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

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

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

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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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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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

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 . '
1 1

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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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

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.

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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.
2 2

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

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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

The corporation as pusher

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 :
4

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

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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.
4

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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

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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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Fiddling half t h e s h i p m e n t at $10 p e r g r a m and to send t h e o t h e r half free c h a r g e 'for use in c o n d u c t i n g t r i a l s ' . H e a d q u a r t e r s t h e n gets r e q u i r e d p r i c e for total s h i p m e n t , w h i l e t h e s u b s i d i a r y is a b l e w a v e an i n v o i c e u n d e r t h e n o s e of a H e a l t h D e p a r t m e n t official p r o v e t h a t this e x p e n s i v e p r o d u c t c o s t s $10 a g r a m . of its to to

T r a n s f e r p r i c i n g is often s u p p o r t e d by 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 i n t h e T h i r d W o r l d . T h e d a n g e r for t h e t r a n s n a t i o n a l i s t h a t t h e T h i r d W o r l d g o v e r n m e n t will p o i n t o u t t h a t i m p o r t e d raw m a t e r i a l s can be p u r c h a s e d more cheaply than the intracompany t r a n s f e r p r i c e from o t h e r s u p p l i e r s . To e n s u r e against d e m a n d s for p u r c h a s e from t h e c h e a p e s t a v a i l a b l e s u p p l i e r the p a r e n t c o m p a n y m i g h t w r i t e into its a g r e e m e n t w i t h a s u b s i d i a r y a tied p u r c h a s e c l a u s e . Tying certain types of purchases to one supplier would be a v i o l a t i o n of a n t i t r u s t laws in m o s t d e v e l o p e d c o u n t r i e 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 o w e v e r , d o not have a n t i t r u s t laws. S o m e c o u n t r i e s , n o t a b l y A r g e n t i n a , P e r u , B o l i v i a and M e x i c o , have b e g u n t o s c r e e n a g r e e m e n t s with t r a n s n a t i o n a l s t o r e m o v e r e s t r i c t i v e b u s i n e s s c l a u s e s . B r a z i l , C h i l e , E c u a d o r , C o l o m b i a and I n d i a also n o w specifically p r o h i b i t c e r t a i n t y p e s o f tied p u r c h a s e schemes. B r a z i l is a l e a d e r in fostering e x c h a n g e of i n f o r m a t i o n b e t w e e n c o u n t r i e s o n p h a r m a c e u t i c a l transfer p r i c e s . K n o w l e d g e i s p o w e r i n n e g o t i a t i o n w i t h t r a n s n a t i o n a l s . G o v e r n m e n t s can d e m a n d l o w e r t r a n s f e r p r i c e s only w h e n t h e y k n o w w h a t transfer p r i c e s are being p a i d b y o t h e r c o u n t r i e s o n t h e s a m e p r o d u c t s . W h e n the B r a z i l i a n s find t h a t a s u p p l i e r is a v a i l a b l e with p r i c e s m u c h c h e a p e r t h a n the i n t r a c o m p a n y t r a n s f e r p r i c e , t h e y insist t h a t t h e t r a n s n a t i o n a l s o u r c e from t h e c h e a p e r s u p p l i e r . I n t h e i n t e r n a t i o n a l transfer p r i c i n g g a m e t h e i r o n y is t h a t t h e r h e t o r i c o f t h e free m a r k e t is often empty without government intervention. T h e m a i n p r o b l e m for d e v e l o p i n g c o u n t r i e s is a lack of r e s o u r c e s t o m o u n t a c o n t i n u o u s , s o p h i s t i c a t e d and c o m p r e h e n s i v e m o n i t o r ing o f t r a n s f e r p r i c e s . G u a t e m a l a , for e x a m p l e , has rules against c l a i m i n g e x c e s s i v e l y high transfer p r i c e s for i m p o r t e d m a t e r i a l s w h e n s e e k i n g p r i c e i n c r e a s e s from t h e g o v e r n m e n t . H o w e v e r , i t s e e m s t h a t n o o n e c h e c k s t h e cost f i g u r e s supplied b y t h e c o m p a n i e s . E f f e c t i v e l y , t h e c o m p a n i e s can get away with a n y t h i n g . W i t h tax e v a s i o n t h r o u g h transfer p r i c i n g , d e v e l o p e d e c o n o m i e s are p r o g r e s s i n g t o w a r d s e x c h a n g e o f i n f o r m a t i o n b e t w e e n tax a u t h o r i t i e s a n d e v e n i n t e r n a t i o n a l tax a u d i t s ( e . g . C a n a d a with t h e U n i t e d S t a t e s ) . In contrast, poor countries a r e ' i n danger of being excluded 287

Fiddling from a p r i v i l e g e d c l u b of efficient tax a d m i n i s t r a t i o n s ' ( L a l l , 1979b: 245). All t h e familiar t r i c k s of large c o m p a n i e s for e v a d i n g tax in the d e v e l o p e d w o r l d c a n also b e seen i n t h e T h i r d W o r l d . T h e differe n c e i s t h a t i n t h e T h i r d W o r l d t h e y a r e typically m o u n t e d with i m p u n i t y . Officials w h o s h o w signs of p u t t i n g o b s t a c l e s in the c o m p a n y ' s w a y can be n e u t r a l i s e d w i t h a b r i b e . In G u a t e m a l a , A m e r i c a n t r a n s n a t i o n a l s split their i n c o m e a m o n g a s m a n y a s six h o l d i n g c o m p a n i e s t o s p r e a d t h e i r m a r g i n a l tax liability. The investigation by the Audit C o m m i t t e e o f t h e Board 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 r p o r a t i o n , p u r s u a n t t o their b r i b e r y c o n s e n t d e c r e e (see C h a p t e r 2 ) , i l l u s t r a t e s s o m e o f the activities w h i c h c a n b e g o i n g o n q u i t e u n b e k n o w n t o T h i r d W o r l d tax a u t h o r i t i e s . A H S e m p l o y e e s i n s o m e c o u n t r i e s w e r e r e c e i v i n g part o f their s a l a r y in local c u r r e n c y in t h e i r c o u n t r y of r e s i d e n c e , and the r e m a i n d e r i n U S d o l l a r s , d e p o s i t e d b y A H S into U S b a n k a c c o u n t s . I n t h e c a s e o f n o n - U S c i t i z e n s , n e i t h e r t h e U S n o r foreign tax a u t h o r i t e s w e r e notified o f this U S b a n k c o m p e n s a t i o n . I n one c o u n t r y A H S a l s o had a n illegal s c h e m e for u n d e r s t a t i n g sales tax. G o o d s w e r e sold t o a m a r k e t i n g s u b s i d i a r y o w n e d b y A H S . T h e b a s e for c a l c u l a t i n g sales tax liability w a s t h e value of sales to t h e m a r k e t i n g s u b s i d i a r y . W h e n t h e l a t t e r i s o w n e d b y the original s e l l e r t h e c o r r e c t b a s e for c a l c u l a t i n g tax liability is t h e value of sales from t h e m a r k e t i n g s u b s i d i a r y .

Conclusion T h e financial m a n i p u l a t i o n s d i s c u s s e d i n this c h a p t e r s e e m t o r e p r e s e n t t y p e s o f c o r p o r a t e c r i m e which a r e q u a l i t a t i v e l y different from t h o s e d i s c u s s e d e a r l i e r . R e a d e r s may feel t h a t i n a t t e m p t i n g t o c o v e r c o m p r e h e n s i v e l y t h e s p e c t r u m o f c o r p o r a t e c r i m e s which o c c u r in o n e i n d u s t r y , we a r e left with a m u d d l e of d i s p a r a t e c r i m i n a l f o r m s . Y e t in the final c h a p t e r it will b e c o m e clear that t h e s e v a r i o u s forms o f c o r p o r a t e c r i m e d o have i m p o r t a n t c h a r a c teristics in c o m m o n . W h a t do a Dr F. D o n a l d C o s t e r g a m e with i m a g i n a r y assets and a M E R / 2 9 g a m e with i m a g i n a r y r a t s and m o n k e y s h a v e i n c o m m o n ? A t t h e i r r o o t , t h e p r o b l e m s h a v e similar s o l u t i o n s . B o t h c r i m e s w e r e r e n d e r e d p o s s i b l e by t h e fact t h a t key i n d i v i d u a l s had a u t o c r a t i c c o n t r o l of e i t h e r a w h o l e o r g a n i s a t i o n , or a division within an o r g a n i s a t i o n . C o n t r o l s t r a t e g i e s for b o t h t y p e s o f c r i m e m u s t focus 288

Fiddling on rendering unaccountable organisational power more accounta b l e , or, m o r e simply, exposing the exercise of that power to s c r u t i n y b y o t h e r s . E v e n i f t h e o t h e r s w h o o b s e r v e t h e exercise o f p o w e r h a v e no formal right of c h a l l e n g e (as in t h e case o f t h e lowly t r e a s u r e r a t M c K e s s o n and R o b b i n s ) t h e m e r e fact that o n e ' s actions are o b s e r v e d by others constitutes a situational deterrent. H e n c e , we saw in C h a p t e r 3 t h a t 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 m a k e s fraud m o r e difficult t h a n in a t r a d i t i o n a l h i e r a r c h i c a l r e s e a r c h o r g a n i s a t i o n . W i t h t h e f o r m e r , w h e r e m a n y p e o p l e are i n v o l v e d in a d e c i s i o n , it is h a r d e r to k e e p t h e lid on illegality. C o m p a r a b l e p r o t e c t i o n s against illegality a r e p r o v i d e d by a rule which requires that loans to company directors must be approved b y , a n d r e c o r d e d in t h e m i n u t e s of, t h e full b o a r d m e e t i n g , or by a r u l e w h i c h insists t h a t a variety of p e o p l e p a r t i c i p a t e in a p p r o v i n g a drug p r o m o t i o n a l claim, rather than the m a r k e t i n g d e p a r t m e n t alone. A n e n c o u r a g i n g t h i n g a b o u t t h e study o f c o r p o r a t e c r i m e is, t h e r e f o r e , t h a t t h e s a m e g e n e r a l p r i n c i p l e s o f c o n t r o l may apply t o the most dissimilar types of crime imaginable. Fiddling the books c a n b e m a d e m o r e difficult b y h a v i n g t h e b o o k s g o t h r o u g h m o r e h a n d s a n d b y d i s c l o s u r e r e q u i r e m e n t s w h i c h m a k e their c o n t e n t s m o r e a c c e s s i b l e t o s h a r e h o l d e r s and o t h e r i n t e r e s t e d p a r t i e s . Intern a t i o n a l fiddles m u s t be dealt with by j o i n t a u d i t s and e x c h a n g e of information between national regulatory agencies. Multiple a p p r o v a l s , disclosures, international exchange of information: t h e s e a r e f u n d a m e n t a l s in t h e c o n t r o l of all the t y p e s of c o r p o r a t e c r i m e c o v e r e d i n this b o o k . I n s i d e r t r a d i n g hides b e h i n d t h e c o m p l e x i t y o f t h e c o m m e r c i a l w o r l d j u s t a s f r a u d u l e n t safety-testing p r o g r a m m e s hide behind the complexity of science. Both types of c r i m e d e m a n d a r e t h i n k i n g of p r o c e d u r a l s a f e g u a r d s in c r i m i n a l c o u r t s w h i c h w e a l t h y d e f e n d a n t s e x p l o i t t o p r e v e n t c o u r t s from untangling the web of complexity. O f c o u r s e , t h e s e g e n e r a l p r i n c i p l e s m u s t b e given q u i t e specific c o n t e n t for different t y p e s of c r i m e . Y e t we will see in t h e final c h a p t e r t h a t g e n e r a l i s a t i o n s are p o s s i b l e a b o u t t h e c i r c u m s t a n c e s i n w h i c h s e l f - r e g u l a t i o n can and c a n n o t c o m p l e m e n t 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 . A n d w e will see t h a t t r a n s f e r pricing and using T h i r d W o r l d c i t i z e n s as g u i n e a pigs in t h e safety t e s t i n g of d r u g s are m e r e l y specific m a n i f e s t a t i o n s o f t h e u n d e r l y i n g reality o f t h e way 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 deal with t h e c o n s t r a i n t s o f n a t i o n a l laws. 289

Strategies for controlling corporate crime

T h e p u r p o s e of this c h a p t e r is to shift from specific t y p e s of c o r p o r a t e c r i m e to a m o r e g e n e r a l set of l e s s o n s to be l e a r n e d from the p h a r m a c e u t i c a l industry about the control o f c o r p o r a t e crime. It is for o t h e r s to do case s t u d i e s of c o r p o r a t e c r i m e in different industries to assess w h e t h e r these generalisations based on an e x a m i n a t i o n o f d i s p a r a t e t y p e s o f r e g u l a t i o n within o n e industry have wider relevance.

The a r g u m e n t in outline In t h e s u c c e e d i n g p a g e s an a t t e m p t will be m a d e to d e v e l o p a b a l a n c e d p e r s p e c t i v e o n w h a t law can and c a n n o t a c h i e v e with r e s p e c t to t h e p r o b l e m of c o r p o r a t e c r i m e as manifested 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 will be a r g u e d that an e m p i r i c a l 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 i n this i n d u s t r y implies t h a t law c a n n o t a c h i e v e s i m u l t a n e o u s l y all t h e goals e x p e c t e d of it. E v e n t h o u g h these goals are compatible within theories of j u r i s p r u d e n c e , e m p i r i c a l l y t h e y a r e often i n c o m p a t i b l e , not j u s t at t h e level of i n d i v i d u a l c a s e s , but for t h e c r i m i n a l j u s t i c e system as a t o t a l i t y . L e t us b e g i n with w h a t law can a c h i e v e . It will be a r g u e d t h a t law e n f o r c e m e n t can r e d u c e c o r p o r a t e c r i m e 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 , p r o b a b l y d r a m a t i c a l l y . T h e c r i m e r e d u c t i o n goal can b e a c h i e v e d via a n u m b e r of s u b g o a l s . F i r s t , d e t e r r e n c e - b o t h specific ( a g a i n s t o f f e n d e r s ) and g e n e r a l ( a g a i n s t t h o s e w h o w i t n e s s t h e s a n c t i o n i n g of o t h e r s ) - can be effective. This is so b e c a u s e corp o r a t e o f f e n d e r s , w i t h m o r e t o lose t h a n t r a d i t i o n a l b l u e - c o l l a r offenders, are inherently more deferrable. 290

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S e c o n d , t h e law can effectively i m p o s e r e h a b i l i t a t i o n on corp o r a t e o f f e n d e r s . R e h a b i l i t a t i o n is a m o r e w o r k a b l e goal for c o r p o r a t e c r i m i n a l law t h a n for i n d i v i d u a l c r i m i n a l law b e c a u s e o r g a n i s a t i o n c h a r t s and S O P s can m o r e easily b e r e a r r a n g e d t h a n human personalities. T h i r d , t h e law can readily r e q u i r e r e s t i t u t i o n to victims of c o r p o r a t e c r i m e and r e p a r a t i o n t o t h e c o m m u n i t y . This i s b e c a u s e t h e c o r p o r a t i o n n o r m a l l y h a s an i n o r d i n a t e c a p a c i t y to p a y , and a p o o l o f e x p e r t i s e w h i c h m a k e s p o s s i b l e r e p a r a t o r y acts o f c o m m u n i t y service o f e n o r m o u s social v a l u e . R e s t i t u t i o n i m p o s e d b y l a w , p a r t i c u l a r l y t h r o u g h t h e m e c h a n i s m o f class a c t i o n s , also has i n v a l u a b l e d e t e r r e n t effects. T h e s e t h r e e g o a l s c a n b e a c h i e v e d w i t h o u t resort t o the r e p r e s s i v e m e a s u r e s ( i m p r i s o n m e n t , c o r p o r a l p u n i s h m e n t , capital p u n i s h m e n t ) w h i c h h a v e b e e n s o unsuccessful i n a t t e m p t s t o c o n t r o l t r a d i t i o n a l i n d i v i d u a l c r i m e . A w i d e a r r a y of s a n c t i o n s - fines, r e s t i t u t i o n o r d e r s , c o m m u n i t y service o r d e r s , i n t e r v e n t i o n i n the c o r p o r a t i o n ' s m a n a g e m e n t system, licence r e v o c a t i o n , injunction, seizure, r e m e d i a l a d v e r t i s i n g - all h a v e i m p o r t a n t p l a c e s in t h e a r m o u r i e s of r e g u l a t o r y a g e n c i e s . G e n e r a l l y , t h o u g h not e x c l u s i v e l y , it will be s u g g e s t e d t h a t c o r p o r a t e c r i m i n a l liability r a t h e r t h a n individual liability i m p o s e d by t h e c o u r t s r e s u l t s in m o r e efficient crime c o n t r o l . I n d i v i d u a l liability can often be effectively d e l e g a t e d from t h e c o u r t t o t h e c o r p o r a t i o n itself. H o w e v e r , i m p o s i n g individual liability on c h i e f e x e c u t i v e officers m u s t r e m a i n an i m p o r t a n t responsibility o f c o u r t s . T h e r e i s a n i r r e c o n c i l a b l e i n c o m p a t i b i l i t y b e t w e e n the c a p a c i t y o f l a w to a c h i e v e c o r p o r a t e c r i m e r e d u c t i o n and its c a p a c i t y to d i s p e n s e j u s t i c e . C o r p o r a t e c r i m e i n t h e p h a r m a c e u t i c a l industry kills p e o p l e . It will be a r g u e d that c h o i c e s m u s t be m a d e b e t w e e n s a v i n g m o r e lives a n d b e i n g m o r e j u s t . A total c o m m i t m e n t t o u n i f o r m i t y and c o n s i s t e n c y i n t h e t r e a t m e n t o f c o r p o r a t e offenders s h o u l d be e s c h e w e d . A policy of d i s p e n s i n g 'just d e s e r t s ' to all c o r p o r a t i o n s found t o b r e a k t h e law w o u l d i m p o s e f i n a n c i a l b u r d e n s b e y o n d t h e c a p a c i t y o f any g o v e r n m e n t . I n d e e d , t o even a p p r o a c h t h a t r a t e o f c l e a r - u p a n d p r o s e c u t i o n w h i c h w e have c o m e t o e x p e c t w i t h i n d i v i d u a l c r i m i n a l offenders w o u l d c a u s e n a t i o n a l b a n k r u p t c y . M o r e i m p o r t a n t l y , i t will b e a r g u e d t h a t giving r e g u l a t o r s d i s c r e t i o n t o d o d e a l s w i t h guilty c o r p o r a t i o n s , t o selectively forget 'just d e s e r t s ' in o r d e r to get c o r p o r a t i o n s to c o - o p e r a t e w i t h , for e x a m p l e , s c h e m e s t o r a p i d l y recall d a n g e r o u s p r o d u c t s , i s i n the 291

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p u b l i c i n t e r e s t . T h e uniform and j u s t t r e a t m e n t o f offenders should n e v e r t a k e p r e c e d e n c e o v e r p r o t e c t i o n o f h u m a n life a s t h e p r i m a r y r e s p o n s i b i l i t y of p h a r m a c e u t i c a l i n d u s t r y r e g u l a t o r s . If this princ i p l e is a c c e p t e d , t h e n e m p i r i c a l l y we will see that t h e r e can be little j u s t i c e i n t h e p u n i s h m e n t o f c o r p o r a t e c r i m e within the p h a r m a c e u t i c a l i n d u s t r y . M o r e o v e r , gross d i s p a r i t y b e t w e e n t h e way j u s t i c e i s d i s p e n s e d t o p o w e r l e s s i n d i v i d u a l s c o m p a r e d with p o w e r ful c o r p o r a t i o n s will c o n t i n u e . B e c a u s e m o s t s c h o l a r s w h o s t u d y c o r p o r a t e c r i m e have b e e n l a w y e r s , insufficient a t t e n t i o n has b e e n d e v o t e d t o non-legal a p p r o a c h e s to the p r o b l e m . In practice, most control of c o r p o r a t e c r i m e i s t h r o u g h n e g o t i a t i o n b e t w e e n r e g u l a t o r s and c o r p o r a t i o n s . C r i m i n a l law is i m p o r t a n t in this p r o c e s s as t h e u l t i m a t e s a n c t i o n to b a c k u p t h e t h r e a t s o f r e g u l a t o r s . I n a d d i t i o n t o e n s u r i n g that c r i m i n a l law b a c k u p is a v a i l a b l e , t h e i m p o r t a n c e of s t r a t e g i e s for g i v i n g r e g u l a t o r s n e g o t i a t i n g clout c a n n o t b e o v e r e m p h a s i s e d . I n t h e final a n a l y s i s , b a r g a i n i n g m u s c l e for r e g u l a t o r s can save m o r e lives t h a n finely t u n e d laws. A m o n g t h e m o s t c o n s t r u c t i v e w a y s t h a t r e g u l a t o r y p o w e r can be a p p l i e d is in forcing c o r p o r a t i o n s to set up effective s e l f - r e g u l a t o r y s y s t e m s w i t h i n their o r g a n i s a t i o n s . N o w to the a r g u m e n t in detail.

The cost of regulation

W h i l e it w a s s e e n in C h a p t e r 4 t h a t r e g u l a t i o n can have a social cost, i t w a s t h e e c o n o m i c cost w h i c h w a s o f m o s t c o n c e r n t o the e x e c u t i v e s i n t e r v i e w e d . I n t h e U n i t e d S t a t e s a b o v e all t h e g r e a t e s t c o n c e r n w a s with t h e s o - c a l l e d d r u g lag - t h e t e n d e n c y for n e w d r u g s to t a k e l o n g e r to be a p p r o v e d for m a r k e t i n g in the U n i t e d S t a t e s t h a n i n o t h e r c o u n t r i e s . I n d u s t r y a l l e g e s t h a t the m o u n t a i n s o f d o c u m e n t a t i o n a n d e x p e r i m e n t a t i o n r e q u i r e d before the F D A will a p p r o v e a n e w d r u g is a d i s i n c e n t i v e to n e w d r u g d e v e l o p m e n t ( C o c k s , 1 9 7 3 ; G r a b o w s k i , 1976; S c h w a r t z m a n , 1976; W a r d e l l . 1 9 7 9 ; W i g g i n s , 1979). A t p r e s e n t i t c o s t s a n a v e r a g e o f s o m e $ 5 0 m i l l i o n to get a d r u g to the point of F D A a p p r o v a l . M o r e o v e r , i n d u s t r y a r g u e s , t h e d e l a y d u r i n g which n e w d r u g s a r e m a r k e t e d i n o t h e r p a r t s o f t h e w o r l d , but not A m e r i c a , costs p a t i e n t s i n t h e U n i t e d S t a t e s a price in suffering. T h e c o n s u m e r m o v e m e n t c o u n t e r s w i t h t h e claim that A m e r i c a h a s a ' d e a t h lag' r a t h e r t h a n a ' d r u g lag'. T h e y point out t h a t the U n i t e d S t a t e s w a s o n e o f t h e few c o u n t r i e s t o p r e v e n t t h e m a r k e t i n g 292

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of t h a l i d o m i d e precisely b e c a u s e of the more cautious attitude of t h e F D A . T h e superficial case for the US drug lag is easy to m a k e . S i n c e t h e t o u g h e n i n g o f t h e F o o d , D r u g a n d C o s m e t i c A c t i n 1962 t h e a n n u a l n u m b e r o f n e w d r u g a p p r o v a l s i n t h e U n i t e d S t a t e s has d r o p p e d , t h e cost has i n c r e a s e d , and t h e a v e r a g e t i m e lag b e t w e e n s u b m i s s i o n a n d a p p r o v a l has i n c r e a s e d . H o w e v e r , m o s t o f t h a t d e l a y is d u e to t h e lag in F D A a p p r o v a l of m e - t o o d r u g s w h i c h p r o v i d e no t h e r a p e u t i c a d v a n c e s over existing p r o d u c t s . The F D A , a n d m a n y o t h e r n a t i o n a l drug r e g u l a t o r y a g e n c i e s , have p r i o r i t i e s w h e r e b y d r u g s t h a t offer no t h e r a p e u t i c a d v a n c e sit on the b o t t o m of t h e pile w h i l e p r o d u c t s w h i c h offer t h e r a p e u t i c gains are dealt with considerably more quickly.' E v e r y c o u n t r y h a s a d r u g lag. A s w e s a w i n C h a p t e r 7 , p h a r m a c e u t i c a l c o m p a n i e s h a v e a v a r i e t y of r e a s o n s for w a n t i n g to s u b m i t a n e w p r o d u c t for r e g i s t r a t i o n i n c e r t a i n c o u n t r i e s before o t h e r s . K e n n e d y ( 1 9 7 8 ) has c o m p a r e d t h e p e r c e n t a g e o f significant n e w c h e m i c a l e n t i t i e s i n t r o d u c e d i n t h e six m a j o r d r u g d e v e l o p m e n t c o u n t r i e s ( E n g l a n d , F r a n c e , G e r m a n y , Italy, J a p a n and the United S t a t e s ) i n 1976. F o r t y - s e v e n per cent o f t h e n e w c h e m i c a l e n t i t i e 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 in t h a t y e a r w e r e not a v a i l a b l e in E n g l a n d , 73 per cent w e r e not a v a i l a b l e in F r a n c e , 60 per cent in G e r m a n y , 7 3 p e r c e n t i n I t a l y , and 8 7 p e r cent i n J a p a n . O n l y 47 per cent o f t h e US new approvals had been approved in any of t h e o t h e r five c o u n t r i e s before 1976. T h i s figure c o m p a r e d f a v o u r a b l y w i t h t h e o t h e r five c o u n t r i e s for w h o m t h e p e r c e n t a g e o f n e w a p p r o v a l s w h i c h had a l r e a d y b e e n a p p r o v e d e l s e w h e r e r a n g e d from 33 p e r c e n t to 86 p e r c e n t . It is not my i n t e n t i o n to s y s t e m a t i c a l l y e v a l u a t e t h e e v i d e n c e on w h e r e t h e d r u g - l a g - d e a t h - l a g i s w o r s t . M y p u r p o s e i s simply t o show t h a t t h e lag i s e v e r y w h e r e a n d t h a t d e t e r m i n i n g w h e r e i t i s w o r s t i s p r o b l e m a t i c . T h e only way t o a d d r e s s this q u e s t i o n a d e q u a t e l y i s t o l o o k a t specific c a s e s r a t h e r t h a n play statistical g a m e s . H o w m u c h d a t a a r e n e c e s s a r y to satisfy e x p e r t s t h a t a p a r t i c u l a r p r o d u c t has b e n e f i t s w h i c h justify its risks is b e y o n d my e x p e r t i s e . In a n y c a s e , t h i s b o o k is a b o u t c o r p o r a t e c r i m e . It is a c r i m e to go a h e a d a n d m a r k e t a d r u g before i t has w o n g o v e r n m e n t a p p r o v a l . T h e q u e s t i o n r e l e v a n t to t h e i m m e d i a t e d i s c u s s i o n is w h e t h e r a law r e q u i r i n g g o v e r n m e n t p r e c l e a r a n c e of d r u g s is n e c e s s a r y . In all c o u n t r i e s p h a r m a c e u t i c a l s are t h e only p r o d u c t s w h i c h must b e p r e c l e a r e d o n t h e b a s i s o f r e s e a r c h s u b m i t t e d t o g o v e r n m e n t before t h e y a r e a l l o w e d o n t h e m a r k e t . T h e r e s e e m s t o b e a l m o s t total 293

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c o n s e n s u s t h a t such p r e c l e a r a n c e laws are n e c e s s a r y . T h e only c o m m e n t a t o r w h o seems to have argued to the contrary is none o t h e r t h a n M i l t o n F r i e d m a n . F r i e d m a n b e l i e v e s that m a r k e t forces can w e e d o u t d a n g e r o u s d r u g s , and i n d e e d s u g g e s t s that the F D A itself s h o u l d be a b o l i s h e d (Newsweek, 8 J a n u a r y 1 9 7 3 : 4 9 ) ! O n e w o n d e r s a b o u t the r e l e v a n c e of the r h e t o r i c of the free m a r k e t to an i n d u s t r y w h e r e t h e d e c i s i o n to buy is m a d e by a p h y s i c i a n r a t h e r t h a n by t h e p e r s o n w h o will suffer the injury. I n d e e d w e h a v e seen t h a t such t w o - s t e p p r o c e s s e s u n d e r m i n e the c a p a c i t y of c o m p e t i t i o n to r e g u l a t e a b u s e s at all levels in t h e pharmaceutical industry. For example, a pharmaceutical company w h i c h c h o o s e s a c h e a p c o n t r a c t l a b o r a t o r y for t e s t i n g might not suffer if t h e d a t a a r e s h o d d y . It m i g h t benefit w h e n the l a b o r a t o r y tells it w h a t it w a n t s to h e a r . T h e c o m p a n y benefits from the c h e a p r e s e a r c h but p a s s e s t h e r i s k o n t o t h e c o n s u m e r . H e r e m a r k e t forces m a y e n c o u r a g e l o w e r s t a n d a r d s , not h i g h e r o n e s . H e n c e , o n e m u s t d i s m i s s t h e p r o p o s i t i o n t h a t laws r e q u i r i n g the p r e c l e a r a n c e of d r u g s can be r e p l a c e d by t h e free o p e r a t i o n of m a r k e t f o r c e s . N e v e r t h e l e s s , t h e r e is a case for m a k i n g the new drug a p p r o v a l p r o c e s s less of an all or n o n e affair. O n c e n e w p r o d u c t s d e m o n s t r a t e c e r t a i n m i n i m u m safety r e q u i r e m e n t s they could b e g i v e n s o m e form o f c o n d i t i o n a l a p p r o v a l for limited m a r k e t i n g . D u r i n g t h e p r o b a t i o n p e r i o d t h e p r o d u c t w o u l d b e subject t o s t r i n g e n t p o s t m a r k e t i n g s u r v e i l l a n c e . I m m e d i a t e l y a significant p r o b l e m a p p e a r e d , the product would be withdrawn. At the m o m e n t , o n c e a p r o d u c t has b e e n a p p r o v e d , w i t h d r a w a l i s a n a r d u o u s p r o c e s s for a r e g u l a t o r y a g e n c y . I n d u s t r y also claims that t h e a p o c a l y p t i c n a t u r e o f a n u n c o n d i t i o n a l a p p r o v a l forces regulat o r s to be o v e r c a u t i o u s in w e i g h i n g up risks and benefits. T h e official h a s m u c h to lose by a p p r o v i n g a s e c o n d t h a l i d o m i d e , but little to gain by a p p r o v i n g a n e w p r o d u c t w h i c h confers a m o d e r a t e therapeutic advance. T h e r e is a shift in p r o f e s s i o n a l o p i n i o n in favour of g r a d u a t e d a p p r o v a l in the U n i t e d States, as evidenced by the Congressional t e s t i m o n y o n t h e 1978 a n d 1979 D r u g R e f o r m Bills. Y e t t h e m o s t c o m p e l l i n g a r g u m e n t a g a i n s t t h e d r u g lag as it exists in t h e U n i t e d S t a t e s a t t h e m o m e n t i s o n e n e v e r voiced b y t h e i n d u s t r y : t h a t t h e d r u g lag will shift t h e n e x t t h a l i d o m i d e d i s a s t e r from t h e d e v e l o p e d world to the Third World w h e r e p o s t m a r k e t i n g surveillance of new d r u g s is virtually non-existent (and w h e r e , c o n s e q u e n t l y , more p e o p l e will die b e f o r e t h e d i s a s t e r i s d i s c o v e r e d ) . O n c e d i s c o v e r e d , 294

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recall will be s l o w e r and less efficient in t h e T h i r d W o r l d , t r e a t m e n t a n d social w e l f a r e s u p p o r t for t h e victims will be i n a d e q u a t e . An a r g u m e n t for q u i c k e r a p p r o v a l i n t h e U n i t e d S t a t e s qualified b y m o r e t h o r o u g h p o s t - m a r k e t i n g s u r v e i l l a n c e i s t h a t t h e suffering from t h e n e x t t h a l i d o m i d e , and all the m i n i - t h a l i d o m i d e s , will be c o n t a i n e d . On the other hand, currently many Third World count r i e s a p p r o v e n e w d r u g s a s soon a s they see F D A a p p r o v a l . U n l e s s g r a d u a t e d US approval were a c c o m p a n i e d by a more guarded w i l l i n g n e s s o f d e v e l o p i n g c o u n t r i e s t o follow t h e A m e r i c a n lead, t h e a b o v e - m e n t i o n e d benefits w o u l d b e illusory. N o t all r e g u l a t i o n s a r e a b u r d e n o n t h e e c o n o m y . R e g u l a t i o n s w h i c h b a n c e r t a i n t y p e s o f a d v e r t i s i n g o r limit a d v e r t i s i n g e x p e n d i t u r e o b v i o u s l y reduce c o s t s (see C h a p t e r 6 ) . W h e r e a n t i t r u s t laws effectively i n c r e a s e c o m p e t i t i o n , this m i g h t b r i n g c o s t - r e d u c i n g p r e s s u r e s i n t o play. O c c u p a t i o n a l h e a l t h and safety r e g u l a t i o n s m i g h t i m p o s e a cost b u r d e n on t h e m a n u f a c t u r e r , but in the final a n a l y s i s , may also i n c r e a s e t h e G r o s s N a t i o n a l P r o d u c t b y r e d u c i n g t h e n u m b e r of d a y s lost t h r o u g h injury and t h e m e d i c a l costs of t r e a t m e n t . N e v e r t h e l e s s , there are many regulations which impose c o s t s o u t of all p r o p o r t i o n to c o m m u n i t y benefits. Often t h e s e are r e g u l a t i o n s w h i c h w e r e o n c e cost-effective but w h i c h h a v e b e c o m e a n a c h r o n i s m s t h r o u g h t e c h n o l o g i c a l o r e c o n o m i c c h a n g e . A n irony o f i r r a t i o n a l r e g u l a t i o n s i s t h a t they i m p o s e p r o p o r t i o n a t e l y t h e g r e a t e s t c o s t s on small b u s i n e s s e s . As a cost b a r r i e r to m a r k e t entry for small c o m p e t i t o r s , o n e set of r e g u l a t o r y goals conflicts with a n o t h e r (antitrust law). T h e r e a r e s o l u t i o n s . M a j o r n e w r e g u l a t i o n s s h o u l d b e subject t o cost o f r e g u l a t i o n i m p a c t s t a t e m e n t s . I t m u s t b e c a u t i o n e d , howe v e r , t h a t p r e p a r i n g a cost of r e g u l a t i o n impact s t a t e m e n t itself i m p o s e s a c o n s i d e r a b l e cost. S u c h i m p a c t s t a t e m e n t s should t h e r e fore be p r e p a r e d only for m a j o r r e g u l a t o r y initiatives. If industry d i s a g r e e s with an a g e n c y d e c i s i o n t h a t a n e w r e g u l a t i o n is not of sufficient i m p o r t a n c e to justify t h e cost of an i m p a c t s t u d y , t h e n i n d u s t r y s h o u l d be e n c o u r a g e d to c o n d u c t t h e study at its o w n e x p e n s e w i t h i n t h e g u i d e l i n e s set d o w n b y t h e r e g u l a t o r y a g e n c y . F o r e x i s t i n g r e g u l a t i o n s , sunset l e g i s l a t i o n has a n i m p o r t a n t p l a c e . S u n s e t l e g i s l a t i o n is s o m e t h i n g of a c u r r e n t c r a z e in the U n i t e d S t a t e s , b e g u n b y t h e C o l o r a d o s t a t e l e g i s l a t u r e i n 1976. T h e s u n s e t p r i n c i p l e is t h a t r e g u l a t i o n s be given a finite life. At t h e end of a p r e d e t e r m i n e d p e r i o d , r e g u l a t i o n s are r e v i e w e d . T h e y are e i t h e r a b o l i s h e d , r e a u t h o r i s e d or r e w r i t t e n . S u n s e t legislation is a 295

