n social costs of G M P r e g u l a t i o n will b e d i s c u s s e d . C o m p a r e d with o t h e r w o r k s i t u a t i o n s , p e o p l e w o r k i n g with d r u g s have relatively little disc r e t i o n . M o s t t h i n g s t h e y do a r e limited by a r u l e . M o s t m u s t be r e c o r d e d . M a n y o p e r a t i o n s c a n n o t b e d o n e w i t h o u t t h e direct s u p e r v i s i o n of a s e c o n d p e r s o n w h o signs off to i n d i c a t e t h a t t h e o p e r a t i o n was c o m p l e t e d as recorded. In short, pharmaceutical w o r k e r s h a v e little a u t o n o m y and often a r e e x c e e d i n g l y a l i e n a t e d . R e g u l a t i o n t h e r e f o r e has a social cost on t h e quality o f t h e lives of these people. T h e a l i e n a t i o n e n g e n d e r e d can also r e b o u n d o n t h e effectiveness of r e g u l a t i o n . T h e m i n u t i a e of r e g u l a t i o n has r e a c h e d its height in t h e U n i t e d S t a t e s . O n e q u a l i t y c o n t r o l e x e c u t i v e w h o had e x p e r i e n c e b o t h i n t h e A u s t r a l i a n and A m e r i c a n w o r k e n v i r o n m e n t d e s c r i b e d t h e p r o b l e m in t h e following t e r m s : 'In A u s t r a l i a , if a w o r k e r h a p p e n e d to n o t i c e a red pill in a b o t t l e full of g r e e n o n e s he w o u l d r e p o r t it. T h i s h a p p e n e d o n c e w h e n I w a s w o r k i n g i n A u s t r a l i a . I n t h e U S t h e p h a r m a c e u t i c a l w o r k e r w o u l d j u s t let i t g o . It is n o t his r e s p o n s i b i l i t y . ' W h e t h e r or not this is an o v e r s t a t e m e n t (it p r o b a b l y i s ) , t h e r e is a d a n g e r in m a k i n g w o r k e r s into rulefollowing a u t o m a t o n s rather than responsible, concerned people w h o feel t h a t t h e e x e r c i s e of their p e r s o n a l d i s c r e t i o n m a k e s a d i f f e r e n c e . T h e p r o b l e m is, f u r t h e r m o r e , t h a t t h e latter k i n d s o f p e o p l e q u i c k l y m o v e o u t o f t h e j o b . ' G o o d p e o p l e get fed u p w i t h b e i n g slaves t o r u l e s , ' a s o n e e x e c u t i v e e x p l a i n e d . G o o d p e o p l e also l e a v e b e c a u s e t h e y get fed up w i t h a w o r k s i t u a t i o n in w h i c h s o m e o n e i s a l w a y s l o o k i n g o v e r y o u r s h o u l d e r , c h e c k i n g y o u r every action. I r o n i c a l l y , p e r h a p s , a u t o m a t i o n h o l d s o u t s o m e h o p e o f partially 151

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a l l e v i a t i n g t h e l a t t e r p r o b l e m s . D e v i c e s for r e a d i n g c o d e s p r i n t e d on b o t t l e s or t u b e s for o i n t m e n t can a u t o m a t i c a l l y c h e c k and eject t u b e s w h i c h h a v e b e e n m i s t a k e n l y l a b e l l e d , for e x a m p l e . B u t t h e r e a r e limits t o w h i c h h u m a n c h e c k s can b e r e p l a c e d with m e c h a n i c a l surveillance. A l i e n a t e d w o r k e r s are c a r e l e s s w o r k e r s . T h e y b e c o m e a g g r a v a t e d w h e n forced t o c o m p l y w i t h r e g u l a t i o n s w h i c h seem petty t o t h e m , w h e n t h e y are r e p r i m a n d e d for only initialling a record w h i c h r e q u i r e s t h e i r full s i g n a t u r e . E x a s p e r a t i o n o v e r the p e r c e i v e d p e t t i n e s s o f t h e r e g u l a t i o n s l e a d s t o less d i l i g e n c e w h e n the following o f r e a l l y i m p o r t a n t r e g u l a t i o n s i s r e q u i r e d . W o r k e r s a b r o g a t e social r e s p o n s i b i l i t y t o u n e n t h u s i a s t i c rule following. A n o t h e r c o n s e q u e n c e o f a l i e n a t i o n i s industrial s a b o t a g e ( D u b o i s , 1979). O n e t r a n s n a t i o n a l p h a r m a c e u t i c a l c o m p a n y has faced a s i t u a t i o n w h e r e w o r k e r s a t t e m p t e d to set fire to o n e of its A m e r i c a n f a c t o r i e s . A n e x e c u t i v e from a n o t h e r c o m p a n y d e s c r i b e d an e x t r a o r d i n a r i l y m a l i c i o u s act of s a b o t a g e w h i c h could have ( p e r h a p s d i d ) cost lives: "We had a n industrial s a b o t a g e p r o b l e m w h e r e a w o r k e r w a s p u t t i n g q u a r t e r s inside t h e lids o f t h e c o n t a i n e r s [of an i n j e c t a b l e p r o d u c t ] . M a y b e he w a s t r y i n g to get back at [the c o m p a n y ] . ' T h e F D A did not find o u t a b o u t t h e p r o b l e m . T h e w o r k e r w a s d i s m i s s e d , but t h e c o m p a n y did not notify F D A for fear of a d v e r s e p u b l i c i t y a r i s i n g from his p r o s e c u t i o n . T h e r e a r e s o l u t i o n s . R u l e s which g e n u i n e l y a r e petty should b e e l i m i n a t e d , a n d r u l e s w h i c h only s e e m p e t t y t o t h e u n i n f o r m e d s h o u l d b e e x p l a i n e d . ' F r o m t h e p o i n t o f view o f m o t i v a t i o n , " k n o w w h y " i s m o r e i m p o r t a n t t h a n " k n o w - h o w " ' ( M o d y , 1969: 4 7 ) . W o r k e r s m u s t b e p e r s u a d e d a s t o t h e d e s i r a b i l i t y o f rule-following a n d d o c u m e n t a t i o n , b u t t h e y m u s t also b e given r e a s o n t o b e l i e v e t h a t t h e y h a v e s o m e influence o v e r t h o s e r u l e s . A d e g r e e o f w o r k e r p a r t i c i p a t i o n i n r u l e - m a k i n g m a y b e t h e p r i c e that m a n a g e m e n t and g o v e r n m e n t m i g h t h a v e t o a c c e p t for w o r k e r c o m m i t m e n t t o t h e rules. In a small w a y , this h a p p e n s in s o m e factories a l r e a d y . U n d e r A b b o t t ' s Q u a l i t y A l e r t A w a r d s c h e m e w o r k e r s can suggest new S O P s . W o r k e r s w h o c o m e forward with a useful quality alert s u g g e s t i o n a r e p r e s e n t e d w i t h a pin. F o r their second s u g g e s t i o n t h e y a r e g i v e n a g r e e n s t o n e for the p i n , for t h e i r third a red s t o n e , a n d s o o n . " A b b o t t likes t o k e e p its w o r k e r s ' p a r t i c i p a t i o n within r e a s o n a b l e l i m i t s , h o w e v e r . W h e n h e a d q u a r t e r staff saw o n t h e n o t i c e b o a r d of o n e p l a n t t h a t a w o r k e r had b e e n given a special

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c o m m e n d a t i o n for finding seven v i o l a t i o n s o f F D A r e g u l a t i o n s i n t h e p l a n t , t h e n o t i c e w a s o r d e r e d d o w n lest i t p r o v i d e a m m u n i t i o n for an F D A i n s p e c t o r . C i b a - G e i g y in 1971 also s t a r t e d its ' Q u a l i t y S e a l ' p r o g r a m m e t o foster e m p l o y e e p a r t i c i p a t i o n i n m e t h o d s o f error reduction. T h e p h a r m a c e u t i c a l i n d u s t r y can g o m u c h further i n h a n d i n g o v e r d e c i s i o n - m a k i n g p o w e r t o w o r k e r s . I n this r e g a r d , t h e r e i s m u c h it c o u l d learn from t h e a u t o m o b i l e i n d u s t r y , p a r t i c u l a r l y t h e J a p a n e s e car m a n u f a c t u r e r s . U n d e r t h e J a p a n e s e m o d e l , w h i c h i s n o w b e i n g a d o p t e d b y G e n e r a l M o t o r s , w o r k e r s are given t h e a u t h o r i t y to shut d o w n t h e a s s e m b l y line if they t h i n k t h a t , for w h a t e v e r r e a s o n , q u a l i t y c o n t r o l s t a n d a r d s are not being m e t ( L o h r , 1981). A n o t h e r idea for g e n e r a t i n g shopfloor c o m m i t m e n t t o quality w h i c h h a s b e e n w i d e l y i m p l e m e n t e d b y quality p r o f e s s i o n a l s i n m a n y i n d u s t r i e s i s t h e ' z e r o defects d a y ' . T h e e n t i r e w o r k f o r c e i s asked to c o n t r i b u t e their ideas to ways of making an experimental d a y u n i q u e l y free of d e f e c t i v e o u t p u t . If t h e z e r o defects day is successful in i m p r o v i n g q u a l i t y , t h e quality p e r f o r m a n c e of t h a t day b e c o m e s a b e n c h m a r k for future i m p r o v e m e n t . O n e s t r a t e g y for g e n e r a t i n g c o m m i t m e n t t o quality w o r k m a n s h i p f o l l o w e d by B a x t e r - T r a v e n o l in A u s t r a l i a is to t a k e w o r k e r s to t h e local W e s t m e a d H o s p i t a l t o see their i n t r a v e n o u s s o l u t i o n s i n u s e . ' O n e old lady g r a b b e d t h e a r m of o n e of o u r s u p e r v i s o r s and said h o w m u c h she a p p r e c i a t e d w h a t h e w a s d o i n g for her. T h a t c o m p l e t e l y c h a n g e d his a t t i t u d e t o his w o r k . ' W h a t e v e r t h e s t r a t e g i e s u s e d , t h e i m p o r t a n t thing i s t o a c h i e v e s o m e real w o r k e r p a r t i c i p a t i o n t o m a k e e m p l o y e e s b e l i e v e t h a t i t i s i m p o r t a n t t h a t t h e y s h o w initiative o n t h e j o b . T h e m o s t d a n g e r o u s b e l i e f t h a t can p e r m e a t e a p h a r m a c e u t i c a l c o m p a n y is t h a t quality is t h e r e s p o n s i b i l i t y o f t h e quality a s s u r a n c e d e p a r t m e n t . E v e r y w o r k e r s h o u l d be a c c o u n t a b l e for t h e q u a l i t y of his or her o w n task. W h e n a q u a l i t y failure o c c u r s , b o t h t h e o p e r a t i v e r e s p o n s i b l e and t h e q u a l i t y c o n t r o l staff s h o u l d be called to a c c o u n t .

International variations in GMP compliance
J. B.: Production manager: Are there ever product recalls [in Guatemala]? N a h . P r o b l e m s a r e put d o w n t o post-operative shock.

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G M P s t a n d a r d s vary g r e a t l y b e t w e e n c o u n t r i e s . T h e r e are many c o u n t r i e s like G u a t e m a l a w h e r e t h e r e are n o G M P i n s p e c t i o n s , n o n a t i o n a l d r u g - t e s t i n g l a b o r a t o r y . T r a n s n a t i o n a l c o m p a n i e s are able t o t a k e a d v a n t a g e o f this s i t u a t i o n . M a n y o f t h e major t r a n s n a t i o n a l s h a v e m a n u f a c t u r i n g p l a n t s t o serve the C e n t r a l A m e r i c a n r e g i o n i n G u a t e m a l a . O n e o f t h e a d v a n t a g e s o f this a r r a n g e m e n t i s t h a t m a n u f a c t u r i n g is not only c h e a p e r by virtue of the nonu n i o n i s e d w o r k f o r c e and tax c o n c e s s i o n s , but also b e c a u s e m a n u f a c t u r i n g s t a n d a r d s do not h a v e to be as high as in the U n i t e d S t a t e s , G e r m a n y or Great Britain. T h e s i t u a t i o n is m o r e c o m p l i c a t e d w h e n m a n u f a c t u r i n g in a part i c u l a r c o u n t r y i s for b o t h d e v e l o p e d and T h i r d - W o r l d m a r k e t s . S o m e m a n u f a c t u r i n g for t h e A s i a n m a r k e t t a k e s place i n A u s t r a l i a n p l a n t s . G e n e r a l l y , t h e costs o f c h a n g i n g r o u t i n e d o not justify i n t e n t i o n a l l y m a n u f a c t u r i n g i t e m s for t h e A s i a n m a r k e t to lower s t a n d a r d s t h a n for A u s t r a l i a n c o n s u m e r s . N e v e r t h e l e s s , i f b a t c h e s e m e r g e w h i c h h a p p e n t o fail t o m e e t A u s t r a l i a n s t a n d a r d s , t h e n t h e r e is an obvious t e m p t a t i o n to d u m p these batches on the Asian m a r k e t - a t e m p t a t i o n w h i c h s o m e i n f o r m a n t s c o n c e d e d is not a l w a y s r e s i s t e d . C o n v e r s e l y , e x p o r t s t o t h e J a p a n e s e m a r k e t might have to meet higher standards than in Australia on certain criteria. T r a n s n a t i o n a l c o m p a n i e s vary g r e a t l y in the e x t e n t to which they follow different G M P s t a n d a r d s i n different p a r t s o f the w o r l d . S o m e h a v e a p h i l o s o p h y t h a t t h e c o m p a n y has a c e r t a i n s t a n d a r d w h i c h m u s t be followed w h e n e v e r a p r o d u c t is sold u n d e r t h e c o m p a n y n a m e . M a n y A m e r i c a n c o m p a n i e s regularly send c o m p l i a n c e a u d i t o r s to all s u b s i d i a r i e s to c h e c k t h a t this is h a p p e n i n g . E u r o p e a n c o m p a n i e s w h o also s u b s c r i b e t o this p h i l o s o p h y t e n d not to be so tightly c e n t r a l l y c o n t r o l l e d , but c l a i m they a c h i e v e t h e s a m e e n d b y p o s t i n g h e a d office E u r o p e a n s t o m a n a g e T h i r d - W o r l d subsidiaries. O t h e r companies attempt to imbue Third-World m a n a g e r s with ' c o r p o r a t e s t a n d a r d s ' b y p e r i o d i c a l l y b r i n g i n g t h e m i n t o h e a d q u a r t e r s for t r a i n i n g . S o m e t r a n s n a t i o n a l s . while p a y i n g lip s e r v i c e t o a u n i f o r m c o r p o r a t e G M P s t a n d a r d , i m p l e m e n t the p o l i c y simply by s e n d i n g a set of c o r p o r a t e s t a n d a r d s , w h i c h might be e i t h e r d e t a i l e d or g e n e r a l , to all s u b s i d i a r i e s . Such a g e s t u r e m i g h t or m i g h t not be c o m b i n e d with a r e q u i r e m e n t for s u b s i d i a r i e s t o p e r i o d i c a l l y send s a m p l e s o f final p r o d u c t t o h e a d q u a r t e r s for t e s t i n g . At t h e e x t r e m e are t r a n s n a t i o n a l s which m a k e a virtue o f local a u t o n o m y and e m p h a s i s e t h e s o v e r e i g n r i g h t o f e a c h n a t i o n to set its o w n G M P s t a n d a r d s . E a c h of its s u b s i d i a r i e s is e n c o u r a g e d

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O f t h e a b o v e a p p r o a c h e s , only a n i n t e r n a t i o n a l a u d i t i n g p r o g r a m m e i m p o s e d from h e a d q u a r t e r s e n s u r e s a m o d i c u m o f u n i f o r m i t y . T h e fact t h a t d e t a i l e d c o r p o r a t e s t a n d a r d s m e a n little on t h e i r o w n w a s g r a p h i c a l l y i l l u s t r a t e d w h e n I visited the A u s t r a l i a n s u b s i d i a r y o f a major A m e r i c a n c o m p a n y . The m a n a g i n g d i r e c t o r s p o k e t o m e first and g a v e g l o w i n g a c c o u n t s o f h o w m u c h t o u g h e r their c o r p o r a t e s t a n d a r d s w e r e w h e n c o m p a r e d w i t h g o v e r n m e n t s t a n d a r d s . I w a s t h e n i n t r o d u c e d t o the quality a s s u r a n c e d i r e c t o r w h o told m e : ' W e follow H e a l t h D e p a r t m e n t r e g u l a t i o n s . T h e r e a r e [ c o r p o r a t e s t a n d a r d s ] which are p r o b a b l y t o u g h e r i n s o m e w a y s , but t o b e h o n e s t I've n e v e r read t h e m . ' E v e n t h e t r a n s n a t i o n a l s w h i c h e n f o r c e t h e strictest o f international auditing systems cannot achieve c o m p l e t e uniformity of s t a n d a r d s a r o u n d t h e w o r l d . A n d c o m p a n i e s w h i c h m a k e only t o k e n efforts to a c h i e v e such a policy a l l o w , by default, vast disparities in G M P s to continue. N e v e r t h e l e s s , it is undoubtedly true that in T h i r d - W o r l d countries the G M P standards o f t h e transn a t i o n a l s , n o m a t t e r h o w m u c h l o w e r t h a n a t h e a d q u a r t e r s , are g e n e r a l l y h i g h e r t h a n t h o s e o f m o s t locally o w n e d m a n u f a c t u r e r s . T r a n s n a t i o n a l s a r e s o m e t i m e s a l o b b y i n g force for u p g r a d i n g the G M P s t a n d a r d s in T h i r d - W o r l d c o u n t r i e s . T h e y see this as a way of p u t t i n g ' b a t h t u b ' c o m p e t i t o r s o u t o f b u s i n e s s . C e r t a i n l y this s e e m e d t o b e t h e effect o f t h e d e c i s i o n o f t h e P o r t i l l o g o v e r n m e n t i n M e x i c o t o c l o s e d o w n 300 o f t h e 600 p h a r m a c e u t i c a l c o m p a n i e s o p e r a t i n g i n t h e c o u n t r y in 1977. T h u s , the internationalisation of capital, both because of the e c o n o m i c i n t e r e s t s i t b r i n g s t o t h e T h i r d W o r l d and b e c a u s e o f t h e t r a n s f e r of q u a l i t y c o n t r o l t e c h n o l o g y , is a force for the upgrading of G M P standards. Increasingly, Third-World countries a r e e s t a b l i s h i n g n a t i o n a l t e s t i n g l a b o r a t o r i e s for d r u g s ( N y l e n , 1975). M a n y a r e e n a c t i n g G M P s a n d s e n d i n g i n s p e c t o r s t o t h e F D A for t r a i n i n g . T h e i n c r e a s i n g l y i n t e r n a t i o n a l c h a r a c t e r of t h e industry is also having an impact on the equalisation of standards between d e v e l o p e d c o u n t r i e s . C o u n t r i e s w i t h l o w e r s t a n d a r d s are forced t o c o m e i n t o line b y u p g r a d i n g t h e i r s t a n d a r d s . F o u r M e d i t e r r a n e a n c o u n t r i e s ( G r e e c e , P o r t u g a l , Spain and T u r k e y ) w h o h a v e b e e n e x p l o r i n g t h e possibility o f m e m b e r s h i p i n t h e E u r o p e a n E c o n o m i c C o m m u n i t y h a v e b e e n told t h a t they w o u l d have t o t i g h t e n their

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d r u g r e g u l a t o r y p r a c t i c e s before b e i n g a d m i t t e d . C o u n t r i e s i n the E u r o p e a n Free Trade Association (Ireland, Austria, D e n m a r k , Finland, Hungary. Iceland, Liechtenstein, Norway, Portugal. S w e d e n , S w i t z e r l a n d and G r e a t B r i t a i n ) now have a " C o n v e n t i o n for t h e M u t u a l R e c o g n i t i o n o f I n s p e c t i o n s i n R e s p e c t o f t h e M a n u f a c t u r e o f P h a r m a c e u t i c a l P r o d u c t s . ' T h i s has b e e n a c h i e v e d t h r o u g h a d e g r e e of a g r e e m e n t on u n i f o r m i t y of i n s p e c t i o n stand a r d s . U n d e r t h e a g r e e m e n t i n s p e c t o r s from o n e c o u n t r y can g o into a n o t h e r to check the manufacturing standards of products to be imported. The Benelux countries (Belgium, Netherlands, L u x e m b u r g ) and t h e A n d e a n P a c t c o u n t r i e s ( P e r u , E c u a d o r , B o l i v i a , C o l o m b i a and V e n e z u e l a ) h a v e b o t h m a d e p r o g r e s s o n e s t a b l i s h i n g s o m e u n i f o r m i t y i n d r u g r e g u l a t i o n within t h e i r g r o u p s . The F r e n c h have been most anxious in recent years to improve G M P s , G L P s and t h e s t r i n g e n c y o f t h e drug a p p r o v a l p r o c e s s p r e c i s e l y so t h e y can b e t t e r c o m p e t e for t h e d e v e l o p e d c o u n t r y m a r k e t s . B r i t i s h c o n t r a c t l a b o r a t o r i e s w r i t e to the F D A asking for G L P i n s p e c t i o n s s o t h a t t h e y can tell c u s t o m e r s t h a t they are a p p r o v e d u n d e r A m e r i c a n G L P s . T h e r e can b e n o d o u b t , t h e n , that t h e i n t e r n a t i o n a l i s a t i o n of capital i s , in a g g r e g a t e , a force to u p g r a d e t h e s t a n d a r d s o f t h o s e w h o lag b e h i n d . T h e m o s t significant force of all for h a r m o n i s a t i o n of s t a n d a r d s h a s b e e n t h e W o r l d H e a l t h O r g a n i s a t i o n ' s Certification S c h e m e o n the Quality of Pharmaceutical Products Moving in International C o m m e r c e . P a r t i c i p a n t c o u n t r i e s i n t h e s c h e m e certify o n r e q u e s t from a n o t h e r p a r t i c i p a n t c o u n t r y t h a t specified p h a r m a c e u t i c a l e x p o r t s m e e t t h e G M P s t a n d a r d s set d o w n u n d e r t h e s c h e m e , that t h e p l a n t s a r e subject to p e r i o d i c i n s p e c t i o n , and that the p r o d u c t is a u t h o r i s e d for sale i n t h e e x p o r t i n g c o u n t r y . P a r t i c i p a n t c o u n t r i e s are Argentina, Australia, Belgium, Cyprus, Egypt, Finland, F r a n c e , Iceland, Italy, J a p a n , J o r d a n , Mauritius, N e w Z e a l a n d . N o r w a y , Poland. Portugal, Republic of Korea. Romania, Senegal, Spain, S w e d e n , Syria, United A r a b E m i r a t e s , United Kingdom, U n i t e d S t a t e s . To t h e e x t e n t t h a t such s c h e m e s have an effect it is in r a i s i n g t h e s t a n d a r d s o f t h e less s t r i n g e n t c o u n t r i e s . N a t i o n s with h i g h e r s t a n d a r d s h a v e not i n p r a c t i c e r e d u c e d their r e q u i r e m e n t s t o a lowest c o m m o n denominator. V a s t d i s p a r i t i e s r e m a i n , but t h e y are n a r r o w i n g . T h e p l a n t m a n a g e r o f t h e M e x i c a n subsidiary of an A m e r i c a n company was p r e p a r e d to give w h a t s e e m e d an h o n e s t a s s e s s m e n t of h o w far his factory had c o m e and h o w far it had to g o .

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It t a k e s t i m e for us to c a t c h up to US s t a n d a r d s . I k n o w h o w m a c h i n e s s h o u l d be c l e a n e d . B u t t h e y say we should h a v e i n s t r u c t i o n s i n w r i t i n g o n h o w t o clean m a c h i n e s . B e f o r e w e had n o t h i n g i n w r i t i n g . N o w w e are b e g i n n i n g t o w r i t e t h i n g s down.

The malevolent multinationals?
T r a n s n a t i o n a l c o r p o r a t i o n s d e s e r v e to be criticised for a l l o w i n g m u c h m o r e lax G M P s t a n d a r d s t o apply i n t h e p o o r p a r t s o f the w o r l d t h a n in t h e rich n a t i o n s . Possibly t h e r e are a c o u p l e of c o m p a n i e s ( p e r h a p s Lilly i s o n e ) w h o g o close t o i n t e r n a t i o n a l u n i f o r m i t y of q u a l i t y s t a n d a r d s - b u t no m o r e t h a n a c o u p l e . In spite o f t h e i r b l a m e w o r t h i n e s s o n this s c o r e , t h e foregoing discussion i m p l i e s t h a t t r a n s n a t i o n a l c o r p o r a t i o n s are a force for h i g h e r s t a n d a r d s in the Third W o r l d . Certainly their standards exceed those of most of their indigenous competitors. F u r t h e r m o r e , w i t h i n the U n i t e d S t a t e s t h e t r a n s n a t i o n a l c o m panies have much more sophisticated G M P compliance systems m a n a g e d b y m o r e qualified p e r s o n n e l t h a n t h e s m a l l e r A m e r i c a n c o m p a n i e s . M a n y s m a l l e r o p e r a t i o n s c a n n o t afford a quality a u d i t f u n c t i o n s u p e r i m p o s e d a b o v e t h e i n - p l a n t quality c o n t r o l staff. O n e small c o m p a n y e x e c u t i v e a r g u e d t h a t t h e y d o not need a n a u d i t f u n c t i o n as m u c h as a large c o m p a n y in w h i c h t o p m a n a g e m e n t , far r e m o v e d from t h e s h o p floor, n e e d a s s u r a n c e s t h a t s t a n d a r d s are b e i n g m a i n t a i n e d . P e r h a p s s o , but e a c h plant o w n e d b y a t r a n s n a t i o n a l is s i m i l a r in size to m a n y a small c o m p a n y c o n s i s t i n g o f a single p l a n t . T h e t r a n s n a t i o n a l plant m a n a g e r i s j u s t a s i n t o u c h with t h e s h o p floor a s t h e small c o m p a n y plant m a n a g e r . H o w e v e r , t h e f o r m e r i s s u b j e c t e d t o t w o t y p e s o f i n s p e c t i o n s (from h e a d q u a r t e r s a n d t h e F D A ) , w h i l e t h e l a t t e r i s s u b j e c t e d t o only o n e t y p e , and i f i t is a small p l a n t , F D A i n s p e c t i o n s are likely to be m u c h less frequent. S m a l l p l a n t s s o m e t i m e s do not h a v e the e c o n o m i e s of scale to justify s o m e of t h e q u a l i t y r e f i n e m e n t s of t h e t r a n s n a t i o n a l . A g e n e r i c m a n u f a c t u r e r , w h i c h d o e s not enjoy t h e m o n o p o l i s t i c profits of large c o m p a n i e s with p r o d u c t s on p a t e n t , survives by cost c u t t i n g . S o m e t i m e s this i n v o l v e s c u t t i n g c e r t a i n quality c h e c k s w h i c h , p e r h a p s t h o u g h not r e q u i r e d b y g o v e r n m e n t r e g u l a t i o n s , are n e v e r t h e l e s s d e s i r a b l e . In a small c o m p a n y it m i g h t be a practical impossibility to have decisions on the approval of batches m a d e by
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s o m e o n e w h o has n o i n t e r e s t i n t h e o u t c o m e . All e m p l o y e e s may effectively a n s w e r to t h e p r e s i d e n t and e v e r y o n e is intimately i n v o l v e d in t h e p r o d u c t i o n of every b a t c h of p r o d u c t . M o r e o v e r , in a small c o m p a n y the c o s t s of r e j e c t i n g o n e b a t c h ( p e r h a p s $50,000) m i g h t c a u s e t h e e n t e r p r i s e to run at a loss for the m o n t h . T h e t e m p t a t i o n to c o m p r o m i s e s t a n d a r d s is much g r e a t e r t h a n in a t r a n s n a t i o n a l w h e r e $ 5 0 , 0 0 0 is as n o t h i n g c o m p a r e d to t h e costs of t h e a d v e r s e publicity a r o u n d t h e w o r l d should the b a t c h c a u s e s e r i o u s a d v e r s e r e a c t i o n s . T h e large c o m p a n y also has m o r e t o lose by falling o u t of favour with the F D A - m o r e p r o d u c t s being c o n s i d e r e d for a p p r o v a l b y t h e a g e n c y , m o r e p l a n t s w h i c h can b e h a r a s s e d by i n s p e c t o r s , and so o n . A Lilly c o r p o r a t i o n study ( P a u l s and K l o e r , 1978) c o m p a r e d t h e i n c i d e n c e o f p r o d u c t recalls and F D A e n f o r c e m e n t action b e t w e e n t h e 2 3 ' r e s e a r c h - i n t e n s i v e ' c o m p a n i e s (all t r a n s n a t i o n a l ) and the h u n d r e d s o f s m a l l e r A m e r i c a n c o m p a n i e s . T h e d a t a w e r e from F D A E n f o r c e m e n t R e p o r t s for t h e p e r i o d J a n u a r y 1974 t h r o u g h D e c e m b e r 1977. O n l y recalls w h i c h w e r e classified b y t h e F D A a s i n v o l v i n g a risk to h e a l t h w e r e i n c l u d e d . T h e i n c i d e n c e of recalls w a s found to be s e v e n t i m e s h i g h e r by v o l u m e of sales in the s m a l l e r c o m p a n i e s . T h e r a t e o f F D A c o u r t a c t i o n s ( p r o s e c u t i o n s , injunct i o n s , s e i z u r e s ) w a s 4 3 t i m e s h i g h e r for the s m a l l e r c o m p a n i e s c o m p a r e d w i t h t h e t r a n s n a t i o n a l s . T h e F D A and p u b l i c - i n t e r e s t g r o u p s w h o w e r e k e e n t o defend t h e q u a l i t y o f g e n e r i c a l l y m a n u f a c t u r e d d r u g s a s e q u a l t o t h a t o f b r a n d - n a m e p r o d u c t s a t t a c k e d the Lilly s t u d y on a n u m b e r of m e t h o d o l o g i c a l g r o u n d s . H o w e v e r , Lilly w e r e a b l e to field t h e s e o b j e c t i o n s c o n v i n c i n g l y (Eli Lilly and C o m p a n y , 1979). U n d o u b t e d l y ail t h e e v i d e n c e is not yet in on this d e b a t e . H o w e v e r , a f a i r - m i n d e d o b s e r v e r has to find t h e existing e v i d e n c e c o n v i n c i n g t h a t e v e n i n the A m e r i c a n m a r k e t t h e t r a n s n a t i o n a l s h a v e a q u a l i t y r e c o r d s u p e r i o r t o t h a t o f t h e rest o f t h e industry.

158

5

Antitrust

A n t i t r u s t l a w , it will be a r g u e d , fulfils m a i n l y a s y m b o l i c function in c a p i t a l i s t s o c i e t i e s r a t h e r t h a n c r i m e c o n t r o l functions. I t a s s u r e s p e o p l e t h a t t h e m y t h o l o g y of c o m p e t i t i o n and free e n t e r p r i s e is r e a l . A n i m p r e s s i o n o f m o n o p o l i s a t i o n u n r e s t r a i n e d b y law u n d e r m i n e s t h e l e g i t i m a t i o n o f capitalist r e l a t i o n s o f p r o d u c t i o n ( P e a r c e . 1976; O ' M a l l e y , 1980). T h i s is not to say t h a t a n t i t r u s t law is not d e s i r a b l e and n e c e s s a r y . H o w e v e r , it will be a r g u e d that if capitalist s o c i e t i e s are s e r i o u s a b o u t r e s t o r i n g c o m p e t i t i o n to an industry like p h a r m a c e u t i c a l s , t h e r e are m o r e effective s t r u c t u r a l r e m e d i e s for a c h i e v i n g t h i s t h a n a r e a v a i l a b l e u n d e r a n t i t r u s t law. C e r t a i n l y a n t i t r u s t law can be r e f o r m e d to focus m o r e on m o n o p o l i s t i c and o l i g o p o l i s t i c s t r u c t u r e s and less o n c o n s p i r a t o r i a l c o n d u c t . B u t n o m a t t e r h o w far such reform g o e s , a n t i t r u s t law will r e m a i n less i m p o r t a n t t h a n g o v e r n m e n t e c o n o m i c policies for r e s t r a i n i n g m o n o p o l i s t i c pricing. B e f o r e c o n s i d e r i n g t h e n a t u r e of a n t i t r u s t offences in t h e pharm a c e u t i c a l i n d u s t r y w e must first c o m e t o grips with the e c o n o m i c structure o f t h e industry.

Profits in the pharmaceutical industry
Since the Second W o r l d W a r p h a r m a c e u t i c a l s have been one o f t h e m o s t a t t a c t i v e a r e a s o f i n v e s t m e n t . D r u g s have r a n k e d first o r s e c o n d in profitability a m o n g all i n d u s t r i e s in most y e a r s since 1955. In some y e a r s , some c o m p a n i e s - including Sterling, A m e r i c a n H o m e P r o d u c t s , N o r w i c h , S c h e r i n g , and S e a r l e - have r e c o r d e d 159

Antitrust net [after tax] profits of 30 to 39 per cent per year. C a r t e r - W a l l a c e , R o h r e r , and Smith K l i n e & F r e n c h have a c h i e v e d profits o f 4 0 t o 4 7 per c e n t . M a r i o n L a b o r a t o r i e s , A . H . R o b i n s , and S y n t e x have r e p o r t e d net profits of 51 to 54 per cent in s o m e y e a r s . E v e n d u r i n g t h e s e v e r e d e p r e s s i o n years of 1930 to 1935 U p j o h n r e p o r t e d profits of at least 30 per cent ( S i l v e r m a n a n d L e e , 1974: 3 0 ) .

T h e t h r e e l e a d i n g B r i t i s h c o m p a n i e s - B o o t s , B e e c h a m and G l a x o in 1972 e a r n e d 45 p e r c e n t , 41 per cent and 22 per cent r e s p e c t i v e l y o n c a p i t a l e m p l o y e d . R a n k X e r o x w a s t h e only c o m p a n y w h i c h w a s m o r e p r o f i t a b l e t h a n B o o t s and B e e c h a m i n that year a m o n g t h e top 100 B r i t i s h firms (Gereffi, 1979: 6 0 ) . A m y r i a d of r e s e a r c h e r s from different p a r t s of the w o r l d have s h o w n h o w r e c o r d e d profits in the p h a r m a c e u t i c a l industry are far i n e x c e s s o f m a n u f a c t u r i n g i n d u s t r y a v e r a g e s ( N a d e r , 1973; B u r a c k , 1976; 6 6 - 8 ; S i l v e r m a n , 1976: 1 2 1 ; L a b o u r P a r t y , 1976: 2 0 - 1 ; C l a r k s o n , 1977, 1979; M a e s d a y , 1977: 2 7 6 ; S l a t t e r , 1977; S u b c o m m i t t e e o n H e a l t h , 1977; A g a r w a l , 1978; Lall, 1978; Gereffi, 1 9 7 9 ; U n i t e d N a t i o n s C e n t r e o n T r a n s n a t i o n a l C o r p o r a t i o n s , 1979: 5 4 - 9 ) . E c o n o m i s t s d e f e n d i n g t h e i n d u s t r y have a r g u e d that r e c o r d e d profit figures in t h e p h a r m a c e u t i c a l industry artificially inflate t h e t r u e r a t e o f r e t u r n o n i n v e s t m e n t ( A y a n i a n , 1975; S c h w a r t z m a n , 1975; Stauffer, 1975; P h a r m a c e u t i c a l M a n u f a c t u r e r s A s s o c i a t i o n , 1977). T h e c e n t r a l t h r u s t o f their a r g u m e n t i s that " d i s c o v e r y i n t e n s i v e * i n d u s t r i e s such as p h a r m a c e u t i c a l s are in a u n i q u e s i t u a t i o n . E x c e s s i v e profits i n t h e industry are a n a c c o u n t i n g i l l u s i o n , t h e y say, a r i s i n g from t h e fact t h a t r e s e a r c h and d e v e l o p m e n t e x p e n d i t u r e s a r e not c a p i t a l i s e d a s a n i n v e s t m e n t asset, but r a t h e r a r e set a g a i n s t c u r r e n t i n c o m e . Gereffi (1979) p o i n t s o u t , h o w e v e r , t h a t t h e p r a c t i c e of not t r e a t i n g r e s e a r c h as a capital i n v e s t m e n t can r e s u l t in e i t h e r an u n d e r s t a t e m e n t or an overs t a t e m e n t o f t h e ' r e a l ' o r e c o n o m i c rate o f r e t u r n . S o m e o f the s t a t e m e n t s o f p r o - i n d u s t r y e c o n o m i s t s o n t h e q u e s t i o n o f profits have been calculatingly misleading. I n d u s t r y d e f e n d e r s tell us t h a t drug d e v e l o p m e n t is a risky b u s i n e s s . It is. M a n y millions can be spent on a p r o d u c t w h i c h p r o v e s to be unsafe or ineffective. I n d e e d , the Lilly e c o n o m i s t . C o c k s ( 1 9 7 5 ) , s h o w s t h a t this risk e l e m e n t p r o d u c e s wild v a r i a t i o n s in t h e s h a r e o f t h e m a r k e t held by different c o m p a n i e s . In a list of t w e n t y i n d u s t r y g r o u p s , d r u g s r a n k s e c o n d o n a n index o f m a r k e t 160

Antitrust s h a r e i n s t a b i l i t y . W h e n w e look a t t h e r a w d a t a , h o w e v e r , w e find t h a t t o p of t h e list for m a r k e t - s h a r e instability is that struggling i n d u s t r y , ' p e t r o l e u m * . C o u l d i t b e t h a t c e r t a i n i n d u s t r i e s are b o t h h i g h l y risky a n d highly p r o f i t a b l e ? T h e s m o k e s c r e e n from i n d u s t r y e c o n o m i s t s c a n n o t d i s p l a c e the r e a l i t y t h a t p h a r m a c e u t i c a l profits are e x t r a o r d i n a r i l y high. If actual profits m e r e l y b a l a n c e d risk, t h e n o n e w o u l d e x p e c t capital t o b e i n v e s t e d in t h e p h a r m a c e u t i c a l i n d u s t r y at t h e same rate as t h e all-industry average. The United Nations Centre on Transnational C o r p o r a t i o n s ( 1 9 7 9 : 5 7 - 8 ) s h o w s t h a t t h i s is not so. F r o m 1953 to 1967 in t h e U n i t e d S t a t e s , e q u i t y c a p i t a l in d r u g s i n c r e a s e d 584 per c e n t , t h e s e c o n d h i g h e s t figure for any i n d u s t r y g r o u p . E q u i t y c a p i t a l for t h e w h o l e m a n u f a c t u r i n g sector i n c r e a s e d only 183 per c e n t d u r i n g t h e s a m e p e r i o d . I n o t h e r w o r d s , drug profits h a v e a t t r a c t e d new m o n e y at more than three times the average rate.

Oligopoly in the pharmaceutical industry
E x c e s s i v e profits in t h e p h a r m a c e u t i c a l i n d u s t r y arise in c o n s i d e r a b l e m e a s u r e from t h e p e c u l i a r f e a t u r e s o f t h e m a r k e t which s h e l t e r p r o d u c e r s from p r i c e c o m p e t i t i o n . C o n s u m e r s o v e r e i g n t y i s a b s e n t i n t h e p r e s c r i p t i o n d r u g m a r k e t b e c a u s e i t i s not t h e c o n s u m e r w h o m a k e s a d e c i s i o n to p u r c h a s e , but t h e p h y s i c i a n . D o c t o r s have no r e a s o n to be p r i c e - c o n s c i o u s . M o r e o v e r , t h e need for effective m e d i c a l c a r e is relatively price inelastic in affluent s o c i e t i e s . T h e i n c r e d i b l e i m p e r v i o u s n e s s o f t h e p h a r m a c e u t i c a l industry t o m a r k e t forces b e c a m e a p p a r e n t i n t h e K e f a u v e r h e a r i n g s before the U S S e n a t e S u b c o m m i t t e e o n A n t i t r u s t a n d M o n o p o l y i n the early 1960s. K e f a u v e r ' s staff found t h a t t h e a v e r a g e p r o d u c t i o n costs for fifteen m a j o r d r u g firms w e r e 32.3 p e r cent o f t h e w h o l e s a l e price a t w h i c h t h e m a n u f a c t u r e r s sold their p r o d u c t . N o t o n e o f fifty c o m p a r i s o n c o m p a n i e s from o t h e r i n d u s t r i e s had p r o d u c t i o n costs l o w e r t h a n the highest p r o d u c t i o n costs a m o n g the 15 drug companies. A m o n g t h e n o n - d r u g f i r m s , C o c a - C o l a w a s the l o w e s t , with p r o d u c t i o n c o s t s b e i n g only 4 2 . 6 per cent o f e x - m a n u f a c t u r e r sales. T h e d r u g i n d u s t r y c l a i m e d t h a t t h e r e a s o n for this w a s the a m o u n t s they had to s p e n d on r e s e a r c h . In fact only 9 per cent of their sales d o l l a r s a r e s p e n t o n r e s e a r c h , m o r e t h a n twice t h a t i s s p e n t o n a d v e r t i s i n g , a n d m o r e t h a n twice t h e r e s e a r c h e x p e n d i t u r e i s a c c o u n t e d for b y p r e - t a x profits ( S i l v e r m a n and L e e , 1974: 2 8 - 3 0 ) . ' The Kefauver hearings revealed that in many situations 161

Antitrust c o m p a n i e s c h a r g e a l m o s t w h a t e v e r t h e y c h o o s e for a p r o d u c t . T h e r e a r e not t h e c o m p e t i t i v e forces t o m a k e price b e a r any relation to c o s t s . R o u s s e l , a F r e n c h firm, sold a d r u g used for m e n o p a u s a l d i s o r d e r s ( e s t r a d i o l p r o g y n o n ) to S c h e r i n g in bulk form. S c h e r i n g did no r e s e a r c h on t h e d r u g . T h e y simply put t h e p r o d u c t into tablet form in b o t t l e s of 60 u n d e r their o w n label. T h e b o t t l e s , which c o n t a i n e d 11.7 c e n t s w o r t h o f t h e d r u g , w e r e sold for S 8 . 4 0 , a m a r k - u p o f 7079 p e r cent ( M i n t z , 1967: 3 5 9 ) . D e f e n d e r s o f t h e p h a r m a c e u t i c a l i n d u s t r y c o r r e c t l y point out that t h e o v e r a l l s t r u c t u r e of the i n d u s t r y is not m o n o p o l i s t i c or o l i g o p o l i s t i c . In B r i t a i n , for e x a m p l e , t h e t o p five firms a c c o u n t e d for o n l y 2 6 . 6 p e r c e n t of p h a r m a c e u t i c a l sales for 1973 ( S l a t t e r , 1977: 4 7 ) . A g a i n t h e p e o p l e w h o point to such statistics put up a misl e a d i n g s m o k e s c r e e n . It is only meaningful to talk a b o u t d e g r e e of c o n c e n t r a t i o n in a m a r k e t for p r o d u c t s which are s u b s t i t u t a b l e . F o r e x a m p l e , it is m e a n i n g f u l to talk a b o u t c o n c e n t r a t i o n in t h e a u t o m o b i l e m a r k e t b y o b s e r v i n g w h a t p r o p o r t i o n o f t h e m a r k e t i s cont r o l l e d by t h e five l e a d i n g car m a n u f a c t u r e r s . T h i s is b e c a u s e F o r d s o r C h r y s l e r s c a n b e s u b s t i t u t e d for G e n e r a l M o t o r s c a r s . H o w e v e r , t h e p r o d u c t s o f o n e drug m a n u f a c t u r e r which m a k e s a n t i b i o t i c s c a n n o t b e s u b s t i t u t e d for t h o s e o f a n o t h e r which p r o d u c e s tranq u i l l i s e r s o r c o n t r a c e p t i v e s . W h e n o n e l o o k s a t the c o n c e n t r a t i o n w i t h i n t h e r a p e u t i c c a t e g o r i e s , t h e p h a r m a c e u t i c a l industry e m e r g e s as a highly o l i g o p o l i s t i c m a r k e t ( S l a t t e r , 1977: 4 8 - 9 ) . S c h w a r t z m a n ' s ( 1 9 7 6 : T a b l e 6.14) d a t a e n a b l e u s t o e x a m i n e t h e p e r c e n t a g e o f t h e US m a r k e t c o n t r o l l e d by t h e leading four firms for n i n e m a j o r t h e r a p e u t i c c a t e g o r i e s i n 1973. B e g i n n i n g with the l o w e s t four-firm c o n c e n t r a t i o n r a t i o , t h e results w e r e : s e d a t i v e s - 6 1 p e r c e n t , a n a l g e s i c s (ethical s y s t e m i c ) - 66 p e r c e n t ; a n t i b i o t i c s ( t o t a l ) - 69 p e r c e n t ; a n t i h i s t a m i n e s - 76 p e r c e n t ; oral d i u r e t i c s - 77 p e r c e n t ; p s y c h o s t i m u l a n t s - 83 per c e n t ; t r a n q u i l l i s e r s (oral a t a r a c t i c s ) - 86 p e r c e n t ; a n t i a r t h r i t i c s - 96 per c e n t ; and antid i a b e t i c s (oral h y p o g l y c e m i c s ) - 98 per c e n t . C o n c e n t r a t i o n is e v e n m o r e p r o n o u n c e d at t h e level of bulk drug p r o d u c t i o n . For e x a m p l e , a s c o r b i c acid ( V i t a m i n C) in d o s a g e forms is sold by m o r e t h a n a h u n d r e d c o m p a n i e s . T h e e n t i r e o u t p u t o f t h e v i t a m i n itself, h o w e v e r , i s p r o d u c e d b y M e r c k . Pfizer, and R o c h e ( U N C e n t r e o n T r a n s n a t i o n a l C o r p o r a t i o n s , 1979: 3 8 ) . B y their selling policies b u l k p r o d u c e r s are a b l e t o c o n t r o l t h e e x t e n t o f c o m p e t i t i o n . M a n y b u l k p r o d u c e r s a r e m o n o p o l i s t s . N e a r l y 500 o f t h e 650 bulk m e d i c i n a l c h e m i c a l s sold in the U n i t e d S t a t e s in 1975 w e r e a v a i l a b l e 162

Antitrust from only a single d o m e s t i c s o u r c e . O n l y 4 of the 650 medicinal c h e m i c a l s w e r e sold b y m o r e t h a n four m a n u f a c t u r e r s ( U S Intern a t i o n a l T r a d e C o m m i s s i o n , 1977: 9 3 - 1 0 6 ) . H i g h profits i n t h e p h a r m a c e u t i c a l i n d u s t r y are t h e r e f o r e t h e p r o d u c t o f m i n i m a l price competition.

Legal monopolies
T h e f u n d a m e n t a l m e c h a n i s m which g u a r a n t e e s limited price c o m p e t i t i o n in t h e p h a r m a c e u t i c a l i n d u s t r y is t h e g r a n t i n g of p a t e n t s to t h e d i s c o v e r e r s of n e w m e d i c i n e s for a p e r i o d of 16, 17 or 20 y e a r s , t h e p e r i o d d e p e n d i n g on the c o u n t r y . T h e h o l d e r of a p r o d u c t p a t e n t has e x c l u s i v e r i g h t s o v e r t h e m a n u f a c t u r e and sale of the p r o d u c t until t h e p a t e n t e x p i r e s . It is a legal m o n o p o l y . By definit i o n , w h e n a d r u g is still u n d e r p a t e n t price c o m p e t i t i o n is precluded. A m o s t v o c i f e r o u s o p p o n e n t of legal m o n o p o l i e s on m e d i c i n e s w a s S e n a t o r K e f a u v e r w h o a d v o c a t e d "the long-held m o r a l belief t h a t no o n e s h o u l d h a v e the right to w i t h h o l d from t h e p u b l i c p r o d u c t s w h i c h r e l i e v e suffering and may spell the difference b e t w e e n life a n d d e a t h ' . N a t i o n s differ in the e x t e n t to w h i c h they p e r m i t legal m o n o p o l i e s o v e r m e d i c i n e s . M a n y c o u n t r i e s will not p a t e n t m e d i c i n a l p r o d u c t s , but grant t h e m u c h w e a k e r p r o t e c t i o n o f p a t e n t s for a p a r t i c u l a r m e t h o d of p r o d u c i n g a d r u g (e.g. A r g e n t i n a , Austria. Cameroon. C e n t r a l African E m p i r e . Chad, Chile, Colombia, C o n g o , D a h o m e y , Denmark. Egypt, Gabon, Ghana. G r e e c e , I n d i a , Ivory Coast. M a d a g a s c a r , the N e t h e r l a n d s . Pakistan, Senegal. Spain, Sweden, Switzerland, Upper Volta, U r u g u a y , V e n e z u e l a , Yugoslavia). A dwindling number of countries grant neither product nor process patents (e.g. Brazil, Iran, Italy, R e p u b l i c of K o r e a , T u r k e y ) . A n u m b e r of countries which r e c o g n i s e b o t h p r o d u c t and p r o c e s s p a t e n t s have a d o p t e d p r o v i s i o n s for c o m p u l s o r y licensing of c o m p e t i n g firms to p r o d u c e t h e p r o d u c t in the public interest (e.g. Australia, C a n a d a , Federal R e p u b l i c o f G e r m a n y , G r e a t B r i t a i n ( r e p e a l e d i n 1977), I s r a e l ) . S e n a t o r K e f a u v e r o n c e w e n t close i n t h e U n i t e d States t o w i n n i n g s u p p o r t for a p r o p o s a l to r e d u c e t h e p e r i o d of p a t e n t p r o t e c t i o n for d r u g s t o t h r e e y e a r s . A t t h e end o f t h a t p e r i o d t h e d i s c o v e r e r w o u l d h a v e t o m a k e t h e p r o d u c t a v a i l a b l e u n d e r licence t o all c o m p e t i t o r s for a r o y a l t y fee of up to 8 p e r cent.
2

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Antitrust i n c e n t i v e for i n n o v a t i o n . T h e q u e s t i o n that K e f a u v e r w a s a s k i n g , h o w e v e r , i s h o w m u c h i n c e n t i v e i s sufficient. I n a d d i t i o n t o u n d e r m i n i n g c o m p e t i t i o n t h e r e are o t h e r w a y s that t h e quest for p a t e n t s can run c o u n t e r t o t h e p u b l i c i n t e r e s t . D u r i n g the S e c o n d W o r l d W a r , D r V . B u s h , d i r e c t o r o f t h e U S Office o f Scientific R e s e a r c h , w a s r e s p o n s i b l e for g e t t i n g t h e d r u g c o m p a n i e s t o m a k e t h e new w o n d e r d r u g , p e n i c i l l i n , a v a i l a b l e in q u a n t i t y for the war effort. In A p r i l 1943 B u s h r e p o r t e d t h a t t h e c o m p a n i e s had c o - o p e r a t e d "after a f a s h i o n ' . In a letter to an A r m y A i r C o r p s c o n s u l t a n t , Dr B u s h c o m p l a i n e d : ' T h e y h a v e n o t m a d e their e x p e r i m e n t a l results and their d e v e l o p m e n t of manufacturing processes generally available, h o w e v e r . . . this is the p r o b l e m ' ( M i n t z , 1967: 366). T h e p r o b l e m w a s t h a t ' t h e firms w e r e t o o busy trying t o c o r n e r p a t e n t s o n v a r i o u s p r o c e s s e s in t h e p r o d u c t i o n of penicillin to p r o d u c e much of it' ( H a r r i s , 1964). T h e c o - o r d i n a t o r o f t h e W a r P r o d u c t i o n B o a r d ' s special penicillin p r o g r a m m e , Albert L. Elder, wrote in a January 1944 m e m o r a n d u m : T h e v a l u e of penicillin in saving t h e lives of w o u n d e d soldiers has b e e n so t h o r o u g h l y d e m o n s t r a t e d t h a t I c a n n o t w i t h a c l e a r c o n s c i e n c e a s s u m e t h e r e s p o n s i b i l i t y for c o o r d i n a t i n g this p r o g r a m any l o n g e r w h i l e a t the s a m e t i m e b e i n g h a n d i c a p p e d b y b e i n g u n a b l e t o m a k e a v a i l a b l e i n f o r m a t i o n w h i c h w o u l d result i n t h e o u t p u t of m o r e penicillin and t h e r e b y save the lives of our s o l d i e r s ( M i n t z , 1967: 3 6 6 ) . A n o t h e r w a y t h a t t h e p a t e n t m e c h a n i s m r e b o u n d s against the p u b l i c i n t e r e s t is t h r o u g h c r e a t i n g i n c e n t i v e s for r e s e a r c h effort to be directed at ' m e - t o o ' drugs rather than therapeutic advances. In C h a p t e r 3 we saw t h a t t h e g r e a t m a j o r i t y of n e w p r o d u c t s which c o m e o n t h e m a r k e t are m o l e c u l a r m a n i p u l a t i o n s o f p r o d u c t s a l r e a d y u n d e r p a t e n t . T h e y are a t t e m p t s t o get a r o u n d t h e legal m o n o p o l y by p a t e n t i n g a m e - t o o p r o d u c t which is m o l e c u l a r l y d i s t i n c t but t h e r a p e u t i c a l l y i d e n t i c a l . S c a r c e r e s e a r c h t a l e n t and m o n e y are directed at me-too research precisely because of the p a t e n t s y s t e m . M e - t o o r e s e a r c h has o c c a s i o n a l l y s t u m b l e d u p o n significant t h e r a p e u t i c a d v a n c e s ( e . g . p r e d n i s o n e from c o r t i s o n e ; T h o r a z i n e from t h e e a r l y a n t i h i s t a m i n e s ) . Y e t h o w m u c h m o r e o f v a l u e m i g h t t h e s e scientists have d i s c o v e r e d i f their goal had b e e n t h e m a x i m u m a d v a n c e m e n t of m e d i c i n e i n s t e a d of finding a l o o p hole a r o u n d a patent? Former 164 Squibb medical director, Dr Dale Console, testified

Antitrust b e f o r e a S e n a t e s u b c o m m i t t e that d u r i n g his t e n u r e at S q u i b b an e s t i m a t e d 25 per cent of r e s e a r c h funds w e r e d e v o t e d to ' w o r t h w h i l e ' p r o j e c t s , a n d 7 5 p e r c e n t t o the d e v e l o p m e n t o f m e - t o o d r u g s a n d u n i m p o r t a n t c o m b i n a t i o n p r o d u c t s . C o n s o l e testified that 'with m a n y of t h e s e p r o d u c t s , it is clear w h i l e t h e y are on t h e d r a w i n g b o a r d t h a t t h e y p r o m i s e no utility. T h e y p r o m i s e s a l e s . It is not a q u e s t i o n of p u r s u i n g t h e m b e c a u s e s o m e t h i n g may c o m e of it. . .it is p u r s u e d s i m p l y b e c a u s e t h e r e is a profit in it' ( S i l v e r m a n and L e e , 1974: 4 0 ) . P a t e n t laws also restrict the c a p a c i t y o f i n d u s t r y r e s e a r c h e r s t o c o n s u l t w i t h o u t s i d e scientists o n t h e p r o g r e s s o f t h e i r w o r k . T o d o s o m i g h t e n d a n g e r t h e secrecy o f a p a t e n t a b l e i n n o v a tion. O n e of A m e r i c a ' s most eminent pharmacologists. Professor K e n n e t h L. M e l m o n , testified before t h e S e n a t e : i k n o w for a fact t h a t t h e p r e s e n t p a t e n t laws have p r e v e n t e d m y scientific c o o p e r a t i o n w i t h i n d u s t r y ' ( S u b c o m m i t t e e o n H e a l t h , 1974, P a r t 2 : 6 8 5 ) . T h e i m p o r t a n t fact a b o u t p a t e n t s i s t h a t t h e r e i s s t r o n g e v i d e n c e t h a t t h e i r r e s t r i c t i v e effect on c o m p e t i t i o n c o n t i n u e s long after the p a t e n t s c o n c e r n e d h a v e e x p i r e d ( S l a t t e r , 1977; 7 2 - 3 ) . A c o m p a n y w h i c h h a s h a d e x c l u s i v e m a r k e t i n g o f a n e w p r o d u c t for a n u m b e r o f y e a r s g e t s c o n s u m e r s ( d o c t o r s ) i n the habit o f using ( p r e s c r i b i n g ) t h a t p r o d u c t ( W h i t t e n , 1979). L a t e e n t r a n t s t o t h e m a r k e t after the p a t e n t has e x p i r e d have to struggle a g a i n s t this a d v a n t a g e . A F e d e r a l T r a d e C o m m i s s i o n study ( B o n d and L e a n , 1977) i n d i c a t e s t h a t late e n t r a n t s g e n e r a l l y fail to do t h i s , at least in t h e oral d i u r e t i c s and a n t i a n g i n a l m a r k e t s w h i c h w e r e t h e subject o f the s t u d y . N e i t h e r h e a v y p r o m o t i o n n o r p r i c e c u t t i n g w a s successful i n p e r s u a d i n g d o c t o r s t o select t h e s u b s t i t u t e b r a n d s o f t h e e n t r a n t s i n g r e a t v o l u m e . O n e m u s t s y m p a t h i s e with t h e a p p a r e n t l y irrational i n t r a n s i g e n c e o f t h e p r e s c r i b i n g p h y s i c i a n . T h e b e w i l d e r i n g array o f b r a n d n a m e s w h i c h c o n f r o n t s t h e d o c t o r - 2 0 , 0 0 0 b r a n d n a m e s for t h e 700 different d r u g s on t h e m a r k e t in t h e U n i t e d States - m e a n s t h a t t h e d o c t o r is d o i n g well if s/he can r e m e m b e r the b r a n d n a m e of t h e first v e r s i o n w h i c h a p p e a r s . T h e d o c t o r has e n o u g h t o learn w i t h o u t b o t h e r i n g w i t h t h e b r a n d n a m e s o f late m a r k e t e n t r a n t s . H e n c e t h e r a t i o n a l e for t h e policy a d v o c a t e d b y m a n y r e f o r m e r s o f a b o l i s h i n g b r a n d n a m e s . E a c h p r o d u c t w o u l d h a v e a single g e n e r i c n a m e , so that choices between c o m p e t i n g suppliers would be made m o r e on t h e b a s i s of p r i c e and quality and less on t h e s t r e n g t h of habits c o n d i t i o n e d by early entry.
3

T h e e x t e n t t o w h i c h t h e early m a r k e t e n t r a n t with a n e x p i r e d p a t e n t can resist p r i c e r e d u c t i o n s w h i l e m a i n t a i n i n g m a r k e t 165

Antitrust d o m i n a n c e c a n b e s t a g g e r i n g . T h e m o s t e x p e n s i v e p r o d u c t often h a s t h e g r e a t e s t s h a r e o f t h e m a r k e t . F r e q u e n t l y the leading b r a n d sells at five to ten t i m e s t h e price o f t h e c h e a p e s t s u p p l i e r s . In t h e c a s e o f t h e r e s e r p i n e m a r k e t , the a v e r a g e price c h a r g e d i n t h e U n i t e d S t a t e s by t h e four lowest cost s u p p l i e r s w a s S I . 1 7 (1,000 0.25 m g . t a b l e t s ) . T h e l e a d i n g b r a n d , C i b a - G e i g y ' s S e r p a s i l , sold for S 3 8 . 7 1 , more than 30 times as much (UN Centre on Transnational C o r p o r a t i o n s , 1979: 4 9 . 1 3 6 ) .
4

T h e fact t h a t p a t e n t s c r e a t e legal m o n o p o l i e s , and that they a l l o w a r b i t r a r y p r i c e differentials t o c o n t i n u e e v e n after t h e y e x p i r e , has i m p o r t a n t i m p l i c a t i o n s for c r i m e . I n t h e m i n d o f t h e p h a r m a c e u t i c a l e x e c u t i v e , t h e r e is little m o r a l difference b e t w e e n legal and illegal p r i c e fixing. T h e m o r a l a u t h o r i t y of a n t i t r u s t law rests in a s s u m p t i o n s a b o u t t h e v a l u e o f free c o m p e t i t i o n . P h a r m a c e u t i c a l execut i v e s find difficulty in e s t a b l i s h i n g t h e r e l e v a n c e of this m o r a l a u t h o r i t y t o t h e i r w o r k s i t u a t i o n i n which e s c h e w i n g price c o m p e t i t i o n is n o r m a l a n d legal. M o r e t h a n l e g a l , it is affirmatively s a n c t i o n e d i n law t h r o u g h p a t e n t s .
5

T h e e x i s t e n c e of legal m o n o p o l y p o i n t s up t h e a m b i g u i t y felt by t h e e x e c u t i v e a b o u t t h e i m p r o p r i e t y o f illegal m o n o p o l y . I n d e e d , p h a r m a c e u t i c a l e x e c u t i v e s a r e socialised t o p e r c e i v e moral virtue i n a n t i c o m p e t i t i v e p r i c i n g p r a c t i c e s . R e p e a t e d l y m y i n f o r m a n t s would a d m o n i s h t h a t such pricing p r a c t i c e s w e r e a way of e n s u r i n g that p r o p e r r e w a r d s and incentives went to the innovators of healthg i v i n g d r u g s . ' P r i c e fixing saves lives' is a c a r i c a t u r e of this p o s i t i o n , b u t t h e c a r i c a t u r e g r a s p s t h e e s s e n c e o f t h e stance w h i c h has real m o r a l a u t h o r i t y t o p h a r m a c e u t i c a l e x e c u t i v e s . 'Price c o m p e t i t i o n i s t h e s t r e n g t h o f t h e free e n t e r p r i s e s y s t e m ' has n o moral a u t h o r i t y b e c a u s e it is r e c o g n i s e d for the h u m b u g it is with r e s p e c t to t h e i r industry.

Advantages of oligopoly
E c o n o m i s t s s o m e t i m e s c a s t i g a t e l a w y e r s w h o wish t o litigate antit r u s t m a t t e r s e v e n w h e n t h e illegal c o n d u c t c o n c e r n e d i s i n the n a t i o n a l e c o n o m i c i n t e r e s t ( e . g . P o s n e r , 1976). T h e y claim that c o u r t s t o o often lose sight of the o r i g i n a l p u r p o s e of legislation. In t h e c a s e o f a n t i t r u s t laws t h e p u r p o s e i s t o i n c r e a s e e c o n o m i c efficiency t h r o u g h e n s u r i n g u n f e t t e r e d c o m p e t i t i o n . B u t i f t h e goal i s g r e a t e r efficiency, w h y d e t e r m o n o p o l i s t i c p r a c t i c e s i n c i r c u m s t a n c e s w h e r e m o n o p o l y i s efficient? S o m e t i m e s l a w y e r s d o t a k e t h e 166

Antitrust v i e w t h a t m o n o p o l y isperse evil and e x h i b i t an i n c l i n a t i o n to apply a n t i t r u s t law t o a r e a s w h e r e t h e costs o f m o n o p o l y pricing are o u t w e i g h e d by t h e e c o n o m i e s of c e n t r a l i s i n g p r o d u c t i o n in o n e or a very few firms." L e g a l i s m t e n d s to focus a t t e n t i o n on t h o s e t y p e s of a n t i t r u s t offences w h i c h are m o s t c o n s p i r a t o r i a l , m o s t p r e d a t o r y i n t h e i r i n t e n t ; e c o n o m i s m a d v o c a t e s t h e d i r e c t i o n o f scarce enf o r c e m e n t resources to m o n o p o l i e s which have the most adverse structural implications. T h e r e have been a r g u m e n t s that oligopoly in the pharmaceutical i n d u s t r y p r o d u c e s socially beneficial e c o n o m i e s of scale in (a) q u a l i t y c o n t r o l ; (b) p r o d u c t i o n ; (c) p r o m o t i o n ; and (d) r e s e a r c h and d e v e l o p m e n t ( G e r e f f i , 1979). In t h e last c h a p t e r it w a s a r g u e d t h a t the large t r a n s n a t i o n a l do have superior performance in ensuring drug quality. The UN C e n t r e on Transnational C o r p o r a t i o n s (1979: 3 5 ) a r g u e t h a t t h e r e are e x p l a n a t i o n s for this i n t e r m s o f e c o n o m i e s of s c a l e : T h e r e are two major sources of scale-economies in controlling d r u g q u a l i t y : l a r g e o v e r h e a d costs w h i c h d o not vary w i t h o u t p u t a n d t h e n e e d t o e m p l o y p e r s o n s with highly specialized skills w h i c h w o u l d be i n c o m p l e t e l y utilized by firms t h a t p r o d u c e d a small q u a n t i t y o r r a n g e o f d r u g s . T h e latter i n c l u d e c o n t r o l s y s t e m s w h i c h utilize c o m p u t e r s for t h e entry of test results and t h e m a i n t e n a n c e o f b a t c h r e c o r d s ; t h e staffing and o p e r a t i n g costs o f t h e q u a l i t y c o n t r o l l a b o r a t o r y ; t h e d e c l i n i n g cost o f s a m p l i n g a n d t e s t i n g p e r unit o f o u t p u t w i t h i n c r e a s e s i n b a t c h size; and the c o s t s o f t h e c u s t o m e r c o m p l a i n t d e p a r t m e n t r e s p o n s i b l e for l o c a t i n g and r e c a l l i n g defective p r o d u c t s , c o s t s t h a t i n c r e a s e less t h a n p r o p o r t i o n a l l y w i t h sales. O f c o u r s e t h e a b o v e a r g u m e n t s and t h e d a t a o f t h e last c h a p t e r s u g g e s t i n g t h e s u p e r i o r q u a l i t y p e r f o r m a n c e o f the t r a n s n a t i o n a l s do n o t imply t h a t by b e c o m i n g e v e n larger, t r a n s n a t i o n a l s will r e l e v a n c e to f u r t h e r i m p r o v e t h e i r quality p e r f o r m a n c e . E c o n o m i e s of scale pharmaceuticals. T h e r e a r e t w o s t a g e s i n drug m a n u f a c t u r e : raw m a t e r i a l o r active i n g r e d i e n t p r o d u c t i o n , and dosage-form fabrication. The e c o n o m i e s of scale in d o s a g e - f o r m f a b r i c a t i o n are small and t h e r e f o r e do n o t b a r e n t r y . T h e t e c h n o l o g y calls for relatively s i m p l e e q u i p m e n t a n d t h e following o f well s p e l l e d - o u t 167 in p r o d u c t i o n are of limited

Antitrust d i r e c t i o n s . T h o s e significant scale e c o n o m i e s t h a t d o exist are p r e s e n t only in the manufacture of active ingredients. O n e e x a m p l e d e a l s with t h e b a t c h f e r m e n t a t i o n p r o c e s s e s that c h a r a c t e r i z e t h e p r o d u c t i o n o f a n t i b i o t i c s and s y n t h e t i c c o r t i c o s t e r o i d s . T h e t e c h n o l o g y in this case is s o p h i s t i c a t e d and c a p i t a l - i n t e n s i v e , and only large m a n u f a c t u r e r s can use it efficiently. T h e r e is a t h r e s h o l d to o u t p u t v o l u m e , h o w e v e r , b e y o n d w h i c h t h e r e are n o further gains i n p r o d u c t i o n e c o n o m i e s from size. E a c h o f t h e large a n t i b i o t i c s m a n u f a c t u r e r s , for i n s t a n c e , uses from ten to fifty f e r m e n t a t i o n v e s s e l s ; w h e n they w a n t t o i n c r e a s e t h e i r o u t p u t , they i n c r e a s e t h e n u m b e r r a t h e r t h a n t h e c a p a c i t y of i n d i v i d u a l vats - a c i r c u m s t a n c e c o n d u c i v e to c o n s t a n t r e t u r n s t o scale (Gereffi, 1979: 4 0 - 1 ) . T h e r e a r e c e r t a i n l y e c o n o m i e s o f scale i n p r o m o t i o n . L a r g e firms spend almost as much on p r o m o t i o n as they do on production. S m a l l firms find it i m p o s s i b l e to r e t a i n a large t e a m of d e t a i l e r s for d o c t o r v i s i t s , t o t a k e o u t full-page a d v e r t i s e m e n t s i n leading m e d i c a l j o u r n a l s , s p o n s o r c o n f e r e n c e s i n A c a p u l c o , and d o all the o t h e r t h i n g s n e c e s s a r y for e n t r y t o t h e b r a n d - n a m e m a r k e t . T h e s e s c a l e - e c o n o m i e s in p r o m o t i o n are not a justification for o l i g o p o l y , b u t o n e o f t h e c a u s e s of it. T h e y c o n s t i t u t e a m a j o r b a r r i e r for e n t r y of n e w c o m p e t i t o r s . M o r e o v e r , the question of w h e t h e r p r o m o t i o n is on b a l a n c e a social benefit will be c o n s i d e r e d critically in t h e next chapter. T h e s t r o n g e s t i n d u s t r y justification for o l i g o p o l y c o n c e r n s e c o n o m i e s o f scale i n r e s e a r c h and d e v e l o p m e n t . H a n s e n (1979) f o u n d t h e a v e r a g e c u r r e n t cost of d e v e l o p i n g a new c h e m i c a l entity to t h e s t a n d a r d s r e q u i r e d for m a r k e t i n g as a drug in t h e U n i t e d S t a t e s to be $54 m i l l i o n . C l e a r l y , this is b e y o n d the r e s o u r c e s of s m a l l c o m p a n i e s . T h e O E C D c o n s i d e r e d t h a t 'for a r e s e a r c h - b a s e d p h a r m a c e u t i c a l c o m p a n y t o have r e a s o n a b l e p r o s p e c t s o f g r o w t h , i t is u s u a l l y c o n s i d e r e d t h a t at least 300 r e s e a r c h w o r k e r s should be e m p l o y e d ' ( O E C D , 1969). I n c r e a s i n g l y , p r o d u c t i n n o v a t i o n s are c o n c e n t r a t e d i n t h e r e s e a r c h d i v i s i o n s o f t h e largest c o m p a n i e s b e c a u s e o f e s c a l a t i n g r e g u l a t o r y r e q u i r e m e n t s and t e c h n i c a l d e m a n d s for n e w b r e a k t h r o u g h s . G r a b o w s k i and V e r n o n ( 1 9 7 9 : 4 7 ) s h o w t h a t w h i l e t h e s h a r e of d r u g sales of the largest four firms r e m a i n e d fairly c o n s t a n t b e t w e e n 1957 and 1 9 7 1 , t h e p r o p o r t i o n o f i n n o v a t i o n a l o u t p u t ( n e w c h e m i c a l e n t i t i e s ) a c c o u n t e d for b y t h e four l a r g e s t firms i n c r e a s e d from 24 p e r cent to 49 p e r c e n t . B e t w e e n 168

Antitrust 1957 a n d 1961 t h e r e w e r e 51 firms w h o d e v e l o p e d a n e w c h e m i c a l e n t i t y ; b e t w e e n 1967 a n d 1971 t h e r e w e r e only 2 3 . P r i o r to t h e m i d - 1 9 6 0 s it w a s t h e case t h a t t h e very largest firms w e r e n o t t h e m o s t i n n o v a t i v e , s o t h a t t h e r e w e r e c e r t a i n dise c o n o m i e s o f scale ( C o m a n o r , 1965; G r a b o w s k i , 1968; R e e k i e , 1 9 6 9 ; M a n s f i e l d e t a l . , 1 9 7 1 ; M o n o p o l i e s C o m m i s s i o n , 1972). H o w e v e r , R e e k i e and W e b e r ( 1 9 7 9 : 146-51) have r e v i e w e d the c o n s i d e r a b l e e v i d e n c e w h i c h p o i n t s t o t h e c o n c l u s i o n t h a t since t h e m i d - 1 9 6 0 s r e s e a r c h and d e v e l o p m e n t effort and o u t p u t n o w i n c r e a s e p r o p o r t i o n a t e l y w i t h firm size. A f r e q u e n t l y o v e r s t a t e d , b u t n e v e r t h e l e s s r e a l , social benefit of t h e o l i g o p o l i s t i c s h e l t e r i n g of t h e r e s e a r c h - i n t e n s i v e firms is t h e p r o d u c t i o n o f ' s e r v i c e drugs'. These are products of great medical v a l u e , but for w h i c h t h e r e is such a small m a r k e t t h a t t h e costs of p r o d u c t i o n , safety t e s t i n g , and d o c u m e n t a t i o n for g o v e r n m e n t r e g i s t r a t i o n e x c e e d r e t u r n s from sales. F o r e x a m p l e , t h e r e i s t h e story o f C u p r i m i n e ( p e n i c i l l a m i n e ) , w h i c h M e r c k i n t r o d u c e d i n 1963 to r e m o v e c o p p e r in t r e a t i n g W i l s o n ' s d i s e a s e , an often fatal c o m p l a i n t w h i c h afflicts only 1,000 p e r s o n s in t h e US ( M i n t z , 1967: 3 4 7 - 8 ) . R o s e n t h a l (1960) points out that it would b e c y n i c a l . . . to dismiss as mere public relations Mead J o h n s o n ' s drug which cures a rare mental disorder occurring in p e r h a p s four h u n d r e d infants i n this c o u n t r y ; W y e t h ' s A n t i v e n i n a g a i n s t s n a k e b i t e ; L i l l y ' s m u s t a r d gas kit; o r A b b o t t ' s r a d i o a c t i v e i s o t o p e s . T h e s e a r e c e r t a i n l y not p r o f i t a b l e . O n e s u s p e c t s t h a t p h a r m a c e u t i c a l c o m p a n i e s m o r e often t h a n not d e c i d e a g a i n s t m a r k e t i n g a beneficial yet u n p r o f i t a b l e p r o d u c t . N e v e r t h e l e s s , in a perfectly c o m p e t i t i v e m a r k e t , c o m p a n i e s could n o t afford t h e l u x u r y o f a n y lines w h i c h c a u s e losses. T o t h e e x t e n t t h a t s e r v i c e d r u g s d o e x i s t , t h e y are m a d e p o s s i b l e b y t h e oligop o l i s t i c s t r u c t u r e o f t h e m a r k e t . I n c o n c l u s i o n , t h e n , t h e r e are c e r t a i n i m p o r t a n t p u b l i c benefits from o l i g o p o l y i n t h e p h a r m a c e u t i c a l i n d u s t r y . T h e q u e s t i o n is, h o w e v e r , w h e t h e r t h e public w o u l d be b e t t e r s e r v e d by direct p u b l i c funding for t h e s e benefits (for e x a m p l e , g o v e r n m e n t p r o d u c t i o n o f service d r u g s ) , while subs i d i s i n g such f u n d i n g from t h e savings which w o u l d follow from breaking oligopolistic power.

169

Antitrust

Government price controls
M o s t g o v e r n m e n t s , realising that t h e p r i c e s t h e i r p e o p l e are asked t o pay t r a n s n a t i o n a l d r u g c o m p a n i e s b e a r little r e l a t i o n t o m a r k e t f o r c e s , h a v e i n t r o d u c e d m o r e or less effective g o v e r n m e n t control o f p h a r m a c e u t i c a l p r i c e s . F o r a l m o s t e v e r y p r e s c r i p t i o n d r u g , one c a n o b s e r v e t h e identical p r o d u c t p r o d u c e d b y t h e same c o m p a n y selling at grossly d i s p a r a t e p r i c e s in different p a r t s o f t h e world Lilly's D a r v o n , for e x a m p l e , sold for S7.02 per h u n d r e d c a p s u l e s in t h e U n i t e d S t a t e s a n d S I . 6 6 i n I r e l a n d . W i d e s p r e a d price controls on d r u g s h a v e b e e n a r e s p o n s e to t h e reality that prices b e a r m o r e r e l a t i o n to w h a t p u b l i c o p i n i o n will b e a r t h a n to what the m a r k e t will b e a r . T h e y a r e a reflection of political choices r a t h e r than purchasing choices. In m o s t c o u n t r i e s the price at w h i c h a d r u g is to be sold is n e g o t i a t e d w i t h t h e g o v e r n m e n t at t h e t i m e it is first allowed on the m a r k e t and may not b e c h a n g e d w i t h o u t g o v e r n m e n t a p p r o v a l . I n m a n y c a s e s t h e n e g o t i a t e d prices are b a s e d on a formula which i n c o r p o r a t e s costs of raw materials, production, distribution, r e s e a r c h , a n d a profit m a r g i n . S o m e c o u n t r i e s such as A u s t r a l i a do q u i t e d e t a i l e d a n a l y s i s o f v a r i o u s c o s t s o f m a r k e t i n g the p r o d u c t . I t a l y , in c o n t r a s t , simply a w a r d s a price w h i c h is a multiple o f t h e r a w m a t e r i a l s and p r o d u c t i o n c o s t s . B r i t a i n d e t e r m i n e s price i n c r e a s e s or d e c r e a s e s on t h e basis of w h a t a m o u n t of i n c o m e will a l l o w t h e c o m p a n y a p r e d e t e r m i n e d level of profit. T h e r e is no a n a l y s i s o f c o m p o n e n t c o s t s . M a n y T h i r d - W o r l d c o u n t r i e s which c a n n o t afford m o r e d e t a i l e d i n v e s t i g a t i o n base their decisions o n the prices prevailing in the country of origin. In s o m e c o u n t r i e s a 'free m a r k e t ' o p e r a t e s alongside a pricec o n t r o l l e d m a r k e t . T h e g o v e r n m e n t might not allow a p r o d u c t into its s u b s i d i s e d p h a r m a c e u t i c a l benefits s c h e m e unless the c o m p a n y is w i l l i n g to a g r e e to t h e g o v e r n m e n t ' s d e c i s i o n on the price at which t h e p r o d u c t will be sold within t h e c o u n t r y . But the c o m p a n y can d e c i d e not to h a v e its p r o d u c t on the p h a r m a c e u t i c a l benefits s c h e m e a n d sell it on t h e o p e n m a r k e t at w h a t e v e r price it c h o o s e s . T h e l a t t e r is g e n e r a l l y not an a t t r a c t i v e p r o p o s i t i o n to c o m p a n i e s b e c a u s e d r u g s u n a p p r o v e d b y g o v e r n m e n t subsidy s c h e m e s are less likely to be p r e s c r i b e d by d o c t o r s . H e n c e , e v e n w h e r e t h e free m a r k e t o p t i o n is o p e n , effective p r i c e c o n t r o l is generally possible. T h e U n i t e d S t a t e s is t h e only large p h a r m a c e u t i c a l m a r k e t in the w o r l d w h e r e p r i c e s a r e not p r i m a r i l y c o n t r o l l e d b y g o v e r n m e n t . 170

Antitrust A f u n d a m e n t a l reality of any e c o n o m i c i n s t i t u t i o n is t h a t it c r e a t e s n e w t e m p t a t i o n s , p r e s s u r e s and o p p o r t u n i t i e s for c r i m e w h i c h a r e u n i q u e t o it. P a t e n t s c r e a t e p a t e n t p i r a t e s , a n d . a s w e saw i n C h a p t e r 2 , b r i b e s for e m p l o y e e s t o disclose c o m m e r c i a l s e c r e t s . P r i c e c o n t r o l s c r e a t e illegal price i n c r e a s e s . In 1977 the M e x i c a n g o v e r n m e n t i m p o s e d fines of up to 5().(XX) p e s o s ( S U S 2 , 7 1 5 ) on forty companies for increasing prices without government a p p r o v a l . M o r e t y p i c a l l y , f i n d i n g l o o p h o l e s t o get a r o u n d price c o n t r o l laws i s t h e p r e f e r r e d s t r a t e g y . I n M e x i c o , c o m p a n i e s w h o h a v e had a price of say 100 p e s o s a p p r o v e d for a b o t t l e o f 2 0 t a b l e t s m a n o e u v r e a r o u n d t h e law by m a r k e t i n g a n e w pack of 24 t a b l e t s for 150 p e s o s . A m o r e w i d e l y used s t r a t e g y is t h e ' r e g i s t r a t i o n l o o p h o l e ' . W h e n t h e price of o n e of its d r u g s is fixed at an unsatisfactorily low l e v e l , t h e c o m p a n y s u b m i t s a n e w r e g i s t r a t i o n a p p l i c a t i o n for t h e s a m e d r u g u n d e r a n e w n a m e ; or, if it has o n e . a m e - t o o version o f t h e original. S o m e o f t h e g o v e r n m e n t price r e g u l a t o r s t o w h o m I s p o k e had little d o u b t that c o m p a n i e s often p r o v i d e d t h e m with false and m i s l e a d i n g i n f o r m a t i o n on costs in o r d e r to get a price i n c r e a s e . O n e c o m p a n y i n f o r m a n t told m e t h a t t h e m a n a g i n g - d i r e c t o r o f his t r a n s n a t i o n a l had a s c h e m e for s h o w i n g the A u s t r a l i a n H e a l t h D e p a r t m e n t t h a t its t r a n s f e r prices for r a w m a t e r i a l s i m p o r t e d from c o r p o r a t e h e a d q u a r t e r s w e r e twice w h a t they i n fact w e r e . H a l f the r a w m a t e r i a l s w e r e i m p o r t e d from h e a d q u a r t e r s at. say. S10 a g r a m a n d half sent free of c h a r g e 'for use in c o n d u c t i n g trials'. W h i l e the real cost of t h e s h i p m e n t w a s $5 a g r a m , t h e H e a l t h D e p a r t m e n t c o u l d be s h o w n an i n v o i c e to i n d i c a t e t h a t t h e transfer price w a s S10. W h i l e t h e g o v e r n m e n t price c o n t r o l s b r i n g into play n e w forms o f c r i m i n a l i t y , o n e w o u l d e x p e c t t h e m to e l i m i n a t e o t h e r s - for e x a m p l e , price-fixing c o n s p i r a c i e s . T h e following r e v e l a t i o n from o n e o f t h e most indiscreet o f t h e executives I interviewed brought h o m e t h e fact t h a t g o v e r n m e n t c o n t r o l o v e r p r i c e s d o e s not eliminate price-fixing c o n s p i r a c i e s ; it m e r e l y c h a n g e s their form. I had had an a b s o l u t e l y fruitless discussion with four A u s t r a l i a n e x e c u t i v e s of an A m e r i c a n c o m p a n y . G e n e r a l l y , I found t h a t in c o l l e c t i v e i n t e r v i e w s , e x e c u t i v e s w h o w e r e frank i n private j o i n e d t h e o t h e r s i n a t t e m p t s t o o u t d o each o t h e r with displays o f c o m p a n y l o y a l t y a n d o r a t i o n s a b o u t t h e evils of r e g u l a t i o n . As I w a i t e d d e j e c t e d l y in t h e foyer for a taxi to t a k e me to my h o t e l , one o f t h e four e x e c u t i v e s , a t e n n i s r a c q u e t u n d e r his a r m , c a m e o v e r and 171

Antitrust b e g a n to c h a t . In t h e c o u r s e of an a m i a b l e c o n v e r s a t i o n he m e n t i o n e d t h a t he w a s off to play t e n n i s on the c o u r t s of a n o t h e r p h a r m a c e u t i c a l c o m p a n y l o c a t e d n e a r b y . W i t h c a l c u l a t e d naivety I said: ' O h a r e n ' t you c u t - t h r o a t c o m p e t i t o r s w h o are a l w a y s a t e a c h o t h e r ' s t h r o a t s ? ' - a t a u t o l o g o u s q u e s t i o n t h a t still rings in my e a r s . N o , h e s a i d , t h e y got o n well t o g e t h e r . W h y , h e c o n t i n u e d , j u s t r e c e n t l y w e got t o g e t h e r a b o u t 3 0 o f u s , all o f t h e a c c o u n t a n t s a n d f i n a n c e d i r e c t o r s . . . t o sit a r o u n d t h e table t o g e t h e r and w o r k o u t p r i c e s t h a t we could all a g r e e on in t h e s u b m i s s i o n s that w e m a k e t o t h e H e a l t h D e p a r t m e n t . . . . S o t h a t , for e x a m p l e , we w o u l d all p u t d o w n r o u g h l y the s a m e price for the costs of d i s t r i b u t i n g a d r u g s o t h a t the H e a l t h D e p a r t m e n t c o u l d n ' t c o m e to o n e of us and say: ' L o o k , o t h e r c o m p a n i e s are c o s t i n g this at a lot less t h a n y o u a r e . ' I furtively b l u r t e d this into my t a p e r e c o r d e r in t h e b a c k o f t h e t a x i , d e s p i t e my e m b a r r a s s m e n t at the driver's presence.

T h e H o f f m a n - L a R o c h e case s t u d y D r . R i c h a r d B u r a c k c o m p a r e s t h e cost o f V a l i u m t o the price o f g o l d . He d i s c o v e r e d t h a t t h e w h o l e s a l e price of V a l i u m is t w e n t y - f i v e t i m e s t h e price o f g o l d . B u t t h a t said n o t h i n g a b o u t t h e profit to R o c h e . T h i s w a s r e v e a l e d in a p a t e n t h e a r i n g in C a n a d a , initiated by the attorney general of that country. H e r e ' s w h a t w a s f o u n d . It costs $87 per kilo (2.2 p o u n d s ) for the raw m a t e r i a l for V a l i u m , k n o w n by its g e n e r i c c h e m i c a l n a m e as d i a z e p a m . To put t h e r a w m a t e r i a l into final d o s a g e form and to label a n d p a c k a g e t h e t a b l e t s b r i n g s t h e cost up to $487. T h i s is a g e n e r o u s e s t i m a t e o f p r o d u c t i o n c o s t s ; t h e y are p r o b a b l y less. T h e final retail p r i c e is $11,000 for t h a t s a m e original kilo w h i c h h a s n o w p r o d u c e d 100,000 t e n - m i l l i g r a m t a b l e t s . T h e selling p r i c e is 140 t i m e s t h e original cost of m a t e r i a l s and t w e n t y t i m e s t h e t o t a l p r o d u c t i o n cost ( P e k k a n e n , 1973: 8 1 ) . V a l i u m a n d L i b r i u m h a v e b e e n b e t t e r t h a n gold for H o f f m a n - L a R o c h e , t h e Swiss p a t e n t - h o l d e r s o f t h e t r a n q u i l l i s e r s . R o c h e sales o f V a l i u m in t h e U n i t e d S t a t e s a l o n e a p p r o a c h e d $200 million for 1972 m a k i n g i t t h e t o p - s e l l i n g p r e s c r i p t i o n d r u g ( N a d e r , 1973). Intern a t i o n a l p r i c e v a r i a t i o n s for V a l i u m reflect t h e c a p a c i t y of the t r a n s n a t i o n a l w i t h a legal m o n o p o l y to c h a r g e w h a t e v e r t h e traffic 172

Antitrust will b e a r . E v e n w i t h i n t h e E E C , i n G e r m a n y R o c h e sells V a l i u m a t a l m o s t four t i m e s t h e p r i c e i t c h a r g e s i n B r i t a i n (1976 p r i c e s ) . R o c h e h a s q u o t e d t h e Sri L a n k a n g o v e r n m e n t a price for V a l i u m 70 t i m e s higher than the price charged by an Indian company ( A g a r w a l , 1 9 7 8 b ) . T h e P a p u a N e w G u i n e a g o v e r n m e n t has b e e n offered V a l i u m a t o n e t e n t h t h e price c h a r g e d t o the n e i g h b o u r i n g A u s t r a l i a n g o v e r n m e n t ( G o r r i n g , 1978: 9 3 ) . I n t h e late 1960s t h e B r i t i s h g o v e r n m e n t d e c i d e d t h a t H o f f m a n L a R o c h e w a s a b u s i n g m o n o p o l y p o w e r b y its pricing o f V a l i u m a n d L i b r i u m . N e g o t i a t i o n s with t h e c o m p a n y led t o p a y m e n t s o f S I . 6 m i l l i o n to t h e g o v e r n m e n t for excess profits b e t w e e n 1967 and 1969. R o c h e r e g a r d e d p a y i n g s o m e o f their profits t o t h e g o v e r n m e n t a s p r e f e r a b l e to c u t t i n g t h e i r p r i c e s for fear t h a t t h e l a t t e r w o u l d lead t o d e m a n d s from o t h e r c o u n t r i e s for e q u i v a l e n t price r e d u c t i o n s . V a l i u m w a s also g i v e n free of c h a r g e to h o s p i t a l s in the N a t i o n a l H e a l t h S e r v i c e . T h e r e w e r e c o m p e n s a t i n g benefits from this e x p e n s e . P a t i e n t s started on Valium in hospital would continue on it w h e n d i s c h a r g e d , and young doctors would acquire the habit of p r e s c r i b i n g t h e d r u g d u r i n g their h o s p i t a l t r a i n i n g . N e v e r t h e l e s s , in 1971 R o c h e refused to m a k e any r e p a y m e n t s for e x c e s s i v e profits for t h e y e a r 1970. T h e D e p a r t m e n t o f H e a l t h and S o c i a l S e c u r i t y d e c i d e d t o p r o c e e d a g a i n s t t h e c o m p a n y b y referring t h e m a t t e r o f t h e s u p p l y o f L i b r i u m and V a l i u m t o the M o n o p o l i e s C o m m i s s i o n . H a v i n g carefully i n v e s t i g a t e d R o c h e ' s c o s t s , t h e M o n o p o l i e s C o m m i s s i o n r e c o m m e n d e d that t h e price o f L i b r i u m be r e d u c e d to 40 p e r c e n t o f t h e 1970 price and V a l i u m to 25 per c e n t o f t h e 1970 f i g u r e . ' A n o r d e r u n d e r t h e m o n o p o l i e s legislation fixing these prices was m a d e on 12 April 1973." R o c h e petitioned the H o u s e o f L o r d s Special O r d e r s C o m m i t t e e against t h e o r d e r w i t h o u t s u c c e s s . ' Then the c o m p a n y c o m m e n c e d High Court proc e e d i n g s c h a l l e n g i n g t h e validity o f b o t h t h e M o n o p o l i e s C o m m i s sion r e p o r t and t h e price-fixing o r d e r . O u t - o f - c o u r t n e g o t i a t i o n s s e t t l e d t h e m a t t e r i n N o v e m b e r 1975 w h e n R o c h e a g r e e d t o pay the g o v e r n m e n t S3.75 million in e x c e s s profits. It w a s also a g r e e d t h a t p r i c e s for L i b r i u m a n d V a l i u m be r o u g h l y half the 1970 levels. T h e B r i t i s h M o n o p o l i e s C o m m i s s i o n r e p o r t o n L i b r i u m and V a l i u m focused i n t e r n a t i o n a l a t t e n t i o n o n m o n o p o l i s t i c d r u g p r i c i n g . A n t i - c a r t e l c o u r t a c t i o n s followed i n W e s t G e r m a n y and t h e N e t h e r l a n d s t o r e d u c e t h e p r i c e s o f L i b r i u m and V a l i u m . F o r H o f f m a n - L a R o c h e , and for t h e p h a r m a c e u t i c a l i n d u s t r y g e n e r a l l y , the a d v e r s e publicity o f t h e British report o p e n e d the floodgates of 173

Antitrust t o u g h e r g o v e r n m e n t a l price c o n t r o l s a l m o s t e v e r y w h e r e except t h e U n i t e d S t a t e s , w h e r e t h e P M A lobby p r o v e d a s s t r o n g a s ever. H o f f m a n - L a R o c h e had d o n e a disservice to the industry by p u s h i n g t o o h a r d , by failing to realise that w h i l e t h e m a r k e t could i m p o s e no u p p e r limit on its p r i c e s , p u b l i c o p i n i o n c o u l d . W h i l e it had violated no a n t i t r u s t l a w s , it had b r e a c h e d t h e c o m m u n i t y ' s sense of fair p l a y , a n d i n d o i n g s o d e m o n s t r a t e d t h e limited r e l e v a n c e o f antit r u s t law t o t h e p r o t e c t i o n o f d r u g c o n s u m e r s .

The Centrafarm case study
T h e logical u p s h o t of a r b i t r a r y i n t e r n a t i o n a l price v a r i a t i o n in p h a r m a c e u t i c a l s o c c u r r e d i n 1973. F o l l o w i n g the M o n o p o l i e s C o m m i s s i o n r e p o r t B r i t a i n had c h e a p e r d r u g prices t h a n t h e rest o f the E E C . An enterprising Dutch firm, Centrafarm, began buying H o f f m a n - L a R o c h e L i b r i u m and V a l i u m from British w h o l e s a l e r s and t h e n reselling the drugs in the N e t h e r l a n d s , undercutting Roche p r i c e s on sales of its o w n p r o d u c t . C e n t r a f a r m e v e n b o u g h t a p r o d u c t ( N e g r a m ) i n B r i t a i n w h i c h had b e e n m a n u f a c t u r e d i n H o l l a n d . T h e y b r o u g h t i t back t o resell i n H o l l a n d , again u n d e r c u t t i n g p r i c e s o n t h e local m a r k e t . T h e n t w o D u t c h l i c e n c e - h o l d e r s for N e g r a m , S t e r l i n g and W i n t h r o p , sued C e n t r a f a r m for b r e a c h o f p a t e n t a n d t r a d e m a r k r i g h t s . W h i l e they w o n i n t w o D u t c h c o u r t s , t h e S u p r e m e C o u r t i n t h e H a g u e , for t h e first t i m e e v e r , w e n t t o t h e E E C C o u r t for a r u l i n g . The Court of Justice o f t h e E u r o p e a n Communities in Luxemb o u r g d e c i d e d in favour of C e n t r a f a r m on 31 O c t o b e r 1974, ruling t h a t t h e E E C t r e a t y forbids firms from d o i n g a n y t h i n g that has t h e effect o f r e s t r i c t i n g t r a d e w i t h i n t h e E E C . T h e C e n t r a f a r m victory w a s s h o r t lived, b e c a u s e t h e D u t c h g o v e r n m e n t d e c i d e d t o back R o c h e and t h e o t h e r t r a n s n a t i o n a l i n t h e i r a t t e m p t s t o s t o p C e n t r a f a r m ' s price c u t t i n g . T h e D u t c h g o v e r n m e n t e n a c t e d a law r e q u i r i n g i m p o r t e r s t o s u b m i t d o c u m e n t s from t h e m a n u f a c t u r e r giving full d e t a i l s o f t h e d r u g s i m p o r t e d . O b v i o u s l y , R o c h e refused t o issue such d o c u m e n t s t o C e n t r a f a r m . W h e n C e n t r a f a r m b r o k e t h e n e w l a w , i t w a s p r o s e c u t e d . C e n t r a f a r m ' s d e f e n c e that t h e new D u t c h law w a s i n conflict with the N e t h e r l a n d s ' E E C o b l i g a t i o n s resulted in the m a t t e r being referred to the E E C Court again. B e f o r e t h e L u x e m b o u r g C o u r t , t h e D u t c h g o v e r n m e n t b a s e d its c a s e for d e m a n d i n g t h e d o c u m e n t s o n the p o t e n t i a l d a n g e r t o public h e a l t h - t h e only g r o u n d s t h e R o m e t r e a t y allows for r e s t r i c t i n g 174

Antitrust t r a d e . R o c h e w a s n o t k e e n for the D u t c h g o v e r n m e n t t o a r g u e that t h e p r o d u c t s it sold in B r i t a i n w e r e inferior to t h o s e it sold in t h e N e t h e r l a n d s . I n any c a s e , C e n t r a f a r m p o i n t e d out that the p r o d u c t s it b o u g h t in B r i t a i n w e r e m a d e in t h e s a m e S w i s s - G e r m a n plant from w h i c h R o c h e ' s D u t c h sales o r i g i n a t e d . T h e British and D a n i s h g o v e r n m e n t s w e i g h e d i n o n t h e side o f t h e D u t c h a u t h o r i t i e s : T h e w i d e l y a c c e p t e d m o t i v a t i o n for t h e U K p o s i t i o n w a s straight s e l f - i n t e r e s t . If B r i t i s h c o m p a n i e s are forced to sell c h e a p e r e l s e w h e r e in E u r o p e , t h e y will a r g u e t h a t they can no l o n g e r hold to t h e low p r i c e s c h a r g e d in B r i t a i n and t h e cost to t h e N H S will g o u p ( L a m b e r t , 1976). B u t t h e tiny D u t c h i m p o r t e r w o n a g a i n s t t h e legal might o f t h e t h r e e g o v e r n m e n t s and t h e i n t e r n a t i o n a l p h a r m a c e u t i c a l lobby. T h e E u r o p e a n C o u r t r u l e d t h a t any a d m i n i s t r a t i v e r e q u i r e m e n t not b a s e d strictly on c o n c e r n for p u b l i c h e a l t h w a s against the T r e a t y . M o r e o v e r , t h e y h u m i l i a t e d t h e D u t c h g o v e r n m e n t with t h e further r u l i n g t h a t t h e o n u s for s u p p l y i n g d o c u m e n t s r e l a t i n g to a p h a r m a c e u t i c a l p r e p a r a t i o n lies s q u a r e l y with t h e m a n u f a c t u r e r - and not with the importer.

The tetracycline case study
The market for antibiotics

A n t i b i o t i c s a r e a m a j o r g r o u p of d r u g s w h i c h are effective against a v a r i e t y of i n f e c t i o n s . P e n i c i l l i n w a s t h e first of the a n t i b i o t i c w o n d e r d r u g s . T h e m a r k e t for this n a r r o w - s p e c t r u m a n t i b i o t i c has a l w a y s b e e n c o m p e t i t i v e since n o c o m p a n y had a p a t e n t . F o r t u n e s w e r e not m a d e o n p e n i c i l l i n . B u t t h e a d v a n c e s t o t h e b r o a d - s p e c t r u m antib i o t i c s saw Pfizer a n d C y a n a m i d d o m i n a t e this m a r k e t with p a t e n t s on chlortetracycline and oxytetracycline. This patent protection e n a b l e d t h e m t o m a i n t a i n high p r i c e s and m a s s i v e profits. T h e s e profits w e r e t h r o w n i n t o j e o p a r d y i n 1953 w h e n t h e t h e r a p e u t i c a l l y s u p e r i o r t e t r a c y c l i n e c a m e o n t h e s c e n e . T h e r e w a s a real d a n g e r t h a t t e t r a c y c l i n e w o u l d not b e r e g a r d e d a s p a t e n t a b l e b y e i t h e r Pfizer or C y a n a m i d and t h a t t e t r a c y c l i n e w o u l d go the way of p e n i c i l l i n . M o r e o v e r , low p r i c e s for t e t r a c y l i n e w o u l d force d o w n t h e p r i c e s of c h l o r t e t r a c y c l i n e and o x y t e t r a c y c l i n e . Pfizer and C y a n a m i d w i s h e d t o avoid this c o m p e t i t i v e m a r k e t s t r u c t u r e a t all c o s t s , a n d t h r o u g h a series of d e a l s w h i c h will be discussed later. 175

Antitrust m a n a g e d to r e s t r i c t t e t r a c y c l i n e sales to five c o m p a n i e s - Pfizer, C y a n a m i d , B r i s t o l . S q u i b b and U p j o h n - all of w h o m r e c o g n i s e d Pfizer as t h e p a t e n t - h o l d e r . F r o m 1954 t h e five c o m p a n i e s m a n a g e d t o m a i n t a i n uniform and high p r i c e s for t e t r a c y c l i n e . We shall see t h a t t h e uniformity w a s so s t r i k i n g as to be e i t h e r t h e result of price fixing or c o i n c i d e n c e w h i c h defies belief. W h a t e v e r the s o u r c e s , t h e high prices for t e t r a c y c l i n e m a d e t h e s e c o m p a n i e s into t h e m a s s i v e t r a n s n a t i o n a l s they are t o d a y . In 1957, t h e first year for which such figures are a v a i l a b l e , Pfizer L a b o r a t o r i e s r e p o r t e d an o p e r a t i n g profit of S23,886,(KK), $ 2 0 , 0 0 0 , 0 0 0 of w h i c h w a s a c c o u n t e d for by profits from b r o a d s p e c t r u m a n t i b i o t i c s . F o r s o m e y e a r s in t h e early 1950s all of C y a n a m i d ' s p h a r m a c e u t i c a l profits c a m e from b r o a d - s p e c t r u m a n t i b i o t i c s , the r e m a i n d e r of the c o m p a n y ' s pharmaceutical d i v i s i o n r u n n i n g at a loss. T h e i r sales of b r o a d - s p e c t r u m a n t i b i o t i c s b e t w e e n 1954 a n d 1961 w e r e $ 3 2 6 , 0 0 0 , 0 0 0 .

The

evidence for price fixing

T h e U S g o v e r n m e n t ' s p r i m a r y e v i d e n c e against the five c o m p a n i e s w a s t h e e x t r a o r d i n a r y uniformity o f p r i c e s s u m m a r i s e d i n T a b l e 5 . 1 . T h i s u n i f o r m i t y existed in spite o f t h e fact that t h e p r o d u c t i o n costs of t h e five c o m p a n i e s w e r e widely d i s p a r a t e . T a b l e 5.2 indicates how S q u i b b a n d U p j o h n p r o d u c t i o n costs w e r e a l w a y s a t least t h r e e times a s high a s t h o s e o f t h e o t h e r c o m p a n i e s . T h i s w a s b e c a u s e S q u i b b a n d U p j o h n did n o t m a n u f a c t u r e t h e r a w m a t e r i a l t h e m s e l v e s . T h e y b o u g h t in b u l k from Bristol and did t h e i r o w n e n c a p s u l a t i o n . It c a n be seen from T a b l e 5.1 t h a t t h e first n o t a b l e price cuts o c c u r r e d in 1961 a n d 1962. T h e s e w e r e largely a p u b l i c - r e l a t i o n s r e a c t i o n t o K e f a u v e r ' s S e n a t e i n v e s t i g a t i o n o f t h e a l l e g e d cons p i r a c y . B y 1964, h o w e v e r , t h e t h r e a t o f real c o m p e t i t i o n b e g a n t o build u p , p r i m a r i l y from t e t r a c y c l i n e i m p o r t e d from I t a l y , a c o u n t r y w h i c h did not r e c o g n i s e t h e p a t e n t . T h e s e i m p o r t e r s w e r e g e n e r a l l y driven out o f t h e A m e r i c a n m a r k e t by patent infringement suits.'" H o w e v e r , o n e n e w c o m p e t i t o r , M c K e s s o n and R o b b i n s , had the r e s o u r c e s t o resist. T h e i n f r i n g e m e n t suit against M c K e s s o n and R o b b i n s w a s settled in 1966 w h e n t h e c o m p a n y s h o w e d that it was m o r e t h a n w i l l i n g to go t h r o u g h with a legal c h a l l e n g e to the shaky Pfizer p a t e n t . M c K e s s o n w a s licensed by Pfizer and C y a n a m i d to sell t h e i r o w n b r a n d o f t e t r a c y c l i n e , and pricing uniformity b e g a n t o fall a p a r t . 176

Antitrust T A B L E 5.1 W e i g h t e d a n n u a l a v e r a g e price t o r e t a i l e r s o f t e t r a c y c l i n e , 2 5 0 m g , 100 c a p s u l e s '
Bristol (Polycycline & Brislacycline) S 30.60 30.60 30.60 30.60 30.60 28.87 25.88 23.82 22.00 19.51 17.74 15.88 14.95 14.26 6.00 4.46 4.17 4.17 3.25 3.25 Squibb (Steclin & Tetracycline)

Pfizer (Tetracyn) J 30.60 30.60 30.60 30.60 30.60 28.67 26.01 23.81 22.00 19.35 17.60 16.05 11.75 5.02 4.25 4.25 4.25 3.36 3.25 3.31

Cyanamid (Achromycin)

Upjohi (Panm

$
30.60 30.60 30.60 30.60 30.60 29.36 25.88 23.75 22.00 19.36 17.60 15.62 11.37 11.22 11.22 9.23 4.50 4.50 4.50 3.90

$
30.60 30.60 30.60 30.60 30.60 29.15 26.00 23.31 22.00 19.43 17.60 15.79 8.41 4.25 4.25 4.25 4.25 4.25 4.25 4.25

$
30.60 30.60 30.60 30.60 30.60 29.31 25.95 23.80 22.00 13.02 8.41 7.08 6.57 4.94 4.95 4.08 3.86 3.62 2.52 2.47

1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974
'

E x t r a c t e d f r o m US v Pfizer et aL. 4 - 7 1 C i v . 4 3 5 . 4 - 7 1 C i v . 4 0 3 .

US D i s t r i c t C o u r t . D i s t r i c t of 1975.

M i n n e s o t a . A m e n d m e n t a n d S u p p l e m e n t t o P r e t r i a l D a m a g e B r i e f for U S . 9 O c t o b e r .

T h e r e w a s o t h e r e v i d e n c e c o n s i s t e n t with a price-fixing cons p i r a c y . P r i o r t o t h e m a r k e t i n g o f t e t r a c y c l i n e , c o m p a n i e s like C y a n a m i d , U p j o h n a n d S q u i b b had d i s s i m i l a r d i s c o u n t s c h e d u l e s t o w h o l e s a l e r s and c u s t o m e r s b u y i n g u n d e r p u r c h a s i n g plans and agency a g r e e m e n t s . Following the introduction of tetracycline, h o w e v e r , t h e s e d i s p a r a t e s c h e d u l e s w e r e a l t e r e d t o bring all retail p r i c e s exactly i n t o line. N e v e r t h e l e s s , t h e g o v e r n m e n t did not h a v e d i r e c t e v i d e n c e of m e e t i n g s which t o o k place to illegally fix p r i c e s . T h e best kind o f e v i d e n c e c o n c e r n i n g c o m m u n i c a t i o n s a b o u t prices w h i c h c o u l d b e found w a s i n t h e n a t u r e o f t h e following i n s t r u c t i o n s e n t to S q u i b b ' F i e l d M a n a g e r s ' on 12 N o v e m b e r 1954. ' A s you h a v e b e e n i n f o r m e d , it is our fixed policy not only to avoid price c u t t i n g on Steclin b u t to a v o i d any p r a c t i c e w h i c h might lay us o p e n to such an accusation.' W h i l e t h e d i r e c t p r o o f o f c o n s p i r a c y w a s w e a k , the c i r c u m s t a n t i a l e v i d e n c e w a s c o m p e l l i n g . C l e a r l y t h e m o s t difficult a r e a in w h i c h to hold t h e line in a price-fixing c o n s p i r a c y is the secret bid m a r k e t s 177

Antitrust TABLE 5.2 T e t r a c y c l i n e p r o d u c t i o n costs 250 m g . c a p s u l e s 100's
*th qu 1954 Cyanamid Achromycin Capsules. 2 5 0 m g . 100's (Unit cost)* Pfizer Tetracyn Capsules, 2 5 0 m g . 100's ( A c t u a l unit cost) Bristol Polycycline Capsules, 2 5 0 m g . 100's (Reaveraged unit c o s t ) * arter '111, q
U

4th qu arter 1956

4th qu arter 1957

4th qu arter 1958

4th qu arter 1959

4th qu arter 1960

arter

1955

S2.26

SI.57

SI.77

$1.64

$1.59

$1.52

$1.56

S3.87

S3.01

S3.08

$2.74

$3.24

$2.94

$1.70

S6.24t

NA

SI.08 (January •57)

$1.67

$1.91

$1.92

$1.86

Squibb Steclin Capsules, 2 5 0 m g . 100's ( U n i t factory cost)* Upjohn Panmycin Capsules. 2 5 0 m g . 100's (Unit finished goods cost)

NA

$11.28

$9.47

$9.50

$9.58

$9.59

$7.71

$14.61 (October) $12.08 (December)

$9.86

NA

NA

$9.39

NA

$7.98

NA t In

=

not available.

D o e s not include royalty p a y m e n t s , 1 9 5 4 B r i s t o l ' s r e a v e r a g e d unit c o s t s w e r e : $ 6 0 . 2 5 ( M a y ) . $ 4 7 . 4 1 ( J u n e ) . $ 3 9 . 6 1 ( J u l y ) . (December). p. 17. $ 2 9 . 7 9 ( A u g u s t ) . $ 2 3 . 7 3 ( S e p t e m b e r ) . $9.01 ( O c t o b e r ) . $6.24 ( N o v e m b e r ) . $4.91 From US\PfizerelaL.VSCoun of A p p e a l s for the S e c o n d Circuit.

B r i e f for t h e A p p e l l e e ,

t h a t is. s a l e s t o h o s p i t a l s and o t h e r p u b l i c i n s t i t u t i o n s . T h e r e w a s c o n s i d e r a b l e e v i d e n c e t h a t t h e t e t r a c y c l i n e c o m p a n i e s did hold the line o n s e c r e t b i d s . O n e i l l u s t r a t i o n w a s with a n $ 8 3 0 , 0 0 0 c o n t r a c t w i t h t h e M i l i t a r y M e d i c a l S u p p l y A g e n c y i n 1957. B r i s t o l , Pfizer a n d C y a n a m i d all bid S I . 8 3 a b o t t l e . B u t Pfizer had bid on t h e w r o n g

178

Antitrust size b o t t l e (70cc i n s t e a d of 7 5 c c ) . T h e M e d i c a l Military Supply A g e n c y d e c i d e d t o use this o p p o r t u n i t y t o p u s h the price d o w n and r e i s s u e d the call for bids at 70cc a m o u n t s . Pfizer and C y a n a m i d b o t h bid S I . 8 3 a g a i n . B u t B r i s t o l , w h o s e t u r n i t w a s , u n d e r t h r e a t from t h e A g e n c y to switch the c o n t r a c t to Pfizer unless a lower bid w e r e f o r t h c o m i n g for the s m a l l e r a m o u n t , w o n the c o n t r a c t with a bid of SI,828. T h e s t a n d a r d bid p r i c e to C C S h o s p i t a l s for 100 c a p s u l e s ( 2 5 0 m g . ) in 1955 w a s S22.49. H o w e v e r , in A p r i l 1955 S q u i b b b r o k e r a n k s w i t h the offer o f a 2 p e r cent d i s c o u n t . U p j o h n ' s d i s p l e a s u r e at this is i n d i c a t e d b y the following i n t e r n a l c o r r e s p o n d e n c e . A s r e q u e s t e d , w e are e n c l o s i n g the r e s u l t s o f t h e bids a t Los Angeles County Hospital: 864 T e t r a c y c l i n e C a p s . 2 5 0 m g . w e n t a s follows: Pfizer S22.49 2% 15th P r o x i m s S q u i b b S22.49 2 % o p e n L e d e r l e S22.49 net [Cyanamid] B r i s t o l S22.49 n e t H o m e r H a m m o n d feels S q u i b b will get the bid with an o p e n 2% no t i m e limit. . . . On the P a n m y c i n it l o o k s like S q u i b b scuttled o u r ship. I w o n d e r if B r i s t o l will c o m p l a i n to t h e m as t h e y did w i t h us. T h e r e w a s also e v i d e n c e o f Pfizer d i s q u i e t that S q u i b b ' s d i s c o u n t m i g h t m e a n ' t h a t t h e S22.49 price has b e e n b r o k e n b y S q u i b b . ' S q u i b b m a n a g e m e n t w a s i n d e e d w o r r i e d a b o u t w i n n i n g this bid, a s e v i d e n c e d by a l e t t e r from A. I. H e b e r g e r , m a n a g e r of S q u i b b ' s m a r k e t i n g d e p a r t m e n t t o L . L . H e r b e r t , L o s A n g e l e s regional sales m a n a g e r , d a t e d 2 7 A p r i l 1955: I w a s d i s t u r b e d to l e a r n t h a t we w e r e the successful b i d d e r to L o s A n g e l e s C o u n t y b e c a u s e w e bid o n t e t r a c y c l i n e 2 5 0 m g . c a p s u l e s S22.49 p e r 100 less 2% d i s c o u n t . It is nice to get a Steclin o r d e r finally from L o s A n g e l e s C o u n t y , but I have my fingers c r o s s e d , a n t i c i p a t i n g c e r t a i n r e a c t i o n s to w h a t we did. which may not be good. W h e n I got J a c k ' s p e r m i s s i o n t o q u o t e 2 % cash d i s c o u n t , t h e r e w a s no q u e s t i o n in his mind or m i n e t h a t we e x p e c t e d you to q u o t e the 2% as a c a s h d i s c o u n t . 179

Antitrust As I s a y , it w o u l d be nice to get t h e o r d e r but I am h o p i n g t h e r e are no serious results. W i t h i n a few w e e k s , S q u i b b p e r h a p s m a d e a m e n d s to its ' c o m p e t i t o r s ' . T h e i r 2 p e r c e n t d i s c o u n t w a s d r o p p e d on a N e w a r k bid, as i n d i c a t e d by t h e following i n t e r n a l C y a n a m i d m e m o r a n d u m of 6 M a y 1955. I n f o r m a t i o n I p r e v i o u s l y r e c e i v e d and as w a s r e p o r t e d to you in my l e t t e r of 4 - 2 7 - 5 5 stated that S q u i b b w a s to get the a w a r d in N e w a r k b e c a u s e o f t h e fact that t h e y did a l l o w a 2% discount. It n o w d e v e l o p s from further r e p o r t that S q u i b b called the a t t e n t i o n o f t h e P u r c h a s i n g Office in N e w a r k to the fact that t h e r e w a s an a s t e r i s k on t h e i r bid, w h i c h m e a n t that the 2% w o u l d not be a l l o w e d . On t h e basis of this i n f o r m a t i o n , Pfizer, S q u i b b . B r i s t o l and L e d e r l e w e r e e q u a l i n b i d d i n g the $ 2 2 . 4 9 . O n May 4 t h , M r . Z i e g l e r , as a r e p r e s e n t a t i v e of L e d e r l e , w a s called in for a d r a w i n g out o f a hat. B r i s t o l w a s successful and has r e c e i v e d t h e award. H o l d i n g a c a r t e l t o g e t h e r is not easy. A c e n t r a l r e q u i r e m e n t for a n y c a r t e l is a s y s t e m for r e c o r d i n g ' v i o l a t i o n s ' and p u n i s h i n g ' d e l i n q u e n t s ' . If such a s y s t e m did exist a m o n g the t e t r a c y c l i n e p r o d u c e r s , its form h a s not b e e n d i s c o v e r e d . N e v e r t h e l e s s , t h e r e i s e v i d e n c e s u g g e s t i n g t h a t s o m e sort of s y s t e m did exist. C o n s i d e r t h e following internal Squibb m e m o r a n d u m : Y o u r e p o r t e d on a r e c e n t bid m a d e to M i l w a u k e e C o u n t y , for which we thank you. On Bid N o . 635 for 100's of T e t r a c y c l i n e 2 5 0 M g . , L e d e r l e ' s p r o d u c t w a s offered at $ 2 1 . 0 8 p e r 100. In o r d e r to p r o p e r l y record t h i s v i o l a t i o n I m u s t k n o w w h e t h e r this w a s a direct bid by L e d e r l e , o r w h e t h e r t h e bid w a s m a d e t h r o u g h a d e a l e r . I w o u l d very m u c h a p p r e c i a t e y o u r setting me straight. B r i s t o l , S q u i b b and U p j o h n s e e m e d to display a c e r t a i n willingn e s s to ' t u r n t h e o t h e r c h e e k ' and m a i n t a i n a f i x e d - b i d price d e s p i t e a p p a r e n t p r o v o c a t i o n from Pfizer. T h e following c o r r e s p o n d e n c e from S q u i b b m a n a g e m e n t to o n e of their field officers illustrates this policy of d e t e n t e . In y o u r l e t t e r to me you r e p o r t t h e fact t h a t Pfizer q u o t e d Steclin to t h e K i n g C o u n t y H o s p i t a l at t h e r e g u l a r price and also offered 180

Antitrust 2 0 0 on a no c h a r g e b a s i s . Y o u stated t h a t you w o u l d like to h e a r my c o m m e n t s . A n y c o m m e n t I m i g h t m a k e a b o u t this and s o m e o t h e r Pfizer m a n e u v e r s w o u l d n o t be fit to print. I guess h o w e v e r , you really m e a n t to ask me w h e t h e r we w o u l d m a t c h this Pfizer price on future b i d s . If I w e r e free to m a k e my own d e c i s i o n s on m e e t i n g Pfizer c o m p e t i t i o n , I w o u l d c e r t a i n l y m a t c h a n y t h i n g they give but u n d e r t h e c i r c u m s t a n c e s w e can not r e t a l i a t e . W e have i n s t r u c t i o n s and t h e s e c a m e directly from t h e t o p and t h e r e f o r e u n d e r n o c i r c u m s t a n c e s can w e d e v i a t e from o u r regular s c h e d u l e . I k n o w w h y we m u s t o b s e r v e o u r s c h e d u l e and can not h e l p but a g r e e t h a t w e have n o o t h e r r e c o u r s e . I t i s u n f o r t u n a t e b u t for t h e t i m e b e i n g we are h e l p l e s s . S o m e data support the conclusion that outside the United States t e t r a c y c l i n e may h a v e b e e n a classic i n t e r n a t i o n a l price c a r t e l . K e f a u v e r ' s S e n a t e i n v e s t i g a t i o n and s u b s e q u e n t follow-up r e v e a l e d an i d e n t i t y of t e t r a c y c l i n e p r i c e s in 13 c o u n t r i e s for which d a t a w e r e a v a i l a b l e ( C o s t e l l o , 1968: 3 7 ) . P a r t i c u l a r l y d a m a g i n g i n the S e n a t e w e r e L a t i n A m e r i c a n c o m m u n i c a t i o n s a m o n g t h e five c o m p a n i e s , s o m e o f t h e m m a r k e d ' p e r s o n a l a n d c o n f i d e n t i a l ' and ' p l e a s e d e s t r o y ' . S e n a t o r L o n g d e s c r i b e d o n e l e t t e r a s 'the most startling price-fixing d o c u m e n t I h a v e ever s e e n ' . T h e letter w a s w r i t t e n p a r t l y in c o d e . D a t e d 7 N o v e m b e r 1958, it w a s signed in C a r a c a s by ' P l u t o ' - t h e a l l e g e d c o d e n a m e for Rafael N. Silva, Pfizer's m a n a g e r i n V e n e z u e l a - and w a s a d d r e s s e d t o F r a n k P . W i l s o n , Pfizer's p r i c i n g m a n a g e r i n N e w Y o r k . I n e x p l a i n i n g the l e t t e r t o t h e S e n a t e , L o n g h a d to use a g l o s s a r y . H e s a i d , for e x a m p l e , t h a t 'Special G - 1 3 ' d e n o t e d ' P f i z e r - V e n e z u e l a ' s " p a y - o f f fund to " f a c i l i t a t e " sales to g o v e r n m e n t a l p u r c h a s e r s in V e n e z u e l a . ' A ' s i n n e r ' d e n o t e d a v i o l a t o r of a price-fixing a g r e e m e n t . A ' p o w - w o w ' w a s a pricefixing m e e t i n g . A ' d i s t u r b e d family' m e a n t that s o m e o n e had cut p r i c e s . A n u n p r o n o u n c e a b l e ' b r s t l h s t c h l d r l l p t t p f z r ' d e n o t e d five c o m p a n i e s - B r i s t o l ; H o e c h s t , t h e G e r m a n firm it licensed to m a k e t e t r a c y c l i n e ; L e d e r l e ; L e p e t i t , t h e Italian firm licensed b y Pfizer to m a k e t e t r a c y c l i n e ; and Pfizer. T h e l e t t e r told of an a n t i b i o t i c s ' p o w w o w ' r e c e n t l y ' c o n v o k e d i n o u r office with b r s t l h s t c h l d r l l p t t p f z r i n a t t e n d a n c e . ' ' P l u t o ' noted that 'our friend s q b b [ S q u i b b ] could not a t t e n d b u t w a s no p a r t y to any 181

Antitrust offense [ c o m p e t i t i v e price v a r i a t i o n ] a n d w a s fully d e s i r o u s of o t h e r s r e - e s t a b l i s h i n g the p r e v i o u s a t m o s p h e r e o f c o n f i d e n c e . . . it b e c a m e e v i d e n t t h a t brstl [ B r i s t o l ] w a s e n g a g e d in a n a t i o n w i d e p r i c e c u t t i n g s c h e m e . . . Idrl [ L e d e r l e ] had followed suit w i t h o u t c o n s u l t i n g t h e r e m a i n i n g p a r t n e r s . . . ' T h e letter r e c o u n t s that t h e "powwow* s u c c e e d e d in r e s t o r i n g "the p r e v i o u s c o n f i d e n c e ' in a spirit o f ' l e t ' s try a g a i n ! ' - but only a day later t h e r e c a m e a r e p o r t , ' P l u t o ' said, t h a t Tdrl w a s a t i t again." A n o t h e r ' p o w w o w ' w a s s c h e d u l e d "to t h r a s h o u t this [ n e w ] v i o l a t i o n ' ( M i n t z , 1967: 184d-e). T h e l a t t e r w a s not r e l e v a n t , o f c o u r s e , t o m o s t o f t h e U S p r i c e fixing c a s e s . M o s t d r a m a t i c o f t h e c i r c u m s t a n t i a l e v i d e n c e w a s the c o n v i c t i o n in N e w Y o r k state in D e c e m b e r 1955 of J o h n G. B r o a d y , a l a w y e r a n d p r i v a t e i n v e s t i g a t o r , for w i r e - t a p p i n g n u m e r o u s telep h o n e s , i n c l u d i n g t h o s e o f Bristol and S q u i b b ' s e x e c u t i v e offices. P f i z e r ' s g e n e r a l c o u n s e l had paid B r o a d y $ 6 0 , 0 0 0 t o m a k e c e r t a i n i n v e s t i g a t i o n s a n d his illegal a c t i o n s s t e m m e d from t h o s e investig a t i o n s . L i k e so m u c h o f t h e e v i d e n c e for c o n s p i r a c y , this w a s highly c i r c u m s t a n t i a l . E v e n i f B r o a d y w a s b u g g i n g the Bristol and S q u i b b e x e c u t i v e s u i t e s at Pfizer's b e h e s t , h o w could it be p r o v e d that this w a s d o n e to p o l i c e a c o n s p i r a c y ?

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T h e J u s t i c e D e p a r t m e n t s o u g h t t o p r o s e c u t e all five c o m p a n i e s and a n u m b e r of i n d i v i d u a l s w i t h i n t h e m . On 7 A u g u s t 1961 a g r a n d jury i n d i c t e d Pfizer, C y a n a m i d , B r i s t o l - M y e r s and t h r e e e x e c u t i v e s c h a r g i n g c o n s p i r a c y t o m o n o p o l i s e and r e s t r a i n t r a d e u n d e r s e c t i o n s o n e and t w o o f t h e S h e r m a n A c t . S q u i b b and U p j o h n w e r e n a m e d a s c o - c o n s p i r a t o r s , but w e r e not i n d i c t e d . A N e w Y o r k j u r y found e a c h c o r p o r a t e d e f e n d a n t guilty of all t h r e e c o u n t s on 29 D e c e m b e r 1967. T h e y w e r e fined S50,(XX) a p i e c e on e a c h c o u n t . T h e i n d i c t m e n t s a g a i n s t t h e i n d i v i d u a l d e f e n d a n t s had b e e n d i s m i s s e d i n 1965. In 1970 t h e US C o u r t of A p p e a l s , S e c o n d C i r c u i t , r e v e r s e d t h e c o n v i c t i o n s , r e m a n d i n g t h e c o r p o r a t e d e f e n d a n t s for a new t r i a l . " T h e C o u r t of A p p e a l s opinion was that the District J u d g e . M a r v i n F r a n k e l , had m a d e a n i m p r o p e r c h a r g e t o the j u r y stressing ' i n f l a m m a t o r y issues". A g o v e r n m e n t a p p e a l to the S u p r e m e C o u r t u p h e l d t h e A p p e a l C o u r t d e c i s i o n for retrial on a split 4 - 4 decision.'" 182

Antitrust In 1 9 7 3 . t w e n t y y e a r s after t h e c o n s p i r a c y w a s alleged to have b e g u n , a r e t r i a l c o m m e n c e d before J u d g e C a n e l l a o n t h e basis o f t h e p r e v i o u s trial r e c o r d , w i t h o u t a j u r y . All d e f e n d a n t s w e r e a c q u i t t e d . W h i l e c o n c e d i n g that t h e d e f e n d a n t s had m a i n t a i n e d substantially similar prices over a n u m b e r of years. Judge Canclla felt t h a t t h e g o v e r n m e n t ' s c i r c u m s t a n t i a l e v i d e n c e w a s insufficient for p r o o f b e y o n d r e a s o n a b l e d o u b t . ' T h e w a n t o f direct e v i d e n c e for c o n s p i r a t o r i a l m e e t i n g s w a s the g o v e r n m e n t ' s d o w n f a l l .
1

T h e r e c o r d , w h i c h is fully d e v e l o p e d by e x t e n s i v e direct and cross e x a m i n a t i o n , d o e s n o t reveal that any d i s c u s s i o n o f p r i c e s , price f i x i n g , e x c l u s i o n o f c o m p e t i t o r s o r licensing r e s t r i c t i o n s o c c u r r e d a t t h e N o v e m b e r m e e t i n g s and t h e i n d i v i d u a l s p r e s e n t have v i g o r o u s l y d e n i e d any illegal m o t i v e for their c o n d u c t . T h e t e s t i m o n y given s t r e s s e s t h e b u s i n e s s r e a s o n s for t h e a c t i o n s t a k e n a n d t h e a c t o r s * e x e r c i s e o f b u s i n e s s j u d g m e n t a s free a g e n t s , a n d not a s c o n s p i r a t o r s . M o r e o v e r , t h e J u d g e c o n c l u d e d : i n t h e face o f t h e g o v e r n m e n t ' s c i r c u m s t a n t i a l p r o o f and a r g u m e n t , s t a n d s t h e d e f e n d a n t s ' v i g o r o u s and c o m p l e t e d e n i a l s o f t h e e x i s t e n c e o f any a g r e e m e n t o r cons p i r a c y to e n g a g e in t h e illegal acts c h a r g e d in t h e i n d i c t m e n t . ' W h i l e t a k i n g p a i n s t o point out t h a t c i r c u m s t a n t i a l e v i d e n c e could b e highly r e l e v a n t , h e a p p r o v i n g l y cited J u d g e M e d i n a ' s s t a t e m e n t in t h e Investment Bankers' c a s e " on d e t e r m i n i n g t h e e x i s t e n c e of c o n s p i r a c y : ' T h e a n s w e r m u s t not be f o u n d in s o m e crystal ball or v a g u e l y s e n s e d by s o m e p r o c e s s of i n t u i t i o n , b a s e d u p o n a c h a n c e p h r a s e used h e r e or t h e r e . . . .' To c o n c l u d e . J u d g e Canella q u o t e d Judge C h a s e in US v. Buchalter: ' N o t h i n g this c o u r t might n o w say could b e t t e r summ a r i z e t h e r a t i o n a l e of its o p i n i o n in t h e i n s t a n t c a s e . ' Difficulty of p r o o f is no s u b s t i t u t e for a c t u a l i t y of p r o o f and an a c c u s e d is p r e s u m e d to be i n n o c e n t until p r o v e d guilty as c h a r g e d b e y o n d a r e a s o n a b l e doubt. H e r e there w e r e , indeed, many s u s p i c i o u s c i r c u m s t a n c e s t o lead t o t h e c o n c l u s i o n t h a t [the d e f e n d a n t ] w a s guilty but t h e r e w a s n o s u b s t a n t i a l e v i d e n c e t o o v e r c o m e t h e p r e s u m p t i o n of i n n o c e n c e . . .