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s o u n d w a y o f c u l l i n g cost-ineffective r e g u l a t i o n s , s t o p p i n g t h e unw a r r a n t e d e x p a n s i o n o f self-serving b u r e a u c r a t i c e m p i r e s , and i m p o s i n g on a g e n c i e s a n e e d to e v a l u a t e their p e r f o r m a n c e . It could m a k e r o u t i n e t h e a b o l i t i o n o f e n t i r e b u r e a u c r a c i e s w h i c h have s e r v e d t h e i r h i s t o r i c a l p u r p o s e . H o w e v e r , the p r o b l e m with s u n s e t l e g i s l a t i o n is a g a i n t h a t t h e r e v i e w p r o c e s s itself i m p o s e s c o n s i d e r a b l e c o s t s . In t h e U n i t e d S t a t e s it has r e q u i r e d an e x p a n s i o n of l e g i s l a t i v e staffs t o i m p l e m e n t t h e d e t a i l e d o v e r s i g h t r e q u i r e d o f t h e l e g i s l a t u r e . I n p r a c t i c a l t e r m s any l e g i s l a t u r e c o u l d afford t h e t i m e to t h o r o u g h l y r e v i e w only o n e of its m a j o r r e g u l a t o r y a g e n c i e s a year. O n e s t r a t e g y for r e d u c i n g the cost of r e g u l a t i o n is setting perf o r m a n c e s t a n d a r d s and letting c o m p a n i e s d e c i d e h o w t o m e e t t h e m , i n s t e a d o f i m p o s i n g design s t a n d a r d s . O S H A is u s i n g this a p p r o a c h ; it is c u t t i n g its fire p r e v e n t i o n s t a n d a r d s , for e x a m p l e , from 400 p a g e s d o w n t o 30. E P A has a d o p t e d a ' b u b b l e ' policy which sets p l a n t - w i d e limits on air e m i s s i o n s r a t h e r t h a n c o n t r o l l i n g e a c h s o u r c e ; t h e cost o f c o n t r o l v a r i e s w i d e l y from s o u r c e to s o u r c e , so this policy lets plant m a n a g e r s save m i l l i o n s o f d o l l a r s w i t h o u t any h a r m t o p o l l u t i o n c o n t r o l . D u P o n t , for e x a m p l e , figures i t c a n save $80 m i l l i o n 60 p e r c e n t of its air c l e a n i n g c o s t s . Marketable Rights. R e g u l a t o r s can get results by letting p r i v a t e p a r t i e s e x c h a n g e g o v e r n m e n t - c o n f e r r e d r i g h t s . E P A ' s 'offsets' p o l i c y is an e x a m p l e : it lets a c o m p a n y build up a n e w plant by p a y i n g o t h e r s to c l e a n up t h e i r facilities. E P A also is c o n s i d e r i n g a m a r k e t s y s t e m t o limit f l u o r o c a r b o n p r o d u c t i o n ( N e u s t a d t , 1980: 141). Such a p p r o a c h e s , which a m o u n t to decriminalising some types of c o r p o r a t e c r i m e , h a v e v a l u e in a v a r i e t y of a r e a s . T h e i r a p p l i c a b i l i t y t o 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 very l i m i t e d , h o w e v e r . U n i f o r m , rigid s t a n d a r d s a r e n o r m a l l y r e q u i r e d for t h e c o n t r o l o f h a z a r d o u s p r o d u c t s w h i c h p o s e a d i r e c t t h r e a t to h u m a n life. M o r e o v e r , as s h o w n i n C h a p t e r 4 , t h e t e s t i n g o f final o u t p u t p r o v i d e s only w e a k a s s u r a n c e s of d r u g q u a l i t y . ' W h i l e it is easy to e n f o r c e a design s t a n d a r d - o n e n e e d s only to look at t h e e q u i p m e n t - it is often h a r d t o m o n i t o r p e r f o r m a n c e . ' ( N e u s t a d t , 1980: 142). T h e r e is an u n d e n i a b l e n e e d for r e f o r m s to e n s u r e t h e d e m i s e of i r r a t i o n a l and c o s t - i n e f f e c t i v e r e g u l a t i o n s . Y e t c o m m e n t a t o r s s h o w a t e n d e n c y to o v e r - r e a c t to i n d u s t r y a r g u m e n t s a b o u t the costs of 296

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r e g u l a t i o n , well d o c u m e n t e d a s they a r e . T h i s i s b e c a u s e t h e b e n e f i t s of r e g u l a t i o n are not so well d o c u m e n t e d . W h i l e i n d u s t r y has an i n c e n t i v e to m e a s u r e a c c u r a t e l y the costs of installing air p o l l u t i o n c o n t r o l d e v i c e s , w h o could m e a s u r e e v e n t h e e c o n o m i c b e n e f i t s i n r e d u c e d h e a l t h c o s t s with any a c c u r a c y ? N o o n e has e v e n a t t e m p t e d t o d o t h e s u m s t o e s t i m a t e t h e total f i n a n c i a l cost t o t h e c o m m u n i t y o f t h e t h a l i d o m i d e d i s a s t e r . W e t e n d t o lose pers p e c t i v e b y b e i n g h a m m e r e d w i t h only o n e side o f t h e cost-benefit equation. I n a g g r e g a t e , g o v e r n m e n t s should s p e n d m o r e , not less, o n regul a t i n g b u s i n e s s . T h e s u m s n e e d e d a r e not s o e n o r m o u s . 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 has set its m e m b e r c o u n t r i e s t h e t a r g e t o f s p e n d i n g 0.5 p e r cent o f t h e v a l u e o f d r u g sales i n their c o u n t r i e s o n d r u g c o n t r o l r e g u l a t i o n . M o s t o f its m e m b e r c o u n t r i e s s p e n d less t h a n half t h a t a m o u n t a t p r e s e n t . T h e d i s c u s s i o n in t h e p r e c e d i n g p a r a g r a p h s suffers from a kind o f u n r e a l i t y . C h o i c e s a b o u t h o w m u c h m o n e y w e are willing t o s p e n d i n a t t e m p t s t o p r e v e n t h u m a n suffering a r e not subject t o r a t i o n a l n u m e r i c a l c a l c u l a t i o n . S u c h c h o i c e s reflect t h e p r o f o u n d i r r a t i o n a l i t y t h a t s u r r o u n d s our a t t i t u d e s t o h u m a n suffering. N o one would dare suggest that an attempt to rescue trapped miners be a b a n d o n e d b e c a u s e it w o u l d cost t o o m u c h . Y e t cost is a major o b j e c t i o n t o m a n y o c c u p a t i o n a l h e a l t h and safety p r o t e c t i o n s w h i c h c a n b e s h o w n t o s a v e lives. A t t i t u d e s a r e d r a m a t i c a l l y t r a n s f o r m e d as we shift from identifiable victims to a n o n y m o u s statistical v i c t i m s . T h e p u n d i t s of cost-benefit a n a l y s i s will d e s e r v e a b e t t e r h e a r i n g w h e n t h e y a r e p r e p a r e d t o a p p l y their t e c h n i q u e s t o situa t i o n s i n w h i c h t h e r e a r e identifiable v i c t i m s . It c a n be a r g u e d t h a t p o l i t i c i a n s effectively put a dollar value on h u m a n lives w h e n t h e y d e c i d e t h e v o l u m e o f t a x e s t h e y will raise t o fund r e g u l a t o r y a g e n c i e s . B u t civil s e r v a n t s really do not h a v e to m a k e t h i s kind o f j u d g m e n t . W h a t they m u s t d o , h o w e v e r , i s use t h e i r finite r e g u l a t o r y b u d g e t to save as m a n y lives and p r e v e n t as m u c h i l l - h e a l t h a s p o s s i b l e . S o m e t i m e s this will m e a n r e j e c t i n g c o s t l y p r o g r a m m e s w h i c h will p r e v e n t suffering in favour of an a l t e r n a t i v e d e p l o y m e n t of funds which will p r e v e n t g r e a t e r suffering e l s e w h e r e . R e g u l a t o r s c o n c e r n e d t o a c h i e v e t h e g r e a t e s t good for t h e g r e a t e s t n u m b e r n e e d not c a l c u l a t e h o w m a n y d o l l a r s a life is w o r t h ; b u t t h e y m u s t m a x i m i s e t h e n u m b e r o f lives saved for the dollar.
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Regulatory agencies: captives of industry? O n e w o u l d a s s u m e from the d e b a t e on t h e cost of r e g u l a t i o n that all r e g u l a t o r y a g e n c i e s d o i s i m p o s e costs o n i n d u s t r y . O n the c o n t r a r y , m a n y a g e n c y a c t i v i t i e s r e p r e s e n t a subsidy to i n d u s t r y . T a k e the f o l l o w i n g e x a m p l e from a n A u s t r a l i a n i n f o r m a n t : We had a s a l m o n e l l a infected b a t c h of p r o d u c t i m p o r t e d from o v e r s e a s . W e w o r k e d with N B S L [the H e a l t h D e p a r t m e n t ] t o w o r k o u t a m e t h o d of sterilizing it using r a d i a t i o n . T h e y t e s t e d all t h e s t e r i l i z e d s a m p l e s for free. M o r e dramatically, Fred L a m b , a Richardson-Merrell lawyer, h a s said o f F r a n c e s K e l s e y , t h e F D A scientist w h o s t o p p e d t h e m from m a r k e t i n g t h a l i d o m i d e : ' S h e ' s a h e r o . If it h a d n ' t b e e n for h e r , w e ' d be out of b u s i n e s s . ' T h e r e c u r r e n t criticism o f r e g u l a t o r y a g e n c i e s from c o n s u m e r g r o u p s i s t h a t t h e y are s e r v a n t s o f i n d u s t r y r a t h e r t h a n a d v e r s a r i e s . It is a t r u i s m t h a t t h e p o w e r of r e g u l a t o r y a g e n c i e s is small c o m p a r e d t o t h e p o w e r o f t h e i n d u s t r i e s t h e y r e g u l a t e . I n d u s t r y can use p o l i t i c a l l o b b y i n g a g a i n s t a r e g u l a t o r t h e y do n o t like, and t h e p r o s p e c t o f a j o b in i n d u s t r y for r e g u l a t o r s w h o do the right t h i n g by t h e m . C o n s u m e r a d v o c a t e s criticise t h e ' r e v o l v i n g d o o r ' r e l a t i o n ship b e t w e e n industry and regulatory agency. It is true that industry f r e q u e n t l y b u y s o u t g o v e r n m e n t officials t o apply their e x p e r i e n c e o n t h e o t h e r side o f t h e fence. C o n v e r s e l y , m a n y officials i n h e a l t h r e g u l a t o r y a g e n c i e s formerly w o r k e d i n t h e i n d u s t r y . C o n s u m e r c r i t i c i s m o f t h e r e v o l v i n g d o o r has r e n d e r e d t h e F D A , i n p a r t i c u l a r , m o r e w a r y o f a p p o i n t m e n t s from i n d u s t r y , w h i l e industry has cont i n u e d w i t h o u t t h e slightest c o n c e r n o v e r t h e s o u r c e o f its a p p o i n t m e n t s . C o n s e q u e n t l y , t h e F D A is left with a staff w h o have a lesser u n d e r s t a n d i n g o f t h e t h i n k i n g and s t r a t e g i e s o f t h e o t h e r s i d e , w h i l e i n d u s t r y c o n t i n u e s t o enjoy c o u n s e l from t h e best p e o p l e m o n e y can buy. I n d u s t r y a d o p t s t h e ( a c c u r a t e ) view t h a t t h e m e n t a l i t y o f b u r e a u c r a t s in g o v e r n m e n t a n d b u s i n e s s is q u i t e similar. To be successful, y o u play as well as you can for t h e t e a m y o u ' r e on at the m o m e n t . Life for successful p e o p l e in t h e n e w i n d u s t r i a l state is r a t h e r like t h e c a r e e r o f a p r o f e s s i o n a l footballer. T h e e s s e n c e o f success i s selling o n e ' s skills to different b i d d e r s d u r i n g a c a r e e r cycle. Y o u play y o u r h e a r t o u t for y o u r p r e s e n t t e a m e v e n i f y o u are p l a y i n g a g a i n s t t h e old h o m e t e a m . T h e infinite c a p a c i t y of p e o p l e to switch loyalties is 298

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an old r e a l i t y , b u t o n e w h i c h has e x t e n d e d to n e w d i m e n s i o n s in t h e late c a p i t a l i s t era. Critics of r e g u l a t o r y a g e n c i e s which sign up t o p p l a y e r s from t h e o t h e r side are fixed at a n o s t a l g i c n i n e t e e n t h c e n t u r y view o f t h e p e r m a n e n c y o f l o y a l t i e s . T h e a d v a n t a g e s o f e m p l o y i n g p e o p l e with e x p e r i e n c e i n the o p p o s i t i o n i s t r a n s p a r e n t e n o u g h . C o r p o r a t i o n s have c o m p l i a n c e g r o u p s w h i c h t h e y wish t o h a v e r o u t i n e c o m m i t m e n t t o d o i n g their j o b w e l l . W h a t i n t e r n a l r e g u l a t o r s do is not very different from g o v e r n m e n t r e g u l a t o r s , and t h e r e f o r e g o v e r n m e n t e x p e r i e n c e i s useful. ' I ' m d o i n g basically t h e s a m e t h i n g inside t h e c o m p a n y t h a t I w a s d o i n g a s a r e g u l a t o r . T h e y view u s a s t h e i n t e r n a l F D A . ' T h e s a m e i n f o r m a n t t h e n e x p r e s s e d a view on w h a t he could c o n t r i b u t e if he w e n t t h r o u g h t h e r e v o l v i n g d o o r a g a i n : 'If I w e n t b a c k n o w I'd be a b l e to do a m u c h b e t t e r j o b . I get to k n o w t h e inside story on t h i n g s t h a t I w o u l d h a v e b e e n frozen o u t from as a r e g u l a t o r . ' B e f o r e i n d u s t r y signs up a n e w p l a y e r they go to c o n s i d e r a b l e l e n g t h s to e n s u r e t h a t he or she will be a loyal and d e d i c a t e d player. E q u a l l y , r e g u l a t o r y a g e n c i e s s h o u l d not e m p l o y industry p e o p l e w h o d o n o t h a v e t h e i r h e a r t i n t h e right p l a c e . T h e r e v o l v i n g d o o r u n d o u b t e d l y h a s a d v e r s e c o n s e q u e n c e s . R e g u l a t o r s and r e g u l a t e d c o m e to share a c o m m o n b u r e a u c r a t i c mentality whereby the g e n e r a l p u b l i c a r e v i e w e d a s a n h y s t e r i c a l and i r r a t i o n a l m o b w h o s h o u l d b e p r o t e c t e d from any s u g g e s t i o n o f p r o d u c t h a z a r d s . P r o b l e m s c a n b e s o r t e d o u t a m i a b l y b e t w e e n t h e official a d v e r s a r i e s w i t h o u t p u b l i c p a r t i c i p a t i o n . I t i s r a t h e r like t h e c o n d e s c e n d i n g a t t i t u d e s to c l i e n t s s n a r e d by o p p o s i n g c o u n s e l in law c o u r t s ( B l u m b e r g , 1967). L a t e r I will a r g u e t h a t it is not d e s i r a b l e to exclude public participation in health regulatory matters. There a r e , t h e n , u n d e s i r a b l e c o n s e q u e n c e s from t h e r e v o l v i n g d o o r . H o w e v e r , g i v e n t h a t it w o u l d be difficult to s t o p t h e traffic b e t w e e n g o v e r n m e n t and i n d u s t r y , to s t o p traffic in t h e o t h e r d i r e c t i o n would b e t o h a m s t r i n g g o v e r n m e n t efforts t o get t h e m o s t e x p e r i e n c e d p e o p l e for c e r t a i n j o b s . E v i d e n c e 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 g r e a t influence o v e r 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 i s o v e r w h e l m i n g . A n official o f the A s s o c i a t i o n of the British P h a r m a c e u t i c a l Manufacturing I n d u s t r y told m e t h a t m a n y B r i t i s h g o v e r n m e n t r e g u l a t i o n s w e r e w r i t t e n i n t h e i r offices. S i m i l a r l y , J o s e p h S t e t l e r , former p r e s i d e n t o f t h e A m e r i c a n P M A o n c e c o m m e n t e d : "As I l o o k back o v e r t h r e e o r four y e a r s , w e h a v e c o m m e n t e d o n 6 0 different p r o p o s e d r e g u l a t i o n s . At least a t h i r d w e r e n e v e r p u b l i s h e d in final form. A n d 299

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e v e r y o n e , w i t h o u t e x c e p t i o n , picked up a significant part of o u r s u g g e s t i o n s ' ( H u g h e s a n d B r e w i n , 1979: 2 2 9 ) . It is n o t only civil s e r v a n t s w h o a r e in d a n g e r of c a p t u r e by t h e i n d u s t r y . C a m p a i g n c o n t r i b u t i o n s can r e n d e r t h e l e g i s l a t u r e a m e n a b l e as well. L a n g (1974: 257) has r e p o r t e d on a d o n a t i o n of 20,000 to the British Conservative Party by B e e c h a m . More r e c e n t l y , L a n g a r g u e s , such d o n a t i o n s h a v e b e c o m e less n e c e s s a r y a s i n d u s t r y p e o p l e h a v e found their way into p a r l i a m e n t . A c c o r d i n g t o L a n g , t h e s e m e m b e r s o f p a r l i a m e n t i n c l u d e Sir Tufton H . B e a m i s h , a S m i t h K l i n e d i r e c t o r ; Sir H e r b e r t W. B u t c h e r , a B e e c h a m d i r e c t o r ; D r W y n d h a m D a v i e s , a f o r m e r senior m e d i c a l a d v i s o r t o N i c h o l a s a n d British S c h e r i n g ; Sir A r t h u r V e r e H a r v e y , c h a i r m a n o f C i b a ( U K ) and a d i r e c t o r o f C i b a ( S w i t z e r l a n d ) ; D a v i d E. C. P r i c e , an e x - e c o n o m i c c o n s u l t a n t to ICI and formerly p e r s o n a l a s s i s t a n t to t h e c h a i r m a n of I C I ; Nigel T. F i s h e r , a former d i r e c t o r o f B a y e r and W i n t h r o p ; Sir F r e d e r i c k B e n n e t t , a former S q u i b b d i r e c t o r ; D a v i d C r o u c h , a Pfizer d i r e c t o r ; and D u d l e y S m i t h , a S m i t h K l i n e d i r e c t o r . O n t h e o t h e r side o f t h e A t l a n t i c , one e x e c u t i v e w a s frank a b o u t w h a t h e t h o u g h t o f t h a t t h o r n i n t h e side 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 , the late S e n a t o r K e f a u v e r : ' W e i n t h e i n d u s t r y m a d e a m i s t a k e i n t h e way w e h a n d l e d K e f a u v e r . W e s h o u l d h a v e d e a l t with t h e p r o b l e m publicly b y w o r k i n g against him in T e n n e s s e e . ' I n d e e d , all m a n n e r o f r e l e v a n t c o n s t i t u e n c i e s c o m e within t h e p a y 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 . I r e m e m b e r sharing a lift with a g r o u p of p h a r m a c e u t i c a l e x e c u t i v e s after a h e a r i n g of t h e R a l p h e n q u i r y i n t o A u s t r a l i a ' s P h a r m a c e u t i c a l Benefits S c h e m e . S o m e d o c t o r s h a d j u s t testified t h a t t h e P B S w a s t o o slow t o a d m i t c e r t a i n n e w d r u g s . A n e x e c u t i v e from a c o m p a n y which m a n u f a c t u r e d t h e s e d r u g s b o a s t e d t o his c o l l e a g u e s from t h e o t h e r c o m p a n i e s : ' T h e d o c t o r s h a v e d o n e a g o o d j o b t o d a y . ' A n o t h e r ruefully r e p l i e d : ' W e s h o u l d h a v e lined up a d o c t o r to say t h a t b e t a - b l o c k e r s are d i s a d v a n t a g e d b y t h e P B S ' (see also H e m m i n k i and P e s o n e n , 1977b). I n 1974 e l e v e n F D A m e d i c a l officers testified before S e n a t o r K e n n e d y ' s c o m m i t t e e ( S u b c o m m i t t e e o n H e a l t h , 1974) t o t h e effect t h a t t h e y had b e e n v i c t i m i s e d b y s e n i o r m a n a g e m e n t o f t h e F D A b e c a u s e o f t h e adversarial stance they a d o p t e d towards industry. A n i n v e s t i g a t i o n b y F D A C o m m i s s i o n e r S c h m i d t c l e a r e d t h e alleg a t i o n s . H o w e v e r , a D e p a r t m e n t o f H e a l t h E d u c a t i o n and W e l f a r e review o f t h e Schmidt investigation ordered reinvestigation by an 300

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i n d e p e n d e n t panel chaired by N o r m a n Dorsen, chairperson o f t h e N e w Y o r k U n i v e r s i t y L a w S c h o o l . O v e r a l l , t h e D o r s e n r e p o r t also c l e a r e d t h e F D A o f p r o - i n d u s t r y b i a s , w h i l e a d m i t t i n g t h a t i t found m a n y i n d i v i d u a l c a s e s o f i m p r o p e r d e a l i n g s with d r u g c o m p a n i e s . I f p r o - i n d u s t r y bias w a s not t h e finding o f t h e D o r s e n r e p o r t , i t c e r t a i n l y did c o n c l u d e t h a t t h e F D A c o n s c i e n t i o u s l y b e l i e v e d t h a t i t w a s better to have a co-operative than an adversarial relationship w i t h i n d u s t r y . S u c h a p o s i t i o n , it w a s c o n c l u d e d , a r o s e not from a v e n a l p r o p e n s i t y to be t o o l s of i n d u s t r y , b u t b e c a u s e of a sincere b e l i e f w i t h i n t h e a g e n c y t h a t b e i n g ' r e a s o n a b l e ' , ' c o - o p e r a t i v e ' and n o n a d v e r s a r i a l w a s t h e m o s t effective w a y o f g e t t i n g t h e i r j o b d o n e . D o r s e n found t h a t l o w e r - l e v e l officers w h o m a d e t h i n g s difficult for i n d u s t r y (for e x a m p l e , by h o l d i n g up a p p r o v a l of a n e w d r u g ) w e r e from t i m e to t i m e shifted to less sensitive p o s i t i o n s . I n d e e d , this w a s a ' s y s t e m a t i c p a t t e r n o f i n v o l u n t a r y t r a n s f e r s and o t h e r u n f a v o r a b l e actions against employees who were more adversarial towards industry than m a n a g e m e n t was'. F D A has b e e n m a n a g e d , d u r i n g t h e p e r i o d i n q u e s t i o n , b y i n d i v i d u a l s w h o h a v e m a d e a c o n s c i o u s d e t e r m i n a t i o n that t h e a g e n c y shall b e c o o p e r a t i v e w i t h , r a t h e r t h a n a d v e r s a r i a l t o w a r d s , 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 i t h that d e c i s i o n f i r m l y m a d e , m a n a g e m e n t asserted control over a group of medical officers w h o s e a p p r o a c h to i n d u s t r y w a s m o r e a d v e r s a r i a l in a m a n n e r w h i c h c o u l d aptly b e d e s c r i b e d a s 'political h a r d b a l l ' . T h e d i s s e n t e r s w e r e effectively s u p p r e s s e d , p r i m a r i l y b y resort t o involuntary transfers. M o r e o v e r , m a n a g e m e n t ' s execution ofthis policy w a s often u n t r u t h f u l , usually u n k i n d , s o m e t i m e s unlawful, and consistently unprofessional (Review Panel on New Drug R e g u l a t i o n , 1977). T h e D o r s e n c o m m i t t e e r e p o r t i s t h e r e f o r e a r a t h e r schizoid d o c u m e n t , c l a i m i n g a n a b s e n c e o v e r a l l o f agency d o m i n a t i o n b y i n d u s t r y , yet pointing to abuses which would seem to indicate the o p p o s i t e . I r r e s p e c t i v e o f t h e p e r v a s i v e n e s s o f i n d u s t r y influence o v e r g i v e n r e g u l a t o r y a g e n c i e s , i t i s u n d e n i a b l e t h a t t h e r e are t i m e s w h e n civil s e r v a n t s sell o u t t h e p u b l i c i n t e r e s t t o p h a r m a c e u t i c a l i n d u s t r y p r e s s u r e . T h e r e is a d a n g e r to be g u a r d e d against by s t r i n g e n t l y e n f o r c e d conflict o f i n t e r e s t r u l e s , and b y o m b u d s m e n w h o c a n e i t h e r e n c o u r a g e m o r e a d v e r s a r i a l officers t o lodge c o m p l a i n t s o f s t a n d o v e r t a c t i c s quietly a n d w i t h o u t r e p e r c u s s i o n , o r e v e n e n c o u r a g e p u b l i c w h i s t l e b l o w i n g . A t t e n t i o n should b e d r a w n 301

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t o t h e r o l e t h e K e n n e d y s u b c o m m i t t e e p l a y e d i n p r o v i d i n g a forum for t h e e l e v e n w h i s t l e b l o w e r s w h o set i n t r a i n the c o n s t r u c t i v e examination of industry-agency relationships. T o t h e e x t e n t t h a t r e g u l a t o r y a g e n c i e s a r e c a p t i v e s o f industry i n t e r e s t s , a c t i v e p u b l i c i n t e r e s t m o v e m e n t s p r o v i d e vital safeg u a r d s . In one area in particular, the control of carcinogens, public interest groups have provided a greater stimulus to regulation than g o v e r n m e n t a g e n c i e s . Wolfe (1977) c o n c l u d e s that of 26 US regul a t o r y actions on c a r c i n o g e n s in the w o r k p l a c e or in c o n s u m e r p r o d u c t s , unions or public interest groups were the initiators o f t h e a c t i o n in 22 c a s e s . In only 4 c a s e s w a s g o v e r n m e n t classified as t h e i n i t i a t o r (see also E p s t e i n , 1978: 4 1 6 ) . T h e w a t c h d o g e f f e c t i v e n e s s o f c o n s u m e r g r o u p s has not b e e n a s g r e a t i n o t h e r c o u n t r i e s a s i n t h e U n i t e d S t a t e s . P a r t l y this i s b e c a u s e t h e y h a v e not had t h e t o o l s t o d o so. T h e U n i t e d S t a t e s i s t h e only c o u n t r y h a v i n g a F r e e d o m o f I n f o r m a t i o n A c t with any b i t e . I n m a n y c o u n t r i e s c o n s u m e r g r o u p s are not a c c o r d e d t h e legal s t a n d ing t o c h a l l e n g e r e g u l a t o r y d e c i s i o n s i n c o u r t . E v e n i n the U n i t e d S t a t e s , p u b l i c p a r t i c i p a t i o n n e e d s t o b e o p e n e d u p further. A s a r g u e d i n C h a p t e r 3 , r e s u l t s o f r e s e a r c h o n t h e safety t e s t i n g o f n e w d r u g s s h o u l d n o t b e t r e a t e d a s t r a d e s e c r e t s . Such results should b e a v a i l a b l e t o a n y o n e i n t h e scientific c o m m u n i t y w h o w i s h e s t o bring t h e i r critical faculties t o b e a r o n t h e q u a l i t y o f t h e d a t a . Scientific a d v a n c e in all a r e a s is f o s t e r e d by t h e p u b l i c clash of ideas in l e a r n e d j o u r n a l s . U n d e r c o n d i t i o n s o f secrecy i t w i t h e r s . I n s i d e r s in the regulation g a m e do not want public participation. R e g u l a t o r s d o n ' t w a n t i t b e c a u s e i t will e x p o s e t h e i r p e r f o r m a n c e t o p u b l i c criticism. Industry doesn't want it because they know that o p e n g o v e r n m e n t w o u l d e x p o s e s i t u a t i o n s i n which r e g u l a t o r s have f o u n d c o m f o r t a b l e a c c o m m o d a t i o n s with t h e m . P r e s s u r e for t o u g h e r a g e n c y s t a n c e s w o u l d m o u n t . L a w y e r s o n b o t h sides d o n ' t w a n t i t b e c a u s e t h e y see p u b l i c p a r t i c i p a t i o n a s c o m p r o m i s i n g disp a s s i o n a t e d u e p r o c e s s . Political heat is seen to be an i n a p p r o p r i a t e c l i m a t e i n w h i c h t o d e c i d e i m p o r t a n t m a t t e r s o f law. Scientists o n b o t h s i d e s d o n ' t w a n t i t b e c a u s e ' s c i e n c e a n d politics d o n ' t m i x ' . T h e r e a r e e l e m e n t s o f t r u t h i n all t h e s e v i e w p o i n t s . I n p a r t i c u l a r , o n e m u s t s h a r e s y m p a t h y w i t h t h e c o n c e r n o f i n d u s t r y and g o v e r n m e n t s c i e n t i s t s a t t h e w a y t h a t t h e m a s s m e d i a oversimplify and s e n s a t i o n a l i s e scientific d i s p u t e s . O n t h e o t h e r h a n d , scientific i s s u e s d o not e n t e r t h e political a r e n a u n l e s s ( a ) t h e y are i m p o r t a n t a n d ( b ) t h e r e i s significant d i s a g r e e m e n t a m o n g scientists o v e r 302

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t h e m . P o l i t i c i a n s , c o n s u m e r g r o u p s and t h e m a s s m e d i a are not s o s t u p i d as to t a k e up scientific q u e s t i o n s u n l e s s t h e r e is s o m e b o d y of s u p p o r t for t h e i r p o s i t i o n w i t h i n t h e scientific c o m m u n i t y . Unfort u n a t e l y t h e political p r o c e s s , r e p o r t e d in a free p r e s s , is the only v i a b l e m e c h a n i s m w e h a v e for d e a l i n g w i t h d i s p u t e s a m o n g rival e x p e r t s . T o x i c o l o g i s t s w h o d i s a g r e e o v e r t h e safety of a d r u g must h a v e t h e i r d i s a g r e e m e n t r e s o l v e d at a political level, j u s t as the d i s a g r e e m e n t s b e t w e e n e c o n o m i s t s o v e r inflation must b e r e s o l v e d at a p o l i t i c a l level. To t a k e a n o t h e r e x a m p l e , most of us prefer d i s p u t e s b e t w e e n t o w n p l a n n e r s on t h e future of our cities to be r e s o l v e d in t h e u l t i m a t e by a d e m o c r a t i c political p r o c e s s . To t h e e x t e n t t h a t d i s p u t e s a r e b r o u g h t o u t i n t h e o p e n , the messy b u s i n e s s o f d e m o c r a c y can a r b i t r a t e m o r e i n f o r m a t i v e l y and less c o r r u p t l y . If d i s p u t e s w e r e settled by a ' s u p r e m e c o u r t of s c i e n c e ' or a ' s u p r e m e c o u r t o f e c o n o m i c s ' w e m i g h t s o m e t i m e s benefit from m o r e r a t i o n a l d e c i s i o n s . B u t t h e cost w o u l d be a less p a r t i c i p a t o r y s o c i e t y w h e r e p e o p l e lose s e l f - d e t e r m i n a t i o n b y h a n d i n g o v e r their d e s t i n y to e x p e r t s . My s u s p i c i o n is t h a t a h e a l t h i e r society will be o n e w h e r e o r d i n a r y c i t i z e n s h a v e o p i n i o n s a b o u t w h a t t h e y are doing to their bodies with the drugs they ingest, even though those o p i n i o n s will often lead to i r r a t i o n a l and scientifically ill-informed b e h a v i o u r . T h e r e a s o n s for this belief h a v e b e e n a r g u e d i n C h a p t e r 6. Before leaving the question of relationships b e t w e e n regulatory a g e n c i e s a n d i n d u s t r y , i t m u s t b e r e a l i s e d t h a t t h e r e are justificat i o n s for r e g u l a t o r s m a i n t a i n i n g r e l a t i o n s h i p s with industry w h i c h are ' r e a s o n a b l e ' and 'co-operative'. While public interest groups c a n n o t be expected to routinely accept the a c c o m m o d a t i o n s r e a c h e d b e t w e e n r e g u l a t o r s and i n d u s t r y , they s h o u l d b e sensitive t o t h e n e e d for t h e t w o g r o u p s t o h a v e o p e n c h a n n e l s o f c o m m u n i c a t i o n . We s a w in C h a p t e r s 3 and 4 h o w t h e i n s p e c t o r ' s task is often o n e of c o n c e i v i n g a s o l u t i o n to a p r o b l e m in c o n j u n c t i o n with t h e p e o p l e in t h e i n d u s t r y w h o m u s t i m p l e m e n t it. T h e r e s o l u t i o n to a G M P p r o b l e m m i g h t i n v o l v e a s u p e r i o r s o l u t i o n t o t h a t set d o w n i n t h e r e g u l a t i o n s . I n s p e c t o r s d o not w a n t t o e n c o u r a g e t h e view t h a t c o m p a n i e s s h o u l d b e slavish rule f o l l o w e r s a n d n o m o r e . T h e r e are t o o m a n y s h a d e s of grey and i n h e r e n t p o s s i b i l i t i e s for l o o p h o l i n g to m a k e t h a t d e s i r a b l e . I n s p e c t o r s s h o u l d see p a r t o f their role a s f o s t e r i n g safety i n n o v a t i o n a n d e n c o u r a g i n g m a n u f a c t u r e r s t o g o the extra mile. S o m e o f m y i n d u s t r y i n f o r m a n t s c o m p l a i n e d o f F D A officers w h o 303

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a v o i d e d b e i n g s e e n with t h e m a t c o n f e r e n c e s lest t h a t b e i n t e r p r e t e d as e v i d e n c e of b e i n g in bed with i n d u s t r y . O t h e r s c o m p l a i n e d of r e g u l a t o r s w h o had a ' g o t c h a ' a t t i t u d e , w h o w e r e 'only i n t e r e s t e d i n n o t c h e s o n t h e i r g u n ' . T h e e x e c u t i v e s b e l i e v e d that t h e s e r e g u l a t o r s , rather than forewarn t h e m , would allow them to go a h e a d and m a k e m i s t a k e s s o they could c a t c h t h e m i n c o n t r a v e n t i o n o f t h e r e g u l a t i o n s . T h e r e w e r e s o m e F D A officers w h o m i t w a s i m p o s s i b l e t o t e l e p h o n e a n d p r e c l e a r a p r a c t i c e before p r o c e e d i n g . To do so w o u l d be to 'tip t h e m off: in any case t h e official w o u l d be u n w i l l i n g to give t h e g r e e n light, in case a n o t h e r official might subsequently come to a different c o n c l u s i o n following an inspection. It is not d e s i r a b l e for i n s p e c t o r s to see their role as primarily s a n c t i o n i n g r a t h e r t h a n p r i m a r i l y p r o b l e m - s o l v i n g . T h e r e is a need for m o r e f r e q u e n t p r o s e c u t i o n s of flagrant v i o l a t i o n s of r e g u l a t i o n s 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 . B u t t h e i n s p e c t o r should be able to say: T j u s t w r o t e up t h e facts in my r e p o r t and t h e g e n e r a l c o u n s e l p i c k e d it up and d e c i d e d to p r o s e c u t e . It w a s not my d e c i s i o n . ' T h e i n s p e c t o r n e e d s a store of g o o d w i l l to p e r s u a d e a m a n u f a c t u r e r t o g o t h e e x t r a mile w i t h safety i m p r o v e m e n t s . T h a t g o o d will can be w o n by a p r e t e n c e of i n t e r c e d i n g on b e h a l f of the m a n u f a c t u r e r a g a i n s t p r o s e c u t i o n in a case that w a s clearly a m i s t a k e r a t h e r t h a n a flagrant v i o l a t i o n . To p r o s e c u t e v i o l a t i o n s w h i c h a r e m i n o r m i s t a k e s i s t o foster r e s e n t m e n t and dissipate m o t i v a t i o n to o b e y t h e r e g u l a t i o n s . E v e r y local police officer or s c h o o l t e a c h e r knows the psychology of building motivation to obey t h e r u l e s by telling a m i s c r e a n t of basically r e p u t a b l e c h a r a c t e r that s/he will give him a s e c o n d c h a n c e . E q u a l l y , t h e y k n o w h o w c o u n t e r p r o d u c t i v e such g e s t u r e s can be w h e n d i r e c t e d at less r e p u t a b l e i n d i v i d u a l s w h o s h o w no signs of m o t i v a t i o n to follow the r u l e s . T h e fact t h a t such d i s c r e t i o n is in t h e i n t e r e s t s of c r i m e c o n t r o l i s o f c o n c e r n t o legalists p r e o c c u p i e d w i t h e q u i t a b l e e n f o r c e m e n t o f t h e law. T h e e q u i t y issue will be t a k e n up in t h e next section. T h e final w a y t h a t r e g u l a t o r s can m a i n t a i n t h e requisite goodwill from i n d u s t r y is to c o u n t e r b a l a n c e t h e i n c r e a s e d use of p r o s e c u t i o n with r e c o u r s e to positive sanctions. Stone has been an advocate of such an a p p r o a c h . D u r i n g W o r l d W a r I I , for e x a m p l e , ' E ' a w a r d s w e r e b e s t o w e d o n d e f e n s e c o m p a n i e s t h a t had e x c e e d e d t h e i r allotted p r o d u c t i o n . T h e p r e s e n t a t i o n o f t h e ' E ' t o a qualifying c o r p o r a t i o n w a s t h e 304

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o c c a s i o n of a high c e r e m o n y , at w h i c h 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 , e x e c u t i v e s , and w o r k e r s j o i n e d . T h e c o m p a n y w o u l d get a f l a g , and e a c h o f t h e w o r k e r s a n ' E ' pin. W h y should not t h e E n v i r o n m e n t a l P r o t e c t i o n A g e n c y , for e x a m p l e , b e a u t h o r i z e d t o g i v e out its o w n E n v i r o n m e n t a l P r o t e c t i o n ' E ' s t o c o m p a n i e s that accelerate beyond their 'cleanup' timetables, or come up with ingenious new environment-protecting methods? (Stone, 1975: 2 4 3 ) . 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 it w o u l d not be difficult to a l l o c a t e a w a r d s for o u t s t a n d i n g a c h i e v e m e n t i n c o m p l i a n c e with G M P s o r G L P s o r for o u t s t a n d i n g a d v a n c e s i n safety i n n o v a t i o n .

The question of equity

R a d i c a l critics o f c r i m i n a l ( i n ) j u s t i c e s y s t e m s c o r r e c t l y p o i n t out t h a t w h i l e p o o r p e o p l e get long p r i s o n s e n t e n c e s for m i n o r p r o p e r t y c r i m e s , c o m p a n y e x e c u t i v e s can fix p r i c e s , defraud c o n s u m e r s o f m i l l i o n s , and kill and m a i m w o r k e r s w i t h i m p u n i t y . Social j u s t i c e w o u l d s e e m t o d e m a n d that w e p u r s u e and p r o s e c u t e c o r p o r a t e c r i m i n a l s w i t h at least as m u c h v i g o u r as t r a d i t i o n a l c r i m i n a l s . C e r t a i n l y i f t h e law w e r e e n f o r c e d e q u i t a b l y , t h e r e w o u l d b e m o r e w h i t e - c o l l a r c r i m i n a l s in prison t h a n t h e r e w o u l d be of the bluec o l l a r v a r i e t y ( s e e B r a i t h w a i t e , 1979b: 1 7 9 - 2 0 1 ; B r a i t h w a i t e , 1982). M a n y c r i m i n o l o g i s t s , i n c l u d i n g t h e a u t h o r , favour r e s o l v i n g this i n e q u i t y by l e t t i n g m o s t of t h e b l u e - c o l l a r offenders o u t of prison a n d p u n i s h i n g t h e i r c r i m e s with less c o u n t e r p r o d u c t i v e s a n c t i o n s t h a n a r e c u r r e n t l y a p p l i e d . But for p e o p l e w h o d o not favour that s o l u t i o n t h e r e is a difficult m o r a l c h o i c e to be m a d e . C a n society afford t h e u n i m a g i n a b l e cost o f i n v e s t i g a t i n g , p r o c e s s i n g t h r o u g h t h e c o u r t s and i n c a r c e r a t i n g c o r p o r a t e c r i m i n a l s with t h e same d e g r e e o f c e r t a i n t y and severity t h a t w e apply t o t r a d i t i o n a l offenders? Because o f t h e greater complexity of corporate cases, t h e cost w o u l d b e g r e a t e r t h a n t h e w h o l e a p p a r a t u s o f criminal justice that we have at the m o m e n t . But the choice is more than s i m p l y a m a t t e r of cost. I t has b e e n a r g u e d i n t h e p r e v i o u s s e c t i o n , and t h r o u g h case s t u d i e s such a s t h a t o f t h e a n o n y m o u s t r a n s n a t i o n a l i n C h a p t e r 4 , t h a t u s i n g t h e full force of the law is not always t h e best way of p r o t e c t i n g t h e p u b l i c i n t e r e s t w h e n a c o r p o r a t e c r i m e has o c c u r r e d . O f t e n c o n s u m e r s will be b e t t e r p r o t e c t e d by a deal w h e r e b y t h e 305

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c o m p a n y agrees to dismiss certain responsible e m p l o y e e s , immed i a t e l y recall c e r t a i n p r o d u c t s from the m a r k e t , institute r e s t i t u t i v e m e a s u r e s and r e h a b i l i t a t e its o r g a n i s a t i o n a l p r o c e s s e s t o e n s u r e that t h e offence will not be r e p e a t e d . L e g a l i s t s w h o opt for an a b s o l u t i s t p r i n c i p l e o f t h e e v e n - h a n d e d e n f o r c e m e n t o f t h e law w o u l d c a u s e t h e d e a t h s o f c o n s u m e r s w h i l e s o m e cases slowly d r a g g e d t h r o u g h the courts. In some m e a s u r e a choice must be m a d e between equal treatment u n d e r law and p r o t e c t i n g t h e h e a l t h o f c o n s u m e r s . M y c h o i c e i s to give p r i o r i t y to t h e latter. F o r this r e a s o n I s u p p o r t the t h o r o u g h l y i n e q u i t a b l e p r o v i s i o n i n S e c t i o n 306 o f t h e U S F o o d , D r u g a n d C o s m e t i c A c t t h a t ' n o t h i n g i n this A c t shall b e c o n s t r u e d as r e q u i r i n g t h e S e c r e t a r y to r e p o r t for p r o s e c u t i o n , or for t h e i n s t i t u t i o n of libel or i n j u n c t i o n p r o c e e d i n g s , m i n o r v i o l a t i o n s of this A c t w h e n e v e r he b e l i e v e s that t h e p u b l i c interest will be a d e q u a t e l y s e r v e d by a s u i t a b l e w r i t t e n n o t i c e or w a r n i n g . ' E v e n the m i n o r i t y of t r a d i t i o n a l c r i m i n a l offenders w h o benefit from pre-trial d i v e r s i o n p r o g r a m m e s m e e t d e m a n d s and suffer i n c o n v e n i e n c e w h i c h w o u l d m a k e t h e m a j o r i t y o p t i o n for food and drug offenders - r e c e i v i n g a l e t t e r of a d m o n i t i o n in t h e mail - s e e m very a t t r a c t i v e . T r a d i t i o n a l c r i m i n a l o f f e n d e r s also do n o t g e n e r a l l y benefit from t h e r o u t i n e F D A policy o f only p r o s e c u t i n g after t h e offender has b e e n w a r n e d o n c e and failed t o t a k e h e e d . B u r g l a r s w o u l d benefit e n o r m o u s l y from a c o n s i s t e n t policy of a w a r n i n g only for a first offence.
4

I t c o u l d b e a r g u e d t h a t t h e difference b e t w e e n p h a r m a c e u t i c a l industry crimes and traditional crimes in discretion to prosecute is o n e o f d e g r e e r a t h e r t h a n o f kind. P r o s e c u t o r i a l d i s c r e t i o n with t r a d i t i o n a l c r i m e i s , after all, e n o r m o u s ( D a v i s , 1 9 7 1 , 1976; G a b b a y , 1973). I f r e a d e r s a r e not p e r s u a d e d a b o u t how great the d i f f e r e n c e is e m p i r i c a l l y , t h e y m i g h t a g r e e with h o w great t h e d i f f e r e n c e ought to be in t e r m s of p r i n c i p l e s of p r o s e c u t o r i a l disc r e t i o n . W i t h t r a d i t i o n a l i n d i v i d u a l c r i m e , w h i l e t h e r e is a recogn i t i o n t h a t e q u a l i t y b e f o r e t h e law is a fiction, we still s u b s c r i b e to e q u a l i t y b e f o r e t h e law as an ideal to w h i c h we o u g h t to s t r i v e , no m a t t e r h o w i m p e r f e c t l y . L e g a l fictions fulfil i m p o r t a n t p u r p o s e s , a s Fuller (1967) pointed out. Some theoreticians of traditional crime s u g g e s t t h a t e q u a l i t y and u n i f o r m i t y o f t r e a t m e n t (or 'just d e s e r t s ' ) s h o u l d b e t h e p r i m a r y aim o f s e n t e n c i n g p r a c t i c e s , while c r i m e p r e v e n t i o n s h o u l d be m e r e l y a c o n s t r a i n t w h i c h sets limits to this g o a l ( e . g . von H i r s c h , 1976). O b v e r s e l y , o t h e r s suggest that c r i m e 306

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p r e v e n t i o n ought to be the primary goal, with equity the constraint, p r e v e n t i n g e x c e s s i v e l y unfair p e n a l t i e s from b e i n g i m p o s e d for the s a k e o f c r i m e p r e v e n t i o n ( e . g . M o r r i s . 1974). W h a t I a m a d v o c a t i n g w i t h r e s p e c t t o c o r p o r a t e c r i m e i n t h e p h a r m a c e u t i c a l industry i s t h a t e q u a l i t y of t r e a t m e n t u n d e r law be n e i t h e r a p r i m a r y goal n o r a c o n s t r a i n t . T h e p r i m a r y goal should b e r e d u c t i o n o f risk t o h u m a n h e a l t h ( c r i m e p r e v e n t i o n ) , and e q u i t y c o n s i d e r a t i o n s should never c o n s t r a i n t h e a t t a i n m e n t o f this p r i m a r y g o a l . A m o r e e q u i ' a b l e p r o s e c u t o r i a l or s e n t e n c i n g p r a c t i c e s h o u l d be p r e f e r r e d to a less e q u i t a b l e o n e if, a n d only if, t h e former d o e s not increase risks to h u m a n h e a l t h i n c o m p a r i s o n with t h e latter. F o o d a n d d r u g l a w y e r s t e n d to have a c o n c e r n o v e r w h a t I w o u l d call p e t t y e q u a l i t y or p e t t y u n i f o r m i t y of t r e a t m e n t of offenders while ignoring gross inequities in the criminal justice system. Rulem a k i n g to c o n s t r a i n a d m i n i s t r a t i v e d i s c r e t i o n which leads to ine q u i t a b l e t r e a t m e n t o f food and d r u g offenders a t t r a c t s their s u p p o r t . Y e t i n e q u a l i t y b e t w e e n the t r e a t m e n t o f food and drug v e r s u s o t h e r t y p e s of offenders is not an i s s u e . E l i m i n a t i o n of petty i n e q u a l i t y is, in itself, d e s i r a b l e . H o w e v e r , r e d u c i n g petty sent e n c i n g d i s p a r i t i e s can w i d e n t h e m o r e f u n d a m e n t a l d i s p a r i t i e s b e t w e e n w h i t e - c o l l a r and t r a d i t i o n a l o f f e n d e r s . T h i s is a feature of efforts to r e d u c e any kind of p e t t y i n e q u a l i t y w h i c h i g n o r e s global inequality. For e x a m p l e , equalising income disparities among d o c t o r s b y i n c r e a s i n g t h e r e m u n e r a t i o n o f G P s t o t h a t o f specialists a c h i e v e s p e t t y e q u a l i t y a m o n g d o c t o r s . H o w e v e r , i t also i n c r e a s e s s o c i e t a l i n e q u a l i t y by further w i d e n i n g t h e gap b e t w e e n d o c t o r s as a c l a s s a n d t h e rest o f t h e p o p u l a t i o n . T h e F D A s e t t l e s for a w a r n i n g r a t h e r t h a n a p r o s e c u t i o n for o v e r 90 p e r c e n t of first offences. So why not e n a c t a rule which elimina t e s t h e d i s c r e t i o n to victimise a m i n o r i t y by specifying that no first offence will be p r o s e c u t e d ? O n e a n s w e r is t h a t t h e petty e q u a l i t y is a c h i e v e d a t t h e e x p e n s e o f e v e n g r e a t e r i n e q u a l i t y b e t w e e n food a n d d r u g first o f f e n d e r s and o t h e r t y p e s o f criminal offenders w h o a r e t h r o w n into jail o n t h e i r first offence. M o r e o v e r , petty e q u a l i t y c a n conflict w i t h o t h e r s u b s t a n t i v e c r i m i n a l j u s t i c e g o a l s . A rule t h a t n o o n e will b e p r o s e c u t e d u n l e s s t h e y h a v e b e e n p r e v i o u s l y w a r n e d r e d u c e s i n c e n t i v e s for law o b s e r v a n c e a m o n g firms w h o have not yet b e e n w a r n e d ( K r e i s b e r g , 1976: 1113). By all m e a n s let us have m o r e p e t t y e q u a l i t y w h e n its p u r s u i t d o e s not i n c r e a s e t h e r i s k t o h u m a n health." A d v o c a t e s of this, however, must question the extent to which it confounds broader justice goals. 307

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The limits ofcriminal law

L e t us e x a m i n e s o m e o f t h e difficulties in a p p l y i n g legal s o l u t i o n s to m a n y o f t h e p r o b l e m s which occur in the pharmaceutical industry. As will be c o n s i d e r e d in m o r e detail l a t e r , t h e p r o b l e m of locating c u l p a b l e i n d i v i d u a l s i s p a r t i c u l a r l y difficult b e c a u s e o f t h e t e n d e n c y to scapegoat. O n e executive explained that in pharmaceutical comp a n i e s . T h e r e ' s a M u r p h y ' s L a w of a kind: If s o m e o n e else can be b l a m e d , t h e y will." To my a m a z e m e n t , two A m e r i c a n executives I interviewed e x p l a i n e d t h a t t h e y h a d held t h e p o s i t i o n o f "vice-president r e s p o n sible for g o i n g to j a i l ' and I w a s told of this p o s i t i o n existing in a third c o m p a n y . L i n e s o f a c c o u n t a b i l i t y had b e e n d r a w n i n t h e o r g a n i s a t i o n s u c h t h a t i f t h e r e w e r e a p r o b l e m a n d s o m e o n e ' s h e a d had t o go on t h e c h o p p i n g b l o c k , it w o u l d be t h a t of the ' v i c e - p r e s i d e n t r e s p o n s i b l e for going to jail". As will be seen in the next s e c t i o n , s t r u c t u r i n g a c c o u n t a b i l i t y in t h i s w a y is m u c h m o r e difficult in t h e U n i t e d S t a t e s since t h e Park c a s e . Of c o u r s e the c h a n c e s of the v i c e - p r e s i d e n t a c t u a l l y g o i n g to j a i l , or e v e n b e i n g p r o s e c u t e d for an o f f e n c e , a r e very slim i n d e e d . T h e s e e x e c u t i v e s p r o b a b l y w o u l d not h a v e b e e n p r o m o t e d t o v i c e - p r e s i d e n t had they not b e e n willing t o act as s c a p e g o a t s . If t h e y p e r f o r m w e l l , p r e s u m a b l y they w o u l d be shifted s i d e w a y s to a safer v i c e - p r e s i d e n c y . C o r p o r a t i o n s can t h e r e fore pay s o m e o n e to be t h e i r fall guy. T h i s can be d o n e in v a r i o u s w a y s . I n r e t u r n for t a k i n g the r a p , g e n e r o u s s e v e r a n c e pay may b e f o r t h c o m i n g . T h e g e n e r a l p o i n t i s t h a t with c o r p o r a t e c r i m e , d e c i s i o n s as to w h i c h i n d i v i d u a l s will be called to a c c o u n t h a v e little to do w i t h e q u i t y , j u s t i c e or guilt. L a r g e c o r p o r a t i o n s c a n be q u i t e planful in h o w they set up struct u r e s for a l l o c a t i n g b l a m e . C h a p t e r 3 s h o w e d h o w c o m p a n i e s can g e t c o n t r a c t o r s t o d o t h e i r dirty w o r k . B i o m e t r i c T e s t i n g I n c . , itself a safety t e s t i n g c o n t r a c t o r to larger p h a r m a c e u t i c a l c o m p a n i e s , s u b c o n t r a c t e d s o m e o f its w o r k t o o t h e r c o m p a n i e s , m a k i n g t h e t e s t s t w o s t e p s r e m o v e d from t h e c o r p o r a t i o n w h i c h w o u l d p r e s e n t t h e m to t h e r e g u l a t o r y a g e n c y . S i m i l a r l y , in C h a p t e r 2 t h e use of a g e n t s outside the c o m p a n y to pass bribes was d o c u m e n t e d . The l a r g e r t h e c o r p o r a t i o n and t h e m o r e c o m p l e x t h e c o r p o r a t e c r i m e t h e g r e a t e r t h e d i s t a n c e which can b e p l a c e d b e t w e e n the criminal m i n d a n d t h e c r i m i n a l act. P a r t i c u l a r l y from t h e case s t u d i e s in C h a p t e r s 3 and 4, it w a s c o n c l u d e d t h a t t h e m o s t f u n d a m e n t a l p r o b l e m with t r a d i t i o n a l legal

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s o l u t i o n s to c o r p o r a t e crime in the p h a r m a c e u t i c a l industry is that legal s a n c t i o n s a r e r e s e r v e d for specific harmful acts w h i c h o c c u r at a p a r t i c u l a r p o i n t in t i m e . T h e p r o b l e m in the p h a r m a c e u t i c a l i n d u s t r y is u s u a l l y a harmful p a t t e r n of c o n d u c t . It is not so m u c h a failure to sterilise a s o l u t i o n p r o p e r l y on o n e p a r t i c u l a r d a y ; it is t h e o n g o i n g failure to h a v e a tight quality c o n t r o l function. C r i m i n a l l a w fixed at t h e level of specific h a r m s c a n c e r t a i n l y s u p p r e s s , o n e at a t i m e , s y m p t o m s o f t h e u n d e r l y i n g m a l a i s e . But w i t h o u t reforms o f t h e faulty c o m p l i a n c e s y s t e m s , n e w s y m p t o m s will be forever surfacing. P e r h a p s t h e s o l u t i o n , t h e n , is to m a k e it an offence for a c o m p a n y to h a v e a s l i p s h o d system for e n s u r i n g c o m p l i a n c e with t h e law? S u c h a s o l u t i o n r a i s e s s o m e f u n d a m e n t a l q u e s t i o n s . Most c r i m i n o l o g i s t s find t h e m o s t o b j e c t i o n a b l e laws d e a l i n g w i t h indiv i d u a l s to be t h o s e w h i c h p u n i s h p e o p l e for w h a t they a r e r a t h e r t h a n for w h a t t h e y d o . It is illiberal to p u n i s h i n d i v i d u a l s for b e i n g a ' v a g r a n t ' , j u v e n i l e s for b e i n g 'likely to l a p s e i n t o a life of vice or c r i m e ' , o r e v e n e x - o f f e n d e r s for ' c o n s o r t i n g w i t h k n o w n c r i m i n a l s ' . T h e r e a r e s t r o n g c u r r e n t s of liberal o p i n i o n to w i p e such laws off the b o o k s a n d p u n i s h o n l y specific h a r m s . Y e t h e r e I am a r g u i n g for the p u n i s h m e n t of c o r p o r a t i o n s for w h a t t h e y are (a c o m p a n y with a d i s o r g a n i s e d c o m p l i a n c e s y s t e m ) r a t h e r t h a n for w h a t they did (produced a non-sterile solution). T h i s is c e r t a i n l y a c o n c e r n for l a w y e r s w h o a n t h r o p o m o r p h i s e ' c o r p o r a t i o n s ' as ' p e r s o n s ' . H o w e v e r , I fail to see any r e a s o n for a p r e s u m p t i o n t h a t p u b l i c c o m p a n i e s s h o u l d enjoy t h e s a m e r i g h t s and privileges as private individuals. A t t e m p t s to control corporate c r i m e will n e v e r s u c c e e d if t h e y r e m a i n c o n s t r a i n e d by p r i n c i p l e s d e v e l o p e d t o d e a l with i n d i v i d u a l c r i m e . T h e r e will n e v e r b e effective c o n t r o l until t h e t w o b e c o m e r e g a r d e d a s q u a l i t a t i v e l y d i f f e r e n t . L e g a l l y e n f o r c e d r e h a b i l i t a t i o n of a publicly t r a d e d c o m p a n y i s not t h e s a m e i n v a s i o n o f p r i v a c y a s t h e enforced r e h a b i litation of an individual. A t t e m p t i n g to rearrange an organisation c h a r t is not so o p p r e s s i v e as r e a r r a n g i n g a p s y c h e , especially w h e n t h e l a t t e r i n v o l v e s e n f o r c e d i n c a r c e r a t i o n . In any c a s e , if we m o v e a s h o r t s t e p a w a y from c r i m i n a l law, we find t h a t t h e law is p r e p a r e d t o e n f o r c e r e a r r a n g i n g t h e p s y c h e s o f p e o p l e w h o have d o n e n o specific h a r m , b u t w h o a r e certified a s ' i n s a n e ' . I f t h e law can c o p e w i t h d e t e r m i n i n g w h a t e v e r i t m e a n s t o b e ' i n s a n e ' , i t can c e r t a i n l y c o p e w i t h d e c i d i n g w h e n a c o m p a n y has a n i n a d e q u a t e quality control system.

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U n d o u b t e d l y , h o w e v e r , t h e v a g u e n e s s o f n o t i o n s such a s " i n s a n i t y ' a n d ' i n a d e q u a t e quality c o n t r o l s y s t e m ' c a r r i e s d a n g e r s o f s t a t e a b u s e o f t h i s lack o f definition. Such a b u s e has b e e n a m p l y d e m o n s t r a t e d with t h e civil c o m m i t m e n t o f t h e ' i n s a n e ' . O n e w o n d e r s , h o w e v e r , h o w m a n y o f t h e p e o p l e w h o are i n v o l u n t a r i l y c o m m i t t e d to m e n t a l i n s t i t u t i o n s w o u l d suffer that fate if t h e y could call on t h e legal r e s o u r c e s a large c o r p o r a t i o n w o u l d use to defend its i n v o l u n t a r y r e o r g a n i s a t i o n . In s u m m a r y , t h e n , we are willing to use far g r e a t e r o p p r e s s i o n to r e g u l a t e i n d i v i d u a l s for w h a t t h e y a r e t h a n w e w o u l d d a r e apply t o c o r p o r a t i o n s for w h a t t h e y a r e . Y e t t h e justification for e m p h a s i s on w h a t c o r p o r a t i o n s a r e r a t h e r t h a n w h a t they d o i s g r e a t e r t h a n with i n d i v i d u a l s . It h a s b e e n seen that o n e specific c o r p o r a t e act might n o t be so e g r e g i o u s on its o w n , but m i g h t a s s u m e g r e a t i m p o r t a n c e as p a r t o f a p a t t e r n of c o n d u c t . M o r e o v e r , w h i l e it is often difficult to s a n c t i o n c o m p a n i e s for w h a t they do ( e . g . c o n s p i r e to fix p r i c e s ) it is often m o r e s t r a i g h t f o r w a r d to r e g u l a t e t h e m for w h a t t h e y are ( p a r t of an o l i g o p o l y ) . It is i m p o s s i b l e to o v e r e s t i m a t e t h e e x t e n t to which existing law h a s failed to deal with c o r p o r a t e c r i m e . Surely n o t h i n g could be m o r e s t a g g e r i n g t h a n t h e fact t h a t (to my k n o w l e d g e at least) t h e t h a l i d o m i d e d i s a s t e r led t o n o t o n e successful p r o s e c u t i o n nor one successful p r i v a t e suit in a c o u r t of law a n y w h e r e in t h e w o r l d . A l l o w i n g t h a t kind of s i t u a t i o n to c o n t i n u e is t h e price we will pay for c o n t i n u i n g to a p p l y legal p r e c e p t s fixed in t h e i d e o l o g y of i n d i v i d u a l i s m to c o l l e c t i v i t i e s . In t h e U n i t e d S t a t e s , w i t h the inc r e a s i n g a p p l i c a t i o n o f t h e R I C O ( R a c k e t e e r Influenced and C o r r u p t O r g a n i s a t i o n s ) s t a t u t e ( S c h m i d t , 1980) t o o r g a n i s e d c r i m e a n d s o m e t y p e s of w h i t e - c o l l a r c r i m e t h e r e is a g r o w i n g r e a l i s a t i o n that creative statutes a p p r o p r i a t e to the patterns of conduct of collectivities are n e e d e d . Putting aside the wider debate about the s o u n d n e s s of R I C O as a statute, what is heartening about R I C O is t h a t it m a n i f e s t s a r e c o g n i t i o n of t h e n e e d for radically different legal t o o l s for n e w e c o n o m i c r e a l i t i e s .

The demerits of legal codification

T h e q u e s t i o n m u s t b e r a i s e d w h e t h e r for m a n y o f t h e legal p r o b l e m s 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 an i n q u i s i t o r i a l system in w h i c h s c i e n t i s t s d o m i n a t e o v e r l a w y e r s w o u l d b e p r e f e r a b l e t o a n advers a r i a l s y s t e m . T h i s s e e m s t o b e t h e view o f F D A G e n e r a l C o u n s e l , 310

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i n s o m e o f his t e s t i m o n y before t h e K e n n e d y

T h a t gets into my next q u e s t i o n - w h e t h e r c r o s s - e x a m i n a t i o n really is an a p p r o p r i a t e and efficient way to d e c i d e these issues. C r o s s - e x a m i n a t i o n in my u n d e r s t a n d i n g as a l a w y e r and my e x p e r i e n c e as a l i t i g a t o r , is very useful w h e n we have issues of c r e d i b i l i t y , w h e n m e m o r y and o b s e r v a t i o n are i m p o r t a n t and you w a n t t o p r o b e t o see j u s t exactly w h a t t h e p e r s o n o b s e r v e d , w h a t he r e a l l y r e c a l l s . B u t for the k i n d s of issues t h a t are involved in a m o n o g r a p h p r o c e e d i n g on the interpretation of data, it seems to me t h a t c r o s s - e x a m i n a t i o n is simply an o p p o r t u n i t y to w a s t e a lot o f t i m e , and t h a t t h e m a r g i n a l c o n t r i b u t i o n t o k n o w l e d g e from c r o s s - e x a m i n a t i o n i n t h o s e c i r c u m s t a n c e s i s very low c o m p a r e d t o its c o s t s in t e r m s of t i m e and r e s o u r c e s t h a t are d e v o t e d to it. I think the q u e s t i o n s even if there are disputes about what the data m e a n , w h a t t h e c o n s e q u e n c e s w o u l d b e o f a p p r o v i n g a d r u g , are n o t a m e n a b l e very well t o c r o s s - e x a m i n 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 , 1978: 1583). O n t h e o t h e r h a n d o n e w o u l d not w a n t t o see scientific inquisitions which are totally devoid o f a d v e r s a r i n e s s . O n e o f t h e reasons that ' e x p e r t s ' are not to be trusted is their t e n d e n c y to eliminate conflicting v i e w p o i n t s in t h e n a m e of logical c o n s i s t e n c y . ' A s the a n c i e n t d i a l e c t i c i a n s k n e w , in o r d e r to k e e p a d i s c u s s i o n going it is often n e c e s s a r y t o " m a k e t h e w e a k e r case t h e s t r o n g e r " ' ( M a j o n e , 1979: 5 7 9 ) . I n q u i s i t o r i a l a p p r o a c h e s m u s t e n s u r e t h a t t h e i d e o l o g y o f e x p e r t i s e d o e s n o t s u p p r e s s conflict. P o t e n t i a l l y , i n q u i s i t i o n s can b e t t e r k e e p o p e n radical r e i n t e r p r e t a t i o n s o f t h e p r o b l e m t h a n can t h e t r a d i t i o n a l a d v e r s a r y a p p r o a c h . T h i s i s b e c a u s e w h i l e t h e latter t e n d s to fix d e b a t e at a b i n a r y conflict, i n q u i s i t i o n s can a c c o m m o d a t e multiple dialectics. T h e r e a r e also g r e a t d a n g e r s i n a t t e m p t s a t t h e legal codification o f scientific c r i t e r i a . S o m e l a w y e r s a r g u e t h a t t h e r e s h o u l d b e m o r e r u l e s specifying t h e c o n d i t i o n s u n d e r w h i c h F D A scientists can use their discretion to d e t e r m i n e a drug as unsafe. The problem with s u c h r u l e s i s t h a t t h e y w o u l d have t o b e c o n s t a n t l y u p d a t e d t o k e e p p a c e w i t h scientific a d v a n c e s . S c i e n c e a l w a y s c h a n g e s faster t h a n a n y form of law b e c a u s e , by d e s i g n , law a i m s for stability w h e r e a s s c i e n c e a i m s a t g r o w t h and t r a n s f o r m a t i o n b y r e v o l u t i o n a r y p a r a d i g m shifts. S c i e n t i s t s u n d e r s t a n d a b l y r e s e n t s e e i n g d i s p u t e s settled o v e r t h e 311

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legal m e a n i n g o f t h e rule r a t h e r t h a n o v e r w h e t h e r i t i s a p p r o p r i a t e (scientifically) t o a p p l y t h e rule t o t h e p a r t i c u l a r c a s e . D e b a t e s h o u l d not b e o v e r t h e m e a n i n g o f w o r d s but o v e r the s u b s t a n c e o f s c i e n c e . P e r h a p s t h e r e a r e g o o d scientific r e a s o n s for a p p l y i n g a rule t o m o s t c a s e s s u b s u m e d u n d e r it. B u t the rule h a v i n g b e e n w r i t t e n , i n d i v i d u a l c a s e s are t h e n d e c i d e d a c c o r d i n g t o the rule r a t h e r than a c c o r d i n g t o t h e s c i e n c e w h i c h g e n e r a t e d t h e r u l e . T h e legal codific a t i o n of s c i e n c e has p e r h a p s a l r e a d y g o n e t o o far in t h e r e g u l a t i o n 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 . It is a d e v e l o p m e n t to be r e g r e t t e d t h a t m o s t r e g u l a t o r y affairs d i r e c t o r s of large US c o m p a n i e s are t o d a y l a w y e r s , w h e n o n c e t h e y w e r e scientists. Surely m o r e r a t i o n a l d e c i s i o n s on r i s k - b e n e f i t q u e s t i o n s are likely to c o m e out of n e g o t i a t i o n b e t w e e n s c i e n t i s t s t h a n from litigation b e t w e e n l a w y e r s . L o n F u l l e r ( 1 9 6 4 : 3 3 ) s u g g e s t s t h a t only t w o t y p e s o f p r o b l e m s are s u i t e d to a full j u d i c i a l - l e g a l p r o c e s s : ' y e s - n o q u e s t i o n s ' (Did he do it? W a s t h e r e a b r e a c h o f c o n t r a c t ? ) , and ' m o r e o r less q u e s t i o n s ' ( H o w m u c h s h o u l d b e paid i n d a m a g e s ? ) , o r s o m e m i x t u r e o f t h e s e t w o q u e s t i o n s . P o l a n y i ( 1 9 5 1 : 174-84) d i s t i n g u i s h e s ' p o l y c e n t r i c ' p r o b l e m s from t h e s e . P o l y c e n t r i c p r o b l e m s are not well suited t o t h e j u d i c i a l m o d e l . T h e y r e q u i r e r e c o n c i l i a t i o n o f c o m p l e x intera c t i n g c o n s e q u e n c e s of a m u l t i f a c e t e d policy. W h e t h e r , and if so h o w , I B M s h o u l d be b r o k e n up is a p o l y c e n t r i c p r o b l e m . It has interdependent consequences for inflation, unemployment, e c o n o m i c g r o w t h and A m e r i c a ' s e c o n o m i c p o w e r i n t h e w o r l d s y s t e m . T h e i m p l i c a t i o n s of a ' y e s ' or ' n o ' d e c i s i o n d e p e n d on ' h o w ' a n d ' w h e n ' . D e c i d i n g w h e t h e r , and if so h o w , to recall a drug is a p o l y c e n t r i c p r o b l e m i n v o l v i n g t h e c o s t s o f t h e r e c a l l , the d a n g e r t o p a t i e n t s w h o use t h e d r u g , t h e d a n g e r t o p a t i e n t s from w h o m the d r u g m i g h t b e w i t h h e l d , c o m m u n i t y p a n i c , possible u n e m p l o y m e n t i n t h e c o m p a n y affected, and d e t e r r e n c e o f c o m p a n i e s with i n a d e q u a t e q u a l i t y c o n t r o l s . D e g r e e of p o l y c e n t r i s m is clearly a cont i n u u m . H o w e v e r , it is a useful c o n s t r u c t for a n a l y s i n g t h e c i r c u m stances in which the judicial-legal model is viable. W i t h polycentric p r o b l e m s it might be more a p p r o p r i a t e to subs t i t u t e w h a t J o w e l l ( 1 9 7 3 : 216) calls ' s u b s t a n t i v e d u e p r o c e s s ' (affecting t h e q u a l i t y o f t h e d e c i s i o n r e a c h e d ) for ' p r o c e d u r a l due p r o c e s s ' (affecting t h e p r o p r i e t y o f t h e p r o c e d u r e involved i n r e a c h ing a d e c i s i o n ) . W h i l e t h e j u d i c i a l i n t e r p r e t a t i o n of laws m i g h t not be a c o n s t r u c t i v e w a y of d e c i d i n g h o w to deal with a d a n g e r o u s p r o d u c t , it m i g h t n e v e r t h e l e s s be r e g a r d e d as i m p o r t a n t to insist on a p u b l i c d e c i s i o n - m a k i n g p r o c e s s in w h i c h all affected p a r t i e s are 312

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a b l e t o p a r t i c i p a t e and i n which t h e g o v e r n m e n t must p r o v i d e r e a s o n s for its d e c i s i o n . J o w e l l s e e s a ' d a n g e r in s u b m i t t i n g decisions to " p r o c e d u r a l due p r o c e s s " , where "substantive due p r o c e s s " is not p o s s i b l e ; a d a n g e r of w h a t has b e e n referred to as " s y m b o l i c r e a s s u r a n c e " - a t e c h n i q u e w h e r e b y the m y t h s and s y m b o l s s u r r o u n d i n g t h e state are i n v o k e d i n o r d e r t o a c h i e v e the " q u i e s c e n c e " of a p o t e n t i a l l y critical p u b l i c ' ( J o w e l l , 1973: 2 1 7 ) . C h a y e s ( 1 9 7 6 ) , in a p r o v o c a t i v e a n a l y s i s , p u t s an o p p o s i t e p o i n t of view - t h a t c o u r t s have definite a d v a n t a g e s o v e r 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 for p o l y c e n t r i c p r o b l e m s . T h e a d v a n t a g e s which C h a y e s s e e s for j u d i c i a l r e s o l u t i o n o f c o m p l e x public policy q u e s t i o n s c a n b e s u m m a r i s e d i n p o i n t form: 1 J u d g e s c o m e from a professional t r a d i t i o n which insulates t h e m from n a r r o w political p r e s s u r e s . M o r e specifically, b e c a u s e o f j u d i c i a l i n v o l v e m e n t w i t h a w i d e array of p r o b l e m s w h i c h cut a c r o s s i n d u s t r y l i n e s , j u d g e s are less s u s c e p t i b l e to being 'captives of industry' than specialised regulatory agencies. 2 J u d i c i a l l y i m p o s e d r e s o l u t i o n s can be m o r e flexible and b e t t e r tailored to the needs o f t h e particular situation. Bureaucratic d e c i s i o n s , i n c o n t r a s t , m u s t c o n f o r m w i t h b r o a d e r policy guidelines. 3 A d v e r s a r i a l h e a r i n g s p r o v i d e s t r o n g i n c e n t i v e s for affected p a r t i e s to c o m e f o r w a r d with i n f o r m a t i o n and for that i n f o r m a t i o n t o b e critically r e v i e w e d b y o p p o s i n g p a r t i e s . 4 U n l i k e an a d m i n i s t r a t i v e b u r e a u c r a c y or a l e g i s l a t u r e , t h e j u d i c i a r y must r e s p o n d t o t h e c o m p l a i n t s o f t h e a g g r i e v e d . T h e r e might be delay, but resolution o f t h e problem cannot be indefinitely p o s t p o n e d o r i g n o r e d . 5 B e i n g n o n - b u r e a u c r a t i c , t h e j u d i c i a r y can t a p r e s o u r c e s and e x p e r t i s e o u t s i d e itself and o u t s i d e t h e g o v e r n m e n t . 'It d o e s n o t w o r k t h r o u g h a rigid, m u l t i l a y e r e d h i e r a r c h y o f n u m e r o u s officials, b u t t h r o u g h a smallish r e p r e s e n t a t i v e task force, a s s e m b l e d a d h o c , and easily d i s m a n t l e d w h e n t h e p r o b l e m i s finally r e s o l v e d . ' ( C h a y e s , 1976: 1309). C h a y e s ' s a r g u m e n t s are well t a k e n . H o w e v e r , with t h e e x c e p t i o n of p o i n t 4 a b o v e , t h e y refer to a d v a n t a g e s w h i c h are not u n i q u e to j u d i c i a l m o d e s of p r o b l e m - s o l v i n g . Ad hoc c o m m i t t e e s of e n q u i r y c o n s t i t u t e d o f s c i e n t i s t s o r o t h e r e x p e r t s can share the s t r e n g t h s o f flexibility, professional objectivity, political detachment, and 313