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J u d g e C a n e l l a ' s o v e r t u r n i n g o f t h e criminal convictions was a severe

183

Antitrust s e t b a c k for o v e r a h u n d r e d plaintiffs w h o w e r e s e e k i n g civil d a m a g e s a g a i n s t t h e f i v e t e t r a c y c l i n e c o m p a n i e s . B u t t h e civil cases c o n t i n u e d , and still c o n t i n u e to this day. T h e a c q u i t t a l s led the l i t i g a n t s to shift t h e i r a t t a c k a g a i n s t t h e c o m p a n i e s from a focus on c o n s p i r a c y to e m p h a s i s on the allegation that the tetracycline patent w h i c h e n a b l e d t h e m t o m a i n t a i n e x c e s s i v e prices w a s o b t a i n e d b y fraud. L e t u s t h e n r e t r a c e t h e history o f t h e t e t r a c y c l i n e p a t e n t . Pfizer f i r s t d i s c o v e r e d t h e m o l e c u l a r s t r u c t u r e o f t e t r a c y c l i n e and filed a p a t e n t a p p l i c a t i o n on it on 23 O c t o b e r 1952. A l m o s t simult a n e o u s l y C y a n a m i d had realised t h e t h e r a p e u t i c i m p o r t a n c e o f t e t r a c y c l i n e and l o d g e d a p a t e n t a p p l i c a t i o n on 16 M a r c h 1953. A t h i r d c o m p a n y , H e y d e n C h e m i c a l C o r p o r a t i o n , had also p r o d u c e d t e t r a c y c l i n e a n d l o d g e d its p a t e n t c l a i m o n 2 8 S e p t e m b e r 1953. B r i s t o l w a s t h e last to file on 19 O c t o b e r 1953. A l l p a r t i e s w e r e a w a r e o f t h e fact t h a t t h e y had i n s e c u r e claims o n t h e p a t e n t and t h a t a ruling t h a t t e t r a c y c l i n e was u n p a t e n t a b l e , in that it was 'no a d v a n c e m e n t over prior art', was probable. By a t t a c k i n g each o t h e r s ' claims they would certainly destroy a n y o n e ' s c h a n c e s o f g e t t i n g t h e p a t e n t . C y a n a m i d first e l i m i n a t e d t h e t h r e a t from H e y d e n by b u y i n g its a n t i b i o t i c division for $ 1 2 , 0 0 0 , 0 0 0 , a p p r o x i m a t e l y twice t h e b o o k v a l u e o f its a s s e t s . T h e U S g o v e r n m e n t c l a i m e d t h a t C y a n a m i d ' s p u r c h a s e o f H e y d e n w a s unlawful, being in contravention ofthe Clayton Act. In J a n u a r y , 1954 Pfizer and C y a n a m i d a g r e e d not to d e s t r o y e a c h o t h e r ' s c h a n c e s o f s e c u r i n g a legal m o n o p o l y o v e r t e t r a c y c l i n e . T h e w r i t t e n a g r e e m e n t p r o v i d e d t h a t w h i c h e v e r o n e s e c u r e d the p a t e n t w o u l d license t h e o t h e r t o sell t h e d r u g . T h e a g r e e m e n t further p r o v i d e d for a p r i v a t e a d j u d i c a t i o n t o d e t e r m i n e w h i c h o f t h e two w a s t h e first i n v e n t o r . Pfizer w o n and duly cross-licensed C y a n a m i d . C y a n a m i d also a g r e e d t o supply Pfizer w i t h bulk t e t r a c y c l i n e until its p r o d u c t i o n facilities could be t o o l e d up for m a s s p r o d u c t i o n . T h i s p r o v i s i o n w a s t o p r e v e n t C y a n a m i d from e s t a b l i s h i n g its b r a n d n a m e b e f o r e Pfizer got o n t h e m a r k e t . H e n c e the e v i d e n c e suggests t h a t t h e p a t e n t p r o v i d e d a c o v e r for c o n s p i r a t o r i a l b e h a v i o u r to p a r t i t i o n a m a r k e t w h i c h i n t h e a b s e n c e o f t h e p a t e n t w o u l d have b e e n c l e a r l y illegal. U n l i k e Pfizer a n d C y a n a m i d , the last p a t e n t c l a i m a n t o n t h e s c e n e , B r i s t o l , w a s a small c o m p a n y in t h o s e d a y s , and t h e former r e g a r d e d it as no m a t c h for t h e m in a p a t e n t s t r u g g l e . H o w e v e r , in O c t o b e r 1954 t h e p a t e n t - h e a r i n g e x a m i n e r , i n dissolving the interf e r e n c e b e t w e e n Pfizer and B r i s t o l , ruled t h a t 'on t h e e x a m i n e r ' s 184

Antitrust a s s u m p t i o n t h a t t e t r a c y c l i n e w a s i n h e r e n t l y p r o d u c e d b y the p r o c e s s d i s c l o s e d in' t h e C y a n a m i d p a t e n t o n c h l o r t e t r a c y c l i n e , t e t r a c y c l i n e itself w a s not p a t e n t a b l e . H e n c e t h e e x a m i n e r ' s conc l u s i o n w a s t h a t Pfizer had identified t e t r a c y c l i n e a s o n e o f a n u m b e r of d r u g s p r o d u c e d in an 'old p r o c e s s ' and t h e r e f o r e c o n s t i t u t e d no a d v a n c e m e n t over prior art. T h i s s e t b a c k c a u s e d Pfizer's p a t e n t a g e n t t o direct Pfizer scientists to e v a l u a t e the e x a m i n e r ' s assumption of co-production. Subseq u e n t l y t h e r e s e a r c h w a s s t o p p e d , h o w e v e r . Yet t h e t e s t s w e r e i n fact c o n t i n u e d and t h e r e s u l t s r e c o r d e d o u t s i d e t h e n o r m a l l a b o r a t o r y r e c o r d s . T h e s e secret d a t a s h o w e d t h e e x a m i n e r ' s a s s u m p t i o n to be correct, according to the g o v e r n m e n t ' s evidence. A p a r t from t h e c o n c e a l m e n t o f test r e s u l t s , i t w a s alleged that Pfizer r i g g e d o t h e r t e s t s . T h e e x a m i n e r had a g r e e d t o r e a d m i t the a p p l i c a t i o n i f Pfizer could d e m o n s t r a t e t h a t t e t r a c y c l i n e could not b e r e c o v e r e d from f e r m e n t a t i o n b r o t h s p r o d u c e d i n a c c o r d a n c e with the chlortetracycline process patent. G o v e r n m e n t evidence i n d i c a t e d t h a t t h e m i c r o - o r g a n i s m s s e l e c t e d by Pfizer for this test w e r e k n o w n t o b e p o o r p r o d u c e r s o f a n t i b i o t i c s , and t h a t the w h o l e t e s t p r o c e d u r e w a s s t r u c t u r e d t o m i n i m i s e a n t i b i o t i c p r o d u c t i o n and d i s c o v e r y . T h e p a t e n t w a s g r a n t e d , but t h e p a t e n t e x a m i n e r w a s l a t e r t o testify t h a t i f h e had k n o w n o f t h e t e c h n i c a l c o n d i t i o n s u n d e r w h i c h t h e Pfizer test had b e e n c o n d u c t e d , h e w o u l d not have granted the patent. T h e g o v e r n m e n t a r g u e d t h a t C y a n a m i d was a p a r t y to this fraud on t h e p a t e n t office in t h a t its s u p p o r t for t h e Pfizer affidavit t h a t c o - p r o d u c t i o n did n o t o c c u r w e n t b e y o n d m e r e silence. I t i s clear t h a t B r i s t o l k n e w t h a t c o - p r o d u c t i o n did o c c u r . B r i s t o l ' s alleged s t r a t e g y w a s to assist Pfizer in o b t a i n i n g t h e p a t e n t t h r o u g h misr e p r e s e n t a t i o n and t h e n use t h a t i n f o r m a t i o n to force a licence out of Pfizer. Pfizer refused to g r a n t B r i s t o l a l i c e n c e . N e g o t i a t i o n s b r o k e d o w n on t h e f o r e b o d i n g n o t e of S c h w a r t z of Bristol saying to P o w e r s of Pfizer: i h o p e this isn't g o i n g to be a dirty fight, J o h n . ' P o w e r s r e p l i e d : i t ' s g o i n g to get very r o u g h but it w o n ' t be d i r t y . ' Bristol c a l l e d Pfizer's bluff and b e g a n to sell t e t r a c y c l i n e in v i o l a t i o n o f t h e Pfizer p a t e n t on 30 A p r i l 1954. B r i s t o l did not have a p r o m o t i o n a l n e t w o r k to h a n d l e l a r g e - v o l u m e s a l e s , so it sold bulk t e t r a c y c l i n e to S q u i b b and U p j o h n . S q u i b b and U p j o h n gave Bristol legal m u s c l e by i n d e m n i f y i n g t h e m a g a i n s t any p a t e n t i n f r i n g e m e n t suit. Pfizer s u e d . B u t a s B r i s t o l c o u n s e l , W a l k e r , later testified, they w e r e 185

Antitrust determined woods'. to "impress Pfizer t h a t B r i s t o l w a s no b a b e in t h e

T h i s t h e y surely did. Bristol p r i v a t e l y sent Pfizer a 12-page ' S t a t e m e n t o f F a c t s ' . T h e s e "facts' i n c l u d e d B r i s t o l ' s belief that t h e Pfizer p a t e n t had b e e n fraudulently o b t a i n e d , that the p u r c h a s e o f H e y d e n and m a n y o t h e r collusive p r a c t i c e s b y Pfizer and C y a n a m i d w e r e i n v i o l a t i o n o f t h e C l a y t o n and S h e r m a n A c t s , and that Bristol w a s in a s t r o n g p o s i t i o n b o t h to d e s t r o y t h e p a t e n t and r e c o v e r t r e b l e d a m a g e s in a p r i v a t e a n t i t r u s t suit. B r i s t o l had t h e m o v e r a b a r r e l . T h e r e w a s no c h o i c e but to a d m i t B r i s t o l to t h e c l u b . Pfizer g r a n t e d the c o m p a n y a licence on 13 J a n u a r y 1955. I n t h e s e t t l e m e n t a g r e e m e n t Bristol ' a c k n o w l e d g e d ' t h e validity of Pfizer's p a t e n t ( e v e n t h o u g h Bristol had a r g u e d for its i n v a l i d i t y i n t h e p r i v a t e ' S t a t e m e n t o f F a c t s ' ) , and ' c o n c e d e d ' t h a t i t had infringed t h a t p a t e n t . Bristol w a s to be a l l o w e d to c o n t i n u e s u p p l y i n g b u l k t e t r a c y c l i n e t o S q u i b b and U p j o h n , but not t o any n e w o u t l e t s . T h e g o v e r n m e n t a l l e g a t i o n a g a i n s t B r i s t o l , S q u i b b and U p j o h n is t h e r e f o r e t h a t they a c c e p t e d licences u n d e r a p a t e n t w h i c h t h e y k n e w t o b e f r a u d u l e n t l y o b t a i n e d and c o n s e q u e n t l y s h a r e d i n t h e e x p l o i t a t i o n o f a n illegally o b t a i n e d p a t e n t m o n o p o l y .

The

civil cases

A long trail of civil c a s e s focusing p r i m a r i l y on the alleged p a t e n t fraud issue r a t h e r t h a n on t h e price-fixing q u e s t i o n have run in p a r a l l e l with t h e c r i m i n a l c a s e s . I n 1958 the F e d e r a l T r a d e C o m m i s s i o n first c h a r g e d t h e five c o m p a n i e s with m o n o p o l i s i n g t h e t e t r a c y c l i n e m a r k e t . A n F T C h e a r i n g e x a m i n e r d i s m i s s e d the c h a r g e s i n 1 9 6 1 . H o w e v e r , o n a r e v i e w o f t h e h e a r i n g r e c o r d , the full f i v e - m e m b e r c o m m i s s i o n held t h a t Pfizer and C y a n a m i d had c o m m i t t e d fraud on t h e P a t e n t Office and t h a t the five d e f e n d a n t s had c o n s p i r e d to fix p r i c e s on t e t r a c y c l i n e . " It o r d e r e d Pfizer to l i c e n s e t h e d r u g to all r e q u e s t i n g c o m p a n i e s at a 2.5 p e r c e n t royalty. T h e C o u r t o f A p p e a l s for t h e Sixth C i r c u i t vacated t h e c o m m i s s i o n ' s findings o n t h e g r o u n d t h a t p r o c e d u r a l defects had t a i n t e d the c o m m i s s i o n ' s d e t e r m i n a t i o n s . " W h e n h e a r d a g a i n i n the F T C b e f o r e a different e x a m i n e r a finding of fraud on t h e P a t e n t Office w a s a g a i n m a d e . S e p t e m b e r 1967 saw this decision u p h e l d b y the full c o m m i s s i o n ; b u t on a split v o t e , it found a g a i n s t t h e e x i s t e n c e of a c o n s p i r a c y to fix p r i c e s . ' " T h i s d e c i s i o n was affirmed by t h e US C o u r t o f A p p e a l s , Sixth C i r c u i t , o n 3 0 S e p t e m b e r 1968, and t h e 186

Antitrust r e q u i r e m e n t s for Pfizer to license c o m p e t i t o r s at a 2.5 per cent royalty s t o o d . " A f t e r t h e 1967 guilty c r i m i n a l v e r d i c t a n t i t r u s t t r e b l e - d a m a g e suits b e g a n to flow in, finally t o t a l l i n g o v e r 160. T h e y c a m e from p r i v a t e h o s p i t a l s , h e a l t h and welfare funds, u n i o n s , state g o v e r n m e n t s s u i n g on b e h a l f of their citizens as a c l a s s , the US g o v e r n m e n t , a n d t h e g o v e r n m e n t s o f I r a n , W e s t G e r m a n y , C o l o m b i a , the P h i l i p p i n e s , I n d i a , S p a i n , S o u t h K o r e a and K u w a i t . T h e s e cases have been a never-ending judicial nightmare. A l r e a d y s e t t l e m e n t s in e x c e s s of $250 million h a v e b e e n paid by t h e c o m p a n i e s . A n u m b e r of litigants, including the US g o v e r n m e n t , p u s h o n . T h e U S g o v e r n m e n t suit a l l e g e s o v e r c h a r g e s and prej u d g m e n t i n t e r e s t o n t e t r a c y c l i n e sales t o t h e g o v e r n m e n t o f $376.5 million. It is believed that the impossible burden ofthe tetracycline l i t i g a t i o n w a s a factor in t h e ill-health which led J u d g e W y a t t to be r e l i e v e d of r e s p o n s i b i l i t y for t h e a n t i t r u s t suits w h i c h had not b e e n s e t t l e d . H i s place w a s t a k e n b y J u d g e L o r d w h o a p p l i e d extrao r d i n a r y p r o c e d u r a l i n n o v a t i o n t o t h e 5 8 u n s e t t l e d cases h a n d e d t o h i m i n 1970. W e saw t h e r e m a r k a b l e c o u r t r o o m scene o f t w o different trials in six different cases p r o c e e d i n g at o n c e . S o m e o f t h e hearings were a t t e n d e d by more than a hundred attorneys. 'Jury O n e ' was hearing evidence in actions brought by the United S t a t e s , t w o n a t i o n a l c l a s s e s ( o n e o f i n s u r a n c e c o m p a n i e s and the o t h e r of u n i o n h e a l t h and welfare f u n d s ) , and a California m e d i c a l g r o u p . ' J u r y T w o ' w a s h e a r i n g e v i d e n c e i n suits b r o u g h t in behalf of c o m p e t i t o r s o f t h e defendant drug companies. For the most part, the juries were hearing evidence c o m m o n to both sets o f c a s e s . W h e n e v i d e n c e w a s i n t r o d u c e d t h a t w a s r e l e v a n t t o o n l y o n e set o f c a s e s , t h e o t h e r j u r y w o u l d b e e x c u s e d ( W o l f r a m . 1976: 2 5 4 ) . A unique judicial organization proliferated around Judge L o r d . A s t h e e v i d e n c e and a r g u m e n t s a b o u t t h e o r i e s o f d a m a g e s a n d liability b e c a m e m o r e c o m p l e x . J u d g e L o r d , o n M a y 10, 1 9 7 1 , a p p o i n t e d t w o e x p e r t s a s his p e r s o n a l c o n s u l t a n t s o n e c o n o m i c s and s t a t i s t i c s , t h e costs to be s h a r e d e q u a l l y by plaintiffs and d e f e n d a n t s ( W o l f r a m , 1976: 3 1 3 - 4 ) . A s d i s c o v e r y i n t h e v a r i o u s c a s e s p r o c e e d e d t h r o u g h the s u m m e r of 1971, J u d g e Lord was confronted with a n u m b e r of m o t i o n s a n d o t h e r signs o f conflict a b o u t d i s c o v e r y . T h e plaintiffs filed very b r o a d r e q u e s t s t o p r o d u c e d o c u m e n t s , and t h e 187

Antitrust d e f e n d a n t s r e s p o n d e d with s w e e p i n g c l a i m s o f p r i v i l e g e , p r i m a r i l y b e c a u s e o f a l l e g e d a t t o r n e y - c l i e n t r e l a t i o n s h i p , but also o n t r a d e s e c r e t and r e l a t e d g r o u n d s . V a r i o u s privileges w e r e claimed as to several hundred thousand d o c u m e n t s . In order to d e a l w i t h t h e issues t h a t t h e o b j e c t i o n s r a i s e d . J u d g e L o r d , o n A u g u s t 5, 1971, appointed a t h r e e - m e m b e r team of discovery m a s t e r s t o m a k e p r e l i m i n a r y rulings o n privilege and t o m a k e r e c o m m e n d a t i o n s t o him ( W o l f r a m 1976: 3 1 4 - 1 5 ) . In s p i t e of t h e t i m e saved by this brilliant s t r e a m l i n i n g , the c o r p o r a t e d e f e n d a n t s w e r e a b l e to effect a six m o n t h s ' delay in 1 9 7 1 - 2 b y p e t i t i o n s o f m a n d a m u s c h a l l e n g i n g J u d g e L o r d ' s ability to be i m p a r t i a l . N e v e r t h e l e s s , t h e t e t r a c y c l i n e class a c t i o n s are a l a n d m a r k i n t h e way t h a t s e e m i n g l y u n m a n a g e a b l e legal t a n g l e s o f u n p r e c e d e n t e d m a g n i t u d e can be solved with a sufficient will for p r o c e d u r a l innovativeness. The manageability problem is of course c o m p o u n d e d w h e n the defendants have an interest in perpetuating it. O n e t e t r a c y c l i n e d e f e n c e a t t o r n e y c a l c u l a t e d smugly t h a t i t w o u l d t a k e J u d g e L o r d 8,000 y e a r s t o try all t h e c o n s u m e r d a m a g e c l a i m s . A g a i n , o n e can d o n o b e t t e r t h a n q u o t e W o l f r a m ( 1 9 7 6 : 3 4 4 ) a s t o h o w t h e j u d g e m a n a g e d t o find s i m p l e s o l u t i o n s t o c o m p l e x detail. O n e o f t h e m a i n a r g u m e n t s o f t h e d e f e n d a n t s against c r e a t i o n o f t h e c o n s u m e r c l a s s e s w a s t h a t trial o f t h e c l a i m s i n t h e s e classes w o u l d be u n m a n a g e a b l e for a n u m b e r of r e a s o n s . F i r s t , t h e d e f e n d a n t s w o u l d insist u p o n their right to j u r y trial as to each a n d e v e r y c o n s u m e r ' s c l a i m . T h i s w o u l d r e q u i r e t h e services o f all t h e federal j u d g e s in t h e e n t i r e s y s t e m o v e r a p e r i o d of several y e a r s . J u d g e L o r d r e s p o n d e d with t h e d e v a s t a t i n g r e m a r k t h a t t h e w a y to try to a j u r y a vast n u m b e r of d a m a g e claims w a s to try all of a s t a t e ' s c o n s u m e r d a m a g e c l a i m s at o n c e . T h e e v i d e n c e w o u l d not c o n s i s t o f a n infinite p a r a d e o f individual c o n s u m e r s w i t h t e s t i m o n y a b o u t family d r u g s t o r e p u r c h a s e s . R a t h e r e c o n o m i s t s a n d s t a t i s t i c i a n s w o u l d d e s c r i b e t h e total v o l u m e o f c o n s u m e r sales and t h e p r o b a b l e p r i c e s t h a t w o u l d have b e e n charged in the absence ofthe antitrust violations. In other w o r d s , t h e ' d a m a g e ' issue c o u l d b e r e f r a m e d t o i n q u i r e into t h e e x t e n t o f injury t h a t t h e a n t i t r u s t v i o l a t i o n had w r e a k e d u p o n all c o n s u m e r s w i t h i n t h e s t a t e . As to this i s s u e , a single j u r y could h e a r all t h e e v i d e n c e a n d r e n d e r a final and b i n d i n g verdict. T h e c o n s u m e r m e m b e r s o f t h e class w o u l d t h e n simply m a k e claims 188

Antitrust a g a i n s t w h a t e v e r fund w a s p r o d u c e d b y t h e v e r d i c t . T h e d e f e n d a n t s w o u l d h a v e n o further l e g i t i m a t e i n t e r e s t i n t h e q u e s t i o n o f d a m a g e d i s t r i b u t i o n and could b e e x c u s e d . T h e v a l i d a t i o n of c l a i m s a n d d i s t r i b u t i o n could be h a n d l e d by a t e a m a p p o i n t e d b y t h e j u d g e . T h e costs o f d i s t r i b u t i o n w o u l d b e t a k e n o u t o f t h e fund. A l t h o u g h t h e s e c o n c e p t s w e r e t e n t a t i v e . J u d g e L o r d b e l i e v e d t h a t s o l u t i o n s t o so-called m a n a g e a b i l i t y p r o b l e m s were ready to hand. In spite of J u d g e L o r d ' s successful insistence t h a t p r o b l e m s of a n e w o r d e r r e q u i r e d legal s o l u t i o n s of a n e w o r d e r , t h e legal costs of t h e saga h a v e b e e n m o m e n t o u s . C o l l e c t i v e legal e x p e n s e s for t h e plaintiffs often a p p r o a c h e d $ 1 0 0 , 0 0 0 per m o n t h . I n s o m e c l a s s e s . W o l f r a m ( 1 9 7 6 : 3 6 2 ) e s t i m a t e d , c o s t s ( a t t o r n e y fees, mailed n o t i c e s , e t c . ) w o u l d be a s u m a l m o s t e q u a l to t h e net m o n i e s e v e n t u a l l y d i s t r i b u t e d t o class m e m b e r s . H e a r g u e d that t h e case i l l u s t r a t e d t h e n e e d for g r e a t e r p u b l i c scrutiny of the costs t h a t l a w y e r s a r e a b l e to c h a r g e t h e i r r e m o t e c l i e n t s in a class a c t i o n suit. H o w e v e r , a m o r e r e c e n t a s s e s s m e n t o f t h e legal and a d m i n i s t r a t i v e c o s t s of d i s t r i b u t i n g refunds to eligible c o n s u m e r s p u t s it overall at less t h a n 2 0 p e r c e n t o f t h e s e t t l e m e n t fund ( B a r t s h e t a l . , 1978). M o r e o v e r , a s u r v e y of c l a i m a n t s found t h a t most r e g a r d e d a 20 p e r cent overhead as acceptable. T h e c a s e s w h i c h r e m a i n e d u n s e t t l e d after J u d g e L o r d ' s interv e n t i o n s w e r e d e a l t a s e v e r e b l o w i n A u g u s t 1980 w h e n J u d g e W e i n e r ruled, in c o - o r d i n a t e d pretrial proceedings in the E a s t e r n D i s t r i c t of P e n n s y l v a n i a , a g a i n s t a finding of fraud by Pfizer in o b t a i n i n g the tetracycline p a t e n t . T h e U S g o v e r n m e n t ' s case r e s t e d h e a v i l y o n t e s t i m o n y b y p a t e n t e x a m i n e r Lidoff t h a t h e w o u l d not h a v e g r a n t e d Pfizer t h e p a t e n t had c e r t a i n i n f o r m a t i o n not been withheld by the c o m p a n y . B e c a u s e o f t h e passage of so many years b e t w e e n Lidoff s testimony and the events about which h e w a s t e s t i f y i n g , t h e j u d g e w a s n o t p r e p a r e d t o accept such e v i d e n c e a l o n e a s sufficient t o sustain t h e b u r d e n o f p r o o f b e y o n d reasonable doubt:
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T h e g o v e r n m e n t relies on t h e t e s t i m o n y of Lidoff given in 1966 at t h e F T C p r o c e e d i n g s and in 1972 in a d e p o s i t i o n in this c a s e , w h e r e he a t t e m p t s to r e c o n s t r u c t his state of mind in 1954 d u r i n g t h e p r o c e e d i n g s for t h e C o n o v e r p a t e n t . W e c a n n o t a c c e p t such t e s t i m o n y as credible e v i d e n c e . Such evidence cannot constitute 189

Antitrust t h e c l e a r , u n e q u i v o c a l and c o n v i n c i n g e v i d e n c e which a c h a r g e of fraud r e q u i r e s . M o r e o v e r , J u d g e W e i n e r held t h a t e v e n i f m i s l e a d i n g informat i o n had b e e n p r o v i d e d t o t h e p a t e n t office, t h e g o v e r n m e n t had not p r o v e d t h a t t h i s h a d b e e n d o n e with i n t e n t t o defraud: T h e g o v e r n m e n t had the b u r d e n t o p r o v e t h a t M u r p h y and H u t z n o t only w i t h h e l d o r m i s s t a t e d m a t e r i a l i n f o r m a t i o n , but that t h e y did so w i t h t h e specific intent to defraud the P a t e n t Office. T h e g o v e r n m e n t h a s failed t o p r o v e t h e fraudulent i n t e n t . T h e J u s t i c e D e p a r t m e n t i s c o n s i d e r i n g w h e t h e r i t will a p p e a l Judge Weiner's decision.

Tetracyclines

today

R e g a r d l e s s of h o w badly t h e r e m a i n i n g u n s e t t l e d suits t u r n o u t for t h e d e f e n d a n t s , t h e r e c a n b e little d o u b t t h a t t h e f i n a l s e t t l e m e n t s will t o t a l only a fraction of t h e e x t r a profits t h e c o m p a n i e s m a d e t h r o u g h a v o i d i n g c o m p e t i t i v e p r i c i n g . M o s t class a c t i o n s c l a i m e d o n l y a p r o p o r t i o n o f t h e e s t i m a t e d d a m a g e s t o class m e m b e r s . M o s t v i c t i m s w e r e not i n c l u d e d i n any c l a s s , p a r t i c u l a r l y t h e p o o r e s t victims in the Third W o r l d . T o d a y t e t r a c y c l i n e i s p e r h a p s t h e most p r i c e c o m p e t i t i v e o f any o f t h e m a j o r t h e r a p e u t i c c l a s s e s of d r u g s , and c e r t a i n l y the least conc e n t r a t e d m a r k e t ( S l a t t e r , 1977: 1 0 4 - 5 ) . P r o b a b l y the a n t i t r u s t c a s e s p l a y e d s o m e role i n c r e a t i n g this s i t u a t i o n . But t h e m o r e f u n d a m e n t a l r e a s o n s are t h a t t e t r a c y c l i n e has b e e n off p a t e n t since 1972, a n d t h a t it is so large a m a r k e t as to a t t r a c t n e w major firms w i t h b r a n d e d lines as late e n t r a n t s in a d d i t i o n to t h e small g e n e r i c manufacturers.

The role of antitrust law in the pharmaceutical industry
R e a d e r s m i g h t be e x c u s e d for t h i n k i n g t h a t t h e issues of c o n c e r n in t h i s c h a p t e r a r e less i m p o r t a n t t h a n t h o s e a d d r e s s e d i n the p r e v i o u s t w o c h a p t e r s b e c a u s e w e a r e h e r e d e a l i n g only with m o n e y and not t h r e a t s to h u m a n life. T h i s is a m i s t a k e n v i e w , a p r o d u c t o f W e s t e r n m i d d l e - c l a s s affluence. M o s t o f t h e w o r l d ' s p o p u l a t i o n d o not b e n e f i t from " w o n d e r d r u g s ' b e c a u s e t h e y c a n n o t afford t h e m . I n I n d i a , 8 0 p e r c e n t o f t h e p o p u l a t i o n d o e s not h a v e access t o d r u g s 190

Antitrust ( L a l l , 1979a :22). T h e r e a s o n for b o t h this s i t u a t i o n and for t h e high profits of p h a r m a c e u t i c a l c o m p a n i e s is the o l i g o p o l i s t i c s t r u c t u r e of the industry. A d m i t t e d l y , t h e classic i n t e r n a t i o n a l c a r t e l that w a s alleged with t e t r a c y c l i n e is not a f e a t u r e o f t h e w o r l d m a r k e t in p h a r m a c e u t i c a l s t o d a y : g o v e r n m e n t p r i c e c o n t r o l s m a k e this i m p o s s i b l e . But m o r e t h a n t h a t , c o r p o r a t i o n s t o d a y are m o r e s o p h i s t i c a t e d t h a n t o risk the b l a t a n t u n i f o r m i t y o f p r i c e s e v i d e n t with t e t r a c y c l i n e . P r i c e s might b e m a i n t a i n e d w i t h i n b r o a d t o l e r a n c e levels b y ' m e m b e r s o f the c l u b ' , but e x a c t u n i f o r m i t y w o u l d b e i m p o l i t i c . M o r e o v e r , o n e s u s p e c t s t h a t t h e p r e s s u r e s a g a i n s t price c u t t i n g are m o r e subtle i n a p p l i c a t i o n . If, for e x a m p l e , o n e c o m p a n y w e r e licensing a n o t h e r to sell a m e - t o o d r u g it had d i s c o v e r e d , it w o u l d be s u r p r i s i n g if the l i c e n s e e w e r e not a s k e d t h e price it i n t e n d e d to c h a r g e . A n d it w o u l d b e e v e n m o r e s u r p r i s i n g i f t h e l i c e n c e w e r e g r a n t e d after a n i n a p p r o p r i a t e a n s w e r w a s given. O f c o u r s e , a p o t e n t i a l licensee w h o w a s t u r n e d a w a y w o u l d b e given s o m e r e a s o n o t h e r t h a n price for the b r e a k d o w n o f t h e a g r e e m e n t so that there would be no grounds for an a n t i t r u s t suit. A successful l i c e n s e e w h o w e n t o u t and c h a r g e d a l o w e r p r i c e to t h a t i n d i c a t e d to t h e l i c e n s o r would be t h e subject of a d v e r s e g o s s i p in p h a r m a c e u t i c a l circles a n d w o u l d be unlikely on a n y future o c c a s i o n to be a d m i t t e d to t h e c l u b . T h e very fact that c o m p a n i e s w h i c h d i s c o v e r a m e - t o o v a r i a n t on a p r o d u c t t h e y h a v e u n d e r p a t e n t often licence t h e m e - t o o p r o d u c t to a c o m p e t i t o r is e v i d e n c e o f t h e lack of t h r e a t from a c o m p e t i t o r which is kept within the club.
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It is impossible to generalise about these matters. Pharmaceutical c o m p a n i e s are highly s o p h i s t i c a t e d in the way they r e s o l v e t h e i r p r i c i n g d e c i s i o n s a c c o r d i n g t o t h e specific c i r c u m s t a n c e s w h i c h a p p l y i n e a c h s i t u a t i o n t h e y c o n f r o n t . W h e r e a s t h e s e c o n d and third c o m p a n i e s i n t o a m a r k e t m i g h t see it as in their i n t e r e s t s to j o i n the c l u b , t h e f o u r t h and fifth m a r k e t e n t r a n t s m i g h t d e c i d e that t h e only r o u t e to a significant m a r k e t s h a r e is d r a s t i c price c u t t i n g . As o n e i n f o r m a n t e x p l a i n e d : i have to d e c i d e , is it b e t t e r for me to m a k e w a v e s o r t o not m a k e w a v e s , t o j o i n t h e c l u b o r t o b r e a k o u t . ' Often w h e n a c o u p l e of l a r g e c o m p a n i e s c h o o s e t h e l a t t e r as their rational e c o n o m i c d e c i s i o n , t h e w h o l e price s t r u c t u r e will b r e a k d o w n . A t t h e o t h e r e x t r e m e , o n e can still see s i t u a t i o n s t o d a y which o n o c c a s i o n a p p r o a c h classic c a r t e l s . I n 1978, t h e C o m m i s s i o n o f t h e E u r o p e a n C o m m u n i t i e s , sitting i n B r u s s e l s , s t o p p e d a D u t c h cartel which controlled the m a r k e t i n g of pharmaceuticals in the 191

Antitrust N e t h e r l a n d s . T h e C o m m i s s i o n found that most D u t c h m a n u f a c t u r e r s , i m p o r t e r s and d e a l e r s b e l o n g e d t o a n a s s o c i a t i o n which a c c o u n t e d for 80 to 90 p e r cent of all p h a r m a c e u t i c a l sales in the c o u n t r y . F u r t h e r , i t w a s ruled t h a t t h e a s s o c i a t i o n r e s t r i c t e d c o m p e t i t i o n i n t h e m a r k e t and t h e C o m m i s s i o n o b j e c t e d t o the resale p r i c e m a i n t e n a n c e i m p o s e d by t h e a s s o c i a t i o n on all drug products.
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O n e o f t h e r e a s o n s t h a t classic c a r t e l s are fairly r a r e t o d a y i s that m e t h o d s o f d e t e c t i n g t h e m a r e s o m u c h i m p r o v e d . T o d a y t h e r e are c o m p u t e r p r o g r a m s w h i c h e n a b l e r e g u l a t o r s t o t h r o w into t h e m a c h i n e all b i d s for a g i v e n p r o d u c t line o v e r a period of y e a r s to d i s c e r n if t h e r e is a p a t t e r n in t h e b i d d i n g a l o n g the lines o f ' t o d a y it's y o u r c o n t r a c t and next t i m e its m i n e ' ( E d e l h e r t z , 1979: 4 5 ) . I m p r o v e d m e t h o d s o f d e t e c t i o n are o f limited v a l u e , h o w e v e r , i f the c h a r g e s c a n n o t b e m a d e t o stick i n c o u r t . T h e t e t r a c y c l i n e case study i l l u s t r a t e s in g r a n d style t h e limitat i o n s o f p r o s e c u t o r i a l s o l u t i o n s . H i s t o r i c a l l y , t h e w e a p o n s t h a t the c r i m i n a l law d e v e l o p e d t o deal with c o n s p i r a c i e s i n o t h e r a r e a s have b e e n glibly a p p l i e d t o price f i x i n g . H e n c e , the case law e n s h r i n e d t h e i m p o r t a n c e o f e v i d e n c e o f c o n s p i r a t o r s g e t t i n g t o g e t h e r and c o m m u n i c a t i n g with o n e a n o t h e r for t h e p u r p o s e o f r e s t r i c t i n g c o m p e t i t i o n . T h i s e m p h a s i s on c o n s p i r a c y has had t h e effect of e m p t y i n g a n t i t r u s t law of its e c o n o m i c c o n t e n t . D o e s it m a t t e r very m u c h w h e t h e r lurid secret hotel m e e t i n g s t o o k p l a c e o r n o t ? W h y c a n n o t t h e focus b e o n e c o n o m i c b e h a v i o u r r a t h e r t h a n c o n s p i r a torial intent? If there is e c o n o m i c evidence of unacceptable u n i f o r m i t y of p r i c i n g , why not issue an o r d e r that the n e x u s of prices m u s t be b r o k e n and t h a t s o m e f i n a n c i a l p e n a l t y be paid for the e x c e s s profits w h i c h h a v e b e e n a c c r u e d from the n o n - c o m p e t i t i v e p r i c i n g ? O b v i o u s l y it w o u l d be unjust to t h r o w individuals in jail on the strength of proof of unacceptable corporate economic b e h a v i o u r w i t h o u t any d e m o n s t r a t i o n o f individual i n t e n t . B u t i s i t n e c e s s a r y to i m p r i s o n i n d i v i d u a l s to d e t e r collusive pricing effect i v e l y ? S u r e l y m o r e cost-effective ( a n d h u m a n e ) d e t e r r e n c e would r e s u l t from m a n y successful a c t i o n s against c o m p a n i e s for u n a c c e p t a b l e p r i c i n g u n i f o r m i t y , r a t h e r t h a n from a small n u m b e r o f p r o s e c u t i o n s a t m u c h g r e a t e r cost u n d e r the m o r e c o m p l e x legal d e t e r m i n a t i o n s based on conspiracy. A n o t h e r way of stating t h e p r o b l e m is to a r g u e that we should m o v e a w a y from t h e t r a d i t i o n a l c r i m i n a l law p r e o c c u p a t i o n with b l a m e w o r t h i n e s s a n d focus instead on effects. If c e r t a i n pricing 192

Antitrust p a t t e r n s h a v e e c o n o m i c effects w h i c h are u n a c c e p t a b l e , t h e n that p r i c i n g b e h a v i o u r s h o u l d b e s t o p p e d . A n d i f such pricing p a t t e r n s h a v e a l r e a d y led t o unjustifiable e n r i c h m e n t o f t h e c o m p a n i e s a t the e x p e n s e o f t h e p u b l i c , t h e n t h o s e c o m p a n i e s should b e r e q u i r e d t o pay b a c k at least a p a r t of t h a t unjustified e n r i c h m e n t . Such an a p p r o a c h w o u l d r e t u r n e c o n o m i c c o n t e n t t o a n a r e a o f law w h i c h w a s e n a c t e d for e c o n o m i c r e a s o n s . I t w o u l d avoid t h e p r o s e c u t i o n of conspiracies which have minimal economic consequences, or w h i c h a r e e v e n in t h e p u b l i c i n t e r e s t ( e . g . by securing e c o n o m i e s of scale t h r o u g h g e o g r a p h i c p a r t i t i o n i n g of a m a r k e t ) . A n d it w o u l d d e a l w i t h t h e p r o b l e m o f inability t o act against a n t i - c o m p e t i t i v e b e h a v i o u r w h i c h has a d v e r s e effects w h e r e p r o o f o f c o n s p i r a c y i s lacking. T h e r e a s o n s for s t e e r i n g a w a y from n o t i o n s o f m o r a l b l a m e w o r t h i n e s s b e c o m e m o r e a p p a r e n t w h e n o n e c o n s i d e r s so-called ' t a c i t c o l l u s i o n ' . T a c i t c o l l u s i o n u n d o u b t e d l y c a u s e s m o r e social h a r m in the p h a r m a c e u t i c a l industry than blatant cartels. The c o n c e p t of tacit c o l l u s i o n is u n d e r p i n n e d by the i n t e r d e p e n d e n c e t h e o r y o f o l i g o p o l y p r i c i n g , w h i c h P o s n e r ( 1 9 7 6 : 4 2 - 3 ) has e x p l a i n e d as follows. In a m a r k e t of m a n y s e l l e r s , t h e i n d i v i d u a l seller is t o o small for his d e c i s i o n s on p r i c i n g and o u t p u t to affect t h e m a r k e t p r i c e . He c a n sell all t h a t he c a n p r o d u c e at t h a t price and n o t h i n g at a h i g h e r p r i c e . H e can s h a d e price w i t h o u t fear o f r e t a l i a t i o n b e c a u s e t h e e x p a n s i o n of his o u t p u t r e s u l t i n g from a price r e d u c t i o n will d i v e r t only a n i m p e r c e p t i b l e a m o u n t o f b u s i n e s s from e a c h of his c o m p e t i t o r s . ( F o r e x a m p l e , in a m a r k e t of 100 s e l l e r s of e q u a l size, an e x p a n s i o n in o u t p u t o f 2 0 p e r c e n t by o n e of t h e m will result in an a v e r a g e fall in o u t p u t of only a b o u t .2 of 1 p e r c e n t for e a c h o f t h e o t h e r s , so a seller need not w o r r y in m a k i n g his p r i c i n g d e c i s i o n s a b o u t t h e r e a c t i o n s of his rivals.) In c o n t r a s t , in a m a r k e t w h e r e t h e r e a r e few sellers (an ' o l i g o p o l y ' ) , a p r i c e cut t h a t p r o d u c e s a s u b s t a n t i a l e x p a n s i o n in t h e sales of o n e seller will r e s u l t in so s u b s t a n t i a l a c o n t r a c t i o n in t h e sales of t h e o t h e r s t h a t t h e y will p r o m p t l y m a t c h t h e cut. If, for e x a m p l e , t h e r e a r e t h r e e sellers o f e q u a l s i z e , a 2 0 - p e r c e n t e x p a n s i o n i n the sales of o n e will c a u s e t h e sales of e a c h o f t h e o t h e r s to fall by an a v e r a g e of 10 p e r c e n t - a sales loss the victims can hardly o v e r l o o k . A n t i c i p a t i n g a p r o m p t r e a c t i o n by his rivals t h a t will q u i c k l y nullify his g a i n s from price c u t t i n g , the seller in a highly 193

Antitrust c o n c e n t r a t e d m a r k e t will be less likely to initiate a price cut t h a n his c o u n t e r p a r t i n t h e a t o m i z e d m a r k e t . O l i g o p o l i s t s a r e ' i n t e r d e p e n d e n t ' i n t h e i r pricing: t h e y b a s e their pricing d e c i s i o n s in p a r t on a n t i c i p a t e d r e a c t i o n s to t h e m . T h e result is a t e n d e n c y t o a v o i d v i g o r o u s price c o m p e t i t i o n . It is difficult to c o n c e i v e of such i n t e r d e p e n d e n t pricing b e h a v i o u r as m o r a l l y b l a m e w o r t h y , e v e n if it d o e s result in p e o p l e dying t h r o u g h n o t b e i n g a b l e t o afford d r u g s . T u r n e r ( 1 9 6 2 : 6 5 5 - 6 ) a r g u e s that: t h e r a t i o n a l o l i g o p o l i s t is b e h a v i n g in exactly t h e s a m e way as is t h e r a t i o n a l seller in a c o m p e t i t i v e l y s t r u c t u r e d i n d u s t r y ; he is s i m p l y t a k i n g a n o t h e r factor into a c c o u n t [likely r e a c t i o n s o f rivals to a p r i c e c u t ] . . . w h i c h he has to t a k e into a c c o u n t b e c a u s e t h e s i t u a t i o n in w h i c h he finds h i m s e l f p u t s it t h e r e . H o w can t h e o l i g o p o l i s t b e b l a m e w o r t h y w h e n it, n o differently from t h e a c t o r in a c o m p e t i t i v e m a r k e t , follows t h e only e c o n o m i c ally r a t i o n a l c o u r s e o f c o n d u c t ? H e n c e , T u r n e r ( 1 9 6 2 : 669) a r g u e s t h a t a n i n j u n c t i o n t h a t m e r e l y ' p r o h i b i t e d each d e f e n d a n t from t a k i n g into a c c o u n t t h e p r o b a b l e price d e c i s i o n s o f his c o m p e t i t o r s i n d e t e r m i n i n g his o w n p r i c e ' w o u l d ' d e m a n d such i r r a t i o n a l b e h a v i o r t h a t full c o m p l i a n c e w o u l d be virtually i m p o s s i b l e . ' G i v e n t h i s p r e d i c a m e n t , it s h o u l d not s u r p r i s e us to find, as r e p o r t e d in this c h a p t e r , t h a t i n spite o f t h e long history o f a n t i t r u s t law, p h a r m a c e u t i c a l e x e c u t i v e s h a v e not i n t e r n a l i s e d a sense of i m m o r a l i t y about antitrust violations. T h e i n t e r d e p e n d e n c e t h e o r y o f o l i g o p o l y pricing leads t o t h e c o n c l u s i o n t h a t it is i m p o s s i b l e to e l i m i n a t e c o n d u c t w h i c h follows i n e v i t a b l y from a given i n d u s t r y s t r u c t u r e . S t r u c t u r a l r a t h e r t h a n c o n d u c t r e m e d i e s are r e q u i r e d . L a t e r s o m e o f t h e s e s t r u c t u r a l r e m e d i e s will b e c o n s i d e r e d . First, we must p o n d e r some other traditional antitrust remedies. In a price-fixing a g r e e m e n t , t h e m o s t crucial r e q u i r e m e n t is to be able to detect cheating. Even an inadvertent undercutting of c o m p e t i t o r s on a bid can lead to a g e n e r a l r o u n d of price c u t t i n g ; or o n e c o m p a n y w h i c h is ( w r o n g l y ) s u s p e c t e d of c h e a t i n g to g r a s p a b i g g e r m a r k e t s h a r e can c a u s e o t h e r s t o r e t a l i a t e . T h e historical i n s t a b i l i t y of c a r t e l s is a result of t h e fact t h a t they are rife with t e m p t a t i o n s and i n d u c e m e n t s to cheat. H e n c e the i m p o r t a n c e of c o m m u n i c a t i o n b e t w e e n c o m p a n i e s of detailed information on

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Antitrust p r i c i n g b e h a v i o u r ; and h e n c e t h e c o n c e r n o f m a n y a n t i t r u s t e n f o r c e r s t o m a k e e x c h a n g e o f pricing i n f o r m a t i o n a m o n g c o m p e t i t o r s a perse a n t i t r u s t offence. T h e p h a r m a c e u t i c a l i n d u s t r y has the last w o r d in m a r k e t intellig e n c e t h r o u g h t h e p r i c i n g s u r v e y s o f p h a r m a c i s t s and o t h e r o u t l e t s c o n d u c t e d in m o s t m a j o r c o u n t r i e s by the I M S c o m p a n y . Simply by s u b s c r i b i n g t o I M S you can find e x a c t l y w h a t y o u r c o m p e t i t o r s are c h a r g i n g for different d o s a g e forms a n d d o s a g e s t r e n g t h s o f a given p r o d u c t . C o u l d w e s e r i o u s l y talk o f m a k i n g I M S illegal? N o t w i t h s t a n d i n g its i m p r a c t i c a l i t y , m a k i n g price i n f o r m a t i o n e x c h a n g e aper se a n t i t r u s t v i o l a t i o n w o u l d be u n d e s i r a b l e b e c a u s e pricing intellig e n c e c o n f e r s social benefits as well as c o s t s . I n g e n e r a l , t h e m o r e i n f o r m a t i o n sellers h a v e a b o u t t h e prices a n d o u t p u t o f t h e i r c o m p e t i t o r s t h e m o r e efficiently the m a r k e t will o p e r a t e . A firm c a n n o t d e c i d e h o w m u c h to p r o d u c e , or i n d e e d w h e t h e r t o p r o d u c e a t all, w i t h o u t k n o w i n g w h a t the m a r k e t p r i c e is. . . . Y e t such i n f o r m a t i o n could also be useful in e n a b l i n g a c a r t e l to restrict its o u t p u t by limiting t h e e x p a n s i o n of p r o d u c t i v e c a p a c i t y . I n f o r m a t i o n is t h u s a t w o - e d g e d s w o r d : it is n e c e s s a r y if t h e c o m p e t i t i v e p r o c e s s is to w o r k p r o p e r l y , but it can a l s o facilitate c o l l u s i o n ( P o s n e r , 1976: 136). S i m i l a r l y , t r a d e a s s o c i a t i o n m e e t i n g s are i n f a m o u s a s v e n u e s for s w a p p i n g pricing plans. Some of the P h a r m a c e u t i c a l Manufact u r e r s ' A s s o c i a t i o n s a r o u n d t h e w o r l d h a v e s u b c o m m i t t e e struct u r e s b a s e d o n p r o d u c t g r o u p i n g s w h i c h w o u l d o b v i o u s l y facilitate collusion a m o n g producers of therapeutically equivalent drugs. Lilly clearly see t r a d e a s s o c i a t i o n m e e t i n g s a s p r o v i d i n g e x c e l l e n t o p p o r t u n i t i e s for a n t i t r u s t v i o l a t i o n s w h e n they d e v o t e c o n s i d e r a b l e a t t e n t i o n to t h e m a t t e r in t h e i r Guidelines of Company Policy ( S e p t e m b e r , 1978): H o w e v e r , t r a d e a s s o c i a t i o n m e e t i n g s are a l m o s t invariably a f a v o r i t e a r e a of e x a m i n a t i o n by a n t i t r u s t e n f o r c e m e n t officials. It is i m p o r t a n t t h a t e m p l o y e e s be p a r t i c u l a r l y careful to c o n d u c t t h e m s e l v e s i n a m a n n e r t h a t i s a b o v e suspicion w h e n a t t e n d i n g t h e s e m e e t i n g s . T h e following r u l e s should b e o b e y e d carefully: 1 . A t t e n d only m e e t i n g s o f l e g i t i m a t e t r a d e and p r o f e s s i o n a l a s s o c i a t i o n s held for p r o p e r b u s i n e s s , scientific, or professional purposes. 195

Antitrust 2. A p a r t from p u r e l y social affairs, n e v e r a t t e n d informal gatherings of representatives of c o m p e t i t o r s before, during, or after t h e formal b u s i n e s s s e s s i o n s of a t r a d e a s s o c i a t i o n m e e t i n g . S u c h "rump* m e e t i n g s a r e a l w a y s suspect. 3. T a k e no p a r t in, or e v e n listen t o , any d i s c u s s i o n s of p r i c e , t e r m s of s a l e , b o y c o t t s , or blacklists at an a s s o c i a t i o n m e e t i n g . H o w e v e r , d i s c u s s i o n s o f g e n e r a l e c o n o m i c t r e n d s are p r o p e r . If t h e d i s c u s s i o n at an a s s o c i a t i o n m e e t i n g t u r n s to t h e subject o f p r i c e s o r o t h e r p r o h i b i t e d t o p i c s , leave the r o o m . 4. If t h e a g e n d a of a f o r t h c o m i n g a s s o c i a t i o n m e e t i n g i n d i c a t e s d o u b t f u l s u b j e c t s , check i n a d v a n c e w i t h y o u r s u p e r v i s i o n before attending.

5 . A d v i s e y o u r s u p e r v i s i o n o r t h e a p p r o p r i a t e legal p e r s o n n e l p r o m p t l y of any activity of an a s s o c i a t i o n that may a p p e a r to be illegal or e v e n s u s p i c i o u s . A g a i n , t r a d e a s s o c i a t i o n m e e t i n g s are a n a r e a which i s k n o w n t o c a u s e p r o b l e m s , b u t which the law c a n n o t effectively deal with b e c a u s e t h e a c t i v i t i e s t h a t t a k e p l a c e w i t h i n t h e m also confer social b e n e f i t s ( e . g . diffusion of i n n o v a t i o n , p r o m o t i o n of self-regulation). C r e a t i n g v a r i o u s per se offences to p r o h i b i t b e h a v i o u r k n o w n to be a s s o c i a t e d w i t h p r i c e fixing d o e s not s e e m a very p r o d u c t i v e r e s p o n s e to the w i d e s p r e a d impossibility of proving conspiracy ( P o s n e r , 1976, 1977). An a l t e r n a t i v e r o u t e is to focus on structural p r e c o n d i t i o n s r a t h e r t h a n the c o n d u c t which such s t r u c t u r e s p r o d u c e . D i v e s t i t u r e o r d e r s and p r o h i b i t i o n o f m e r g e r s a r e the m o s t w i d e l y s u p p o r t e d s t r u c t u r a l r e m e d i e s . Such m e a s u r e s d e m a n d c o n s i d e r a b l e political will and for t h a t r e a s o n have not b e e n a d o p t e d ( A d a m s , 1 9 5 1 ; E l z i n g a . 1969; P f u n d e r e t a l . , 1972). I n the U n i t e d S t a t e s , t h e A n t i t r u s t D i v i s i o n o f t h e J u s t i c e D e p a r t m e n t has p e r m i t t e d five m a s s i v e m e r g e r s a m o n g t r a n s n a t i o n a l p h a r m a c e u t i c a l c o m p a n i e s d u r i n g t h e last fifteen y e a r s : M e a d J o h n s o n and B r i s t o l M y e r s ; P l o u g h and S c h e r i n g ; C i b a and G e i g y ; P a r k e D a v i s a n d W a r n e r - L a m b e r t ; D o w and R i c h a r d s o n - M e r r e l l . I n any c a s e , one w o n d e r s how much would be achieved by attempts to break up t h e i n d u s t r y . M a n y o f t h e p h a r m a c e u t i c a l c o m p a n i e s which h a v e m e r g e d i n r e c e n t t i m e s w e r e not c o m p e t i t o r s (in the sense t h a t their p r o d u c t lines w e r e not t h e r a p e u t i c a l l y s u b s t i t u t a b l e ) . E v e n t h e c o m b i n a t i o n o f t w o m e m b e r s (or t h e b r e a k i n g i n t w o o f one m e m b e r ) o f t h e s a m e o l i g o p o l y might not m a k e m u c h difference 196

Antitrust g i v e n w h a t w e k n o w a b o u t h o w little c o m p e t i t i o n t h e r e i s t o start with in most o f t h e oligopolies. Finally, it is known that research p r o d u c t i v i t y i n c r e a s e s with c o m p a n y size; s o i t b e c o m e s possible t h a t a t t e m p t s t o b r e a k u p the industry m i g h t have m i n i m a l i m p a c t on c o m p e t i t i o n w h i l e r e d u c i n g t h e flow of t h e r a p e u t i c b r e a k throughs. T h e r e are a great many alternative types of structural remedies available in the pharmaceutical industry, however. Abolishing p a t e n t s i s t h e m o s t radical s o l u t i o n for r e s t o r i n g c o m p e t i t i o n . A s a n a l t e r n a t i v e t o b r e a k i n g u p t h e large c o m p a n i e s , this w o u l d foster the e n t r y o f m a n y s m a l l e r c o m p e t i t o r s t o c h a l l e n g e the g i a n t s . A s has b e e n pointed out a l r e a d y , patents have the advantage of r e w a r d i n g , a n d t h e r e b y e n c o u r a g i n g i n v e s t m e n t i n i n n o v a t i o n . H o w e v e r , this benefit s h o u l d n o t b e e x a g g e r a t e d . P a t e n t r e w a r d s , a s K n i g h t (1971) p o i n t e d o u t , g o t o t h o s e w h o put t h e 'finishing t o u c h ' o n a n innovat i o n , w h e n t h e activity w h i c h is m o s t d e s e r v i n g of r e w a r d is basic r e s e a r c h . T h e r o u t i n i s e r g e t s the i n c e n t i v e s w h i l e t h e real p i o n e e r ing and e x p l o r a t i o n are d o n e b y o t h e r s . M o r e o v e r , i n m e d i c i n e p a t e n t s a r e r e s e r v e d for i n n o v a t o r s i n c h e m i c a l t r e a t m e n t s but not i n n o v a t o r s i n n o n - c h e m i c a l t r e a t m e n t s . T h i s c o n c e n t r a t e s scarce r e s e a r c h r e s o u r c e s a n d t a l e n t into c h e m i c a l s o l u t i o n s w h e n altern a t i v e d i r e c t i o n s for r e s e a r c h m i g h t c o n f e r a g r e a t e r social b e n e f i t . " T h e s e k i n d s o f a r g u m e n t s lead K n i g h t t o a r g u e a g a i n s t p a t e n t m o n o p o l i e s : 'It w o u l d s e e m to be a m a t t e r of political i n t e l l i g e n c e a n d a d m i n i s t r a t i v e c a p a c i t y t o r e p l a c e artificial m o n o p o l y w i t h s o m e d i r e c t m e t h o d o f s t i m u l a t i n g and r e w a r d i n g r e s e a r c h . ' Such 'direct m e t h o d s of stimulating and rewarding research' w o u l d , of c o u r s e , cost a g r e a t deal of p u b l i c m o n e y . W a l k e r (1971) c o n c l u d e d o n t h e b a s i s o f his e c o n o m i c r e s e a r c h that t h e costs t o t h e p u b l i c o f p a y i n g for all o f t h e r e s e a r c h c o n d u c t e d b y t h e p h a r m a c e u t i c a l i n d u s t r y w o u l d b e m o r e t h a n c o m p e n s a t e d for b y the s a v i n g s in p r i c e r e d u c t i o n s which w o u l d follow from a b o l i s h i n g p a t e n t s . P h a r m a c e u t i c a l c o m p a n i e s w o u l d n o t c o m p l e t e l y stop their r e s e a r c h a c t i v i t i e s i f p a t e n t s w e r e a b o l i s h e d . T h e r e w o u l d still b e g r e a t a d v a n t a g e s in b e i n g t h e first in t h e d o c t o r ' s surgery with a n e w product. M o r e o v e r , w e h a v e seen that t h e r e are c e r t a i n a d d i t i o n a l c o n s e q u e n c e s o f p a t e n t s w h i c h run c o u n t e r t o t h e p u b l i c interest a p a r t from t h e i r a d v e r s e i m p a c t o n c o m p e t i t i o n . T h e S e c o n d W o r l d W a r fiasco w i t h p e n i c i l l i n i l l u s t r a t e d o n e o f t h e m . T h e m o s t i m p o r t a n t i s t h a t m o s t r e s e a r c h a n d safety t e s t i n g r e s o u r c e s are d i r e c t e d a t 197

Antitrust efforts t o c i r c u m v e n t e x i s t i n g p a t e n t s with m e - t o o p r o d u c t s , instead of at efforts to i m p r o v e h e a l t h . C o n s i s t e n t with K n i g h t ' s a r g u m e n t , t h e t e t r a c y c l i n e c a s e study i l l u s t r a t e s h o w quite a r b i t r a r y forces w h i c h h a v e little to do with r e s e a r c h effort often s h a p e w h o gets a p a t e n t and w h o d o e s not. A final a r g u m e n t against p a t e n t s , t h o u g h p e r h a p s not a particularly s t r o n g o n e , i s C o s t e l l o ' s ( 1 9 6 8 ) c o n t e n t i o n t h a t m o n o p o l y p o w e r is in s o m e w a y s a d e t e r r e n t to i n n o v a t i o n (see also H a m b e r g , 1966: 3 9 4 4 ) . A s e v i d e n c e o f t h i s , C o s t e l l o a r g u e s , for e x a m p l e , t h a t o n c e C y a n a m i d had p a t e n t e d c h l o r t e t r a c y c l i n e i t rested o n its l a u r e l s , a b a n d o n i n g all further r e s e a r c h in t h e a r e a until the stimulus o f t h e discovery of tetracycline by other companies (mainly Pfizer) c a m e a l o n g . W h e n all t h e a r g u m e n t s a g a i n s t p a t e n t s are a s s e m b l e d , their j u s t i f i c a t i o n for e x i s t i n g at all s e e m s less o b v i o u s t h a n the industry w o u l d h a v e u s b e l i e v e . G i v e n the p o w e r o f t h e p h a r m a c e u t i c a l l o b b y , t h e political feasibility o f c o m p l e t e l y a b o l i s h i n g p a t e n t s s e e m s m i n i m a l i n m o s t c o u n t r i e s . N e v e r t h e l e s s , all o f t h e a d v a n t a g e s o f p a t e n t s c o u l d surely b e a d e q u a t e l y p r o t e c t e d u n d e r a r e d u c e d p e r i o d o f p a t e n t p r o t e c t i o n . T h e a d v a n t a g e s o f being first on t h e m a r k e t are so great with p h a r m a c e u t i c a l s that 16-20 y e a r s of p a t e n t p r o t e c t i o n is an e n o r m o u s cost in r e d u c e d c o m p e t i t i o n for an i n c e n t i v e w h i c h i s e x c e s s i v e l y g r e a t e r t h a n that r e q u i r e d t o foster innovation. C o m p u l s o r y licensing is a n o t h e r s t r u c t u r a l reform for i n c r e a s e d c o m p e t i t i o n . It p r o v i d e s i n c e n t i v e s for i n n o v a t i o n from r o y a l t i e s r a t h e r t h a n m o n o p o l y profits. A n u m b e r o f W e s t e r n E u r o p e a n c o u n t r i e s , C a n a d a , Israel and I n d i a , t o n a m e a few, h a v e p r o v i s i o n for g o v e r n m e n t t o r e q u i r e c o m p a n i e s t o license t h e i r p a t e n t e d p r o d u c t t o p o t e n t i a l c o m p e t i t o r s w h e n t h e g o v e r n m e n t ' s assessment o f t h e public interest d e m a n d s . A b o l i t i o n of b r a n d n a m e s is a s t r u c t u r a l p a t h to i n c r e a s e d c o m p e t i t i o n w h i c h h a s b e e n followed in a limited way by P a k i s t a n and I n d i a . " It h a s b e e n seen t h a t e v e n after a p r o d u c t g o e s off p a t e n t , t h e m a r k e t d o m i n a n c e o f the o r i g i n a l p a t e n t - h o l d e r i s usually r e t a i n e d b e c a u s e of established brand-prescribing habits among d o c t o r s . T y p i c a l l y t h e m a r k e t share o f t h e l e a d e r r e m a i n s i m p e r v i o u s t o i n c u r s i o n s from price c u t t e r s . A b o l i s h i n g b r a n d n a m e s a b o l i s h e s t h e a d v a n t a g e from p h y s i c i a n - p r e s c r i b i n g h a b i t s and w o u l d o p e n t h e f l o o d g a t e s o f price c o m p e t i t i o n . P r o d u c t s w o u l d b e p r o m o t e d a n d sold b y g e n e r i c n a m e o n l y . C o m p a n y r e p u t a t i o n 198

Antitrust c o u l d still b e r e l e v a n t . V a l i u m w o u l d b e c o m e R o c h e d i a z e p a m and w o u l d c o m p e t e w i t h d i a z e p a m sold b y v a r i o u s c o m p a n i e s , but the magic o f t h e Valium brand name would disappear. T h a l i d o m i d e d e m o n s t r a t e d t h e o t h e r i m p o r t a n t justification for abolishing brand names. Many deformed babies were born because o f t h e c o n f u s i o n s u r r o u n d i n g t h e d o z e n s o f different c o m m e r c i a l n a m e s u n d e r w h i c h t h a l i d o m i d e w a s sold a r o u n d t h e w o r l d . I t w o u l d be e a s i e r for d o c t o r s b o t h to get t h e i r initial t r a i n i n g a n d to k e e p u p w i t h n e w d e v e l o p m e n t s i f only o n e n a m e w e r e a s s o c i a t e d w i t h e a c h distinct m o l e c u l a r e n t i t y . I n t h e U n i t e d S t a t e s a t the m o m e n t t h e r e are a l m o s t 3 0 r e g i s t e r e d b r a n d n a m e s for each p r e s cription drug on the m a r k e t ( U N C e n t r e on Transnational Corporations, 1979:47). T h e r e a r e m a n y c o m p r o m i s e m e a s u r e s t h a t g o only part o f t h e way towards undermining the quasi-monopolistic power of brand n a m e s . All but four A m e r i c a n s t a t e s have n o w r e p e a l e d their a n t i s u b s t i t u t i o n l a w s , so t h a t p h a r m a c i s t s are e m p o w e r e d to s u b s t i t u t e a c h e a p e r , b u t t h e r a p e u t i c a l l y e q u i v a l e n t , g e n e r i c p r o d u c t for t h e b r a n d n a m e w h i c h t h e p h y s i c i a n w r i t e s o n the p r e s c r i p t i o n . I n s o m e s t a t e s this cost s a v i n g can be m a d e only if t h e p h y s i c i a n e x p r e s s e s a p p r o v a l o f g e n e r i c s u b s t i t u t i o n o n t h e p r e s c r i p t i o n form; i n o t h e r s s u b s t i t u t i o n i s a u t o m a t i c a l l y p e r m i t t e d unless t h e physician expressly indicates disapproval ofthe practice. O t h e r c o m p r o m i s e m e a s u r e s aim t o r e d u c e c o n s u m e r costs b y m a k i n g both physicians and pharmacists m o r e price conscious. D r u g c o m p e n d i a with information on comparative therapeutic efficacy and p r i c e s a r e p u b l i s h e d by g o v e r n m e n t s in t h e U n i t e d K i n g d o m , S w e d e n and N o r w a y (Gereffi, 1979: 2 3 ) . I n the U n i t e d S t a t e s , t h e D e p a r t m e n t o f H e a l t h and H u m a n S e r v i c e s n o w s e n d s lists o f d r u g - p r i c e c o m p a r i s o n s t o p h y s i c i a n s and p h a r m a c i s t s t o e n c o u r a g e t h e m t o l o w e r t h e i r p a t i e n t s ' e x p e n d i t u r e (Business Week, 6 O c t o b e r 1 9 7 5 : 9 9 ) . A n u m b e r of c o u n t r i e s , a n d s o m e A m e r i c a n s t a t e s , r e q u i r e t h e p o s t i n g o f p r e s c r i p t i o n prices i n pharm a c i e s t o facilitate cost-effective p u r c h a s i n g (Gereffi, 1979: 2 3 - 4 ) . T h e g r e a t a d v a n t a g e o f s t r u c t u r a l r e m e d i e s such a s t h e a b o l i t i o n o f b r a n d n a m e s , p a t e n t s , and a n t i - s u b s t i t u t i o n laws i s that they d o n o t i n v o l v e t h e b u r e a u c r a t i c and legal costs o f a n t i t r u s t p r o s e c u t i o n s and divestitures. S o m e progress is being m a d e towards a more competitive pharmaceutical market. The proportion of United S t a t e s d r u g p r e s c r i p t i o n s w h i c h are w r i t t e n g e n e t i c a l l y rose from 6 p e r c e n t in 1966 to 12.4 p e r cent in 1977 ( U N C e n t e r on 199

Antitrust Transnational Corporations, 1979:80). I n c i d e n t s such a s the C e n t r a f a r m a m b i t , and w i d e r d i s s e m i n a t i o n o f i n f o r m a t i o n o n i n t e r n a t i o n a l price v a r i a t i o n s on t h e s a m e p r o d u c t , will lead to g r o w i n g d e m a n d s for price r e d u c t i o n s in c o u n t r i e s with prices well a b o v e w o r l d a v e r a g e s . T h e reality o f g r o w i n g p r i c e c o m p e t i t i o n from g e n e r i c m a n u f a c t u r e r s has b e e n c o n f r o n t e d by a n u m b e r o f t h e m a j o r t r a n s n a t i o n a l s w h o are n o w d e v e l o p i n g lines o f ' b r a n d e d g e n e r i c s ' . T h e s e a r e simply g e n e r i c d r u g s t o c o m p e t e w i t h t h e o f f - p a t e n t p r o d u c t s o f o t h e r t r a n s n a t i o n a l s , but which use the c o m p a n y r e p u t a t i o n of the 'branded generic' manufacturer as a promotional advantage. In s p i t e of t h e g r e a t e r efficiency of t h e s t r u c t u r a l s o l u t i o n s to b a r r i e r s t o c o m p e t i t i o n discussed a b o v e , t h e r e are still s i t u a t i o n s w h e n c o n d u c t r e m e d i e s m u s t b e relied u p o n . W h i l e the real h o p e for r e s t o r i n g c o m p e t i t i o n c o m e s from a r e a s o t h e r t h a n a n t i t r u s t law, o n e w o u l d n o t w a n t to do away with t h e latter. C o n s i d e r , for e x a m p l e , t h e p r o b l e m of a large c o m p a n y w h i c h has a drug in an i n t r a v e n o u s l y i n j e c t a b l e , i n t r a m u s c u l a r l y injectable and orally i n g e s t a b l e form. A c o m p e t i t o r e n t e r s t h e m a r k e t by p r o d u c i n g only t h e i n t r a v e n o u s f o r m , in w h i c h it u n d e r c u t s the price of t h e first c o m p a n y . T h e o r i g i n a l p r o d u c e r t h e n tells its h o s p i t a l c u s t o m e r s t o b u y all t h r e e forms of t h e d r u g from t h e m , or t h e y will lose their n o r m a l b u l k d i s c o u n t o n t h e t w o lines t h e y c o n t i n u e t o p u r c h a s e . T h i s t y p e o f r e s t r i c t i v e t r a d e p r a c t i c e can really only b e d e a l t with b y a c o n d u c t p r o s e c u t i o n or a civil a n t i t r u s t suit. E a r l i e r i t w a s a r g u e d t h a t pricing p a t t e r n s which h a v e u n a c c e p t a b l e e c o n o m i c effects s h o u l d s o m e t i m e s b e s t o p p e d , for t h a t r e a s o n a l o n e , w i t h o u t t h e r e q u i r e m e n t o f p r o v i n g c o n s p i r a c y , and o r d e r s for t h e r e p a y m e n t of e x c e s s profits s h o u l d also be m a d e in s o m e of t h e s e c a s e s . B u t w h o i s t o d e c i d e w h a t e c o n o m i c effects are una c c e p t a b l e ? In some E u r o p e a n countries courts tend to make these e c o n o m i c d e c i s i o n s w i t h o u t great difficulty and w i t h o u t slipping i n t o t h e m o r a l b l a m e w o r t h i n e s s t r a p s w h i c h have b e e n t h e o u t c o m e o f l e g a l i s m i n c o u n t r i e s such a s A u s t r a l i a , C a n a d a and J a p a n w h i c h h a v e followed the A m e r i c a n antitrust m o d e l . N e v e r t h e l e s s , o n e w o n d e r s w h e t h e r i t i s t h e role o f t h e c o u r t s t o m a k e e c o n o m i c decisions. Perhaps the British M o n o p o l i e s Comm i s s i o n i n t e r v e n t i o n in t h e V a l i u m and L i b r i u m case study is closer t o a n a p p r o p r i a t e m o d e l . C o u r t s h a v e n o t fared p a r t i c u l a r l y well i n dealing with the complexities of antitrust matters. P e r h a p s much of a n t i t r u s t s h o u l d be shifted from t h e legal d o m a i n to t h e political. A 200

Antitrust p a r l i a m e n t a r y c o m m i t t e e , or a commission of economic experts a p p o i n t e d b y t h e l e g i s l a t u r e , could h o l d p u b l i c h e a r i n g s and m a k e r e c o m m e n d a t i o n s about the economic desirability of intervention in t h e p r i c i n g s t r u c t u r e of a m o n o p o l i s t i c or o l i g o p o l i s t i c m a r k e t w i t h o u t n e c e s s a r y r e f e r e n c e t o m o r a l b l a m e w o r t h i n e s s o r prec e d e n t . The legislature (or perhaps the executive under the A m e r i c a n s y s t e m ) c o u l d t h e n c h o o s e t o a c c e p t o r reject the r e c o m m e n d a t i o n . T h e political s y s t e m , like the legal s y s t e m , has its o w n c h e c k s and b a l a n c e s a g a i n s t a b u s e s o f d e c i s i o n - m a k i n g p o w e r ( e l e c t i o n s , r e m o v a l o f m i n i s t e r s from office, r e q u i r e m e n t t o p u b l i c l y justify d e c i s i o n s , e t c . ) . T h e d e m o c r a t i c political p r o c e s s , w i t h all its f a u l t s , is s u p e r i o r to t h e legal p r o c e s s for s o m e t y p e s of d e c i s i o n - m a k i n g , and e c o n o m i c d e c i s i o n - m a k i n g i s one o f t h e m .
2 5

T h e legal s y s t e m w i t h its m o r e i n t r i c a t e p r o c e d u r a l safeguards is c l e a r l y s u p e r i o r for d e c i s i o n s w h i c h t h r e a t e n t h e life and liberty of i n d i v i d u a l p e r s o n s a c c u s e d of w r o n g d o i n g . If, h o w e v e r , o n e is p r e p a r e d to eschew the option of punishing individuals (particularly i n c a r c e r a t i o n , c o r p o r a l and c a p i t a l p u n i s h m e n t ) , t h e n t h e p r i m a r y r a t i o n a l e for giving t h e c o u r t s r e s p o n s i b i l i t y for d e c i s i o n s a b o u t u n i q u e and e v e r - c h a n g i n g e c o n o m i c s i t u a t i o n s i s n o longer t e n a b l e . M y o w n view i s t h a t t h e r e p o r t o f t h e B r i t i s h M o n o p o l i e s C o m m i s sion on L i b r i u m and V a l i u m r e p r e s e n t s a m i l e s t o n e on the p a t h to a m o r e constructive, more political, approach to antitrust. This conclusion might be generalised beyond the pharmaceutical i n d u s t r y . I f t h e U S g o v e r n m e n t w a n t e d t o b r e a k u p I B M i n 1969, w h y did t h e y h a v e to go a b o u t it by tying up c o u r t s for 13 y e a r s and s p e n d i n g t e n s of m i l l i o n s of t a x p a y e r s ' d o l l a r s in legal costs? T h e p r e s u m e d a d v a n t a g e of c e r t a i n t y in law is feeble w h e n n e w and r a p i d l y c h a n g i n g e c o n o m i c r e a l i t i e s , c o m b i n e d with a n i n e v i t a b l e legal c o m p l e x i t y t o g r a p p l e with such flux, r e n d e r t h e o u t c o m e o f l i t i g a t i o n a n y o n e ' s g u e s s . P r e s u m e d c e r t a i n t y of law is a d u b i o u s benefit w h e n an i n d u s t r y m u s t suffer t e r r i b l e u n c e r t a i n t y for a d e c a d e w h i l e c l u m s y c o u r t s a g o n i s e o v e r major e c o n o m i c d e c i s i o n s . T h e polity is m o r e a b l e ( e v e n if not a l w a y s willing) to be d e c i s i v e . S u r p r i s i n g l y , it can also be m o r e d e t e r m i n e d to b r e a k up m o n o p o l y p o w e r t h a n t h e c o u r t s . O n e o f t h e ironies o f t h e o t h e r major U S m o n o p o l i z a t i o n c a s e o f t h e 1970s - A T & T - w a s that the c o m p a n y o p t e d for a legal s e t t l e m e n t in 1982 b e c a u s e of fear t h a t legislation p e n d i n g in t h e C o n g r e s s w o u l d result in a m o r e severe b r e a k u p of A T & T t h a n t h e c o u r t s w o u l d ever dish out (Sunday News Journal, 10 J a n u a r y 1982). 201

Antitrust It t h e r e f o r e s e e m s u n d e s i r a b l e for a m a t t e r like t h e b r e a k - u p of a c o m p a n y with $20 billion in assets to be d e c i d e d e i t h e r by the c o u r t s o r t h r o u g h t h e secret p o w e r o f a d m i n i s t r a t i v e d e c i s i o n - m a k i n g . S u r e l y t h e b r e a k - u p of I B M is a big e n o u g h political issue to be d e b a t e d b y e l e c t e d r e p r e s e n t a t i v e s and v o t e d o n i n the C o n g r e s s . C y n i c s w o u l d be justified in p o i n t i n g out t h a t political r e g u l a t i o n is m o r e s u s c e p t i b l e t o t h e p o w e r o f big m o n e y t h a n legal r e g u l a t i o n . C e r t a i n l y political r e g u l a t i o n must be a c c o m p a n i e d by s t r o n g g u a r a n t e e s o f o p e n n e s s and effective laws p r o h i b i t i n g c o r p o r a t e campaign contributions. T h e t h r u s t of t h e c o n c l u s i o n to this c h a p t e r is t h e r e f o r e fundam e n t a l l y different from t h o s e o f t h e p r e v i o u s t w o . T h e p r e v i o u s t w o c h a p t e r s p r e s e n t e d a r g u m e n t s for a g r e a t e r role for s e l f - r e g u l a t i o n , a g r e a t e r role for a d m i n i s t r a t i v e r e g u l a t i o n and a role for litigious r e g u l a t i o n o f safety less c e n t r a l t h a n t h e o t h e r t w o s t r a t e g i e s . T h e p r e s e n t c h a p t e r also a r g u e s for i n f r e q u e n t r e g u l a t i o n t h r o u g h t h e c o u r t s , b u t i m p l i e s an i n c r e a s e d role for political r a t h e r t h a n a d m i n i s t r a t i v e r e g u l a t i o n , and a m i n i m a l role for self-regulation. W i t h safety m a t t e r s t h e r e is an i m p o r t a n t place for self-regulation b e c a u s e up to a p o i n t g o v e r n m e n t a n d b u s i n e s s share a c o m m o n i n t e r e s t in t h e sale of safe p r o d u c t s . In c o n t r a s t , c o m p a n i e s do not g e n e r a l l y h a v e an i n t e r e s t in e n f o r c i n g t h e setting of l o w e r p r i c e s for t h e i r p r o d u c t s . Since t h e m a r k e t and t h e c o u r t s have failed t o r e g u l a t e p h a r m a c e u t i c a l p r i c e s effectively, and since self-regulation of pricing w o u l d be to put Dracula in charge o f t h e blood bank, the o n l y c o u r s e i s for g r e a t e r p o l i t i c a l - a d m i n i s t r a t i v e " price c o n t r o l . As a r g u e d e a r l i e r , it is g e n e r a l l y p r e f e r a b l e to h a v e such c o n t r o l s t o w a r d t h e political end o f t h e p o l i t i c a l - a d m i n i s t r a t i v e c o n t i n u u m . H o w e v e r , voting in the legislature on every major antitrust matter w o u l d clearly clog up t h e legislative p r o c e s s ( N e u s t a d t , 1980: 1 4 6 - 4 9 ) . L o w e r levels o f p o l i t i c i s a t i o n (such a s t h r o u g h a n i n d e p e n d e n t c o m m i s s i o n c o n d u c t i n g a n e n q u i r y and t h e n m a k i n g a r e c o m m e n d a t i o n for c a b i n e t d e c i s i o n u n d e r t h e W e s t m i n s t e r s y s t e m , o r p e r h a p s u n d e r the A m e r i c a n system a n i n d e p e n d e n t c o m m i s s i o n m a k i n g r e c o m m e n d a t i o n s w h i c h will a u t o m a t i c a l l y b e a d o p t e d u n l e s s t h e C o n g r e s s c h o o s e s t o v e t o t h e m within a fixed p e r i o d ) , m u s t be a p p l i e d to all but t h e m o s t crucial a n t i t r u s t d e t e r m i n a t i o n s . To the extent that professional opinion is relevant to t h e s e p o l i t i c a l d e c i s i o n s , it s h o u l d be p r i m a r i l y t h e professional o p i n i o n s o f e c o n o m i s t s , not l a w y e r s . M o r e important than

202

Antitrust p r o f e s s i o n a l o p i n i o n i s c o n s u m e r o p i n i o n . T h i s s h o u l d b e fostered by f i n a n c i a l s u p p o r t for c o n s u m e r g r o u p s to m o u n t s u b m i s s i o n s to g o v e r n m e n t , r e p r e s e n t a t i o n of c o n s u m e r groups on relevant comm i t t e e s of e n q u i r y a n d full p u b l i c a c c e s s to r e c o r d s of g o v e r n m e n t d e l i b e r a t i o n s o n a n t i t r u s t m a t t e r s . W i t h o u t such g u a r a n t e e s , politicised antitrust would be captured by the superior power ofthe c o r p o r a t i o n s i n t h e s a m e way t h a t legal a n t i t r u s t has b e e n .