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a d v e r s a r i n e s s (to t h e e x t e n t that the l a t t e r is w a r r a n t e d for t h e specific p r o b l e m ) . I n d e e d , an ad hoc c o m m i t t e e of e n q u i r y , t r i b u n a l , o r c o m m i s s i o n surely has g r e a t e r flexibility a d v a n t a g e s b y v i r t u e of b e i n g less b o u n d to legal p r e c e d e n t s and p r o c e d u r a l cons t r a i n t s . I n d e p e n d e n t c o m m i t t e e s can not only tap e x p e r t i s e a v a i l a b l e o u t s i d e t h e g o v e r n m e n t , they can also be constituted of p e o p l e with the most relevant expertise. T h e r e a r e c i r c u m s t a n c e s w h e r e t h e very real p r o b l e m s t o w h i c h C h a y e s refers i n b u r e a u c r a t i c solving o f p o l y c e n t r i c q u e s t i o n s a s s u m e g r e a t p r o p o r t i o n s . I a m s u g g e s t i n g t h a t w h e n this h a p p e n s , it m a y be m o r e a p p r o p r i a t e to shift to an i n d e p e n d e n t c o m m i t t e e m o d e for r e c o m m e n d i n g p u b l i c policy. C h a y e s neglects t h e p o i n t s r a i s e d h e r e a b o u t t h e w a y t h a t legal codification i m p o s e s a debilit a t i n g s t r a i t j a c k e t on t h e c a p a c i t y of c o u r t s to solve p o l y c e n t r i c p r o b l e m s . S e c o n d , a s C h a y e s d o e s c o n c e d e : "the c o u r t has little b a s i s for e v a l u a t i n g c o m p e t i n g claims on t h e public p u r s e ' (p. 1309). W e i g h i n g alternative solutions to polycentric problems almost invariably involves allocative decisions. While the disadvantage of i n d e p e n d e n t c o m m i t t e e s i s that t h e i r r e c o m m e n d a t i o n s can b e o v e r r u l e d p o l i t i c a l l y , t h i s i s a t the s a m e t i m e a n a d v a n t a g e , b e c a u s e o n l y t h e p o l i t y is e q u i p p e d to a s s u m e r e s p o n s i b i l i t y for c o m p e t i n g claims on the public purse. L e t u s t h e n r e t u r n t o o u r t h e m e b y c o n s i d e r i n g s o m e further d a n g e r s i n h e r e n t i n e x c e s s i v e codification. T h e s e i n c l u d e rigidity a n d i n c r e a s e d cost b e c a u s e of e i t h e r t h e necessity of e r r i n g on the c a u t i o u s side o r t h e n e c e s s i t y o f litigation o v e r t h e m e a n i n g o f t h e r u l e . E l s e w h e r e ( S u t t o n and W i l d , 1978; B r a i t h w a i t e , 1980) i t has b e e n a r g u e d t h a t t h e e n a c t m e n t o f m o r e and m o r e laws t o c o n t r o l c o r p o r a t e c o n d u c t can r e b o u n d t o the a d v a n t a g e o f t h e r e g u l a t e d corporations. T h e m o r e formal a n d c o m p l e x t h e b o d y o f law b e c o m e s , the m o r e it will o p e r a t e in favour of f o r m a l , r a t i o n a l b u r e a u c r a t i c g r o u p s s u c h a s c o r p o r a t i o n s . I n o n e s e n s e , t h e r e f o r e , 'law' and ' j u s t i c e ' m a y b e f u n d a m e n t a l l y i r r e c o n c i l a b l e ( S u t t o n and W i l d , 1978: 195). A p r o l i f e r a t i o n of laws m e a n s a p r o l i f e r a t i o n of l o o p h o l e s o v e r w h i c h legal a r g u m e n t is p o s s i b l e . I n d e e d , "The m o r e precise a rule i s , t h e m o r e likely it is to o p e n up l o o p h o l e s - to p e r m i t by implicat i o n c o n d u c t t h a t t h e rule w a s i n t e n d e d t o forbid' ( P o s n e r , 1977: 4 2 5 ) . T h e a p p l i c a b i l i t y o f t h e s e a r g u m e n t s t o a r e a s such a s tax law i s 314

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t r a n s p a r e n t . H o w e v e r , t h e i r force w i t h r e s p e c t t o t h e r e g u l a t i o n o f a r e a s like G M P s i s l i m i t e d . I n p r a c t i c e , c o m p a n y l a w y e r s find i t difficult to use t h e d o c t r i n e s implicit in o n e p a r t o f t h e food and drug law in t h e U n i t e d S t a t e s as justification for a c t i o n s t h a t e v a d e o t h e r p a r t s o f t h e s a m e b o d y o f law. T h e r e are a n u m b e r o f r e a s o n s for t h i s . F i r s t , m a n y o f t h e F D A r e g u l a t i o n s a r e i n h e r e n t l y s i m p l e , a l m o s t o f the w e i g h t s and m e a s u r e s v a r i e t y . S e c o n d , t h e l e n g t h y p r o c e s s o f c o n s i d e r i n g all i n d u s t r y o b j e c t i o n s t o n e w r e g u l a t i o n s w h e n they are first a n n o u n c e d b y t h e F D A i n t h e F e d e r a l R e g i s t e r forces industry t o s h o w its h a n d o v e r any o b j e c t i o n s i t h a s . T a x p a y e r s d o not write t h e tax laws, but in c o n s i d e r a b l e m e a s u r e drug c o m p a n i e s write the drug r e g u l a t i o n s . H e n c e , if a c o m p a n y a t t e m p t s to challenge the a u t h o r i t y of a r e g u l a t i o n in c o u r t on t h e g r o u n d s of its i n c o n s i s t e n c y w i t h o t h e r F o o d , D r u g a n d C o s m e t i c A c t r e g u l a t i o n s , the q u e s t i o n c a n b e a s k e d : ' W h y did y o u not raise this s u p p o s e d i n c o n s i s t e n c y w i t h t h e o t h e r r e g u l a t i o n s d u r i n g t h e i n d u s t r y c o n s u l t a t i o n s o n the r e g u l a t i o n ? ' T h i r d , t h e p r o l i f e r a t i o n of laws on the b o o k s is limited by t h e fact t h a t w h e n a n e w set of r e g u l a t i o n s is e n a c t e d , t h e slate is w i p e d c l e a n o f t h e old r e g u l a t i o n s and m o s t o f t h e case law associa t e d w i t h it. F o o d a n d d r u g law d o e s not p r o c e e d by an i n c r e m e n t a l p l u g g i n g o f g a p s t o t h e e x t e n t w h i c h s e e m s typical o f m a n y o t h e r a r e a s o f c o r p o r a t e r e g u l a t i o n . F i n a l l y , a c c o r d i n g t o c e r t a i n disg r u n t l e d l a w y e r s from large c o m p a n i e s , t h e F D A c o n t r o l s the case law effectively by t a k i n g on small c o m p a n i e s in the early cases u n d e r a n e w r e g u l a t i o n . A c a s e law f a v o u r a b l e to t h e a g e n c y is e s t a b l i s h e d a g a i n s t u n f o r m i d a b l e a d v e r s a r i e s . T h a t case law can t h e n b e used later against the larger companies. N e v e r t h e l e s s , at a c o m p l e t e l y different l e v e l , it can be a r g u e d t h a t t h e r e is an overspecification of drug regulations. Even though the p r o l i f e r a t i o n of r e g u l a t i o n s d o e s not u l t i m a t e l y m a k e it easier for 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 v a d e t h e law, t h e c o m p a n i e s m a k e efforts t o find l o o p h o l e s i n t h e r e g u l a t i o n s . W h e n the c o m p a n i e s are s e e n b y t h e r e g u l a t o r s a s a l w a y s t r y i n g t o find l o o p h o l e s , t h e r e s p o n s i b i l i t y o f t h e r e g u l a t o r i s seen t o b e t o plug t h o s e l o o p h o l e s a h e a d o f t i m e . S p e c i f i c a t i o n s can p r o l i f e r a t e w h e n c o m p a n i e s are s e e n as likely to be i n n o v a t i v e in finding l o o p h o l e s . B u t w h e n the specifications have reached myriad p r o p o r t i o n s , the c o m p a n i e s attack the regulatory agency over the tedious regulatory burden. In t u r n , t h e r e g u l a t o r s p l e a d t h a t they h a v e n o a l t e r n a t i v e . T h e r e is an a l t e r n a t i v e : to step b a c k from the w h o l e g a m e of cat 315
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a n d m o u s e - to t r a n s f o r m it from a legal g a m e into a n e g o t i a t i n g g a m e . I n s t e a d of d e a l i n g with an i n a d e q u a t e system by p u t t i n g a n e w l a y e r of r e g u l a t i o n s on t o p o f t h e existing p r o c e s s to c h e c k all its d e c i s i o n s , t h e o r g a n i s a t i o n a l defects c a u s i n g the p r o b l e m s w h i c h n e c e s s i t a t e t h e r e g u l a t i o n s can be d i a g n o s e d . A c r e a t i v e solution to t h e s e r o o t p r o b l e m s can t h e n b e n e g o t i a t e d b e t w e e n i n s p e c t o r and c o m p a n y . E v e r y day i n s p e c t o r s get m a n u f a c t u r e r s t o m a k e c h a n g e s w i t h o u t r e g u l a t i o n s t o b a c k u p t h e i r r e q u e s t . T h e y a c h i e v e this e i t h e r t h r o u g h t h e g o o d w i l l they h a v e built u p with the m a n u f a c t u r e r o r t h r o u g h using t h e i r b a r g a i n i n g p o w e r . F o r e x a m p l e , t h e i n s p e c t o r can d e m a n d t h a t t h e safety i m p r o v e m e n t b e m a d e 'or I'll be b a c k o n c e a m o n t h l o o k i n g for t h i n g s to n a b you o n ' . Such t h r e a t s do not sit c o m f o r t a b l y w i t h o u r views of h o w j u s t i c e s h o u l d be a d m i n i s t e r e d . H o w e v e r , I suspect that most companies would p r e f e r to live w i t h a little of such s t a n d o v e r every n o w and t h e n t h a n w i t h m y r i a d s of d e t a i l e d r e g u l a t i o n s . I am not a r g u i n g that n e g o t i a t i o n g a m e s a r e a l w a y s b e t t e r for all c o n c e r n e d t h a n legal g a m e s . I t d e p e n d s o n t h e c o n f i g u r a t i o n o f t h e activities o n e i s a t t e m p t i n g to r e g u l a t e . The point is that there is an alternative to t h e e x h a u s t i n g cat and m o u s e a p p r o a c h t o l o o p h o l e s . T h e r e are certain areas w h e r e , if the c o m p a n y is determined to play legal cat and m o u s e , t h e r e is little a l t e r n a t i v e b u t for the r e g u l a t o r y a g e n c y t o j o i n in. F o r m e r F D A G e n e r a l C o u n s e l , R i c h a r d M e r r i l l , tells o f o n e m a n u f a c t u r e r with w h o m F D A had e n g a g e d in ' e l e v e n different l a w s u i t s , and e a c h t i m e we h a v e w o n a l a w s u i t he has c h a n g e d t h e d r u g a little bit, c h a n g e d t h e labelling a little bit, a n d s a i d , " A h a , i t i s not t h e s a m e o n e you c o n d e m n e d b e f o r e " ' ( H u g h e s a n d B r e w i n , 1 9 7 9 : 2 7 6 - 7 ) . T h e C o r d i s case study a l s o i l l u s t r a t e d this t a c t i c . J u s t i c e d e l a y e d c a n b e profits r e t a i n e d . G r e e n ( 1 9 7 8 : 129-35) p r o v i d e s as o n e of m a n y i l l u s t r a t i o n s of this p r i n c i p l e t h e efforts of U p j o h n l a w y e r s t o d e l a y t h e w i t h d r a w a l from t h e m a r k e t o f P a n a l b a o n c e i t h a d b e e n found b y t h e F D A t o b e unsafe. U p j o h n w a s g r o s s i n g S I . 5 m i l l i o n a m o n t h from US P a n a l b a sales w h i l e its l a w y e r s e x p e d i t e d t h e d e l a y i n g t a c t i c s . G r e e n even m a n a g e d t o b r i n g t o g e t h e r e v i d e n c e from t h e m o u t h s o f t o p c o m p a n y l a w y e r s t o confirm the w i d e s p r e a d tactic.

N o w I w a s b o r n , I t h i n k , to be a p r o t r a c t o r . . . . I quickly r e a l i z e d in my e a r l y d a y s at t h e bar t h a t I c o u l d t a k e t h e simplest a n t i t r u s t c a s e t h a t J u d g e H a n s e n [ A n t i t r u s t D i v i s i o n chief] could t h i n k o f 316

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a n d p r o t r a c t it for t h e d e f e n s e a l m o s t to infinity. . . . I f y o u will l o o k at t h a t r e c o r d [United States v. Bethlehem Steel] you will see i m m e d i a t e l y t h e B r o m l e y p r o t r a c t o r t o u c h i n t h e third line. P r o m p t l y after t h e a n s w e r w a s filed I s e r v e d q u i t e a c o m p r e h e n s i v e set of i n t e r r o g a t o r i e s on t h e G o v e r n m e n t . I said to myself, ' T h a t ' l l tie b r o t h e r H a n s e n up for a w h i l e , ' and I w e n t a b o u t o t h e r b u s i n e s s ( E x - j u d g e B r u c e B r o m l e y , i n G r e e n , 1978: 128). D e l a y w a s a l s o t h e o r d e r o f t h e d a y , a s s h o w n i n C h a p t e r 5 , with t h e t e t r a c y c l i n e class a c t i o n s . Y e t this case study is a lesson in h o w , w i t h a j u d g e w h o will r e s o r t to p r o c e d u r a l i n n o v a t i o n , it is possible t o o v e r c o m e t h e d e l a y i n g t a c t i c s , t h e c o m p l e x i t y o f t h e facts and the law to r e a c h a s o l u t i o n . W i t h c a s e s of such m a g n i t u d e ( w h e r e the cost o f t h e l i t i g a t i o n itself b e g i n s t o h a v e significant e c o n o m i c cons e q u e n c e s ) J u l i u s S t o n e ' s m a x i m , t h a t it may be b e t t e r t h a t a q u e s t i o n be settled t h a n it be settled r i g h t , g a i n s force. It w o u l d be u n r e a l i s t i c , h o w e v e r , t o e x p e c t m o s t j u d g e s t o s h o w t h e virtuosity o f a J u d g e L o r d . In a d d i t i o n to his u n u s u a l skill and e n e r g y , he e n j o y e d a special m a n d a t e from t h e C h i e f J u s t i c e o f t h e U n i t e d States to clean up the tetracycline mess. W h e n one considers that m o s t c o m p l e x c o r p o r a t e cases m u s t b e d e a l t w i t h b y a v e r a g e j u d g e s o f a v e r a g e c o n s e r v a t i s m o n e c a n n o t but b e pessimistic a b o u t the limits o f legal s o l u t i o n s . A c e n t r a l c o n c l u s i o n of this b o o k is t h a t t h e 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 has b e c o m e m o r e a n e g o t i a t i o n g a m e t h a n a legal g a m e a n d t h a t t h i s will b e c o m e e v e n m o r e t r u e in the future. F i g u r e 9.1 s u m m a r i z e s h o w in spite of an e n o r m o u s i n c r e a s e in e n f o r c e m e n t e x p e n d i t u r e o v e r t h e last forty y e a r s , the n u m b e r o f c a s e s t a k e n t o c o u r t b y t h e F D A has steadily d e c l i n e d . T h e d r o p i n criminal p r o s e c u t i o n s b y F D A has b e e n e v e n m o r e d r a m a t i c , falling from a p e a k of 550 in 1947 to fewer t h a n 50 a y e a r in t h e late 1970s ( H e a v i s i d e , 1980: 7 8 ) . A t o p official in 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 e x p l a i n e d w h a t h a p p e n e d w h e n t h e d e p a r t m e n t first a s k e d c o m p a n i e s t o p r o v i d e t h e m with i n f o r m a t i o n o n transfer p r i c e s t o assist P B S p r i c i n g d e c i s i o n s . M a n y o f t h e c o m p a n i e s said: ' W e ' l l g i v e y o u t h i s i n f o r m a t i o n w h e n y o u r laws d e m a n d it.' B u t t h e s e c o m p a n i e s s o o n found t h a t i t w a s i n t h e i r i n t e r e s t s t o p r o v i d e the transfer pricing information when they confronted interminable d e l a y s i n g e t t i n g t h e i r P B S listing. I n A u s t r a l i a , m u c h m o r e t h a n t h e U n i t e d S t a t e s , b o t h sides find i t c h e a p e r i n t i m e and m o n e y t o play 317

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o S 2

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Figure 9.1 Total seizures, injunctions and prosecutions taken to court by the F D A . Figure with permission from Heaviside (1980:82) n e g o t i a t i n g r a t h e r t h a n legal g a m e s . W h e n o n e c o m p a n y t o o k 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 t o c o u r t t o c h a l l e n g e one o f its r e g u l a t o r y d e c i s i o n s , a s e n i o r H e a l t h D e p a r t m e n t official p o i n t e d o u t to t h e c o m p a n y in a t e l e p h o n e c o n v e r s a t i o n c e r t a i n activities w h i c h w o u l d justify a p r o s e c u t i o n of t h e c o m p a n y by the g o v e r n m e n t . T h e lesson w a s l e a r n e d . T w o could play the legal g a m e . I t w a s b e t t e r t h a t b o t h sides limit t h e m s e l v e s t o t h e n e g o t i a t i o n g a m e . T h e r e is a f u n d a m e n t a l historical reality u n d e r l y i n g t h e a b o v e . N e g o t i a t i o n is n o t t h e n o r m a l w a y for a s o v e r e i g n state to c o n t r o l p r i v a t e u n i t s . O r g a n i s a t i o n s w h i c h are m u c h m o r e powerful t h a n t h e i r a d v e r s a r i e s d o n o t g e n e r a l l y h a v e t o resort t o n e g o t i a t i o n . B u t a s t h e a d v e r s a r y b e c o m e s m o r e e q u a l i n p o w e r t o the c o n t r o l l e r , control t h r o u g h negotiation increasingly b e c o m e s the preferred o p t i o n . W e h a v e s e e n t h i s sociological reality with r e l a t i o n s b e t w e e n e m p l o y e r s and u n i o n s . E a r l i e r this c e n t u r y u n i o n s w e r e c o n t r o l l e d b y e m p l o y e r s t h r o u g h t h e m e c h a n i s m s o f law. A s late a s 1936, the S u p r e m e C o u r t of the United States d e t e r m i n e d a m i n i m u m w a g e act a s a n u n c o n s t i t u t i o n a l i n t e r f e r e n c e with the f r e e d o m o f p r o p e r t y . T r a d e u n i o n activities w e r e a t t a c k e d using t h e l a w o f c o n s p i r a c y . B u t a s t r a d e u n i o n s b e c a m e m o r e o r g a n i s e d and powerful, n e g o t i a t i o n rather than prosecution became the more viable way of resolving disputes. E m p l o y e r - e m p l o y e e relations 318

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h a v e in a s e n s e seen a shift from status to c o n t r a c t to collective bargaining. T h e a r g u m e n t is, t h e n , 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 n o w a p p r o a c h i n p o w e r t h e states which r e g u l a t e t h e m . I n s o m e c a s e s , t h e c o m p a n i e s c o n f r o n t g o v e r n m e n t s w h i c h have smaller G N P s t h a n t h e i r a n n u a l c o r p o r a t e sales. H a r d political realities d i c t a t e t h a t in this s i t u a t i o n it is difficult for t h e state to be s o v e r e i g n in the e n f o r c e m e n t o f its l a w s . N e g o t i a t i o n b e t w e e n e q u a l s increasingly r e p l a c e s law e n f o r c e m e n t . B u t i n spite o f t h e t r e m e n d o u s cost and difficulty of p r o s e c u t i n g c o m p l e x c r i m e s by large e n t i t i e s , p r o s e c u t i o n r e m a i n s a tool w h i c h states can c o n t i n u e to use selectively. T h e y do not use it e n o u g h . W h i l e t h e cost of e q u a l j u s t i c e u n d e r law is b e y o n d the r e a c h of e v e n t h e U n i t e d S t a t e s , no c o u n t r y can afford not to have periodic showcase prosecutions of serious corporate a b u s e s t o foster d e t e r r e n c e .

Individual versus corporate liability

O n e c a n n o t d o r e s e a r c h o n c o r p o r a t e c r i m e w i t h o u t b e i n g imp r e s s e d by t h e i r r a t i o n a l fear e x e c u t i v e s h a v e of p r o s e c u t i o n - fear o u t of all p r o p o r t i o n to t h e o b j e c t i v e risks. C o r p o r a t i o n s and corp o r a t e e x e c u t i v e s a r e d e f e r r a b l e in a w a y t h a t m u r d e r e r s are not. T h e i r offences a r e not c r i m e s o f p a s s i o n . T h e t h r e a t t o c o m m u n i t y p r e s t i g e from a c r i m i n a l p r o s e c u t i o n , or e v e n from having o n e ' s c o r p o r a t e c o n d u c t t h e subject o f g r u e l l i n g c r o s s - e x a m i n a t i o n ( w i t n e s s t h e A b b o t t c a s e study o f C h a p t e r 4 ) , are viewed with great a p p r e h e n s i o n ( M a n n e t a l . , 1980). W i t h a c t o r s w h o view t h e m s e l v e s a s pillars o f r e s p e c t a b i l i t y , the h a b i t - f o r m i n g function o f p u n i s h m e n t i s p e r h a p s m o r e i m p o r t a n t t h a n d e t e r r e n c e . H e n c e , s o m e e x e c u t i v e s a b s t a i n from b r i b e r y b e c a u s e t h e y a r e afraid o f b e i n g p u n i s h e d . M o s t a b s t a i n from b r i b e r y b e c a u s e t h e y view i t a s i m m o r a l . O n e r e a s o n t h a t t h e y view it as i m m o r a l is that executives who bribe are sometimes punished a n d h e l d u p t o p u b l i c s c o r n . D o a w a y with c r i m i n a l p u n i s h m e n t and y o u d o a w a y w i t h m u c h o f t h e sense o f m o r a l i t y which m a k e s s e l f - r e g u l a t i o n p o s s i b l e . S e l f - r e g u l a t i o n and p u n i t i v e r e g u l a t i o n are t h e r e f o r e c o m p l e m e n t a r y r a t h e r t h a n a l t e r n a t i v e s . A n o t h e r sense in w h i c h this is t r u e is t h a t r e g u l a t o r s c a n often p e r s u a d e c o m p a n i e s t o i n s t i t u t e s e l f - r e g u l a t o r y m e a s u r e s only b e c a u s e t h e c o m p a n i e s k n o w t h a t r e g u l a t o r s can always r e s o r t t o c r i m i n a l e n f o r c e m e n t should they choose. 319

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F o r t h e r e a s o n s set d o w n in the p r e v i o u s s e c t i o n , the following F D A policy o f s e l e c t i v e p r o s e c u t i o n i s s e n s i b l e : In deciding w h e t h e r to r e c o m m e n d prosecution in particular c a s e s , w e c o n s i d e r several i n t e r r e l a t i n g f a c t o r s , including: (1) the s e r i o u s n e s s o f t h e v i o l a t i o n : (2) e v i d e n c e o f k n o w l e d g e o r i n t e n t ; (3) t h e p r o b a b i l i t y of effecting future c o m p l i a n c e by t h e firm in q u e s t i o n as well as o t h e r s similarly s i t u a t e d as a result o f t h e p r e s e n t a c t i o n ; (4) t h e r e s o u r c e s a v a i l a b l e t o c o n d u c t i n v e s t i g a t i o n s n e c e s s a r y t o c o n s u m m a t e the case successfully; a n d ( u n d e r l y i n g all of t h e s e ) (5) t h e e x t e n t to which the action will benefit c o n s u m e r s i n t e r m s o f p r e v e n t i n g r e c u r r e n c e s o f t h e v i o l a t i o n t h r o u g h o u t t h e i n d u s t r y ( F i n e , 1976: 328). U n f o r t u n a t e l y , h o w e v e r , this policy is i n t e r p r e t e d in p r a c t i c e to s u b s u m e very few c a s e s a s a p p r o p r i a t e for p r o s e c u t i o n . C o n s e q u e n t l y , t h e d e t e r r e n t and h a b i t - f o r m i n g functions o f U S food and d r u g law a r e b e i n g e r o d e d . T h e case for m o r e p r o s e c u t i o n s hardly n e e d s t o b e l a b o u r e d . W h o o r w h a t s h o u l d b e t h e subject o f the s h o w c a s e p r o s e c u t i o n s t h e n b e c o m e s t h e key q u e s t i o n . S h o u l d i t b e c u l p a b l e i n d i v i d u a l s w i t h i n the c o r p o r a t i o n o r the c o r p o r a t i o n itself, o r b o t h ? T h e a r g u m e n t a g a i n s t i n d i v i d u a l liability has m o s t frequently b e e n , as d i s c u s s e d e a r l i e r , t h a t t h e i n d i v i d u a l s found c u l p a b l e will b e j u n i o r s c a p e g o a t s w h i l e t h e m a n i p u l a t o r s a t t h e t o p o f the o r g a n i s a t i o n g o free. W i t h c o r p o r a t e p r o s e c u t i o n s n o individual m i g h t be t e r r i b l y a d v e r s e l y affected, y e t it is g e n e r a l l y the m o r e s e n i o r p e o p l e i n t h e c o r p o r a t i o n w h o feel m o s t t h e stigma associa t e d w i t h t h e p r o s e c u t i o n . S o m e w o u l d say t h a t in t h e food and drug a r e a this w h o l e a r g u m e n t has b e e n t u r n e d a r o u n d b y the Park decision. J o h n P a r k w a s t h e C h i e f E x e c u t i v e Officer o f A c m e M a r k e t s , a n a t i o n a l food r e t a i l e r w i t h 3 6 , 0 0 0 e m p l o y e e s . H e w a s c h a r g e d with v i o l a t 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 b y a l l o w i n g food t o b e s t o r e d in a B a l t i m o r e w a r e h o u s e w h i c h w a s r o d e n t infested. T h e c r u c i a l q u e s t i o n w a s h o w r e s p o n s i b l e c o u l d P a r k be for a r o d e n t p r o b l e m in B a l t i m o r e w h e n his office was in P h i l a d e l p h i a . In 1972 P a r k had r e c e i v e d a l e t t e r from t h e F D A c o m p l a i n i n g of c o n d i t i o n s in t h e B a l t i m o r e w a r e h o u s e . P a r k c a l l e d in his v i c e - p r e s i d e n t for legal affairs w h o i n f o r m e d him that t h e B a l t i m o r e division vicep r e s i d e n t "was i n v e s t i g a t i n g t h e s i t u a t i o n i m m e d i a t e l y and w o u l d be t a k i n g c o r r e c t i v e a c t i o n and w o u l d b e p r e p a r i n g a s u m m a r y o f t h e 320

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c o r r e c t i v e a c t i o n t o reply t o t h e l e t t e r . ' H e n c e , the d e f e n d a n t c l a i m e d he had d o n e all t h a t c o u l d r e a s o n a b l y be e x p e c t e d of a chief e x e c u t i v e officer to rectify t h e p r o b l e m . N e v e r t h e l e s s , w h e n the F D A r e - i n s p e c t e d t h e w a r e h o u s e and found t h a t t h e p r o b l e m had n o t b e e n rectified. P a r k w a s c h a r g e d . F D A ' s c o n t e n t i o n w a s t h a t P a r k had failed t o e n s u r e that his c o m p a n y had a d e q u a t e S O P s for e n s u r i n g h y g i e n i c w a r e h o u s e cond i t i o n s . T h e S u p r e m e C o u r t u p h e l d P a r k ' s c o n v i c t i o n and t h e fine of $50 on e a c h of five c o u n t s . ' In d o i n g so t h e C o u r t reaffirmed the v i e w in Dotterweich" t h a t w h e r e d a n g e r s to public h e a l t h are i n v o l v e d , ' T h e a c c u s e d , i f h e d o e s not will t h e v i o l a t i o n , usually is in a p o s i t i o n to p r e v e n t it with no m o r e c a r e t h a n society might r e a s o n a b l y expect and no more exertion than it might reasonably e x a c t from o n e w h o a s s u m e d his r e s p o n s i b i l i t i e s . ' So the Park d e c i s i o n i n t e r p r e t e d t h e F o o d , D r u g and C o s m e t i c A c t a s i m p o s i n g on t h e c h i e f e x e c u t i v e of a large c o r p o r a t i o n a d u t y of foresight and v i g i l a n c e a n d a r e s p o n s i b i l i t y to e n s u r e t h a t m e a s u r e s to p r e v e n t v i o l a t i o n s a r e i m p l e m e n t e d . T h e Park d e c i s i o n falls j u s t short of i m p o s i n g a s t a n d a r d of strict liability on t h e chief e x e c u t i v e officer. It i m p o s e s a duty of e x t r a o r d i n a r y c a r e . Park r e c o g n i s e s a defence of i m p o s s i b i l i t y ; t h a t if t h e d e f e n d a n t can s h o w t h a t he or she e x e r c i s e d e x t r a o r d i n a r y c a r e , liability i s a v o i d e d . But a b s o l u t e r e l i a n c e on any single i n d i v i d u a l , no m a t t e r h o w t r u s t w o r t h y , is t a k e n as insufficient to satisfy t h e s t a n d a r d of c a r e r e q u i r e d . T h e Park d e c i s i o n w a s c o n t r o v e r s i a l b e c a u s e it e s t a b l i s h e d the p r i n c i p l e t h a t i n d i v i d u a l s c a n be held c r i m i n a l l y liable for acts they did not c o m m i t , a n d of w h i c h they had no k n o w l e d g e . F o r an offence w h i c h is t h e s u b j e c t of only a relatively small fine, p e r h a p s this c a n be justified for t h e s a k e of a s t a n d a r d of e x t r a o r d i n a r y care t o p r o t e c t h u m a n h e a l t h . B u t t h e r e i s p r o v i s i o n for i m p r i s o n m e n t u n d e r t h e F o o d , D r u g a n d C o s m e t i c A c t . S o t h e Park d e c i s i o n c o u l d be used to i m p r i s o n an e x e c u t i v e in similar c i r c u m s t a n c e s , t h o u g h , as y e t , it has not b e e n so u s e d . T h e i m p r i s o n m e n t of p e o p l e w h o lack c r i m i n a l i n t e n t s e e m s a s o u n d way of u n d e r m i n i n g public c o m m i t m e n t t o t h e m o r a l force o f t h e c r i m i n a l law. A t t h e o t h e r e x t r e m e , w h e n o r d i n a r y c i t i z e n s see u n e m p l o y e d p e o p l e going t o p r i s o n for m i n o r theft and large c o r p o r a t i o n s e n d a n g e r i n g t h e p u b l i c h e a l t h with r o d e n t - i n f e s t e d w a r e h o u s e s going u n p u n i s h e d , this also u n d e r m i n e s r e s p e c t for t h e law. T h e Park d e c i s i o n is o b j e c t i o n a b l e b e c a u s e it p e r m i t s the imp r i s o n m e n t of i n d i v i d u a l s for acts of which t h e y had no k n o w l e d g e . 321

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H o w e v e r , a s t a n d a r d of e x t r a o r d i n a r y c a r e is not i n h e r e n t l y o b j e c t i o n a b l e if it is a p p l i e d to the c o r p o r a t i o n as a w h o l e , or if the s a n c t i o n s w h i c h can be i m p o s e d on i n d i v i d u a l s do not run to d e p r i v a t i o n of liberty. T h e s t r e n g t h o f t h e Park d e c i s i o n is t h a t it sheets h o m e r e s p o n sibility to t h e p e o p l e w h o can m a k e a difference. P e r h a p s t h e most r e c u r r e n t t h e m e from m y 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 w a s t h a t t h e a t t i t u d e of a c o r p o r a t i o n to the law filters d o w n from t h e c h i e f e x e c u t i v e officer. If he or she d e m a n d s high stand a r d s , t h e c o r p o r a t i o n will o b s e r v e high s t a n d a r d s . I n t h e w o r d s o f one interviewee: If a l o w e r level e x e c u t i v e c o m e s into t h e p r e s i d e n t and s a y s , ' W e h a v e this p r o b l e m : We could get a r o u n d it by. . . . ' A n d t h e p r e s i d e n t s a y s , ' Y o u ' r e not s u g g e s t i n g w e bend the rules. N o t u n d e r any c i r c u m s t a n c e s . ' T h e n h e w o n ' t c o m e back t o him a g a i n w i t h this kind of s o l u t i o n . If, on t h e o t h e r h a n d , he says: "Look, it's y o u r c o n c e r n t o get a r o u n d this p r o b l e m t h e best way you can. I d o n ' t w a n t to k n o w h o w you do it, but j u s t get t h e j o b d o n e ' , t h e n t h e l o w e r level e x e c u t i v e will go and b e n d t h e rules. M r B r u c e B r e n n a n , v i c e - p r e s i d e n t and g e n e r a l c o u n s e l o f 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 Association, was even prepared to c o n c e d e t h a t since Park F D A i n s p e c t o r s have b e g u n d r o p p i n g n o t i c e s o f s u s p e c t e d o r p o t e n t i a l v i o l a t i o n s with t h e c h a i r m a n o r p r e s i d e n t : 'So t h e s e n i o r officials s t a r t e d b e c o m i n g m o r e a w a r e i n t h a t r e g a r d , b u t t h e y k n e w o f t h e i r r e s p o n s i b i l i t y right a l o n g ' ( S u b c o m m i t t e e on H e a l t h , 1978: 1 6 3 0 ) . ' Of c o u r s e if a virtual strict liability s t a n d a r d can fairly be a p p l i e d to a n y o n e it is. as in Park, the c h i e f e x e c u t i v e . T h e chief e x e c u t i v e has b o t h a special duty of care by v i r t u e o f t h e e x t r e m e l y r e s p o n s i b l e p o s i t i o n he or she v o l u n t a r i l y t a k e s o n a n d has t h e p o w e r t o p r e v e n t o r c o r r e c t d a n g e r o u s cond i t i o n s . D e f e n d e r s o f t h e Park s t a n d a r d a g a i n s t t h o s e w h o w o u l d p r e f e r to see a r e t u r n to a n e g l i g e n c e s t a n d a r d also point out that no o n e has e v e r a l l e g e d t h a t t h e r e is a history of a b u s e flowing from t h e Park d e c i s i o n . T h e F D A has not s h o w n a w i l l i n g n e s s to i m p o s e c r i m i n a l s a n c t i o n s on c o m p a n y p r e s i d e n t s and has n e v e r a r g u e d for t h e i m p r i s o n m e n t o f a n y o n e u n d e r t h e Park s t a n d a r d . I r r e s p e c t i v e o f w h e t h e r o n e a p p r o v e s o r d i s a p p r o v e s o f t h e Park d e c i s i o n , it m u s t be seen as h e a l t h y at least in r e s p e c t of b e i n g part of a l a r g e r t h r u s t to r e n d e r t h e chief e x e c u t i v e officer m o r e legally v u l n e r a b l e . T h e ability o f t h e chief e x e c u t i v e officer to k e e p his or 322

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h e r o w n h a n d s c l e a n w h i l e h a v i n g u n d e r l i n g s d o the dirty w o r k i s p r o v e r b i a l . H e n c e , w i t h all t y p e s o f c o r p o r a t e c r i m e i t i s i m p o r t a n t t h a t wilful b l i n d n e s s be a c c e p t e d as e q u i v a l e n t to k n o w l e d g e ( F i s s e , 1973: 2 5 5 - 7 ) . W h i l e t h e law is g e n e r a l l y r e l u c t a n t to i m p o s e criminal liability for k n o w i n g o f a c r i m e and failing to p r e v e n t it. this p r i n c i p l e should not b e c a r r i e d o v e r t o t h e c o n t e x t o f t h e c o r p o r a t i o n . W h e n the c h i e f e x e c u t i v e officer k n o w s of (or is wilfully blind t o ) a c r i m e and fails to s t o p it, s/he l e n d s his or h e r a u t h o r i t y tacitly to a p p r o v e t h e c r i m e . C o m m a n d differs from a u t h o r i s a t i o n only i n t e r m s o f w h i c h p a r t y - t h e s u p e r i o r or t h e s u b o r d i n a t e - i n i t i a t e s t h e c r i m e . T h u s , it w o u l d often not be u n r e a s o n a b l e to a s c r i b e criminal intent to the c h i e f e x e c u t i v e officer w h o says: T w a n t t h e j o b d o n e , but I d o n ' t w a n t t o k n o w h o w y o u d o it.' In o t h e r a r e a s , t h e law quite h a p p i l y i m p o s e s a duty to k n o w . O l i v e r W e n d e l l H o l m e s has justified t h e p r i n c i p l e that i g n o r a n c e o f law s h o u l d be no e x c u s e by a r g u i n g t h a t ' t o a d m i t t h e e x c u s e at all w o u l d be to e n c o u r a g e i g n o r a n c e . . . and j u s t i c e to the individual is r i g h t l y o u t w e i g h e d by t h e larger i n t e r e s t s on t h e o t h e r side of t h e s c a l e s ' ( F l e t c h e r , 1978: 7 3 2 ) . F o r c o r p o r a t i o n p r e s i d e n t s , m u c h m o r e so t h a n for o r d i n a r y c i t i z e n s , t h e law c a n n o t afford to enc o u r a g e i g n o r a n c e . T h e real s t r e n g t h o f t h e Park d o c t r i n e , with all its a s s o c i a t e d w e a k n e s s e s , is t h a t it i m p o s e s a duty to k n o w . W h i l e it m i g h t not be a l t o g e t h e r u n r e a s o n a b l e to i m p o s e a virtual strict liability s t a n d a r d on t h e chief e x e c u t i v e officer, it clearly w o u l d be u n r e a s o n a b l e to i m p o s e such a s t a n d a r d on those lowerlevel officers w h o d o n o t h a v e c o m p a r a b l e d u t i e s o r p o w e r s . H o w e v e r , t h e sad history o f c o r p o r a t e law e n f o r c e m e n t s h o w s that p r o v i n g b e y o n d r e a s o n a b l e d o u b t t h e n e g l i g e n c e o f a n individual i n t h e c o n t e x t of a c o m p l e x o r g a n i s a t i o n is e x t r e m e l y difficult. It is a l w a y s p o s s i b l e t o b l a m e s o m e o n e e l s e . T h e d e f e n d a n t , X , says h e w a s a c t i n g u n d e r o r d e r s from Y; Y says he w a s acting on o r d e r s from Z, b u t Z says t h a t Y m i s c o n s t r u e d his o r d e r s . In any c a s e , Z c o n t e n d s , p o o r little Y w a s simply following S O P s w h i c h w e r e w r i t t e n by a c o m m i t t e e c h a i r e d by t h e f o r m e r p r e s i d e n t , w h o died five y e a r s a g o . ' S t r u c t u r a l c r i m e s ' , i n w h i c h the c o r p o r a t i o n c o m m i t s a c r i m i n a l offence but no c r i m i n a l l y c u l p a b l e individual c a n be identified a r e c o m m o n e n o u g h (Yale Law Journal, 1979: 3 5 8 ) . E v e n w h e n t h e r e are c u l p a b l e i n d i v i d u a l s , d e f e n d a n t s enjoy infinite r e s o u r c e f u l n e s s a t b a m b o o z l i n g c o u r t s with d e m o n s t r a t i o n s of w h y it really w a s o t h e r s w h o w e r e to b l a m e . In C h a p t e r 4 we saw
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t h a t t h e p r e s u m e d diffusion of a c c o u n t a b i l i t y in a c o m p l e x o r g a n i s a t i o n s o m e t i m e s can be a h o a x that t h e c o r p o r a t i o n plays on the rest o f t h e w o r l d , e s p e c i a l l y c o u r t s and s o c i o l o g i s t s ! I t w a s a r g u e d i n t h a t c h a p t e r that c o m p a n i e s have t w o k i n d s o f r e c o r d s : t h o s e d e s i g n e d t o a l l o c a t e guilt (for i n t e r n a l p u r p o s e s ) , and t h o s e for o b s c u r i n g guilt (for p r e s e n t a t i o n to the o u t s i d e w o r l d ) . W h e n c o m p a n i e s w a n t clearly defined a c c o u n t a b i l i t y t h e y can g e n e r a l l y get it. Diffused a c c o u n t a b i l i t y is not a l w a y s i n h e r e n t in o r g a n i s a t i o n a l c o m p l e x i t y ; it is in c o n s i d e r a b l e m e a s u r e the resultof a d e s i r e to p r o t e c t i n d i v i d u a l s w i t h i n t h e o r g a n i s a t i o n by p r e s e n t i n g a c o n f u s e d p i c t u r e t o t h e o u t s i d e w o r l d . O n e m i g h t say t h a t c o u r t s s h o u l d be able to p i e r c e this c o n s p i r a c y of confusion. W i t h o u t s y m p a t h e t i c w i t n e s s e s from w i t h i n the c o r p o r a t i o n w h o are willing to h e l p , this is difficult. In the p h a r m a c e u t i c a l i n d u s t r y , at least, the i n d i c t m e n t o f s e n i o r e x e c u t i v e s for c o r p o r a t e c r i m e s has almost i n v a r i a b l y b e e n followed b y their a c q u i t t a l , e v e n w h e n the c o r p o r a t i o n is c o n v i c t e d . T h i s t h e r e f o r e c o n s t i t u t e s a good case for c o u r t s c o n c e n t r a t i n g on finding c o r p o r a t i o n s i n n o c e n t or guilty and t h e n leaving it to the c o r p o r a t i o n t o sort o u t t h e guilt o r i n n o c e n c e o f i n d i v i d u a l s . " R e m e m b e r t h a t c o r p o r a t i o n s are e x p e r t a t c u t t i n g t h r o u g h the a p p a r e n t confusion within their own c o m p l e x organisation systems to identify t h e b l a m e w o r t h y . O n c e t h e c o u r t has found a c o r p o r a t i o n g u i l t y , it c a n be r e q u i r e d to r e t u r n p r i o r to s e n t e n c e w i t h a r e p o r t on w h a t it has d o n e to d i s c i p l i n e or dismiss c u l p a b l e indiv i d u a l s ( M i t c h e l l C o m m i t t e e , 1977: 3 6 1 - 2 ) . I f t h e c o u r t i s not p e r s u a d e d t h a t sufficiently s t r i n g e n t i n t e r n a l discipline m e a s u r e s h a v e b e e n e n f o r c e d t h e n a h e a v i e r s e n t e n c e can b e i m p o s e d o n the corporation.
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T h i s p r o c e d u r e will victimise s c a p e g o a t s j u s t a s d o c o u r t a c t i o n s a g a i n s t i n d i v i d u a l s . T h e h o p e is, h o w e v e r , t h a t b e c a u s e t h e corp o r a t e goal will be to p e r s u a d e t h e c o u r t t h a t a g o o d j o b has been d o n e o f identifying t h e m o s t guilty i n d i v i d u a l s ( r a t h e r t h a n t o a r g u e t h a t t h e s i t u a t i o n is so c l o u d e d that no o n e is to b l a m e for the ' a c c i d e n t ' ) , t h e r e m i g h t b e m o r e j u s t i c e i n w h o i s singled out. T h i s h o p e m i g h t b e c o m e m o r e realistic i f o n e o r t w o a s t u t e o u t s i d e r s w e r e included on the c o m m i t t e e of insiders w h o investigate the a l l o c a t i o n of i n d i v i d u a l guilt. T h e o t h e r j u s t i f i c a t i o n i s cost. W h e n t h e i n s i d e r s a r e n o t intent i o n a l l y i n j e c t i n g c o n f u s i o n into t h e s t r u c t u r e s o f a c c o u n t a b i l i t y , the i n v e s t i g a t i o n a n d a d j u d i c a t i o n of i n d i v i d u a l r e s p o n s i b i l i t y will be 324

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m o r e s t r a i g h t f o r w a r d a n d t h e r e f o r e less costly. A n d o f c o u r s e that cost i s b o m e b y t h e guilty c o r p o r a t i o n r a t h e r t h a n t h e s t a t e . M o r e o f t h e limited g o v e r n m e n t i n v e s t i g a t o r y and p r o s e c u t o r i a l r e s o u r c e s a r e left t o p r o s e c u t e o t h e r c r i m e s . T h e r e can b e m o r e d e t e r r e n c e for the dollar. There are other r e a s o n s for concentrating prosecutorial r e s o u r c e s on c o r p o r a t i o n s rather than i n d i v i d u a l s . " While the n a m e s of c o n v i c t e d officers of a c o m p a n y will m e a n n o t h i n g to the c o n s u m e r , t h e c o n v i c t i o n o f the c o r p o r a t i o n itself puts t h e cons u m e r ( t h e d o c t o r ) o n g u a r d against safety o r o t h e r r e l e v a n t defects i n t h e p r o d u c t s o f t h a t identifiable c o m p a n y . S m i t h and H o g a n ( 1 9 7 3 : 1 2 4 - 5 ) p o i n t out t h a t w h i l e for guilty c o r p o r a t i o n s a fine can be in p r o p o r t i o n to t h e g r a v i t y o f t h e offence, such a p e n a l t y will t y p i c a l l y be b e y o n d t h e m e a n s of a guilty i n d i v i d u a l . " F o r t h e same r e a s o n t h e c o r p o r a t i o n is in a b e t t e r p o s i t i o n t h a n any i n d i v i d u a l to r e s t i t u t e v i c t i m s . B e c a u s e fines on i n d i v i d u a l s rarely could be in p r o p o r t i o n to t h e g r a v i t y o f t h e offence in t h e w a y t h a t fines on the c o r p o r a t i o n m i g h t b e , c o r p o r a t i o n s m i g h t find i t c h e a p e r t o m a k e s i d e p a y m e n t s t o ' b r i b e ' e x e c u t i v e s t o a c c e p t individual liability ( E l z i n g a a n d B r e i t , 1976: 133). C r a n s t o n ( 1 9 7 8 : 2 6 7 - S ) has also s u g g e s t e d a j u s t i c e a r g u m e n t a g a i n s t i n d i v i d u a l liability for corporate crime: F i r s t l y it is t h e b u s i n e s s t h a t m a k e s any profit w h e n an e m p l o y e e c o m m i t s an offence. In g e n e r a l t e r m s , t h e result of a p r o s e c u t i o n is s i m p l y to d e p r i v e t h e b u s i n e s s of t h i s w r o n g l y a c q u i r e d profit, a l t h o u g h i n p a r t i c u l a r c a s e s t h e b u s i n e s s may b e fined a n a m o u n t g r e a t e r t h a n t h e profit m a d e o r t h e p u b l i c i t y s u r r o u n d i n g t h e p r o s e c u t i o n may c a u s e financial loss in e x c e s s o f t h e profit. S e c o n d l y , it is socially u n d e s i r a b l e for e m p l o y e e s to be p u n i s h e d for such offences w h i c h they c o m m i t not for t h e i r benefit but in the course of their e m p l o y m e n t . W h y should they be b l a m e d ? T h e y a r e l o c k e d i n t o a s y s t e m w h e r e t h e y h a v e to carry out a c o m p a n y ' s m a r k e t i n g s c h e m e ; in the case of j u n i o r e m p l o y e e s , for low w a g e s in an u n c r e a t i v e e n v i r o n m e n t . T w o general types of c o r p o r a t e crime in the pharmaceutical i n d u s t r y c a n b e a b s t r a c t e d from t h e c a s e s t u d i e s w h i c h h a v e b e e n d i s c u s s e d . O n e is t h e offence a r i s i n g from defective or nonexistent S O P s (e.g. t h e C o r d i s case study in C h a p t e r 4 ) ; the other an offence a r i s i n g from a d e c i s i o n to c o m p r o m i s e S O P s ( e . g . t h e d e c i s i o n t o r e p l a c e t h e blind m o n k e y i n t h e M E R / 2 9 c a s e s t u d y ) . 325

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Unquestionably, corporate rather than individual liability would seem to be the more appropriate tool against offences of the first type. SOPs are typically a manifestation of the collective intelligence ofthe company. Normally they would be written orginally by a committee, and subsequently modified by a succession of executives in relevant positions of responsibility. Defective SOPs are a reflection of poor communication within the organisation and the absence of ongoing self-critical re-evaluation of how things have been done in the past. Whether they are a manifestation of sheer managerial incompetence or a generalised willingness to tolerate corner-cutting (arguably an incompetent management stance itself), corporate or chief executive officer liability are clearly more relevant than liability imposed on middle managers. Certainly there are practical difficulties in holding contemporary individuals accountable for the historical sediment of the collective intelligence of the corporation. A decision to compromise an adequate SOP is a more difficult matter. Where a production manager over-rules a quality control decision to fail a batch of drugs, surely individual criminal liability for the production manager is appropriate. Undoubtedly so, when the problem is so cut and dried. But it rarely is. The more common scenario according to my informants is for shared understandings to crystallise between the relevant actors. The production manager ensures that he gets a quality control manager whom 'he can work with'. Perhaps if there is a production run underway that is vital for meeting quotas or satisfying impatient customers the importance of getting the product through quickly will be communicated to the quality control manager before the testing is done. There is then a shared understanding among all involved that anyone who highlights a problem will not be popular. If it appears to be on the borderline, it is good enough. If the test results don't look good then run it again, and if it is an acceptable result the second time, report that result. Often pieces of a jigsaw puzzle from different members of the laboratory team will have to be put together to identify a problem. If everyone is hesitant to come forward with their piece then the problem will remain unidentified. Again, each individual is part of a whole that no one of them fully admits. No individual has done anything heinous, but the collective fault is unquestionable. The strength of severe sanctions imposed on the corporation is that most individuals within it are affected in some small way. Individual liability puts corporate actors on guard 326

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against doing an individually culpable act, but it gives no incentives for the prevention of collective wrongs. Let us not overstate the extent to which a sanction imposed on the corporation provides incentives for one and all to be watchdogs over collective fault. Certainly it can happen that the upper echelons o f a company are so stung by the adverse publicity from a conviction that corporate morale sags all the way down the line.'" But more likely, lower level employees will be indifferent to the effect ofthe conviction on the corporation or even pleased that the boss got what he had coming. Of course it is desirable that the more senior the employee the more keenly the deterrence is felt. One wonders, however, if the impact ofthe sanction goes very far down the organisation at all. It is possible to conjure up eccentric solutions to ensure in a more rigorous way that corporate liability will reverberate down the corporate tree. One would be a sanction which installs a new president in the company, demotes the incumbent president to senior vice-president, the senior vice-president to second vicepresident, and so on down the line. Another considered by Pepinsky (1976: 139) is the imposition of a fine consisting of a proportion of the salary of each employee and of the dividend of each shareholder. Such solutions do not recommend themselves to those who are interested in realpolitik. In practical terms, we must settle for sanctions imposed on the corporation as a whole with their uncertain prospects of pervasive impacts throughout the decisionmaking levels of the organisation. Nevertheless, it is true that interventionist sanctions against corporations, such as community service orders, can be implemented with stronger guarantees that senior management will be personally inconvenienced than are possible with fines (see Fisse, 1981). To the extent that corporate crime ofthe second type is a product of shared understandings, there is clearly more justice in collective than in individual attributions of guilt. However, a paradox is that individual liability might jolt what were comfortable shared understandings out into the open. A quality control manager who fears that there is a realistic possibility that s/he might be held personally liable for an impure batch of drugs is more likely to adopt a 'protect your own ass' strategy. That is, s/he is more likely to break out ofthe shared understanding by writing a memo or taking some other action to indicate personal opposition to the sale ofthe batch. Once the quality control manager does this, other actors are likely to 327

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'protect their asses' by also formally signifying their opposition. T h e only solution then b e c o m e s not to send the batch out. Individual liability of t h e s c a p e g o a t i n g k i n d c a n be as effective as j u s t attrib u t i o n s o f i n d i v i d u a l liability i n p r o d d i n g a c t o r s t o ' p r o t e c t t h e i r own asses'. H e n c e , w h i l e t h e r e m i g h t b e m o r e j u s t i c e i n c o r p o r a t e liability for m o s t o f t h e t y p e s o f c r i m e w h i c h h a v e b e e n d i s c u s s e d i n this b o o k , t h e c o m p l e m e n t a r y a p p l i c a t i o n o f i n d i v i d u a l liability m i g h t t r a n s form t h e very reality w h i c h m a k e s c o r p o r a t e liability m o r e j u s t . W h i l e t h e j u s t i f i c a t i o n for i n d i v i d u a l l i a b i l i t y w i t h t r a d i t i o n a l c r i m e s is that the p u n i s h m e n t o f w r o n g d o e r s d e t e r s o t h e r s , the stronger justification in the context of c o r p o r a t e c r i m e is that it e n c o u r a g e s actors to m a k e self-protective p r o n o u n c e m e n t s to e n s u r e that they a r e n o t s c a p e g o a t e d . S u c h p r o n o u n c e m e n t s c l o s e off t h e c r i m i n a l o p t i o n to o t h e r actors who are also i n t e r e s t e d in self-preservation. I a m not a r g u i n g t h a t c o u r t s s h o u l d not i m p o s e i n d i v i d u a l c r i m i n a l liability w h e n t h i s s e e m s c l e a r - c u t a n d j u s t . H o w e v e r , talk o f ' v i c e - p r e s i d e n t s r e s p o n s i b l e for g o i n g t o j a i l ' d o e s give c a u s e for p e s s i m i s m t h a t c o u r t s c a n n o t a v o i d s c a p e g o a t i n g i n a large p r o p o r tion o f c a s e s . This is one o f t h e r e a s o n s I f a v o u r c o u r t s specialising in the ( m o r e j u s t ) c o r p o r a t e allocations of guilt, while c o r p o r a t i o n s s p e c i a l i s e i n t h e (less j u s t ) i n d i v i d u a l a l l o c a t i o n s o f guilt. W i t h t h e l a t t e r , I am not p r o p o s i n g a n e w r o l e for t h e c o r p o r a t i o n . E v e r y day l a r g e c o m p a n i e s d i s m i s s a n d d e m o t e p e o p l e for r e a s o n s t h a t m i g h t o r m i g h t not b e j u s t . T h e s t i g m a o f t h e c r i m i n a l l a b e l , h o w e v e r , s h o u l d b e used with g r e a t e r g u a r a n t e e s o f j u s t i c e . L e t u s n o w m o v e o n from t h e s e f u n d a m e n t a l i s s u e s t o t h e specific t y p e s o f s a n c t i o n s which are available.

Imprisonment and capital punishment

W h i l e a m i n o r i t y o f c r i m i n o l o g i s t s a d v o c a t e c a p i t a l p u n i s h m e n t for c e r t a i n blue-collar c r i m e s , no o n e s e r i o u s l y suggests it as a sanction for w h i t e - c o l l a r c r i m e s . C a p i t a l p u n i s h m e n t of a s o r t c a n be a p p l i e d t o c o r p o r a t i o n s a s well a s i n d i v i d u a l s . W e saw i n t h e I B T c a s e s t u d y of C h a p t e r 3 t h a t 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 w a s i m p o s e d via b a n k r u p t c y . S o m e c o m m e n t a t o r s s u g g e s t t h a t n a t i o n a l i s a t i o n i s an a p p r o p r i a t e s a n c t i o n for c o r p o r a t i o n s w i t h a h i s t o r y of flagrant l a w v i o l a t i o n . T h i s s o l u t i o n will b e d i s c u s s e d l a t e r . W e h a v e s e e n t h a t the U n i t e d S t a t e s h a s t h e t o u g h e s t laws for r e g u l a t i n g c o r p o r a t e crime in the p h a r m a c e u t i c a l industry. Yet an 328

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e x e c u t i v e o f a m a j o r p h a r m a c e u t i c a l c o m p a n y has n e v e r b e e n imp r i s o n e d for a v i o l a t i o n of t h e F o o d , D r u g and C o s m e t i c A c t . A h a n d f u l o f o f f e n d e r s h a v e b e e n i m p r i s o n e d i n the history o f t h e A c t , b u t t h e s e h a v e all b e e n i n d i v i d u a l ' q u a c k s ' , p h a r m a c i s t s , o r m e r c h a n t s . I t i s well d o c u m e n t e d i n t h e s t u d y o f c o r p o r a t e c r i m e a c r o s s all i n d u s t r i e s t h a t i m p r i s o n m e n t of e x e c u t i v e s is most u n u s u a l , a n d , e v e n w h e r e i t d o e s o c c u r , s e n t e n c e s are s h o r t . T h e 1 6 officers w h o had b e e n i m p r i s o n e d from t h e 582 c o r p o r a t i o n s i n C l i n a r d e t a l . ' s ( 1 9 7 9 : xxii) s t u d y served a v e r a g e s e n t e n c e s o f 3 7 . 1 days. C o r p o r a t i o n s themselves, of course, cannot be imprisoned. T h e r e a r e r e a s o n s w h y i t m i g h t b e a r g u e d that i m p r i s o n m e n t should be used m o r e with c o r p o r a t e offenders than traditional c r i m i n a l s . T h e P o l i s h c r i m i n a l c o d e p r o v i d e s for h e a v i e r s e n t e n c e s for s e n i o r m a n a g e r s c o n v i c t e d o f e c o n o m i c c r i m e s t h a n for j u n i o r officers c o n v i c t e d o f t h e s a m e c r i m e s . T h e r a t i o n a l e i s that t o p m a n a g e m e n t e n j o y g r e a t e r p r i v i l e g e s , s o t h e y should also bear m o r e p r o f o u n d d u t i e s o f i n t e g r i t y . S o m e n o n - l i t e r a t e s o c i e t i e s also p r o v i d e for h e a v i e r p e n a l t i e s o n powerful t h a n o n p o w e r l e s s o f f e n d e r s ( N a d e r and T o d d , 1978: 2 0 ) . T h e r e i s also a d e t e r r e n c e r a t i o n a l e for s u c h s e e m i n g l y i n e q u i t a b l e s e n t e n c i n g . Since it is an i n e s c a p a b l e r e a l i t y t h a t p o w e r f u l o f f e n d e r s will be able to m a n i p u l a t e t h e legal s y s t e m t o a g r e a t e r e x t e n t t h a n p o w e r l e s s o f f e n d e r s , c e r t a i n t y of p u n i s h m e n t will a l w a y s be less for t h e powerful. D e t e r r e n c e is a f u n c t i o n of b o t h c e r t a i n t y a n d s e v e r i t y of p u n i s h m e n t . T h e r e f o r e o n e w a y t o e q u a l i s e t h e d e t e r r e n c e o f t h e powerful and p o w e r l e s s is to i n c r e a s e t h e severity of t h e p u n i s h m e n t of t h e powerful. M o r e o v e r , i t h a s b e e n a r g u e d t h a t i m p r i s o n m e n t i s a m o r e effective d e t e r r e n t w i t h w h i t e - c o l l a r t h a n w i t h t r a d i t i o n a l offenders b e c a u s e t h e s t i g m a of p r i s o n is m o r e i n t e n s e l y felt by r e s p e c t a b l e middle- and upper-class people (Geis, 1972; C o f f e e , 1980). B u s i n e s s e x e c u t i v e s a l s o h a v e m o r e t o l o s e , b o t h financially a n d i n d i m i n u t i o n o f t h e q u a l i t y o f t h e i r e n v i r o n m e n t , b y m o v i n g from their n o r m a l situation into prison. T h e s e a r g u m e n t s a r e all s o u n d as far as t h e y g o . T h e y beg t h e q u e s t i o n , h o w e v e r , w h e t h e r i m p r i s o n m e n t i s a p a r t i c u l a r l y desira b l e w a y o f d e a l i n g w i t h e i t h e r t r a d i t i o n a l o r w h i t e - c o l l a r offenders. P r i s o n s a r e c o s t l y , d e h u m a n i s i n g i n s t i t u t i o n s which g e n e r a l l y turn o u t p e o p l e w h o a r e w o r s e liabilities t o society t h a n w h e n they w e n t in. I m p r i s o n m e n t , for any t y p e of o f f e n d e r , s h o u l d be used as a last r e s o r t w h e n i t w o u l d s e e m t o p r o v i d e t h e only way o f p r o t e c t i n g 329

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society from a dangerous person. There is little choice but to incarcerate a psychopathic killer who vows to kill again. But the corporate killer is much more easily incapacitated. A court should be able to order that a repeatedly reckless quality control manager never be allowed to hold a key quality control position again. It is undoubtedly true that white-collar offenders are more readily deterred by the threat of imprisonment, but that is because the white-collar offender is more deferrable per se. Upper-class offenders have a greater stock of community respectability to lose through the stigma of criminal conviction whether that conviction results in prison or something else (Mann et al.. 1980). Since whitecollar criminals are generally more solvent than traditional criminals, they can be more readily deterred by large fines." While white-collar offenders can be deprived of the right to act as company directors, to practise as physicians or lawyers, blue-collar offenders have no professional privileges to lose." In sum, whitecollar offenders are inherently more deferrable because they have more of everything that can be lost." Class inequality in the resort to imprisonment is of course a matter of great concern. My solution is greater equity (and probably less crime) by not incarcerating most of the types of blue-collar offenders who are currently going to jail."* In any case, deeper thinking about how to redress the class imbalance in our criminal justice system leads to the conclusion that lesser use of imprisonment means more equity. The problem with corporate crime, as has been demonstrated time and again in this book, is the difficulty of clarifying beyond reasonable doubt the facts of a complex corporate activity. All of the procedural safeguards built up to protect the powerless from the might ofthe state place an impossible burden on prosecutors who seek to bring powerful corporations and their senior executives to justice. Courts have shown an historical unwillingness to relax these procedural safeguards when loss of liberty through imprisonment is at stake. When only penalties such as fines are involved, however, American courts have been prepared to relax the guarantees ofthe sixth amendment, the protection against double jeopardy, and the requirement of proof beyond reasonable doubt (Harvard Law Review. 1979: 1306-7). This makes a strong case for removing imprisonment provisions from most corporate crime statutes. The apparent trade-off of less severity for more certainty is in fact hardly a trade-off at all given the demonstrated unwillingness of courts to send senior executives to jail.
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The fine The fine is the predominant sanction used against corporate crime. It is a cheap and efficient form of sanction compared with imprisonment. Indeed it raises rather than drains revenue. Because a fine can be readily repaid with interest, it is the most remissible of all penalties when injustice is discovered. Fines have a seducing mathematical attraction to those who are concerned with equity in sentencing because of their quantitative adjustability to the offender's means and the gravity ofthe offence. Fines are widely assumed to be more appropriate to corporate than to traditional crime because of the conception of the traditional offender as irrational or driven by anger, while the corporation which breaks the law does so as a rational decision to maximise profit. Simply tune the fine to the size of the profits illegally obtained and corporate crime will no longer be rational. It would be difficult, however, to calculate how much extra profit a company makes as a result of sloppy SOPs. These SOPs might be causing it to lose money. Even when crime results from a cynical decision to compromise SOPs, this need not necessarily be done to increase the company's profit. It might be perpetrated to foster the growth of a corporate subunit, or to protect the scientific standing of a new discovery, when such goals are not in the long-run profitability interests of the whole corporation. Proponents of fines often succumb too readily to a rational economic conception of corporate crime. While a great deal of crime is committed for the sake ofcorporate profit, a great deal is not. It does seem reasonable, nevertheless, that in those cases where corporate crime can be shown to have increased profits, any fine should exceed the value of that illegally obtained profit. The maximum fines available for most corporate offences in most countries are nowhere near high enough to render this possible. Fines as they currently operate are justifiably criticised as licence fees to break the law. Another criticism ofthe fine is that it harms people who have no responsible relationship to the offence. The most frequently mentioned group in this regard is shareholders. However, shareholders might suffer no economic burden from fines imposed on a company because the price they paid for the shares reflected expectations about the effects of the fine. They will be in front if the illegally obtained profits are greater than the size of the fine. Shareholders 331

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benefit w h e n t h e c o r p o r a t i o n m a k e s profits from offences which are n o t d i s c o v e r e d . T h e y c a n n o t have i t b o t h w a y s . T h a t m a n a g e m e n t will run foul o f t h e law is no less a n o r m a l i n v e s t m e n t risk t h a n that m a n a g e m e n t will m a k e a foolish d e c i s i o n on the l o c a t i o n of a n e w p l a n t . S h a r e h o l d e r s m u s t b e a r t h e r e s p o n s i b i l i t y for t h e s e risks i n r e t u r n for t h e right t o eject m a n a g e m e n t w h o m t h e y find u n s a t i s factory. T h e n t h e r e i s t h e criticism t h a t t h e c o r p o r a t i o n passes t h e fine b a c k t o t h e c o n s u m e r i n h i g h e r p r i c e s . T h i s w i d e l y held belief really h a s l i m i t e d f o r c e . In a highly c o m p e t i t i v e i n d u s t r y a c o m p a n y c a n n o t afford to p u t up p r i c e s in such an a r b i t r a r y fashion lest it lose s a l e s to its c o m p e t i t o r s . W i t h i n o l i g o p o l i e s a c o r p o r a t i o n w h i c h is fined c a n n o t u n i l a t e r a l l y i n c r e a s e its p r i c e s w h e n o t h e r c o r p o r a t i o n s in t h e o l i g o p o l y ( w h o h a v e not b e e n fined) have no r e a s o n to go along with i t . " Oligopolies generally attempt to minimise the f r e q u e n c y of p r i c e c h a n g e s so as to c u t t h e risk of b r e a k d o w n s in p r i c i n g u n i f o r m i t y a n d a c o m p e t i t i v e price war. P r i c e i n c r e a s e s in oligopolies therefore normally occur in response to across-theb o a r d cost i n c r e a s e s such a s w a g e r i s e s . H o w e v e r , t h e ability to p a s s on costs is only a p r o t e c t i o n for t h e t e c h n o s t r u c t u r e o f t h e p a r t i c u l a r c o r p o r a t i o n i f t h e cost i n c r e a s e , in t h e m a n n e r of an i n d u s t r y - w i d e w a g e n e g o t i a t i o n , affects all t h e firms of an i n d u s t r y at a p p r o x i m a t e l y t h e s a m e t i m e and by m o r e or less t h e s a m e a m o u n t . If t h e i n c r e a s e affects only o n e firm - if an oil c o m p a n y p a y s m o r e for its c r u d e or a steel c o m p a n y m o r e for its o r e w h i l e c o s t s for t h e i n d u s t r y as a w h o l e r e m a i n u n a f f e c t e d - it c a n n o t c o u n t on b e i n g able to i n c r e a s e its p r i c e s . O t h e r firms m a y not b e c o - o p e r a t i v e ( G a l b r a i t h , 1973: 118). I n o l i g o p o l i e s , c o r p o r a t i o n s t h e r e f o r e typically h a v e t o a b s o r b t h e cost o f f i n e s . A d m i t t e d l y , o u t and o u t m o n o p o l i s t s o r p r i c e l e a d e r s m a y be able to p a s s on fines to c o n s u m e r s in the way indicated by the critics. E v e n with t h e m , courts can impose on the c o r p o r a t i o n i n j u n c t i o n s f o r b i d d i n g this ( M c A d a m s , 1978: 9 % ) . A real c o n c e r n in t h e US with t h e t r a n s m i s s i b i l i t y of fines on i n d i v i d u a l s i s t h a t t h e y will b e b o r n e b y i n s u r a n c e c o m p a n i e s . N a d e r et al. ( 1 9 7 6 : 107) found t h a t 80 p e r cent of F o r t u n e 500 c o m p a n i e s i n d e m n i f i e d t h e i r e x e c u t i v e s a g a i n s t fines arising from t h e p e r f o r m a n c e o f t h e i r d u t i e s (see also M c A d a m s and T o w e r , 1978: 8 0 ) . C o m p a n i e s r e g i s t e r e d i n D e l a w a r e enjoy t h e r i g h t t o insure e m p l o y e e s a g a i n s t any civil o r c r i m i n a l liability i n c u r r e d i n t h e i r 332

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c a p a c i t i e s a s officers o f t h e c o r p o r a t i o n . D e l a w a r e has b e e n t h e w i n n e r in a ' r a c e to the b o t t o m ' to see w h i c h state can a t t r a c t the g r e a t e s t n u m b e r o f i n c o r p o r a t i o n s with t h e m o s t p e r m i s s i v e corp o r a t i o n s t a t u t e s . C l e a r l y , it is d e s i r a b l e , as in E n g l a n d and A u s t r a l i a , t h a t t h e law forbid i n s u r i n g a g a i n s t p u n i s h m e n t s i m p o s e d by c o u r t s . N a g e l ( 1 9 7 9 : 104), in his ' p r o g r a m m e d a p p r o a c h to the fine as a sanction against c o r p o r a t i o n s ' has suggested two sentencing guidel i n e s t o d e a l w i t h the t r a n s m i s s i b i l i t y p r o b l e m : (i) T h e o f f e n d i n g c o r p o r a t i o n m u s t s t i p u l a t e the m a n n e r i n w h i c h it p r o p o s e s the loss o c c a s i o n e d by a fine to be b o r n e . (ii) T h e c o u r t m a y , b y o r d e r , r e q u e s t t h a t the offending c o r p o r a t i o n furnish such i n f o r m a t i o n as n e c e s s a r y to d e m o n s t r a t e t h a t the loss o c c a s i o n e d by the fine w a s b o r n e in t h e m a n n e r by w h i c h it s t i p u l a t e d . N a g e l ' s g u i d e l i n e s s e e m t o p r o v i d e the best solution a v a i l a b l e t o t h e p r o b l e m . It is a c o n v e n t i o n a l w i s d o m to d i s p a r a g e the fine as a s a n c t i o n a g a i n s t c o r p o r a t i o n s . Yet I h a v e a t t e m p t e d to a r g u e that t h e c o n v e n t i o n a l c r i t i c i s m s a r e not so p e r s u a s i v e as to b a l a n c e the efficiency and cost a d v a n t a g e s o f t h e fine as the m o s t widely used c o r p o r a t e s a n c t i o n . In any c a s e , it m a y be t h a t t h e g r e a t e r h o p e for effective d e t e r r e n c e i s the a d v e r s e publicity t h a t a c c o m p a n i e s t h e p u n i s h i n g o f a c o r p o r a t i o n r a t h e r t h a n t h e punishment/>er.se. R a l p h N a d e r , in a p e r s o n a l c o m m u n i c a t i o n , r e c e n t l y suggested that if a p h a r m a c e u t i c a l c o m p a n y is fined t h e n t h a t fine should go to a p u b l i c i n t e r e s t g r o u p specifically c o n c e r n e d w i t h the p h a r m a c e u t i c a l i n d u s t r y ( s u c h a s the H e a l t h R e s e a r c h G r o u p i n the U n i t e d S t a t e s ) . T h i s s u g g e s t i o n has g r e a t m e r i t . It w o u l d m a k e the fine a d o u b l e e d g e d s w o r d for the c o r p o r a t i o n . T h e a d v e r s e publicity e d g e could b e m o r e hurtful t h a n t h e cost o f t h e f i n e . An i n t e r e s t i n g c o n c l u s i o n from C r a n s t o n ' s (1979) British study of c o n s u m e r affairs offences w a s t h a t the larger the offending c o m p a n y , t h e m o r e n e c e s s a r y t h e fine a s a n a l t e r n a t i v e t o a w a r n i n g l e t t e r . W i t h a small c o m p a n y , a w a r n i n g letter from a r e g u l a t o r y a g e n c y will a l m o s t i n v a r i a b l y b e b r o u g h t t o t h e a t t e n t i o n o f t h e chief e x e c u t i v e officer. B u t t h e larger the c o m p a n y , the m o r e likely that t h e w a r n i n g will be lost in the i n t e r s t i c e s b e t w e e n o r g a n i s a t i o n a l s u b u n i t s . H e n c e , one regulator argued: A f t e r 40 y e a r s of e x p e r i e n c e I am s u r e t h a t , w h e n it c o m e s to a 333

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n a t i o n a l c o m p a n y , o n e little p r o s e c u t i o n saves a lot of hard w o r k . I n a lot of firms t h e r e is a lack of c o m m u n i c a t i o n b e t w e e n t h e sales side a n d t h e p r o d u c t i o n side. Y o u can w r i t e l e t t e r s to big c o m p a n i e s from m o r n i n g to night and it w o n ' t h a v e any effect. B u t o n e p r o s e c u t i o n will m a k e all the difference ( C r a n s t o n , 1979: 170).