203

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P e o p l e w h o foster d e p e n d e n c e on illicit d r u g s such as h e r o i n are r e g a r d e d a s a m o n g t h e m o s t u n s c r u p u l o u s p a r i a h s o f m o d e r n civilisa t i o n . In c o n t r a s t , p u s h e r s of licit d r u g s tend to be v i e w e d as a l t r u i s t i c a l l y m o t i v a t e d p u r v e y o r s o f a social g o o d . Yet d e p e n d e n c e o n V a l i u m o r D a r v o n can h a v e c o n s e q u e n c e s j u s t a s frightening a s h e r o i n a d d i c t i o n . C o n s t a n t l y i n t h e m e d i a w e read h o r r o r stories o f b i z a r r e e x p l o i t s of p e o p l e u n d e r t h e influence of illicit d r u g s . It t o o k t h e d r u g d e p e n d e n c e o f t h e wife o f a p r e s i d e n t , B e t t y F o r d , t o get h e a d l i n e s a b o u t V a l i u m a d d i c t i o n into A m e r i c a n n e w s p a p e r s . V a l i u m in i n t e r a c t i o n with alcohol c a n p r o d u c e a ' p a r a d o x i c a l r a g e r e a c t i o n ' - p a r a d o x i c a l b e c a u s e V a l i u m is s u p p o s e d to bring c a l m , n o t r a g e . F D A a d v e r s e r e a c t i o n files tell o f a w o m a n w h o , h a v i n g had a few d r i n k s , had an a r g u m e n t with h e r h u s b a n d . W h e n he left t h e h o u s e , she t o o k several V a l i u m t a b l e t s to calm d o w n and w e n t t o s l e e p . W o k e n b y t h e r e t u r n o f t h e h u s b a n d , she t o o k out a p i s t o l a n d shot him d e a d . T h e story p r o v e s n o t h i n g . P e r h a p s the F D A w e r e w r o n g t o classify this a s a n ' o b v i o u s a d v e r s e r a g e r e a c t i o n ' t o V a l i u m . She m i g h t h a v e shot him w i t h o u t the V a l i u m . T h e p o i n t is t h a t t h e r e is no n e w s v a l u e in anti-social c o n d u c t p r e s u m e d to be c a u s e d by licit d r u g s . C o m p a r a b l e cases w h e r e illicit d r u g s might be p r e s u m e d to cause anti-social behaviour decidedly are news. P u b l i c o p i n i o n r e g a r d s t h e p r o d u c t i o n and d i s t r i b u t i o n o f illicit d r u g s as a m a l e v o l e n t c o n s p i r a c y of vast p r o p o r t i o n s . In a p r o v o c a t i v e p a p e r , G o r r i n g ( 1 9 7 8 : 82) a r g u e s t h a t t h e p u b l i c i m a g e o f h e r o i n d i s t r i b u t i o n is really not a s o u n d d e s c r i p t i o n o f w h a t h a p p e n s in t h e h e r o i n t r a d e , but is r e m a r k a b l y in a c c o r d with w h a t in fact 204

The h a p p e n s in t h e d i s t r i b u t i o n of legal

corporation

as pusher Gorring

d r u g s of a d d i c t i o n .

d e l i n e a t e s t h e c o m m o n l y held beliefs a b o u t h e r o i n as: 1. T h a t a h u g e a n d e l a b o r a t e o r g a n i z a t i o n , forming a n e t w o r k a c r o s s i n t e r n a t i o n a l b o u n d a r i e s , exists t o h a n d l e it. 2 . T h a t t h e p o w e r b r o k e r s i n this o r g a n i z a t i o n , c o n c e r n e d only w i t h m a x i m i z i n g profits w h i c h run t o t h o u s a n d s o f per c e n t , c o r n e r all s u p p l i e s o f t h e d r u g . 3. T h a t a d i s t r i b u t i o n h i e r a r c h y e x i s t s . At t h e t o p are faceless m e n i n s o m e undefined foreign c o u n t r y i n t h e E a s t . B e l o w t h e m a r e a g e n t s w h o a r r a n g e supply t o i m p o r t e r s i n o t h e r countries. The importers, in turn, have agents who operate a sales n e t w o r k t h r o u g h o u t their own c o u n t r y t o a c h i e v e m a x i m u m d i s t r i b u t i o n . A t t h e lowest level i s t h e p u s h e r w h o s e j o b it is to see t h a t , i r r e s p e c t i v e of c o n s e q u e n c e s , the m a x i m u m n u m b e r o f c o n s u m e r s use a s m u c h o f t h e drug a s t h e y can afford to pay for. 4. T h a t t h e c o n s u m e r ' s welfare is i m p o r t a n t only b e c a u s e a d e a d c o n s u m e r n o l o n g e r uses d r u g s a n d , i f his d e a t h i s a t t r i b u t e d to t h e use of d r u g s , it may d i s c o u r a g e o t h e r s from taking them. 5 . T h a t t h e i m m o r a l i t y o f t h e o p e r a t i o n lies i n t h e d e l i b e r a t e , p r o f i t - m o t i v a t e d c r e a t i o n of a n e e d w h i c h is seen as d e t r i m e n t a l to b o t h t h e c o n s u m e r and society as a w h o l e . T h e fact t h a t t h e c o n s u m e r d e r i v e s t r a n s i e n t p l e a s u r e from the g r a t i f i c a t i o n of this illicit n e e d i n c r e a s e s t h e i m m o r a l i t y . 6. T h a t o t h e r c r i m i n a l activities o c c u r in t h e p r o c e s s of d i s t r i b u t i o n - b r i b e r y and c o r r u p t i o n of officials, r u t h l e s s m e a s u r e s t a k e n to squeeze out rival distributors. G o r r i n g a r g u e s t h a t t h e h e r o i n t r a d e is not as highly o r g a n i s e d as p o p u l a r belief w o u l d h a v e it. O p i u m is g r o w n by p e a s a n t s and p u r c h a s e d by small t r a d e r s . T h e factories w h e r e it is refined into h e r o i n a r e small and often makeshift. W h i l e t h e r e are m a n y large d e a l e r s (see M c C o y , 1980), e q u a l l y significant are t h e small s e l l e r s , w h o , far from cynically m a n i p u l a t i n g a d d i c t i o n i n o t h e r s , are a d d i c t s t h e m s e l v e s w h o buy for their o w n use and sell excess to f r i e n d s . C o n v e r s e l y , G o r r i n g ' s a r g u m e n t t h a t her six p o i n t s constitute a m o r e a c c u r a t e depiction of the multinational p h a r m a c e u t i c a l i n d u s t r y h a r d l y n e e d s t o b e r e p e a t e d h e r e . T h i s c h a p t e r will p r o v i d e f u r t h e r t e s t i m o n y to t h e validity of all t h e p o i n t s e x c e p t n u m b e r 4 , w h i c h g o e s t o o far. 205

The

corporation

as

pusher

A bit of history
S o m e q u i t e d i r e c t links b e t w e e n t h e licit and illicit d r u g t r a d e s can b e m a d e . T o d a y t h e Swiss c o m p a n y H o f f m a n - L a R o c h e i s the w o r l d ' s l e a d i n g seller o f legal p s y c h o t r o p i c d r u g s . E l m e r B o b s t w a s p r e s i d e n t o f H o f f m a n - L a R o c h e i n the U n i t e d S t a t e s until t h e end o f t h e S e c o n d W o r l d W a r , and in the 1960s r e i g n e d as p r e s i d e n t of W a r n e r - L a m b e r t . I n his a u t o b i o g r a p h y , B o b s t r e v e a l e d t h a t R o c h e w a s heavily involved in the supply of m o r p h i n e to the underworld b e t w e e n t h e t w o w a r s ( B o b s t , 1973: 1 2 3 - 2 5 ) . T h e C a n t o n R o a d s m u g g l i n g c a s e , h e a r d by t h e M i x e d C o u r t of S h a n g h a i in 1925, r e v e a l e d t h e e x t e n s i v e i n v o l v e m e n t o f H o f f m a n - L a R o c h e i n the illegal d r u g t r a d e . T h e c a s e i n v o l v e d 180 c h e s t s o f o p i u m s h i p p e d from C o n s t a n t i n o p l e and sold in C h i n a , and 26 b o x e s c o n t a i n i n g m o s t l y h e r o i n i m p o r t e d from B a s l e , S w i t z e r l a n d by a C h i n e s e d e a l e r , G w a n d o . ' D o c u m e n t s p r o d u c e d a t t h e trial r e v e a l e d t h a t a c o n s i d e r a b l e t r a d e had b e e n p l y i n g b e t w e e n G w a n d o a n d t h e Swiss d r u g f i r m s H o f f m a n L a R o c h e and M a c D o n a l d and C o . ' ( B r u u n , 1979: 3 ) . The m i n u t e s of the L e a g u e of N a t i o n s O p i u m Advisory Comm i t t e e m e e t i n g of 1927 r e v e a l t h a t w h e n a n o t h e r case of traffic i n v o l v i n g R o c h e w a s d i s c u s s e d , t h e c h a i r m a n o f t h e British d e l e g a t i o n , Sir J o h n C a m p b e l l a r g u e d t h a t h e ' h a d n o d o u b t w h a t e v e r t h a t H o f f m a n La R o c h e a n d C o m p a n y w a s not a firm to which a licence t o d e a l w i t h d r u g s s h o u l d b e g i v e n . ' R o c h e w a s not a l o n e . M a n y s u p p o s e d l y l a w - a b i d i n g p h a r m a c e u t i c a l firms w e r e a l m o s t equally n o t o r i o u s . A t t h e 1923 m e e t i n g o f t h e O p i u m A d v i s o r y C o m m i t t e e , t h e C h i n e s e r e p r e s e n t a t i v e s p o i n t e d out t h a t G e r m a n y , G r e a t B r i t a i n , J a p a n , S w i t z e r l a n d a n d t h e U n i t e d S t a t e s w e r e all t u r n i n g out ' m o r p h i n e by the ton, which was purchased by the smugglers by the ton'. S o m e o f t h e g r e a t p h a r m a c e u t i c a l c o m p a n i e s o f t o d a y o w e their e x i s t e n c e to profits from t h e t r a d e in h e r o i n and m o r p h i n e in an era w h i c h laid t h e f o u n d a t i o n s for the s e l f - p e r p e t u a t i n g cycles of a d d i c t i o n t o t h e s e d r u g s i n m o d e r n s o c i e t i e s . T h e next g e n e r a t i o n m i g h t l o o k b a c k on t h e a c t i v i t i e s of H o f f m a n - L a R o c h e in p u s h i n g V a l i u m a n d L i b r i u m w i t h disgust e q u a l to that we feel t o d a y t o w a r d s t h e i r h e r o i n sales b e t w e e n t h e w a r s . It is fair c o m m e n t to say t h a t R o c h e h a s a l w a y s b e e n o n e step a h e a d o f public o p i n i o n , m a k i n g m a s s i v e profits from d r u g s of a d d i c t i o n in t h e e r a before t h e d r u g b e c o m e s a m a t t e r o f w i d e s p r e a d p u b l i c c o n c e r n . O t h e r global 206

The

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p h a r m a c e u t i c a l c o m p a n i e s carry a similar legacy. At the t u r n of the century B a y e r were applying the same mass-marketing tactics to h e r o i n as it had used so successfully with a s p i r i n . B a y e r ' s international advertising campaign p r o m o t e d heroin as a panacea for infant r e s p i r a t o r y a i l m e n t s . A t a b o u t t h e s a m e t i m e P a r k e D a v i s w a s a p p l y i n g similar p r o m o t i o n a l e n t h u s i a s m t o t h e t h e r a p e u t i c virtues of cocaine. As one o f t h e world's leading cocaine manufacturers, Parke-Davis produced coca-cordial, cocaine c i g a r e t t e s , h y p o d e r m i c c a p s u l e s , o i n t m e n t s and sprays ( M u s t o . 1973: 7 ) . A m p h e t a m i n e s a r e p r o d u c e d for t h e A m e r i c a n m a r k e t i n q u a n t i t i e s w h i c h far e x c e e d any c o n c e i v a b l e level of l e g i t i m a t e d e m a n d . M a n y o f t h e pills sold i n m a s s i v e o r d e r s t o M e x i c a n p u r c h a s e r s are redirected back to the street trade in the United States. T h e r e is no e v i d e n c e of direct sales of a m p h e t a m i n e s to t h e u n d e r w o r l d by today's reputable drug companies. Nevertheless, t h e r e a r e s i m i l a r i t i e s b e t w e e n t h e role o f i n d u s t r y i n s u p p o r t i n g t h e s t r e e t t r a d e i n a m p h e t a m i n e s and t h e role w h i c h i n d u s t r y played i n h e r o i n distribution b e t w e e n the wars. Excess production is u n l o a d e d w i t h full k n o w l e d g e of w h e r e t h a t e x c e s s will end u p . T h e m o s t i m p o r t a n t link b e t w e e n licit and illicit d r u g use is m e d i a t e d b y c u l t u r e . T h e c o n s t a n t b a r r a g e o f O T C (over t h e c o u n t e r ) d r u g a d v e r t i s i n g o n t e l e v i s i o n , c o m b i n e d with t h e h e g e m o n y o f d r u g t h e r a p y i n the m e d i c a l p r o f e s s i o n , c r e a t e s a pill-popping culture. Y o u n g people need to develop a tolerance of f r u s t r a t i o n t h r o u g h following adult role m o d e l s w h o w i t h s t a n d and c o p e w i t h t h e s t r e s s e s and a n x i e t i e s o f e v e r y d a y life. But drug a d v e r t i s i n g c o n s t a n t l y e x p o s e s c h i l d r e n t o o p p o s i t e role m o d e l s a d u l t s w h o i m m e d i a t e l y resort t o c h e m i c a l s o l u t i o n s t o frustration r a n g i n g from h e a d a c h e s t o i n s o m n i a a n d mild a n x i e t y . A n d the a d v e r t i s i n g i s p e r v a s i v e . B r i s t o l - M y e r s and A m e r i c a n H o m e P r o d u c t s spend more on A m e r i c a n network TV advertising than G e n e r a l M o t o r s . S e n a t o r G a y l o r d N e l s o n found t h a t the a n n u a l e x p e n d i t u r e s on the advertising of psychoactive O T C drugs exceed the federal g o v e r n m e n t ' s allocations to combat drug abuse (Hughes a n d B r e w i n , 1 9 7 9 : 2 6 1 ) . T h e i m p o r t a n c e o f a d u l t role m o d e l s i n this r e g a r d i s n o w fairly well e s t a b l i s h e d . T h e r e i s e v i d e n c e t h a t p a r e n t s w h o a r e u s e r s o f t r a n q u i l l i s e r s , b a r b i t u r a t e s and s t i m u l a n t s are m o r e likely t o h a v e c h i l d r e n w h o are u s e r s o f m a r i j u a n a , L S D , and o t h e r d r u g s ( P e k k a n e n , 1973: 9 7 - 8 ) .

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The overmedicated society
T h e s u b c o m m i t t e e h e a r d that o n e out o f every t w o h o s p i t a l i z e d A m e r i c a n s w h o r e c e i v e s a n t i b i o t i c s this y e a r will be t a k i n g a drug t h a t is i r r a t i o n a l l y p r e s c r i b e d and w h i c h may result in an a d v e r s e d r u g r e a c t i o n . A s a n overall class, a d v e r s e drug r e a c t i o n s a l r e a d y a c c o u n t for $2 billion in medical and hospital costs and 3 0 , 0 0 0 d e a t h s e a c h y e a r . E i g h t y p e r c e n t o f t h e s e r e a c t i o n s are t h o u g h t t o be preventable (Senator Edward Kennedy, Subcommittee on H e a l t h , 1974: 7 1 9 ) . T h e n u m b e r o f d e a t h s from a d v e r s e d r u g r e a c t i o n s i n t h e U n i t e d S t a t e s e a c h y e a r has b e e n a hotly d i s p u t e d q u e s t i o n , with s o m e r e s e a r c h e r s c l a i m i n g t h a t the n u m b e r could be as high as 130,000 for h o s p i t a l - i n d u c e d r e a c t i o n s alone ( e . g . S h a p i r o e t a l . , 1971). I r r e s p e c t i v e of w h e t h e r a m o r e a c c u r a t e figure is 30,000 or 130,000, it is c e r t a i n t h a t A m e r i c a p a y s a heavy price for b e i n g an o v e r m e d i c a t e d s o c i e t y . I n v a r i a b l y , d r u g s which are powerful e n o u g h to c o n t r o l a d i s e a s e a r e also c a p a b l e o f c a u s i n g s e v e r e injury t o p a t i e n t s . A s one c o r p o r a t e m e d i c a l d i r e c t o r e x p l a i n e d : ' P r e s c r i p t i o n d r u g s are n o more than tamed poisons.' T h e d i s e a s e s for w h i c h a d r u g is r e c o m m e n d e d a r e called its i n d i c a t i o n s , and the d i s e a s e s for w h i c h it w o u l d be p a r t i c u l a r l y d a n g e r o u s t o use t h e drug are its c o n t r a - i n d i c a t i o n s . P h a r m a c e u t i c a l c o m p a n i e s n a t u r a l l y have a n i n t e r e s t i n e x p a n d i n g m a r k e t s b y p r o m o t i n g w i d e i n d i c a t i o n s a n d limiting c o n t r a - i n d i c a t i o n s . T h e e x t e n t o f a d r u g ' s i n d i c a t i o n s is no a c a d e m i c q u e s t i o n . If, for e x a m p l e , a d r u g is r e c o m m e n d e d and used for a d i s e a s e a g a i n s t w h i c h it is n o t e f f e c t i v e , t h e n t h e d i s e a s e , p e r h a p s s e r i o u s , will be left u n t r e a t e d . I n a d d i t i o n , and d e s p i t e t h e ineffectiveness o f t h e d r u g , t h e p e r s o n using it still r u n s t h e risk ofits toxic effects. E v e n i f t h e d r u g is effective, t h e p e r s o n m a y be s u b j e c t e d to u n n e c e s s a r y risks if a less toxic d r u g w o u l d do t h e j o b as well (Ledogar, 1975:7). P h a r m a c e u t i c a l c o m p a n i e s e v e n m a n a g e t o invent n e w d i s e a s e s as indications. M a d i s o n A v e n u e is able to respond creatively when t h e p h a r m a c e u t i c a l c o m p a n y says: ' H e r e ' s t h e c u r e , find t h e d i s e a s e . ' A n e x a m p l e o f such c r e a t i v i t y was t h e p r o m o t i o n o f L i l l y ' s A v e n t y l for a n e w d i s e a s e called ' b e h a v i o r a l drift'. B e h a v i o r a l drift, a c c o r d i n g t o t h e m e d i c a l j o u r n a l a d v e r t i s e m e n t s , is defined as: 208

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1st v i s i t . . . and t h e n I start crying for no real r e a s o n ; 2nd visit . . . I c a n ' t sit still. It m a k e s me n e r v o u s to stay in o n e p l a c e ; 3rd v i s i t . . . I s e e m to h a v e lost my p o w e r s of c o n c e n t r a t i o n ; 4th visit . . . T h e least n o i s e and I'm r e a d y to c l i m b t h e w a l l s ; 5th visit. . . M a y b e it's silly, but I t h i n k I have c a n c e r ; 6th v i s i t . . . I feel so w o r t h l e s s all t h e t i m e ; 7th v i s i t . . . I c a n ' t fall a s l e e p , so I r o a m t h r o u g h t h e h o u s e ; 8th v i s i t . . . D o c t o r , a r e you sure it's not cancer? T h e n t h e r e i s t h e m o r e basic s t r a t e g y o f defining i n d i c a t i o n s such as d e p r e s s i o n as widely as possible. Dr Richard C r o u t , Director of t h e F D A ' s B u r e a u o f D r u g s , gives t h e e x a m p l e o f a Pfizer v i d e o t a p e d i s t r i b u t e d to h o s p i t a l s . T h e t a p e b e g i n s by a s s e r t i n g t h a t 4 to 8 m i l l i o n A m e r i c a n s suffer from d e p r e s s i o n , but later we are told t h a t u n d e r a d e f i n i t i o n of d e p r e s s i o n as ' a b s e n c e of j o y ' t h e figure w o u l d b e 2 0 m i l l i o n . C r o u t c o n c l u d e s t h a t Pfizer w e r e a t t e m p t i n g t o c r e a t e t h e i m p r e s s i o n t h a t d e p r e s s i o n w a s ' e v e r y w h e r e and being u n d e r diagnosed'. V a l i u m h a s b e e n t h e d r u g w h i c h has b e e n m o s t heavily and successfully p r o m o t e d in this kind of w a y . T h e o v e r u s e of V a l i u m has b r o u g h t a frightful c o s t . F o r a t w e l v e - m o n t h p e r i o d in 1 9 7 6 - 7 7 , o n e study found that 54,400 sought hospital emergency room t r e a t m e n t in the United States concerning the use, o v e r u s e , or a b u s e o f V a l i u m ( H u g h e s a n d B r e w i n , 1979: 8 - 9 ) . D u r i n g t h e s a m e p e r i o d , the study, c o n d u c t e d by the National Institute of D r u g A b u s e , f o u n d a t least 900 d e a t h s a t t r i b u t a b l e t o V a l i u m u s e , plus a n o t h e r 2 0 0 d e a t h s linked t o its c h e m i c a l p r e d e c e s s o r , L i b r i u m . M a n y of the d e a t h s were due to either accidental or intentional o v e r d o s e . H e n c e t h e c o n c l u s i o n o f D r E d w a r d T o c u s , chief o f t h e D r u g A b u s e Staff a t t h e F D A t h a t "We are d e v e l o p i n g a p o p u l a t i o n d e p e n d e n t o n this d r u g e q u a l t o t h e n u m b e r o f a l c o h o l i c s i n this c o u n t r y . We a r e in a s i t u a t i o n n o w w h e r e we see at least as m a n y p e o p l e b e i n g h u r t by t h i s d r u g as a r e b e i n g helped by it' ( H u g h e s a n d B r e w i n , 1979: 2 4 ) . T h e N a t i o n a l I n s t i t u t e o f D r u g A b u s e c o n c l u d e s from its study that Lilly's D a r v o n is an even bigger d a n g e r than Valium. It was l i n k e d t o 1,100 d e a t h s d u r i n g t h e y e a r . D a r v o n has b e e n the subject of a c o n c e r t e d p u b l i c - i n t e r e s t c a m p a i g n for w i t h d r a w a l from the m a r k e t . Lilly d e f e n d s its p r o d u c t by p o i n t i n g out t h a t if used p r o p e r l y a n d c a u t i o u s l y , i t has t h e r a p e u t i c v a l u e . T h e publici n t e r e s t m o v e m e n t , i n t u r n , r e p l i e s t h a t t h e p r o d u c t i s not being 209

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u s e d c a u t i o u s l y p r e c i s e l y b e c a u s e o f t h e a d v e r t i s i n g h y p e o f Lilly's p r o m o t i o n o f D a r v o n in the y e a r s following its r e l e a s e . T h e m o s t w a n t o n e x a m p l e o f t h e o v e r u s e o f a d r u g causing social h a r m b e c a u s e of p r o m o t i o n for e x c e s s i v e i n d i c a t i o n s is that of c h l o r a m p h e n i c o l by P a r k e - D a v i s ( n o w a s u b s i d i a r y of W a r n e r L a m b e r t ) . C h l o r a m p h e n i c o l is a r e m a r k a b l y effective a n t i b i o t i c in t h e t r e a t m e n t of a limited r a n g e of infections - t y p h o i d fever, h a e m o p h i l u s i n f l u e n z a , and a few o t h e r s . B u t it was p r o m o t e d as a b r o a d - s p e c t r u m a n t i b i o t i c , and p r e s c r i b e d by d o c t o r s for everyt h i n g from s o r e t h r o a t s to a c n e . In its first y e a r on the m a r k e t , 1 9 5 1 , P a r k e - D a v i s sold $52 million w o r t h o f c h l o r a m p h e n i c o l ( b r a n d n a m e C h l o r o m y c e t i n ) , to put the c o m p a n y at the top of drugc o m p a n y e a r n i n g s for t h a t y e a r . U n f o r t u n a t e l y , c h l o r a m p h e n i c o l w a s a s s o c i a t e d with a n u m b e r o f s e r i o u s s i d e - e f f e c t s , t h e w o r s t being a p l a s t i c a n a e m i a . A p l a s t i c a n a e m i a causes a terrible d e a t h , especially in children. The proba b i l i t y o f t h e side-effect a p p e a r i n g w a s not high, s o i n the t r e a t m e n t of a s e r i o u s d i s e a s e like t y p h o i d , it w a s a risk w o r t h t a k i n g . But for t h e t r e a t m e n t o f c o m m o n cold and o t h e r trivial c o m p l a i n t s t h e risk is u n c o n s c i o n a b l e . T h e F D A was c o n c e r n e d , and in 1952 issued an official w a r n i n g t h a t c h l o r a m p h e n i c o l "should not be used indisc r i m i n a t e l y for m i n o r i n f e c t i o n s ' . P a r k e - D a v i s m i s r e p r e s e n t e d the F D A w a r n i n g to its o w n sales r e p r e s e n t a t i v e s in a " P r e s i d e n t ' s L e t t e r ' w h i c h r e a d : ' C h l o r o m y c e t i n [ c h l o r a m p h e n i c o l ] has b e e n officially c l e a r e d b y t h e F D A and t h e N a t i o n a l R e s e a r c h C o u n c i l w i t h no r e s t r i c t i o n s on t h e n u m b e r or t h e r a n g e of d i s e a s e s for w h i c h C h l o r o m y c e t i n may be a d m i n i s t e r e d . ' The Nelson S u b c o m m i t t e e d i s c o v e r e d in N o v e m b e r 1967 that 3.5 to 4 million A m e r i c a n s w e r e b e i n g d o s e d w i t h P a r k e - D a v i s C h l o r o m y c e t i n e a c h year. I f the drug h a d b e e n p r e s c r i b e d only for c o n d i t i o n s for which it w a s truly i n d i c a t e d , it w a s e s t i m a t e d t h a t only 10,000 p e r s o n s at most w o u l d h a v e r e c e i v e d it ( U S S e n a t e , 1968; P a r t 6: 2 5 6 6 ) . A n a t i o n a l survey in 1975, m o r e t h e n t w e n t y y e a r s after the fatal side-effects of c h o l o r a m p h e n i c o l w e r e clearly e s t a b l i s h e d , found that d u r i n g t h e year 93,000 c h l o r a m p h e n i c o l prescriptions were written in the US for u p p e r r e s p i r a t o r y infections ( S u b c o m m i t t e e o n H e a l t h , 1978: 664).

The costs of promotion
W h e n the p r o p o r t i o n ofthe G N P spent on health is never enough to 210

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p r o v i d e a d e q u a t e h e a l t h care for e v e r y o n e , it is tragic to see h e a l t h c a r e r e s o u r c e s w a s t e d on a c t i v i t i e s w h i c h often do as m u c h h a r m as g o o d . T h e F D A e s t i m a t e s that p h a r m a c e u t i c a l c o m p a n i e s i n the U n i t e d S t a t e s s p e n d b e t w e e n $ 6 , 0 0 0 and $8,000 e a c h y e a r for every d o c t o r i n t h e c o u n t r y o n p r e s c r i p t i o n d r u g p r o m o t i o n . T h e total c o m e s t o o v e r a billion d o l l a r s , several t i m e s t h e U S g o v e r n m e n t ' s e x p e n d i t u r e o n t h e n a t i o n ' s m e d i c a l s c h o o l s . O n o n e drug a l o n e , I n d e r a l , A m e r i c a n H o m e P r o d u c t s s p e n d s $ 4 million o n p r o m o t i o n annually within the United States. Much o f t h e pharmaceutical industry's promotional expenditure a r o u n d t h e w o r l d g o e s o n p e r k s for d o c t o r s w h o p r e s c r i b e t h e c o m p a n y ' s p r o d u c t s . D o c t o r s and t h e i r w i v e s are f l o w n t o alle x p e n s e s - p a i d ' c o n f e r e n c e s ' i n e x o t i c l o c a t i o n s such a s B e r m u d a , N i c e , t h e W a l d o r f A s t o r i a i n N e w Y o r k C i t y . ' S e l e c t e d influential p h y s i c i a n s i n t h e T h i r d W o r l d can e x p e c t m u c h m o r e , a c c o r d i n g t o S i l v e r m a n et al. ( 1 9 8 2 : 121), i n c l u d i n g free M e r c e d e s - B e n z s e d a n s , p r o s t i t u t e s laid o n , or simply a cash k i c k b a c k for e a c h p r e s c r i p t i o n w r i t t e n . S i l v e r m a n et al. (1982: 123) q u o t e a well placed source in N i g e r i a as s u g g e s t i n g t h a t a third o f t h e w h o l e s a l e cost of p r e s c r i p t i o n d r u g s g o e s on this graft. T h e K e n n e d y S e n a t e h e a r i n g s d o c u m e n t e d gifts t o d o c t o r s o f f r e e z e r s , t a p e r e c o r d e r s , s t e t h o s c o p e s , golf balls with Pfizer s t a m p e d on t h e m ; i n d e e d , almost every type of c o n s u m e r product imaginable ( S u b c o m m i t t e e on H e a l t h , 1974). T h e gifts are d i s t r i b u t e d by t h e sales r e p r e s e n t a t i v e to c l i e n t s , the value of t h e gifts b e a r i n g a r e l a t i o n s h i p to h o w heavy a p r e s c r i b e r of t h e c o m p a n y ' s p r o d u c t s t h e d o c t o r is, or is likely to b e . A survey b y K e n n e d y ' s staff r e v e a l e d t h a t , d u r i n g t h e c a l e n d a r y e a r 1973, 20 p h a r m a c e u t i c a l c o m p a n i e s gave 12.8 million gifts to m e m b e r s o f t h e h e a l t h - c a r e p r o f e s s i o n s and o v e r t w o billion s a m p l e s o f free d r u g s ( S u b c o m m i t t e e on H e a l t h , 1974: 1273). S o m e of t h e gifts a r e so u n c t u o u s as to m a k e o n e w o n d e r why they do not p r o d u c e a b a c k l a s h from t h e m e d i c a l p r o f e s s i o n . S e n a t o r K e n n e d y p r o d u c e d a P e g g y L e e r e c o r d . I n s i d e t h e sleeve w a s a note w h i c h said: D e a r D o c t o r : F o r a n e n t e r t a i n e r , a p p l a u s e i s very p e r s o n a l and an i m m e d i a t e sign of a p p r e c i a t i o n , so this a l b u m is my way of a p p l a u d i n g you in t h e m e d i c a l p r o f e s s i o n . It is a special a l b u m t h a t w e h a v e w o r k e d o u t w i t h A b b o t t L a b o r a t o r i e s , and m y g r e a t h o p e is t h a t it will give you p l e a s u r e p e r h a p s at a t i m e you have a 211

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real n e e d for m o m e n t s of r e l a x a t i o n . W i t h t h a n k s for all you h a v e d o n e , [signed] Peggy Lee T h e b a c k of t h e s l e e v e r e a d s : therapy.' 'Placidyl w h e n sleep is a part of

S o m e c o u n t r i e s h a v e b a n n e d the giving o f gifts t o d o c t o r s . B u t t h e r e are m a n y w a y s a r o u n d such l a w s . O n e i s for t h e drug c o m p a n y to l e n d ' e x p e n s i v e e q u i p m e n t for t h e s u r g e r y , but n e v e r ask for its r e t u r n . T h e g r e e d o f s o m e d o c t o r s plays a n i m p o r t a n t part i n p e r p e t u a t i n g t h e p r o c e s s . O n e e x e c u t i v e c o m p l a i n e d t o m e that h e h a d r e c e n t l y b e e n c o n t a c t e d by a m e d i c a l a s s o c i a t i o n w h i c h w a s h a v i n g a golf t o u r n a m e n t ( w h i c h had n o t h i n g to do with m e d i c i n e ) a n d w h i c h d e m a n d e d t h a t his c o m p a n y d o n a t e a n e x p e n s i v e t r o p h y . A f o r m e r sales r e p r e s e n t a t i v e told t h e following story of d o c t o r greed: O n e ofthe most disconcerting experiences of my detailing career i s w h e n o n e p h y s i c i a n told m e h e had several p o o r p a t i e n t s w h o c o u l d n o t afford to buy t h e i r m e d i c a t i o n . I t h e r e f o r e gave him a g e n e r o u s s u p p l y o f t h o s e p r o d u c t s w h i c h h e said t h o s e p a t i e n t s were taking. T h e following day I saw t h a t very s a m e p h y s i c i a n walk into one o f m y p h a r m a c y a c c o u n t s with t w o s h o p p i n g bags filled with t h e s a m p l e s I had g i v e n h i m , in a d d i t i o n to s a m p l e s which o t h e r d e t a i l m e n had left w i t h h i m . In r e t u r n for this d e l i v e r y of s a m p l e s t h e d o c t o r t o o k shaving c r e a m , r a z o r b l a d e s , a n d a b o t t l e of c o l o g n e for his wife. T h e p h a r m a c y m o s t likely filled t h e p r e s c r i p t i o n s at his r e g u l a r price w i t h s a m p l e s t h a t t h e d o c t o r d r o p p e d off ( S u b c o m m i t t e e o n H e a l t h , 1974: 7 2 5 - 6 ) . U n f o r t u n a t e l y , t h e reselling of free p h y s i c i a n s ' s a m p l e s is a c o m m o n p r a c t i c e i n m o s t p a r t s o f t h e w o r l d , a l t h o u g h limited c o n t r o l s have recently been introduced in the United States. The p r a c t i c e has b e e n s o c o m m o n t h a t b l a c k - m a r k e t c o u n t e r f e i t e r s o f p r e s c r i p t i o n d r u g s , often p a r t o f o r g a n i s e d c r i m e , h a v e b e e n able t o tell p h a r m a c i s t s t h a t t h e i r w a r e s w e r e ' p h y s i c i a n s ' s a m p l e s you can h a v e c h e a p ' ( K r e i g , 1967: 2 0 4 ) .

Promotional expenditure pays off
I do not p r e s u m e to h a v e t h e c o m p e t e n c e to p r o n o u n c e on the 212

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difficult q u e s t i o n o f w h a t c o n s t i t u t e s r a t i o n a l p r e s c r i b i n g . H o w e v e r , w h e r e r e s e a r c h has b e e n d o n e b y p e o p l e with t h e r e l e v a n t e x p e r t i s e , e v i d e n c e o f o v e r p r e s c r i b i n g has b e e n found. A t t h e U n i v e r s i t y of S o u t h e r n California Medical C e n t e r , w h e r e 600,000 prescript i o n s a r e w r i t t e n e a c h y e a r , a g r o u p of five p h y s i c i a n s a n d t w o p h a r m a c i s t s , in c o l l a b o r a t i o n with h o s p i t a l staff from all speciali t i e s , defined r a t i o n a l m a x i m u m p r e s c r i p t i o n s for 7 8 c o m m o n d r u g s ( M a r o n d e e t a l . , 1971). F o r s e d a t i v e s and t r a n q u i l l i s e r s 3 0 - 4 0 p e r c e n t of p r e s c r i p t i o n s w r i t t e n w e r e found to be in excessive q u a n t i t i e s . T h a t is, r a t i o n a l p r e s c r i b i n g , solely i n t e r m s o f a m o u n t s ( w i t h o u t considering w h e t h e r it was rational to prescribe the p r o d u c t at all) m i g h t r e s u l t in a d r o p in sales o f t h e o r d e r of 3 0 - 4 0 p e r c e n t . T h i s f i g u r e a l s o i g n o r e s o v e r m e d i c a t i o n resulting from patients obtaining rational prescriptions independently from n u m e r o u s p h y s i c i a n s . A further i n t e r e s t i n g finding w a s t h a t a l m o s t half t h e e x c e s s i v e p r e s c r i p t i o n s c o u l d be a c c o u n t e d for by a small m i n o r i t y o f 3.4 p e r cent o f t h e p h y s i c i a n s w h o w e r e superprescribers. I n a n o t h e r s t u d y , Stolley e t al. (1972) found t h a t d o c t o r s w h o w e r e , a c c o r d i n g t o t h e i r c r i t e r i a , r a t i o n a l p r e s c r i b e r s , relied m o r e h e a v i l y o n t h e r e a d i n g o f m e d i c a l j o u r n a l s for i n f o r m a t i o n a b o u t d r u g s than on industry p r o m o t i o n . But there is a wealth of evidence from s u r v e y s o f d o c t o r s t o d e m o n s t r a t e t h a t o v e r w h e l m i n g l y t h e most i m p o r t a n t source of information about drugs is the p h a r m a c e u t i c a l i n d u s t r y : sales r e p r e s e n t a t i v e s , p r o m o t i o n a l m a t e r i a l i n t h e m a i l , j o u r n a l a d v e r t i s e m e n t s , m e e t i n g s , cocktail parties organised by t h e i n d u s t r y , e t c . . . . (Office of H e a l t h E c o n o m i c s , 1978; W a l k e r , 1 9 7 1 ; M i n t z , 1967: 8 6 ; M o s e r , 1974; American Medical News, 1 9 7 3 ; E a t o n a n d P a r i s h , 1976). T h e s e s u r v e y s a l s o s h o w t h a t t h e m o s t i m p o r t a n t single s o u r c e o f i n f o r m a t i o n , particularly concerning new drugs, is the pharmac e u t i c a l c o m p a n y sales r e p r e s e n t a t i v e . T h e r e i s e v i d e n c e t h a t p h y s i c i a n s w h o get m o r e visits from sales r e p r e s e n t a t i v e s w r i t e m o r e p r e s c r i p t i o n s . W a l k e r ( 1 9 7 1 : 7 4 ) found t h a t d o c t o r s w h o w r i t e o v e r 150 p r e s c r i p t i o n s a w e e k r e c e i v e m o r e t h a n eight visits a w e e k from sales r e p r e s e n t a t i v e s . D o c t o r s w h o w r o t e fewer t h a n 5 0 p r e s c r i p t i o n s a w e e k r e c e i v e d fewer t h a n half t h i s n u m b e r of visits. This n e e d n o t n e c e s s a r i l y m e a n t h a t t h e e x t r a visits c a u s e i n c r e a s e d s a l e s , b e c a u s e r e p r e s e n t a t i v e s select for special a t t e n t i o n d o c t o r s w h o are k n o w n a s h e a v y p r e s c r i b e r s . M o r e c o n v i n c i n g i s t h e f i n d i n g that a m o n g p h y s i c i a n s w h o w r o t e o v e r 5 0 p r e s c r i p t i o n s a w e e k , 8 0 per
2

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c e n t r e p o r t e d t h a t i n d u s t r y w a s t h e i r m o s t i m p o r t a n t source o f information about new d r u g s ; a m o n g those writing 31-50 presc r i p t i o n s p e r w e e k , half relied p r i m a r i l y o n industry s o u r c e s and half p r i m a r i l y o n p r o f e s s i o n a l s o u r c e s ; and a m o n g d o c t o r s writing 30 or fewer p r e s c r i p t i o n s a w e e k , only 40 p e r cent relied p r i m a r i l y on industry sources (Walker, 1971: 74).

Medical journal advertising
S h e is s t a n d i n g a l o n e b e f o r e a d a r k e n e d b a c k g r o u n d : a y o u n g c o l l e g e g i r l , c a r r y i n g b o o k s . T h e c o r n e r s o f h e r m o u t h are t u r n e d d o w n . It is n o t a grim e x p r e s s i o n b u t it e x h i b i t s c o n c e r n and s u g g e s t s u n c e r t a i n t y . T h e copy u n d e r her p i c t u r e r e a d s : ' A W h o l e N e w W o r l d . . . of A n x i e t y . ' S u r r o u n d i n g her on t h e b a c k g r o u n d a r e italicised s u g g e s t i o n s o f w h a t t h e a n x i o u s world m i g h t b e . ' T h e n e w c o l l e g e s t u d e n t may be afflicted by a sense of lost i d e n t i t y in a s t r a n g e e n v i r o n m e n t . ' A n o t h e r s u g g e s t i o n : ' E x p o s u r e to n e w friends and o t h e r influences may force her to r e e v a l u a t e herself and h e r g o a l s . ' Y e t a n o t h e r : ' H e r newly s t i m u l a t e d i n t e l l e c t u a l c u r i o s i t y may m a k e h e r m o r e sensitive t o a n d a p p r e h e n s i v e a b o u t u n s t a b l e n a t i o n a l and w o r l d c o n d i t i o n s . ' I f w o r l d affairs and p e e r p r e s s u r e d o n ' t m a k e h e r a n x i o u s , t h e a d s u g g e s t s a n o t h e r c a u s e . M a y b e it's ' u n r e a l i s t i c p a r e n t a l e x p e c t a t i o n s ' o r ' t o d a y ' s c h a n g i n g m o r a l i t y ' and ' n e w f r e e d o m ' t h a t a r e d o i n g it. E v e n t h o u g h this last p r o b l e m s e e m s t o suggest h e r n e e d for b i r t h c o n t r o l pills m o r e t h a n a n y t h i n g e l s e , the real a n s w e r to h e r w o e s is s o m e t h i n g different. 'To h e l p free h e r of excessive anxiety . . . adjunctive L I B R I U M . ' O f course. ' W h e n m o u n t i n g p r e s s u r e s c o m b i n e t o t h r e a t e n t h e e m o t i o n a l stability o f t h e a n x i o u s s t u d e n t , a d j u n c t i v e use o f L i b r i u m can h e l p relieve the s y m p t o m s caused by her excessive anxiety. T o g e t h e r with y o u r ( t h e d o c t o r ' s ) c o u n s e l i n g and r e a s s u r a n c e , L i b r i u m , i f i n d i c a t e d , can help the anxious student to handle the primary p r o b l e m and to " g e t h e r b a c k on her feet" ' ( P e k k a n e n 1973: 77-8).

V a l i u m and L i b r i u m h a v e b e e n p r o m o t e d a s s o l u t i o n s t o almost e v e r y p s y c h o l o g i c a l s t a t e which falls s h o r t of total s e r e n i t y . At the s a m e t i m e V a l i u m has b e e n p r o m o t e d for 'psychic s u p p o r t for the t e n s e i n s o m n i a c ' and for t h e ' a l w a y s w e a r y ' . P e r h a p s m o s t a p p e a l ingly of all to t h e m e d i c a l p r o f e s s i o n , V a l i u m has b e e n a d v e r t i s e d in 214

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a d o c t o r ' s m a g a z i n e as an aid in p r o d u c i n g 'a less d e m a n d i n g and c o m p l a i n i n g p a t i e n t ' ( W a l d r o n , 1977: 4 1 ) . O t h e r p s y c h o t r o p i c d r u g s h a v e b e e n t o u t e d i n e q u a l l y i r r e s p o n s i b l e w a y s . Pfizer p r o m o t e d t h e t r a n q u i l l i s e r Vistaril b y s h o w i n g t h e t e a r - s t r e a k e d face of a y o u n g girl a n d proffering its use for c h i l d r e n w h o are frightened by 'school, the d a r k , separation, dental visits, " m o n s t e r s " ' ( P e k k a n e n , 1973: 8 0 ) . Pfizer w a s also forced by F D A to send a ' D e a r D o c t o r l e t t e r ' to p h y s i c i a n s i n d i c a t i n g t h a t its a d v e r t i s e m e n t s for Vistaril and a n u m b e r of c h e m i c a l l y similar p r o d u c t s failed t o d i s c l o s e t h a t t h e r e w a s r e s e a r c h e v i d e n c e t o s u g g e s t t h a t t h e s e p r o d u c t s could b e d a n g e r o u s t o p r e g n a n t women. O n e o f M e r c k ' s m o s t successful d r u g s has b e e n its a n t i a r t h r i t i c , I n d o c i n . W h e n t h e p r o d u c t w a s first i n t r o d u c e d i n 1 9 6 3 , M e r c k had only d e m o n s t r a t e d efficacy for four t y p e s of a r t h r i t i c d i s e a s e , yet it w a s p r o m o t e d for use w i t h m a n y o t h e r s . T h e a d v e r t i s e m e n t s r e p e a t e d l y d e s c r i b e d I n d o c i n a s 'safer' and ' m o r e effective', w i t h o u t i n d i c a t i n g safer and m o r e effective t h a n w h a t . M e r c k said t h a t ' s i n c e t h e e x p e r i e n c e with I n d o c i n in c h i l d r e n is l i m i t e d , it is r e c o m m e n d e d t h a t this d r u g s h o u l d not b e a d m i n i s t e r e d t o p e d i a t r i c a g e g r o u p s until t h e i n d i c a t i o n s for use and d o s a g e have b e e n e s t a b l i s h e d . ' B u t S i l v e r m a n and L e e p o i n t out t h a t The e x p e r i e n c e had not been that limited; the c o m p a n y was a l r e a d y a w a r e t h a t t h e d r u g h a d b e e n t r i e d i n c h i l d r e n and had evidently caused several d e a t h s . It was claimed that Indocin does not increase susceptibility to infection, but Merck neglected to m e n t i o n t h a t t h e claim w a s b a s e d on e x p e r i m e n t s w i t h a few rats c h a l l e n g e d n o t w i t h infections b u t w i t h b a c t e r i a l e n d o t o x i n s . W h e n h u m a n trials w e r e u n d e r t a k e n , i t w a s found t h a t I n d o c i n i n c r e a s e s s u s c e p t i b i l i t y t o infection ( S i l v e r m a n and L e e , 1974: 61-2). M o r e e m b a r r a s s i n g for M e r c k w a s t h e d i s c o v e r y b y S e n a t e i n v e s t i g a t o r s of i n s t r u c t i o n s to its sales r e p r e s e n t a t i v e s w h i c h e m p h a s i s e d c l a i m s for safety and efficacy far in e x c e s s of w h a t w a s legal i n t h e s e n s e o f h a v i n g b e e n a p p r o v e d b y t h e F D A . T h e i n s t r u c t i o n s a l s o said: it is o b v i o u s t h a t I n d o c i n will w o r k in t h a t w h o l e h o s t o f r h e u m a t i c c r o c k s and c r u d s w h i c h e v e r y g e n e r a l p r a c t i t i o n e r , i n t e r n i s t , a n d o r t h o p e d i c s u r g e o n sees every day i n his p r a c t i c e . ' A c c o r d i n g t o t h e S e n a t e h e a r i n g s t h e i n s t r u c t i o n s continued: 215

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' T e l l ' e m a g a i n , a n d a g a i n , and a g a i n . ' ' T e l l 'em until t h e y are sold and stay s o l d . ' 'For these entities he is presently prescribing steroids, a m i n o p y r i n e - l i k e b u t a z o n e s , a s p i r i n , o r limited a n a l g e s i c s like D a r v o n a n d t h e a l m o s t w o r t h l e s s m u s c l e r e l a x a n t s . . . .' ' Y o u ' v e told t h i s story n o w . p r o b a b l y 130 t i m e s . T h e p h y s i c i a n , h o w e v e r , has h e a r d it only o n c e . S o , go b a c k , and tell it again and a g a i n a n d a g a i n and a g a i n , until it is indelibly i m p r e s s e d in his m i n d and he s t a r t s - and c o n t i n u e s - to p r e s c r i b e I n d o c i n . L e t ' s g o . . . . " L e t ' s s t a n d on o u r little old t w o feet this m o n t h and sell t h e benefits o f I n d o c i n . ' ' T a k e off t h e kid g l o v e s . If he w a n t s to use aspirin as b a s e line t h e r a p y , let him use it. C h a n c e s are t h e p a t i e n t is a l r e a d y t a k i n g a s p i r i n . H e h a s c o m e t o t h e p h y s i c i a n b e c a u s e a s p i r i n a l o n e i s not a f f o r d i n g s a t i s f a c t o r y , o p t i m a l effects. . . .' ' N o w e v e r y e x t r a b o t t l e of 1,000 I n d o c i n t h a t you sell is w o r t h an e x t r a S2.80 in i n c e n t i v e p a y m e n t s . Go get it. Pile it in. . . .' W h e n the Senate invited the c o m p a n y to explain, the president of M e r c k said: ' L a n g u a g e is not a perfect m e t h o d of c o m m u n i c a t i o n a n d it m a y well be t h a t w o r d s and p h r a s e s t h a t are used in t h e belief t h a t t h e y m e a n o n e t h i n g may h a v e b e e n i n t e r p r e t e d b y s o m e p h y s i c i a n s t o m e a n s o m e t h i n g else. Such are t h e c o m p l e x i t i e s o f s e m a n t i c s ' ( G a d s d e n , 1968). B y t h e e n d o f t h e 1960s M e r c k w a s b e i n g m o r e r e s p o n s i b l e i n t h e p r o m o t i o n of I n d o c i n w i t h i n the U n i t e d S t a t e s . I n d o c i n w a s a highly t o x i c d r u g w h i c h c o u l d c a u s e ' p e r f o r a t i o n s and h e m o r r h a g e o f t h e e s o p h a g u s , s t o m a c h and small i n t e s t i n e s ; g a s t r o i n t e s t i n a l b l e e d i n g ; r e t i n a l d i s t u r b a n c e s and b l u r r i n g o f vision; toxic h e p a t i t i s and j a u n d i c e ; a c u t e r e s p i r a t o r y d i s t r e s s ; h e a r i n g d i s t u r b a n c e s ; loss o f h a i r ; p s y c h o t i c e p i s o d e s ; c o m a and c o n v u l s i o n s . ' Y e t i n A u s t r a l i a and many other parts o f t h e world, some of these warnings were b e i n g w e a k e n e d a n d o t h e r s o m i t t e d . A d r u g w h i c h should b e used i n only r e l a t i v e l y s e v e r e c a s e s o f a r t h r i t i s , and only t h e n w h e n o t h e r less t o x i c t h e r a p i e s had failed, was b e i n g r e c o m m e n d e d i n A u s t r a l i a as an a l t e r n a t i v e to a s p i r i n for the relief of p a i n following dental s u r g e r y , for b u r s i t i s ( t e n n i s e l b o w ) and t e n d i n i t i s . T h e s e A u s t r a l i a n i n d i c a t i o n s a p p e a r e d n o w h e r e in the A m e r i c a n literature (Sessor, 1971). Afterman (1972: 119-121) has s u m m a r i s e d o n e o f t h e instances of journal advertising misrepresentation. 216 worst

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[ S e r a x ] w a s r e c o m m e n d e d i n the t r e a t m e n t o f a n x i e t y and t e n s i o n of p a t i e n t s from all age g o u p s , i n c l u d i n g t h e e l d e r l y . T h e advertisement which appeared in three medical journals, e m p h a s i z e d t h e use o f t h e p r o d u c t for t h e t r e a t m e n t o f e l d e r l y p a t i e n t s a n d i n c l u d e d a w a r n i n g in fine print t h a t g r e a t c a r e should be t a k e n in s e l e c t i n g a d o s a g e , as a s t r o k e or d e a t h could result. T h e a d v e r t i s e m e n t also r e f e r r e d to a study involving 148 'elderly p a t i e n t s ' b u t failed to reveal t h a t t h e s a m p l e age r a n g e c o m m e n c e d at 35 y e a r s for m a l e s a n d 33 y e a r s for f e m a l e s . A d o s a g e o f t h e d r u g up to 40 m g . a day w a s q u o t e d from t h e study d e s p i t e t h e fact t h a t t h e a p p r o v e d p a c k a g e labelling limited t h e initial d o s a g e in o l d e r p a t i e n t s to 30 m g . a day. O n e r e p o r t f a v o u r a b l y c o m p a r i n g a s p e c t s o f Serax t h e r a p y w i t h a c o m p e t i n g p r o d u c t w a s r e p r o d u c e d i n the a d v e r t i s e m e n t . S t u d i e s w h i c h reflected different c o n c l u s i o n s w e r e o m i t t e d . I t w a s i m p l i e d t h a t t h e p a r t i c u l a r study q u o t e d r e p r e s e n t e d the m e d i c a l c o n s e n s u s as to t h e p e r f o r m a n c e of S e r a x in r e l a t i o n to a c o m p e t i n g p r o d u c t . F i n a l l y , t h e p r o d u c t w a s r e c o m m e n d e d for t h e t r e a t m e n t o f ' a n x i e t y - l i n k e d d e p r e s s i o n ' , d e s p i t e the fact that t h e t r e a t m e n t o f d e p r e s s i o n w a s specifically c o n t r a - i n d i c a t e d o n the label. O n t h e s e g r o u n d s t h e F . D . A . c o n s i d e r e d that t h e a d v e r t i s e m e n t c o n t a i n e d n e i t h e r a fair nor factual b a l a n c e , and p r o v i d e d t h e r e a d e r with d a n g e r o u s l y m i s l e a d i n g d o s a g e i n f o r m a t i o n . It w a s also c o n s i d e r e d offensive b e c a u s e it p r e s c r i b e d t h e d r u g for p u r p o s e s for w h i c h it w a s c o n t r a i n d i c a t e d . O n t h e basis o f t h e c o n t e n t s o f this a d v e r t i s e m e n t the p r o d u c t was seized. S o m e o f t h e a d v e r t i s i n g m i s r e p r e s e n t a t i o n s have b e e n m u c h m o r e s u b t l e . O n e for A b b o t t ' s P l a c i d y l , a s l e e p i n g pill, c o n t a i n e d a p i c t u r e of a p r e g n a n t w o m a n , with t h e h e a d i n g , 'give us her n i g h t s ' . T h e small p r i n t at t h e b o t t o m of t h e ad i n d i c a t e d that Placidyl s h o u l d not b e g i v e n t o w o m e n i n early p r e g n a n c y . A b b o t t a p p a r e n t l y a r g u e d t h a t this ad w a s lawful b e c a u s e t h e w o m a n in the p i c t u r e w a s in late p r e g n a n c y . O n e c o u l d c o n t i n u e ad infinitum w i t h p h a r m a c e u t i c a l a d v e r t i s e m e n t s w h i c h m a k e false, e x a g g e r a t e d o r m i s l e a d i n g c l a i m s . T h e S a i n s b u r y C o m m i t t e e i n G r e a t B r i t a i n w a s p r e s e n t e d with the results of a survey by W a d e and E l m e s o f t h e Q u e e n ' s University of B e l f a s t w h i c h found t h a t 22 of 45 a d v e r t i s e m e n t s in t h e study 217

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i n c l u d e d u n w a r r a n t e d c l a i m s . I n a d d i t i o n i t w a s c o m m o n for a d v e r s e effects to be o m i t t e d or glossed o v e r . T h e r e is an infinite v a r i e t y of w a y s t h a t m i s l e a d i n g i m p r e s s i o n s can be created in pharmaceutical advertisements. Advertising
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a g e n c i e s a r e skilled a t d e s i g n i n g l a y o u t s w h i c h highlight the good n e w s a n d n o t t h e b a d . W h e n a p r o d u c t a t t r a c t e d f a v o u r a b l e results from e a r l y r e s e a r c h s t u d i e s , but u n f a v o u r a b l e findings from later m o r e s o p h i s t i c a t e d w o r k , a d v e r t i s e m e n t s m i g h t only refer t o the e a r l y s t u d i e s . N o t i n f r e q u e n t l y r e f e r e n c e s are m a d e t o o b s c u r e j o u r n a l a r t i c l e s in such a way as to imply t h a t t h e source confirms the c l a i m b e i n g m a d e w h e n this is not in fact t h e c a s e . T h e possibilities for c o l o u r i n g reality are so m u l t i f a r i o u s t h a t u n d e r any system of legal c o n t r o l s it is not difficult to s t e e r clear of b l a t a n t v i o l a t i o n s by s k i r t i n g a r o u n d t h e b o u n d a r i e s o f legal r e q u i r e m e n t s . O n e regul a t o r y affairs d i r e c t o r w a s r e m a r k a b l y h o n e s t o n this s c o r e :
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T h e F D A a d v e r t i s i n g c o n t r o l s are very v a g u e l y defined. T h e r e a r e t h r e e a p p r o a c h e s a c o m p a n y can t a k e . I t can m a k e e x t r a v a g a n t c l a i m s w h i c h are clearly o u t s i d e t h e rules but which will sell its p r o d u c t . Or it could be careful not to say a n y t h i n g t h a t w o u l d not be s u p p o r t e d by scientific e v i d e n c e and have low i m p a c t a d v e r t i s i n g . Or it could do a d v e r t i s e m e n t s which are in a fairly l a r g e grey a r e a . We shoot for t h e grey a r e a . We tell o u r a d v e r t i s i n g a g e n c y t h a t we w a n t to go as close as we can to w h a t F D A will a l l o w . T h e e d i t o r s o f m e d i c a l j o u r n a l s d o not h a v e a n illustrious record of r e s t r a i n i n g m i s l e a d i n g d r u g a d v e r t i s i n g . P r i o r to t h e early 1950s t h e A M A had a Seal o f A c c e p t a n c e p r o g r a m m e for a d v e r t i s e m e n t s appearing in the Journal of the American Medical Association. A d v e r t i s e m e n t s w o u l d not a p p e a r u n l e s s their claims had b e e n a p p r o v e d by a d i s t i n g u i s h e d c o m m i t t e e of p h y s i c i a n s . A d r o p in a d v e r t i s i n g r e v e n u e c a u s e d t h e A M A i n 1952 t o c o m m i s s i o n B e n Gaffin and A s s o c i a t e s to find t h e r e a s o n s . T h e Gaffin survey found t h a t t h e l a r g e p h a r m a c e u t i c a l c o m p a n i e s w e r e critical o f t h e restrict i o n s i m p o s e d o n a d v e r t i s e r s b y t h e Seal o f A c c e p t a n c e p r o g r a m m e . A c c o r d i n g l y t h e C o n s u l t a n t s ' r e c o m m e n d a t i o n t h a t t h e Seal o f Acceptance be abolished was accepted. JAMA advertising r e v e n u e s j u m p e d d r a m a t i c a l l y i n t h e y e a r s following t h e liberalising o f t h e r e s t r a i n t s o n its a d v e r t i s e r s . The A M A have been hypocrisy of their stances 218 s u b j e c t e d t o m u c h criticism for t h e on the advertising question. Nothing

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c o u l d e x p r e s s t h e a n t a g o n i s m m o r e clearly t h a n the following e x c h a n g e b e t w e e n S e n a t o r N e l s o n and D r J a m e s H . S a m m o n s , executive vice-president ofthe A M A . S e n . N e l s o n : I t w o u l d b e nice i f t h e A M A w o u l d r e v i e w the ads t h e y run for a c c u r a c y . . . b e c a u s e you run a d s in t h e A M A Journal t h a t are disgracefully i n a c c u r a t e and the history of it is c l e a r as a b e l l . D r . S a m m o n s : S e n a t o r , e v e r y single o n e o f t h e w o r d s i n t h o s e ads [ h a s ] t o h a v e F D A a p p r o v a l and if t h e r e is a long history of i n a c c u r a c y , I s u b m i t to y o u t h e F D A will h a v e to share that responsibility with whoever is responsible. S e n . N e l s o n : T h e y see t h e ad after it r u n s . Do not try to shift it to the F D A . You complain that they interfered in the medical p r a c t i c e and y o u t h r o w t h e b l a m e o n t h e m w h e n they d o n o t d e s e r v e it. T h e fact o f t h e m a t t e r is, d o c t o r , y o u h a v e run ads for y e a r s t h a t p r o m o t e d very bad use o f d r u g s and w e have v o l u m e s t h a t will p r o v e t h a t . [ N e l s o n t h e n cited a d s in the Journal p r o m o t i n g P a r k e - D a v i s ' s a n t i b i o t i c C h l o r o m y c e t i n for g e n e r a l u p p e r r e s p i r a t o r y illness.] D r . S a m m o n s : L e t m e p o i n t o u t t o y o u t h a t t h e A M A was o n e o f t h e first p e o p l e to p o i n t out t h e p o t e n t i a l harmful effects of Chloromycetin. S e n . N e l s o n : B u t t h e disgraceful p a r t is, you p o i n t e d it out and c o n t i n u e d t o t a k e t h e ads t h a t p r o m o t e d i m p r o p e r use o f t h e d r u g , a n d I can d e m o n s t r a t e t h a t to y o u . D r . S a m m o n s : S e n a t o r , C h l o r o m y c e t i n still has a place in t h e a r m a m e n t a r i u m in the practice of m e d i c i n e . S e n . N e l s o n : T h a t is kind of a n o n s t a t e m e n t ; but it is m i s u s e d 90 t o 9 9 p e r c e n t o f t h e t i m e , and you t o o k ads t h a t p r o m o t e d t h e m i s u s e a n d I t h i n k it is disgraceful ( S u b c o m m i t t e e on H e a l t h , 1973). T h e A M A and P M A ( P h a r m a c e u t i c a l M a n u f a c t u r e r s A s s o c i a t i o n ) , a n d t h e i r e q u i v a l e n t s i n o t h e r c o u n t r i e s , are f i r m l y linked within the medical-industrial c o m p l e x . The two associations almost i n v a r i a b l y s u p p o r t e a c h o t h e r before c o m m i t t e e s o f e n q u i r y , and p r o v i d e m u t u a l aid for l o b b y i n g efforts in t h e c a p i t a l s o f t h e w o r l d . T h e n e x u s is i n v a l u a b l e for t h e P M A in b e i n g able to c o u n t on ' i n d e p e n d e n t ' p r o f e s s i o n a l s u p p o r t for t h e i r p o s i t i o n , and for the A M A it is basically a c a s h n e x u s . A P M A p u b l i c r e l a t i o n s p e r s o n told m e t h a t w h e n t h e P M A r u n s its g e n e r a l a d v e r t i s e m e n t s 219

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e x t o l l i n g t h e benefits w h i c h the p h a r m a c e u t i c a l i n d u s t r y has b e s t o w e d u p o n m a n k i n d and p r a i s i n g s e l f - r e g u l a t i o n , m a n y o f t h e m e d i c a l j o u r n a l s run t h e s a m e a d s free of c h a r g e "as a service to the industry which supports them'. JB . PR from P M A : : Why do they do that?