The equity fine

C o f f e e ( 1 9 8 1 ) has p u t f o r w a r d a g e n u i n e i n n o v a t i o n for the s a n c t i o n i n g of c o r p o r a t e c r i m e - t h e equity fine. U n d e r this form of ' c a p i t a l p u n i s h m e n t ' , t h e guilty c o r p o r a t i o n w o u l d b e forced t o i s s u e n e w e q u i t y s e c u r i t i e s t o t h e v a l u e o f t h e fine. U n d e r Coffee's s c h e m e , the securities would be transferred to the state's crime v i c t i m c o m p e n s a t i o n fund. F o r e x a m p l e , if t h e c o r p o r a t i o n had 5 m i l l i o n s h a r e s o u t s t a n d i n g , a 10 per cent e q u i t y fine w o u l d see 5 0 0 , 0 0 0 s h a r e s h a n d e d o v e r t o t h e victim c o m p e n s a t i o n fund. Existing s h a r e h o l d e r s w o u l d see t h e value o f their h o l d i n g d r o p i m m e d i a t e l y by 10 p e r c e n t . C o f f e e b e l i e v e s , p r o b a b l y c o r r e c t l y , t h a t hitting s h a r e h o l d e r s i n t h i s w a y w o u l d force t h e m o s t h a r d b o i l e d a m o n g t h e m t o d e m a n d o f t h e i r m a n a g e m e n t t h a t effective g u a r a n t e e s o f law c o m p l i a n c e w e r e i n p l a c e . T h e stock v a l u e s o f c o m p a n i e s which i n v e s t o r s s u s p e c t e d of i n c o m p e t e n c e at p r e v e n t i n g law v i o l a t i o n s could be e x p e c t e d to d e c l i n e . B u t is it fair to victimize s h a r e h o l d e r s in this w a y ? Coffee a n s w e r s b y p o i n t i n g o u t t h a t ' o n c e such fines b e c o m e p r e v a l e n t , i t c a n also b e a r g u e d t h a t s t o c k h o l d e r s " a s s u m e d t h e r i s k " b y investing in such a c o m p a n y [one w i t h i n a d e q u a t e c o m p l i a n c e s y s t e m s ] . ' M o r e o v e r , i n c a s e s w h e r e s h a r e h o l d e r s are i n n o c e n t victims o f m a n a g e m e n t c r i m i n a l i t y , a m e a n s of r e d r e s s is a v a i l a b l e to t h e m : t h e p e n a l t y c a n be p a s s e d o n t o r e s p o n s i b l e officials t h r o u g h a d e r i v a t i v e suit. T h e e q u i t y fine has s o m e i m p o r t a n t a d v a n t a g e s o v e r a cash fine. To be effective ' r a t i o n a l ' d e t e r r e n t s , c a s h f i n e s w o u l d often have to be u n c o n s c i o n a b l y h i g h b e c a u s e of t h e low risk of d e t e c t i o n for c o r p o r a t e c r i m e . F o r i n s t a n c e , if a c r i m e p r o d u c e s a 1 million d o l l a r b e n e f i t for t h e c o r p o r a t i o n and i f t h e c h a n c e s o f a p p r e h e n s i o n a r e o n l y 1 in 5 0 , t h e n a c o r p o r a t i o n w o u l d be ' r a t i o n a l ' to c o m m i t the c r i m e u n l e s s t h e fine e x c e e d e d 50 million d o l l a r s . A 50 million d o l l a r fine w o u l d b a n k r u p t m a n y c o m p a n i e s o r c a u s e r e t r e n c h m e n t o f e m p l o y e e s e v e n i n large c o r p o r a t i o n s . T h e b e a u t y o f t h e e q u i t y fine 334

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is t h a t very large p e n a l t i e s can be i m p o s e d w i t h o u t d e p l e t i n g t h e c a p i t a l o f t h e c o r p o r a t i o n . I n s t e a d o f r e d u c i n g t h e size o f t h e c a k e , i t is s i m p l y cut i n t o s m a l l e r p i e c e s . T h e r e is no spillover of s a n c t i o n s o n t o i n n o c e n t e m p l o y e e s , c r e d i t o r s and s u p p l i e r s . A n o t h e r a d v a n t a g e o f t h e e q u i t y fine i s t h a t i t h u r t s t o p m a n a g e m e n t , w h o g e n e r a l l y h a v e c o n s i d e r a b l e s h a r e h o l d i n g s i n their c o m p a n y . M o r e i m p o r t a n t l y . Coffee a r g u e s , t h e e q u i t y fine plays o n t h e fear o f t o p m a n a g e m e n t o f hostile t a k e o v e r b i d s . T h e c r e a t i o n o f a l a r g e m a r k e t a b l e block of s e c u r i t i e s in t h e h a n d s of t h e c r i m e victim c o m p e n s a t i o n fund m a k e s t h e c o r p o r a t i o n a n inviting t a r g e t for t a k e o v e r . W h i l e h a r n e s s i n g m a n a g e m e n t ' s fear o f t a k e o v e r s w o u l d u n d o u b t e d l y m a k e for effective d e t e r r e n c e . Coffee neglects t h e q u e s t i o n of w h e t h e r it is d e s i r a b l e to further e x a c e r b a t e industrial c o n c e n t r a t i o n by m a k i n g t a k e o v e r s e a s i e r . It might be sound a n t i t r u s t policy t o c o n s t r a i n t h e c r i m e victim c o m p e n s a t i o n fund from d i s p o s i n g of t h e i r s h a r e s in a w a y t h a t w o u l d aid t a k e o v e r s . L a r g e e q u i t y fines could d e t e r effectively e n o u g h t h r o u g h f r i g h t e n i n g i n v e s t o r s a w a y from legally risky c o m p a n i e s w i t h o u t t h e o v e r k i l l of fear of t a k e o v e r . T h e e q u i t y fine is a p r o m i s i n g n e w i d e a w h i c h is y e t to be fully e v a l u a t e d .

Publicity sanctions
T h e F D A is p r o b a b l y the leading regulatory agency in the world in its use o f p u b l i c i t y s a n c t i o n s against c o r p o r a t e w r o n g d o e r s ( M o r e y , 1 9 7 5 ; P i n e s , 1976). All successful c o u r t a c t i o n s are publicised in its g l o s s y m a g a z i n e , FDA Consumer. T h e F o o d , D r u g and C o s m e t i c A c t explicitly p r o v i d e s for a d v e r s e p u b l i c i t y : ' T h e S e c r e t a r y shall c a u s e to be p u b l i s h e d from t i m e to t i m e r e p o r t s s u m m a r i z i n g all j u d g m e n t s , d e c r e e s , a n d c o u r t o r d e r s w h i c h have b e e n r e n d e r e d u n d e r t h i s A c t , i n c l u d i n g t h e n a t u r e o f t h e c h a r g e a n d t h e disposition t h e r e o f (Section 705a). In C h a p t e r 6 it w a s a r g u e d t h a t the use of r e m e d i a l a d v e r t i s e m e n t s by t h e F D A is a powerful a n d efficient s a n c t i o n . It i m p o s e s a cost o n t h e c o r p o r a t i o n from a d v e r s e publicity w h i c h should b e s o m e w h a t c o m m e n s u r a t e with t h e illegal gain from t h e o v e r s t a t e d a d v e r t i s e m e n t s which are c o r r e c t e d . The sanction is constructive in t h a t i t sets o u t t o u n d o t h e h a r m i n v o l v e d i n t h e c r i m e . G e n e r a l d e t e r r e n c e is f o s t e r e d m u c h m o r e explicitly t h a n with a fine b e c a u s e o t h e r c o r p o r a t i o n s i n t h e i n d u s t r y i n v a r i a b l y see t h e r e m e d i a l advertisement. 335

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O n e o f t h e criticisms of adverse publicity sanctions is that with t h e i r m o r e w i d e s p r e a d use t h e p u b l i c w o u l d g r o w w e a r y o f r e a d i n g a b o u t t h e m . H o w e v e r , t h e g e n e r a l p u b l i c i s not the most a p p r o p r i a t e t a r g e t g r o u p for a d v e r s e p u b l i c i t y . E v e n w h e r e it is, it might be sufficient for t h e a d v e r s e publicity to be d i r e c t e d at o p i n i o n l e a d e r s or specific g r o u p s w i t h an i n t e r e s t in c a r r y i n g on the a d v e r s e p u b l i c i t y , such as sales r e p r e s e n t a t i v e s of c o m p e t i n g b u s i n e s s e s or p u b l i c i n t e r e s t g r o u p s . T h e r e are m a n y target g r o u p s w h i c h are m u c h s m a l l e r t h a n t h e g e n e r a l p u b l i c . P h y s i c i a n s are t h e t a r g e t g r o u p i n m e d i c a l j o u r n a l r e m e d i a l a d v e r t i s e m e n t s , and this subg r o u p can b e f u r t h e r n a r r o w e d b y t h e use o f specialists m e d i c a l j o u r n a l s . T h e financial p r e s s can be t h e o u t l e t with a s e c u r i t i e s o f f e n c e . H o s p i t a l a d m i n i s t r a t o r s or p h a r m a c i s t s can be t a r g e t s for a d v e r s e p u b l i c i t y a b o u t a n a n t i t r u s t offence i n w h i c h t h e y a r e v i c t i m s . F e m i n i s t g r o u p s can b e t a r g e t s for a d v e r s e publicity c o n c e r n i n g a 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 , u n i o n s for o c c u p a t i o n a l h e a l t h a n d safety m a t t e r s , t h e d i p l o m a t i c c o m m u n i t y for foreign c o r r u p t p r a c t i c e s , and s o o n . R e g u l a t o r y a g e n c i e s should have o n staff a c r e a t i v e j o u r n a l i s t w h o e n s u r e s t h a t a d v e r s e publicity on a p r o s e c u t i o n gets h o m e t o w h e r e i t c o u n t s , and t h a t different target g r o u p s a r e a l w a y s b e i n g c h o s e n t o e n s u r e against d i m i n i s h e d impact through habituation. T h e p r i n c i p a l c r i t i c i s m of a d v e r s e publicity s a n c t i o n s is t h a t t h e y a r e n o t c e r t a i n i n t h e i r i m p a c t s , t h o u g h o t h e r s w o u l d suggest that t h i s v e r y u n c e r t a i n t y is precisely why t h e y are feared ( F i s s e , 1 9 7 1 ; Y o d e r , 1978: 5 2 ) . S o m e t i m e s t h e p u b l i c i t y will i m p o s e a c o n s i d e r a b l e cost o n t h e c o r p o r a t i o n . T h e r e will e v e n b e s o m e o c c a s i o n s w h e n 'any p u b l i c i t y is g o o d p u b l i c i t y ' and the offender will b e n e f i t . T h i s d r a w b a c k m u s t b e placed i n t h e c o n t e x t o f t h e total a r g u m e n t of t h i s b o o k t h a t it is not in t h e p u b l i c i n t e r e s t to h a v e e q u i t a b l e and c e r t a i n p u n i s h m e n t of c o r p o r a t e crimes in the pharmaceutical i n d u s t r y . T h a t i s , it is p r e f e r a b l e in most cases to n e g o t i a t e r e m e d i e s , w h i l e s i n g l i n g o u t c e r t a i n c a s e s for e x e m p l a r y p r o s e c u tions.
21

Seizure
U n l i k e fines a n d p u b l i c i t y s a n c t i o n s , s e i z u r e and injunction are e x t r a o r d i n a r i l y e x p e n s i v e i n t i m e and m o n e y . S e i z u r e historically w a s u s e d b y t h e F D A e v e n t o s a n c t i o n offences which had n o t h i n g to do with t h e q u a l i t y of t h e p r o d u c t seized (such as false 336

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advertising). F o r m e r F D A G e n e r a l - C o u n s e l , Hutt (1973: identified w h a t an inefficient s a n c t i o n seizure is: . . . [ A ] s e i z u r e r e p r e s e n t s a s u b s t a n t i a l e x p e n d i t u r e of

177), has

g o v e r n m e n t a l r e s o u r c e s . It b e g i n s with t h e i n s p e c t o r finding a p r o b l e m , i s c l e a r e d t h r o u g h t h e D i s t r i c t a n d R e g i o n a l Offices, i s t h e n c o n s i d e r e d b y t h e A g e n c y B u r e a u i n v o l v e d , from t h e r e i s p r o c e s s e d b y [the G e n e r a l C o u n s e l ' s ] office, r e q u i r e s t h e c o n c u r r e n c e o f t h e U . S . A t t o r n e y a n d a c t i o n b y the U . S . M a r s h a l , a n d u l t i m a t e l y i n v o l v e s a U . S . district j u d g e e v e n i n the s i m p l e s t c a s e . M a n y s e i z u r e s , involving relatively m i n o r v i o l a t i o n s , i n c l u d e only a small a m o u n t o f t h e total g o o d s i n v o l v e d . D u r i n g t h e past ten y e a r s 1 3 % o f our s e i z u r e r e c o m m e n d a t i o n s w e r e n e v e r e x e c u t e d b e c a u s e the p r o d u c t had been moved or consumed during the time taken to complete t h e s e p r o c e d u r e s . . . . O n e p a r t i c u l a r l y d i s t u r b i n g aspect is t h a t , as a n y food a n d d r u g l a w y e r k n o w s , t h e i m p a c t of a single s e i z u r e of a small a m o u n t of a p r o d u c t can be effectively b l u n t e d simply by filing a c l a i m a n d e n g a g i n g in t h e usual pre-trial d i s c o v e r y . T h e i n v e n t o r y o f t h e offending p r o d u c t can t h e n b e r e l a b e l e d , o r e x h a u s t e d w i t h o u t c h a n g e , and a t t h a t p o i n t a c o n s e n t d e c r e e c a n be a c c e p t e d or t h e claim w i t h d r a w n and t h e c a s e forfeited. In t h e m e a n w h i l e , t h e p u b l i c i s s u b j e c t e d t o t h e illegal p r o d u c t and the e n t i r e p u r p o s e o f t h e s e i z u r e i s s u b s t a n t i a l l y d e l a y e d and subverted. W h e r e t h e r e i s a p r o d u c t quality p r o b l e m , v o l u n t a r y recall (with its a t t e n d a n t c o s t s ) c o m b i n e d w i t h a d e g r e e of informal a d v e r s e p u b l i c i t y is n o r m a l l y t h e m o s t efficient s o l u t i o n .

Interventionist sanctions
A r a n g e of w a y s t h a t 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 can effectively s e l f - r e g u l a t e will b e d i s c u s s e d later. C o m p a n i e s which have s h o w n by t h e i r c r i m e s an u n w i l l i n g n e s s to s e l f - r e g u l a t e can be r e q u i r e d by c o u r t s to put c e r t a i n internal compliance systems in place. Comp a n i e s w h i c h h a v e i n a d e q u a t e s y s t e m s for e n s u r i n g the quality and a c c u r a c y of d a t a p r o v i d e d by clinical i n v e s t i g a t o r s could be o r d e r e d to p r o d u c e a r e p o r t on h o w such c o n t r o l s could be i m p l e m e n t e d , h a v e t h e r e c o m m e n d a t i o n s o f t h e r e p o r t a p p r o v e d b y t h e c o u r t , and t h e n have the i m p l e m e n t a t i o n of the proposals monitored. T h e r e is a v a r i e t y of m e c h a n i s m s w h e r e b y such i n t e r v e n t i o n in 337

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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 c o u l d b e a c h i e v e d . I n C h a p t e r 2 it w a s s e e n h o w in m a n y c a s e s t h e S E C has a c h i e v e d reforms to S O P s ( a n d t h e i n s t i t u t i o n of g u a r a n t e e s that S O P s will not be c o m p r o m i s e d ) by consent decree. On occasions the US Federal T r a d e C o m m i s s i o n h a s also s u c c e e d e d a t i n t e r n a l r e s t r u c t u r i n g b y c o n s e n t o r d e r ( S o l o m o n and N o w a k , 1980). A n o t h e r m e c h a n i s m i s to place the c o r p o r a t i o n on p r o b a t i o n under the supervision of an a u d i t o r , quality control expert or other relevant authority who would ensure that an order to restructure certain compliance s y s t e m s w a s c a r r i e d o u t ( s e e Yale Law Journal. 1979; C o f f e e , 1980: 5 6 3 - 4 ; cf. M i t c h e l l C o m m i t t e e , 1977: 3 5 9 - 6 1 ) . P e r h a p s t h e simplest m e c h a n i s m is for t h e c o n v i c t e d c o r p o r a t i o n to have its s e n t e n c e w i t h h e l d until such t i m e as it p r o d u c e s a r e p o r t on t h e w e a k n e s s e s of its old c o m p l i a n c e s y s t e m and i m p l e m e n t s a new o n e .
2 2 2 1

T h e last o p t i o n i s m o r e a t t r a c t i v e t h a n t h e o n e before b e c a u s e t h e c o s t o f b r i n g i n g i n o u t s i d e e x p e r t s t o study a n d m o n i t o r t h e n e e d e d o r g a n i s a t i o n a l r e f o r m s i s b o r n e b y t h e offender r a t h e r than t h e state. No matter how implemented, court mandated intervention in t h e i n t e r n a l affairs of a guilty c o m p a n y will cost m o r e o f t h e c o u r t ' s t i m e t h a n a fine. C l e a r l y t h e n , i n t e r v e n t i o n i s t s a n c t i o n s w o u l d have t o b e u s e d m o r e s e l e c t i v e l y t h a n fines ( F i s s e , 1980). O n e can q u e s t i o n w h e t h e r a n o r d e r t o r e s t r u c t u r e S O P s i s a s a n c t i o n . P e r h a p s i t i s m o r e a p p r o p r i a t e l y viewed a s c o m p u l s o r y corporate rehabilitation. Nevertheless, 'because corporate m a n a g e r s perceive compliance with outside supervision as an u n p l e a s a n t t a s k , such m e a s u r e s i m p o s e p e r s o n a l b u r d e n s that d i r e c t l y d e t e r c o r p o r a t e m a n a g e r s w h o m i g h t play a part in future c o r p o r a t e o f f e n s e s ' (Yale Law Journal. 1979: 3 6 6 ) . F i n a l l y , a s w a s a m p l y i l l u s t r a t e d i n t h e A m e r i c a n H o s p i t a l Supply c a s e s t u d y o f C h a p t e r 2 , such c o u r t o r d e r s can have a n i n c a p a c i t a t i v e effect. W h i l e it is so often difficult to p e n e t r a t e t h e m a z e of c o m p l e x c o r p o r a t e e v e n t s t o p r o v e c r i m i n a l i t y , court o r d e r s can b e c o n s t r u c t e d to r e n d e r proving breach of provisions of the order r e l a t i v e l y s t r a i g h t f o r w a r d . N o t w i t h s t a n d i n g t h e c o m p l e x i t y of a s u b s e q u e n t c r i m e , i f i n c o m m i t t i n g i t t h e c o r p o r a t i o n neglects t o follow c o u r t - m a n d a t e d S O P s , such a failure could be p u n i s h e d for its o w n s a k e . Interventionist court rehabilitative functions. could be included in the activities. An example 338 o r d e r s c o u l d c o m b i n e r e s t i t u t i v e with A r e q u i r e m e n t t h a t victims be r e s t i t u t e d o r d e r , a s could c e r t a i n c o m m u n i t y service of the latter was when Allied Chemical

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funded e n v i r o n m e n t a l p r o t e c t i o n p r o g r a m m e s i n the c o m m u n i t i e s affected b y t h e K e p o n e p o l l u t i o n d i s a s t e r i n lieu o f a c o u r t - i m p o s e d f i n e . " P a r t i c u l a r l y a p p r o p r i a t e c o m m u n i t y s e r v i c e o r d e r s for conv i c t e d 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 w o u l d involve t h e d e v e l o p m e n t o f ' s e r v i c e d r u g s ' for victims of rare d i s e a s e s ( i . e . d r u g s which are n o t p r o f i t a b l e b e c a u s e o f low d e m a n d ) . C o m m u n i t y s e r v i c e o r d e r s a l s o h a v e c o n s i d e r a b l e p o t e n t i a l as a s a n c t i o n a g a i n s t individual c o r p o r a t e e x e c u t i v e s ( F i s s e , 1981).

The corporation and traditional protections against government abuse

C r i m i n a l d e f e n d a n t s enjoy m a n y d u e p r o c e s s p r o t e c t i o n s w h i c h emerged historically from r e v u l s i o n at o v e r z e a l o u s use of p r o s e c u t o r i a l m u s c l e by states w i s h i n g to s e c u r e c o n v i c t i o n at any c o s t . M o s t l y , t h e y w e r e e s t a b l i s h e d t o p r o t e c t the b o u r g e o i s i e from a r b i t r a r y e x e r c i s e o f p o w e r b y the m o n a r c h . T h e p r o t e c t i o n s w e r e b u i l t i n t o e n s u r e t h a t f i n a n c i a l l y w e a k and politically p o w e r l e s s i n d i v i d u a l s w e r e not c r u s h e d b y t h e p r o s e c u t o r i a l might o f t h e s t a t e . T h e q u e s t i o n w h i c h m u s t b e a s k e d i s w h e t h e r t h e s e historically j u s t i f i a b l e r e f o r m s s h o u l d be r e l e v a n t t o d a y to legal b a t t l e s b e t w e e n t h e s t a t e a n d c o r p o r a t i o n s w h i c h are often m o r e w e a l t h y t h a n the s t a t e . E v e n i n t h e m o s t affluent c o u n t r y i n t h e w o r l d , t h e state o f D e l a w a r e can h a r d l y m a t c h t h e legal r e s o u r c e s of a G e n e r a l Motors. T h e t e n d e n c y a u t o m a t i c a l l y t o a t t r i b u t e t r a d i t i o n a l r i g h t s and d u e p r o c e s s p r o t e c t i o n s t o c o r p o r a t i o n s simply b e c a u s e t h e y are availa b l e to i n d i v i d u a l s is legal a n t h r o p o m o r p h i s m at its w o r s t . C o r p o r a t i o n s c a n n o t h a v e a c o n f e s s i o n physically c o e r c e d o u t o f t h e m u n d e r b r i g h t lights at a p o l i c e s t a t i o n . C o r p o r a t i o n s do not s t a n d in t h e d o c k w i t h o u t t h e benefit of legal c o u n s e l . W h e n corp o r a t i o n s do suffer at t h e h a n d s o f t h e s t a t e , t h e suffering is diffused a m o n g many corporate actors - shareholders, managers, workers. T h e e x t r e m e p r i v a t i o n s suffered b y i n d i v i d u a l victims o f state o p p r e s s i o n w h i c h justify e x t r e m e p r o t e c t i o n s o f individual r i g h t s a r e not felt w i t h i n t h e c o r p o r a t i o n . P u b l i c c o m p a n i e s c a n n o t r e a s o n a b l y b e given t h e r i g h t t o privacy a f f o r d e d to p r i v a t e i n d i v i d u a l s . In r e t u r n for t h e privilege of t r a d i n g a s a p u b l i c c o m p a n y , c o r p o r a t i o n s m u s t m a k e m a n y o f their r e c o r d s and m i n u t e s a v a i l a b l e for p u b l i c s c r u t i n y in a w a y we would n e v e r d e m a n d of an individual's personal diary. The US Supreme
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C o u r t a g r e e s t h a t " c o r p o r a t i o n s can claim n o equality with indiv i d u a l s in t h e e n j o y m e n t of a right to privacy. . . . T h e y are e n d o w e d w i t h p u b l i c a t t r i b u t e s . T h e y h a v e a collective impact on s o c i e t y , from w h i c h t h e y d e r i v e t h e privilege of acting as artificial e n t i t i e s . ' " Y e t m a n y of t h e g u a r a n t e e s of the Bill of R i g h t s are g r o u n d e d i n t h e right t o p r i v a c y . J u s t i c e D o u g l a s e x p l a i n s :
2

V a r i o u s g u a r a n t e e s c r e a t e z o n e s of p r i v a c y . . . . T h e F o u r t h A m e n d m e n t explicitly affirms t h e 'right o f t h e p e o p l e t o b e secure i n t h e i r p e r s o n s , h o u s e s , p a p e r s , and effects against u n r e a s o n a b l e s e a r c h e s and s e i z u r e s ' . T h e Fifth A m e n d m e n t in its Selfi n c r i m i n a t i o n C l a u s e e n a b l e s the citizen to c r e a t e a z o n e of p r i v a c y w h i c h g o v e r n m e n t m a y n o t force him t o s u r r e n d e r . '
2

W h i l e t h e U n i t e d S t a t e s d e n i e s c o r p o r a t i o n s t h e privilege against s e l f - i n c r i m i n a t i o n , " t h e t r a d i t i o n a l view in E n g l i s h law has b e e n t h a t t h e p r i v i l e g e a p p l i e s t o b o t h i n d i v i d u a l s and c o r p o r a t i o n s . "

2

Trial by jury is a n o t h e r relevant procedural protection. In c o m p l e x c o r p o r a t e c a s e s j u r i e s often c a n n o t b e e x p e c t e d t o u n d e r s t a n d t h e m a z e o f s e c u r i t i e s m a n i p u l a t i o n s , scientific d a t a o r o r g a n i s a t i o n a l c h a r t s which s p r e a d a c r o s s n a t i o n a l b o r d e r s . A m o r e r a t i o n a l , r a p i d and j u s t d e c i s i o n i n t h e s e cases w o u l d c o m e from a j u d g e w i t h e x p e r i e n c e in t h e a r e a sitting a l o n e , or from a p a n e l o f e x p e r t j u r o r s . Y e t c o r p o r a t i o n s t e n d t o insist o n their right t o a j u r y t r i a l . T h e US S u p r e m e C o u r t has e x p l a i n e d t h e r e a s o n s for t r i a l b y j u r y i n t e r m s o f p r o t e c t i o n from t h e a r b i t r a r y p o w e r o f t h e state: A right to j u r y trial is g r a n t e d to c r i m i n a l d e f e n d a n t s in o r d e r to prevent o p p r e s s i o n by the G o v e r n m e n t . Those w h o wrote our c o n s t i t u t i o n s k n e w from history a n d e x p e r i e n c e that i t w a s n e c e s s a r y t o p r o t e c t a g a i n s t u n f o u n d e d criminal c h a r g e s b r o u g h t t o e l i m i n a t e e n e m i e s and a g a i n s t j u d g e s t o o r e s p o n s i v e t o t h e v o i c e of h i g h e r a u t h o r i t y . . . . P r o v i d i n g an a c c u s e d with t h e right to be t r i e d by his p e e r s gave him an i n e s t i m a b l e safeguard a g a i n s t t h e c o r r u p t o r o v e r z e a l o u s p r o s e c u t o r and against t h e c o m p l i a n t , biased, or eccentric judge. W h e r e t h e p o w e r d i s p a r i t y b e t w e e n s t a t e and d e f e n d a n t i s r e d u c e d or r e v e r s e d o n e w o n d e r s w h e r e this l e a v e s t h e r a t i o n a l e for trial by j u r y . The d o u b l e j e o p a r d y protection is a n o t h e r which is grounded in the a s s u m p t i o n of a state with more resources and p o w e r than the d e f e n d a n t . Justice Black in the US S u p r e m e Court: 340

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T h e u n d e r l y i n g i d e a . . . i s that t h e S t a t e with all its r e s o u r c e s and p o w e r s s h o u l d not b e a l l o w e d t o m a k e r e p e a t e d a t t e m p t s t o c o n v i c t an i n d i v i d u a l for an alleged o f f e n s e , t h e r e b y s u b j e c t i n g h i m t o e m b a r r a s s m e n t , e x p e n s e and o r d e a l and c o m p e l l i n g him to live in a c o n t i n u i n g state of a n x i e t y a n d insecurity as well as e n h a n c i n g t h e possibility that e v e n t h o u g h i n n o c e n t h e may b e found g u i l t y . " A n d so t h e r e is a n e e d to q u e s t i o n w h e t h e r all t h e t r a d i t i o n a l p r o t e c t i o n s afforded to i n d i v i d u a l s should also be a v a i l a b l e to c o r p o r a t i o n s ( F r i e d m a n , 1979). C o n s i d e r e n t r a p m e n t . I n C h a p t e r 3 i t w a s s e e n h o w 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 o c c a s i o n a l l y slips its o u t s i d e t e s t i n g l a b o r a t o r i e s a c o m p o u n d w i t h certain clearly e s t a b lished effects t o test t h e i r c o n t r o l s t a n d a r d s , and h o w o n e quality c o n t r o l m a n a g e r o c c a s i o n a l l y ' s p i k e s ' p r o d u c t s for t e s t i n g t o c h e c k t h a t his staff a r e f i n d i n g i m p u r i t i e s . S h o u l d g o v e r n m e n t s also be a b l e to do t h i s a n d use t h e f i n d i n g s as e v i d e n c e against c o r p o r a t i o n s ? A t p r e s e n t , such e n t r a p m e n t i s not p e r m i s s i b l e u n d e r A m e r i c a n law, but would be possible under English or Australian law. A p a r t from t h e p o w e r d i s p a r i t y r a t i o n a l e , t h e m a i n r e a s o n for e x t r e m e p r o t e c t i o n s , h i s t o r i c a l l y , w a s t h e severe n a t u r e o f t h e s a n c t i o n s . E x t r a o r d i n a r y c i r c u m s p e c t i o n i s essential w h e n t h e issue is w h e t h e r an i n d i v i d u a l will lose his or her right to life or liberty. P a c k e r s e e s i m p r i s o n m e n t a s t h e o p p r e s s i v e m e a s u r e which sets a p a r t t h e n e e d for d u e p r o c e s s p r o t e c t i o n s . L a b e l s a s i d e , t h e c o m b i n a t i o n o f stigma and loss o f liberty i n v o l v e d in a c o n d i t i o n a l or a b s o l u t e s e n t e n c e of i m p r i s o n m e n t sets t h a t s a n c t i o n a p a r t from a n y t h i n g else t h e law i m p o s e s . W h e n t h e law p e r m i t s t h a t d e g r e e o f s e v e r i t y , t h e d e f e n d a n t should b e e n t i t l e d to litigate t h e issue of c u l p a b i l i t y by raising the k i n d s of d e f e n s e s w e h a v e b e e n c o n s i d e r i n g . I f the b u r d e n o n t h e c o u r t s i s t h o u g h t to be t o o g r e a t , a less s e v e r e s a n c t i o n t h a n i m p r i s o n m e n t s h o u l d b e t h e m a x i m u m p r o v i d e d for. T h e l e g i s l a t u r e o u g h t not to be a l l o w e d to h a v e it b o t h w a y s ( P a c k e r , 1968: 131). T h e full p a r a p h e r n a l i a o f t r a d i t i o n a l p r o c e d u r a l p r o t e c t i o n s s h o u l d be a v a i l a b l e w h e n t h e r e is any possibility of i m p r i s o n m e n t . C o r p o r a t i o n s can n e i t h e r b e i m p r i s o n e d nor e x e c u t e d (in t h e literal s e n s e ) . So this s e c o n d m a j o r r a t i o n a l e for t h e h i s t o r i c s a f e g u a r d s is also not relevant to t h e m . 341

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T h e m o s t v e x e d q u e s t i o n of all is w h e t h e r , given the difficulties of proving complex corporate crimes 'beyond reasonable doubt', p r o o f 'on t h e b a l a n c e o f p r o b a b i l i t i e s ' s h o u l d b e r e g a r d e d a s sufficient. J u d g e C a n e l l a ' s j u d g m e n t i n t h e t e t r a c y c l i n e c r i m i n a l price-fixing case i n d i c a t e s t h a t w h i l e p r o o f o n t h e b a l a n c e o f p r o b a b i l i t i e s m i g h t h a v e b e e n t h e r e , t h e e v i d e n c e did not put t h e issues 'beyond reasonable doubt'.'" I n c a s e s w h i c h i n v o l v e scientific d i s p u t e , p r o o f ' b e y o n d r e a s o n able d o u b t ' is rarely, ifever, possible. Science deals in probabilities, n o t c e r t a i n t i e s . T h e s u p e r s t r u c t u r e of s c i e n c e is e r e c t e d on a found a t i o n of m a t h e m a t i c a l statistics w h i c h e s t i m a t e a p r o b a b i l i t y that i n f e r e n c e s a r e t r u e or false. L o g i c a l l y , p r o o f b e y o n d a r e a s o n a b l e d o u b t t h a t A ' c a u s e s ' B is i m p o s s i b l e . It is a l w a y s possible t h a t a c o r r e l a t i o n b e t w e e n A and B is e x p l a i n e d by an u n k n o w n third v a r i a b l e , C, which simultaneously causes both A and B. The s c i e n t i s t can n e v e r e l i m i n a t e all t h e p o s s i b l e third v a r i a b l e s w h i c h m i g h t e x p l a i n a w a y a p r e s u m e d causal c o n n e c t i o n . T h u s , t o r e q u i r e 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 that G M P violation caused an o b s e r v e d level o f d r u g i m p u r i t y , a s i n t h e A b b o t t case ( C h a p t e r 4 ) , is to r e q u i r e t h e i m p o s s i b l e . W h e n a r e m i s s i b l e s a n c t i o n such as a fine is t h e most s e v e r e p e n a l t y w h i c h can be i m p o s e d on a c o r p o r a t i o n , t h e case for proof b e y o n d r e a s o n a b l e d o u b t i s w e a k . H i s t o r y i s l i t t e r e d w i t h shameful i n s t a n c e s o f i n n o c e n t p e o p l e w h o w e n t t o t h e g a l l o w s o r suffered y e a r s o f d e s p a i r i n p r i s o n only t o h a v e t h e i r i n n o c e n c e s u b s e q u e n t l y v i n d i c a t e d . S u c h i n s t a n c e s justify insistence o n 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 s t a t e c a n n o t c o m p e n s a t e t h e s e p e o p l e for t h e i r d e a t h o r suffering. I t c a n i n s t a n t l y c o m p e n s a t e t h e w r o n g l y fined c o r p o r a t i o n w i t h a c h e q u e for t h e value of t h e fine plus interest. O f c o u r s e , w h e n o n e i s c o n s i d e r i n g t h e p r o s e c u t i o n o f individual c o r p o r a t e executives under statutes permitting the sanction of i m p r i s o n m e n t , t h e s e d e f e n d a n t s s h o u l d b e a c c o r d e d all t h e p r o t e c t i o n s a v a i l a b l e u n d e r c r i m i n a l law. A d m i t t e d l y , w e a l t h y p e o p l e u s e t h e s e p r o t e c t i o n s m o r e t o t h e i r a d v a n t a g e t h a n the indigent p e o p l e a t w h o m t h e liberal p r o t e c t i o n s a r e s u p p o s e d l y a i m e d . A s E h r l i c h ( 1 9 3 6 : 2 3 8 ) long ago r e m i n d e d us: 'the m o r e the rich and t h e p o o r a r e d e a l t w i t h a c c o r d i n g t o t h e s a m e legal p r o p o s i t i o n s , t h e m o r e t h e a d v a n t a g e o f t h e rich i s i n c r e a s e d . " I f w e find t h a t the o n l y w a y to get c o n v i c t i o n s is to try w e a l t h y c o r p o r a t e e x e c u t i v e s u n d e r less s t r i n g e n t p r o c e d u r a l s a f e g u a r d s , t h e n t h e m i n i m u m 342

Strategies for r e q u i r e m e n t will imprisonment.

controlling

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crime

be to a b o l i s h for t h o s e c r i m e s t h e s a n c t i o n of

Laws to foster whistle blowing

L a w s in all W e s t e r n s o c i e t i e s p r o v i d e a m p l y for the rights of e m p l o y e r s t o d i s m i s s e m p l o y e e s for w h a t e v e r r e a s o n they wish r e g a r d l e s s o f h o w unjust this m i g h t b e . I n r e c e n t y e a r s t h e historical s u b s e r v i e n c e of this a r e a of law to e m p l o y e r i n t e r e s t s has b e e n u n d e r t h r e a t . M a n y c o u n t r i e s n o w h a v e a n t i - d i s c r i m i n a t i o n legisl a t i o n w h i c h f e t t e r s t h e r i g h t o f e m p l o y e r s t o hire and fire a s t h e y see fit. In a d d i t i o n to legal p r o t e c t i o n s a g a i n s t d i s c r i m i n a t i o n on t h e b a s i s of r a c e , sex or c r e e d , t h e r e w o u l d be j u s t i c e in p r o v i s i o n s to forbid d i s c r i m i n a t i o n a g a i n s t e m p l o y e e s w h o r e p o r t t h e i r e m p l o y e r to a r e g u l a t o r y a g e n c y . It is clearly in t h e p u b l i c i n t e r e s t to e n c o u r a g e e m p l o y e e s to r e p o r t law v i o l a t i o n s , which they o b s e r v e , to relevant authorities. N a d e r e t a l . ( 1 9 7 6 : 195-7) h a v e r e c o m m e n d e d a n ' E m p l o y e e Bill o f R i g h t s ' t o p r e v e n t e m p l o y e r i n t i m i d a t i o n o f i n d i v i d u a l s for exercising their constitutional rights to freedom of expression, equal r i g h t s or p r i v a c y . M i c h i g a n recently t o o k t h e lead with a ' W h i s t l e B l o w e r s ' P r o t e c t i o n A c t ' w h i c h p e r m i t s suits a g a i n s t e m p l o y e r s for u n j u s t r e p r i s a l b y e m p l o y e e s w h o h a v e b e e n d i s m i s s e d for r e p o r t i n g a law violation. A n o t h e r e m p l o y e e right w h i c h s h o u l d be legally g u a r a n t e e d is a r i g h t o f r e s e a r c h s c i e n t i s t s t o p u b l i s h t h e i r f i n d i n g s e v e n t h o u g h the e m p l o y e r m i g h t o b j e c t to such p u b l i c a t i o n . T h i s is a difficult a r e a since it o b v i o u s l y w o u l d be u n d e s i r a b l e to give scientists c a r t e b l a n c h e t o r e v e a l t r a d e s e c r e t s . N e v e r t h e l e s s , the very fact that s o m e c o m p a n i e s give t h e i r scientists a c o n t r a c t u a l r i g h t to p u b l i s h so l o n g as s e c r e t s a r e not r e v e a l e d d e m o n s t r a t e s t h a t such difficulties are s u r m o u n t a b l e . I n a d d i t i o n t o laws g u a r a n t e e i n g r i g h t s t o b l o w t h e w h i s t l e , a n a r g u m e n t can be m a d e for a duty to b l o w t h e w h i s t l e in c e r t a i n e x t r e m e c i r c u m s t a n c e s . This was the reasoning behind a m e n d m e n t s to the federal criminal code introduced into the US C o n g r e s s in 1979. T h e y a t t e m p t e d to m a k e it an offence for 'an a p p r o p r i a t e m a n a g e r ' w h o ' d i s c o v e r s in t h e c o u r s e of b u s i n e s s as such m a n a g e r a s e r i o u s d a n g e r a s s o c i a t e d w i t h ' a p r o d u c t and fails to inform e a c h a p p r o p r i a t e F e d e r a l r e g u l a t o r y a g e n c y o f t h e d a n g e r w i t h i n thirty d a y s . T h e v a l u e of such a law w o u l d not be t h a t it w o u l d p u n i s h 343