T h e r e ' s a self-interest. If the industry sees t h a t t h e j o u r n a l i s s u p p o r t i n g t h e m , they will s u p p o r t it w i t h a d v e r t i s i n g . •IB. : As a result of this your advertising space for your money is doubled or something like that? P R from P M A : More than doubled. A t t i m e s t h e c a s h n e x u s w i t h i n the m e d i c a l - i n d u s t r i a l c o m p l e x h a s v e r g e d o n t h e d o w n r i g h t c o r r u p t . H e n r y W e l c h served a s d i r e c t o r o f t h e F D A ' s a n t i b i o t i c s division d u r i n g t h e b o o m p e r i o d for a n t i b i o t i c s w h i c h c o i n c i d e d with t h e a l l e g e d t e t r a c y c l i n e pricing conspiracy ( 1 9 5 3 - 6 0 ) . W e l c h was a target of public-interest-group c r i t i c i s m for t h e zeal w i t h w h i c h he p u s h e d t h e use of a n t i b i o t i c s ( T u r n e r , 1976: 2 1 8 - 2 2 ) . T h r o u g h o u t his d i r e c t o r s h i p o f t h e a n t i biotics division, W e l c h was the editor of two private j o u r n a l s which w e r e financially b a c k e d by a n t i b i o t i c m a n a u f a c t u r e r s such as Pfizer, U p j o h n , S m i t h K l i n e and A b b o t t . A third W e l c h j o u r n a l failed, but n o t b e f o r e P a r k e - D a v i s had sunk $ 1 0 0 , 0 0 0 into it. E d i t o r ' s h o n o r a r i u m s w e r e paid t o W e l c h . I n a d d i t i o n , b e t w e e n 1953 and 1960 W e l c h ' s s h a r e o f t h e profits, a s h a l f - o w n e r o f t h e c o m p a n y that published the two journals, was $287,142.40. J o u r n a l i s t s can also b e c o - o p t e d into t h e m e d i c a l - i n d u s t r i a l c o m p l e x . M i n t z ( 1 9 6 7 : 6 0 - 6 1 ) r e c o u n t s t h e story o f A l t o n L . B l a k e s l e e , a s c i e n c e w r i t e r o f t h e A s s o c i a t e d P r e s s , i n his o w n w o r d s . R e c e n t l y , I w a s a p p r o a c h e d by a m a n w h o said he had an o p p o r t u n i t y for me to p l a c e an article in a m a g a z i n e on a f r e e - l a n c e b a s i s . He d e s c r i b e d very frankly his o w n r a t h e r c u r i o u s o r g a n i z a t i o n . H e a n d his a s s o c i a t e s w e r e r e p r e s e n t i n g a c o m p a n y w h i c h had d e v e l o p e d a n e w p r o d u c t to t r e a t a very c o m m o n a i l m e n t . T h e y g u a r a n t e e d t o find t h e m e d i c a l r e s e a r c h e r s w h o w o u l d test it, and had d o n e so. F u r t h e r , t h e y had a m e t h o d of g e t t i n g it p u b l i s h e d m o r e quickly in a m e d i c a l j o u r n a l t h a n might o t h e r w i s e be d o n e , so that it b e c a m e 'legitimate' news. At t h i s p o i n t he w e n t to a m a g a z i n e and s u g g e s t e d a story on t h e g e n e r a l t o p i c , a n d told t h e m a g a z i n e e d i t o r t h a t t h e c o m p a n y 220

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w o u l d p l a c e a large a m o u n t of a d v e r t i s i n g with t h e m if t h e story w e r e u s e d . He a l s o v o l u n t e e r e d to find a science w r i t e r w h o w o u l d w r i t e t h e s t o r y , and this i s w h a t h e w a s t a l k i n g t o m e a b o u t . He said I w o u l d m a k e my deal with t h e m a g a z i n e e d i t o r , and p e r h a p s be p a i d S 1,500 or $2,000 for t h e a r t i c l e , and all I had to do w a s t o m e n t i o n this n e w p r o d u c t b y t r a d e n a m e t w i c e , and n e v e r m e n t i o n any o t h e r p r o d u c t . T h e c o m p a n y , h e said, k n e w t h a t w r i t e r s w e r e n e v e r paid w h a t t h e y w e r e w o r t h , s o the c o m p a n y w o u l d give me $ 5 , 0 0 0 on t h e side. T h e n if t h e article w e r e picked up a n d r e p r i n t e d by a c e r t a i n o u t l e t , I w o u l d get that r e p r i n t fee, a n d t h e c o m p a n y w o u l d b e s o d e l i g h t e d w i t h the a d v e r t i s i n g a c h i e v e d t h a t way t h e y w o u l d pay m e $ 1 0 , 0 0 0 m o r e . D r u g c o m p a n i e s d i s p e n s e n e g a t i v e a s well a s p o s i t i v e s a n c t i o n s t o m a s s m e d i a o u t l e t s a c c o r d i n g t o h o w they p e r f o r m . I n J a n u a r y 1976 t h e New York Times ran a s e r i e s of a r t i c l e s on m e d i c a l incomp e t e n c e , including the misuse of prescription drugs. Retaliation in t h e form of c a n c e l l a t i o n of half a m i l l i o n d o l l a r s ' w o r t h of a d v e r t i s i n g in Modern Medicine, a j o u r n a l o w n e d by t h e Times c o m p a n y , w a s said t o h a v e b e e n e x a c t e d . T h e n e w s p a p e r q u o t e d a n officer o f t h e m e d i c a l j o u r n a l a s saying t h a t t h e c o m p a n i e s c a n c e l l e d their a d v e r t i s e m e n t s b e c a u s e t h e y felt 'you d o n ' t feed p e o p l e w h o beat y o u u p ' ( H u g h e s a n d B r e w i n , 1979: 2 1 9 ) . A s w e m o v e t o w a r d s t h e twenty-first c e n t u r y , p h a r m a c e u t i c a l a d v e r t i s i n g i s finding n e w , m o r e effective, m o d a l i t i e s . I n t h e U n i t e d S t a t e s , 8 0 , 0 0 0 d o c t o r s i n 3 5 cities h a v e b e e n p r o v i d e d , free o f c h a r g e , w i t h F M r a d i o sets t u n e d t o t h e P h y s i c i a n s R a d i o N e t w o r k . T h e r a d i o s c o n s t a n t l y c h u r n out m e d i c a l n e w s and f e a t u r e s o f i n t e r e s t to p h y s i c i a n s . M i x e d in with this is p r o m o t i o n a l copy on n e w a n d old d r u g s . T h e P h y s i c i a n s R a d i o N e t w o r k c l a i m s a 'signif i c a n t l y h i g h e r " s h a r e o f m i n d " a m o n g r a d i o h o l d e r s ' t h a n can b e g a i n e d by a d v e r t i s i n g by d i r e c t mail or in j o u r n a l s ( H u g h e s and B r e w i n , 1979: 2 0 3 ) . T h e initial lists of d o c t o r s to get free r a d i o sets w e r e s u p p l i e d by a d v e r t i s i n g d r u g c o m p a n i e s from their lists of k n o w n high p r e s c r i b e r s . P e r h a p s it will soon be free v i d e o - s e t s . B e f o r e w e h a v e r e a l l y b e g u n t o c o m e t o grips with r e g u l a t i o n o f pharmaceutical advertising in traditional channels, new, more p o w e r f u l m o d a l i t i e s a r e d e m a n d i n g a r e a s s e s s m e n t of h o w drug pushing can be brought under control.

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The sales representative
O v e r 100,000 p e o p l e a r o u n d t h e w o r l d e a r n a living as sales r e p r e s e n t a t i v e s ( ' d e t a i l m e n * ) w h o visit d o c t o r s t o p e r s u a d e t h e m t o p r e s c r i b e t h e i r c o m p a n y ' s p r o d u c t s . W e have seen t h a t surveys o f d o c t o r s s h o w t h e s a l e s r e p r e s e n t a t i v e t o b e the m o s t i m p o r t a n t s i n g l e s o u r c e o f d r u g i n f o r m a t i o n , p a r t i c u l a r l y with n e w p r o d u c t s . I n t h e t e r m s o f G o r r i n g ' s ( 1 9 7 8 ) a n a l y s i s , t h e sales r e p r e s e n t a t i v e i s t h e a n a l o g u e for licit d r u g s o f t h e s t r e e t p u s h e r of illicit d r u g s . A 1971 C i b a sales r e p o r t w a s e v e n so explicit as to u r g e sales r e p r e s e n t a t i v e s to be "more effective p u s h e r s ' of R i t a l i n : ' Y o u r ingenuity in the promotion of Ritalin FBP [Functional B e h a v i o r P r o b l e m s ] is b e c o m i n g m o r e a p p a r e n t : Mr. Y [a d e t a i l e r ] r e p o r t s t h a t a t a n i n s e r v i c e m e e t i n g o f special e d u c a t i o n p e r s o n n e l . . . a physician brought two hyperactive children to use i n a d e m o n s t r a t i o n o f t h e basic s y m p t o m s o f F u n c t i o n a l B e h a v i o u r P r o b l e m s . T h a t ' s g e t t i n g i n v o l v e m e n t folks' (Hentoff, 1972: 2 1 ; c i t e d i n G r u n s p o o n and S t r i n g e r , 1973). O b v i o u s l y it is m u c h m o r e difficult for h e a l t h a u t h o r i t i e s to m o n i t o r t h e c l a i m s of sales r e p r e s e n t a t i v e s t h a n it is to m o n i t o r t h e p r i n t e d w o r d . B u t s l i p - u p s o c c u r , such as w h e n a p r a c t i s i n g physic i a n w h o h a p p e n e d to be a p a r t - t i m e F D A e m p l o y e e w a s told by a P a r k e - D a v i s r e p r e s e n t a t i v e t h a t C h l o r o m y c e t i n p o s e d n o m o r e risk of b l o o d d a m a g e t h a n any o t h e r a n t i b i o t i c - a claim t h a t the heavy d e a t h toll from C h l o r o m y c e t i n can r e a d i l y d i s p r o v e ( e . g . B e s t , 1967). T h e M E R / 2 9 litigation unearthed a wealth of information about t h e i n s t r u c t i o n s w h i c h w e n t o u t t o R i c h a r d s o n - M e r r e l l sales r e p r e s e n t a t i v e s o n h o w t o p u s h this d r u g : H e r e ' s o n e t h a t s e e m s like a red hot i d e a for M E R / 2 9 . . . if it's y o u r s t y l e . I t ' s from T i m B o w e n , C h a r l o t t e , N . C . A i m e d p a r t i c u l a r l y a t t h e 'wait and s e e ' p h y s i c i a n , T i m ' s close [ i . e . , f i n a l sales p i t c h to t h e d o c t o r ] g o e s s o m e t h i n g like this (we got it third hand): D o c t o r , I can a p p r e c i a t e and a d m i r e y o u r c a u t i o n a b o u t any n e w d r u g , but M E R / 2 9 has b e e n o n t h e m a r k e t a l m o s t a y e a r n o w a n d w a s s t u d i e d i n t h o u s a n d s o f p a t i e n t s for y e a r s before t h a t . Its r a t e o f use i n d i c a t e s t h a t a c c e p t a n c e i s b r o a d e n i n g rapidly. P e r h a p s these words of A l e x a n d e r Pope have some 222

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b e a r i n g o n y o u r c o n s i d e r a t i o n o f M E R / 2 9 : ' B e not t h e first b y w h o m t h e n e w is t r i e d , nor t h e last to lay t h e old a s i d e . ' L o t s of p o w e r t h e r e . . . can y o u r style be b e n t j u s t a bit to fit? ( F u l l e r , 1972: 8 8 ) . B y a n d l a r g e , h o w e v e r , i t t a k e s e x t r a o r d i n a r y e v e n t s such a s t h e M E R / 2 9 p r o s e c u t i o n s t o bring such a b u s e s t o t h e surface. A W H O s u r v e y in 1968 s h o w e d t h a t m o s t g o v e r n m e n t s do not have legisl a t i o n w h i c h e n a b l e s t h e m t o c o n t r o l oral s t a t e m e n t s b y drug sales r e p r e s e n t a t i v e s ( W H O , 1969). S o u t h Africa w a s t h e only e x c e p t i o n f o u n d . T h e r e , w h e n e v e r a drug is a d v e r t i s e d orally for t h e first t i m e , w r i t t e n i n f o r m a t i o n e q u i v a l e n t t o t h a t r e q u i r e d for p a c k a g e inserts m u s t be g i v e n to t h e p h y s i c i a n . In Yarrow v. Sterling Drug Inc. it w a s held in t h e U n i t e d S t a t e s that a m a n u f a c t u r e r w a s liable for a failure of its sales r e p r e s e n t a t i v e s to disclose side-effects, e v e n w h e r e d i s c l o s u r e w a s m a d e i n labelling m a t e r i a l s ( A f t e r m a n , 1972). In spite of t h e s e d e v e l o p m e n t s , it r e m a i n s a major irony t h a t the m o s t influential m e t h o d o f d r u g p r o m o t i o n i s t h e least c o n s t r a i n e d by l a w . P h y s i c i a n s t h e m s e l v e s are t h e m o s t hopeful source o f c o n t r o l . M a n y d o c t o r s enjoy g e t t i n g n e w s a m p l e s from t h e sales r e p r e s e n t a t i v e . A s o n e m e d i c a l d i r e c t o r e x p l a i n e d : ' D o c t o r s like n e w toys t o p l a y w i t h . ' P h a r m a c e u t i c a l c o m p a n i e s d o not like t o upset d o c t o r s : S a l e s r e p r e s e n t a t i v e s will be on t h e m a t if t h e y have r u b b e d d o c t o r s u p t h e w r o n g w a y . O u r g r e a t c o n c e r n i s not s o m u c h a v o i d i n g m i s r e p r e s e n t a t i o n , t h o u g h t h a t ' s i m p o r t a n t for its o w n s a k e , but avoiding those kinds of m i s r e p r e s e n t a t i o n which upset d o c t o r s . T h e c o m p a n y ' s credibility i s a l l - i m p o r t a n t . D o c t o r s t h e r e f o r e i n v o k e a n effective c o n t r o l w h e n they w r i t e t o t h e c o m p a n y t o c o m p l a i n a b o u t t h e c l a i m s o f a sales r e p r e s e n t a t i v e . E v e n m o r e effective with a t r a n s n a t i o n a l is for t h e d o c t o r to c o m plain direct to world h e a d q u a r t e r s . A senior Australian executive c o n c e d e d that doctors w h o have an intelligent understanding of h o w t o sting t h e sales d e p a r t m e n t ' w o n ' t g o t h r o u g h t h e local p e o p l e b e c a u s e t h e y will only c o v e r i t u p ' . C o r p o r a t e h e a d q u a r t e r s d o not get a lot of f e e d b a c k a b o u t h o w its s u b s i d i a r i e s in far-flung p a r t s of t h e w o r l d a r e p e r f o r m i n g , s o l e t t e r s from p h y s i c i a n s with s e r i o u s c o m p l a i n t s can c r e a t e s o m e heat for t h e local sales d e p a r t m e n t . O n e F D A official l a m e n t e d t h a t F D A c o m p l a i n t s t o t h e c o m p a n y a r e not a l w a y s as effective a s a n c t i o n : 'Often t h e y will r e s p o n d to t h e 223

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c o m p l a i n t b y t r a n s f e r r i n g the overly a g g r e s s i v e detail m a n a n o t h e r r e g i o n - o n e t h a t n e e d s its sales b o o s t e d along a bit.'

T h e l i m i t a t i o n o f d o c t o r c o m p l a i n t s is, h o w e v e r , t h a t c o m p a n i e s will only be c o n c e r n e d a b o u t t h o s e t y p e s of claims w h i c h are an i n s u l t to t h e i n t e l l i g e n c e of p h y s i c i a n s . It will not bring u n d e r c o n t r o l t h e m o r e p e r v a s i v e subtle forms o f m i s r e p r e s e n t a t i o n . O n e of t h e s e is t h e s e l e c t i v e use of a c c u r a t e i n f o r m a t i o n . An e x a m p l e from o n e e x e c u t i v e : A s h a d e o f g r e y a r e a w o u l d be w h e r e t h e c o m p a n y r e c o m m e n d s a d o s a g e i n t h e r a n g e say 2 0 0 - 2 5 0 m i s . M a y b e m o s t specialists a g r e e w i t h t h i s d o s a g e . B u t o n e specialist says to a sales r e p r e s e n t a t i v e t h a t you really n e e d a d o s a g e of450 mis. T h e n t h e s a l e s r e p r e s e n t a t i v e will go and say this to a G P : that such and such a s p e c i a l i s t r e c o m m e n d s t h a t t h e d o s a g e really should be 450 mis. T h e p h a r m a c e u t i c a l sales r e p r e s e n t a t i v e i s told b y the c o m p a n y t h a t s/he has a dual r e s p o n s i b i l i t y : to sell and p r o m o t e the a d v a n t a g e s o f t h e p r o d u c t , but also t o e d u c a t e d o c t o r s a s t o t h e risks and l i m i t a t i o n s o f t h e t h e r a p y . I n spite o f t h i s r h e t o r i c , ' T h e success o f t h e r e p r e s e n t a t i v e s ' w o r k i s m e a s u r e d b y t h e v o l u m e o f s a l e s , and not by i m p r o v e m e n t s in the k n o w l e d g e of the physicians' ( H e m m i n k i and P e s o n e n , 1977a: 111). I n d e e d , s/he is usually paid s a l a r y and i n c e n t i v e s c o m m e n s u r a t e with success at selling, not on the strength ofthe balance ofthe knowledge imparted. Newspaper a d v e r t i s e m e n t s for p h a r m a c e u t i c a l sales r e p r e s e n t a t i v e s typically a p p e a r u n d e r S for s a l e s m e n , a n d often ask for p r o v e n ability at a g g r e s s i v e sales p e r f o r m a n c e . S e n a t o r K e n n e d y o n c e d r e w a t t e n t i o n t o a J o h n s o n and J o h n s o n t e a c h i n g m a n u a l w h i c h e m p h a s i s e d t h e selling r a t h e r t h a n the i n f o r m a t i o n - p r o v i d i n g side of their w o r k : ' T h i n k s a l e s m e n and not d e t a i l m e n . D e l e t e t h e w o r d " d e t a i l " from the v o c a b u l a r y and think selling and s a l e s ' ( S u b c o m m i t t e e o n H e a l t h , 1974: 7 7 0 ) . T h e p r e s s u r e to a c h i e v e sales m a k e s it difficult for the c o m p a n y r e p r e s e n t a t i v e t o b e o b j e c t i v e i n p r e s e n t i n g t h e a d v a n t a g e s and d i s a d v a n t a g e s , c o m p a r e d w i t h a l t e r n a t i v e t h e r a p i e s , o f t h e p r o d u c t s/he i s p u s h i n g . I n d e e d , m a n y r e p r e s e n t a t i v e s discard any p r e t e n c e o f a fair p r e s e n t a t i o n of risks and benefits. T h e former m e d i c a l d i r e c t o r of S q u i b b , Dr A. D a l e C o n s o l e , said at o n e point in his t e s t i m o n y b e f o r e t h e K e f a u v e r s u b c o m m i t t e e : ' T h e r e is a simple m a x i m , I 224

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l e a r n e d from detail m e n . . . . "If you c a n ' t c o n v i n c e t h e m , confuse t h e m " ' ( M i n t z , 1967: 8 6 ) . F o r m a n y p r o m o t i o n a l c a m p a i g n s , it is i m p o s s i b l e to see h o w a s a l e s r e p r e s e n t a t i v e could afford t o b e o b j e c t i v e . M a d i s o n A v e n u e f r e q u e n t l y c r e a t e s q u i t e artificial d i s t i n c t i o n s b e t w e e n p r o d u c t s w h i c h a r e e s s e n t i a l l y similar t h e r a p e u t i c a l l y , i n o r d e r t o e m b r a c e n e w m a r k e t s . C o n s i d e r t h e following i n f o r m a t i o n p r o v i d e d t o S m i t h K l i n e sales r e p r e s e n t a t i v e s : ' " C o m p a z i n e " and " S t e l a z i n e " a r e very s i m i l a r , clinically. D i f f e r e n c e s i n d o c t o r s ' a t t i t u d e s t o w a r d t h e m a r e d u e m a i n l y t o o u r p r o m o t i o n ' ( N a d e r , 1973: 6 ) . A f a s c i n a t i n g case study o f t h i s t y p e w a s t h e p r o m o t i o n of Serentil ( m e s o r i d a z i n e ) b y S a n d o z i n t h e U n i t e d S t a t e s . Serentil i s m e t a b o l ized i n e s s e n t i a l l y t h e s a m e w a y a s a n o t h e r S a n d o z p r o d u c t , Melloril ( t h i o m i d a z i n e ) , for t h e t r e a t m e n t o f s c h i z o p h r e n i a and o t h e r psychoses involving disordered thinking. But Sandoz needed a new m a r k e t . S o S e r e n t i l w a s p r o m o t e d 'for t h e anxiety t h a t c o m e s from n o t fitting in' - a l o n g step from s c h i z o p h r e n i a . Serentil a d v e r t i s e m e n t s r e f e r r e d t o : ' T h e n e w c o m e r i n t o w n w h o can't m a k e friends. T h e o r g a n i z a t i o n m a n w h o can't adjust to a l t e r e d status w i t h i n his c o m p a n y . T h e w o m a n w h o can't get a l o n g w i t h her n e w d a u g h t e r i n - l a w ' , a n d s o on. T h e 'not f i t t i n g in' a d v e r t i s e m e n t w a s u n a c c e p t a b l e t o t h e F D A , and S a n d o z w e r e c o m p e l l e d t o run a r e m e d i a l a d v e r t i s e m e n t which read: T h e F D A s t a t e s t h a t t h e p r i n c i p a l t h e m e o f t h e a d suggests u n a p p r o v e d uses of S e r e n t i l for relatively m i n o r or e v e r y d a y a n x i e t y s i t u a t i o n s e n c o u n t e r e d often i n t h e n o r m a l c o u r s e o f living. T h e fact is t h a t S e r e n t i l , a p h e n o t h i z i n e d r u g , is limited in its use to c e r t a i n d i s e a s e s t a t e s . . . . A c c o r d i n g t o a s e n i o r F D A official, S a n d o z sales r e p r e s e n t a t i v e s w e r e h a v i n g difficulty in e x p l a i n i n g to d o c t o r s the fact that w h a t w a s e s s e n t i a l l y t h e s a m e p r o d u c t c o u l d be u s e d for p s y c h o s i s on t h e one h a n d , a n d for mild a n x i e t y o n t h e o t h e r . F D A r e g u l a t o r y action a g a i n s t t h e S e r e n t i l a d v e r t i s i n g b r o u g h t t h e p r o d u c t differentiation p r o b l e m to a h e a d . S a n d o z solved t h e p r o b l e m by selling t h e licence to d i s t r i b u t e S e r e n t i l to a c o m p e t i t o r , B o e h r i n g e r - I n g e l h e i m , w h o s e sales r e p r e s e n t a t i v e s w o u l d not h a v e t h e p r o b l e m o f disting u i s h i n g it from o t h e r p r o d u c t s in t h e i r line. I n m o s t p a r t s o f t h e world sales r e p r e s e n t a t i v e s are paid b o n u s e s a c c o r d i n g t o t h e i r sales p e r f o r m a n c e . T h e l a t t e r i s not a l w a y s easy t o a s s e s s . T h e d o c t o r d o e s not place a n o r d e r w i t h t h e r e p r e s e n t a t i v e s . 225

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b u t will s i m p l y give an i n d i c a t i o n t h a t he or she m i g h t try the p r o d u c t w i t h future p r e s c r i p t i o n s . H o w e v e r , c o m p a n i e s have good m a r k e t i n t e l l i g e n c e o n h o w t h e i r p r o d u c t s are selling a t p h a r m a c i e s w i t h i n e a c h sales r e g i o n . A H e l s i n k i study found that 94 per cent of s a l e s r e p r e s e n t a t i v e s o b t a i n e d sales statistics - 17 per cent only n a t i o n - w i d e , 18 p e r c e n t only from t h e i r own a r e a , and the o t h e r s from t h e w h o l e c o u n t r y and their o w n a r e a ( H e m m i n k i and P e s o n e n , 1977a: 108). I n m a n y p a r t s o f t h e w o r l d c o m p a n i e s d o p r e s c r i p t i o n s u r v e y s w h e r e t h e p h a r m a c i s t ' s r e c o r d s are c h e c k e d t o see w h i c h i n d i v i d u a l d o c t o r s h a v e p r e s c r i b e d a p a r t i c u l a r p r o d u c t in n u m b e r s . O b v i o u s l y this p r a c t i c e e n t a i l s a c e r t a i n b r e a c h of conf i d e n t i a l i t y o n t h e part o f t h e p h a r m a c i s t . R o c h e d o e s t e l e p h o n e s p o t - c h e c k s of d o c t o r s to d e t e r m i n e t h e last t i m e d o c t o r s saw a R o c h e r e p r e s e n t a t i v e 'and w h a t d r u g s t h e y t a l k e d a b o u t ' . D o c t o r s w e r e a l s o sent r e p o r t c a r d s t o r a t e R o c h e r e p r e s e n t a t i v e s a s ' e x c e l l e n t , g o o d o r p o o r ' . R o c h e sent t h e d o c t o r ' s medical school a d o n a t i o n o f $10 for e a c h r e p o r t c o m p l e t e d ( H u g h e s and B r e w i n , 1979: 2 0 6 ) . O n e m u s t s p a r e a t h o u g h t for t h e sales r e p r e s e n t a t i v e as victim. They are put u n d e r t r e m e n d o u s pressure to perform, pressure w h i c h c a u s e s m a n y t o b r e a k d o w n . T h e y are i n d o c t r i n a t e d into b e l i e v i n g t h a t t h e i r p r o d u c t s really are a b o o n t o m a n k i n d : ' Y o u o w e it to y o u r s e l f - to y o u r c o m p a n y - to t h e millions of p e o p l e w h o n e e d M E R / 2 9 - t o b e e n t h u s i a s t i c ' ( R i c h a r d s o n - M e r r e l l sales m a n u a l ) ( S h a p o , 1979: 8 8 - 9 ) . T h e s t a t e m e n t o f a M e r c k sales r e p r e s e n t a t i v e b e f o r e t h e K e n n e d y s u b c o m m i t t e e u n d e r l i n e s the situation: D e t a i l m e n a r e g e n u i n e l y c o n v i n c e d b y their e m p l o y e r s t h a t they a r e w o r k i n g for t h e finest p h a r m a c e u t i c a l c o m p a n y in t h e i n d u s t r y , a n d t h a t t h e i r p r o d u c t s are t h e best. M o r e t h a n t h i s , t h e y a r e c o n v i n c e d t h a t society is in n e e d of t h e i r e m p l o y e r s ' p r o d u c t s . T h e y m u s t t h e r e f o r e s p r e a d t h e word a s t o t h e w o r t h o f t h e i r d r u g s ( S u b c o m m i t t e e o n H e a l t h , 1974: P a r t 3 : 7 3 3 ) . O r , a s a n o t h e r sales r e p r e s e n t a t i v e put it: ' W h e n you k e e p saying t h a t t h i s d r u g is g o o d and n e c e s s a r y for a w h o l e y e a r , you finally b e l i e v e it yourself, t o o ' ( H e m m i n k i and P e s o n e n , 1977a: 109). M a k i n g sales r e p r e s e n t a t i v e s more informed would help to underm i n e t h e t e n d e n c y t o w a r d s glib a c c e p t a n c e o f their c o m p a n y ' s p r o p a g a n d a . T r a i n i n g c o u r s e s run b y d i s i n t e r e s t e d p a r t i e s o u t s i d e the p h a r m a c e u t i c a l industry might help. At present, in most 226

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c o u n t r i e s a r o u n d the world, including the U n i t e d States, c o m p a n i e s c o n d u c t i n - h o u s e t r a i n i n g c o u r s e s t h a t r u n for w e e k s r a t h e r t h a n m o n t h s . W e l l - t r a i n e d science g r a d u a t e s are m o r e likely t o look c r i t i c a l l y at t h e c l a i m s of an e m p l o y e r w h o is found to p r o v i d e t h e m o n l y with j o u r n a l r e f e r e n c e s to s t u d i e s f a v o u r a b l e to a p r o d u c t . S o m e c o m p a n i e s a r e b e t t e r t h a n o t h e r s . E i g h t y p e r c e n t o f Lilly's sales r e p r e s e n t a t i v e s w i t h i n t h e U n i t e d S t a t e s are qualified p h a r m a c i s t s . C o s t a R i c a has g o n e so far as to r e q u i r e t h a t p h a r m a c e u t i c a l r e p r e s e n t a t i v e s be pharmacy graduates. But in neighbouring G u a t e m a l a , t h e s i t u a t i o n is d r a m a t i c a l l y different. W h e n I asked t h e g e n e r a l m a n a g e r o f o n e c o m p a n y w h e t h e r his r e p r e s e n t a t i v e s w e r e a s well t r a i n e d a s i n t h e U n i t e d S t a t e s , h e replied: ' N o . T h e y g e t j u s t t h r e e o r four w e e k s o n basic s a l e s m a n s h i p and p r o d u c t i n f o r m a t i o n . W e ' r e lucky i f w e can get high school g r a d u a t e s . S o m e o f t h e m I w o u l d n ' t e m p l o y to . . . as j a n i t o r s . '

Doctor conflict of interest
Dr A. Dale Console, former Squibb medical director, testified

before the US Senate: S o m e t i m e in 1956, w h e n I w a s still a m e d i c a l d i r e c t o r , t h e lagging s a l e s o f o n e o f o u r p r o d u c t s led m a n a g e m e n t t o d e c i d e t h a t t h e p r o d u c t n e e d e d a b o o s t . T h e boost t o o k t h e form o f o b t a i n i n g an e n d o r s e m e n t from a p h y s i c i a n w h o w a s a p r o m i n e n t a u t h o r i t y in t h e field. W e k n e w t h a t t h e p a r t i c u l a r p h y s i c i a n w a s being s u b s i d i z e d b y a n o t h e r d r u g c o m p a n y and s o m a n a g e m e n t d e c i d e d t h a t it w o u l d be s i m p l e for me as m e d i c a l d i r e c t o r to ' b u y ' him. I o b j e c t e d since I felt t h a t t h e d o c t o r w a s i n c o r r u p t i b l e and b e c a u s e I felt t h e p r o d u c t did not d e s e r v e e n d o r s e m e n t . My b u s i n e s s c o l l e a g u e s o v e r r u l e d me and I w a s left w i t h a blank check to win his favor. I w a s free to offer him a large g r a n t to s u p p o r t any r e s e a r c h of his c h o i c e ' w i t h o u t s t r i n g s ' or to r e t a i n him as a c o n s u l t a n t w i t h a g e n e r o u s a n n u a l c o m p e n s a t i o n . I w a s quite c e r t a i n t h a t t h e d o c t o r w o u l d t h r o w me out of his office if I a p p r o a c h e d him w i t h any o f t h e t e c h n i q u e s s u g g e s t e d b y m y c o l l e a g u e s . T h e y all had t h e o b v i o u s o d o r of a b r i b e . I d e c i d e d , t h e r e f o r e , to use a s t r a t a g e m t h a t was m o r e likely to be effective a n d t h a t I t h o u g h t (at t h e t i m e ) w o u l d be e a s i e r on my o w n conscience. I t o o k t h e d o c t o r to l u n c h , and after t h e usual two m a r t i n i s , I 227

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told him e x a c t l y w h a t had b e e n g o i n g on and my d i s a g r e e m e n t w i t h my c o l l e a g u e s . In this m a n n e r we e s t a b l i s h e d a p h y s i c i a n - t o - p h y s i c i a n r e l a t i o n s h i p i n which w e w e r e b o t h d e p l o r i n g t h e q u e s t i o n a b l e tactics used b y t h e d r u g i n d u s t r y . C o n v e r s a t i o n g r a d u a l l y shifted to t h e p r o d u c t a n d , to m a k e a long story s h o r t , we got o u r e n d o r s e m e n t a l m o s t as a p e r s o n a l favor. M y t r a v e l e x p e n s e s and t h e price o f t h e lunch m a d e u p the e n t i r e cost t o t h e c o m p a n y ( P e k k a n e n , 1973: 7 3 ) . O n e c o u l d p o i n t t o o t h e r e x a m p l e s o f this sort, but the m o r e p e r v a s i v e conflict of i n t e r e s t w h i c h i m p i n g e s on physician drug p u s h i n g is t h e o w n e r s h i p by d o c t o r s of s h a r e s in p h a r m a c e u t i c a l c o m p a n i e s . M o s t d o c t o r s are affluent e n o u g h t o h a v e capital t o invest, and the drug industry is one o f t h e more obvious investment c h o i c e s for p e o p l e w h o in t h e c o u r s e of their professional w o r k are k e p t i n f o r m e d a b o u t d e v e l o p m e n t s in t h a t i n d u s t r y . In 1979 w h e n I w a s i n t h e U n i t e d S t a t e s , p h y s i c i a n s w e r e abuzz with interest i n the s u c c e s s o f T a g a m e t , a n i m p r o v e d t h e r a p y for u l c e r s , and h o w this h a d d o u b l e d S m i t h K l i n e s h a r e p r i c e s i n the c o u r s e o f six m o n t h s . B u t t h e m o r e i n t e n s e conflict o f i n t e r e s t i s with s m a l l e r c o m p a n i e s w h e r e i n d i v i d u a l p h y s i c i a n s , o r small g r o u p s o f physicians p u s h i n g d r u g s , can h a v e a significant i m p a c t on profitability. In the U n i t e d S t a t e s , M i n t z ( 1 9 6 7 : 3 2 0 - 3 2 5 d ) has forcefully b r o u g h t h o m e the p r o b l e m s . H e p o i n t s o u t t h a t i n 1964, T e x a s p h y s i c i a n s had a n i n t e r e s t in 1 in 25 o f t h e s t a t e ' s p h a r m a c i e s and in 26 o f t h e 126 Texas-licensed p h a r m a c e u t i c a l manufacturing firms. O n e of these s m a l l c o m p a n i e s , M e r i t P h a r m a c e u t i c a l C o m p a n y I n c . , had 244 p h y s i c i a n s a m o n g its 4 6 6 s t o c k h o l d e r s . S e n a t o r H a r t d e s c r i b e d t h e M e r i t s e t - u p before t h e S e n a t e :

D o c t o r s e n t e r e d into partnership with drug salesmen to p r o m o t e c o m p a n y p r o d u c t s . . . t h e c o m p a n y split 5 0 - 5 0 w i t h t h e detail m e n . T h e y in t u r n g a v e 25 p e r c e n t to p a r t i c i p a t i n g d o c t o r s . . . t h i s a p p e a r s to be n o t h i n g but a k i c k - b a c k for p r e s c r i b i n g t h e c o m p a n y p r o d u c t s . A n d for a p e r i o d o f t w o y e a r s d o c t o r s w e r e f o u n d w h o w e r e willing to p a r t i c i p a t e in such a s c h e m e ( M i n t z 1967:320-1). A n e x a m p l e from N e w O r l e a n s w a s C a r r t o n e L a b o r a t o r i e s . O f its 3 , 0 0 0 s t o c k h o l d e r s , at least 1,200 w e r e p h y s i c i a n s . In M a r c h 1964, c o m p a n y president, Dr William W. F r y e , D e a n o f t h e Louisiana S t a t e U n i v e r s i t y School o f M e d i c i n e , w r o t e t o t h e c o m p a n y ' s 228

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p h y s i c i a n - s h a r e h o l d e r s u r g i n g e a c h of t h e m to 'do j u s t a little bit m o r e for his c o m p a n y ' , so t h a t it w o u l d 'start m a k i n g a sizeable profit i m m e d i a t e l y ' . L e t t e r s like t h i s d r e w a h e a r t w a r m i n g r e s p o n s e . I n t h e s u b c o m m i t t e e h e a r i n g r e c o r d is a reply in w h i c h D r . J o s e p h A. T h o m a s of N a t c h i t o c h e s , L o u i s i a n a , a g r e e d that 'it is up to us s h a r e h o l d e r s t o m a k e o u r c o m p a n y g o and g r o w . ' F r o m S h r e v e p o r t , D r . T. E. Strain w r o t e , 'I do a g r e e to p r e s c r i b e and e n c o u r a g e m y a s s o c i a t e s t o use C a r r t o n e p r o d u c t s . ' Similar l e t t e r s , s o m e o f t h e m m a k i n g i t clear t h a t t h e a u t h o r s w e r e glad t o h e l p if to do so w a s c o n s i s t e n t with t h e p a t i e n t ' s h e a l t h n e e d s c a m e from o t h e r s o u t h e r n states i n c l u d i n g A r k a n s a s , K e n t u c k y , a n d O k l a h o m a . D r . E . W a y n e Gilley o f C h a t t a n o o g a w r o t e t h a t h e had ' s e n t p e r s o n a l l e t t e r s t o all d o c t o r s i n T e n n e s s e e w h o w e r e k n o w n to have C a r r t o n e stock.' Dr. Boyce P. Griggs of L i n c o l n t o n , N o r t h C a r o l i n a , a t t e m p t i n g t o initiate a c a m p a i g n o f s u p p o r t for C a r r t o n e a m o n g his fellow p h y s i c i a n - s t o c k h o l d e r s , u r g e d t h a t ' w e . . . p r o m o t e o u r stock i n t e r e s t by way of actively " p e n p u s h i n g " Carrtone products. . . . ' H e wrote them that ' C a r r t o n e ' s g r o w t h will r e w a r d you t h r o u g h y o u r h o l d i n g i n C a r r t o n e stock . . . I l o o k u p o n C a r r t o n e a s a r o s e b u d a b o u t t o b l o o m , s t o c k w i s e . . . L e t ' s p u s h t h e p e n for C a r r t o n e . . . .' ( M i n t z , 1967: 3 2 2 - 3 ) . C a r r t o n e s u r v i v e d by s c h e m e s to sell its stock to d o c t o r s w h o w o u l d agree to heavily prescribe C a r r t o n e products to e n h a n c e the v a l u e of t h e i r i n v e s t m e n t . A letter from C. K. A v e r y , assistant b u s i n e s s m a n a g e r o f t h e B r o u g h t o n State Hospital, was tabled in t h e S e n a t e c o n c e r n i n g a c o n f e r e n c e t e l e p h o n e call a m o n g A v e r y , D r J o h n M c K e e J r . , s u p e r i n t e n d e n t o f t h e h o s p i t a l , and t h r e e Carrtone people: I do n o t k n o w w h o m a d e t h e s u g g e s t i o n , but it w a s m a d e a g a i n a n d a g a i n t h a t t h e m e d i c a l staff b e a d v i s e d t o p u r c h a s e s u b s t a n t i a l q u a n t i t i e s o f t h e c o m m o n stock i n C a r r t o n e L a b o r a t o r i e s w h i c h w a s t h e n selling at a low price . . . a n d t h a t the H o s p i t a l t h e n switch its e n t i r e b u s i n e s s t o C a r r t o n e L a b o r a t o r i e s . W e w e r e ' g u a r a n t e e d ' t h a t t h e stock w o u l d triple o r q u a d r u p l e i f w e t o o k such a c t i o n . . . [it] was t h e b a l d e s t p r o p o s i t i o n that I h a v e e v e r h e a r d in 17 y e a r s of bulk p u r c h a s i n g ( M i n t z : 1967: 322-3). 229

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M i n t z i s r e l e n t l e s s i n using S e n a t e t e s t i m o n y t o d e m o n s t r a t e t h a t p h y s i c i a n conflict of i n t e r e s t may be a p e r v a s i v e p r o b l e m . In t h e 1967 H a r t h e a r i n g s , M a v e n J. M y e r s , an assistant professor a t t h e P h i l a d e l p h i a C o l l e g e o f P h a r m a c y and S c i e n c e , testified a b o u t a s u r v e y he had d o n e in a large but unidentified city, w h i c h may have been M i l w a u k e e , about pharmaceutical repackaging firms. F o u r such firms w e r e o w n e d by a total of 14 p h y s i c i a n s and o s t e o p a t h s . A m o n g their p r i v a t e - l a b e l offerings w e r e p r o d u c t s c o n t a i n i n g p e n i c i l l i n , t o w h i c h a n e s t i m a t e d 2 0 million A m e r i c a n s a r e a l l e r g i c or s e n s i t i v e . M y e r s testified t h a t o u t of e v e r y 1,000 p r e s c r i p t i o n s w r i t t e n by t h e d o c t o r - o w n e r s , 104 w e r e for p e n c i l l i n - c o n t a i n i n g p r o d u c t s . T h i s w a s a rate 2Vi t i m e s t h e n a t i o n a l a v e r a g e ; it was 8 t i m e s that found a m o n g a control g r o u p of p r e s c r i b i n g p h y s i c i a n s . A similar p a t t e r n a m o n g eye d o c t o r s w a s testified to by D r . M a r c A n t h o n y . In his city of S p o k a n e , W a s h i n g t o n , h e told S e n a t o r H a r t , four o p h t h a l m o l o g i s t s w h o sell e y e g l a s s e s s t i p u l a t e d in a c o u r t case t h a t each p r e s c r i b e s 2 , 2 0 0 p a i r s a y e a r . T h i s is 1,000 m o r e t h a n w e r e p r e s c r i b e d by t h e e q u a l l y busy D r . A n t h o n y o r e a c h o f his litigant c o l l e a g u e s w h o d o not d i s p e n s e . D r . A n t h o n y testified t h a t m o s t o f t h e d i f f e r e n c e - an 83 p e r c e n t difference - w a s a c c o u n t e d for by e x p l o i t a t i o n o f p a t i e n t s w h o s e old g l a s s e s 'are really ok' ( M i n t z , 1967:325d).

O t h e r c o u n t r i e s h a v e not had t h e benefit o f t h e A m e r i c a n system o f S e n a t e s u b c o m m i t t e e h e a r i n g s and t h e i n v e s t i g a t i v e j o u r n a l i s m of a M o r t o n M i n t z to e x p o s e t h e e x t e n t of d o c t o r conflict of i n t e r e s t . T h i s is not to say it d o e s not exist. In t h e late 1970s t h e r e w e r e e x p r e s s i o n s of c o n c e r n in P a r a g u a y , for e x a m p l e , a b o u t a g r o w i n g p h a r m a c e u t i c a l c o m p a n y with s i x t e e n d o c t o r s h a v i n g key s h a r e h o l d i n g s , a n d a n o t h e r c o m p a n y run b y t h e wives o f t e n d o c t o r s .

Towards effective control
It is t r i t e to say t h a t t h e r e is m u c h m o n e y to be m a d e from drug a b u s e . B u t m o s t d o not realise h o w m u c h , o r h o w g e n e r a l l y true this p r o p o s i t i o n is. W i n k l e r (1974) has d e m o n s t r a t e d its g e n e r a l i t y in A u s t r a l i a w h e n he s h o w e d t h a t for a l c o h o l , 26 p e r cent of all sales r e v e n u e c o m e s from h a z a r d o u s u s e r s ; for n i c o t i n e , 73 per c e n t ; for a n a l g e s i c s , 33 per c e n t of sales w e r e to h a z a r d o u s u s e r s . If sales of h a z a r d o u s s u b s t a n c e s w e r e limited only t o r e s p o n s i b l e u s e r s , t h e 230

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profits of a l c o h o l , t o b a c c o and d r u g c o m p a n i e s w o u l d be shot to pieces. F o r this r e a s o n c o n t r o l of a b u s e is b o u n d to be difficult. P h a r m a c e u t i c a l c o m p a n i e s fight h a r d a g a i n s t p e o p l e w h o c h a l l e n g e t h e h a z a r d s from use o f t h e i r p r o d u c t s . C o n s i d e r , for e x a m p l e , t h e l e t t e r from C h a r l e s S . B r o w n , E x e c u t i v e Vice P r e s i d e n t o f A b b o t t L a b o r a t o r i e s to the Chancellor o f t h e University of Pittsburgh. It c o m p l a i n s a b o u t a n a r t i c l e b y P r o f e s s o r Jack S c h u b e r t o f the U n i v e r s i t y w h i c h w a s critical o f t h e h a z a r d s a s s o c i a t e d with e x t e n s i v e use o f c y c l a m a t e s . I m o s t s t r o n g l y p r o t e s t t h e use by a faculty m e m b e r of publications ofthe University ofPittsburgh to make unwarranted misleading s t a t e m e n t s about a product of A b b o t t L a b o r a t o r i e s . . . . T h e scientific i n f o r m a t i o n we have - and it is e x t e n s i v e - tells us c y c l a m a t e , at c u r r e n t l y used levels is safe and useful in t h e h u m a n d i e t . . . . T h e p r i m e c o r p o r a t e i n t e r e s t of A b b o t t L a b o r a t o r i e s is Health Care World Wide. . . . In Dr. S c h u b e r t ' s s t a t e m e n t s , o u r p r o d u c t - and t h u s o u r r e p u t a t i o n - is unjustifiably a t t a c k e d . F o r t h e s e r e a s o n s , w e m u s t p r o t e s t w h e n a r e s p e c t e d a c a d e m i c i n s t i t u t i o n like t h e U n i v e r s i t y o f P i t t s b u r g h i s u s e d to m a k e an u n w a r r a n t e d a t t a c k on t h e p r o d u c t of a c o r p o r a t i o n t h a t is highly r e s p e c t e d for its scientific r e p u t a t i o n a n d i n t e g r i t y . W e r e q u e s t t h a t you t a k e a p p r o p r i a t e action t o c o r r e c t the misleading s t a t e m e n t s m a d e in the n a m e o f y o u r U n i v e r s i t y ( T u r n e r 1976: 9 3 ) . F o l l o w i n g visits from r e p r e s e n t a t i v e s o f A b b o t t ' s public r e l a t i o n s firm a n d a p u b l i c a t t a c k by A b b o t t , P r o f e s s o r S c h u b e r t r e t a i n e d a l a w y e r t o p r o t e c t his i n t e r e s t s . In spite o f t h e p r o p e n s i t y for t h e p h a r m a c e u t i c a l industry to fight its o p p o n e n t s v i g o r o u s l y , t h e industry is v u l n e r a b l e on the c h a r g e of p u s h i n g t h e o v e r u s e o f p r e s c r i p t i o n d r u g s . R e f o r m will c o m e . A s i n o t h e r a r e a s o f p h a r m a c e u t i c a l r e g u l a t i o n , reform follows crises w h i c h b e c o m e visible t o t h e p u b l i c . B e l g i u m legislated for d r u g a d v e r t i s i n g to be p r e - c l e a r e d with h e a l t h a u t h o r i t i e s in 1977 after a f u r o r e l e a d i n g t o t h e b a n n i n g o f the so-called ' b r o n z e pill', w h i c h m a n u f a c t u r e r s c l a i m e d w o u l d tan t h e skin w h e n t a k e n orally. S i n c e t h e t h a l i d o m i d e d i s a s t e r , t h e A m e r i c a n F o o d , D r u g and C o s m e t i c A c t h a s p r o v i d e d c r i m i n a l p e n a l t i e s for m i s l e a d i n g advert i s i n g o f p h a r m a c e u t i c a l p r o d u c t s . T h e first c r i m i n a l p r o s e c u t i o n t o o k p l a c e i n 1965 w h e n W a l l a c e L a b o r a t o r i e s w a s c h a r g e d with 231

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o m i t t i n g e s s e n t i a l side-effect and c o n t r a - i n d i c a t i o n i n f o r m a t i o n in a d v e r t i s i n g for t h e d r u g , P r e e M. T. T h e m a x i m u m $2,000 fine w a s i m p o s e d by t h e U n i t e d S t a t e s District C o u r t for N e w J e r s e y after a p l e a of no c o n t e s t by t h e c o m p a n y . W i t h i n a few y e a r s t h e r e had b e e n six c r i m i n a l p r o s e c u t i o n s c o n c e r n i n g a d v e r t i s i n g . T h e F o o d , D r u g and C o s m e t i c A c t also p r o v i d e s for g o v e r n m e n t seizure o f p r o d u c t s which have been improperly advertised. This permits F D A a civil c o u r s e of a c t i o n as an a l t e r n a t i v e to criminal p r o s e c u t i o n , o n e w h i c h has m o r e s e v e r e c o n s e q u e n c e s for t h e c o m p a n y t h a n a fine o f a few t h o u s a n d d o l l a r s . B u t seizure is an o b v i o u s l y d e f e c t i v e r e c o u r s e for m i s l e a d i n g a d v e r t i s i n g . W h e n p a t i e n t s read t h a t s t o c k s o f a p r o d u c t h a v e b e e n s e i z e d , they a s s u m e this m e a n s t h a t t h e p r o d u c t itself is defective in s o m e w a y . T h i s is not t h e case w i t h s e i z u r e s a r i s i n g from e x t r a v a g a n t a d v e r t i s i n g . A m e r i c a n s e i z u r e s o f t h i s t y p e h a v e b e e n found t o g e n e r a t e u n n e c e s s a r y w o r r y a m o n g p a t i e n t s a b o u t w h e t h e r they should c o n t i n u e using the d r u g s they have in their medicine chests. Of course when batches of p r o d u c t really a r e physically d e f e c t i v e , seizure is an essential protection. T h e last d e c a d e has seen a shift a w a y from not only the use of s e i z u r e s , b u t t h e use of any litigious s o l u t i o n to t h e c o n t r o l of a d v e r t i s i n g c l a i m s ( R h e i n s t e i n and H u g s t a d , 1979). C r i m i n a l p r o s e c u t i o n s s i m p l y d o not o c c u r any m o r e . F D A r e a s o n i n g i s that the c r i m i n a l s a n c t i o n is not sufficiently flexible a d e v i c e for d e a l i n g with t h e p r o b l e m . It w o u l d typically t a k e t h r e e y e a r s to b r i n g a criminal p r o s e c u t i o n to a c o n c l u s i o n . By t h e n an a d v e r t i s i n g c a m p a i g n w o u l d h a v e long since run its c o u r s e . T h e p r e f e r r e d strategy w a s t o s t r i k e at an a d v e r t i s i n g c a m p a i g n i m m e d i a t e l y , d u r i n g t h e period it was believed to have an impact. So the most c o m m o n sanctions became:
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(a) Dear doctor letters: T h e c o m p a n y is r e q u i r e d to write to all p h y s i c i a n s p o i n t i n g out that t h e c l a i m s m a d e i n r e c e n t p r o m o t i o n a l m a t e r i a l w e r e u n r e a s o n a b l e i n c e r t a i n specified ways. (b) Remedial advertisements: T h e c o m p a n y is r e q u i r e d to include in t h e issue of a j o u r n a l following o n e in w h i c h a m i s l e a d i n g c l a i m w a s m a d e an a d v e r t i s e m e n t of e q u a l size and eye a p p e a l refuting t h e c l a i m s o f t h e p r e v i o u s a d v e r t i s e m e n t . T h e s e a r e effective s a n c t i o n s . P h a r m a c e u t i c a l c o m p a n i e s pay a d v e r t i s i n g a g e n c i e s a g r e a t deal of m o n e y for effective a d v e r t i s i n g 232

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c a m p a i g n s , and t o see t h e m t u r n e d against t h e c o m p a n y i s e n o r m o u s l y p a i n f u l . R e m e d i a l a d v e r t i s e m e n t s and D e a r D o c t o r l e t t e r s a r e p a r t i c u l a r l y c o u n t e r p r o d u c t i v e t o t h e c o m p a n y i n the way that t h e y d e n t t h e i r r e p u t a t i o n for integrity a m o n g the p e o p l e w h o m a t t e r m o s t - d o c t o r s . It also costs a lot of m o n e y to send a l e t t e r to tens of t h o u s a n d s of d o c t o r s . The content of D e a r Doctor letters a n d r e m e d i a l a d v e r t i s e m e n t s is a m a t t e r of t o u g h n e g o t i a t i o n b e t w e e n t h e c o m p a n y and t h e F D A . But t h e F D A has the b a c k s t o p of c r i m i n a l p r o s e c u t i o n , s u r r o u n d e d by all t h e a d v e r s e publicity it can m u s t e r , i f t h e c o m p a n y refuses t o c o m p l y . T h e s e s o l u t i o n s , t h e n , a c c e p t t h e reality that p h a r m a c e u t i c a l a d v e r t i s e m e n t s have such a s h o r t half-life that t h e c o u r t s p r o v i d e t o o s l o w - m o v i n g a d e v i c e for r o u t i n e c o n t r o l . N e v e r t h e l e s s , o n e w o u l d h a v e t h o u g h t t h a t t h e r e w o u l d b e a case for o c c a s i o n a l p r o s e c u t i o n s t o foster g e n e r a l d e t e r r e n c e and m a i n t a i n t h e s t i g m a of t h e a s s o c i a t i o n of c r i m i n a l i t y with false a d v e r t i s i n g . In n e i t h e r t h e 1977 n o r 1978 financial y e a r s w e r e t h e r e any legal a c t i o n s o f any sort i n s t i t u t e d a g a i n s t d r u g a d v e r t i s e m e n t s . " I n d e e d , t h e r e w e r e only 3 D e a r D o c t o r l e t t e r s and 3 r e m e d i a l a d v e r t i s e m e n t s d u r i n g t h e t w o y e a r s . T h e r e w e r e 125 a d v e r t i s e m e n t s c a n c e l l e d and 174 ' N o t i c e of V i o l a t i o n L e t t e r s ' sent out. H e n c e , e v e n t h e use o f t h e n e w flexible s a n c t i o n s falls s o m e w h a t s h o r t of a blitz. T h e s i t u a t i o n is similar in A u s t r a l i a , w h e r e even t h o u g h states have the power to prosecute pharmaceutical comp a n i e s for false or m i s l e a d i n g a d v e r t i s i n g , p r o s e c u t i o n s never h a p p e n ( A f t e r m a n , 1972; D a r v a l l , 1978, 1980). F e e b l e t h o u g h t h e A m e r i c a n level o f e n f o r c e m e n t might s e e m t o b e , it has c e r t a i n l y had an effect. In c o n t r a s t to t h e U n i t e d S t a t e s , G r e a t B r i t a i n and A u s t r a l i a h a v e not seen t h e direct i n t e r v e n t i o n o f h e a l t h a u t h o r i t i e s in the control of j o u r n a l advertising.' Instead i n d u s t r y s e l f - r e g u l a t i o n h a s b e e n the s t r a t e g y . In 1968 t h e British A s s o c i a t i o n of P h a r m a c e u t i c a l Manufacturers succeeded in having t h e g o v e r n m e n t a c c e p t a v a g u e l y w o r d e d v o l u n t a r y c o d e o f advert i s i n g . A u s t r a l i a n s t a t e and F e d e r a l H e a l t h m i n i s t e r s a g r e e d i n 1974, in a r e m a r k a b l e m o m e n t of i n t e r s t a t e u n a n i m i t y , u p o n a set of 'Proposed R e q u i r e m e n t s for t h e A d v e r t i s i n g o f T h e r a p e u t i c G o o d s ' . H o w e v e r , the Australian Pharmaceutical Manufacturers A s s o c i a t i o n h a s successfully l o b b i e d to k e e p this legislation sitting on t h e shelf. T h e t r a d e - o f f w a s a g a i n a v a g u e l y w o r d e d v o l u n t a r y c o d e . N a j m a n e t al. ( 1 9 7 9 ) have s h o w n t h a t British and A u s t r a l i a n s e l f - r e g u l a t i o n by v o l u n t a r y c o d e s has not p r o d u c e d t h e g o o d s in t h e 233

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w a y t h e A m e r i c a n F D A - i m p o s e d c o n t r o l h a s . W i t h the p r o g r e s s i v e i n t r o d u c t i o n of US c o n t r o l s b e t w e e n 1961 and 1977 t h e p r o p o r t i o n o f a d v e r t i s i n g s p a c e d e v o t e d t o side-effects and c o n t r a - i n d i c a t i o n s increased markedly in t h e Journal of the American Medical Association. In G r e a t B r i t a i n and A u s t r a l i a , in c o n t r a s t , i m p r o v e m e n t s w e r e n o t e v i d e n t d u r i n g this p e r i o d i n t h e c o u n t e r p a r t j o u r n a l s . W h i l e m i n u s c u l e p r o p o r t i o n s o f t h e British and A u s t r a l i a n a d v e r t i s i n g copy a r e d e v o t e d t o side-effects and c o n t r a - i n d i c a t i o n s , t h e p r o p o r t i o n of A m e r i c a n advertising space devoted to cautionary c o n t e n t is n o w a l m o s t as g r e a t as t h e s p a c e d e v o t e d to indic a t i o n s . N o t w i t h s t a n d i n g t h i s , q u a n t i t y i s not q u a l i t y ; i t r e m a i n s t h e i n d i c a t i o n s w h i c h a r e t h e subject o f e y e - c a t c h i n g copy i n t h e U n i t e d States.
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T h e r e is some e v i d e n c e suggesting that remedial advertisements a r e effective from a s t u d y c o n d u c t e d for t h e F D A by A p p l i e d M a n a g e m e n t S c i e n c e s ( S u b c o m m i t t e e o n H e a l t h , 1974: 2 0 0 3 - 3 0 ) . T h e r e m e d i a l a d v e r t i s e m e n t is a t t r a c t i v e b e c a u s e it is such a public k i n d of s a n c t i o n . H o p e f u l l y , all o t h e r m a n u f a c t u r e r s see it, and g e n e r a l d e t e r r e n c e is fostered in t h e m o s t explicit way p o s s i b l e . A p p l i e d M a n a g e m e n t Sciences asked a representative sample of 1,379 p h y s i c i a n s if t h e y had seen a r e m e d i a l a d v e r t i s e m e n t conc e r n i n g an o r a l c o n t r a c e p t i v e . A s u r p r i s i n g 2 4 . 6 p e r cent of the s a m p l e saw and r e m e m b e r e d the r e m e d i a l a d v e r t i s e m e n t . M o r e i m p o r t a n t l y , 3 6 . 8 p e r c e n t o f o b s t e t r i c i a n s and g y n a e c o l o g i s t s and 4 0 . 7 p e r c e n t o f p h y s i c i a n s w h o had e v e r p r e s c r i b e d t h a t b r a n d o f o r a l c o n t r a c e p t i v e n o t i c e d t h e ad. T h i s surely can be c o u n t e d as r e m a r k a b l y effective c o m m u n i c a t i o n of a r e g u l a t o r y action to the relevant audience. I n g e n e r a l , a d v e r s e publicity i s t h e m o s t f l e x i b l e , c h e a p , s p e e d y a n d effective s a n c t i o n a g a i n s t p r o m o t i o n a l e x c e s s e s . T h e F D A has legislative backing to disseminate information concerning drugs, f o o d , d e v i c e s , or c o s m e t i c s which it c o n s i d e r s e i t h e r c o n s t i t u t e an ' i m m i n e n t d a n g e r to h e a l t h ' or i n v o l v e a ' g r o s s d e c e p t i o n of the c o n s u m e r ' . T h e d i s c r e t i o n i s w i d e , p r o v i d i n g that ' n o t h i n g i n t h e s e c t i o n shall be c o n s t r u e d to p r o h i b i t t h e S e c r e t a r y from . . . r e p o r t ing .. . t h e r e s u l t s of i n v e s t i g a t i o n s . . . .' It w a s held in Hoxsey Cancer Clinic v. Folsom t h a t t h e F D A may issue such i n f o r m a t i o n w i t h o u t a h e a r i n g , and t h a t no legal r e m e d y is a v a i l a b l e to p r e v e n t its r e l e a s e to t h e p u b l i c ( A f t e r m a n , 1972: 122).