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g u i l t y p e o p l e , b u t t h a t it w o u l d h e l p lift t h e lid on d a n g e r o u s p r o d u c t s before t h e y did any h a r m . It is c o n c e i v a b l e t h a t the e x i s t e n c e of s u c h a law in G e r m a n y could have p r e v e n t e d the t h a l i d o m i d e d i s a s t e r , r e m e m b e r i n g t h a t i t t a k e s only o n e t o blow the w h i s t l e . "

Product liability
P r o d u c t liability refers t o t h e right o f t h e c o n s u m e r t o o b t a i n c o m p e n s a t i o n from t h e p r o d u c e r of faulty g o o d s . As in so m a n y t h i n g s , the t h a l i d o m i d e disaster was the w a t e r s h e d which changed the e m p h a s i s i n p r o d u c t liability a r o u n d the w o r l d . Since t h a l i d o m i d e , m a n y c o u n t r i e s h a v e b e g u n to shift a w a y from t h e necessity for v i c t i m s of p r o d u c t defects to p r o v e n e g l i g e n c e on t h e part of the m a n u f a c t u r e r i n o r d e r t o r e c e i v e c o m p e n s a t i o n for injuries. M a n y c o u n t r i e s a r e shifting t o w a r d s t h e US p o s i t i o n of effective strict liability o f t h e m a n u f a c t u r e r for p r o d u c t d e f e c t s . T h a t is, t h e m a n u f a c t u r e r c o m p e n s a t e s t h e victim i r r e s p e c t i v e of w h e t h e r it w a s in a n y way n e g l i g e n t . O t h e r c o u n t r i e s ( n o t a b l y G e r m a n y , S w e d e n , J a p a n a n d N e w Z e a l a n d ) have o p t e d for no-fault c o m p e n s a t i o n for v i c t i m s of d e f e c t i v e p h a r m a c e u t i c a l p r o d u c t s from a g o v e r n m e n t s p o n s o r e d i n s u r a n c e fund. G e n e r a l l y t h e s e are funded b y m a n d a t o r y c o n t r i b u t i o n s from c o m p a n i e s i n t h e i n d u s t r y . " T h e s h e e r b u r d e n o n t h e e c o n o m y o f w i d e s p r e a d litigation o v e r t h e n e g l i g e n c e o r o t h e r w i s e o f m a n u f a c t u r e r s m a k e s the r e f o r m s d e s i r a b l e . S u c h q u e s t i o n s o f n e g l i g e n c e are a l m o s t invariably c o m p l e x with respect to drugs. P e r h a p s the patient contributed to t h e n e g l i g e n c e by failing to t a k e t h e d r u g r e g u l a r l y or a c c o r d i n g to i n s t r u c t i o n s , or by failing to tell t h e d o c t o r of an allergic r e a c t i o n from w h i c h he or she suffered. D r u g s are a l w a y s p o t e n t i a l l y toxic "tamed p o i s o n s ' , as o n e i n f o r m a n t e x p l a i n e d . J u d g i n g fault w h e n a p o i s o n p r o v e s not t o b e s o t a m e i s p r o f o u n d l y c o m p l e x . T h e d r u g s a r e u s u a l l y t a k e n b y p e o p l e w h o are a l r e a d y ill and t h e r e f o r e unusually susceptible to adverse reactions. A m e r i c a n law e x c u s e s m a n u f a c t u r e r s from strict liability for p r o d u c t s w h i c h a r e v a l u a b l e yet u n a v o i d a b l y d a n g e r o u s . T o qualify for strict liability t h e p r o d u c t m u s t h a v e a defect which is ' u n r e a s o n a b l y d a n g e r o u s ' (Teff a n d M u n r o , 1976: 135-7). P r o d u c t s which c a u s e injury by failing to m e e t p u r i t y or sterility specifications are clearly r e g a r d e d as 'unreasonably d a n g e r o u s ' . It is therefore e x t r e m e l y difficult for t h e m a n u f a c t u r e r to avoid liability by a r g u i n g 344

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t h a t e v e r y t h i n g p o s s i b l e w a s d o n e t o p r e v e n t t h e sale o f i m p u r e product." O b v i o u s l y t h e r e is an e l e m e n t of injustice in r e q u i r i n g m a n u f a c t u r e r s w h o h a v e t h e best quality c o n t r o l system possible with c u r r e n t t e c h n o l o g y t o pay c o m p e n s a t i o n w h e n that system fails. T h e r e is an e c o n o m i c justification for strict liability, h o w e v e r . C o m p a n i e s benefit financially from the social gains from the use of t h e i r p r o d u c t s , and so t h e y s h o u l d lose f i n a n c i a l l y from the social h a r m s o f t h e p r o d u c t s . I f c o m p a n i e s can r a k e i n t h e benefits w h i l e h a v i n g o t h e r s pay t h e c o s t s , m a r k e t forces can n e v e r put t h e m out o f b u s i n e s s i f t h e i r p r o d u c t i o n has social c o s t s w h i c h e x c e e d t h e social b e n e f i t s . It is n o r m a l l y in t h e p u b l i c i n t e r e s t for a c o m p a n y with t h e b e s t q u a l i t y c o n t r o l s y s t e m p o s s i b l e to c o n t i n u e p r o d u c i n g a p r o d u c t w h i c h , i n spite o f t h a t s y s t e m , i m p o s e s costs o n injured c o n s u m e r s w h i c h e x c e e d t h e a g g r e g a t e price t h a t c o n s u m e r s are willing t o pay to o b t a i n t h e b e n e f i t s o f t h e p r o d u c t . W i t h strict liability it is not p r o f i t a b l e for c o m p a n i e s t o c o n t i n u e p r o d u c i n g such p r o d u c t s . T h e o t h e r e c o n o m i c r a t i o n a l e w h i c h cuts a c r o s s t h e injustice o b j e c t i o n c o n c e r n s p r o d u c t safety i n n o v a t i o n s . U n d e r a n e g l i g e n c e s t a n d a r d , a c o m p a n y w h i c h has t h e best quality c o n t r o l system c u r r e n t l y a v a i l a b l e has n o i n c e n t i v e t o d i s c o v e r a n e v e n b e t t e r s y s t e m . So long as t h e c o m p a n y is not n e g l i g e n t , victims will pay the c o s t s from t h e unsafe p r o d u c t s p r o d u c e d . U n d e r a strict liability s t a n d a r d , a m a n u f a c t u r e r with the best s y s t e m possible is still losing m o n e y from t i m e to t i m e in c o m p e n s a t i o n for victims of unsafe p r o d u c t s . T h e m a n u f a c t u r e r t h e r e f o r e has a n i n c e n t i v e t o d e v e l o p an e v e n b e t t e r q u a l i t y c o n t r o l s y s t e m . Strict liability t h u s fosters i n n o v a t i o n i n p r o d u c t safety m e a s u r e s . " T o t h e e x t e n t t h a t m a n u f a c t u r e r s i n s u r e against p r o d u c t liability s u i t s , t h i s a r g u m e n t loses force; but not e n t i r e l y , since p r o d u c t safety i n n o v a t i o n s m a y r e d u c e t h e p r e m i u m s paid t o i n s u r e r s . M o r e o v e r , p o l i c i e s w h i c h p l a c e a n u p p e r limit o n the a m o u n t i n s u r e d , o r w h i c h r e q u i r e t h e c o m p a n y t o m e e t the first s o m a n y t h o u s a n d s o f t h e c o m p e n s a t i o n c l a i m , r e t a i n limited safety incentives. C e r t a i n c o u n t r i e s w h o s e p r o d u c t liability laws fall short of strict liability h a v e n e v e r t h e l e s s r e v e r s e d t h e b u r d e n o f p r o o f from t h e plaintiff t o t h e d e f e n d a n t . W e s t G e r m a n y and the N e t h e r l a n d s are e x a m p l e s ( P e a r s o n C o m m i s s i o n , 1978: v o l u m e 3 ) . T h e r a t i o n a l e i s t h a t t h e scientifically and o r g a n i s a t i o n a l l y u n i n f o r m e d c o n s u m e r i s n o t in as g o o d a p o s i t i o n to p r e s e n t a c a s e a b o u t the a d e q u a c y o f t h e 345

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m a n u f a c t u r e r ' s s y s t e m for a s s u r i n g safety as is t h e m a n u f a c t u r e r itself. T y p i c a l l y t h e victim will have no k n o w l e d g e of t h e c h a i n of e v e n t s l e a d i n g t o t h e d a n g e r o u s o u t c o m e . I t i s r e a s o n a b l e t h a t the b u r d e n o f p r o o f lies w i t h t h e p a r t y with g r e a t e r r e s o u r c e s and m o r e d i r e c t a c c e s s to t h e r e l e v a n t facts. T h i s is yet a n o t h e r i l l u s t r a t i o n of t h e n e e d t o r e t h i n k t r a d i t i o n a l legal p r i n c i p l e s w h e n t h e typical c o n f r o n t a t i o n has a l a r g e c o r p o r a t i o n a s one o f t h e a d v e r s a r i e s . A f a s c i n a t i n g d e v e l o p m e n t in J a p a n has b e e n a d e c i s i o n by the K a n a z a w a District C o u r t under J a p a n ' s National Redress Law that t h e J a p a n e s e G o v e r n m e n t b e a r o n e t h i r d o f t h e m a s s i v e liability for n e u r o t o x i c effects o f t h e d r u g c l i o q u i n o l . T h e r e m a i n i n g t w o - t h i r d s o f t h e p r o d u c t liability c l a i m s w a s t o b e b o r n e b y the m a n u f a c t u r e r s . G o v e r n m e n t liability w a s a s s e s s e d b e c a u s e o f t h e failure o f the g o v e r n m e n t ' s P h a r m a c y Affairs B u r e a u t o subject the d r u g t o r i g o r o u s r e g i s t r a t i o n p r o c e d u r e s . G o l d r i n g and M a h e r ( 1 9 7 9 : 31) h a v e d i s c u s s e d t w o N e w Z e a l a n d p r o d u c t liability c a s e s w h e r e the failure o f g o v e r n m e n t b u i l d i n g and t r a n s p o r t i n s p e c t o r s t o d o their j o b p r o p e r l y w a s found to be a basis for g o v e r n m e n t liability. To d a t e t h e e x t e n t to w h i c h law s h o u l d p r o v i d e i n c e n t i v e s for g o v e r n m e n t as well as b u s i n e s s e s to i m p r o v e their safety s y s t e m s has been a neglected topic.

Class actions
I n m o s t c o u n t r i e s , b u t e s p e c i a l l y t h e U n i t e d S t a t e s , p r o d u c t liability l a w r a t h e r t h a n c r i m i n a l law h a s p r o v i d e d most o f the d e t e r r e n c e a g a i n s t c o r p o r a t e c r i m 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 . C o m p e n s a t i o n , n o t d e t e r r e n c e , i s t h e r e c o g n i s e d function o f p r o d u c t liability law. Yet t h e c o n c l u s i o n from m y i n t e r v i e w s w a s that 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 o r t fear of p r o d u c t - l i a b i l i t y suits as a r e a s o n for o b e y i n g t h e F o o d , D r u g a n d C o s m e t i c A c t o f i m m e n s e l y g r e a t e r i m p o r t a n c e t h a n fear of c r i m i n a l p r o s e c u t i o n or any o t h e r regul a t o r y a c t i o n . T h e y w o u l d b e i r r a t i o n a l t o think o t h e r w i s e . M E R / 2 9 c o s t R i c h a r d s o n - M e r r e l l an $ 8 0 , 0 0 0 c r i m i n a l fine; b u t it is e s t i m a t e d t h a t t h e p r o d u c t liability s e t t l e m e n t s t o t a l l e d a b o u t $200 million. T h e r e a l i t y t h a t it is civil d a m a g e s which p r o v i d e t h e g r e a t e s t d e t e r r e n c e m u s t c a u s e a q u e s t i o n i n g of t h e h e a v y use of nolo contendere p l e a s for c o r p o r a t e c r i m e in t h e U n i t e d States ( S a x o n , 1980: 5 3 - 4 ) . A nolo contendere or ' n o c o n t e s t ' p l e a , a l t h o u g h t h e o r e t i c a l l y t h e s a m e as a guilty p l e a , d o e s not force t h e offender to a d m i t guilt. C o n s e q u e n t l y , victims o f t h e crime c a n n o t use t h e plea 346

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as p r o o f of guilt in any s u b s e q u e n t civil d a m a g e s litigation. T h e d e t e r r e n t v a l u e of civil a c t i o n s is also a j u s t i f i c a t i o n for t h e p r o p o s e d US r e f o r m , u n d e r t h e C r i m i n a l C o d e R e f o r m A c t of 1979, to a l l o w a j u d g e t o o r d e r c o n v i c t e d offenders t o notify t h e i r victims o f t h e c o n v i c t i o n so t h a t t h e victims may r e c o v e r d a m a g e s t h r o u g h civil p r o c e e d i n g s ( S a x o n , 1980: 6 4 ) . I n p a r t , d e t e r r e n c e o f c o r p o r a t e c r i m e t h r o u g h civil suits i s m o r e profound in the United States than in other countries because ofthe a v a i l a b i l i t y o f class a c t i o n s . O t h e r c o u n t r i e s a r e b e g i n n i n g t o a d o p t a n d frame q u i t e w i d e - r a n g i n g class a c t i o n l a w s , while in some m e a s u r e i n r e c e n t y e a r s , t h e U n i t e d S t a t e s has s o u g h t t o n a r r o w the s c o p e of class a c t i o n s ( e . g . see C a p p e l l e t t i , 1976). C l a s s a c t i o n s p e r m i t victims of a p a r t i c u l a r loss or injury to b a n d t o g e t h e r and sue t h e d e f e n d a n t j o i n t l y . O r r a t h e r , o n e m e m b e r o f t h e class of plaintiffs notifies the o t h e r s and sues on their behalf. Class actions therefore o v e r c o m e the reluctance of c o n s u m e r s to s u e a p o w e r f u l c o r p o r a t i o n w h e n t h e e x t e n t o f t h e i r loss or injury is n o t so g r e a t as to justify t h e risk of large legal e x p e n s e s . Diffused i n t e r e s t s a r e g a l v a n i s e d by t h e p o o l i n g of risks and benefits. In fact, u n d e r t h e A m e r i c a n c o n t i n g e n c y fee s y s t e m t h e plaintiff class's l a w y e r b e a r s t h e risk. T h e lawyer a g r e e s to t a k e on t h e c a s e for a percentage o f t h e settlement. W i t h o u t p r o v i s i o n for t h e c h a r g i n g of c o n t i n g e n c y fees, class a c t i o n s c a n h a v e little b i t e . E v e n g r o u p s o f c o n s u m e r s are r e l u c t a n t to r u n t h e risk o f t h e tally of legal e x p e n s e s t h a t m i g h t follow from c h a l l e n g i n g a c o r p o r a t e giant in c o u r t . C l a s s a c t i o n s c o m b i n e d with c o n t i n g e n c y fees a s s a u l t t h e f u n d a m e n t a l i n e q u i t y i n legal s y s t e m s the crushing of individual powerlessness by corporate might. As c o r p o r a t i o n s g r o w m o r e m a s s i v e , t h e n e e d for structural s o l u t i o n s t o r e d r e s s t h e b a l a n c e , such a s class a c t i o n s , b e c o m e s m o r e c o m pelling. Class a c t i o n s , as the A u s t r a l i a n Law Reform Commission Disc u s s i o n P a p e r ( 1 9 7 9 ) o n t h e subject c o n c l u d e s , are 'the private e n t e r p r i s e a n s w e r t o legal aid'. I n s t e a d o f g o v e r n m e n t s t a k i n g r e s p o n s i b i l i t y for p r o t e c t i n g their i n t e r e s t s , c o n s u m e r s collectively t a k e t h e i r i n t e r e s t s i n t h e i r own h a n d s . A federal class a c t i o n l a w . . . will put t h e p o w e r to seek j u s t i c e in c o u r t w h e r e it b e l o n g s - b e y o n d t h e r e a c h of c a m p a i g n c o n t r i b u t o r s , i n d u s t r y l o b b y i s t s , or W a s h i n g t o n l a w y e r s - a n d it will p u t p o w e r i n t h e h a n d s o f t h e c o n s u m e r s t h e m s e l v e s and i n 347

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the hands of their own lawyers, retained by them to represent their interests alone (Ms Bess Myerson. Commissioner of C o n s u m e r Affairs o f t h e City o f N e w Y o r k , q u o t e d i n A u s t r a l i a n L a w R e f o r m C o m m i s s i o n , 1979: 3 3 ) . C l a s s a c t i o n s s u p p l e m e n t e d by c o n t i n g e n c y fees are one of the few w a y s i n w h i c h i n d i v i d u a l w e a k n e s s can c o m e t o m a t c h collectivist m i g h t . F o r this r e a s o n , the b u s i n e s s l o b b i e s a r e ferociously r e s i s t i n g r e f o r m s for t h e i n t r o d u c t i o n of class a c t i o n s in m a n y c o u n t r i e s a r o u n d the world.

Making self-regulation work

L a w s c a n n o t b e w r i t t e n t o c o v e r all t h e t y p e s o f social r e s p o n s i b i l i t y we w o u l d like to see a p h a r m a c e u t i c a l c o m p a n y m a n i f e s t . No rule can m a k e a scientist l o o k h a r d i n s t e a d of c u r s o r i l y w h e n c h e c k i n g for t u m o u r s in a l a b o r a t o r y a n i m a l . An a t t e m p t w a s m a d e at t h e end o f t h e M E R / 2 9 c a s e s t u d y o f C h a p t e r 3 t o illustrate that the a c c u m u l a t i o n o f m a n y m i n o r acts o f social i r r e s p o n s i b i l i t y c a u s e s g r e a t e r h a r m t h a n explicitly illegal a c t s . W h i l e law c a n n o t r e g u l a t e s u b t l e t i e s , t h e e t h o s of social r e s p o n s i b i l i t y in a c o m p a n y can. E v e n w h e r e law i s a n effective tool o f c o n t r o l , t h e r e h a v e b e e n m a n y e x a m p l e s i n this b o o k w h e r e s e l f - r e g u l a t o r y s y s t e m s p r o v i d e d t o u g h e r protections than g o v e r n m e n t control systems. R e m e m b e r , for e x a m p l e , 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 which w a s d e f e n d e d a s a c c e p t a b l e b y B r i t i s h g o v e r n m e n t i n s p e c t o r s , but criticised a s u n s a f e by c o m p l i a n c e staff from h e a d q u a r t e r s in t h e U n i t e d S t a t e s ( C h a p t e r 4 ) . T h e fact t h a t s e l f - r e g u l a t o r y c o n t r o l s afford the p u b l i c g r e a t e r p r o t e c t i o n s t h a n e x t e r n a l l y i m p o s e d c o n t r o l s d o e s not m e a n t h a t t h e s o l u t i o n lies w i t h g e t t i n g c o r p o r a t i o n s t o w r i t e i n t e r n a l c o d e s of ethics. O n e businessman suggested that relying on a code o f e t h i c s w a s 'like society issuing t h e T e n C o m m a n d m e n t s but not b o t h e r i n g to h a v e a p o l i c e force'. F o r m e r Shell I n t e r n a t i o n a l D i r e c t o r , G e o f f r e y C h a n d l e r , has a n a p p r o p r i a t e l y cynical v i e w o f such pieces of paper: ' C o d e s of conduct tend to be placebos which a r e likely to be less t h a n a r e s p o n s i b l e c o m p a n y will do of its own v o l i t i o n a n d m o r e t h a n a n i r r e s p o n s i b l e c o m p a n y will d o w i t h o u t c o e r c i o n ' ( q u o t e d i n M e d a w a r , 1979: 70) A start is to e x a m i n e S O P s . But e v e n l o o k i n g at w r i t t e n S O P s can be misleading. P h a r m a c e u t i c a l c o m p a n i e s generally have comm i t t e e s w h i c h a d j u d i c a t e r e q u e s t s t o w a i v e t h e c o r p o r a t e rules i n 348

Strategies for o r d e r t o deal with u n i q u e s i t u a t i o n s . informal decisions to ignore the rules:

controlling

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B e y o n d t h a t , t h e r e are t h e

I d o n ' t follow t h e c o r p o r a t e rules w h e n it d o e s n ' t suit m e . No o n e d o e s . T h a t is if y o u ' r e c r e d i b l e you can get a w a y w i t h it. W e ' r e c r e d i b l e b e c a u s e we p e r f o r m w e l l . I f w e w e r e r u n n i n g at a l o s s , I'd be fired for b r e a k i n g the r u l e s . B u t b e c a u s e w e ' r e d o i n g w e l l , it's a good m a n a g e m e n t decision ( M a n a g i n g director ofthe Australian subsidiary of an A m e r i c a n transnational). W h i l e t h e a b o v e view is m o r e e x t r e m e t h a n I had from any o t h e r i n f o r m a n t , it is c l e a r t h a t S O P s are far from i m m u t a b l e . We n e e d to l o o k b e y o n d t h e m t o t h e spirit i n w h i c h they a r e a p p l i e d . In s o m e c o m p a n i e s , t h e c l i m a t e is t h a t so long as you are not g e t t i n g i n t o h o t w a t e r a n d t h e b o t t o m line is g o o d , all is well. A s e n i o r A u s t r a l i a n e x e c u t i v e o f o n e i n t e r n a t i o n a l c o m p a n y w h i c h has a b a d r e c o r d of b r i b e r y a n d o t h e r l a w - b r e a k i n g said: ' W e w o u l d say t h a t i t i s t h e r e s p o n s i b i l i t y o f t h e H e a l t h D e p a r t m e n t t o w o r k out w h e t h e r r e s e a r c h r e s u l t s h a v e b e e n c h e a t e d on. M a y b e i f w e d o fudge s o m e r e s u l t it's t h e j o b o f t h e H e a l t h D e p a r t m e n t t o find that o u t . I t ' s not o u r r e s p o n s i b i l i t y . T h a t ' s t h e i r j o b . T h a t ' s w h a t t h e y ' r e p a i d to d o . ' H e r e is t h e a n t i t h e s i s of a s e l f - r e g u l a t i n g c o m p a n y with an e t h o s of social r e s p o n s i b i l i t y . I r o n i c a l l y , a w i l l i n g n e s s to h a n d o v e r r e s p o n s i b i l i t y to r e g u l a t o r y a g e n c i e s is a hallmark o f t h e irresponsible c o m p a n y : O f t e n o u r p e o p l e use t h e F D A to get out of m a k i n g a decision t h e m s e l v e s on a d r u g . We find it very h a r d to r e a c h c o n s e n s u s a m o n g o u r s e l v e s on t h e safety of a p r o d u c t and often t h e r e are s t r o n g d i s a g r e e m e n t s a m o n g us. S o s o m e t i m e s w e get out o f m a k i n g o u r o w n d e c i s i o n b y p u t t i n g i t t o t h e F D A and letting t h e m d e c i d e for u s . T h e r e s p o n s i b l e c o m p a n y t a k e s t h e view t h a t t h e y , a s the disc o v e r e r s o f t h e p r o d u c t , h a v e a d e e p e r u n d e r s t a n d i n g o f its r i s k s and b e n e f i t s t h a n F D A officials, t h a t t h e y h a v e c o r p o r a t e s t a n d a r d s o f i n t e g r i t y a n d e x c e l l e n c e and t h e r e f o r e wish t o m a k e their own d e c i s i o n . W h e n F D A d i s a g r e e s with t h e m , t h e y r e s e n t it. T h e last t h i n g t h e y w i s h to do is w a s h t h e i r h a n d s of a difficult d e c i s i o n . In c o n t r a s t , the irresponsible c o m p a n y is pleased to do so, pleased to h a n d o v e r i n c o m p l e t e facts t o facilitate t h e r e g u l a t o r y d e c i s i o n , a n d . i f t h e a g e n c y g i v e s a g r e e n light, d e l i g h t e d t o b e a b l e t o c l a i m : i t ' s w i t h i n t h e r u l e s , s o let's g o a h e a d . ' 349

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S O P s w h i c h a r e s o u n d with r e s p e c t t o c r i m e p r e v e n t i o n are i m p e r a t i v e . H o w e v e r , not only a r e S O P s m o r e fluid t h a n w o u l d a p p e a r from t h e c o r p o r a t e o p e r a t i n g m a n u a l s , but e x e c u t i v e s are f o r e v e r e n c o u n t e r i n g n e w e n v i r o n m e n t a l c i r c u m s t a n c e s for which t h e c o r p o r a t e rule b o o k offers little g u i d a n c e . A senior e x e c u t i v e of o n e o f A u s t r a l i a ' s t o p c o m p a n i e s (not a p h a r m a c e u t i c a l c o m p a n y ) r e c e n t l y t o o k me to task w h e n I c o m m e n t e d favourably on E x x o n ' s fairly d e t a i l e d c o r p o r a t e rules t o p r e v e n t l a w - b r e a k i n g . H i s view w a s t h a t t h e i m p o r t a n t t h i n g w a s not s o m u c h t h e ' c o r p o r a t e s t a t u t e s ' as t h e ' c o r p o r a t e case law'. R u l e s could not be codified to c o v e r t h e e v e r - c h a n g i n g s i t u a t i o n s w h i c h confront e x e c u t i v e s with e t h i c a l d i l e m m a s . S o his c o m p a n y w a s b e g i n n i n g t o a t t e m p t t o put t h e ' c o r p o r a t e case law' on a m o r e formal basis. T h e f u n d a m e n t a l r e q u i r e m e n t i s t h a t w h e n e x e c u t i v e s e n c o u n t e r a n ethical d i l e m m a , the p r o b l e m should be written down. It should then be passed up t h e line until it r e a c h e s a p e r s o n w h o k n o w s the existing case law w i t h r e s p e c t to t h i s class of p r o b l e m . If t h e p r o b l e m readily fits w i t h i n t h e p a r a m e t e r s e s t a b l i s h e d by existing case law, it goes no f u r t h e r . B u t if it h o l d s out t h e possibility of e s t a b l i s h i n g an i m p o r t a n t p r e c e d e n t , i t could g o t o t h e s u p r e m e court o f t h e chief e x e c u t i v e officer. T h e second fundamental r e q u i r e m e n t is that the decision in the c a s e be p u t in w r i t i n g and sent d o w n t h e line. A senior e x e c u t i v e m u s t t h e n t a k e r e s p o n s i b i l i t y for c o l l a t i n g , c o n c e p t u a l i s i n g , crossr e f e r e n c i n g a n d d r a w i n g o u t g e n e r a l p r i n c i p l e s from the c a s e law. If t h e c o m p a n y is t h e n e x p o s e d to criticism for t h e ethical stance it has t a k e n on a p a r t i c u l a r i s s u e , the b o a r d can be p r o v i d e d with a d e f i n i t i v e s u m m a r y o f t h e r e l e v a n t case law. T h e cases are t h e r e i n t h e files for t h e m to i n s p e c t . C r i t i c i s m c a n be d i r e c t e d not only at the w o r d i n g o f r u l e s b u t a t t h e m a n a g e r i a l j u d g m e n t s u n d e r l y i n g the r e s o l u t i o n o f specific d i l e m m a s w h i c h set i m p o r t a n t p r e c e d e n t s . W h e n t h e c o r p o r a t e case law b e c o m e s widely c o m m u n i c a t e d and u n d e r s t o o d w i t h i n t h e o r g a n i s a t i o n , t h e n e e d t o pass ethical d i l e m m a s u p t h e fine d e c r e a s e s b e c a u s e they a r e simply n o l o n g e r d i l e m m a s . T h e c a s e law can build a c o r p o r a t e c u l t u r e w h e r e i n w h a t w e r e s h a d e s o f grey b e c o m e black a n d w h i t e . M i n i m i s i n g t h e incidence of ethical d i l e m m a s is important because ofthe timeliness p r o b l e m with m a n a g e m e n t d e c i s i o n s . C o r p o r a t i o n s often m a k e t h e right decisions at the w r o n g time because they prevaricate while d i l e m m a s a r e p a s s e d u p t h e line. A u t h o r i t y must b e d e v o l v e d i f c o r p o r a t i o n s a r e t o m a x i m i s e their c a p a c i t y t o seize u p o n 350

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o p p o r t u n i t i e s as s o o n as t h e y p r e s e n t t h e m s e l v e s . H e n c e it is essential t h a t c o r p o r a t e c a s e law b e p r o a c t i v e r a t h e r t h a n simply r e a c t i v e . F o r m a l i s e d c o r p o r a t e c a s e law i s o b v i o u s l y m o r e a m e n a b l e t o critical scrutiny and evaluation than s p o k e n (and u n s p o k e n ) understandings. It renders corporate decision-making processes more v u l n e r a b l e to c r i t i c i s m . T h i s is its very s t r e n g t h . If c o r p o r a t i o n s c o m e to h a v e p u b l i c i n t e r e s t d i r e c t o r s , a p r o p o s i t i o n to be discussed l a t e r , t h e s e p e o p l e w o u l d b e able t o d o t h e i r j o b infinitely b e t t e r i f t h e y c o u l d criticise t h e way l e a d i n g c a s e s o f ethical d i l e m m a s have b e e n s e t t l e d . C r i t i c i s i n g r u l e s , t h e i n t e r p r e t a t i o n of which is une x p l i c a t e d , o b v i o u s l y i s o f m o r e limited v a l u e . Similarly, g o v e r n m e n t i n s p e c t o r s w o u l d b e m o r e effective g u a r d i a n s o f t h e public i n t e r e s t if t h e y had a c c e s s to a c o m p r e h e n s i v e b o d y of c o r p o r a t e c a s e law. T o p m a n a g e m e n t h a s a n i n t e r e s t i n t h e formalising o f c o r p o r a t e c a s e law in t h a t it t i g h t e n s m a n a g e m e n t c o n t r o l and r e d u c e s the risk of wild i d i o s y n c r a t i c d e c i s i o n s . T h e i m p o r t a n t benefit of enforcing the r e c o r d i n g and systematising of ethical d i l e m m a s , however, is t h a t it fosters s e l f - r e g u l a t i o n , a n d , to t h e e x t e n t that the c a s e s are m a d e available to outsiders, government regulation. Costs would n o t b e g r e a t . E x e c u t i v e s d o not e n c o u n t e r e t h i c a l d i l e m m a s every d a y o f t h e w e e k , a n d o n m o s t o c c a s i o n s w h e n t h e y d o , t h e y will b e d i l e m m a s w h i c h g e n e r a t e a n i m m e d i a t e r e s o l u t i o n from a m o r e s e n i o r p e r s o n w h o has e n c o u n t e r e d p r o b l e m s o f this t y p e b e f o r e . T h e p o i n t of view w h i c h I h e a r d a g a i n a n d a g a i n in the i n t e r v i e w s w a s t h a t t h e ethical c l i m a t e of a c o r p o r a t i o n b e g i n s w i t h , and is f u n d a m e n t a l l y d e t e r m i n e d by, the chief e x e c u t i v e officer:" He sets t h e t o n e a n d t h e rest of m a n a g e m e n t fall in line. T h e ethical s t a n d a r d s of a n y o n e other than him d o n ' t matter so much. W e l l , u n l e s s you h a v e o n e o f t h o s e c o m p a n i e s w h e r e a n old guy a t t h e h e l m has a r i g h t h a n d m a n m a k i n g all t h e real d e c i s i o n s (American executive). T h i s c o n c l u s i o n i s c o n s i s t e n t with o t h e r e v i d e n c e . B a u m a r t (1968) f o u n d t h a t e x e c u t i v e s r a n k e d t h e b e h a v i o u r o f their s u p e r i o r s i n the c o m p a n y as t h e p r i n c i p a l d e t e r m i n a n t of u n e t h i c a l d e c i s i o n s . In a f i f t e e n - y e a r f o l l o w - u p o f B a u m a r t ' s w o r k , B r e n n e r and M o l a n d e r ( 1 9 7 7 ) found s u p e r i o r s still r a n k e d as t h e p r i m a r y influence on u n e t h i c a l d e c i s i o n - m a k i n g . H a l f o f t h e 1977 s a m p l e o f e x e c u t i v e s b e l i e v e d t h a t s u p e r i o r s often d o n o t w a n t t o k n o w h o w r e s u l t s a r e o b t a i n e d , so long as t h e d e s i r e d o u t c o m e is a c h i e v e d . 351

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S u c h e v i d e n c e p r o v i d e s a c r i m e - p r e v e n t i o n r a t i o n a l e for t h e Park d e c i s i o n . T h e law s h o u l d a t t e m p t t o m a k e the chief e x e c u t i v e officer u n i q u e l y susceptible to individual criminal responsibility because s/he is u n i q u e l y a b l e to p r e v e n t c o r p o r a t e c r i m e t h o u g h o u t his or h e r o r g a n i s a t i o n . T h e e v i d e n c e also s u s t a i n s a c a s e for r e n d e r i n g c h i e f e x e c u t i v e officers e s p e c i a l l y v u l n e r a b l e t o s o m e o f t h e quite effective informal a d v e r s e publicity s a n c t i o n s which can ginger up t h e c o m p l i a n c e efforts o f c o m p a n i e s . H e n c e , c o n g r e s s i o n a l and p a r l i a m e n t a r y c o m m i t t e e s s h o u l d m a k e special efforts t o get chief e x e c u t i v e officers i n front o f t h e c a m e r a s w h e n q u e s t i o n s a r e being a s k e d a b o u t t h e e t h i c o - l e g a l s t a n d a r d s o f their c o r p o r a t i o n . W h i l e we k n o w t h a t t h e chief e x e c u t i v e officer holds t h e key to m a k i n g s e l f - r e g u l a t i o n w o r k , it is difficult to specify w h a t implicat i o n s this has for p u b l i c policy. P e r h a p s t h e only s u g g e s t i o n is for public interest groups to transform their criticisms of corporations i n t o p e r s o n a l a t t a c k s on t h e faceless chief e x e c u t i v e officer as well. W h e n t h e t i m e c o m e s for a p p o i n t i n g n e w chief e x e c u t i v e officers, public interest m o v e m e n t s might convey the message to the board t h a t t h e a p p o i n t m e n t of a c e r t a i n p e r s o n w o u l d lead to the c o r p o r a t i o n b e i n g singled out for special i n v e s t i g a t i v e a t t e n t i o n . If t h e b o a r d g o e s a h e a d and a p p o i n t s t h a t p e r s o n , i t w o u l d b e likely t h a t s/he w o u l d be k e e n to h e a d off t r o u b l e by d e m o n s t r a t i n g to c o n s u m e r i s t s t h a t s/he is not t h e o g r e t h e y a s s u m e d . A m o r e selfr e g u l a t i n g c o r p o r a t i o n might be the result. W h e n D o n a l d R u m s f e l d w a s a p p o i n t e d chief e x e c u t i v e officer o f S e a r l e i n 1977 f o l l o w i n g t h e c o m p a n y ' s s a f e t y - t e s t i n g c r i s e s , t h e a p p o i n t m e n t w a s criticised b e c a u s e R u m s f e l d had held s e n i o r c a b i n e t p o s i t i o n s i n t h e N i x o n a d m i n i s t r a t i o n . H o w e v e r , one o f R u m s f e l d ' s first a c t s w a s t o c o u n t e r S e a r l e ' s p o o r c o m p l i a n c e r e c o r d w i t h an edict t h a t staff w e r e to be e v a l u a t e d for p r o m o t i o n and i n c e n t i v e p a y m e n t s o n t h e basis o f t h e i r c o m p l i a n c e r e c o r d i n a d d i t i o n to the usual c r i t e r i a . " M o v i n g d o w n t h e o r g a n i s a t i o n a l h i e r a r c h y , i t i s i m p o r t a n t that p r o - p u b l i c i n t e r e s t c o n s t i t u e n c i e s w i t h i n t h e c o r p o r a t i o n a r e given o r g a n i s a t i o n a l c l o u t . T h e g r e a t m i s t a k e w h i c h m a n y critics o f big b u s i n e s s m a k e i s t h a t c o r p o r a t i o n s are u n i t a r y e n t i t i e s w h e r e every a c t i v i t y is g u i d e d by t h e goal of profit m a x i m i s a t i o n . I've s e e n this firm g r o w from a small c o m p a n y to a very large o n e . W h e n w e w e r e s m a l l , p e o p l e w o u l d a r g u e for t h i n g s i n t e r m s o f t h e o v e r a l l i n t e r e s t s o f t h e c o r p o r a t i o n . T o d a y p e o p l e a r g u e for 352