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In arguing above that g o v e r n m e n t - i m p o s e d regulation of advert i s i n g in t h e U n i t e d S t a t e s has b e e n m o r e effective t h a n selfr e g u l a t i o n in G r e a t B r i t a i n and A u s t r a l i a , I did not m e a n to imply t h a t s e l f - r e g u l a t i o n is u s e l e s s . I n d e e d , m u c h of t h e success of g o v e r n m e n t r e g u l a t i o n in t h e U n i t e d S t a t e s is in a p e r v e r s e way a t t r i b u t a b l e t o s e l f - r e g u l a t i o n . D r P e t e r R h e i n s t e i n , D i r e c t o r o f the F D A ' s D i v i s i o n o f D r u g A d v e r t i s i n g , gets m a n y o f his best tip-offs a b o u t a d v e r t i s i n g v i o l a t i o n s inside plain b r o w n e n v e l o p e s w h i c h a p p e a r u n d e r his d o o r i n t h e d e a d o f night. S o m e c o m p a n i e s are less r e t i r i n g , and c o m p l a i n verbally a b o u t v i o l a t i o n s c o m m i t t e d b y c o m p e t i t o r s . S o m e t i m e s t h e s e c o n t a i n m a n y p a g e s o f legal o p i n i o n on t h e a l l e g e d v i o l a t i o n . T h e s e tips are of g r e a t a s s i s t a n c e to a p r o f e s s i o n a l staff of five w h o c a n n o t r e a d and hear all t h e p r o m o t i o n a l m a t e r i a l d i s s e m i n a t e d i n t h e U n i t e d S t a t e s each d a y . C o m p a n i e s will often i n s t i t u t e c e r t a i n s e l f - r e g u l a t o r y m e a s u r e s t o c l e a n u p t h e i r p r o m o t i o n i n r e s p o n s e t o r e m o n s t r a t i o n s from F D A . F o r e x a m p l e , c o m p a n i e s s o m e t i m e s a g r e e t o d i s m i s s sales r e p r e s e n t a t i v e s w h o a r e t h e subject o f F D A c o m p l a i n t . T h e c a r e e r o f one j u n i o r c o m p a n y e m p l o y e e m i g h t be r e g a r d e d as a small sacrifice to e n a b l e s e n i o r m a n a g e m e n t t o d e m o n s t r a t e t h e i r g o o d faith t o F D A . O n e can o n l y s y m p a t h i s e with t h e sales r e p r e s e n t a t i v e w h o s e guilt or i n n o c e n c e m i g h t n o t be an issue. Self-regulation is better than no regulation. The Australian Pharmaceutical Manufacturers Association committee which s c r u t i n i s e s all j o u r n a l a d v e r t i s e m e n t s o f m e m b e r s before they are p u b l i s h e d d o e s , i n a small w a y , raise t h e lowest c o m m o n d e n o m i n a t o r of advertising s t a n d a r d s . The chairperson of the c o m m i t t e e told m e t h a t w h e n e v e r t h e c o m m i t t e e t h i n k s t h a t a n a d g o e s t o o far, he t e l e p h o n e s the m a n a g i n g director o f t h e c o m p a n y concerned. ' N o t o n c e h a s a m a n a g i n g d i r e c t o r refused to c o m p l y with the r e q u e s t e d c h a n g e , e v e n in a c o u p l e of c a s e s w h e r e it w a s a nonP M A m e m b e r . ' F o r its o w n m e m b e r s , A P M A has t h e s a n c t i o n o f e x p e l l i n g t h e v i o l a t o r from t h e a s s o c i a t i o n . M a n y local m a n a g i n g d i r e c t o r s of t r a n s n a t i o n a l s m i g h t be d i s m i s s e d if t h e y did s o m e t h i n g w h i c h c a u s e d t h e c o m p a n y t o b e t h r o w n o u t o f t h e A P M A . B u t this s a n c t i o n n e v e r has to be used. A m i n o r c h a n g e to o n e a d v e r t i s e m e n t is n o t a m a t t e r w h i c h w o u l d justify falling o u t with o t h e r m e m b e r s of t h e c l u b . T h e s e r e l a t i o n s h i p s m u s t b e p r e s e r v e d for m o r e i m p o r t a n t m a t t e r s like ' o r d e r l y m a r k e t i n g ' . A t least w i t h respect t o the 235

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p h a r m a c e u t i c a l i n d u s t r y , the criticism of t r a d e a s s o c i a t i o n selfr e g u l a t i o n is n o t t h a t it can n e v e r exact effective s a n c t i o n s to maint a i n c o m p l i a n c e , but t h a t t h e s t a n d a r d s i m p o s e d will be low o n e s w h i c h are m u t u a l l y c o m f o r t a b l e a m o n g the industry l e a d e r s . T h e c o m m i t t e e r a r e l y b r i n g s specialists o n t o t h e c o m m i t t e e t o discuss t h e scientific m e r i t o f a specific claim or o m i s s i o n . W h a t they do not k n o w a b o u t , t h e y n e e d not act u p o n . E x c e p t i n o c c a s i o n a l s t r u g g l e s b e t w e e n c o m p e t i t o r s (when 'orderly marketing' breaks d o w n ) , t h e r e is no i n c e n t i v e for c o m m i t t e e m e m b e r s to do investigative digging. M o r e i m p o r t a n t t h a n t r a d e a s s o c i a t i o n self-regulation i s intrac o r p o r a t e s e l f - r e g u l a t i o n . O n e c o m p a n y I visited c l a i m e d that if t h e r e w e r e 30 p a p e r s a s s o c i a t e d w i t h a given a d v e r t i s i n g c l a i m , t h e n t h e legal d e p a r t m e n t , q u i t e a p a r t from t h e m e d i c a l d e p a r t m e n t , w o u l d r e a d e a c h o f t h o s e 3 0 p a p e r s . A g a i n w e have a s i t u a t i o n w h e r e only l a r g e c o m p a n i e s can afford a legal d e p a r t m e n t o f a size to be a b l e to do t h i s . A n d of c o u r s e it w o u l d be n a i v e to a s s u m e t h a t in this kind of w o r k t h e legal d e p a r t m e n t ' s function is p r i m a r i l y s e l f - r e g u l a t o r y ; it is e q u a l l y to a d v i s e m a r k e t i n g staff on w h a t t h e y c a n get a w a y w i t h . N e v e r t h e l e s s , i t i s i m p o r t a n t t o g r a n t t h e p r o fessional c o n s t i t u e n c i e s within the organisation power to over-rule marketing on promotional claims. M o s t crucial is the p o w e r o f t h e medical director. In the better c o m p a n i e s , t h e m e d i c a l d i r e c t o r a t h e a d q u a r t e r s and t h e local m e d i c a l d i r e c t o r i n t h e s u b s i d i a r y has a n a b s o l u t e right o f v e t o o v e r a n y p r o m o t i o n a l c l a i m sent u p from m a r k e t i n g . T o u n d e r s t a n d t h e i m p o r t a n c e o f t h i s w e m u s t r e m e m b e r t h a t a large c o r p o r a t i o n i s not a p r o f i t - m a x i m i s i n g m o n o l i t h . W h i l e t h e p e r f o r m a n c e of the m a r k e t i n g d e p a r t m e n t i s m e a s u r e d b y s a l e s , the m e d i c a l d i r e c t o r ' s s u c c e s s is a s s e s s e d in t e r m s of his or h e r c a p a c i t y to s t e e r the c o r p o r a t i o n a w a y from a t h e r a p e u t i c / r e g u l a t o r y d i s a s t e r , and to m a i n t a i n the c o m p a n y ' s credibility a m o n g the medical profession as a socially r e s p o n s i b l e e n t e r p r i s e . T h i s is not to say t h a t t h e m e d i c a l d i r e c t o r can afford to i g n o r e profit c o n s i d e r a t i o n s . N e v e r t h e l e s s , it r e m a i n s true that to the extent that intra-corporate constituencies w h i c h h a v e g r e a t e r e m p h a s i s o n social r e s p o n s i b i l i t y goals can b e g i v e n n e g o t i a t i n g s t r e n g t h against c o n s t i t u e n c i e s w h o s e overw h e l m i n g c o n c e r n is short-term expansion of sales, better protect i o n o f t h e p u b l i c will r e s u l t . M o s t l a r g e c o m p a n i e s h a v e fairly c o m p l e x s y s t e m s for a p p r o v i n g n e w p r o m o t i o n a l m a t e r i a l . T y p i c a l l y , t h e m a r k e t i n g m a n a g e r will

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first h a v e t o sign t h a t his d e p a r t m e n t a p p r o v e s t h e n e w m a t e r i a l . T h e n t h e m e d i c a l d i r e c t o r will sign, t h e n t h e legal d e p a r t m e n t , t h e n r e g u l a t o r y affairs. S o m e t i m e s t h e r e m a y b e a d o z e n p e o p l e w h o m u s t sign off t h e i r a p p r o v a l , a l t h o u g h t h e e x t e n t t o which t h e i r c o m m e n t s a r e h e e d e d will vary. I n t h e o r y , t h e S O P i s usually t h a t all m u s t sign off b e f o r e t h e m a t e r i a l can go o u t ; in p r a c t i c e m i n o r m o d i f i c a t i o n s will be n e g o t i a t e d in e x c h a n g e for a s i g n a t u r e . If s o m e o n e , m o s t likely t h e m e d i c a l d i r e c t o r o r t h e legal d e p a r t m e n t , d i g s in t h e i r h e e l s , t h e n a m e e t i n g m u s t be called to t h r a s h o u t a s e t t l e m e n t , or t h e d e a d l o c k must be referred to a h i g h e r a u t h o r i t y . D e a d l o c k s occur rarely, however. I n this p r o c e s s , o n e w o u l d h a v e t h o u g h t t h e legal d e p a r t m e n t m i g h t afford as g r e a t a p r o t e c t i o n to t h e p u b l i c as t h e medical d i r e c t o r . Y e t t h i s s e e m s not t o b e so. W h i l e t h e p r o f e s s i o n a l s o c i a l i s a t i o n o f d o c t o r s i n d o c t r i n a t e s t h e m w i t h t h e ideal t h a t w h a t t h e y a r e a b o u t i s p r o v i d i n g t h e best p o s s i b l e h e a l t h care t o the p u b l i c , t h e s o c i a l i s a t i o n o f l a w y e r s e m p h a s i s e s serving the best i n t e r e s t s o f t h e client ( w h o p a y s t h e bills) w h e t h e r t h e client i s right o r w r o n g . P r o f e s s i o n a l i d e o l o g y p r o c l a i m s t h a t every p a r t i c i p a n t i n a n a d v e r s a r y s y s t e m d e s e r v e s t h e best legal a d v i c e . C e r t a i n l y p r o fessional s o c i a l i s a t i o n b e c o m e s less and less i m p o r t a n t as b o t h d o c t o r s and l a w y e r s b e c o m e l o o k - a l i k e o r g a n i s a t i o n p e r s o n s . N e v e r t h e l e s s , t h e r e r e m a i n s o m e differences w h e r e b y d o c t o r s c o n t i n u e t o see t h e i r u l t i m a t e mission a s being t o i m p r o v e t h e h e a l t h o f t h e p u b l i c , w h i l e l a w y e r s see t h e i r r e s p o n s i b i l i t y a s t o p r o t e c t t h e i r e m p l o y e r from t h e p u b l i c . O n e l a w y e r e x p r e s s e d a justifiable c y n i c i s m w h e n I put t h e a b o v e i n t e r p r e t a t i o n to him: ' L a w y e r s are o p e n a b o u t selling t h e i r skills t o t h e h i g h e s t b i d d e r ; but d o c t o r s d e l u d e t h e m s e l v e s into b e l i e v i n g t h a t t h e y are serving s o m e o n e o t h e r t h a n he w h o is p a y i n g t h e bills.' 1 r e s p o n d e d t h a t it is a d e l u s i o n w h i c h m i g h t o c c a s i o n a l l y afford s o m e small p r o t e c t i o n t o t h e p u b l i c . T h e l a w y e r a g r e e d t h a t this c o u l d b e . L a w y e r s a r e , t h e n , self-consciously s e r v a n t s o f t h e c o r p o r a t e i n t e r e s t r a t h e r t h a n t h e p u b l i c i n t e r e s t , e s s e n t i a l l y advising the c o r p o r a t i o n o n w h a t t h e y can get a w a y w i t h . B u t this d o e s not m e a n t h a t l a w y e r s see t h e i r m i s s i o n as profit m a x i m i s a t i o n for t h e c o m p a n y . L a w y e r s see t h e i r goal as to be g o o d l a w y e r s , largely as d e f i n e d by t h e i r p r o f e s s i o n a l s o c i a l i s a t i o n . It is t h e j o b of s e n i o r m a n a g e m e n t t o a r t i c u l a t e t h e w o r k o f a s u b u n i t w h i c h d o e s good l a w y e r i n g t o t h e o v e r a l l goals o f t h e o r g a n i s a t i o n :

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pusher When you finally sign off on approval of a new piece of promotional material, do you do so as the lawyer or the company man? Thatis, where there is only a low product liability risk and a high profit gain, do you take the point of view of the company's overall profitability? I am paid to be a l a w y e r . If I d o n ' t r e p r e s e n t legal i n t e r e s t s , I am not doing the j o b I'm paid for.

J. B.:

General counsel:

Replacing advertising with information W e h a v e s e e n t h a t t h e b u r d e n i m p o s e d o n t h e e c o n o m y b y pharm a c e u t i c a l p r o m o t i o n is t r e m e n d o u s . For the average A m e r i c a n d o c t o r w h o writes $35,000 worth of prescriptions a year, about $ 7 , 0 0 0 will h a v e b e e n spent in p e r s u a d i n g him or h e r to write t h o s e p r e s c r i p t i o n s . T h i s i s c e r t a i n l y not a n a r e a w h e r e r e g u l a t i o n w o u l d i m p o s e c o s t s t o b e p a s s e d o n t o t h e c o m m u n i t y . R e g u l a t i o n would p r o d u c e s a v i n g s . H e a l t h a u t h o r i t i e s i n s o m e c o u n t r i e s have recognised that excessive pharmaceutical p r o m o t i o n produces more social h a r m t h a n g o o d and a r e acting t o r e d u c e c o r p o r a t e p r o m o t i o n a l e x p e n d i t u r e . T h e y can d o this b e c a u s e t h e i r g o v e r n m e n t s , a s w e saw i n t h e last c h a p t e r , h a v e effective c o n t r o l o f d r u g p r i c e s . T h e B r i t i s h g o v e r n m e n t i m p o s e s limits o n t h e a m o u n t s p h a r m a c e u t i c a l c o m p a n i e s m a y s p e n d o n p r o m o t i o n . T h e pricing formula for N H S p u r c h a s e s w a s r e v i s e d in 1978-9 to allow an a v e r a g e of 11 per cent of s a l e s r e v e n u e t o g o o n p r o m o t i o n . T h i s has forced d o w n e x p e n d i t u r e on p r o m o t i o n by s e v e r a l p e r c e n t a g e p o i n t s in the last few y e a r s to 12 p e r c e n t of r e v e n u e . T h i s is b e i n g further r e d u c e d as the g o v e r n m e n t has n o w l o w e r e d the t a r g e t to 10 per c e n t . A similar p r o c e s s has b e g u n i n F r a n c e , w h e r e t h e H e a l t h M i n i s t r y a d v i s e d p h a r m a c e u t i c a l m a n u f a c t u r e r s in 1978 t h a t no firm will be allowed to e x c e e d a m a x i m u m of 17 p e r c e n t of sales value on p r o m o t i o n for social s e c u r i t y r e i m b u r s e d p r o d u c t s . T h e A u s t r a l i a n H e a l t h D e p a r t m e n t also a r g u e d before t h e R a l p h E n q u i r y t h a t i t s h o u l d b e e m p o w e r e d t o take steps t o r e d u c e promotional expenditure: T h e D e p a r t m e n t t a k e s t h e view t h a t m u c h o f t h e d r u g p r o m o t i o n (mainly carried out by 'medical representatives' or 'drug d e t a i l e r s ' ) is u n n e c e s s a r y , m u s t o b v i o u s l y i n c l u d e a significant 238

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bias a n d s h o u l d be largely r e p l a c e d by o b j e c t i v e i n f o r m a t i o n to d o c t o r s from a u t h o r i t a t i v e and n o n - b i a s e d s o u r c e s , e.g. t h e ' A u s t r a l i a n P r e s c r i b e r ' ( A u s t r a l i a n D e p a r t m e n t o f H e a l t h , 1978: 66). T h e citizen a s b o t h t a x p a y e r and c o n s u m e r o f d r u g s w o u l d benefit from g o v e r n m e n t a c t i o n t o force d o w n p r o m o t i o n a l e x p e n d i t u r e a n d use a p r o p o r t i o n of t h o s e savings on c o n t i n u i n g p h a r m a c o l o g i cal e d u c a t i o n for t h e m e d i c a l p r o f e s s i o n . T h e r e can n e v e r b e effective c o n t r o l o v e r t h e b i a s e d oral p r e s e n t a t i o n s o f sales r e p r e s e n t a t i v e s . T h e only s o l u t i o n is g r a d u a l l y to do a w a y with t h e m and substitute objective non-commercial information sources. Gradualism is n e c e s s a r y b e c a u s e p h a r m a c e u t i c a l p r o m o t i o n d o e s fulfil an u n d e n i a b l e p h y s i c i a n e d u c a t i o n function. I f o n e w e r e t o ban sales r e p r e s e n t a t i v e s overnight, there would be no government or p r o f e s s i o n a l s o u r c e o f effective i n f o r m a t i o n c o m m u n i c a t i o n ready t o s t e p into t h e v a c u u m . T i g h t e n i n g t h e f i n a n c i a l s c r e w s o n p r o m o t i o n has t h e j o i n t a d v a n t a g e s o f g r a d u a l i s m and g e n e r a t i o n o f s a v i n g s to finance o b j e c t i v e p r e s c r i b i n g i n f o r m a t i o n . If part of this funding w e n t to e s t a b l i s h a t e r t i a r y c o u r s e for g o v e r n m e n t ' d e t a i l e r s ' , it might be desirable to require c o m p a n y detailers to qualify in t h e s a m e c o u r s e . H o p e f u l l y such a c o u r s e w o u l d c o n t a i n a hefty c o m p o n e n t o n p r o f e s s i o n a l e t h i c s . C o m p l e m e n t a r y m e a s u r e s are also n e c e s s a r y , h o w e v e r . Imp r o v e d q u a l i t y can g o h a n d i n h a n d with r e d u c e d q u a n t i t y . O t h e r c o u n t r i e s should adopt the F D A w e a p o n s of remedial advertisem e n t s a n d D e a r D o c t o r l e t t e r s a s t h e basic t o o l s t o c o n t r o l p r o m o t i o n a l e x c e s s e s . M o r e o v e r , t h e r e is no r e a s o n < ihy r e m e d i a l a d v e r t i s e m e n t s i n m e d i c a l j o u r n a l s s h o u l d not b e used t o r e d r e s s e x c e s s i v e oral c l a i m s m a d e b y c o m p a n y sales r e p r e s e n t a t i v e s . I n the C h l o r o m y c e t i n c a s e , for e x a m p l e , this w o u l d have b e e n a singularly a p p r o p r i a t e r e m e d y t o t h e oral d i s c l a i m e r b y t h e P a r k e - D a v i s sales r e p r e s e n t a t i v e a b o u t t h e effect o f t h e d r u g o n b l o o d d i s e a s e . In a d d i t i o n , we s h o u l d n o t forget t h a t false a d v e r t i s i n g to p u s h t h e e x c e s s i v e u s e of d a n g e r o u s d r u g s is so s e r i o u s a m a t t e r as to d e s e r v e t h e s t i g m a o f t h e c r i m i n a l label. E x e m p l a r y p r o s e c u t i o n s o f c o m p a n i e s , p e r h a p s m a r k e t i n g m a n a g e r s , and c e r t a i n l y sales r e p r e s e n t atives are necessary to maintain stigma. Unlike many o f t h e matters d i s c u s s e d i n p r e v i o u s c h a p t e r s , t h e s e a r e not c o m p l e x f e a t u r e s o f c o r p o r a t e c o n d u c t w h i c h are difficult t o e x p l a i n i n c o u r t . T h e p r i n t e d a d v e r t i s e m e n t is t h e r e for all to s e e , and it is not difficult to 239

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b r i n g a n u m b e r of d o c t o r s into c o u r t to testify t h a t a p a r t i c u l a r c o m p a n y sales r e p r e s e n t a t i v e m a d e c e r t a i n specific claims t o t h e m . P o l i c e officers w o u l d wish t h e y had it so easy in i n v e s t i g a t i n g m o s t o t h e r t y p e s of c r i m i n a l offences. R e m e m b e r i n g that all I am s u g g e s t i n g i s e x e m p l a r y p r o s e c u t i o n s , t h e task o f c o n v i c t i o n would be e v e n e a s i e r by s e l e c t i n g o u t t h e m o s t b l a t a n t cases for court action. A n e n f o r c e m e n t a p p r o a c h i s n e c e s s a r y b e c a u s e t h e self-regul a t o r y t r a c k r e c o r d of i n d u s t r y in c o n t r o l l i n g p r o m o t i o n is not g o o d . S e l f - r e g u l a t i o n has b e e n tried and failed. It can c o m p l e m e n t g o v e r n m e n t r e g u l a t i o n , b u t , i n this a r e a , can n e v e r b e a n a l t e r n a t i v e to it.

Abolishing mass media advertising of drugs
M o s t c o u n t r i e s p e r m i t t h e a d v e r t i s i n g o f p r e s c r i p t i o n d r u g s only i n m e d i a o u t l e t s d i r e c t e d specifically a t d o c t o r s ( e . g . medical j o u r n a l s ) , and not t h r o u g h m a s s m e d i a . H o w e v e r , e x c e p t in a few E u r o p e a n c o u n t r i e s , the advertising of non-prescription drugs ( O T C d r u g s ) i s p e r m i t t e d t h r o u g h all m e d i a o u t l e t s . T h e m a i n c o n c e r n a b o u t m a s s m e d i a a d v e r t i s i n g o f d r u g s i s not specific c l a i m s w h i c h a r e f r a u d u l e n t o r i n a c c u r a t e , b u t t h e c o n t r i b u t i o n the a d v e r tising m a k e s to producing a pill-popping culture. Mass advertising f o s t e r s t h e ' m e d i c a l i z a t i o n o f e v e r y d a y life': O n c e a h u m a n p r o b l e m is defined as a d i s e a s e , t h e t e c h n o l o g i c a l a p p a r a t u s m a y be b r o u g h t in for its c u r e . It is t h e r e f o r e in the i n t e r e s t s o f t h e p h a r m a c e u t i c a l i n d u s t r y t o e x p a n d its m a r k e t b y e n c o u r a g i n g d o c t o r s t o e x p a n d t h e m e d i c a l m o d e l and t o m a i n t a i n a p u b l i c belief t h a t h u m a n suffering and pain are not o r d i n a r y c o n c o m i t a n t s o f living but a r e d i s e a s e s w h i c h m e d i c i n e c a n be e x p e c t e d to end ( W i n k l e r , 1977: 7 ) . T h e r e is a d r u g to put you to s l e e p , a d r u g to w a k e you u p , a drug t o m a k e y o u feel g o o d , a n o t h e r t o h e l p you r e l a x , o n e t o k e e p the k i d s q u i e t , still o t h e r s to c u r e a t e n s i o n h e a d a c h e , and best of all, t h e r e a r e pills to m a k e you slim and beautiful. Little c o l o u r e d pills to s o l v e all ills. If we w a n t to m o v e a w a y from a p i l l - p o p p i n g c u l t u r e , t h e n it is n o t t o o r e p r e s s i v e to b a n all m a s s m e d i a a d v e r t i s i n g of d r u g s . It is not an u n c o n s c i o n a b l e t h r e a t to o u r liberalism t h a t we forbid t h e a d v e r t i s i n g of m a r i j u a n a a n d h e r o i n : so why could we not a c c e p t t h e b a n n i n g o f all m a s s a u d i e n c e d r u g a d v e r t i s i n g ( i n c l u d i n g 240

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o f a l c o h o l a n d t o b a c c o ) ? W h y e x p o s e c h i l d r e n t o the guiles o f p u s h e r s of d r u g s , illegal or legal? A g a i n , this t y p e of r e g u l a t i o n w o u l d r e d u c e costs, not increase t h e m . If people need information about chemical solutions to problems t h e y m i g h t h a v e , t h e n t h e y can go to t h e i r d o c t o r , or at least to a p h a r m a c i s t w h o could p r o v i d e t h e m w i t h o b j e c t i v e l i t e r a t u r e and a d v i c e a b o u t O T C d r u g s . T e l e v i s i o n a d v e r t i s i n g o f d r u g s has b e e n b a n n e d in S w e d e n for m o r e t h a n a d e c a d e . A r g u i n g that t e l e v i s i o n d r u g a d v e r t i s i n g fosters drug a b u s e a m o n g c h i l d r e n , t h e a t t o r n e y s g e n e r a l o f e i g h t e e n A m e r i c a n states o n c e p e t i t i o n e d t h e U S F e d e r a l C o m m u n i c a t i o n s C o m m i s s i o n t o halt T V a d v e r t i s i n g o f O T C d r u g s b e t w e e n 6 a . m . a n d 9 p . m . daily ( K a t z , 1 9 7 6 : 2 9 ) . C o r p o r a t i o n s use t h e r h e t o r i c o f l i b e r a l i s m t o defend t h e i r r i g h t t o a d v e r t i s e . B u t l i b e r a l i s m i s t r a d i t i o n a l l y c o n c e r n e d with t h e right o f t h e individual to do a n y t h i n g he or she likes so long as it d o e s no h a r m to o t h e r s , n o t w i t h t h e right of powerful c o r p o r a t i o n s to do i m m e n s e h a r m to i n d i v i d u a l s and t o society with i m p u n i t y .

Toward a more informed public
The p u r p o s e of b a n n i n g television advertising of drugs is to protect c h i l d r e n from a w o r l d view w h i c h is s u i t a b l e to t h e d r u g p u s h e r , not t o s h e l t e r a d u l t s from i n f o r m a t i o n a b o u t d r u g s . T h e p r i m a r y s o u r c e o f i n f o r m a t i o n m u s t r e m a i n t h e p h y s i c i a n , but the e v i d e n c e i s o v e r w h e l m i n g t h a t this i s not e n o u g h . M a n y s t u d i e s have d e m o n s t r a t e d t h e r e m a r k a b l e e x t e n t t o which p a t i e n t s forget t o t a k e d r u g s or t a k e t h e m in q u a n t i t i e s and f r e q u e n c i e s t o t a l l y at o d d s with the i n s t r u c t i o n s o f t h e i r p h y s i c i a n ( M a r s t o n , 1970; B o y d e t a l . , 1974; S a c k e t t , 1976; M o r r i s and H a l p e r i n , 1979; B a r o f s k y , 1980). E r r o n e o u s a n d wilful n o n c o m p l i a n c e with t h e d o c t o r ' s i n s t r u c t i o n s p r o f o u n d l y u n d e r m i n e t h e effectiveness o f c h e m i c a l t h e r a p i e s effectiveness established by studies conducted on patients who do c o m p l y . T h e s t u d i e s listed a b o v e s h o w r a t e s o f n o n c o m p l i a n c e r a n g i n g from 30 p e r cent to a s t a g g e r i n g 80 p e r c e n t . T h e p r o b l e m has its r o o t s i n h o w ill-informed p e o p l e are a b o u t d r u g s . O n e m a n i n H e i l b r o n n , W e s t G e r m a n y , c o m p l a i n e d t h a t his wife had had six c h i l d r e n in seven y e a r s d e s p i t e t h e use of oral c o n t r a c e p t i v e s - t h a t is, his use o f t h e Pill. B e c a u s e he did not trust his wife to t a k e t h e Pill r e g u l a r l y , he had b e e n t a k i n g it himself ( S h a p o , 1979: 9 0 ) . O n e A m e r i c a n s u r v e y found t h a t i n spite o f t h e e x p l i c i t b o x e d w a r n i n g o n t h e p a c k a g e label and t h e e x t e n s i v e 241

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p u b l i c i t y in t h e p r e s s , only 6 4 . 4 p e r cent of Pill users w e r e a w a r e that it c o u l d c a u s e b l o o d c l o t t i n g a b n o r m a l i t i e s (cited in S h a p o , 1979: 132). S t u d i e s c o n d u c t e d in a clinic s h o w that p a t i e n t s r e m e m b e r o n l y a b o u t half o f t h e s t a t e m e n t s m a d e t o t h e m a b o u t their t r e a t m e n t , e v e n w h e n t h e p a t i e n t s are i n t e r v i e w e d within m i n u t e s after l e a v i n g t h e p h y s i c i a n ( J o y c e et a l . , 1960; Ley and S p e l l m a n , 1965). In an a t t e m p t to improve patient understanding of their prog r a m m e of m e d i c a t i o n , the F D A is trying to introduce patient l a b e l l i n g r e q u i r e m e n t s for all p h a r m a c e u t i c a l p r o d u c t s . " T h e s e w o u l d insist t h a t t h e m a n u f a c t u r e r p r e p a r e and d i s t r i b u t e p a t i e n t information with the drug package. The information would be w r i t t e n in n o n - t e c h n i c a l l a n g u a g e , not be p r o m o t i o n a l in t o n e or c o n t e n t , and be based primarily on the information provided to p h y s i c i a n s o n t h e p r o d u c t . T h e r e w o u l d b e i n f o r m a t i o n o n the c i r c u m s t a n c e s u n d e r which t h e d r u g should not b e u s e d , s e r i o u s a d v e r s e r e a c t i o n s , p r e c a u t i o n s the p a t i e n t should t a k e w h e n using t h e p r o d u c t , i n f o r m a t i o n a b o u t side-effects, and o t h e r g e n e r a l i n f o r m a t i o n a b o u t t h e use o f p r e s c r i p t i o n d r u g s . I n a d d i t i o n t o this d e t a i l e d i n f o r m a t i o n , a s u m m a r y w o u l d be p r o v i d e d to e n c o u r a g e a m o d i c u m of u n d e r s t a n d i n g a m o n g less diligent or less l i t e r a t e patients. T h e F D A p r e f a c e d its a r g u m e n t s for t h e r e g u l a t i o n s with survey r e s e a r c h e v i d e n c e i n d i c a t i n g t h a t m o s t p a t i e n t s did d e s i r e m o r e i n f o r m a t i o n a b o u t d r u g s they w e r e u s i n g . T h e p r i m a r y r e a s o n s for the r e g u l a t i o n s were given as to (1) p r o m o t e p a t i e n t u n d e r s t a n d i n g o f and a d h e r e n c e t o t h e drug t h e r a p y , (2) p e r m i t t h e p a t i e n t t o a v o i d i n t e r a c t i o n s with o t h e r d r u g s or f o o d s , (3) p r e p a r e t h e p a t i e n t for possible side effects, (4) i n f o r m t h e p a t i e n t of p o s i t i v e and n e g a t i v e effects from t h e use o f t h e d r u g p r o d u c t , (5) p e r m i t t h e p a t i e n t t o share i n t h e d e c i s i o n t o use t h e d r u g p r o d u c t , (6) e n h a n c e t h e p a t i e n t / p h y s i c i a n r e l a t i o n s h i p , and (7) p r o v i d e t h e p h a r m a c i s t and p h y s i c i a n w i t h a basis for d i s c u s s i n g t h e use of a p r e s c r i p t i o n drug p r o d u c t w i t h t h e p a t i e n t (Federal Register, 4 4 ( 1 3 1 ) , 6 July 1979: 40019). T h e s e justifications are self-explanatory. H o w e v e r , a n u m b e r of o b j e c t i o n s h a v e b e e n raised t o t h e p a t i e n t labelling r e g u l a t i o n s . F i r s t , p a t i e n t l a b e l l i n g is said to e n c o u r a g e self-diagnosis and t r a n s f e r o f p r e s c r i p t i o n d r u g s b e t w e e n p a t i e n t s . T h i s o f c o u r s e goes o n a l r e a d y . I t m i g h t e v e n b e t h a t t h e w a r n i n g i n p a t i e n t labelling 242

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w h i c h i n d i c a t e s t h a t t h e p r o d u c t has b e e n p r e s c r i b e d for a p a r t i c u l a r i n d i v i d u a l a n d s h o u l d not be given to o t h e r s will do m o r e to disc o u r a g e t h a n e n c o u r a g e t h e p r a c t i c e . S e c o n d , i t i s a r g u e d that p a t i e n t l a b e l l i n g could p r o d u c e a d v e r s e r e a c t i o n s i n p a t i e n t s t h r o u g h s u g g e s t i o n . F D A a r g u e s t h a t s u g g e s t i o n effects play a minimal role in causing serious adverse reactions. While patient l a b e l l i n g m i g h t i n c r e a s e t h e reported i n c i d e n c e of a d v e r s e r e a c t i o n , a n u m b e r of s t u d i e s suggest t h a t t h e actual i n c i d e n c e of a d v e r s e r e a c t i o n s will n o t i n c r e a s e ( M y e r s and C a l v e r t , 1 9 7 3 , 1 9 7 6 ; P a u l s o n et a l . , 1976; E k l u n d and W e s s l i n g , 1976; B a s s and S u v e g e s , 1977; W e i b e r t , 1977; K a n o u s e and M o r r i s , 1978). M o r e o v e r , t h e F D A a r g u e d , at a p s y c h o l o g i c a l level t h e a d v a n t a g e s of p a t i e n t information outweigh the disadvantages.

P a t i e n t s m a y b e m o r e sensitive t o ' w a r n i n g signals' o f s e r i o u s a d v e r s e effects. A c c u r a t e e x p e c t a t i o n s m a y help r e d u c e u n c e r t a i n t y and a n x i e t y a b o u t p o s s i b l e effects o f t r e a t m e n t . T h e p a t i e n t m a y also b e b e t t e r able t o i n t e r p r e t and identify m o r e a c c u r a t e l y t h e c a u s e o f d r u g - i n d u c e d r e a c t i o n s , and t r e a t m e n t s c o u l d b e o n m o r e p r e c i s e i n f o r m a t i o n . A c c o r d i n g l y , t h e possible p o s i t i v e effects of s u p p l y i n g a c c u r a t e side effect i n f o r m a t i o n s u b s t a n t i a l l y o u t w e i g h t h e p o s s i b l e n e g a t i v e o n e s (Federal Register 44(131), 6 July 1979: 4 0 0 2 3 ) . A n o t h e r p s y c h o l o g i c a l factor, t h o u g h , i s t h a t informed p a t i e n t s m a y be less likely to be a m e n a b l e to a d v a n t a g e o u s p l a c e b o effects. On the c o n t r a r y , the F D A reply, ' B e c a u s e the patient would know w h a t effects t o e x p e c t from t h e d r u g and b e c a u s e p a t i e n t labelling may e n h a n c e patient/physician c o m m u n i c a t i o n s , information in p a t i e n t l a b e l l i n g a b o u t t h e effects o f t h e d r u g may e v e n i n c r e a s e the p l a c e b o effect of a d r u g p r o d u c t . ' (Federal Register 4 4 ( 1 3 1 ) , 6 July 1979: 4 0 0 2 3 ) . A n o t h e r a t t a c k o n p a t i e n t labelling i s t h a t i t w o u l d c a u s e p a t i e n t s a t t i m e s t o b e a l a r m e d , and put m o r e p r e s s u r e o n t h e t i m e o f d o c t o r s w h o will h a v e to r e a s s u r e t h e m a b o u t c e r t a i n m a t t e r s . Surely such a p a t i e n t / p h y s i c i a n d i a l o g u e is p r e c i s e l y w h a t is lacking at the m o m e n t and explains much o f t h e a p p a r e n t patient ignorance. A r e l a t e d c o n c e r n i s t h a t p a t i e n t s m i g h t lose confidence i n their d o c t o r ' s j u d g m e n t , p a r t i c u l a r l y i f t h e d o c t o r ' s s t a t e m e n t s conflict w i t h w h a t is said on t h e p a t i e n t i n f o r m a t i o n s h e e t . Surely if t h e d o c t o r c a n n o t r e c o n c i l e and e x p l a i n a d i s c r e p a n c y b e t w e e n w h a t 243

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s/he says a n d a s t a t e m e n t in t h e p a t i e n t l a b e l l i n g , t h e n s/he d o e s not d e s e r v e the confidence o f t h e patient. W h i l e s o m e o f t h e o b j e c t i o n s t o p a t i e n t labelling are not w i t h o u t s u b s t a n c e , t h e y a m o u n t to a fairly feeble case against a n e e d e d reform. C o m m u n i t y e d u c a t i o n is p o s i t e d as a trite solution to m a n y social p r o b l e m s w h e n t h e reality i s t h a t the c o m m u n i t y often c a n n o t be b o t h e r e d to b e c o m e e d u c a t e d . Difficult as it is. c o m m u n i t y e d u c a t i o n i s the only u l t i m a t e s o l u t i o n t o p e o p l e b e c o m i n g n e e d l e s s f o d d e r for pill p u s h e r s . If i n t e r e s t in h e a l t h d i e t s , c a n c e r s c a r e s and keep-fit p r o g r a m m e s i s any i n d i c a t i o n , p e r h a p s e n o u g h p e o p l e h a v e a n o b s e s s i v e c o n c e r n a b o u t t h e i r b o d i e s t o m a k e this o n e a r e a w h e r e e d u c a t i o n can w o r k . I n d e e d , t h e r e i s e v i d e n c e that t h e c r e s c e n d o of p u b l i c criticism of o v e r p r e s c r i b i n g of p s y c h o a c t i v e d r u g s has a l r e a d y j o l t e d c o m m u n i t y c o n c e r n t o the point w h e r e c o n s u m p t i o n of t h e s e d r u g s has d r o p p e d o v e r t h e last few y e a r s in t h e U n i t e d S t a t e s ( R e i n h o l d , 1980).
1 0

T h e o n l y p r i n t e d i n f o r m a t i o n p a t i e n t s r e c e i v e d i n t h e past has b e e n from d r u g c o m p a n y p u b l i c r e l a t i o n s d e p a r t m e n t s . T h e r e i s a n e e d for d e m y s t i f i c a t i o n of s o m e o f t h i s 'information*. On a r e c e n t visit to San F r a n c i s c o a p h a r m a c i s t g a v e me a R o c h e ' M e d i c a t i o n E d u c a t i o n ' p a m p h l e t w h i c h told m e , a m o n g s o m e o t h e r q u i t e cons t r u c t i v e t h i n g s , t h a t ' E x t e n s i v e t e s t i n g i n t h e d e v e l o p m e n t a l stage of a m e d i c a t i o n ' s life p r e d i c t s q u i t e a c c u r a t e l y w h a t it will do for m o s t p a t i e n t s . . . . ' I n a q u i t e s u b t l e w a y , t h e d o c u m e n t says: trust u s , do w h a t d o c t o r tells y o u , and all will be well. P a t i e n t l a b e l l i n g r e g u l a t i o n s , like m o s t r e g u l a t i o n s , are e m p t y g e s t u r e s u n l e s s t h e r e i s f o l l o w - u p t o e n s u r e that t h e y are i m p l e m e n t e d . The Australian Health D e p a r t m e n t became concerned in t h e late 1970s o v e r t h e risk of c a n c e r from p r o l o n g e d o e s t r o g e n r e p l a c e m e n t t h e r a p y . S o t h e drug c o m p a n i e s w e r e told t h a t a w r i t t e n w a r n i n g w o u l d have to be e n c l o s e d w i t h the m e d i c a t i o n . A F o u r C o r n e r s t e l e v i s i o n t e a m b o u g h t t h e m e d i c a t i o n from t e n S y d n e y p h a r m a c i s t s i n late 1978. T h e w a r n i n g w a s e n c l o s e d with only one o f t h e purchases.

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T h e i n t e r n a t i o n a l p h a r m a c e u t i c a l i n d u s t r y has a p u b l i c - i m a g e p r o b l e m i n t h e T h i r d W o r l d . A n A m e r i c a n c o m p a n y I visited i n M e x i c o City w a s l o c a t e d i n t h e midst o f o n e o f t h e city's w o r s t s l u m s . T h e c o m p a n y w a s kind e n o u g h t o h a v e m e d r i v e n back t o m y hotel in a h u g e w h i t e l i m o u s i n e d r i v e n by a g e n t l e m a n in a p a r a - m i l i t a r y u n i f o r m . A s w e w o u n d our way t h r o u g h t h e n a r r o w s t r e e t s o f the s l u m , I c o u l d see a h e a d a g r o u p of c h i l d r e n p o i n t i n g at our car in c o n s p i r a t o r i a l f a s h i o n . A s w e a p p r o a c h e d t h e y rolled u n d e r t h e l i m o u s i n e a tin c a n w h i c h had b e e n i n g e n i o u s l y modified to p r o t r u d e s h a r p e d g e s w h i c h w o u l d p u n c t u r e any t y r e . A j o y o u s t i r a d e o f S p a n i s h a c c o m p a n i e d t h e feat. Scoffing r e f e r e n c e t o ' A m e r i c a n o ' w a s all I could u n d e r s t a n d . F o r t u n a t e l y t h e tin c l a n g e d u n d e r the l i m o u s i n e w i t h o u t t o u c h i n g t h e t y r e s and I w a s saved t h e e x p e r i e n c e of e x p l a i n i n g t h a t I w a s ' A u s t r a l i a n o , no A m e r i c a n o ' . It is s u r p r i s i n g h o w i n f o r m e d (ill-informed the c o m p a n i e s w o u l d s a y ) m a n y o r d i n a r y p e o p l e i n t h e T h i r d W o r l d are a b o u t w h a t they see a s t h e a b u s e s o f t r a n s n a t i o n a l p h a r m a c e u t i c a l c o m p a n i e s . W h e n I e x p l a i n e d in very c a u t i o u s t e r m s w h a t I w a s d o i n g to a G u a t e m a l a n taxi d r i v e r , h e s a i d , ' W h a t you should k n o w i s t h a t t h e s e c o m p a n i e s u s e o u r p e o p l e a s g u i n e a pigs t o try out t h e i r n e w d r u g s . ' T h e r e s e n t m e n t a g a i n s t t h e p h a r m a c e u t i c a l i n d u s t r y i s o f c o u r s e part o f the w i d e r r e s e n t m e n t against exploitative activities by transnational c o r p o r a t i o n s in g e n e r a l . A n d indeed the behaviour of pharmac e u t i c a l t r a n s n a t i o n a l s in c o u n t r i e s like G u a t e m a l a is difficult to d i s t i n g u i s h from t h a t o f o t h e r t r a n s n a t i o n a l s . T h e y c o n s p i r e and use t h e i r p o l i t i c a l influence t o s u b v e r t e g a l i t a r i a n tax r e f o r m s , and t o p r e v e n t t h e f o r m a t i o n o f t r a d e u n i o n s a m o n g their e m p l o y e e s ; they 245

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c o - o p e r a t e w i t h t h e C I A and t h e r i g h t - w i n g military d i c t a t o r s h i p w h i c h c o n t r o l s t h e c o u n t r y t o m a i n t a i n 'political stability'. U n f o r t u n a t e l y , t h e latter often r e s p o n d t o c o m p l a i n t s from A m e r i c a n c o m p a n i e s a b o u t s u b v e r s i v e w o r k e r s b y h a v i n g t h e m shot. All t h i s d e t r a c t s from t h e fact t h a t t r a n s n a t i o n a l p h a r m a c e u t i c a l c o m p a n i e s i n t h e T h i r d W o r l d tend t o h a v e h i g h e r s t a n d a r d s o f q u a l i t y c o n t r o l t h a n local f i r m s , often t e n d t o b e m o r e c i r c u m s p e c t t h a n locals i n t h e c l a i m s m a d e i n p r o d u c t p r o m o t i o n , i n m a n y cases h a v e a l e s s e r p r o c l i v i t y to b r i b e h e a l t h officials, and pay their w o r k e r s h i g h e r w a g e s t h a n local firms. A l t h o u g h t h e s e facts may say m o r e a b o u t t h e l a m e n t a b l e s t a n d a r d s o f local capitalists t h a n t h e u p r i g h t n e s s of t r a n s n a t i o n a l , an appreciation of them is necessary for a b a l a n c e d p e r c e p t i o n . T h e b u s i n e s s p r a c t i c e s of t r a n s n a t i o n a l s i n t h e T h i r d W o r l d are n o w o r s e , and i n m a n y w a y s b e t t e r , t h a n t h o s e o f i n d i g e n o u s e n t e r p r i s e s . T h e m o r a l failure o f the t r a n s n a t i o n a l s lies in t h e i r w i l l i n g n e s s to settle for m u c h l o w e r s t a n d a r d s a b r o a d than at h o m e .

Undermedicated societies
T h e r e i s o n e f u n d a m e n t a l way i n which t h e d r u g p r o b l e m i n the T h i r d W o r l d is t h e r e v e r s e of t h a t in t h e d e v e l o p e d w o r l d . In C h a p t e r 6 w e saw t h a t while p o o r s e g m e n t s o f t h e A m e r i c a n p o p u l a t i o n c a n n o t afford t h e d r u g s t h e y n e e d , t h e m o r e f u n d a m e n t a l p r o b l e m i n t h e U n i t e d S t a t e s i s o v e r m e d i c a t i o n , p a r t i c u l a r l y with p s y c h o t r o p i c drugs. In contrast, the Third World is overwhelmingly u n d e r m e d i c a t e d . W o n d e r d r u g s a r e little use t o p e a s a n t s w h o c a n n o t afford t o b u y t h e m . H o l l a n d c o n s u m e s a g r e a t e r q u a n t i t y o f a n t i d i a b e t i c d r u g s t h a n t h e w h o l e o f L a t i n A m e r i c a . I n d i a uses only 0.1 p e r cent as m a n y a n t i h y p e r t e n s i v e d r u g s as B e l g i u m (Gereffi, 1979: 9 7 ) . T h e s t a r k reality of m e d i c a t i o n for most p e o p l e on this p l a n e t is a q u e u e of sick p e o p l e p a t i e n t l y w a i t i n g their t u r n o u t s i d e a village d i s p e n s a r y w i t h virtually n o m o d e r n d r u g s o n its s h e l v e s . S e n a t o r K e n n e d y c a p t u r e d this reality in a 1979 a d d r e s s : W e a r e h e r e , i n t h i s I n t e r n a t i o n a l Y e a r o f t h e C h i l d , b e c a u s e 2.6 m i l l i o n c h i l d r e n will die this year from i m m u n i z a b l e d i s e a s e s b e c a u s e they won't have access to already-developed vaccines. T h e r e will be 72 m i l l i o n c a s e s of m e a s l e s in t h e w o r l d this y e a r . A n d at a t i m e w h e n m e a s l e s is n e a r i n g e x t i n c t i o n in t h e U n i t e d 246

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S t a t e s , 1.2 m i l l i o n c h i l d r e n a r o u n d t h e w o r l d will fall victim to it this y e a r . Six h u n d r e d t h o u s a n d p e o p l e , m o s t o f t h e m c h i l d r e n , will die from t e t a n u s this y e a r ; 2 0 0 , 0 0 0 will die from p o l i o , and 3 0 0 , 0 0 0 from w h o o p i n g c o u g h . M e a s l e s , t e t a n u s , w h o o p i n g c o u g h , p o l i o - we h a v e v a c c i n e s for all of t h e m ( K e n n e d y . 1979: 4; for t h e d a t a on w h i c h this s t a t e m e n t is b a s e d see F o e g e , 1979).

Promotion in the Third World
T h i r d W o r l d c o u n t r i e s are not u n d e r m e d i c a t e d for a w a n t of efforts t o i n f o r m t h e i r c i t i z e n s o f t h e benefits o f m e d i c i n e . T h e b a r r i e r i s s i m p l y cost. I n d e e d t h e t r a g e d y o f p h a r m a c e u t i c a l s i n the T h i r d W o r l d i s t h a t m i s l e a d i n g p r o m o t i o n m e a n s t h a t w h e n p a t i e n t s can afford m e d i c a t i o n , w h a t t h e y get i s often t h o r o u g h l y i n a p p r o p r i a t e t o , o r e x c e s s i v e for, t h e i r c o n d i t i o n . T h e classic d e m o n s t r a t i o n o f t h e l o w e r p r o m o t i o n a l s t a n d a r d s set by t r a n s n a t i o n a l p h a r m a c e u t i c a l c o m p a n i e s in the Third World was S i l v e r m a n ' s ( 1 9 7 6 ) The Drugging of the Americas. Silverman was a b l e to s h o w for a w i d e r a n g e of d r u g s h o w t h e i n d i c a t i o n s a p p r o v e d in t h e U n i t e d S t a t e s Physician's Desk Reference e x p a n d e d into a m u c h w i d e r array of indications in the c o m p a r a b l e Latin A m e r i c a n p u b l i c a t i o n s ; w h i l e t h e r a n g e o f side-effects and c o n t r a - i n d i c a t i o n s m e n t i o n e d was much narrower in Latin A m e r i c a . We h a v e seen t h a t c h l o r a m p h e n i c o l is a d r u g w h i c h can h a v e d a n g e r o u s side-effects and w h i c h s h o u l d only be used for a n a r r o w r a n g e o f l i f e - t h r e a t e n i n g d i s e a s e s , m o s t n o t a b l y t y p h o i d fever. F o r m a n y y e a r s c h l o r a m p h e n i c o l has b e e n p r o m o t e d i n t h e U n i t e d S t a t e s for only t h e s e limited i n d i c a t i o n s . B u t S i l v e r m a n found that i n M e x i c o , E c u a d o r a n d C o l o m b i a , P a r k e - D a v i s p r o m o t e d chlora m p h e n i c o l for a d d i t i o n a l c o n d i t i o n s m a n y of w h i c h w e r e far from l i f e - t h r e a t e n i n g : t o n s i l l i t i s , p h a r y n g i t i s , b r o n c h i t i s , u r i n a r y tract infections, ulcerative colitis, staphylococcus infections, streptoc o c c u s i n f e c t i o n s , eye i n f e c t i o n s , y a w s , and g o n o r r h e a . I n t h e U n i t e d S t a t e s , p h y s i c i a n s are w a r n e d t h a t use o f c h l o r a m p h e n i c o l m a y result in s e r i o u s or fatal a p l a s t i c a n e m i a a n d o t h e r b l o o d d y s c r a s i a s . P h y s i c i a n s in M e x i c o are given a s i m i l a r w a r n i n g i n t h e p r o m o t i o n a l m a t e r i a l for P a r k e - D a v i s ' C h l o r o m y c e t i n , b u t no w a r n i n g s a r e listed for t h e same p r o d u c t in C e n t r a l A m e r i c a ( S i l v e r m a n , 1977: 159). W o r s e , w h e n S i l v e r m a n a p p e a r e d before t h e U S S e n a t e t o discuss 247

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his f i n d i n g s . S e n a t o r B e a l l p o i n t e d o u t t h a t the I t a l i a n labelling for P a r k e - D a v i s c h l o r a m p h e n i c o l said: It is a very significant fact t h a t C h l o r o m y c e t i n t h e r a p y is c o n s p i c u o u s l y d e v o i d of side effects. T h e m e d i c a t i o n enjoys a h i g h d e g r e e o f t o l e r a n c e with b o t h a d u l t s and c h i l d r e n . I n t h e few c a s e s w h e r e r e a c t i o n s h a v e o c c u r r e d , t h e s e are g e n e r a l l y limited to mild n a u s e a or d i a r r h e a and only rarely d o e s their gravity impose suspension of treatment (Subcommittee on Monopoly, 1976: 15359). D r W e g m a r followed u p with a n e v e n m o r e r e m a r k a b l e revelat i o n from S p a i n : I n 1 9 7 3 , t h e y e a r after t h e tragic d e a t h o f their d a u g h t e r . P r o f e s s o r a n d M r s . Z a n d e r t r a v e l l e d i n Spain and b r o u g h t h o m e this poster which was on the drugstore c o u n t e r s , C h l o r o s t r e p , a p r o d u c t of P a r k e - D a v i s of S p a i n . T h e p o s t e r says, in effect, ' D o n ' t a l l o w d i a r r h e a t o interfere w i t h y o u r v a c a t i o n . T a k e C h l o r o s t r e p at t h e first p r o b l e m . ' T h i s d r u g is a c o m b i n a t i o n of c h l o r a m p h e n i c o l and d i h y d r o e s t r e p t o m i c i n e . A s you may k n o w , s t r e p t o m y c i n , a l t h o u g h n o t c o m m o n l y i n small d o s e s , c a r r i e s t h e risk o f c a u s i n g d e a f n e s s . T h u s , i f you t a k e this f i n e c o m b i n a t i o n , y o u r u n t h e risk o f b e c o m i n g deaf before you d i e . A n d its u s e f u l n e s s for m o s t c a u s e s of d i a r r h e a c o m m o n l y seen is n e g l i g i b l e ( S u b c o m m i t t e e o n M o n o p o l y , 1976: 1 5 3 8 5 - 6 ) . The greatest tragedy o f t h e overuse of c h l o r a m p h e n i c o l in the T h i r d W o r l d w a s i l l u s t r a t e d w h e n in 1972-3 t h e r e was a t y p h o i d fever e p i d e m i c i n M e x i c o . C h l o r a m p h e n i c o l i s a n i n v a l u a b l e treatm e n t for t y p h o i d fever. B u t m a n y of t h e 100,000 victims of the M e x i c a n o u t b r e a k could not b e h e l p e d b e c a u s e the p a r t i c u l a r t y p h o i d b a c t e r i a c o n c e r n e d had built up a r e s i s t a n c e to chlora m p h e n i c o l t h r o u g h long e x p o s u r e . 2 0 , 0 0 0 t y p h o i d victims died i n the o u t b r e a k . A n o t h e r d i s t u r b i n g p i c t u r e w a s p a i n t e d b y S i l v e r m a n with r e s p e c t t o o r a l c o n t r a c e p t i v e s m a r k e t e d b y S e a r l e , J o h n s o n and J o h n s o n , W a r n e r - L a m b e r t and A m e r i c a n H o m e Products: I n P D R [ P h y s i c i a n ' s D e s k R e f e r e n c e ] , all o f t h e s e are d e s c r i b e d as i n d i c a t e d for only o n e use - c o n t r a c e p t i o n . In t h e L a t i n A m e r i c a n c o u n t r i e s , t h e y are o p e n l y r e c o m m e n d e d for c o n t r a c e p t i o n , a n d also for t h e c o n t r o l o f p r e m e n s t r u a l t e n s i o n , 248

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m e n s t r u a l p a i n , p r o b l e m s o f t h e m e n o p a u s e , and a host o f o t h e r conditions. I n t h e U n i t e d S t a t e s , p h y s i c i a n s are w a r n e d o f t h e possibility o f m a n y s i d e - e f f e c t s , e s p e c i a l l y t h r o m b o e m b o l i c c h a n g e s t h a t can lead to s e r i o u s or fatal b l o o d c l o t s . In L a t i n A m e r i c a , for all t h e p r o d u c t s s t u d i e d h e r e , t h e risk of t h r o m b o e m b o l i c c h a n g e s i s i g n o r e d . N o a d v e r s e r e a c t i o n s o f any k i n d a r e g i v e n for t h e S e a r l e p r o d u c t i n E c u a d o r , C o l o m b i a , o r B r a z i l for t h e P a r k e - D a v i s p r o d u c t in C e n t r a l A m e r i c a , and for t h e W y e t h p r o d u c t i n E c u a d o r , C o l o m b i a , o r Brazil ( S u b c o m m i t t e e o n M o n o p o l y , 1976: 1 5 3 6 3 - 4 ) . S a n d o z ' s p o w e r f u l a n t i p s y c h o t i c t r a n q u i l l i s e r Mellaril w a s found to be p r o m o t e d in C e n t r a l A m e r i c a for a host of m i n o r n e u r o t i c d i s o r d e r s n o t m e n t i o n e d i n U S p r o m o t i o n . T h e s e a d d i t i o n a l indicat i o n s i n c l u d e d use for c h i l d r e n w i t h b e h a v i o u r a l d i s o r d e r s , hostility r e a c t i o n s , inability t o a d a p t i n s c h o o l , i n s o m n i a , sleep w a l k i n g , b e d - w e t t i n g and nail b i t i n g . M a n y a d v e r s e r e a c t i o n s o f Mellaril w e r e d i s c l o s e d in t h e U n i t e d S t a t e s , a few in M e x i c o , but n o n e in Central America, Colombia or Ecuador. Silverman d o c u m e n t s many many other examples. In some cases, t r i v i a l side-effects w e r e d e s c r i b e d i n g r e a t d e t a i l , while s e r i o u s and p o t e n t i a l l y fatal r e a c t i o n s w e r e not m e n t i o n e d . T h e i n d u s t r y d e f e n c e w a s t h a t they had not v i o l a t e d any local laws by t h e i r p o l i c i e s of disclosing as little as t h e y could get a w a y w i t h . B u t S i l v e r m a n p o i n t s o u t t h a t this w a s not a l w a y s t h e c a s e . I n s o m e o f t h e L a t i n A m e r i c a n c o u n t r i e s t h e r e w e r e r e l e v a n t laws r e q u i r i n g t h e d i s c l o s u r e o f h a z a r d s . I t w a s simply t h a t t h e r e w e r e n o r e s o u r c e s for e n f o r c i n g t h e m . F u r t h e r , S i l v e r m a n p o i n t s o u t , t h e r e i s little r e a l i s t i c p o s s i b i l i t y of civil a c t i o n against large p h a r m a c e u t i c a l c o m p a n i e s for d a m a g e s i n p o o r c o u n t r i e s w h e r e t h e r e i s n o p r o vision in law for class a c t i o n s . S i l v e r m a n ' s b o o k w a s o n e of t h o s e rare h a p p e n i n g s - r e s e a r c h by an i n t e l l e c t u a l w h i c h had an influence on t h e c o u r s e o f e v e n t s . T h i r d W o r l d g o v e r n m e n t s b e g a n to e v i d e n c e a less t r u s t i n g a t t i t u d e to t h e p r o m o t i o n a l c l a i m s o f d r u g c o m p a n i e s . I n 1978 t h e S o u t h K o r e a n M i n i s t r y of H e a l t h r e v i e w e d 2,058 i n d i c a t i o n s for 1,097 p r o d u c t s . O n l y 50.2 p e r c e n t o f t h e i n d i c a t i o n s w e r e found t o b e valid. T h e r e m a i n i n g 1,024 i n d i c a t i o n s w e r e d r o p p e d from p r o m o t i o n a l litera t u r e . F o u r K o r e a n p h a r m a c e u t i c a l e x e c u t i v e s w e r e a r r e s t e d i n late 1979 a n d c h a r g e d in o n e c a s e with p r o m o t i n g a p r e p a r a t i o n officially 249

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i n d i c a t e d for night b l i n d n e s s as b e i n g effective against c a n c e r , and in a n o t h e r case w i t h m a r k e t i n g a p r o d u c t with the a p p r o v e d indicat i o n of liver d i s e a s e in a d u l t s for t h e p r o m o t i o n of g r o w t h in c h i l d r e n . T h e d r u g s had b e e n i m p o r t e d from G e r m a n and Italian firms and resold at o v e r t e n t i m e s the i m p o r t p r i c e . A n i m p o r t a n t e x t e n s i o n o f S i l v e r m a n ' s work w a s c o n d u c t e d b y Y u d k i n ( 1 9 7 8 ) i n T a n z a n i a . Y u d k i n found that t h e r e was o n e d r u g c o m p a n y sales r e p r e s e n t a t i v e for e v e r y four T a n z a n i a n d o c t o r s , a l m o s t as high as t h e o n e to t h r e e ratio S i l v e r m a n had f o u n d i n G u a t e m a l a . T h e s e T h i r d W o r l d d e t a i l e r s have enorm o u s influence o v e r d o c t o r s w h o d o not h a v e access t o the latest m e d i c a l l i t e r a t u r e a n d are often paid m o r e t h a n t h e d o c t o r s . In Tanzania pharmaceutical promotional expenditure averages o v e r S4,(KK) p e r d o c t o r . L i k e S i l v e r m a n , Y u d k i n ' s m e t h o d o l o g y w a s t o c o m p a r e t h e i n f o r m a t i o n p l a c e d b y m a n u f a c t u r e r s i n the B r i t i s h a n d A f r i c a n v e r s i o n s of MIMS (Monthly Index of Medical Specialties). Chloramphenicol was promoted by Lepetit for r e s p i r a t o r y tract a n d a w i d e r a n g e of o t h e r m i n o r infections. M e t h a d o n e , r e c o m m e n d e d i n B r i t a i n for s e v e r e p a i n , w a s included in A f r i c a n MIMS as a c o u g h s u p p r e s s a n t by B u r r o u g h s - W e l l c o m e ! B e l o w a r e t h r e e o t h e r s t a g g e r i n g e x a m p l e s from Y u d k i n ' s ( 1 9 7 8 : 811) work:

A m i n o p y r i n e and d i p y r o n e a r e a n t i p y r e t i c a n a l g e s i c s which may p r o d u c e a g r a n u l o c y t o s i s with a m o r t a l i t y as high as 0 . 5 7 % . In the U n i t e d S t a t e s t h e y a r e licensed for use only in p a t i e n t s with t e r m i n a l m a l i g n a n t d i s e a s e i n w h o m safer a n t i p y r e t i c s h a v e b e e n u n s u c c e s s f u l . I n A f r i c a n M . I . M . S . ( N o v e m b e r , 1977), 3 1 p r e p a r a t i o n s c o n t a i n i n g these drugs are r e c o m m e n d e d as a n a l g e s i c s for m i n o r c o n d i t i o n s . P a c k a g e i n s e r t s claim that they h a v e a "wide m a r g i n of safety' ( ' A v a f o r t a n ' , A s t a W e r k e ) or that t h e i r 'safety has b e e n p r o v e n and c o n f i r m e d in o v e r 500 p u b l i c a t i o n s t h r o u g h o u t the world' ('Buscopan C o m p o s i t u m ' containing dipyrone, Boehringer Ingelheim). A n a b o l i c steroids may produce stunting of growth, irreversible v i r i l i s a t i o n in g i r l s , and liver t u m o u r s . T h e y are used in Britain to t r e a t o s t e o p o r o s i s , renal failure, t e r m i n a l m a l i g n a n t d i s e a s e , and a p l a s t i c a n a e m i a . I n A f r i c a n M . I . M . S . , t h e y are p r o m o t e d a s t r e a t m e n t for m a l n u t r i t i o n , w e i g h t loss, and k w a s h i o r k o r ( ' D e c a d u r a b o l i n ' , O r g a n o n ) , as appetite stimulants ('Winstrol', W i n t h r o p ) , for e x h a u s t i o n states ( ' P r i m o b o l a n D e p o t ' , S c h e r i n g ; 250

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' D i a n a b o l ' , C i b a G e i g y ) , and for ' e x c e s s i v e fatiguability' i n school children ('Dianavit', Ciba G e i g y ) . If a d o s e o f t h e a n t i h y p e r t e n s i v e d r u g c l o n i d i n e is missed by as little as 12 h, s e v e r e r e b o u n d h y p e r t e n s i o n and s o m e t i m e s c e r e b r a l h a e m o r r h a g e m a y result. I t s h o u l d t h u s b e a v o i d e d w h e n p a t i e n t s a r e likely t o t a k e p r e s c r i b e d d r u g s i r r e g u l a r l y . I n Africa, t r a n s p o r t difficulties and a d m i n i s t r a t i v e p r o b l e m s may h i n d e r the r e g u l a r supply o f d r u g s d u r i n g t h e r a p y . I n a d d i t i o n , t h e c o n c e p t o f a s y m p t o m a t i c d i s e a s e i s not w i d e l y a c c e p t e d , pills being t a k e n only for relief of s y m p t o m s ; in o n e s t u d y only 2 0 % of p a t i e n t s w e r e found t o t a k e t h e i r t a b l e t s r e g u l a r l y . C l o n i d i n e ( ' C a t a p r e s ' , B o e h r i n g e r I n g e l h e i m ) w a s i n t r o d u c e d i n t o the c o u n t r y i n 1975; t h e c o m p a n y d i s t r i b u t e d free s a m p l e s o f t h e d r u g , sufficient for only t w o o r t h r e e w e e k s ' u s e , before i t w a s a v a i l a b l e t h r o u g h the G o v e r n m e n t c e n t r a l m e d i c a l s t o r e s ( C . M . S . ) . African M . I . M . S . d o e s not m e n t i o n t h e d a n g e r o f s u d d e n l y s t o p p i n g c l o n i d i n e t h e r a p y , although British M . I . M . S . d o e s ; in the manufacturers' b o o k l e t t w o side-effects are m e n t i o n e d - c o m p a r e d to fifty in A m e r i c a n a d v e r t i s e m e n t s - b u t n o t t h i s risk. B o e h r i n g e r I n g e l h e i m h a v e only n o w a g r e e d t o m e n t i o n t h e d a n g e r i n future package inserts. A f u r t h e r long list of d o u b l e s t a n d a r d s h a s b e e n d o c u m e n t e d by M e d a w a r ( 1 9 7 9 ) . A p a r t i c u l a r c o n t r i b u t i o n of M e d a w a r ' s w o r k is in showing that r e c o m m e n d e d dosage is a n o t h e r area of abuse. For e x a m p l e , t h e m a x i m u m r e c o m m e n d e d d o s a g e for B u r r o u g h s W e l l c o m e ' s Migril (for m i g r a i n e ) w a s t w i c e a s high, o r m o r e t h a n t w i c e as h i g h , in A f r i c a and A s i a as in t h e U n i t e d S t a t e s and U n i t e d K i n g d o m ( M e d a w a r , 1979: 1 1 6 - 7 ) . T h e m o s t r e c e n t c o n t r i b u t i o n s t o t h i s t r a d i t i o n have b e e n b y M e l r o s e ( 1 9 8 2 ) and M u l l e r ( 1 9 8 2 ) . M u l l e r ( 1 9 8 2 : 55) h a s , a m o n g o t h e r r e v e l a t i o n s , d e m o n s t r a t e d t h e a b u s e o f d i u r e t i c s t o deal with t h e b l o a t i n g and puffing s y m p t o m s of k w a s h i o r k o r , a form of childh o o d m a l n u t r i t i o n . M u l l e r q u o t e s from a B B C i n t e r v i e w with a h e a l t h w o r k e r from B a n g l a d e s h : t h e d r u g rep w a s t r y i n g t o p e r s u a d e this r a t h e r y o u n g d o c t o r that f u r o s e m i d e . . . w a s a very good d r u g to use for c h i l d r e n w h o had k w a s h i o r k o r or m a r a s m u s . These are deficiency diseases which p r o d u c e s w e l l i n g all o v e r t h e b o d y and t h e r e p w a s s u g g e s t i n g that this d r u g w a s very g o o d at r e d u c i n g t h i s o e d e m a . . . . W h e n it w a s p o i n t e d o u t t h a t t h e swelling m i g h t g o d o w n but the child 251

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w o u l d be killed . . . the d r u g r e p r e s e n t a t i v e said, ' W e l l , t h e child is g o i n g to die a n y w a y . ' O n e o f t h e m o s t d i s t u r b i n g r e v e l a t i o n s b y M e l r o s e (1982: 102-6) c o n c e r n e d the p r o m o t i o n of anabolic steroids as appetite stimulants for c h i l d r e n in t h e T h i r d W o r l d . All this a d d s up to a d e a d l y t e n d e n c y for Third W o r l d c o n s u m e r s t o get i n a p p r o p r i a t e m e d i c a t i o n . T h e t e n d e n c y i s reinforced b y n o n - e x i s t e n t , i n a d e q u a t e o r rarely e n f o r c e d p r e s c r i p t i o n laws. I n a l m o s t all c o u n t r i e s in L a t i n A m e r i c a you can get practically any d r u g from a p h a r m a c y w i t h o u t a p r e s c r i p t i o n . S i l v e r m a n told the U S S e n a t e o f t h e following e x p e r i e n c e : We w e r e in San J o s e , t h e capital o f C o s t a R i c a , and . . . we n e e d e d s o m e o v e r - t h e - c o u n t e r d r u g . . . . T h e r e w a s a long c o u n t e r w i t h a g r e a t m a n y p e o p l e in w h i t e j a c k e t s w a i t i n g on the c u s t o m e r s . I s t o o d in line b e h i n d o n e nice little old lady. If I had to m a k e a c u r b s t o n e d i a g n o s i s , I w o u l d p r o b a b l y say that she w a s suffering from a s e v e r e t h y r o i d d i s e a s e . She w a s n e r v o u s , t e n s e , a n d j i t t e r y , and very t h i n . W h e n she c a m e up to the m a n to wait on h e r , she r e a c h e d into h e r d r e s s and b r o u g h t out a scrap of p a p e r - it w a s not a p r e s c r i p t i o n ; it w a s a piece of b u t c h e r p a p e r , I t h i n k , o n w h i c h she had w r i t t e n s o m e t h i n g r e c o m m e n d e d b y s o m e b o d y or o t h e r - a n d she a s k e d for a d r u g called L a r g a c t i l , w h i c h is o n e o f t h e t r a d e n a m e s for a very effective, very p o t e n t t r a n q u i l i z e r used in t h e c o n t r o l of p s y c h o s i s . T h e p h a r m a c i s t ' s a s s i s t a n t said, i f m y t r a n s l a t i o n w a s right, that he had s o m e t h i n g m u c h b e t t e r . I w a t c h e d him carefully. He did n o t look at any b o o k , he did not c o n s u l t with any of his c o l l e a g u e s . He w e n t to a s h e l f b e h i n d h i m , and he b r o u g h t d o w n a bottle of one o f t h e more potent antithyroid drugs. It is widely u s e d , very e f f e c t i v e , b u t i t has k n o w n h a z a r d s . O r d i n a r i l y , p h y s i c i a n s in t h e U n i t e d S t a t e s w o u l d not p r e s c r i b e a d r u g like this u n l e s s t h e y had s u b j e c t e d t h e p a t i e n t t o t h o r o u g h d i a g n o s t i c s t u d i e s . S o m e p h y s i c i a n s will e v e n h o s p i t a l i z e their p a t i e n t s b e f o r e t h e y start t h e m o n this d r u g . B u t i n this c a s e , t h e clerk j u s t c o u n t e d out the prerequisite n u m b e r of tablets, collected the p r o p e r n u m b e r o f c o l o n e s from t h e l a d y , w h o w a l k e d o u t . A n d w e w a t c h e d this i n a m a z e m e n t . A f t e r w e got o u t o f t h e s t o r e , m y c o l l e a g u e and I still c a n n o t a g r e e w h e t h e r this assistant w a s aged 14 or 13 or 12. I k n o w he had not b e g u n to shave yet ( S u b c o m m i t t e e o n M o n o p o l y , 1976: 15569). 252

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S i l v e r m a n also g a v e a c c o u n t s o f L a t i n A m e r i c a n p h a r m a c i s t s p r o v i d i n g a p a t i e n t with only a o n e - d a y supply of an a n t i b i o t i c ( w h e n it is e s s e n t i a l to use t h e d r u g for at least a w e e k ) b e c a u s e ' s h e only had t h e m o n e y to buy e n o u g h for o n e d a y ' ; s u b s t i t u t i n g c h l o r a m p h e n i c o l for a t e t r a c y c l i n e p r e s c r i p t i o n b e c a u s e t h e s h o p had run o u t of t e t r a c y c l i n e , and similar p r a c t i c e s ( S i l v e r m a n , 1976: 125). I d e c i d e d to e x p e r i e n c e this p h e n o m e n o n myself in M e x i c o City t h e l a r g e s t m e t r o p o l i s of t h e T h i r d W o r l d and surely o n e of t h e p l a c e s w h e r e o n e w o u l d e x p e c t t o see o b s e r v a n c e o f p r e s c r i p t i o n l a w s . I visited e i g h t p h a r m a c i e s in t h e affluent Z o n a R o s a a r e a of t h e city c o m p l a i n i n g in b r o k e n S p a n i s h of 'la t o u r i s t a ' ( t r a v e l l e r ' s d i a r r h o e a ) . At t h r e e of t h e p h a r m a c i e s I w a s offered L o m o t i l , a p r e s c r i p t i o n d r u g w i t h w o r r y i n g side-effects, but n o d o u b t s o m e t h i n g a d o c t o r m i g h t h a v e given me a p r e s c r i p t i o n for. At a fourth p h a r m a c y , I w a s offered c l i o q u i n o l ( C i b a - G e i g y E n t e r o v i o f o r m ) ; a n d at a n o t h e r , a v a r i a t i o n on t h i s , C i b a - G e i g y M e x a f o r m a . C l i o q u i n o l is b a n n e d in m a n y c o u n t r i e s , and in most c o u n t r i e s w h e r e o n e can get c l i o q u i n o l on p r e s c r i p t i o n it is specifically w a r n e d t h a t t h e d r u g s h o u l d not be a p p l i e d to its historical use - t r a v e l l e r ' s d i a r r h o e a . I n J a p a n , c l i o q u i n o l used i n t h e t r e a t m e n t o f d i a r r h o e a w a s a s s o c i a t e d w i t h s o m e 9,000 cases of a d i s e a s e called S M O N (Subacute myelo-optic neuropathy) (WHO Drug Information, O c t . - D e c , 1977: 9 - 1 5 ) . J a p a n e s e c o u r t s h a v e a l r e a d y a w a r d e d S M O N v i c t i m s o f c l i o q u i n o l $456 million i n c o m p e n s a t i o n . T h e d r u g is a s s o c i a t e d with s e r i o u s n e u r o t o x i c effects on t h e spinal c o r d , t h e n e r v e s o f t h e b o d y surfaces and t h e o p t i c n e r v e . W h i l e t h e p r o b a b i l i t y of t h e s e side-effects is a p p a r e n t l y not so high as to justify b a n n i n g t h e d r u g for limited u s e s , i n the light o f t h e S M O N d i s a s t e r it is a g r o s s a b u s e to use c l i o q u i n o l for simple d i a r r h o e a . T h e sixth p h a r m a c y offered a d r u g called Y o d o z o n o , m a n u f a c t u r e d b y t h e K a l o s c o m p a n y . T h i s m y s t e r i o u s p r o d u c t i s not listed in t h e M e x i c a n Diccionario de Especialidades Farmaceuticas. T h e n e x t p h a r m a c y offered m e T r e d a , a n a n t i b i o t i c p r o d u c e d b y t h e S a n f e r c o m p a n y . A n d l o and b e h o l d , w h a t should b e the last p r o d u c t d r a g g e d o u t o f t h e r e f r i g e r a t o r for m y M e x i c a n d i a r r h o e a ? N o n e o t h e r t h a n o u r old friend, P a r k e - D a v i s C h l o r o m y c e t i n .

The corporate response to Silverman
W i t h i n m o n t h s after t h e p u b l i c a t i o n o f S i l v e r m a n ' s b o o k the council 253

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o f t h e International Federation of Pharmaceutical Manufacturers' A s s o c i a t i o n s a d o p t e d a r e s o l u t i o n s u b m i t t e d by t h e US d e l e g a t i o n c a l l i n g for p r e s c r i p t i o n d r u g labelling to be c o n s i s t e n t with 'the b o d y o f scientific and m e d i c a l e v i d e n c e p e r t a i n i n g t o t h a t p r o d u c t ' . I n a d d i t i o n , ' p a r t i c u l a r c a r e should b e t a k e n t h a t essential i n f o r m a t i o n as to m e d i c a l p r o d u c t s ' safety, c o n t r a i n d i c a t i o n s and side-effects is a p p r o p r i a t e l y c o m m u n i c a t e d . ' Even t h o u g h the u n a n i m o u s I F P M A v o t e w a s not on a t o u g h l y w o r d e d r e s o l u t i o n ( i n d e e d it w a s m e r e l y a r e c o m m e n d a t i o n with no binding status) some change seems to have followed. M a n y of t h e A m e r i c a n c o m p a n i e s I visited c l a i m e d t h a t Silverm a n ' s b o o k had forced t h e m t o put t h e i r h o u s e i n o r d e r . T o varying d e g r e e s t r a n s n a t i o n a l s h a v e pulled a t i g h t e r reign on t h e p r o m o t i o n a l c l a i m s m a d e b y s u b s i d i a r i e s . I n p a r t this c h a n g e has b e e n m e d i a t e d b y s t r o n g i n t e r n a t i o n a l c o n s u m e r a t t a c k s against p h a r m a c e u t i c a l m a r k e t i n g p r a c t i c e s b y such c o a l i t i o n s a s H e a l t h A c t i o n I n t e r n a t i o n a l . I n s o m e c o m p a n i e s , affiliates n o w m u s t g o t h r o u g h q u i t e a n a r d u o u s p r o c e s s t o use v a r i a t i o n s from the p r o m o t i o n a l c l a i m s a p p r o v e d b y h e a d q u a r t e r s . All subsidiary p r o m o t i o n a l m a t e r i a l - j o u r n a l a d v e r t i s i n g , e n t r i e s in MIMS, p a t i e n t l a b e l l i n g in s o m e c o m p a n i e s m u s t be a p p r o v e d by a h e a d q u a r t e r s m e d i c a l g r o u p . T h e basis o f t h e d e l i b e r a t i o n s o f such medical g r o u p s i s s o m e form o f i n t e r n a t i o n a l p r o d u c t d i s c l o s u r e d o c u m e n t w h i c h c o n t a i n s all t h e i m p o r t a n t side-effects, c o n t r a - i n d i c a t i o n s , and r e q u i r e d w a r n i n g s for t h e p r o d u c t . Often t h e l a t t e r m i g h t not be as s t r i n g e n t as F D A r e q u i r e m e n t s , b u t t h e y w o u l d set a fairly high i n t e r n a t i o n a l minimum standard. I c o u l d n o t h e l p but be i m p r e s s e d by s o m e of t h e s e c o r p o r a t e medical g r o u p p e o p l e . They seemed to a p p r o a c h the challenge of t i g h t e n i n g t h e p r o m o t i o n a l c l a i m s b e i n g m a d e i n s u b s i d i a r i e s from G u a t e m a l a t o G h a n a w i t h a l m o s t m i s s i o n a r y zeal. I w a s s u r p r i s e d a t the a d v e r s a r y stance they occasionally evidenced t o w a r d s subsidiary general m a n a g e r s in their own corporation. The latter were t h e e x p l o i t e r s , t h e e n e m y , a n d t h e c o m p a n y w a s going t o b e p u r g e d of their a b u s e s . Of course in these intra-corporate struggles b e t w e e n t h e forces o f ' g o o d ' and ' e v i l ' , it is often the l a t t e r w h o win o u t . N e v e r t h e l e s s , w h a t s u r p r i s e d m e w a s t h a t the fight w a s being f o u g h t w i t h such i n t e n s i t y . I t c e r t a i n l y s h a t t e r s t h e m o n o l i t h i c i m a g e that outsiders have ofthe corporation. The other interesting point is t h a t e a c h o f t h e s e c o r p o r a t e g r o u p s r e s p o n s i b l e for r e g u l a t i n g p r o m o t i o n a r o u n d t h e w o r l d typically has m o r e staff r e s o u r c e s and

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b e t t e r - t r a i n e d p e o p l e t h a n t h e i r c o u n t e r p a r t s i n any r e g u l a t o r y a g e n c y i n t h e w o r l d , i n c l u d i n g t h e F D A (with five p r o f e s s i o n a l s r e s p o n s i b l e for r e g u l a t i n g p r o m o t i o n ) . E v e n t h o u g h t h e s e intrac o r p o r a t e c r u s a d e r s for t h e c o n s u m e r i n t e r e s t often lose their b a t t l e s , o n e s u s p e c t s t h a t t h e y save m o r e lives and p r e v e n t m o r e u n n e c e s s a r y suffering t h a n t h e i r c o u n t e r p a r t s , t o t h e e x t e n t t h e y e x i s t , i n t h e w o r l d ' s r e g u l a t o r y a g e n c i e s . T h e i r s t r u g g l e s are not e a s y . O r g a n i z a t i o n a l c h a n g e s can b e m a d e t o isolate and n e u t r a l i z e e x e c u t i v e s w h o h a v e t o o m u c h zeal for r e f o r m . T h e following i n c i d e n t , for e x a m p l e , w a s r e p o r t e d b y D a l e C o n s o l e , S q u i b b ' s former Medical Director: T h e real e r u p t i o n o c c u r r e d in a b o u t 1955 w h e n , as I u n d e r s t o o d it, P a r k e - D a v i s h a d offered S q u i b b a license to m a r k e t c h l o r a m p h e n i c o l in some of Squibb's South A m e r i c a n m a r k e t s . . . . I w a s p r e s e n t e d with t h e p r o s p e c t of m a r k e t i n g c h l o r a m p h e n i c o l u n d e r t h e S q u i b b label m a k i n g all t h e excessive c l a i m s for t h e d r u g and e x c l u d i n g a w a r n i n g s t a t e m e n t since it w a s n o t r e q u i r e d in t h e c o u n t r i e s in w h i c h sale is p r o p o s e d . I refused to a p p r o v e t h e t e n t a t i v e copy and m a d e it clear t h a t I w o u l d t e n d e r my r e s i g n a t i o n b e f o r e I w o u l d a p p r o v e the c o p y . A p p a r e n t l y my c o l l e a g u e s t h o u g h t I w a s sufficiently v a l u a b l e and i n s t e a d of m a k i n g a c o n f r o n t a t i o n out o f t h e issue t h e y d e c i d e d to use a n end p l a y . T h e O v e r s e a s D i v i s i o n a p p o i n t e d its o w n Medical D i r e c t o r who was in no way responsible to me (US S e n a t e , 1969: 4 4 9 6 ) . T h e c o r p o r a t e o r r e g i o n a l ' m e d i c a l g r o u p frequently d o not have t h e i r way b e c a u s e s u b s i d i a r y g e n e r a l m a n a g e r s m i g h t have t o c o m p e t e w i t h local c o m p a n i e s w h o are n o t e n c u m b e r e d b y 'corp o r a t e s t a n d a r d s ' a n d ' c o r p o r a t e d i s c l o s u r e d o c u m e n t s ' . A s one p r o m o t i o n a l e x p e r t from E c u a d o r said t o S i l v e r m a n (1976: 112), i f y o u r c o m p e t i t o r isn't d i s c l o s i n g t h e s e r i o u s side effects of his p r o d u c t , it's e c o n o m i c a l l y suicidal for you to disclose t h e h a z a r d s of y o u r s . ' W h i l e e c o n o m i c suicide w o u l d r a r e l y b e t h e c o n s e q u e n c e o f h o n e s t d i s c l o s u r e , e s p e c i a l l y i n n o n - c o m p e t i t i v e s e c t o r s o f t h e pharm a c e u t i c a l i n d u s t r y , it is this r h e t o r i c w h i c h t h e local g e n e r a l m a n a g e r s h a v e o n t h e i r side. C o n s i d e r a n o t h e r e x a m p l e from m y interviews: In c o u n t r i e s like Brazil [our p r o d u c t ] has to c o m p e t e w i t h 20 [sic] p i r a t e c o m p e t i t o r s . N o w t h e s e p e o p l e p r o m o t e the p r o d u c t for 255

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e v e r y infection i m a g i n a b l e . T h e y t h e r e f o r e get b e t t e r sales t h a n w e w h o d e v e l o p e d t h e p r o d u c t . T h e i r n a m e gets b e t t e r k n o w n a s t h e i r v e r s i o n g e t s m o r e w i d e l y p r e s c r i b e d . T h e n they even begin to t a k e a w a y sales from us in the a r e a s w h e r e we t h i n k the drug is indicated. Of course our Brazilian m a n a g e r then wants us to e x p a n d the indications too. T h e r e a r e a s m a n y t r a n s n a t i o n a l c o m p a n i e s a s t h e r e are w a y s i n w h i c h a t t e m p t s a r e m a d e t o i m p o s e c o r p o r a t e p r o m o t i o n a l stand a r d s o n s u b s i d i a r i e s . O n e c o m p a n y has a n i n t e r n a t i o n a l p r o d u c t d i s c l o s u r e d o c u m e n t from w h i c h s u b s i d i a r i e s c a n n o t d e l e t e c o n t r a i n d i c a t i o n s and side-effects. Yet they may use their d i s c r e t i o n to a d d i n d i c a t i o n s . M a n y t r a n s n a t i o n a l s are tightly r e g u l a t e d from h e a d q u a r t e r s as to w h a t t h e y can p u t in semi-official p u b l i c a t i o n s like MIMS, but h a v e total a u t o n o m y o v e r local m e d i c a l j o u r n a l a d v e r t i s i n g . C o r p o r a t e m e d i c a l g r o u p s can use t h e c a r r o t o f cost s a v i n g as well as t h e stick of h e a d q u a r t e r s c o n t r o l : W e p r o v i d e p a c k a g e i n s e r t s and a d v e r t i s i n g p a c k a g e s from [ h e a d q u a r t e r s ] . T h e s e a r e not a s e x h a u s t i v e s t a n d a r d s a s r e q u i r e d by F D A . M i n o r side effects m i g h t be put u n d e r a g e n e r a l h e a d i n g r a t h e r t h a n listed s e p a r a t e l y . B u t it's a h i g h e r s t a n d a r d t h a n t h e s u b s i d i a r y w o u l d d o t h e m s e l v e s . T h e cost o f t h e subsidiary red o i n g t h e w o r k often c a u s e s t h e m t o use our m a t e r i a l . S i l v e r m a n , L e e and L y d e c k e r ( 1 9 8 2 : 150) recently did a follow-up to c h e c k if t h i n g s really had i m p r o v e d in L a t i n A m e r i c a . T h e y found t h a t t h e r e had b e e n a s u b s t a n t i a l e x p a n s i o n of d i s c l o s u r e of w a r n i n g s , side-effects and c o n t r a - i n d i c a t i o n s . M e r c k , Lilly and S y n t e x w e r e singled o u t for t h e i m p r o v e m e n t s t o labelling and p r o m o t i o n t h e y had m a d e . W h i l e t h e r e have b e e n efforts b y t r a n s n a t i o n a l c o r p o r a t i o n s since the a p p e a r a n c e o f S i l v e r m a n ' s first book t o e s t a b l i s h i n t e r n a t i o n a l m i n i m u m p r o m o t i o n a l s t a n d a r d s for their far-flung o p e r a t i o n s , it w o u l d be a m i s t a k e to paint t o o rosy a p i c t u r e o f w h a t has b e e n a c h i e v e d . C o r p o r a t i o n s have w r i t t e n rules specifying t h a t v a r i a t i o n s from c o r p o r a t e d i s c l o s u r e r e q u i r e m e n t s m u s t be a p p r o v e d by h e a d q u a r t e r s only to find that s u b s i d i a r y g e n e r a l m a n a g e r s i g n o r e t h e rules and c o n t i n u e t o m a k e idiosync r a t i c p r o d u c t c l a i m s w i t h o u t a p p r o v a l . Just a s with g o v e r n m e n t regulation, corporate rule-making without the provision of a d e q u a t e e n f o r c e m e n t resources is no more than a gesture. Some c o m p a n i e s h a v e m a d e only g e s t u r e s ; o t h e r s p r o d u c e d g e n u i n e 256

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r e f o r m . M o r e often t h a n n o t , t h e real p r o b l e m i s c o n v i n c i n g corp o r a t i o n s t h a t t h e y s h o u l d s t o p m a k i n g a n u n w a r r a n t e d claim a s quickly in t h e T h i r d W o r l d as in d e v e l o p e d c o u n t r i e s w h e r e they are s u b j e c t to t h e s c r u t i n y of r e g u l a t o r s and p u b l i c interest g r o u p s . In t h e classic i l l u s t r a t i o n , G r i i n e n t h a l w a r n e d l i c e n s e e s in late 1961 to s t o p m a k i n g c l a i m s that t h a l i d o m i d e w a s ' n o n - t o x i c ' . But i n p u b l i c i t y m a t e r i a l for W e s t Africa t h a l i d o m i d e c o n t i n u e d to be d e s c r i b e d a s ' c o m p l e t e l y h a r m l e s s ' ( K n i g h t l e y e t a l . , 1979; 4 0 - 1 ) . A s L e d o g a r ( 1 9 7 5 : 39) c o n c l u d e s : ' J u s t a s m a n u f a c t u r e r s are often q u i c k to r e c o m m e n d a drug for a n e w i n d i c a t i o n , they can be very slow to modify or r e m o v e o u t d a t e d i n d i c a t i o n s from their foreign labelling and p r o m o t i o n . ' At an industry-wide level, the International Federation of P h a r m a c e u t i c a l M a n u f a c t u r e r s ' A s s o c i a t i o n s in 1981 a d o p t e d a c o d e o f e t h i c a l s t a n d a r d s i n m a r k e t i n g . T h e i n d u s t r y self-regulatory c o d e has t h e s a m e defect as c o r p o r a t e s e l f - r e g u l a t o r y efforts - t h e r e is no p r o v i s i o n for effective e n f o r c e m e n t a g a i n s t v i o l a t i o n s of the r a t h e r vague provisions o f t h e c o d e . The escape clauses in the code a r e a l s o i m a g i n a t i v e : for e x a m p l e , ' s t a t e m e n t s i n p r o m o t i o n a l c o m m u n i c a t i o n s s h o u l d be b a s e d on s u b s t a n t i a l scientific e v i d e n c e or other responsible medical opinion' (italics a d d e d ) .

Dumping T o m M b o y a was the hope o f t h e western world. Bright, e n e r g e t i c , p o p u l a r and inclined to be d e m o c r a t i c - he w a s a b o r n l e a d e r w h o , W a s h i n g t o n h o p e d , w o u l d rise t o p o w e r i n K e n y a a n d h e l p k e e p Africa safe for U n i t e d S t a t e s c o m m e r c e . I n 1969 he w a s shot d o w n in t h e s t r e e t s of N a i r o b i . An e m e r g e n c y r e s c u e s q u a d w a s by his side in m i n u t e s . T h e y plugged him into t h e latest g a d g e t in r e s u s c i t a t i v e t e c h n o l o g y . . . . W h a t the r e s c u e t e a m d i d n ' t k n o w a s they w a t c h e d T o m M b o y a ' s life slip a w a y w a s t h a t this m a r v e l o u s d e v i c e had b e e n recalled from the A m e r i c a n m a r k e t by t h e U . S . g o v e r n m e n t . . . . T h e p a t i e n t died. L o s i n g M b o y a . . . w a s p e r h a p s a s u b t l e r e t r i b u t i o n for the U . S . for to t h i s day we allow o u r b u s i n e s s l e a d e r s to sell, mostly to Third W o r l d n a t i o n s , shiploads of defective medical devices, l e t h a l d r u g s , k n o w n c a r c i n o g e n s , toxic p e s t i c i d e s , c o n t a m i n a t e d foods and o t h e r p r o d u c t s found unfit for A m e r i c a n c o n s u m p t i o n ( D o w i e , 1979: 2 3 ) . 257

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D o w i e ( 1 9 7 9 ) a n d his t e a m from Mother Jones m a g a z i n e have s u b j e c t e d t h e d u m p i n g p h e n o m e n o n t o p e n e t r a t i n g scrutiny. T h e i r m a i n p h a r m a c e u t i c a l case s t u d i e s are c o n t r a c e p t i v e s , specifically U p j o h n ' s D e p o - P r o v e r a and A . H . R o b i n s ' s D a l k o n Shield. D e p o - P r o v e r a i s a n i n j e c t a b l e drug w h i c h p r e v e n t s c o n c e p t i o n in w o m e n for t h r e e to six m o n t h s . It w a s found t h r o u g h early A m e r i c a n r e s e a r c h to be a s s o c i a t e d with such a w e l t e r o f side-effects t h a t t h e F D A has not only i n d i c a t e d t h a t the p r o d u c t i s n o t a p p r o v a b l e i n t h e U S , but has f o r b i d d e n h u m a n t e s t i n g o f t h e d r u g i n t h e U n i t e d S t a t e s . H u g e q u a n t i t i e s are being d u m p e d o n t h e T h i r d W o r l d . T h r o u g h o u t C e n t r a l A m e r i c a o n e can w a l k i n t o a p h a r m a c y and p u r c h a s e D e p o - P r o v e r a w i t h o u t a p r e s cription. T h e D a l k o n Shield i s a n i n t r a - u t e r i n e d e v i c e w h i c h w a s recalled from t h e A m e r i c a n m a r k e t after it had killed at least 17 w o m e n . P r o b l e m s with t h e d e v i c e w e r e t h e s u b j e c t of s o m e t h i n g of a coverup by A. H. R o b i n s . On 12 J u n e 1973 in t e s t i m o n y before t h e H o u s e of R e p r e s e n t a t i v e s I n t e r g o v e r n m e n t a l Relations s u b c o m m i t t e e , a R o b i n s r e p r e s e n t a t i v e a d m i t t e d t h a t t h e c o m p a n y ' s files c o n t a i n e d o v e r 4 0 0 ' u n f a v o r a b l e r e p o r t s ' from p h y s i c i a n s and o t h e r s a b o u t t h e D a l k o n Shield. N o n e of these 'unfavourable reports' - including 75 i n s t a n c e s o f u t e r i n e p e r f o r a t i o n , 2 8 e c t o p i c p r e g n a n c i e s and a t least o n e d e a t h - w e r e v o l u n t a r i l y r e p o r t e d b y t h e c o m p a n y t o the ( S u b c o m m i t t e e o n H e a l t h , 1973: 3 6 4 ) . A . H . R o b i n s has d u m p e d D a l k o n S h i e l d s i n s o m e 4 0 Third W o r l d c o u n t r i e s . T h e s t a g g e r i n g t h i n g a b o u t this has b e e n t h e i n v o l v e m e n t o f t h e U S g o v e r n m e n t ' s Office o f P o p u l a t i o n with t h e A I D . A I D p u r c h a s e d the c o n t r a c e p t i v e d e v i c e a t d i s c o u n t r a t e s for ' a s s i s t a n c e ' t o d e v e l o p i n g c o u n t r i e s after t h e p r o d u c t w a s b a n n e d i n t h e U S . D o u b l e s t a n d a r d s for T h i r d W o r l d c o n s u m e r s w e r e e v e n m o r e r e m a r k a b l e w h e n R o b i n s sold A I D unsterilised Shields i n bulk p a c k a g e s a t a 4 8 p e r c e n t d i s c o u n t . A I D justifies t h e d i s c o u n t D a l k o n d u m p o n t h e g r o u n d s o f g e t t i n g m o r e c o n t r a c e p t i o n for the aid d o l l a r . B u t surely this is p u s h i n g t h e r a t i o n a l i t y of coste f f e c t i v e n e s s b e y o n d its limits. T h e sale of an u n s t e r i l i s e d d e v i c e for i m p l a n t i n g within the h u m a n body is an unconscionable underc u t t i n g o f any n o t i o n o f m i n i m u m safety s t a n d a r d s . O n e simply c a n n o t c o u n t on h e a l t h w o r k e r s , least of all in j u n g l e clinics, to effectively and c o n s c i e n t i o u s l y sterilise d e v i c e s which t h e y h a v e c o m e to expect to be pre-sterilised. D o w i e p r o d u c e d a list of s t r a t e g i e s used in d u m p s which s h a r e s 258

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r e m a r k a b l e s i m i l a r i t y with a list I c o l l e c t e d from my i n t e r v i e w s w i t h pharmaceutical executives:

T H E N A M E C H A N G E : W h e n a p r o d u c t i s w i t h d r a w n from the A m e r i c a n m a r k e t , r e c e i v i n g a lot of bad publicity in the p r o c e s s , t h e a s t u t e d u m p e r simply c h a n g e s its n a m e . T H E L A S T M I N U T E P U L L O U T : W h e n it looks as if a chemical being tested by the E n v i r o n m e n t a l Protection Agency won't p a s s , t h e m a n u f a c t u r e r will w i t h d r a w t h e a p p l i c a t i o n for r e g i s t r a t i o n and t h e n label t h e c h e m i c a l 'for e x p o r t o n l y . ' T h a t w a y , t h e m a n u f a c t u r e r d o e s n ' t h a v e t o notify the i m p o r t i n g c o u n t r y that the chemical is banned in the U . S . D U M P T H E W H O L E F A C T O R Y : Many companies, p a r t i c u l a r l y p e s t i c i d e m a n u f a c t u r e r s , will simply close d o w n their A m e r i c a n p l a n t s and b e g i n m a n u f a c t u r i n g a h a z a r d o u s p r o d u c t i n a c o u n t r y c l o s e to a g o o d m a r k e t . T H E F O R M U L A C H A N G E : A favorite w i t h drug and p e s t i c i d e c o m p a n i e s . C h a n g i n g a f o r m u l a slightly by a d d i n g or s u b t r a c t i n g a n i n e r t i n g r e d i e n t p r e v e n t s d e t e c t i o n b y s p e c t r o m e t e r s and o t h e r scanning devices keyed to certain molecular structures. T H E S K I P : Brazil - a p r i m e d r u g m a r k e t w i t h its large p o p u l a t i o n a n d v i r u l e n t t r o p i c a l d i s e a s e s - has a law t h a t says no o n e m a y i m p o r t a d r u g t h a t is n o t a p p r o v e d for use in t h e c o u n t r y of o r i g i n . A real c h a l l e n g e for t h e wily d u m p e r . H o w d o e s he do it? G u a t e m a l a h a s no such l a w ; in fact, G u a t e m a l a s p e n d s very little e a c h y e a r r e g u l a t i n g d r u g s . S o , t h e d r u g i s first s h i p p e d t o G u a t e m a l a , which b e c o m e s the export nation. T H E I N G R E D I E N T D U M P : Y o u r p r o d u c t w i n d s u p being b a n n e d . D o n ' t d u m p it. S o m e w i s e - a s s r e p o r t e r from Mother Jones will find a bill of l a d i n g and e x p o s e y o u . E x p o r t t h e i n g r e d i e n t s s e p a r a t e l y - p e r h a p s via different r o u t e s - to a small r e c o m b i n i n g facility or a s s e m b l y p l a n t you have set up w h e r e y o u ' r e d u m p i n g it, or in a c o u n t r y a l o n g t h e w a y . R e a s s e m b l e t h e m a n d d u m p t h e p r o d u c t ( D o w i e , 1979: 2 5 ) . M o r e c o m m o n t h a n 'the s k i p ' , a s D o w i e d e s c r i b e s it, i s simply a w o r l d w i d e s p r e a d o f m a n u f a c t u r i n g p l a n t s w h i c h always e n a b l e s the p h a r m a c e u t i c a l c o m p a n y to s o u r c e d r u g s for a region from a conv e n i e n t l y l o c a t e d p l a n t in a c o u n t r y w h i c h will quickly g r a n t a p p r o v a l . O n e of the reasons why so many transnationals have p h a r m a c e u t i c a l manufacturing plants in G u a t e m a l a is that product r e g i s t r a t i o n is rapid and really only a f o r m a l i t y . To my k n o w l e d g e a 259

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p r o d u c t s u b m i t t e d for a p p r o v a l by a t r a n s n a t i o n a l c o m p a n y h a s n e v e r b e e n r e j e c t e d . I m m e d i a t e l y the c o m p a n y is in a p o s i t i o n to say t h a t t h e p r o d u c t is a p p r o v e d in the c o u n t r y of m a n u f a c t u r e . G u a t e m a l a is a l s o an a t t r a c t i v e l o c a t i o n b e c a u s e t h e r e is effectively no r e g u l a t i o n of t h e p h a r m a c e u t i c a l i n d u s t r y . Since factories are n e v e r i n s p e c t e d by g o v e r n m e n t officials, t h e r e is wide scope for e c o n o m i s i n g on quality control checks which would be mandatory in t h e U n i t e d S t a t e s . A d o u b l e s t a n d a r d of m a n u f a c t u r i n g quality is a l s o f r e q u e n t l y p e r p e t r a t e d by t h e t r a n s n a t i o n a l which g r a n t s a l i c e n c e for m a n u f a c t u r e to local T h i r d W o r l d c o m p a n i e s n o t o r i o u s for c u t t i n g c o r n e r s on quality. All o f t h i s is fairly freely a d m i t t e d by all but the public r e l a t i o n s staff of p h a r m a c e u t i c a l c o m p a n i e s . E v e n publicly, a V i c e - P r e s i d e n t o f o n e o f t h e m o s t r e s p o n s i b l e p h a r m a c e u t i c a l c o m p a n i e s , Lilly, has p l e a d e d b e f o r e t h e U S S e n a t e : ' T o t h e e x t e n t that t h e F e d e r a l F o o d , D r u g , and C o s m e t i c A c t limits t h e e x p o r t o f d r u g s a p p r o v e d for use a b r o a d , it c a u s e s , u n n e c e s s a r i l y , t h e e x p o r t of c a p i t a l , t e c h n o l o g y , and j o b s ' ( S u b c o m m i t t e e o n H e a l t h and the E n v i r o n m e n t . 1976: 5 2 7 ) . P e r h a p s t h e m o s t c o m m o n form o f p h a r m a c e u t i c a l d u m p i n g i s o f p r o d u c t s w h o s e shelf life has e x p i r e d . M e d a w a r (1979: 7 5 - 7 ) cites c a s e s from M a l a y s i a w h e r e i m p o r t e d U S m e d i c i n e s had their date s t a m p o b l i t e r a t e d , and other reported cases of expired drugs ( i n c l u d i n g o u r friend c h l o r a m p h e n i c o l ) i n t h e W e s t I n d i e s and India. Two Hoffman-La Roche executives were jailed in Morocco in 1981 for o b l i t e r a t i n g t h e e x p i r y d a t e s on a n u m b e r of p r o d u c t s to e n a b l e t h e m to be sold after the d u e d a t e ( M u l l e r , 1982: 147). It is difficult t o e s t i m a t e t h e e x t e n t t o w h i c h t r a n s n a t i o n a l d u m p e x p i r e d d r u g s . O n e e x e c u t i v e w a s i n s i s t e n t t h a t this w o u l d n e v e r h a p p e n quite so blatantly with an A m e r i c a n c o m p a n y : T h i s c o m p a n y w o u l d n e v e r e x p o r t e x p i r e d d r u g s . B u t i t m i g h t send off p r o d u c t w h i c h is n e a r e x p i r y k n o w i n g full well t h a t by t h e t i m e it got to t h e c o n s u m e r it w o u l d be past e x p i r y . ' A n o t h e r p h e n o m e n o n that s o m e e x e c u t i v e s w e r e p r e p a r e d t o c o n c e d e m i g h t h a p p e n from t i m e t o t i m e w a s t h e d u m p i n g i n t h e T h i r d W o r l d of d r u g s w h i c h fail to m e e t t h e quality specifications of the developed country w h e r e they are manufactured. An A u s t r a l i a n e x e c u t i v e , w h o d e n i e d t h a t his c o m p a n y w o u l d ever d u m p a b a t c h w h i c h fell b e l o w s p e c i f i c a t i o n s , did a d m i t t h a t w h e n a J a p a n e s e c o n t r a c t had fallen t h r o u g h , t h e p r o d u c t w a s sold t o

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M a l a y s i a with J a p a n e s e l a b e l l i n g w h i c h M a l a y s i a n s w o u l d n o t h a v e b e e n able t o r e a d . An executive of the A u s t r a l i a n subsidiary of a n o t h e r transn a t i o n a l a d m i t t e d t h a t b a t c h e s o f p r o d u c t w o u l d often b e s h i p p e d from t h e U n i t e d S t a t e s t o A u s t r a l i a b e f o r e q u a l i t y c o n t r o l c h e c k s w e r e c o m p l e t e d . S a m p l e s o f t h e final p r o d u c t w o u l d s i m p l y b e t a k e n out and tested while the product was in transit. He claimed t h a t 'All d r u g c o m p a n i e s o r p h a r m a c e u t i c a l c o m p a n i e s i n A u s t r a l i a i m p o r t d r u g s i n a n t i c i p a t i o n like t h i s . ' T h e p r a c t i c e c u t s d o w n d e l i v e r y d e l a y s . B u t t h e p r o b l e m a r i s e s w h e n t h e foreign s u b s i d i a r y is told t h a t t h e b a t c h has failed to p a s s q u a l i t y c o n t r o l . I n s t e a d of d e s t r o y i n g t h e b a t c h , t h e r e m i g h t be a s i t u a t i o n a l i n d u c e m e n t to sell it to i m p a t i e n t c u s t o m e r s who resent d e l a y s , or even to m a k e some m o n e y o n t h e side b y sales o n t h e black m a r k e t . R e p u t a b l e p h a r m a c e u t i c a l c o m p a n i e s d o e n g a g e i n illegal drug s m u g g l i n g . T h e c o r p o r a t i o n can d e n y r e s p o n s i b i l i t y for p o o r quality p r o d u c t d u m p e d t h r o u g h t h e black m a r k e t . I n d o n e s i a , b e c a u s e o f its strict r e q u i r e m e n t s for e s t a b l i s h i n g local m a n u f a c t u r i n g p l a n t s , is a victim of m u c h s m u g g l i n g past c u s t o m s officials. T w o s e n i o r A u s t r a l i a n executives of one A m e r i c a n transnational brazenly admitted that their c o m p a n y entered the Indonesian m a r k e t by the A u s t r a l i a n subsidiary posting the product to an agent in Singapore w h o w o u l d s m u g g l e it into I n d o n e s i a for b l a c k m a r k e t s a l e s on a o n e - t o - o n e basis t o I n d o n e s i a n p h a r m a c i s t s . I n this s i t u a t i o n , any a d v e r s e r e a c t i o n s a r i s i n g from p o o r q u a l i t y i n t h e p r o d u c t c o u l d easily be blamed on 'counterfeiters'. Trythall (1977) estimates that 15 p e r c e n t of t h e d r u g s sold in I n d o n e s i a are s m u g g l e d from S i n g a p o r e . T h e r e i s only o n e c a s e w h e r e a n a l l e g a t i o n o f s m u g g l i n g by a r e p u t a b l e c o m p a n y h a s g o n e p u b l i c : I n C h i l e u n d e r t h e A l l e n d e g o v e r n m e n t , Pfizer's s u b s i d i a r y w a s a c c u s e d o f s m u g g l i n g d r u g s illegally a c r o s s t h e b o r d e r t o Bolivia a n d P e r u . T h e G o v e r n m e n t felt t h a t t h e o n l y w a y t o p r e v e n t such activities w a s state control o f t h e c o m p a n y . Unfortunately the m i l i t a r y c o u p o f S e p t e m b e r 1973 p r e v e n t e d t h e legal c a s e r e a c h i n g any c o n c l u s i o n ( H e l l e r , 1977: 5 5 ) .

American attitudes to dumping
[My c o m p a n y ] a d o p t s t h e view that w h e n it has satisfied itself of t h e safety a n d efficacy o f a d r u g , w h e n i t h a s r e a c h e d t h a t b e n c h 261

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m a r k , satisfied o u r c o r p o r a t e c o n s c i e n c e if you like, t h e n we will go to get it r e g i s t e r e d in e v e r y m a r k e t we can i r r e s p e c t i v e o f w h a t t h e r e g u l a t i o n s of any c o u n t r y say. I f G u a t e m a l a will let us in first b e c a u s e t h e y h a v e no r e g u l a t i o n s , t h e n we will get it r e g i s t e r e d in G u a t e m a l a i n t h e f i r s t six m o n t h s . T h e a b o v e view of a senior A m e r i c a n e x e c u t i v e reflects t h e m o r a l s t a n c e t h a t i s m o s t typical o f p h a r m a c e u t i c a l e x e c u t i v e s w i t h r e s p e c t to p r o d u c t r e g i s t r a t i o n : ' W e k n o w w h e n a d r u g is safe. So once satisfied of safety, we go for b r o k e . " At p r e s e n t , US law d o e s not p e r m i t p h a r m a c e u t i c a l c o m p a n i e s t o e x p o r t d r u g s from t h e U n i t e d S t a t e s w h i c h a r e not a p p r o v e d for m a r k e t i n g within the U n i t e d S t a t e s . T h i s d o e s not p r e v e n t m a n y c o m p a n i e s from b l a t a n t l y v i o l a t i n g t h e law. A s o n e e x e c u t i v e r e m a r k e d , ' U n l e s s t h e p a c k a g e b u r s t s o p e n o n t h e d o c k , you have n o c h a n c e o f b e i n g c a u g h t . ' I n the last few y e a r s g r e a t p r e s s u r e has b e e n b u i l d i n g up to c h a n g e this law, largely because it e n c o u r a g e s t h e shifting of m a n u f a c t u r i n g o p e r a t i o n s offshore for d r u g s not a p p r o v e d i n the U n i t e d S t a t e s . B u t i t has a l s o b e e n a r g u e d t h a t d o i n g a w a y w i t h t h e e x p o r t p r o h i b i t i o n w o u l d e n a b l e U S c o m p a n i e s t o m a k e a m o r e meaningful cont r i b u t i o n t o solving h e a l t h p r o b l e m s w h i c h a r e not significant within the U n i t e d States but i m p o r t a n t e l s e w h e r e : A g o o d e x a m p l e of this situation is a Pfizer d r u g , M a n c i l , for s c h i s t o s o m i a s i s . T h i s is a s n a i l - b o r n e d i s e a s e t h a t affects 2 0 0 to 500 m i l l i o n p e o p l e t h r o u g h o u t t h e w o r l d . In Brazil a l o n e it affects 2 0 t o 4 0 m i l l i o n p e o p l e , o n e - t h i r d o f t h e p o p u l a t i o n . Pfizer, t h e U . S . c o m p a n y w a n t e d t o s y n t h e s i z e t h e d r u g h e r e and e x p o r t i t t o B r a z i l , but t h e y could n o t d o t h a t b e c a u s e o f t h e U . S . law. S o , t h e y are m a n u f a c t u r i n g o v e r s e a s in a m u c h less efficient way t h a n t h e y w o u l d i f t h e y w e r e a b l e t o m a n u f a c t u r e and e x p o r t from t h e U n i t e d S t a t e s ( S u b c o m m i t t e e o n H e a l t h , 1978: 1618). I t h a s b e e n c o r r e c t l y p o i n t e d o u t t h a t different c o u n t r i e s have d i f f e r e n t b e n e f i t - r i s k ratios for p a r t i c u l a r m e d i c i n e s . P e r h a p s in t h e U n i t e d S t a t e s t h e a b u s e p o t e n t i a l of a d r u g with s e r i o u s side-effects is so g r e a t t h a t b a n n i n g it is justified. B u t if t h e d i s e a s e a g a i n s t w h i c h t h a t d r u g is m o s t useful is a s c o u r g e in t r o p i c a l c o u n t r i e s , t h e n t h o s e c o u n t r i e s m i g h t be justified in d e c i d i n g t h a t , for t h e m , t h e benefits outweigh the risks. So t h e D r u g R e g u l a t i o n R e f o r m Bills of 1978 and 1979 p r o p o s e d to the C o n g r e s s that export of drugs not a p p r o v e d in the United 262

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States be allowed, provided that the recipient g o v e r n m e n t is notified o f t h e r e g u l a t o r y s t a t u s o f t h e d r u g i n t h e U n i t e d S t a t e s and signifies t h a t i t d o e s n o t object t o t h e i m p o r t a t i o n o f t h e d r u g . I n a d d i t i o n , t h e 1978 D r u g R e f o r m Bill i n c l u d e d r e f e r e n c e to a vaguely d e f i n e d right o f t h e F D A t o p r o h i b i t e x p o r t i f this w a s "contrary t o t h e p u b l i c h e a l t h o f t h e foreign c o u n t r y o r t h e U n i t e d S t a t e s ' . C l e a r l y , a n e x p o r t could b e c o n t r a r y t o t h e p u b l i c h e a l t h o f t h e U n i t e d S t a t e s if a d r u g of a b u s e could be e x p o r t e d and t h e n s m u g g l e d b a c k into t h e U n i t e d S t a t e s . B u t w h a t ' c o n t r a r y t o t h e p u b l i c h e a l t h o f t h e foreign c o u n t r y ' m i g h t m e a n w a s not clear. T h e a r g u m e n t s for d o i n g a w a y with t h e e x p o r t p r o h i b i t i o n s e e m c o n v i n c i n g . T h e y h a v e a nice liberal ring a b o u t t h e m . A m e r i c a s h o u l d g r a n t o t h e r g o v e r n m e n t s t h e s o v e r e i g n t y t o m a k e their o w n r i s k - b e n e f i t d e c i s i o n s c o n c e r n i n g t h e h e a l t h o f their own c i t i z e n s . H o w e v e r , A n i t a J o h n s o n of the E n v i r o n m e n t a l Defense Fund argued that national sovereignty o f T h i r d World health regulatory a g e n c i e s to m a k e t h e i r o w n c h o i c e s is a c h i m e r a : C e r t i f i c a t i o n by foreign g o v e r n m e n t s in d e v e l o p i n g c o u n t r i e s is a n e g l i g i b l e p r o t e c t i o n for c o n s u m e r s t h e r e . O f 2 2 L a t i n A m e r i c a n c o u n t r i e s , for e x a m p l e , only 12 r e q u i r e any kind of r e g i s t r a t i o n of i m p o r t e d d r u g s . Slightly u n d e r 20 r e q u i r e r e g i s t r a t i o n , but only a small n u m b e r do medical review o f t h e drugs. Two of these are medical reviews by doctors' trade associations, rather than by p u b l i c h e a l t h officials. M a n y of t h e s e c o u n t r i e s do not have s p e c i a l i s t s t o e v a l u a t e d r u g c o m p a n y p r o m o t i o n s . T h e large m a j o r i t y d o not h a v e t h e t o p quality m e d i c a l l i b r a r i e s e v e n . T h o s e d e v e l o p i n g c o u n t r i e s t h a t d o h a v e any kind o f drug c o n t r o l a r e l o o k i n g at c h e m i c a l p u r i t y of d r u g e n t i t y , r a t h e r t h a n at the d e s i g n a n d c o n d u c t of safety and effectiveness s t u d i e s ( S u b c o m m i t t e e o n H e a l t h , 1978: 1619). I w a s in C u b a last m o n t h and d i s c o v e r e d , to my s h o c k , that the N a t i o n a l M e d i c a l L i b r a r y o f C u b a has n o m e d i c a l l i t e r a t u r e b e y o n d the time o f t h e revolution. The drug c o m p a n i e s are in a p o s i t i o n w h e r e t h e y c a n g o d o w n t h e r e and lobby foreign officials, m a k e e x t r a v a g a n t c l a i m s for their d r u g s , claims w h i c h w e k n o w h a v e not b e e n p r o v e n , and t h e officials are essentially helpless ( S u b c o m m i t t e e o n H e a l t h , 1978: 6 4 9 ) . T h e q u e s t i o n i s h o w high d o a b s t r a c t d e m o c r a t i c v a l u e s like national sovereignty rate c o m p a r e d to protection of consumers 263

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from p r o d u c t s m a d e i n o n e ' s c o u n t r y ? O p p o n e n t s o f t h e reform a r g u e t h a t t h e suffering o f c o n s u m e r s has s u b s t a n c e w h i l e n a t i o n a l s o v e r e i g n t y has no s u b s t a n c e for w a n t of t r a i n e d g o v e r n m e n t officials t o a p p l y t h e s o v e r e i g n t y . O n e m u s t also q u e s t i o n t h e i m p o r t a n c e o f t h e liberal d e m o c r a t i c ideal o f n a t i o n a l s o v e r e i g n t y w h e n one is considering undemocratic regimes w h o , as demonstrated in C h a p t e r 2, m a k e many of their decisions about the pharmaceutical i n d u s t r y on the strength of bribes. Less national sovereignty than t h e s o v e r e i g n t y o f t h e dollar! I t d o e s s e e m t h a t liberal A m e r i c a n s a r e b e i n g s e d u c e d by a high political p r i n c i p l e into s u p p o r t i n g a p o l i c y w h i c h will a l l o w powerful d r u g c o m p a n i e s t o h e a p u n t o l d e x p l o i t a t i o n on the c o n s u m e r s of the Third World. The choice b e t w e e n n a t i o n a l s o v e r e i g n t y and c o n s u m e r p r o t e c t i o n i s a m o r a l l y p e r p l e x i n g o n e . B u t m a n y o f u s identify m o r e strongly with the c o n s u m e r s w h o will die i n t h e T h i r d W o r l d t h a n with their g o v e r n m e n t s w h o s o often a r e t o t a l i t a r i a n and c o r r u p t . P e r h a p s a n a c c e p t a b l e a n s w e r t o t h e m o r a l d i l e m m a w a s put f o r w a r d by an A m e r i c a n c i t i z e n , Mr L. J. C o l l i n s , w h o in o p p o s i n g t h e e x p o r t o f d r u g s w h i c h w e r e not fit for A m e r i c a n c o n s u m p t i o n , s a i d : ' A s a m a t t e r of p a t r i o t i s m , I o b j e c t w h e n they w o u l d be m a r k e d , " M a d e in the United States" ' (Subcommittee on Health, 1978: 1332). S u r e l y n a t i o n s o w e t h e m s e l v e s t h e s a m e kind o f p r i d e a s t h e c o m p a n y w h i c h says: 'In G u a t e m a l a t h e y ' l l t a k e a n y t h i n g , but w e will n o t g i v e t h e m a n y t h i n g w h i c h d o e s not m e e t o u r c o r p o r a t e s t a n d a r d . ' I n saying t h a t , t h e c o m p a n y i s q u i t e r i g h t l y d e n y i n g national sovereignty in the name of pride in corporate standards. D o e s the U n i t e d States no longer have pride in national standards? A final w e a k n e s s o f t h e n a t i o n a l s o v e r e i g n t y a r g u m e n t is t h a t it p r e s u p p o s e s that Third W o r l d g o v e r n m e n t s want sovereignty over t h e safety o f i m p o r t e d p r o d u c t s . G a e d e k e and U d o - A k a (1974) c o n d u c t e d a s u r v e y of g o v e r n m e n t r e p r e s e n t a t i v e s from 58 c o u n t r i e s - d e v e l o p e d and T h i r d W o r l d . T h e g o v e r n m e n t r e p r e s e n t a t i v e s w e r e a s k e d : ' W h o should set q u a l i t y and safety s t a n d a r d s for p r o d u c t s sold i n t e r n a t i o n a l l y ? ' Forty-five per cent said the r e s p o n s i b i l i t y s h o u l d lie with t h e i m p o r t i n g c o u n t r y ; 30 p e r c e n t said w i t h t h e e x p o r t i n g c o u n t r y ; and 25 per c e n t o p t e d for c o n t r o l by an i n d e p e n d e n t international body. S u r e l y t h e p r o p e r p o s i t i o n is for g o v e r n m e n t s as a m a t t e r of c o u r s e not t o a l l o w t h e e x p o r t o f p r o d u c t s w h i c h are r e g a r d e d a s unsafe for t h e i r o w n citizens. F o r e i g n g o v e r n m e n t s w h o plead for a l l o w i n g e x p o r t of a p r o d u c t w h i c h has a m o r e f a v o u r a b l e 264

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r i s k - b e n e f i t r a t i o i n t h e i r p a r t o f t h e w o r l d s h o u l d b e listened t o . B u t t h e b u r d e n o f p e r s u a s i o n should b e o n t h e foreign g o v e r n m e n t w h i c h w a n t s t h e e x p o r t e r t o c o m p r o m i s e its n a t i o n a l s t a n d a r d s . S i m p l y notifying t h e foreign g o v e r n m e n t t h a t t h e p r o d u c t i s b a n n e d in t h e U S , and s a y i n g ' t a k e it at y o u r o w n peril' is not placing t h e b u r d e n o f p r o o f o n t h e foreign g o v e r n m e n t . I f t h e r e really w e r e a b u r d e n o f p r o o f placed o n g o v e r n m e n t s w h o w a n t e d t o i m p o r t b a n n e d d r u g s from t h e U S , t h e n t h e F D A w o u l d n o t b e i n u n d a t e d w i t h foreign g o v e r n m e n t s k n o c k i n g a t t h e i r d o o r . W h i l e i t m i g h t b e t r u e t h a t r i s k - b e n e f i t ratios vary s o m e w h a t with g e o g r a p h y , t h e m o r e f u n d a m e n t a l reality i s t h a t risk-benefit ratios a c r o s s t h e b o a r d a r e a l m o s t i n v a r i a b l y w o r s e i n t h e Third W o r l d t h a n i n t h e U n i t e d S t a t e s . A m e r i c a n p a t i e n t s w h o are a d m i n i s t e r e d d r u g s with a high risk and high benefits h a v e t h e i r s y m p t o m s m o n i t o r e d carefully by a qualified p h y s i c i a n . If this d o e s not h a p p e n , t h e p h y s i c i a n can be sued. A G u a t e m a l a n will typically buy t h e s a m e d r u g from a p h a r m a c y w i t h o u t a p r e s c r i p t i o n , and p r o b a b l y t a k e i n a p p r o p r i a t e d o s a g e s ( M u l l e r , 1982: 1 1 0 - 1 1 ) . C o n c e i v a b l y t h e e x p i r y d a t e w h i c h w a s o n c e s t a m p e d o n the b o t t l e will h a v e b e e n e r a s e d . T h e u n t r a i n e d ' p h a r m a c i s t ' , influenced b y c o m p a n y sales r e p r e s e n t a t i v e s w h o s e c l a i m s are not subject t o g o v e r n m e n t r e g u l a t i o n , m a y r e c o m m e n d t h e p o t e n t d r u g for a n u n a p p r o v e d use u n t h i n k a b l e i n t h e U n i t e d S t a t e s . T o m a k e t h i n g s w o r s e , t h e u n s u p e r v i s e d p a t i e n t m i g h t t a k e t h e d r u g with a l c o h o l o r s o m e o t h e r d r u g w h i c h i n t e r a c t s d a n g e r o u s l y with it. T h e s e are j u s t s o m e of the r e a s o n s why risk-benefit ratios are almost invariably w o r s e in the Third W o r l d .

Third World guinea pigs
A g r e a t e r s o u r c e o f r e s e n t m e n t i n t h e T h i r d W o r l d t h a n the d u m p ing of old or u n s a f e d r u g s h a s b e e n t h e t e s t i n g of n e w d r u g s w h i c h a r e r e g a r d e d a s h a v i n g r i s k s t o o high for t e s t i n g i n d e v e l o p e d countries. The most celebrated example is the development of c o n t r a c e p t i v e s . T h e first l a r g e - s c a l e clinical trials o n oral c o n t r a c e p t i v e s w e r e c o n d u c t e d b y S e a r l e i n P u e r t o R i c o a r o u n d 1953. J o h n s o n a n d J o h n s o n and S y n t e x followed with testing i n P u e r t o R i c o , H a i t i a n d M e x i c o . T h e first major U S clinical trials w e r e c o n d u c t e d o n w o m e n from l o w - i n c o m e g r o u p s , 8 4 p e r cent o f w h o m w e r e of M e x i c a n e x t r a c t i o n and 6 p e r cent black ( H e l l e r , 1977: 5 2 - 4 ) . L a t e r r e f i n e m e n t s i n t h e form o f l o w - d o s e oral p r o g e s t e r o n e s 265

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w e r e initially t e s t e d i n C h i l e b y S y n t e x and M e r c k ( G e r m a n y ) . E v e n w i t h i n C h i l e , t h e e m p h a s i s w a s o n illiterate l o w e s t - i n c o m e p e o p l e , t h e s e c o n s t i t u t i n g 345 o f t h e 390 w o m e n t e s t e d ( Z a n a r t u , 1968). O t h e r m e t h o d s o f c o n t r a c e p t i o n r e c e i v e d their t e s t i n g i n this w a y , i n c l u d i ng v a r i o u s t e c h n i q u e s for t h e use of i n t r a - u t e r i n e d e v i c e s , and m o r e recently the addition of copper to these devices. This w a s initially t e s t e d in C h i l e w i t h large scale followup s u r v e y s in C o l u m b i a , I r a n , K o r e a , T a i w a n and T h a i l a n d . . . . [ D e p o - P r o v e r a ] has b e e n t e s t e d i n B r a z i l . T h a i l a n d , C h i l e , P h i l i p p i n e s , Sri L a n k a , H o n g K o n g , E g y p t , H o n d u r a s , P e r u , M e x i c o and P a k i s t a n . W h e n r e s e a r c h into its possible effect on t h e w e i g h t and b l o o d p r e s s u r e o f w o m e n t a k i n g the injections w a s c a r r i e d o u t in S o u t h Africa, t h e r e s e a r c h e r s saw fit to e x a m i n e t h e s e f e a t u r e s b y e x p e r i m e n t i n g with N e g r o (75 p e r c e n t ) a n d A s i a t i c (25 per c e n t ) w o m e n , r a t h e r t h a n o n w o m e n w i t h t h e s a m e c o l o u r e d skin a s t h e r e s e a r c h e r s ( H e l l e r , 1977: 52-4). H e l l e r ' s s t a t e m e n t s e e m s t o imply t h a t d r u g c o m p a n i e s opt t o test particularly d a n g e r o u s drugs in the Third World because poor p e o p l e a r e r e g a r d e d a s m o r e d i s p e n s a b l e , and i n s o m e m e a s u r e this i s u n d o u b t e d l y t r u e . B u t t h e r e are o t h e r m o r e p r a c t i c a l r e a s o n s for g o i n g to t h e T h i r d W o r l d first with d r u g s for which fears of sideeffects a r e g r e a t . P e a s a n t s do not sue g l o b a l c o r p o r a t i o n s for injury. I n f o r m e d c o n s e n t r e g u l a t i o n s for d r u g t e s t i n g do not exist in t h e T h i r d W o r l d . M o r e o v e r , given t h a t t h e p a t e n t life of a n e w d i s c o v e r y is finite, and t h a t m o n o p o l y profits will only a c c r u e while t h e p a t e n t lives, t h e r e a r e i n c e n t i v e s for c o m p a n i e s to get a p r o d u c t r e g i s t e r e d w h e r e v e r t h e y can as early as t h e y can. Clinical d a t a from T h i r d W o r l d c o u n t r i e s d o e s c o u n t for s o m e t h i n g , but not very m u c h , w i t h a g e n c i e s like t h e F D A . H o w e v e r , i f t h e p r o d u c t i s found to be unsafe by s u b s e q u e n t , m o r e s o p h i s t i c a t e d , t e s t i n g in a d e v e l o p e d c o u n t r y , t h e n a t least t h e c o m p a n y has m a d e s o m e m o n e y i n t h e T h i r d W o r l d w h i l e t h e going w a s g o o d . M o r e i m p o r t a n t l y , d i s t r i b u t i o n o f t h e d r u g i n t h e T h i r d W o r l d can act as a d e v i c e for s c r e e n i n g o u t d r u g s w h i c h are o b v i o u s l y i n a p p r o p r i a t e for e v e n a t t e m p t i n g r e g i s t r a t i o n i n d e v e l o p e d c o u n t r i e s . I f G u a t e m a l a n I n d i a n s fall ill at t h e first sniff of t h e d r u g , t h e n t h e c o s t s o f m u c h e x p e n s i v e t e s t i n g i n t h e U n i t e d S t a t e s can b e s a v e d . I r o n i c a l l y , G r a b o w s k i and V e r n o n , t w o p r o - i n d u s t r y e c o n o m i s t s .
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c o n f i r m t h a t t h e s e k i n d s o f c o n s i d e r a t i o n s d o c o m e into play with drug research and d e v e l o p m e n t decisions. M u l t i n a t i o n a l firms h a v e s o m e significant a d v a n t a g e s i n their ability t o r e s p o n d t o t h e m o r e s t r i n g e n t r e g u l a t o r y c o n d i t i o n s that h a v e e v o l v e d i n this c o u n t r y . F i r s t , t h e y can i n t r o d u c e n e w drug p r o d u c t s i n foreign m a r k e t s ( w h e r e r e g u l a t o r y c o n d i t i o n s a r e less s t r i n g e n t ) p r i o r to (or in lieu of) i n t r o d u c t i o n in the U n i t e d S t a t e s . T h i s a l l o w s t h e m t o gain k n o w l e d g e and realize sales r e v e n u e s w h i l e a n e w d r u g c o m p o u n d r e m a i n s u n d e r r e g u l a t o r y r e v i e w and d e v e l o p m e n t in this c o u n t r y . . . . In a d d i t i o n , m u l t i n a t i o n a l firms a l s o c a n p e r f o r m R & D a c t i v i t i e s i n foreign c o u n t r i e s i n o r d e r t o r e d u c e t i m e d e l a y s and t h e overall costs o f d e v e l o p i n g n e w p r o d u c t s . S o m e i m p o r t a n t i n s t i t u t i o n a l b a r r i e r s t o this strategy d o e x i s t , h o w e v e r . H i s t o r i c a l l y t h e F D A has b e e n unwilling t o a c c e p t d a t a from foreign clinical trials or p a t i e n t e x p e r i e n c e s . T h u s U . S . f i r m s h a v e i n c e n t i v e s t o p e r f o r m t h e i r R & D i n this c o u n t r y , e v e n i f t h e y c h o o s e t o i n t r o d u c e t h e i r n e w d r u g s first and in g r e a t e r n u m b e r s a b r o a d . N e v e r t h e l e s s only a small fraction of c o m p o u n d s e n t e r i n g clinical t e s t i n g i n t h e U n i t e d States ever b e c o m e c o m m e r c i a l p r o d u c t s ( W a r d e l l and L a s a g n a indicate that t h i s fraction is n o w less t h a n 10 p e r c e n t ) . M u l t i n a t i o n a l firms t h e r e f o r e h a v e t h e o p t i o n o f s c r e e n i n g n e w d r u g s a b r o a d and p e r f o r m i n g d u p l i c a t e U . S . trials o n t h e relatively small fraction o f d r u g s for w h i c h n e w d r u g a p p l i c a t i o n s ( N D A s ) are s u b m i t t e d t o t h e F D A . T h e y can also p e r f o r m different p h a s e s o f d e v e l o p m e n t a l t e r n a t i v e l y h e r e a n d a b r o a d i n o r d e r t o r e d u c e r e g u l a t o r y lags a n d b o t t l e n e c k s ( G r a b o w s k i and V e r n o n , 1979: 4 8 - 9 ) . I n d e e d , G r a b o w s k i a n d V e r n o n g o o n t o cite L a s a g n a and W a r d e l l ' s e v i d e n c e that because o f t h e 'regulatory n i g h t m a r e ' in the U n i t e d S t a t e s , A m e r i c a n firms a r e i n c r e a s i n g l y shifting t h e i r initial clinical t e s t i n g o f f s h o r e . L a s a g n a and W a r d e l l (1975) studied new d r u g c o m p o u n d s clinically tested b y 1 5 large A m e r i c a n c o m p a n i e s b e t w e e n 1960 a n d 1974. W h e r e a s b e f o r e 1966 t h e s e firms ( w h i c h a c c o u n t for 80 per c e n t of US R & D e x p e n d i t u r e ) did virtually all t h e i r clinical t e s t i n g first in t h e U n i t e d S t a t e s , by 1974 m o r e w e r e b e i n g t e s t e d a b r o a d initially t h a n w e r e b e i n g t e s t e d first i n t h e U S . I t has a l r e a d y b e e n p o i n t e d o u t that T h i r d W o r l d clinical d a t a are n o t a g r e a t d e a l of use in influencing r e g i s t r a t i o n d e c i s i o n s in d e v e l o p e d c o u n t r i e s . N e v e r t h e l e s s , t h e r e can b e indirect influences. C l i n i c a l d a t a from a T h i r d W o r l d c o u n t r y m i g h t assist r e g i s t r a t i o n 267

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in, s a y , B e l g i u m o r s o m e o t h e r c o u n t r y w i t h m o d e r a t e but not high r e g u l a t o r y s t a n d a r d s . T h e fact t h a t a d e v e l o p e d c o u n t r y such as B e l g i u m has a p p r o v e d t h e drug m i g h t t h e n influence a p p r o v a l in a r a n g e o f o t h e r c o u n t r i e s . B e l g i u m is in fact often c h o s e n by p h a r m a c e u t i c a l c o m p a n i e s as a s t r a t e g i c link in their i n t e r n a t i o n a l m a r k e t i n g m a n o e u v r e s b e c a u s e it is a d e v e l o p e d c o u n t r y w i t h rapid n e w d r u g a p p r o v a l ( n o r m a l l y six t o eight m o n t h s ) . T h e t r a n s n a t i o n a l will t h e n be able to start m a n u f a c t u r e in B e l g i u m w i t h the benefit of a certificate of free sale ( i n d i c a t i n g that t h e p r o d u c t is a p p r o v e d for sale in the c o u n t r y of o r i g i n ) from a d e v e l o p e d country. T h e r e a r e a m y r i a d of factors to c o n s i d e r in d e c i d i n g in which c o u n t r i e s to c o m m e n c e clinical trials: w h e r e to go for a p p r o v a l first, s e c o n d and t h i r d ; w h e r e t o set u p t h e first m a n u f a c t u r i n g - e x p o r t i n g o p e r a t i o n s . V a r i a b l e s such a s a v e r a g e length o f t i m e before new d r u g a p p r o v a l i n t h e c o u n t r y , c e n t r a l i t y o f t h e a p p r o v a l for w i n n i n g a p p r o v a l i n o t h e r c o u n t r i e s , cost o f m a n u f a c t u r e , skill o f t h e pharmaceutical workforce in that country, must be considered. Large c o r p o r a t i o n s p u t s y s t e m s analysis g r o u p s o n t o t h e s e p r o b l e m s . E x p e r t s t h r o w d a t a o n all o f t h e v a r i a b l e s into the c o m p u t e r t o c o m e up w i t h an o p t i m a l s o l u t i o n . O f t e n t h e solution will c o m e o u t in t h e form of a P E R T d i a g r a m , a simplified e x a m p l e of which is illust r a t e d i n F i g u r e 7 . 1 . T h e figure i m a g i n e s t h a t a sensible solution t o t h e h y p o t h e t i c a l p r o b l e m w o u l d be to first m a r k e t and clinically test the drug in P a r a g u a y (where new product registration generally t a k e s only a m o n t h ) . T h e n the d a t a from this clinical t e s t i n g ( p r e s u m a b l y t o g e t h e r w i t h a n i m a l t e s t i n g from t h e U n i t e d S t a t e s ) w o u l d be used to a t t e m p t registration in Belgium. The Belgian approval w o u l d t h e n be used to gain e n t r y to a n u m b e r of large T h i r d W o r l d m a r k e t s such a s B r a z i l , and s o on. T h e h y p o t h e t i c a l P E R T d i a g r a m in F i g u r e 7.1 is an oversimplified v e r s i o n of a realistic o n e , which would include registration paths, manufacturing paths, marketingp r o m o t i o n a l p a t h s , and n u m e r o u s o t h e r s . Different sections o f t h e P E R T m o d e l would be circulated to various constituencies in the c o r p o r a t i o n w h o w o u l d send back c o m m e n t s o n h o w silly t h e c o m p u t e r h a d b e e n , a n d m o d i f i c a t i o n s t o t h e g r a n d plan w o u l d b e m a d e a c c o r d i n g l y . T o l e r a n c e s have t o b e built into t h e m o d e l with " e x p e c t e d d a t e s ' qualified b y ' p r o b a b l e d e l a y s ' and ' p o s s i b l e d e l a y s ' . F i n a l l y , it s h o u l d be p o i n t e d o u t t h a t m a n y large c o r p o r a t i o n s do not go in for this kind of g r a n d p l a n n i n g very m u c h at all. S o m e E u r o p e a n c o m p a n i e s g o for r e g i s t r a t i o n i n t h e i r h o m e c o u n t r y first.

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a n d t h e n s u b s i d i a r i e s m o r e or less h a v e a u t o n o m y to m a r k e t a n e w p r o d u c t w h e n e v e r they decide. A l l t h a t h a s b e e n a t t e m p t e d h e r e is to s h o w that using p e o p l e in t h e T h i r d W o r l d as ' g u i n e a pigs' is often part of a very c o m p l e x t o t a l i t y . It is a c o m p l e x i t y w h i c h m a n i f e s t s t h e r a t i o n a l i t y of t h e t r a n s n a t i o n a l c o r p o r a t i o n in finding t h e line of least r e s i s t a n c e to early m a r k e t i n g t h r o u g h the c o m p l e x j u n g l e of the international r e g u l a t o r y n o n - s y s t e m . T r a n s n a t i o n a l s use system against nons y s t e m . W h i l e t h e t r a n s n a t i o n a l ' s w o r l d w i d e goals are c o h e r e n t , the g o a l s of t h e r e g u l a t o r y a g e n c i e s of t h e world are conflicting. C o r p o r a t i o n s t h e r e f o r e e x p l o i t t h e fact t h a t r e g u l a t o r y g o a l s only h a v e c o h e r e n c e at a n a t i o n a l level w h i l e c o r p o r a t e c o h e r e n c e is transnational.

The Third World push in pharmaceuticals The W o r l d H e a l t h O r g a n i s a t i o n estimates that 60-80 p e r c e n t o f t h e p o p u l a t i o n s o f m a n y d e v e l o p i n g c o u n t r i e s d o not have c o n s i s t e n t access to even the most essential drugs ( U N Centre on Transn a t i o n a l C o r p o r a t i o n s , 1979: 9 5 ) . T h e fact that A m e r i c a n and E u r o p e a n c o n t r o l o f t h e i n t e r n a t i o n a l p h a r m a c e u t i c a l i n d u s t r y has i m p o s e d t h e cost b u r d e n s w h i c h put d r u g s b e y o n d t h e r e a c h o f their c i t i z e n s has p r o m p t e d t h e T h i r d W o r l d t o strike back a t t h e global c o r p o r a t i o n s . T h e l e a d e r i n this m o v e m e n t has b e e n I n d i a , i n d i a n i s a t i o n ' of p h a r m a c e u t i c a l p r o d u c t i o n has p r o c e e d e d at a r e m a r k a b l e r a t e , w i t h t h e value o f local m a n u f a c t u r e r e a c h i n g U S $ 1 , 3 0 0 , 0 0 0 , 0 0 0 i n 1 9 7 7 - 8 . O n l y t r a n s n a t i o n a l s w h i c h m a k e hight e c h n o l o g y d r u g s a r e t o b e a l l o w e d t o r e t a i n m a j o r i t y equity p a r t i c i p a t i o n i n t h e i r s u b s i d i a r i e s . F u r t h e r , foreign c o m p a n i e s are t o b e r e q u i r e d to i n v e s t at least 4 p e r c e n t of their local t u r n o v e r in r e s e a r c h w i t h i n I n d i a . In t i m e this will h e l p to r e d r e s s t h e m e a g r e 5 per cent of the research e x p e n d i t u r e of the US pharmaceutical i n d u s t r y w h i c h i s d e v o t e d t o T h i r d W o r l d h e a l t h p r o b l e m s such a s t r o p i c a l d i s e a s e s ( S a r e t t , 1979: 134). O t h e r e l e m e n t s o f t h e I n d i a n s t r a t e g y a r e strict p r i c e c o n t r o l s on d r u g s , a r e d u c t i o n of p a t e n t p r o t e c t i o n , a n d a liberal i n t e r p r e t a t i o n of p a t e n t laws to favour d o m e s t i c i m i t a t o r s o f f o r e i g n t e c h n o l o g y ( L a l l , 1979a). I n d i a n o w has effectively set up its o w n ' m i n i m u l t i n a t i o n a l s ' which are exporting pharmaceutical technology to other parts o f t h e T h i r d W o r l d . I n d i a D r u g s and P h a r m a c e u t i c a l s L t d , a p u b l i c - s e c t o r firm, is selling t u r n k e y p l a n t t e c h n i c a l a s s i s t a n c e and t r a i n i n g 270

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s e r v i c e s t o A r a b c o u n t r i e s , Sri L a n k a , and B a n g l a d e s h . S a r a b h a i C h e m i c a l s , a p r i v a t e c o m p a n y , has h e l p e d e s t a b l i s h a t u r n k e y plant i n C u b a u n d e r a U N I D O p r o g r a m m e ( L a l l , 1979b: 2 3 8 ) . T h e o t h e r d r a m a t i c T h i r d W o r l d reform initiative i n r e c e n t t i m e s b e g a n in Sri L a n k a in 1972 with t h e e s t a b l i s h m e n t of a S t a t e P h a r maceuticals C o r p o r a t i o n ( S P C ) . The SPC introduced centralised b u y i n g o f p h a r m a c e u t i c a l i m p o r t s for t h e w h o l e c o u n t r y . I m p o r t a t i o n w a s s t o p p e d for d r u g s r e g a r d e d a s t h e r a p e u t i c a l l y i r r a t i o n a l , t o o e x p e n s i v e c o m p a r e d with a l t e r n a t i v e t h e r a p i e s , o r excessively toxic. The result was a reduction o f t h e n u m b e r of imported drugs from 2 , 1 0 0 to 6 0 0 . W o r l d w i d e c o m p e t i t i v e t e n d e r i n g for large q u a n t i t i e s of d r u g s on t h e limited list r e d u c e d t h e n a t i o n ' s drug bill b y o v e r 4 0 p e r c e n t (Lall and B i b i l e , 1978). D r u g s w e r e not i m p o r t e d by t h e S P C w h i c h did not c a r r y q u a l i t y certification from a b r o a d or w h i c h failed to satisfy their o w n quality c o n t r o l labora t o r y . B u t s o m e s u b s t a n d a r d g e n e r i c p r o d u c t s did slip t h r o u g h t h e n e t , and t h e s e i n s t a n c e s w e r e highly p u b l i c i s e d b y t h e t r a n s n a t i o n a l b r a n d - n a m e i m p o r t e r s . A n o t h e r part o f t h e p r o g r a m m e o f reform was the r e p l a c e m e n t of brand n a m e s with generic prescribing. The t r a n s n a t i o n a l s successfully f o m e n t e d s t r o n g o p p o s i t i o n t o this a m o n g t h e Sri L a n k a n m e d i c a l p r o f e s s i o n . Sales r e p r e s e n t a t i v e s b e c a m e l o b b y i s t s a n d political o r g a n i s e r s . T h e r e l a t i o n s h i p b e t w e e n the S P C and t h e foreign f i r m s w a s bad. D u r i n g 1974 Pfizer refused an S P C r e q u e s t to m a k e t e t r a c y c l i n e c a p s u l e s from r a w m a t e r i a l w h i c h t h e g o v e r n m e n t had a l r e a d y p u r c h a s e d from H o e c h s t . T h e result w a s t h a t t e t r a c y c l i n e c a p s u l e s h a d to be airlifted into t h e c o u n t r y at g r e a t e x p e n s e (Lall and B i b i l e , 1978). I n r e t a l i a t i o n , t h e S P C , with t h e s u p p o r t o f t h e M i n i s t e r for I n d u s t r i e s , m o v e d for t h e n a t i o n a l i s a t i o n o f Pfizer. H o w e v e r , t h e U S g o v e r n m e n t a c t e d decisively t o p r e v e n t n a t i o n a l i s a t i o n . ' T h e U S A m b a s s a d o r p e r s o n a l l y i n t e r v e n e d with t h e P r i m e M i n i s t e r i n t h e m a t t e r ' (Lall a n d B i b i l e , 1978: 3 1 4 ) . I n t h e final a n a l y s i s , t h e s m a l l c o u n t r y p r o v e d n o m a t c h for t h e m i g h t o f t h e m u l t i n a t i o n a l s . A l r e a d y the reforms were breaking d o w n when the election of a n o n - s o c i a l i s t g o v e r n m e n t i n 1977 saw t h e a l m o s t total d i s m a n t l i n g ofthe SPC. T h i s k i n d of flexing of m u s c l e s by m u l t i n a t i o n a l s in the T h i r d W o r l d i s all t o o c o m m o n . M u l l e r ( 1 9 8 2 : 3 7 - 8 ) has p r o v i d e d o n e a c c o u n t of a w a r n i n g from t h e W e s t G e r m a n e m b a s s y to a T a n z a n i a n u n i v e r s i t y a b o u t t h e i r d e p e n d e n c e o n G e r m a n aid t o b u i l d a n e w e n g i n e e r i n g school after t w o of its m e d i c a l faculty 271

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c i r c u l a t e d a p a p e r criticizing t h e G e r m a n c o m p a n y , A s t a W e r k e , for m a r k e t i n g in Africa a d r u g which had b e e n b a n n e d in t h e UK a n d U S o n safety g r o u n d s . N e v e r t h e l e s s , t h e d r a m a t i c e v e n t s o f Sri L a n k a have n o w b e e n r e p l a c e d by a b r o a d - b a s e d T h i r d W o r l d a s s a u l t on drug prices s u p p o r t e d b y t h e U n i t e d N a t i o n s . W H O has p r o d u c e d a list o f 2 2 5 ' e s s e n t i a l d r u g s ' w h i c h form a g u i d e l i n e for t h e g r o w i n g n u m b e r of c o u n t r i e s w h i c h w i s h t o r e d u c e drug costs b y p r u n i n g n o n - e s s e n t i a l i m p o r t s . T h e m o s t d r a m a t i c r e c e n t initiative has b e e n b y the B a n g l a d e s h i g o v e r n m e n t w h i c h , i n J u n e 1982, w i t h d r e w 4 0 per cent of t h e d r u g s on t h e m a r k e t (a total of 1,792 p r o d u c t s ) w h i c h t h e g o v e r n m e n t v i e w e d as d a n g e r o u s , u s e l e s s or o v e r p r i c e d . A n u m b e r o f c o u n t r i e s h a v e i n s t i t u t e d a c e n t r a l drug p r o c u r e m e n t system: Algeria, Brazil, Chad, Egypt, Ethiopia, Guinea, India, I r a q , R w a n d a , S y r i a , T a n z a n i a and U g a n d a , a m o n g o t h e r s ( G e r e f f i , 1979: 7 3 ) . C e n t r a l i s e d b u y i n g p r o v i d e s t h e cost a d v a n t a g e s o f bulk p u r c h a s e s , b a r g a i n i n g p o w e r , and s u p e r i o r p r o d u c t information-gathering. O b v i o u s l y , t h o u g h , t h e u l t i m a t e s o l u t i o n t o i m p o s s i b l e d r u g costs is for t h e rest o f t h e T h i r d W o r l d to follow t h e I n d i a n e x a m p l e and d e v e l o p their own manufacturing capacity. The interesting conseq u e n c e of such a shift from t h e point of view of this b o o k w o u l d be a higher incidence of Good Manufacturing Practice violations, i n d i a n i s a t i o n ' has p r o d u c e d o v e r 2,500 small drug p r o d u c e r s o n the s u b - c o n t i n e n t . O v e r a n e i g h t - y e a r p e r i o d e n d i n g i n 1968, nearly o n e fifth of t h e d r u g s a n a l y s e d in I n d i a w e r e found to be s u b s t a n d a r d ( A g a r w a l , 1978b: 6 1 ) . S i m i l a r l y , w h e n P a k i s t a n p r e c i p i t o u s l y a t t e m p t e d t o a b o l i s h b r a n d n a m e s i n 1973, a d e q u a t e quality c h e c k s o n t h e g e n e r i c s u b s t i t u t e s w h i c h f l o o d e d t h e m a r k e t w e r e not p r o v i d e d for. T h e r e s e n t m e n t o f d o c t o r s o v e r the quality p r o b l e m s , c o m b i n e d w i t h l o b b y i n g b y t h e t r a n s n a t i o n a l s ( i n c l u d i n g total withd r a w a l from P a k i s t a n b y C i b a - G e i g y ) , c a u s e d t h e e x p e r i m e n t t o fail. Q u a l i t y p r o b l e m s on a large scale a r e not i n e v i t a b l e if a d e q u a t e G M P i n s p e c t i o n a n d a well-staffed n a t i o n a l t e s t i n g l a b o r a t o r y are p r o v i d e d for. C e r t a i n l y t h e e v i d e n c e is, a s w e saw i n C h a p t e r 4 , that i t i s t h e t r a n s n a t i o n a l s w h o , o n a v e r a g e , have the highest G M P s t a n d a r d s . N e v e r t h e l e s s , it is p o s s i b l e to find individual g e n e r i c m a n u f a c t u r e r s w h o h a v e s t a n d a r d s t o m a t c h the t r a n s n a t i o n a l s . I n d e e d t h e t r a n s n a t i o n a l s t h e m s e l v e s r e c o g n i s e this w h e n t h e y buy from, o r license o u t p r o d u c t i o n t o , g e n e r i c m a n u f a c t u r e r s . 272

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A m e r i c a n t r a n s n a t i o n a l s have e v e n b e e n k n o w n o n o c c a s i o n s t o b u y d r u g s from E a s t e r n E u r o p e a n m a n u f a c t u r e r s . N e v e r t h e l e s s , T h i r d W o r l d g o v e r n m e n t s w h o m o v e t o foster i n d i g e n o u s p r o d u c t i o n c a n n o t afford t o lose sight o f t h e reality t h a t , u n l e s s r e g u l a t e d , t h e c u t t i n g of c o r n e r s on quality will be e n d e m i c in small-scale drug production. I n t h e final a n a l y s i s , t h e T h i r d W o r l d c a n n o t d o w i t h o u t the t r a n s n a t i o n a l s . M o s t o f t h e t o p r e s e a r c h and d e v e l o p m e n t e x p e r t i s e in t h e w o r l d is a c c u m u l a t e d w i t h i n t h e t r a n s n a t i o n a l s . It will c o n t i n u e t o b e t h e t o p t w e n t y c o m p a n i e s w h o will p r o v i d e most o f t h e i m p o r t a n t t h e r a p e u t i c b r e a k t h r o u g h s . T h e T h i r d W o r l d has a n i n t e r e s t i n e n t i c i n g t h e t r a n s n a t i o n a l s t o d e v o t e m o r e than the m i n u s c u l e p r o p o r t i o n o f t h e i r r e s e a r c h t a l e n t w h i c h they c u r r e n t l y a l l o c a t e t o t r o p i c a l d i s e a s e s . W h i l e t h e T h i r d W o r l d c a n n o t afford to cut itself off c o m p l e t e l y from the flow of i n n o v a t i o n s from t h e t r a n s n a t i o n a l s , n e i t h e r can it afford to buy d r u g s on the t r a n s n a t i o n a l s ' t e r m s . W h y should d e v e l o p i n g c o u n t r i e s pay a gross p r e m i u m for r e s e a r c h and d e v e l o p m e n t e x p e n d i t u r e w h i c h i s p r i m a r i l y d i r e c t e d a t 'rich m a n ' s d i s e a s e s ' ? T h e r e a r e t w o s o u n d r e a s o n s why i t i s d e f e n s i b l e for d e v e l o p i n g c o u n t r i e s t o cut t h e i r d e p e n d e n c y o n the t r a n s n a t i o n a l s , e v e n w h e n t h a t r e s u l t s in t h e i r c o n s u m e r s g e t t i n g d r u g s w h i c h have a higher i n c i d e n c e o f q u a l i t y failure. T h e first i s t h a t i n d i g e n o u s p r o d u c t i o n s t a n d a r d s will r e m a i n low so long as local m a n u f a c t u r e r s are a l l o w e d to o p e r a t e only on t h e fringe o f t h e i n d u s t r y . At one t i m e all the t r a n s n a t i o n a l s were b a c k r o o m o p e r a t o r s . They developed s t a n d a r d s o f e x c e l l e n c e w h e n t h e y w e r e given o p p o r t u n i t i e s t o e x p a n d . S e c o n d l y , it is not really p u t t i n g m o n e y a h e a d of p e o p l e to justify t o l e r a t i n g c h e a p d r u g s which d o not a l w a y s r e a c h the h i g h e s t s t a n d a r d s o f q u a l i t y . I n c o u n t r i e s w h e r e t h e r e i s not e n o u g h m e d i c i n e t o g o a r o u n d , d r u g s b e l o w half price can m e a n twice a s m a n y p e o p l e g e t t i n g m e d i c i n e . O b v i o u s l y t h e r e is a cut-off point b e y o n d w h i c h such a t e r r i b l e trade-off could not be c o u n t e n a n c e d . E v e n m o r e i m p o r t a n t i s t h e t r a d e - o f f b e t w e e n public e x p e n d i t u r e o n d r u g s and e x p e n d i t u r e o n o t h e r h e a l t h p r i o r i t i e s . Third W o r l d c o u n t r i e s s p e n d a n u n a c c e p t a b l y high p r o p o r t i o n (often o v e r 4 0 per c e n t ( M e d a w a r , 1982: 2 2 ) ) o f t h e i r small h e a l t h b u d g e t s o n d r u g s , w h e n d r u g s a r e far from t h e highest p r i o r i t y . T h e g r e a t e s t a t t e n t i o n n e e d s to be d e v o t e d to the underlying causes of Third World health p r o b l e m s i n m a l n u t r i t i o n and p o o r s a n i t a t i o n . P r e v e n t i v e m e d i c i n e is a h i g h e r p r i o r i t y t h a n pills; clean w a t e r is m o r e i m p o r t a n t t h a n 273

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a n t i b i o t i c s , food m o r e i m p o r t a n t t h a n v i t a m i n pills. W h e n s o m e o f t h e m o n e y n o w b e i n g s p e n t o n d r u g s can b e r e d i r e c t e d t o c l e a n i n g up t h e s e u n d e r l y i n g p r o b l e m s , m o r e lives will be saved. M o r e o v e r , as M u l l e r (1982: 112-13) has persuasively a r g u e d , it can be s o u n d h e a l t h policy even to k e e p d r u g s off the m a r k e t which have b e e n p r o v e n effective in clinical studies w h e n s t a n d a r d s of medical p r a c t i c e a r e m o r e likely t o d e l i v e r t h e side-effects t h a n t h e c u r e : It is so e a s y to select a g r o u p of p a t i e n t s all suffering from t h e s a m e c o m p l a i n t , t r e a t t h e m with a drug u n d e r c o n t r o l l e d c o n d i t i o n s , and s h o w t h a t it is effective. It is quite a n o t h e r thing to l a u n c h a d r u g into a c o m m u n i t y w h e r e t h e r e is no c o n t r o l o v e r t h e q u a l i t y o f t h e d i a g n o s i s , nor o f t r e a t m e n t , nor o f t h e p a t i e n t ' s ability to buy t h e d r u g or t a k e it as i n s t r u c t e d . E v i d e n c e from t h e d e v e l o p e d c o u n t r i e s is not e n c o u r a g i n g in t h i s r e g a r d . W h a t s t u d i e s h a v e b e e n d o n e suggest that d o c t o r s ' d i a g n o s e s a r e often right only 5 0 p e r c e n t o f t h e t i m e ; their p r e s c r i p t i o n s err s i m i l a r l y ; further, less t h a n half their p a t i e n t s t a k e t h e i r m e d i c i n e a s i n s t r u c t e d . T h i s implies t h a t p e r h a p s only o n e in e i g h t t i m e s is t h e right p e r s o n going to get t h e right m e d i c i n e at t h e right t i m e . T h e r e is e v e r y r e a s o n to e x p e c t t h e situation in the developing world to be w o r s e .

Towards effective regulation in the Third World
P h a r m a c e u t i c a l c o r p o r a t i o n s a r e forever k e e n t o p o i n t out t h a t they a l w a y s a b i d e by t h e laws o f t h e c o u n t r y in w h i c h they o p e r a t e . I am n o t a w a r e o f a n y p h a r m a c e u t i c a l t r a n s n a t i o n a l for which that w o u l d be t r u e . E v e n if it w e r e , for m a n y T h i r d W o r l d c o u n t r i e s this a m o u n t s t o s a y i n g t h a t t h e y d o n ' t b r e a k laws which d o n ' t exist. Such l a w s as do exist a r e not e n f o r c e d . I a d o p t e d t h e p r a c t i c e of asking e x e c u t i v e s in G u a t e m a l a w h a t t h e r e g u l a t i o n s (basically a health c o d e d a t i n g from 1946) had to say a b o u t a p a r t i c u l a r q u e s t i o n w h i c h w a s u n d e r d i s c u s s i o n . N o n e of t h e m w a s a b l e to lay h a n d s on a copy o f t h e r e g u l a t i o n s . S o i r r e l e v a n t w e r e g o v e r n m e n t health regulations to the running of the c o m p a n y that some even doubted w h e t h e r t h e c o m p a n y had a c o p y , or if it d i d , t h e y did not k n o w h o w to g e t hold of it. W i t h r e s p e c t to drug r e g i s t r a t i o n , one e x e c u t i v e e x p l a i n e d : ' S o long as we h a v e t h e right a p p l i c a t i o n form and fill it o u t c o r r e c t l y , w e n e v e r get o u r a p p l i c a t i o n r e j e c t e d . ' A n o t h e r d e s c r i b e d the situation as 'practical a n a r c h y ' . 274

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P r a c t i c a l a n a r c h y d e s c r i b e s the r e g u l a t o r y s i t u a t i o n i n most Third W o r l d c o u n t r i e s . E v e n i n the m o s t s o p h i s t i c a t e d p h a r m a c e u t i c a l m a r k e t s i n t h e T h i r d W o r l d t h e s i t u a t i o n i s frightening. T a k e B r a z i l , t h e l a r g e s t d r u g m a r k e t i n the T h i r d W o r l d and t h e second largest m a n u f a c t u r e r o f d r u g s b e h i n d I n d i a . Brazil c o n s u m e s m o r e d r u g s than the United Kingdom (James, in UN Centre on Transnational C o r p o r a t i o n s , 1979: 114). It has by far t h e m o s t s o p h i s t i c a t e d n a t i o n a l t e s t i n g l a b o r a t o r y i n L a t i n A m e r i c a , staffed b y fourteen s c i e n t i s t s . B u t for t h e w h o l e c o u n t r y t h e r e are only two p h a r m a c e u t i c a l i n s p e c t o r s . T h e s e t w o i n s p e c t o r s have r e s p o n s i b i l i t i e s that r a n g e o v e r r e c o r d s for p r i c e c o n t r o l s , G M P s , G L P s , t h e lot. M o s t L a t i n A m e r i c a n c o u n t r i e s h a v e n o i n s p e c t o r s . T h e s i t u a t i o n has not i m p r o v e d g r e a t l y since t h e P a n A m e r i c a n H e a l t h O r g a n i s a t i o n c o n d u c t e d a s u r v e y of L a t i n A m e r i c a i n c l u d i n g the C a r i b b e a n in 1968: ' T h e c o u n t r i e s o f L a t i n A m e r i c a are e x p e n d i n g only $ 3 , 2 2 1 , 0 0 0 p e r y e a r for i n s p e c t i n g their 2,200 drug firms and testing t h e $ 1 , 4 9 2 , 0 0 0 , 0 0 0 o f d r u g s c o n s u m e d per year b y their c i t i z e n s ' ( Y a k o w i t z , 1971). N e v e r t h e l e s s , t h e r e a r e r u m b l i n g s o f r e f o r m . R e a l i s i n g t h a t the c o s t s o f effective n a t i o n a l r e g u l a t o r y a g e n c i e s are b e y o n d their r e a c h . T h i r d W o r l d c o u n t r i e s are b e g i n n i n g t o d e v e l o p r e g i o n a l r e g u l a t o r y s y s t e m s . T h e C a r i b b e a n c o m m u n i t y , with U n i t e d N a t i o n s a s s i s t a n c e , is l e a d i n g t h i s m o v e m e n t by setting up a r e g i o n a l drug testing laboratory in Jamaica. The World Health Organisation is d e v e l o p i n g s i m p l e t e s t s for d r u g quality w h i c h can confirm the i d e n t i t y a n d basic efficacy of d r u g s in s i t u a t i o n s w h e r e l a b o r a t o r i e s d o n o t exist. T h e i d e a i s t h a t p r i m a r y h e a l t h care w o r k e r s a l o n g the d i s t r i b u t i o n c h a i n can d o p e r i o d i c basic t e s t i n g . W H O i s also assisting b e l e a g u e r e d T h i r d W o r l d r e g u l a t o r y a g e n c i e s b y t h e p u b l i c a t i o n of a q u a r t e r l y b u l l e t i n p r o v i d i n g i n f o r m a t i o n on t h e r e g u l a t o r y s t a t u s i n different p a r t s o f t h e w o r l d o f n e w and old d r u g s . T h e e m e r g i n g i n t e r n a t i o n a l and r e g i o n a l c o - o p e r a t i o n i n the T h i r d W o r l d is e n c o u r a g i n g , as is t h e c o n s t r u c t i v e role b e i n g played by an array of UN agencies ( W H O , U N C T A D , U N I D O , U N D P and U N I C E F (see A g a r w a l , 1978b)). Third World countries which c a n n o t afford effective r e g u l a t i o n n a t i o n a l l y h a v e most to gain from i n t e r n a t i o n a l r e g u l a t o r y initiatives such a s t h e Certification S c h e m e on the Quality of Pharmaceutical P r o d u c t s Moving in International C o m m e r c e (see C h a p t e r 4 ) and W H O ' s i n t e r n a t i o n a l d r u g a d v e r s e reaction-reporting scheme.-' In addition to United Nations i n i t i a t i v e s t o t r a n s f e r quality c o n t r o l t e c h n o l o g y t o t h e T h i r d W o r l d , 275

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t h e S w e d i s h g o v e r n m e n t is p l a y i n g an i m p o r t a n t r o l e . A S w e d i s h s t a t e - o w n e d p h a r m a c e u t i c a l company is helping developing count r i e s to e s t a b l i s h p l a n t s to m a n u f a c t u r e their o w n essential d r u g s of high quality. G r o w i n g n u m b e r s o f d e v e l o p i n g c o u n t r i e s are d e m a n d i n g certific a t e s of free sale b e f o r e t h e y will a l l o w d r u g s to be i m p o r t e d - that i s , a d o c u m e n t i n d i c a t i n g t h a t t h e drug is a p p r o v e d for c o n s u m p t i o n in t h e e x p o r t i n g c o u n t r y . W h i l e this p r o v i d e s s o m e g u a r a n t e e s for a g o v e r n m e n t w h i c h c a n n o t afford its o w n e x h a u s t i v e scientific evalua t i o n of a p r o d u c t , we h a v e seen in this c h a p t e r t h a t t r a n s n a t i o n a l c o r p o r a t i o n s h a v e g r e a t flexibility in p l a y i n g t h e w o r l d system to c i r c u m v e n t such p r o t e c t i o n s . A r e g i s t r a t i o n - m a r k e t i n g strategy can b e d e v e l o p e d t h a t c o n c e n t r a t e s o n early s t r a t e g i c n e w drug a p p r o v a l s in foreign c o u n t r i e s from w h i c h initial e x p o r t s will be sourced. E l s e w h e r e ( B r a i t h w a i t e , 1979a, 1980) I have d e s c r i b e d law evasion as a more p r e d o m i n a n t m o d u s operandi of transnational c o r p o r a t i o n s t h a n b l a t a n t law v i o l a t i o n . T h e c o r p o r a t i o n e x p l o i t s d i f f e r e n c e s in n a t i o n a l laws to find t h e line of least r e s i s t a n c e to a c h i e v i n g its e n d s . T r a n s f e r p r i c i n g , w h i c h will be discussed in t h e n e x t c h a p t e r , is a n o t h e r classic i l l u s t r a t i o n of a law e v a s i o n strategy ( t a x l a w s a r e n o t v i o l a t e d , but e v a d e d ) . T h e c o n d u c t o f clinical t e s t i n g o n T h i r d W o r l d ' g u i n e a p i g s ' w h i c h w o u l d not b e p e r m i t t e d as safe in d e v e l o p e d c o u n t r i e s and d u m p i n g are i l l u s t r a t i o n s of i n t e r n a t i o n a l law e v a s i o n par e x c e l l e n c e . O n e e v a d e s laws on h o w a p r o d u c t s h o u l d be i n t r o d u c e d to t h e m a r k e t ; the o t h e r e v a d e s a law t h a t t h e p r o d u c t s h o u l d b e w i t h d r a w n from the m a r k e t . T h e s o l u t i o n to t h e p r o b l e m of global c o r p o r a t i o n s p l a y i n g off the r e g u l a t o r y s t a n d a r d s of o n e c o u n t r y a g a i n s t t h o s e of a n o t h e r is a d e g r e e of h a r m o n i s a t i o n of those standards. The United Nations is a l r e a d y f o s t e r i n g i n t e r n a t i o n a l m i n i m u m s t a n d a r d s with r e s p e c t t o G M P s , t e s t i n g o f d r u g q u a l i t y , p r o t e c t i o n o f t h e subjects o f h u m a n e x p e r i m e n t a t i o n , and industrial h e a l t h and safety. W h i l e cynicism is t h e m o s t c o m m o n r e s p o n s e t o such U N a g r e e m e n t s , t h e y d o have v a l u e w h e n t h e a c c o r d is struck w i t h i n t h e c o n t e x t of a w i d e r will to r e f o r m . T h e r e is a will in m o s t c o u n t r i e s t o d a y to t i g h t e n up the u n e v e n n e s s in the regulatory stringency applied to the p h a r m a c e u t i c a l i n d u s t r y . I n s o m e cases e v e n t h e t r a n s n a t i o n a l c o m p a n i e s a r e p r e p a r e d t o s u p p o r t t o u g h e r r e g u l a t o r y c o n t r o l s w h e r e t h e y can see t h a t this will i m p o s e costs on local c o m p e t i t o r s w h i c h t h e t r a n s nationals already meet.
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G o v e r n m e n t s o f t h e w o r l d d o not have t o h a r m o n i s e their laws perfectly to p r e v e n t t r a n s n a t i o n a l s from p l a y i n g o n e set of laws off a g a i n s t a n o t h e r . I n d e e d t h e p r a c t i c a l e c o n o m i c c o n s t r a i n t s o f law e v a s i o n are often such t h a t o n e c o u n t r y t h a t sets h i g h e r r e g u l a t o r y s t a n d a r d s can effectively i m p o s e its h i g h e r s t a n d a r d s on all o t h e r c o u n t r i e s i n t h e r e g i o n . S t r a t e g i c g o v e r n m e n t a c t i o n can c h a n g e lowest-common-denominator regulation into highest-commonfactor r e g u l a t i o n . F o r e x a m p l e , a C e n t r a l A m e r i c a n r e g i o n a l d i r e c t o r for a t r a n s n a t i o n a l said t h a t w h e n C o s t a Rica b a n n e d a s u s p e c t e d c a r c i n o g e n i c a d d i t i v e i n o n e o f its p r o d u c t s , t h e c o m p a n y t o o k o u t t h e a d d i t i v e from all p r o d u c t s being d i s t r i b u t e d in all C e n t r a l A m e r i c a n c o u n t r i e s since t h e cost o f special p r o d u c t i o n r u n s for t h e C o s t a R i c a n m a r k e t w a s p r o h i b i t i v e . S i m i l a r l y , C o s t a R i c a h a s ruled t h a t all d i s c l o s u r e s and w a r n i n g s m a d e o n t h e drug p a c k a g e s a n d i n s e r t s in t h e c o u n t r y of origin should be identically m a d e i n C o s t a R i c a . T h e s a m e e x e c u t i v e e x p l a i n e d : ' F r o m o u r point of v i e w t h a t m e a n s t h e y all h a v e to say w h a t we say in [our h o m e c o u n t r y ] b e c a u s e t h e cost of h a v i n g different p a c k a g i n g for t h e different C e n t r a l A m e r i c a n countries is too great.' A g a i n , t h o u g h , because of the capacity of the transnational to shift its a c t i v i t i e s a r o u n d t h e w o r l d , t h e r e are limits to h o w high C o s t a R i c a can p u s h u p all C e n t r a l A m e r i c a n s t a n d a r d s : ' L e t m e put it t h i s w a y . It w o u l d not be in our i n t e r e s t s to l o c a t e m o r e of o u r m a n u f a c t u r i n g in the U n i t e d States. For [one o f t h e c o m p a n y ' s main p r o d u c t s ] our literature in E u r o p e , Africa, Australia, South A m e r i c a a n d so on c l a i m s s o m e 10 i n d i c a t i o n s for t h e p r o d u c t . In t h e U S , t h e F D A a p p r o v e s only t h r e e . W e d o n ' t w a n t t o b e forced b y C o s t a R i c a and o t h e r s t o suggest only t h r e e i n d i c a t i o n s worldw i d e w h e n w e b e l i e v e i n 10.' E v e n t h o u g h C o s t a R i c a d o e s not push u p s t a n d a r d s t o t h e level o f t h e U n i t e d S t a t e s , t h e e n c o u r a g i n g t h i n g is t h a t t h e y can p u s h t h e m up to s o m e d e g r e e a c r o s s the w h o l e of C e n t r a l A m e r i c a . W h e r e i n t e r n a t i o n a l c o n v e n t i o n s fail, little C o s t a R i c a can s u c c e e d i n a c h i e v i n g s o m e i n t e r n a t i o n a l h a r m o n i s i n g o f minimum standards. B e c a u s e the F D A is the world's p r e m i e r regulatory agency, the U n i t e d S t a t e s can a c h i e v e m o r e t h a n any c o u n t r y i n raising regul a t o r y s t a n d a r d s w o r l d w i d e . A s soon a s t h e F D A a p p r o v e s a d r u g , m a n y c o u n t r i e s follow t h e i r lead. T h e F D A i s n o l o n g e r only t h e g u a r d i a n ofthe health of A m e r i c a n s ; it is the guardian o f t h e health o f t h e w o r l d . I n C h a p t e r 4 w e saw t h a t w h e n t h e F D A i n t r o d u c e d G L P r e g u l a t i o n s , B r i t i s h c o n t r a c t l a b o r a t o r i e s p l e a d e d with t h e m 277

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for an i n s p e c t i o n so t h a t t h e y m i g h t a n n o u n c e to their c u s t o m e r s t h a t t h e y h a d b e e n certified a s m e e t i n g F D A s t a n d a r d s . E v e n t h e S w i s s t r a n s n a t i o n a l set m a n y o f t h e i r w o r l d w i d e p r o c e d u r e s i n a r e a s like t e s t i n g for sterility and p o t e n c y t o m e e t F D A r e q u i r e m e n t s . F o r m a n y m a t t e r s i t m a k e s e c o n o m i c sense t o m e e t t h e h i g h e s t s t a n d a r d s e v e r y w h e r e r a t h e r t h a n t o confuse e m p l o y e e s b y c h o p p i n g and c h a n g i n g . H o f f m a n - L a R o c h e p l a n t s i n I n d o n e s i a , t h e P h i l i p p i n e s , a n d S w i t z e r l a n d itself all o p e r a t e to m e e t m a n y s t a n d a r d s w h i c h w e r e w r i t t e n i n W a s h i n g t o n . T h e U n i t e d States e n j o y s t h e e c o n o m i c benefits from d o m i n a t i n g the w o r l d ' s p h a r m a c e u t i c a l m a r k e t s . I t c a n n o t enjoy t h o s e benefits w h i l e d e n y i n g its r e s p o n s i b i l i t y for uplifting w o r l d w i d e standards of c o n s u m e r protection.

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Briloff ( 1 9 7 2 : 1-2) tells o f t h e o w n e r of a g r o w i n g c o m p a n y w h o w a n t e d to i n c r e a s e its r e s p e c t a b i l i t y by h a v i n g t h e b o o k s a u d i t e d by o n e o f t h e l a r g e s t a c c o u n t i n g f i r m s . T h e p a r t n e r s o f t h e first t h r e e firms i n t e r v i e w e d w e r e a s k e d , ' W h a t d o e s 2 plus 2 e q u a l ? ' . E a c h r e p l i e d ' F o u r , o f c o u r s e . ' T h e n e x t firm i n t e r v i e w e d w o n t h e client w h e n , after s e r i o u s reflection, t h e p a r t n e r a n s w e r e d , ' W h a t n u m b e r did y o u h a v e i n m i n d ? ' A b o o k on c o r p o r a t e c r i m e in i n t e r n a t i o n a l b u s i n e s s w o u l d not be c o m p l e t e w i t h o u t m e n t i o n o f t h e r a n g e o f financial a b u s e s w h i c h t a k e p l a c e . W h i l e i t i s t h e k i n d s o f w h e e l i n g s and d e a l i n g s fleetingly c o v e r e d in this c h a p t e r which constitute the layperson's e p i t o m e of c o r p o r a t e c r i m e , i n m a n y w a y s t h e y a r e t h e least s e r i o u s forms o f l a w b r e a k i n g i n t h e p h a r m a c e u t i c a l i n d u s t r y . I n most cases they p o s e no d i r e c t t h r e a t to h u m a n life and l i m b . In m a n y cases t h e y involve the victimisation of one corporation by another, rather than t h e v i c t i m i s a t i o n o f c o n s u m e r s o r w o r k e r s . I n d e e d , i n m a n y cases t h e y i n v o l v e a mix of c o r p o r a t e c r i m e by o n e c o r p o r a t i o n against a n o t h e r a n d w h i t e - c o l l a r c r i m e b y a n i n d i v i d u a l e m p l o y e e against his or h e r e m p l o y e r . T h e l a t t e r on its o w n w o u l d not c o n s t i t u t e c o r p o r a t e c r i m e a s i t has b e e n defined h e r e .

The making ofthe McKesson empire
I n t h e 1920s, D r F . D o n a l d C o s t e r t o o k c o n t r o l o f M c K e s s o n and R o b b i n s , a n old and r e s p e c t e d p h a r m a c e u t i c a l c o m p a n y , but h a r d l y a h i g h flyer on t h e stock e x c h a n g e . C o s t e r , e v e r y o n e b e l i e v e d , w a s a f i n a n c i a l g e n i u s . ' By 1938 he had built up t h e c o m p a n y to o n e o f t h e 279

Fiddling
t h r e e l a r g e s t p h a r m a c e u t i c a l c o m p a n i e s i n the U n i t e d S t a t e s . I n p a r t , D r C o s t e r built u p t h e e m p i r e b y selling c o m p a n y p r o d u c t s w h i c h h a d high a l c o h o l c o n t e n t ( m a i n l y hair t o n i c ) t o u n d e r w o r l d b o o t l e g g e r s d u r i n g p r o h i b i t i o n . H o w e v e r , C o s t e r ' s real g e n i u s w a s i n c o n v i n c i n g b a n k s t h a t M c K e s s o n and R o b b i n s had assets w h i c h i t did not i n fact h a v e . W h i l e o t h e r c o m p a n i e s c r u m b l e d d u r i n g the d e p r e s s i o n , b a n k s c o n t i n u e d t o p o u r c a p i t a l into M c K e s s o n and Robbins. Dr C o s t e r a c h i e v e d such a r e p u t a t i o n for m a n a g e r i a l brilliance a n d social r e s p e c t a b i l i t y t h a t in 1937 he w a s a p p r o a c h e d by influential s e c t i o n s of t h e R e p u b l i c a n Party to run a g a i n s t R o o s e v e l t for p r e s i d e n t . A d v i s e d l y , h e d e c l i n e d . I n 1938 C o s t e r ' s m a s q u e r a d e w a s d i s c o v e r e d . T h e p r e s i d e n t o f M c K e s s o n and R o b b i n s w a s i n fact P h i l l i p M u s i c a , o n e of t h e g r e a t e s t con men in A m e r i c a n h i s t o r y . As P h i l l i p M u s i c a he had b a n k r u p t e d a n u m b e r of c o m p a n i e s after f r a u d u l e n t l y p r o c u r i n g l o a n s o n t h e s t r e n g t h o f nonexistent assets. Before the c o m p a n i e s were b a n k r u p t e d , however, t h e l o a n m o n e y s had b e e n d i v e r t e d t o M u s i c a family c o m p a n i e s . M u s i c a had s e r v e d t w o prison s e n t e n c e s . O n e s e n t e n c e for b r i b i n g c u s t o m s officials had b e e n p r e m a t u r e l y t e r m i n a t e d w h e n M u s i c a s w u n g a p a r d o n from no less t h a n P r e s i d e n t Taft. ' D r C o s t e r ' s ' m u c h v a u n t e d M D a n d Phd d e g r e e s from the U n i v e r s i t y o f H e i d e l b e r g were fake. D u r i n g his p e r i o d a t t h e h e l m o f M c K e s s o n and R o b b i n s , ' D r C o s t e r ' s i p h o n e d off a b o u t $20 million in c o m p a n y funds by having t h e c o m p a n y pay to build up an i n c r e a s i n g i n v e n t o r y of bulk d r u g s in its C a n a d i a n w a r e h o u s e . T h e i n v e n t o r y w a s , i n fact, virtually none x i s t e n t . M o n e y t o pay for t h e i m a g i n a r y b u l k d r u g s w a s being d i r e c t e d t h r o u g h a d u m m y c o m p a n y to the president of M c K e s s o n a n d his family. It is b e l i e v e d t h a t s o m e of this m o n e y w a s used to pay off b l a c k m a i l e r s ( a m o n g t h e m , D u t c h S c h u l t z ) w h o w e r e t h r e a t e n ing t o r e v e a l ' D r C o s t e r ' s ' past t o t h e b o a r d . B u t M c K e s s o n a n d R o b b i n s could h a r d l y c o m p l a i n a b o u t the d e p r e d a t i o n s o f t h e i r p r e s i d e n t . T h e c o m p a n y had b e e n a g r e a t e r beneficiary o f ' C o s t e r ' s ' a c u m e n at materialising non-existent assets t h a n ' C o s t e r ' himself. S i n g l e h a n d e d l y , ' C o s t e r ' built u p t h e e m p i r e . I f t h e r e w e r e any real v i c t i m s , t h e y w e r e t h e b a n k s and t h e c o m p e t i t o r s ' C o s t e r ' had c r u s h e d , and t h e r e p u t a t i o n o f t h e c o m p a n y ' s a u d i t o r s , Price W a t e r h o u s e . 'Coster' committed suicide after t h e persistent company t r e a s u r e r d i s c o v e r e d t h a t t h e C a n a d i a n s t o c k p i l e o f bulk d r u g s w a s 280

Fiddling n o t a real c o m p a n y asset. ' C o s t e r ' had left M c K e s s o n and R o b b i n s w i t h e n o u g h s t r e n g t h t o r e c o v e r from t h e o v e r n i g h t e v a p o r a t i o n o f a large slice of its p r e s u m e d a s s e t s . W i t h i n six m o n t h s the c o m p a n y h a d t u r n e d t h e c o r n e r o n t h e loss o f confidence and a d v e r s e p u b l i c i t y it suffered ( B a l d w i n and B e a c h , 1940). Sixty-six cities w e r e b o m b a r d e d with a n e w s p a p e r campaign of 'Facts A b o u t M c K e s s o n & R o b b i n s ' to r e s t o r e c o n f i d e n c e in t h e i m a g e of t h e c o m p a n y . S e v e r a l o f t h e o t h e r largest p h a r m a c e u t i c a l c o m p a n i e s j o i n e d with M c K e s s o n ' s p u b l i c r e l a t i o n s firm t o apply p r e s s u r e to dissuade two motion picture producers who wished to m a k e a film a b o u t C o s t e r - M u s i c a . M c K e s s o n and R o b b i n s is t o d a y n o w h e r e n e a r its z e n i t h a s o n e o f t h e t h r e e t o p p h a r m a c e u t i c a l c o m p a n i e s i n t h e U S . B u t this i s not b e c a u s e o f t h e 1938 s e t b a c k . F o r e m o s t , M c K e s s o n , as it is t o d a y , h a s not evolved as a r e s e a r c h - b a s e d p h a r m a c e u t i c a l c o m p a n y and t h e r e f o r e missed t h e b e n e f i t s o f m o n o p o l y profits from p r o d u c t s u n d e r p a t e n t . N e v e r t h e l e s s , with a n n u a l c o r p o r a t e sales of o v e r $3 billion, it r e m a i n s t o d a y p e r h a p s t h e l a r g e s t g e n e r i c m a n u f a c t u r e r and d i s t r i b u t o r i n the world.

C o m p a n y rips off c o m p a n y C o r p o r a t e c r i m e s i n w h i c h o n e c o m p a n y f i n a n c i a l l y victimises a n o t h e r are c o m m o n p l a c e in the international pharmaceutical i n d u s t r y . I n 1979 J o h n s o n and J o h n s o n successfully sued t h r e e firms ( W a s h i n g t o n W h o l e s a l e D r u g E x c h a n g e , J a y e s H o l d i n g Intern a t i o n a l , a n d J a y e s E x p o r t ) c o m p l a i n i n g t h a t t h e y had illegally c o n s p i r e d to o b t a i n d r u g s at d i s c o u n t r a t e s r e s e r v e d for d e v e l o p i n g c o u n t r i e s . J a y e s H o l d i n g I n t e r n a t i o n a l p u r c h a s e d 5,764 cases o f O r t h o - N o v u m b i r t h c o n t r o l pills and Sultrin t a b l e t s a t t h e d i s c o u n t rate by p r e t e n d i n g to represent the N i g e r i a n g o v e r n m e n t . J o h n s o n and J o h n s o n c o m p l a i n e d that the fraudulently obtained discount cost t h e m S2.3 m i l l i o n . D r u g c o m p a n i e s are also victimised b y n o n - d r u g c o m p a n i e s , f r e q u e n t l y w i t h a s s i s t a n c e from i n s i d e r s . K i c k b a c k s to insiders from s u p p l i e r s often m e a n t h a t d r u g c o m p a n i e s d o not m a k e t h e best p u r c h a s e s t h a t t h e m a r k e t can offer. T h e f i n a n c e d i r e c t o r o f o n e p h a r m a c e u t i c a l c o m p a n y told of a car d e a l e r w h o , in b i d d i n g for t h e l e a s e of e l e v e n n e w c a r s to t h e firm, offered to p r o v i d e an e x t r a car for t h e f i n a n c e d i r e c t o r . He i n t e n d e d to r e c o u p t h e cost of t h e g i v e a w a y by a d d i n g an e x t r a e l e v e n t h on to the n o r m a l price of e a c h 281

Fiddling of the eleven cars. A p p r o p r i a t e l y , the company concerned was called Fair Deal M o t o r s . C e r t a i n F D A officials b e l i e v e t h a t t h e r e i s o p e r a t i n g within t h e U n i t e d S t a t e s a g a n g of c o r p o r a t e c r i m i n a l s w h o specialise in t a k i n g o v e r pharmaceutical companies. They have managerial experience in p h a r m a c e u t i c a l s a n d o p e r a t e by p u r c h a s i n g s h a r e s in a c o m p a n y w h i c h is on a d o w n w a r d p a t h in t h e s t o c k m a r k e t . U l t i m a t e l y , by a v a r i e t y o f m e a n s t h e y gain effective c o n t r o l o f t h e c o m p a n y . I t i s b e l i e v e d t h a t i n o n e c a s e t h e g r o u p w a s actually invited b y d e s p e r a t e m a n a g e m e n t t o t a k e c o n t r o l o f t h e d e c l i n i n g p e r f o r m a n c e o f their c o m p a n y . Having taken control, the corporate criminals then i n t e n t i o n a l l y d e p r e s s t h e s h a r e p r i c e s further. This can be d o n e , for e x a m p l e , b y p a y i n g out v a r i o u s a c c r u e d d e b t s m o r e quickly t h a n t h e y a r e d u e . W h e n t h e s h a r e s d r o p e n o u g h the g r o u p b u y s u p e v e n m o r e a t rock b o t t o m v a l u e . T h e n e x t s t a g e o f t h e s t r a t e g y is to t a k e o v e r a c o m p a n y w h i c h is s i t t i n g on a lot of c a s h , but w h o s e s h a r e h o l d e r s are willing to sell c h e a p l y . In p h a r m a c e u t i c a l s it is often e a s i e r t h a n in o t h e r i n d u s t r i e s to find a c o m p a n y w i t h fat e a r n i n g s and s h a r e h o l d e r s w h o are n e v e r t h e l e s s willing t o sell. P e r h a p s t h e t a r g e t c o m p a n y has o n e m o d e r a t e l y successful p r e s c r i p t i o n d r u g p r o d u c i n g solid e a r n i n g s o n w h i c h t h e c o m p a n y i s t o t a l l y d e p e n d e n t . But t h e s h a r e h o l d e r s a r e willing to sell c h e a p l y b e c a u s e they k n o w that this o n e p r o d u c t is a b o u t to go off p a t e n t , to be t a k e n off t h e m a r k e t by F D A , or to be s u p e r s e d e d by a c o m p e t i t o r ' s n e w d i s c o v e r y . B e f o r e t h e c r a s h c o m e s , t h e h e a l t h y e a r n i n g s o f t h e n e w acquisit i o n p u s h u p t h e e a r n i n g s p e r f o r m a n c e o f the c o m p a n y i n t h e control of the c o r p o r a t e criminals. The paper performance looks g o o d a n d t h e n e w m a n a g e m e n t t e a m i s c r e d i t e d with setting t h e c o m p a n y b a c k o n a n u p w a r d p a t h . W h e n t h e share prices a p p r o a c h t h e i r z e n i t h , t h e g r o u p sells out w i t h a h e a l t h y capital gain on the o r i g i n a l cost o f t h e s h a r e s .
2

The Revco Medicaid fraud
I n a d d i t i o n t o c o r p o r a t e c r i m e s w h i c h involve victimising o t h e r c o m p a n i e s , t h e r e a r e t h o s e w h e r e g o v e r n m e n t s are v i c t i m s . O n e such c a s e w a s t h e R e v c o M e d i c a i d fraud, subject of an i m p r e s s i v e s t u d y by V a u g h a n ( 1 9 8 0 ) . R e v c o is not a p h a r m a c e u t i c a l m a n u f a c t u r e r , b u t a r e t a i l e r , a very large o n e listed in the F o r t u n e 500. R e v c o a n d t w o of its e x e c u t i v e s p l e a d e d no c o n t e s t to a n u m b e r of 282

Fiddling falsification c o u n t s . T h e e x e c u t i v e s w e r e fined $2,000 e a c h and the c o r p o r a t i o n $5().(XK), in a d d i t i o n to b e i n g r e q u i r e d to m a k e restitut i o n of $ 5 2 1 , 5 2 1 to t h e O h i o D e p a r t m e n t of P u b l i c W e l f a r e for the illegally paid M e d i c a i d p a y m e n t s . R e v c o stock suffered a limited d o w n t u r n for a short p e r i o d of t i m e ( V a u g h a n . 1979: 2 0 0 ) . T h e case is i n t e r e s t i n g in t h a t it i l l u s t r a t e s h o w , e v e n in the a r e a of financial c r i m e s , an a v a r i c i o u s d e s i r e for i l l e g i t i m a t e profits c a n n o t e x p l a i n s o m e m a j o r offences. W h e n R e v c o m o v e d its c o r p o r a t e h e a d q u a r t e r s in 1975 b o x e s of c l a i m s for p r e s c r i p t i o n s given to M e d i c a i d r e c i p i e n t s b y R e v c o p h a r m a c i e s w e r e found. T h e s e w e r e c l a i m s w h i c h had b e e n rejected b y t h e O h i o D e p a r t m e n t o f PublicWelfare for r e i m b u r s e m e n t . The government's computerised s c r e e n i n g s y s t e m for d e t e c t i n g e r r o r s had sent b a c k t h e c l a i m s for r e s u b m i s s i o n . F o r s o m e r e a s o n ( d e f e c t i v e S O P s ? ) t h e rejects had n o t b e e n d e a l t w i t h as t h e y c a m e in and had piled u p . O n c e the boxes were discovered, the two convicted executives h a d i n s t i g a t e d a p l a n to bring t h e c o m p a n y ' s a c c o u n t s r e c e i v a b l e b a c k i n t o b a l a n c e . T h e y m a d e t h e j u d g m e n t t h a t e x a m i n i n g each o f t h e 5 0 , 0 0 0 c l a i m s a n d l e g i t i m a t e l y c o r r e c t i n g t h e e r r o r s w o u l d cost more time than it was worth. R a t h e r t h a n c o r r e c t t h e rejected c l a i m s for r e s u b m i s s i o n t o t h e s t a t e , clerical w o r k e r s a t R e v c o h e a d q u a r t e r s w e r e i n s t r u c t e d t o m a n u a l l y r e w r i t e c l a i m forms i n n u m b e r s e q u i v a l e n t t o the r e j e c t e d c l a i m s . T h e y used m o d e l c l a i m s - claims w h i c h a l r e a d y had b e e n a c c e p t e d b y t h e state and paid. D a t e s w e r e c h a n g e d , a n d t h e last t h r e e digits o f t h e six digit p r e s c r i p t i o n n u m b e r s w e r e t r a n s p o s e d . N o a t t e m p t w a s m a d e t o alter a m o u n t s o f t h e individual claims. The two executives believed that because of the large n u m b e r of claims involved, the a m o u n t s would average o u t ( V a u g h a n . 1980). T h e R e v c o e x e c u t i v e s w e r e not a t t e m p t i n g t o e a r n illegitimate p r o f i t s ; t h e y w e r e t r y i n g t o r e c o v e r m o n e y s t o which they w e r e , m o r e o r l e s s , e n t i t l e d . H o w e v e r , t h e y w e r e s u b s t i t u t i n g the legitim a t e m e a n s for a c h i e v i n g t h a t goal with a c h e a p e r and m o r e conv e n i e n t i l l e g i t i m a t e m e a n s . Risk o f d e t e c t i o n o f t h e fraud w a s low s i n c e t h e illicit c l a i m s w e r e w r i t t e n explicitly to satisfy t h e r e q u i r e m e n t s o f t h e c o m p u t e r . T h e g o v e r n m e n t ' s d i s c o v e r y o f t h e fraud was accidental. V a u g h a n ( 1 9 8 0 ) p o i n t s o u t t h a t R e v c o ' s i n t e r p r e t a t i o n o f the c r i m e w a s t h a t i t w a s v i c t i m - p r e c i p i t a t e d . W i t h o u t t h e welfare 283

Fiddling d e p a r t m e n t ' s unnecessarily bureaucratic rules, intolerable delays, a n d c o m p u t e r p r o c e s s i n g lacking i n d i s c r e t i o n o r c o m m o n sense the c r i m e w o u l d not h a v e o c c u r r e d . I t may b e , t h e n , that t h e c r i m e can be e x p l a i n e d by d e f e c t i v e S O P s on t h e part of b o t h t h e o r g a n i s a t i o n a l victim and t h e o r g a n i s a t i o n a l offender.

Intracompany transfer pricing
A l a r g e p r o p o r t i o n of t h e t r a n s a c t i o n s on t h e b o o k s of an intern a t i o n a l c o m p a n y a r e sales from p a r e n t t o s u b s i d i a r y , s u b s i d i a r y t o p a r e n t o r o n e s u b s i d i a r y t o a n o t h e r . I n t r a c o m p a n y transfer prices can effectively shift profits from o n e part of the w o r l d to a n o t h e r . F o r e x a m p l e , d r u g s m i g h t be s h i p p e d from a h i g h - t a x c o u n t r y to a l o w - t a x c o u n t r y at b e l o w m a r k e t p r i c e s in o r d e r to shift profits to w h e r e t h e y will a t t r a c t least tax. T r a n s f e r pricing is t h e r e f o r e a c l a s s i c law e v a s i o n s t r a t e g y . T a x laws o f t h e h i g h - t a x c o u n t r y are not v i o l a t e d , t h e y a r e e v a d e d . T h i s n e e d not n e c e s s a r i l y b e t r u e , h o w e v e r , a s t h e h i g h - t a x c o u n t r y may h a v e e n a c t e d laws r e q u i r i n g that t r a n s f e r p r i c e s be set on an "arms l e n g t h ' basis ( t h a t is, as if the c o m p a n y w e r e selling t o a n o t h e r r a t h e r t h a n t o itself). In r e c e n t y e a r s a n u m b e r of d r u g - t r a n s f e r pricing cases have b e e n h e a r d i n F r e n c h c o u r t s ( D e l m a s - M a r t y and T i e d e m a n n , 1979). A b o u t forty p h a r m a c e u t i c a l c o m p a n i e s a r e said t o b e u n d e r investig a t i o n . Essentially the c o m p a n i e s attempt to evade company taxes i n F r a n c e b y high i m p o r t p r i c e s w h i c h v i o l a t e F r e n c h tax laws. F o r e x a m p l e , in 1973 following an i n v e s t i g a t i o n of M e r c k ' s transfer p r i c e s for I n d o c i d 2 5 , t h e c o m p a n y a g r e e d t o pay t h e F r e n c h g o v e r n m e n t $10 million i n ' r e d r e s s m e n t ' . S o m e c o m p a n i e s s h u n t t h e i r p r o d u c t a r o u n d a E u r o p e a n circuit i n c r e a s i n g t h e p r i c e a t e a c h p o i n t . I n o n e c e l e b r a t e d case v i t a m i n s w e r e m a n u f a c t u r e d in F r a n c e at a cost of Fr 50 p e r k i l o , e x p o r t e d to W e s t G e r m a n y , from t h e r e sent t o S w i t z e r l a n d , t h e n c e M o n a c o , a n d e v e n t u a l l y r e i m p o r t e d to F r a n c e at Fr 250 per kilo u n d e r a different t r a d e n a m e . I t s o m e t i m e s h a p p e n s with such cases that s h u n t i n g a r o u n d t h e circuit h a p p e n s only o n p a p e r w i t h o u t the c o r r e s p o n d i n g physical m o v e m e n t of materials. T a x h a v e n s a r e used t o g r e a t a d v a n t a g e b y t h e i n t e r n a t i o n a l p h a r m a c e u t i c a l i n d u s t r y . T h e N e t h e r l a n d s A n t i l l e s i s one o f t h e w o r l d ' s m o r e n o t o r i o u s tax h a v e n s . C u t t e r L a b o r a t o r i e s , the significant A m e r i c a n t r a n s n a t i o n a l b a s e d in S a n F r a n c i s c o , is o w n e d by a N e t h e r l a n d s Antilles holding company which in turn is owned by 284

Fiddling t h e G e r m a n g i a n t , B a y e r . I n r e c e n t y e a r s I r e l a n d has a t t r a c t e d m a n y n e w p h a r m a c e u t i c a l m a n u f a c t u r i n g p l a n t s partly b e c a u s e o f its t a x a d v a n t a g e s . B u t t h e m o s t i m p o r t a n t tax h a v e n i n t h e p h a r m a ceutical industry is P u e r t o Rico. M a n y A m e r i c a n t r a n s n a t i o n a l s h a v e sizeable m a n u f a c t u r i n g p l a n t s in P u e r t o R i c o , and a large p r o p o r t i o n of t r a n s a c t i o n s b e t w e e n t h e U n i t e d S t a t e s and o t h e r p a r t s o f t h e w o r l d g o t h r o u g h P u e r t o R i c o , l e a v i n g s o m e e x t r a cash i n P u e r t o R i c o each t i m e . T h i s e x p l a i n s the e x t r a o r d i n a r y return on pharmaceutical investment in P u e r t o R i c o c a l c u l a t e d b y Wall S t r e e t a n a l y s t J o h n S . B u t t l e s I I . B u t t l e s c a l c u l a t e s t h a t W a r n e r - L a m b e r t had a 110 per cent r e t u r n on its i n v e s t m e n t in P u e r t o R i c a n p l a n t and e q u i p m e n t in 1976. F o r A b b o t t t h e figure w a s 101 p e r c e n t , w h i l e for S c h e r i n g it w a s a m e a g r e 90 p e r cent (Business Week, 22 M a y 1978: 154-6). In 1977, a c c o r d i n g t o d a t a s u p p l i e d t o B u s i n e s s W e e k b y O p p e n h e i m e r and C o . , S c h e r i n g r e c o r d e d 59.2 p e r cent of its w o r l d w i d e profits in P u e r t o R i c o . F o r S q u i b b t h e f i g u r e w a s 53.7 per c e n t ; A b b o t t , 4 8 . 4 p e r c e n t ; S m i t h K l i n e , 4 5 . 7 per cent. All t h e s e c o m p a n i e s w e r e o u t d o n e by S e a r l e w h i c h in b o t h 1976 and 1977 m a n a g e d to r e c o r d o v e r 100 p e r cent of its w o r l d w i d e profits in P u e r t o R i c o . W h i l e the rest of t h e w o r l d ran at a l o s s , large profits w e r e r e c o r d e d for Searle's Puerto Rican subsidiary. W h e n T h i r d W o r l d c o u n t r i e s a r e t h e v i c t i m s o f transfer pricing the c o n s e q u e n c e s are most serious. Vaitsos (1974) conducted the classic s t u d y o f high t r a n s f e r prices into Third W o r l d c o u n t r i e s . H e f o u n d t h a t p h a r m a c e u t i c a l i m p o r t s into C o l o m b i a b y foreigno w n e d c o m p a n i e s w e r e o v e r p r i c e d b y 155 per c e n t , very m u c h h i g h e r t h a n t h e o v e r p r i c i n g o f o t h e r i m p o r t s (specifically r u b b e r , c h e m i c a l s a n d e l e c t r o n i c s ) . - ' V a i t s o s e s t i m a t e d that i f C o l o m b i a h a d b e e n p a y i n g a v e r a g e w o r l d p r i c e s for its p h a r m a c e u t i c a l i m p o r t s , t h e c o u n t r y w o u l d h a v e s a v e d a c h a r g e of $20 million to t h e C o l o m b i a n b a l a n c e o f p a y m e n t s i n 1968. A p p r o x i m a t e l y half o f t h e e s t i m a t e d $20 m i l l i o n in e x c e s s profits r e p a t r i a t e d by t h e transfer pricing would have gone to the C o l o m b i a n g o v e r n m e n t i n t a x e s . V a i t s o s a l s o found t h a t several o f t h e largest t r a n s n a t i o n a l p h a r m a c e u t i c a l c o m p a n i e s r e t u r n e d t h e i r profits via a h o l d i n g c o m p a n y i n P a n a m a w h i c h , a t t h a t t i m e , w a s a tax h a v e n . T h e s t u d y c o n c l u d e d t h a t t h e effective r a t e o f r e t u r n o n C o l o m b i a n o p e r a t i o n s for fifteen global d r u g c o r p o r a t i o n s ranged from a low of 3 8 . 1 p e r c e n t to a high of 962.1 per cent with an a v e r a g e of 7 9 . 1 p e r c e n t . Y e t t h a t y e a r t h e a v e r a g e d e c l a r e d profits s u b m i t t e d 285

Fiddling by t h e s e s u b s i d i a r i e s to t h e C o l o m b i a n tax a u t h o r i t i e s was 6.7 p e r cent. R e p a t r i a t i o n of profits from the T h i r d W o r l d can be a c h i e v e d by fiddling t h e p a c k a g e s as well as fiddling t h e b o o k s . A E u r o p e a n t r a n s n a t i o n a l w a s found t o b e i m p o r t i n g i n t o S o u t h A m e r i c a sealed p a c k i n g c a s e s o f d r u g s w h i c h c o n t a i n e d less t h a n 3 0 p e r c e n t o f t h e d e c l a r e d c o n t e n t s . B y p a y i n g 100 p e r cent o f t h e d e c l a r e d cost t o the p a r e n t c o m p a n y ( t h r o u g h a tax h a v e n ) t h e subsidiary w a s able t o t r a n s f e r 300 p e r cent i n c r e a s e d profits to t h e p a r e n t ( H e l l e r , 1977: 55). T h e r e a r e m a n y r e a s o n s a p a r t from e v a d i n g tax for a p a r e n t to c h a r g e high p r i c e s for i n t r a c o m p a n y sales to an affiliate, and low p r i c e s for sales from affiliate to p a r e n t . It might be d o n e to circumvent dividend repatriation restrictions, r e d u c e t h e affiliate's e x p o s u r e t o c u r r e n c y d e v a l u a t i o n and e x p r o p r i a t i o n r i s k s , l o w e r a p p a r e n t profits w h e n e x c e s s i v e profits m i g h t e n c o u r a g e l a b o u r u n i o n s t o e s c a l a t e w a g e d e m a n d s o r local c u s t o m e r s (and g o v e r n m e n t s ) t o d e m a n d p r i c e r e d u c t i o n s , o r simply t o a l l o c a t e m a r k e t s b y m a k i n g t h e e x p o r t s o f a s u b s i d i a r y n o n c o m p e t i t i v e . W h i l e incent i v e s t h a t run in this d i r e c t i o n a r e the m o s t i m p o r t a n t in t h e intern a t i o n a l p h a r m a c e u t i c a l i n d u s t r y , t h e r e can b e r e v e r s e i n c e n t i v e s w h i c h e n c o u r a g e l o w - i m p o r t and h i g h - e x p o r t p r i c e s . C o u n t r i e s w h i c h h a v e high c u s t o m s a n d excise d u t i e s o b v i o u s l y h a v e incent i v e s in t h e d i r e c t i o n of low i m p o r t p r i c e s . A t r a n s n a t i o n a l might d e s i r e t h r o u g h t r a n s f e r p r i c i n g t o i n c r e a s e t h e profitability o f a new s u b s i d i a r y d u r i n g a s t a r t - u p p e r i o d and t h e r e b y i m p r o v e its ability to g e t local c r e d i t . W h e n t h e r e a r e conflicting r e a s o n s for b o t h high and low i m p o r t p r i c e s , i n g e n i o u s s o l u t i o n s can e v e n b e found t o a c c o m m o d a t e t h e conflicting f i n a n c i a l g o a l s . P e r h a p s t h e m o s t c o m m o n r a t i o n a l e for high i n t r a c o m p a n y i m p o r t p r i c e s with p h a r m a c e u t i c a l s i s t o conv i n c e g o v e r n m e n t t h a t a p r i c e i n c r e a s e s h o u l d be g r a n t e d b e c a u s e of t h e high cost o f t h e m a t e r i a l s i m p o r t e d t o m a k e t h e d r u g s . G o v e r n m e n t d r u g - p u r c h a s i n g a n d price-fixing a u t h o r i t i e s t a k e a c c o u n t o f t h e c o s t s of i m p o r t e d m a t e r i a l s in d e c i d i n g a fair price for t h e p r o d u c t . H e r e is a trick used by t h e A u s t r a l i a n subsidiary of o n e t r a n s n a t i o n a l . S u p p o s e t h e p a r e n t c o m p a n y for its a c c o u n t i n g r e a s o n s insists t h a t t h e A u s t r a l i a n s u b s i d i a r y pay it exactly $5 a g r a m for a c e r t a i n p r o d u c t . N o w t h e A u s t r a l i a n s u b s i d i a r y is after a price i n c r e a s e from t h e H e a l t h D e p a r t m e n t for t h e P h a r m a c e u t i c a l B e n e f i t s S c h e m e . So it a s k s t h e p a r e n t c o m p a n y to invoice it for
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