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w h a t is best for t h e i r g r o u p e v e n i f t h a t is against t h e c o r p o r a t i o n ' s interest. The bigger we b e c o m e , the bigger that problem becomes (senior American executive). O n c e a c o m p l i a n c e g r o u p is e s t a b l i s h e d 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 , it will t e n d to p u s h for w h a t is best for c o m p l i a n c e , e v e n in m a n y s i t u a t i o n s w h e n t h i s i s not i n t h e profitability i n t e r e s t s o f t h e c o m p a n y . " T h e performance and p r o m o t i o n prospects of people in t h e g r o u p will b e a s s e s s e d i n t e r m s o f t h e goals o f c o m p l i a n c e r a t h e r t h a n c o n t r i b u t i o n to profits. To t h e e x t e n t t h a t c o m p l i a n c e staff p e r c e i v e t h e m s e l v e s a s h a v i n g a c a r e e r line a s c o m p l i a n c e e x p e r t s , t h e y h a v e a s e l f - i m a g e a n d a s e c u r e b a s e from which to r e s t r a i n the e x c e s s e s o f t h e c o n s t i t u e n c i e s w h o a r e c o m m i t t e d t o 'profits a t any c o s t ' , ' p r o d u c t i o n t a r g e t s at any c o s t ' , 'sales q u o t a s at any c o s t ' , ' g r o w t h a t any c o s t ' , ' n e w p r o d u c t r e g i s t r a t i o n a t any c o s t ' . O n e o f t h e w a y s t o foster this kind o f self-image i s t h r o u g h granting professional status to certain types of compliance experts. C h a p t e r 4 d e v e l o p e d a r g u m e n t s for q u a l i t y c o n t r o l b e i n g a prof e s s i o n , w i t h u n i v e r s i t y d e g r e e s b e i n g offered i n 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 o c i a l i s a t i o n w o u l d hopefully c o m e t o i n c o r p o r a t e c e r t a i n e t h i c a l t r a d i t i o n s with at least a m o d i c u m of force. P r o f e s s i o n a l a s s o c i a t i o n s w o u l d h a v e t h e p o w e r t o strike off m e m b e r s w h o v i o l a t e p r o f e s s i o n a l e t h i c s , and t h e t h r e a t of being struck off c a n be u s e d by e m p l o y e e s to resist u n e t h i c a l d e m a n d s from e m p l o y e r s . N a d e r e t al. ( 1 9 7 2 ) h a v e f o r m u l a t e d a n i m p o r t a n t role for p r o f e s s i o n a l a s s o c i a t i o n s in d e f e n d i n g t h e e m p l o y e e rights of whistle b l o w e r s . As argued in C h a p t e r 4, professionalism is no p a n a c e a , but i t m i g h t h e l p . I t h a s b e e n s h o w n t h a t large p h a r m a c e u t i c a l c o m p a n i e s set u p g r o u p s w h o s e j o b i t i s t o e n s u r e i n t e g r i t y , q u a l i t y , and safety in t h e c o m p a n y ' s o u t p u t . T h e y do this b e c a u s e it is in the i n t e r e s t s o f profit t o h a v e g r o u p s totally c o m m i t t e d t o t h e s e g o a l s . Y e t it is also in t h e i n t e r e s t s of profit to have o t h e r g r o u p s like r e g u l a t o r y affairs, p u b l i c r e l a t i o n s and t o p m a n a g e m e n t itself w h o can take matters out o f t h e hands o f t h e pro-public-interest groups w h e n i n t e g r i t y will cost t o o m u c h m o n e y . P h a r m a c e u t i c a l c o m 3

p a n i e s d o not w a n t t h e i r scientists t o d o d i s h o n e s t r e s e a r c h . T h e y w a n t s c i e n t i s t s u n c o m p r o m i s i n g l y c o m m i t t e d t o scientific i n t e g r i t y . H o w e v e r , t h e y also w a n t to be a b l e to use t h a t scientific integrity selectively: to ignore it w h e n they want, to have studies r e p e a t e d w h e n r e s u l t s a r e not f a v o u r a b l e , t o have t h e public 353

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T h e m o r e o r g a n i s a t i o n a l clout p r o - p u b l i c - i n t e r e s t c o n s t i t u e n c i e s a r e g i v e n , t h e m o r e t h e o v e r - r u l i n g o f t h o s e c o n s t i t u e n c i e s will b e c o n f i n e d to m a t t e r s of only m a j o r c o n s e q u e n c e for profit. A l r e a d y , p h a r m a c e u t i c a l c o m p a n i e s f r e q u e n t l y let c o m p l i a n c e g r o u p s have t h e i r h e a d i n w a y s t h a t will r e d u c e profits. T h e y d o this t o m a i n t a i n m o r a l e i n t h e g r o u p and t o avoid u n d e r m i n i n g their a u t h o r i t y i n t h e o r g a n i s a t i o n . W i t h m o r e o r g a n i s a t i o n a l clout for the c o m p l i a n c e g r o u p , t h e i n c r e a s e d d i s r u p t i v e n e s s and conflict from o v e r - r u l i n g t h e m m a k e s i t p r u d e n t t o limit e v e n further the s i t u t a t i o n s w h e r e c o r p o r a t e goals are asserted over them. E x a m p l e s o f s t r e n g t h e n i n g o r g a n i s a t i o n a l clout for p r o - p u b l i c i n t e r e s t c o n s t i t u e n c i e s i n c l u d e giving t h e i n t e r n a t i o n a l m e d i c a l d i r e c t o r an u n q u a l i f i e d right to v e t o any p r o m o t i o n a l m a t e r i a l s from a s u b s i d i a r y w h i c h do not m e e t c o r p o r a t e s t a n d a r d s of full disc l o s u r e o f p r o d u c t h a z a r d s , h a v i n g t h e p l a n t safety officer a n s w e r a b l e to a h e a d office safety d i r e c t o r r a t h e r t h a n subject to the a u t h o r i t y o f t h e p l a n t m a n a g e r w h o m s/he m i g h t n e e d t o pull u p for a safety v i o l a t i o n , h a v i n g quality c o n t r o l i n d e p e n d e n t from m a r k e t i n g or p r o d u c t i o n p r e s s u r e s , having an international comp l i a n c e g r o u p a n s w e r a b l e only t o t h e chief e x e c u t i v e officer. M o r e s i m p l y , i t i s i m p o r t a n t t h a t c o m p l i a n c e e x e c u t i v e s b e senior in t h e o r g a n i s a t i o n a l h i e r a r c h y . A p r e l i m i n a r y study by t h e N a t i o n a l I n s t i t u t e for O c c u p a t i o n a l Safety a n d H e a l t h found t h a t c o m p a n i e s w i t h low e m p l o y e e a c c i d e n t r a t e s w e r e m o r e likely t o have ' t h e i r h i g h e s t safety officials at t o p m a n a g e m e n t levels of their firms' ( c i t e d i n M o n a h a n and N o v a c o , 1979). M o n a h a n . N o v a c o and G e i s ( 1 9 7 9 ) f o u n d t h a t t w o o f t h e 'Big F o u r ' D e t r o i t a u t o m o b i l e m a n u f a c t u r e r s m a k e recall d e c i s i o n s a t t h e m i d d l e - m a n a g e m e n t level and t w o a t t h e level o f t o p m a n a g e m e n t ( v i c e - p r e s i d e n t s and m e m b e r s o f t h e b o a r d ) . N a t i o n a l H i g h w a y Traffic Safety A d m i n i s t r a t i o n d a t a s h o w t h a t t h e t w o c o m p a n i e s w h o s e recall d e c i s i o n s w e r e m a d e b y m i d d l e m a n a g e m e n t w e r e a u d i t e d b y t h e g o v e r n m e n t for p r o d u c t safety v i o l a t i o n s a total o f t e n t i m e s w h i l e t h e t w o in w h i c h d e c i s i o n s w e r e m a d e a t t o p m a n a g e m e n t level w e r e a u d i t e d only o n c e . W h i l e this k i n d of e v i d e n c e is highly t e n t a t i v e , it is c o n s i s t e n t with the v i e w s e x p r e s s e d b y p h a r m a c e u t i c a l e x e c u t i v e s i n t h e p r e s e n t study. In a d d i t i o n to s t r e n g t h e n i n g the b a r g a i n i n g p o s i t i o n of explicitly p r o - p u b l i c - i n t e r e s t s u b u n i t s , it is i m p o r t a n t to r e n d e r all s u b u n i t s m o r e responsive to the public interest. A d a n g e r o u s situation is one 354

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w h e r e line s u p e r v i s o r s r e g a r d safety o r q u a l i t y a s t h e r e s p o n s i b i l i t y of safety or q u a l i t y staff. B o t h line and staff m u s t be held a c c o u n t a b l e for p r o b l e m s w i t h i n t h e i r s p h e r e o f r e s p o n s i b i l i t y . T h e costs o f r e c a l l s or i n d u s t r i a l a c c i d e n t s can be e x t e r n a l i t i e s to t h e e c o n o m i c c a l c u l a t i o n s o f p r o d u c t i o n s u b u n i t s . P e t e r s e n ( 1 9 7 8 : 4 9 - 5 1 ) has suggested that t h e s e costs be sheeted back to the subunit by c h a r g i n g a c c i d e n t c o s t s to t h e profit and loss s t a t e m e n t s of s u b u n i t s . p r o r a t i n g i n s u r a n c e p r e m i u m s a c c o r d i n g t o s u b u n i t safety p e r f o r m a n c e and p u t t i n g safety i n t o t h e s u p e r v i s o r ' s a p p r a i s a l . T h e n e x t r e q u i r e m e n t for effective s e l f - r e g u l a t i o n is that t h e r e be p r o v i s i o n t o 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 o f t h e corp o r a t i o n . T h e r e a r e t w o r e a s o n s for t h i s . F i r s t , w h e n t o p m a n a g e m e n t g e t s t o k n o w a b o u t a c r i m e w h i c h a c h i e v e s c e r t a i n subunit g o a l s , but which is not in the overall interests ofthe c o r p o r a t i o n , top m a n a g e m e n t will s t o p t h e c r i m e . S e c o n d , w h e n t o p m a n a g e m e n t i s forced t o k n o w a b o u t a c t i v i t i e s w h i c h i t w o u l d r a t h e r not k n o w a b o u t , it will often be forced to ' p r o t e c t its ass' by p u t t i n g a s t o p to it. G r o s s has e x p l a i n e d h o w c r i m i n o g e n i c o r g a n i s a t i o n s frequently b u i l d i n a s s u r a n c e s t h a t t h e taint o f k n o w l e d g e d o e s not t o u c h t h o s e at t h e t o p . A j o b o f t h e l a w y e r s is often to p r e v e n t such i n f o r m a t i o n from r e a c h i n g t h e t o p officers so as to p r o t e c t t h e m from t h e taint o f k n o w l e d g e s h o u l d t h e c o m p a n y later end u p i n c o u r t . O n e o f t h e r e a s o n s f o r m e r P r e s i d e n t N i x o n got i n t o such t r o u b l e w a s t h a t t h o s e n e a r him did not feel such s o l i c i t u d e b u t , from selfp r o t e c t i v e m o t i v e s p r e s u m a b l y , m a d e sure h e did k n o w every d e t a i l o f t h e illegal a c t i v i t i e s that w e r e g o i n g o n ( G r o s s , 1978: 203). Pharmaceutical companies sometimes evidence an extraordinary c a p a c i t y t o k e e p bad n e w s from the t o p . W i t h i n t h r e e m o n t h s o f M E R / 2 9 ' s release to the m a r k e t , the chief of cardiology at the Los A n g e l e s C e d a r s o f L e b a n o n H o s p i t a l had a n n o u n c e d that h e had s t o p p e d u s i n g t h e d r u g b e c a u s e o f its a d v e r s e effects. W h i l e t h e Richardson-Merrell board remained uninformed o f t h e dangers of M E R / 2 9 , E. F. H u t t o n , the s t o c k b r o k e r a g e house, picked up the s t o r y a n d a l m o s t i m m e d i a t e l y p o r t e n d e d a fall in R i c h a r d s o n M e r r e l l stock to its b r o k e r s a r o u n d t h e c o u n t r y , in o t h e r w o r d s , the information processes of our society are such that across America doctors were prescribing MER/29, oblivious to dangers that their stockbrokers had long been alerted to' ( S t o n e , 1975: 2 0 2 ) . 355

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4 0

T h e r e a r e m a n y r e a s o n s why b a d n e w s d o e s not get t o t h e t o p . S t o n e ( 1 9 7 5 : 190) p o i n t s out t h a t it w o u l d be no s u r p r i s e if e n v i r o n m e n t a l p r o b l e m s w e r e n o t d e a l t with by t h e b o a r d of a major public utility c o m p a n y w h i c h p r o u d l y told h i m t h a t i t had hired a n e n v i r o n m e n t a l e n g i n e e r . T h e t o u t e d e n v i r o n m e n t a l i s t r e p o r t e d t o the vicep r e s i d e n t for p u b l i c r e l a t i o n s ! M o r e f r e q u e n t l y , t h e p r o b l e m i s that p e o p l e l o w e r d o w n h a v e an i n t e r e s t in k e e p i n g t h e lid on t h e i r failures. A t first, p e r h a p s , t h e l a b o r a t o r y scientists b e l i e v e that their failure c a n be t u r n e d i n t o success. T i m e is lost. F u r t h e r investigation reveals that their miscalculation was even more massive than t h e y had i m a g i n e d . T h e h i e r a r c h y will not be p l e a s e d . M o r e t i m e is w a s t e d d r a f t i n g m e m o r a n d a w h i c h c o m m u n i c a t e that t h e r e i s a p r o b l e m , b u t in a g e n t l e fashion so t h a t t h e s h o c k to m i d d l e m a n a g e m e n t i s not t o o s e v e r e . M i d d l e m a n a g e r s w h o had w a x e d e l o q u e n t to their s u p e r i o r s a b o u t t h e great b r e a k t h r o u g h a r e r e l u c t a n t to a c c e p t t h e s u g a r - c o a t e d b a d n e w s . T h e y tell t h e s c i e n t i s t s t o 'really c h e c k ' t h e i r g l o o m y p r e d i c t i o n s . O n c e t h a t i s d o n e , they must a t t e m p t t o d e s i g n c o r r e c t i v e s t r a t e g i e s . P e r h a p s the p r o b l e m can b e c o v e r e d by m o d i f y i n g the c o n t r a - i n d i c a t i o n s or the d o s a g e level? F u r t h e r d e l a y . I f t h e bad n e w s m u s t g o u p , i t should b e a c c o m p a n i e d by optimistic action alternatives. Finally p e r s u a d e d that the situation is irretrievable, middle m a n a g e r s s e n d u p s o m e o f t h e a d v e r s e f i n d i n g s . B u t t h e y w a n t t o dip t h e i r t o e s i n t h e w a t e r o n t h i s : first send u p s o m e u n f a v o u r a b l e results which the middle m a n a g e r s e a r l i e r p r e d i c t e d could m a t e r i a l i s e and t h e n g r a d u a l l y r e v e a l m o r e bad n e w s for w h i c h they a r e not so well c o v e r e d . If t h e Shockwaves are t o o big, t o o s u d d e n , t h e y ' l l j u s t h a v e t o g o b a c k a n d h a v e a n o t h e r try a t p a t c h i n g t h i n g s u p . T h e result is that busy t o p m a n a g e m e n t get a fragmented picture w h i c h t h e y n e v e r find t i m e t o put t o g e t h e r . This p i c t u r e plays d o w n t h e p r o b l e m and o v e r s t a t e s t h e c o r r e c t i v e m e a s u r e s b e i n g t a k e n b e l o w . C o n s e q u e n t l y , t h e y have little r e a s o n but t o c o n t i n u e e x t o l l i n g t h e v i r t u e s o f t h e p r o d u c t . O t h e r w i s e , t h e b o a r d might pull t h e plug on t h e i r f i n a n c i a l b a c k i n g , " and the sales force might lose t h a t faith in t h e p r o d u c t which is i m p e r a t i v e for p e r s u a d i n g others. In a d d i t i o n , there is the more conspiratorial type of c o m m u n i c a t i o n b l o c k a g e o r c h e s t r a t e d from a b o v e . H e r e , m o r e senior m a n a g e r s i n t e n t i o n a l l y r u p t u r e line r e p o r t i n g t o actively p r e v e n t l o w - l e v e l e m p l o y e e s from p a s s i n g u p t h e i r c o n c e r n o v e r illegalities 356

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T h e classic i l l u s t r a t i o n w a s t h e U S h e a v y electrical e q u i p m e n t pricefixing c o n s p i r a c y of t h e late 1950s: E v e n w h e n s u b o r d i n a t e s had sought to protest o r d e r s they c o n s i d e r e d q u e s t i o n a b l e , they found t h e m s e l v e s c h e c k e d b y t h e l i n e a r s t r u c t u r e o f a u t h o r i t y , w h i c h effectively d e n i e d t h e m any m e a n s by which to appeal. For e x a m p l e , one almost Kafkaesque ploy u t i l i z e d to p r e v e n t an a p p e a l by a s u b o r d i n a t e w a s to h a v e a p e r s o n s u b s t a n t i a l l y a b o v e t h e level o f his i m m e d i a t e s u p e r i o r ask him to e n g a g e in the q u e s t i o n a b l e practice. The i m m e d i a t e s u p e r i o r w o u l d t h e n b e told not t o s u p e r v i s e t h e activities o f t h e s u b o r d i n a t e i n t h e given a r e a . T h u s , b o t h the s u b o r d i n a t e and the s u p e r v i s o r w o u l d be left in t h e d a r k r e g a r d i n g t h e level of a u t h o r i t y from w h i c h t h e o r d e r had c o m e , t o w h o m a n a p p e a l m i g h t l i e , and w h e t h e r they w o u l d violate c o m p a n y policy b y e v e n d i s c u s s i n g t h e m a t t e r b e t w e e n t h e m s e l v e s . B y i n effect r e m o v i n g t h e s u b j e c t e m p l o y e e from his n o r m a l o r g a n i z a t i o n a l t e r r a i n , t h i s s t r a t a g e m effectively s t r u c t u r e d a n i n f o r m a t i o n b l o c k a g e into the corporate c o m m u n i c a t i o n system. I n t e r e s t i n g l y , t h e r e a r e striking s i m i l a r i t i e s b e t w e e n such a n o r g a n i z a t i o n a l p a t t e r n and t h e m a n n e r i n which c o n t r o l o v e r c o r p o r a t e slush funds [in t h e 1970s foreign b r i b e r y s c a n d a l s ] d e l i b e r a t e l y w a s g i v e n t o low-level e m p l o y e e s , w h o s e activities t h e n w e r e carefully e x e m p t e d from t h e s u p e r v i s i o n o f t h e i r i m m e d i a t e s u p e r i o r s ( C o f f e e , 1977: 1133) A s i m i l a r p r o c e s s w a s at w o r k in t h e M E R / 2 9 case study w h e n M r s J o r d a n w a s told t h a t t h e i n s t r u c t i o n t o t h r o w out her pet m o n k e y h a d c o m e from a n o n y m o u s ' h i g h e r - u p s ' . T h e s o l u t i o n to this p r o b l e m is a free r o u t e to t h e t o p . T h e lowly d i s i l l u s i o n e d scientist w h o can see t h a t p e o p l e could b e d y i n g while m i d d l e m a n a g e r s e q u i v o c a t e a b o u t w h a t sort o f m e m o will g o u p s h o u l d be a b l e to b y p a s s line m a n a g e m e n t and send his i n f o r m a t i o n t o a n o m b u d s m a n , a n s w e r a b l e only t o t h e b o a r d o r chief e x e c u t i v e , w h o s e j o b i t i s t o r e c e i v e bad n e w s . G e n e r a l E l e c t r i c , D o w C h e m i c a l , I B M , a n d A m e r i c a n A i r l i n e s all h a v e such s h o r t - c i r c u i t ing m e c h a n i s m s t o a l l o w e m p l o y e e s a n o n y m o u s l y t o get their m e s s a g e a b o u t a m i d d l e m a n a g e m e n t c o v e r - u p to the top. T h e o m b u d s m a n s o l u t i o n is simply a specific e x a m p l e of the g e n e r a l p r o p o s i t i o n t h a t i f t h e r e are t w o lines t o t h e t o p , a d v e r s e i n f o r m a t i o n will get up m u c h m o r e q u i c k l y t h a n if t h e r e is only o n e . For e x a m p l e , if an i n d e p e n d e n t compliance group answering to a 357

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s e n i o r v i c e - p r e s i d e n t p e r i o d i c a l l y a u d i t s a l a b o r a t o r y , scientists in the l a b o r a t o r y have a n o t h e r channel up the organisation through t h e a u d i t g r o u p . N a t u r a l l y , t h e m i d d l e m a n a g e r s r e s p o n s i b l e for t h e l a b o r a t o r y w o u l d prefer t h a t t h e y , r a t h e r t h a n t h e c o m p l i a n c e g r o u p , give s e n i o r m a n a g e m e n t t h e bad n e w s . T h e r e a r e a l s o w a y s of c r e a t i n g de facto a l t e r n a t i v e c h a n n e l s up the organisation. E x x o n have a r e q u i r e m e n t that employees who s p o t a c t i v i t i e s which c a u s e t h e m t o s u s p e c t illegality must r e p o r t t h e s e s u s p i c i o n s to t h e g e n e r a l c o u n s e l . Say a financial a u d i t o r n o t i c e s in t h e c o u r s e of his or her w o r k a m e m o which suggests an a n t i t r u s t offence. I n m o s t c o m p a n i e s , a u d i t o r s w o u l d i g n o r e such e v i d e n c e b e c a u s e it is not t h e i r r e s p o n s i b i l i t y and b e c a u s e of the r e a s o n a b l e p r e s u m p t i o n t h a t they a r e not e x p e c t e d t o b e e x p e r t s i n a n t i t r u s t law. E x x o n i n t e r n a l a u d i t o r s , h o w e v e r , w o u l d b e i n hot w a t e r if t h e y did n o t r e p o r t t h e i r g r o u n d s for suspicion to s o m e o n e w h o i s a n e x p e r t o n a n t i t r u s t (the g e n e r a l c o u n s e l ) . T h e m o r e c h a n n e l s , e i t h e r defacto or formal, w h i c h can s h o r t - c i r c u i t n o r m a l line r e p o r t i n g , t h e b e t t e r . I n d e e d , this i s p a r t o f a n e v e n m o r e g e n e r a l p r i n c i p l e t h a t t h e m o r e p e o p l e w h o a r e i n v o l v e d in a d e c i s i o n , t h e h a r d e r it is to k e e p t h e lid on an illegality. W i t n e s s t h e a r g u m e n t of C h a p t e r 3 that in a research team organised under matrix-management principles, it is m u c h m o r e difficult to fudge d a t a t h a n in a t e a m o r g a n i s e d on traditional hierarchical line-reporting principles. U n d o u b t e d l y , m i d d l e - m a n a g e m e n t c o v e r - u p s in c o m p a n i e s like Lilly, which has a c o m m i t t e e d e c i s i o n - m a k i n g p r o c e s s , a r e m o r e difficult t h a n i n o t h e r c o m p a n i e s . T h i s p r i n c i p l e i s r e l e v a n t t o g o v e r n m e n t a s well. S o m e T h i r d W o r l d c o u n t r i e s h a v e t a k e n c e r t a i n sensitive d e c i s i o n s which a r e s u s c e p t i b l e t o b r i b e r y o u t o f t h e h a n d s o f i n d i v i d u a l s and into t h e k e e p i n g of c o m m i t t e e s . It is h a r d e r to b r i b e a c o m m i t t e e t h a n an i n d i v i d u a l . Of c o u r s e , t h e r e can be a trade-off b e t w e e n c r i m e p r e v e n t i o n a n d efficiency h e r e . Ted K l i n e , formerly general auditor o f t h e Exxon Corporation, a n d n o w a D i r e c t o r of E s s o ( A u s t r a l i a ) , has an a d a g e t h a t 'if you c a n ' t b o o k i t r i g h t , y o u p r o b a b l y s h o u l d not b e d o i n g it.' A c c u r a t e r e c o r d s a r e t h e e s s e n c e o f b o t h i n t e r n a l and e x t e r n a l a c c o u n t a b i l i t y . H e r l i h y and L e v i n e ' s ( 1 9 7 6 : 623) s u g g e s t e d s a f e g u a r d s against b r i b e r y i n c l u d e c o n s i d e r a b l e r e c o r d i n g o f crucial i n f o r m a t i o n and g u a r a n t e e s t h a t t r a n s a c t i o n s are ' b o o k e d r i g h t ' : M o r e o v e r , all c o n s u l t a n t s s h o u l d be r e q u i r e d to file affidavits 358

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w i t h t h e c o m p a n y i n d i c a t i n g t h a t t h e c o n s u l t a n t will not remit any p o r t i o n o f t h e fee r e c e i v e d directly o r indirectly t o t h e c o m p a n y or its e m p l o y e e s or m a k e illegal or i m p r o p e r p a y m e n t s to third p a r t i e s . C h e c k s m a d e p a y a b l e t o ' b e a r e r ' o r t o ' c a s h ' should not be delivered to agents, consultants, or their representatives. T h e r e s h o u l d be a s y s t e m of m u l t i p l e a p p r o v a l s of all c o m p a n y d i s b u r s e m e n t s a b o v e a c e r t a i n m i n i m u m level. R e c o r d s o f c o n t r a c t s b e t w e e n c o r p o r a t e and g o v e r n m e n t a l officials should be m a i n t a i n e d a n d m a d e a v a i l a b l e for i n s p e c t i o n . In t h e e v e n t of a d e l i b e r a t e or flagrant b r e a c h of t h e s e policies by an e m p l o y e e , the e m p l o y e e should be dismissed promptly by the m a n a g e m e n t . W h i l e t h e n e e d for careful r e c o r d i n g of m u l t i p l e a p p r o v a l s has b e e n often e x p r e s s e d as a p r o t e c t i o n a g a i n s t f i n a n c i a l c r i m e s , the p r i n c i p l e s a r e e q u a l l y a p p l i c a b l e t o e n s u r i n g t h a t p e o p l e d o not t a k e shortcuts which violate G L P s or G M P s . T h e f u n d a m e n t a l d i l e m m a with all t h e s e l f - r e g u l a t o r y m e a s u r e s w h i c h h a v e b e e n d i s c u s s e d h e r e is t h a t t h e y m i g h t lead to an o p p r e s s i v e c l i m a t e w i t h i n t h e c o r p o r a t i o n w h e r e e m p l o y e e s are f o r e v e r o b s e s s e d with fear t h a t 'big b r o t h e r i s w a t c h i n g ' . D r u c k e r ( 1 9 6 4 : 51) in his classic w o r k a t t r i b u t e s t h e success of G e n e r a l M o t o r s a s a n o r g a n i s a t i o n i n part t o t h e fact t h a t , ' N o b o d y t h r o w s his w e i g h t a r o u n d , yet t h e r e i s n e v e r any d o u b t w h e r e t h e real a u t h o r i t y l i e s . ' It is p o s s i b l e for i n t e r n a l c o m p l i a n c e g r o u p s to have r e a l a u t h o r i t y w i t h o u t t h r o w i n g their w e i g h t a r o u n d . This i s o n e o f t h e r e a s o n s w h y i t i s i m p o r t a n t t h a t c o m p l i a n c e g r o u p s have o r g a n i s a t i o n a l c l o u t . T h e n w h e n t h e c o m p l i a n c e g r o u p r e q u e s t s that s o m e t h i n g be d o n e , the n o r m a l reaction is that t h e r e is no question, n o a r g u m e n t t h a t i t m u s t a n d should b e d o n e . W h e n c o m p a n i e s h a v e effective s e l f - r e g u l a t o r y s y s t e m s , cogn i s a n c e s h o u l d be t a k e n of this by r e g u l a t o r y a g e n c i e s . Unfortunately, situations occur where regulatory agencies provide d i s i n c e n t i v e s for effective s e l f - r e g u l a t i o n . S m i t h K l i n e e x e c u t i v e s c o m p l a i n e d of a s i t u a t i o n in 1979 w h e n t h e c o m p a n y c o n d u c t e d a d e t a i l e d i n - h o u s e e x a m i n a t i o n w h i c h d i s c o v e r e d c o n t a m i n a n t s i n its n a s a l s p r a y s (Sine-off a n d C o n t a c M i s t ) . I n c o n t r a s t t o m a n y o f t h e ' b a d n e w s ' s t o r i e s in this b o o k , S m i t h K l i n e b e h a v e d as a selfr e g u l a t i n g c o m p a n y and t r e a t e d t h e e m p l o y e e w h o d i s c o v e r e d the c o n t a m i n a n t as s o m e t h i n g of a h e r o . H e r efforts w e r e held up as an e x a m p l e of t h e kind of vigilance r e q u i r e d for t h e s a k e of p r o d u c t p u r i t y . S m i t h K l i n e notified t h e F D A t h a t 1.2 million b o t t l e s of nasal 359

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s p r a y w e r e b e i n g r e c a l l e d from d r u g s t o r e s a n d s u p e r m a r k e t s a r o u n d the c o u n t r y . A c c o r d i n g to the executives, the F D A then i s s u e d a p r e s s r e l e a s e w h i c h c r e a t e d t h e i m p r e s s i o n that it had d i s c o v e r e d t h e p r o b l e m and forced S m i t h K l i n e into t h e recall. T o b a l a n c e t h e a c c o u n t , o t h e r i n t e r v i e w e e s p r a i s e d t h e F D A for not p r o v i d i n g d i s i n c e n t i v e s for s e l f - r e g u l a t o r y initiatives and o p e n n e s s : W e h a v e a g o o d r e l a t i o n s h i p with o u r s e c t i o n o f F D A . W e can b e o p e n w i t h t h e m i n telling t h e m o f o u r p r o b l e m s . T h e y are going t o listen t o o u r p r o p o s a l s for s t r a i g h t e n i n g t h e p r o b l e m o u t . I f t h e y w e r e g o i n g to j u m p on us like a ton o f b r i c k s every t i m e , we w o u l d c o v e r up a lot of t h i n g s . The lesson is that the regulatory agency should j u m p on comp a n i e s like a t o n o f b r i c k s w h e n they do not tell t h e facts, r a t h e r t h a n w h e n t h e y d o . I n c i d e n t a l l y , this p i e c e o f c o m m o n sense i s yet a n o t h e r r e a s o n w h y a u n i f o r m and c e r t a i n p r o s e c u t o r i a l policy is not in the public interest. T h e q u e s t i o n w h i c h a r i s e s a t this p o i n t i s w h a t i n c e n t i v e s a r e t h e r e for c o r p o r a t i o n s t o h a v e s t r o n g s e l f - r e g u l a t o r y s y s t e m s . M a n y c o m p a n i e s u n d o u b t e d l y d e v o t e less a t t e n t i o n t o self-regulation t h a n i s i n t h e i r i n t e r e s t s . T h e crises w h i c h c o m e from sloppy self-regulatory systems - seizures, recalls, remedial advertisements, prosecutions, c o n g r e s s i o n a l h a m m e r i n g s , b r i b e r y s c a n d a l s , p r o d u c t liability s u i t s , dissatisfied c u s t o m e r s , d i s i l l u s i o n e d d o c t o r s - can cost p h a r m a c e u t i c a l c o m p a n i e s a lot of m o n e y . As a g e n e r a l p r i n c i p l e , it is c h e a p e r to b u i l d in a s s u r a n c e s t h a t t h i n g s will be d o n e right t h e first t i m e . O n t h e o t h e r h a n d , t h e r e m u s t b e s o m e o p t i m u m level o f a t t e n t i o n to s e l f - r e g u l a t i o n for m a x i m i s i n g profits, and p e r h a p s s o m e c o m p a n i e s s p e n d m o r e t h a n this o p t i m u m . This i s u n d e r standable because an economically irrational o v e r c o m m i t m e n t to e x c e l l e n c e and integrity fulfils o t h e r v a l u e s . 'It m a k e s it m o r e pleasant to c o m e to work in the morning', as one executive e x p l a i n e d . M a n y t o p e x e c u t i v e s a r e p r e p a r e d t o sacrifice s o m e o f t h e icing on t h e profitability c a k e for t h e s a k e of e n j o y i n g a feeling o f p r i d e i n c o r p o r a t e integrity. I n any c a s e , t h e r e are m a n y h i d d e n b e n e f i t s in h a v i n g a r e p u t a t i o n as a c o m p a n y t h a t g o e s the e x t r a mile to ensure excellence.

C o m p a n i e s like Lilly d e s e r v e the high r e g a r d i n w h i c h t h e y are h e l d b y t h e F D A . B u t t h e n o n the o t h e r h a n d , w h e n Lilly d o have a p r o b l e m t h e y can t a k e the F D A p e o p l e a l o n g t o 1 5 P h D s w h o 360

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k n o w m u c h m o r e t h a n t h e F D A a b o u t t h e p r o b l e m and they can s n o w t h e m . T h e F D A b e l i e v e s t h e m b e c a u s e t h e y respect their reputation. T h e r e is s o m e t h i n g in it for t h e c o m p a n i e s . F o r c o m p a n i e s w h o do n o t see it this w a y , g o v e r n m e n t can m a n d a t e t h a t c e r t a i n selfr e g u l a t o r y m e c h a n i s m s be p u t in p l a c e . T h i s is exactly w h a t t h e F D A did with t h e Q u a l i t y A s s u r a n c e U n i t r e q u i r e m e n t s o f t h e G L P s ( C h a p t e r 3 ) . I n o r d e r t o e n s u r e t h a t the Q A U r e p o r t s and r e c o m m e n d a t i o n s a r e frank and b i t i n g , F D A d o e s n o t inspect t h e r e p o r t s . G o v e r n m e n t c a n n o t h a v e its c a k e and eat i t w h e n passing on t h e c o s t s of c e r t a i n t y p e s of r e g u l a t i o n to i n d u s t r y . If a f u n d a m e n t a l reality is, as I h a v e a r g u e d , t h a t c o r p o r a t i o n s h a v e c l e a r l y defined a c c o u n t a b i l i t y for i n t e r n a l p u r p o s e s and diffused a c c o u n t a b i l i t y for e x t e r n a l e x p o s u r e , t h e n it is a m i n o r i m p o s i t i o n for g o v e r n m e n t t o r e q u i r e c e r t a i n t y p e s o f n o m i n a t e d a c c o u n t a b i l i t y . A f t e r d i s c u s s i n g t h e a p p a r e n t l y diffused r e s p o n s i bility o v e r t h e safety p r o b l e m s o f G e n e r a l M o t o r s ' C o r v a i r , S t o n e concludes: N o w , t h e p o i n t i s , w e r e t h e office of, say, chief test e n g i n e e r o n e e s t a b l i s h e d a n d defined not only by t h e c o m p a n i e s but by t h e s o c i e t y at l a r g e , in such a way t h a t it w a s his legal duty to k e e p a r e c o r d o f t e s t s , and to r e p o r t a d v e r s e e x p e r i e n c e s at o n c e to t h e D e p a r t m e n t of T r a n s p o r t a t i o n , we w o u l d be far b e t t e r off. A s u p e r i o r w h o a s k e d t h e chief test e n g i n e e r to 'forget t h a t little m i s h a p ' w o u l d n o t only b e a s k i n g him t o risk s o m e u n k n o w a b l e p e r s o n ' s life a n d limb at s o m e u n d e f i n e d t i m e in the f u t u r e ; he w o u l d be a s k i n g him to v i o l a t e the law, w h i c h is a far m o r e s e r i o u s and i m m e d i a t e liability for b o t h o f t h e m ( S t o n e , 1975: 191). G o v e r n m e n t i m p o s e d n o m i n a t e d a c c o u n t a b i l i t y for specific i m p o r t a n t r e s p o n s i b i l i t i e s is a s i m p l e , i n e x p e n s i v e reform. T h e p r o f o u n d p s y c h o l o g i c a l c o n n e c t i o n b e t w e e n p e o p l e and their n a m e s g i v e s s o m e v a l u e to t h e m e r e fact of r e q u i r i n g a p e r s o n to sign a s t a t e m e n t t h a t no unsafe effects of a p r o d u c t h a v e b e e n found. T h e r e c a n b e n o m i n a t e d a c c o u n t a b i l i t y for p r e p a r i n g e n v i r o n m e n t a l i m p a c t s t a t e m e n t s , for s u p e r v i s i n g t h e i m p l e m e n t a t i o n o f r e s e a r c h p r o t o c o l s , for e n s u r i n g t h a t any r e g u l a t o r y w a r n i n g s o f a p a r t i c u l a r t y p e are b r o u g h t t o the a t t e n t i o n o f t h e b o a r d . W h e n specific p e o p l e k n o w t h a t t h e y will b e p r o s e c u t e d , fired, o r t h e focus 361

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of c r i t i c i s m if a law is b r o k e n , t h e n t h o s e p e o p l e will not only refrain from c o m m i t t i n g c r i m e , t h e y will b e a c t i v e i n c r i m e p r e v e n t i o n . T o c o n c l u d e , h o w w o u l d o n e g o a b o u t assessing w h e t h e r a c o m p a n y is effectively r e g u l a t i n g itself? T h e first step w o u l d be to t h r o w t h e c o r p o r a t e c o d e o f e t h i c s i n t h e w a s t e p a p e r b a s k e t and p r o b a b l y t h e 'social a u d i t ' from t h e a n n u a l r e p o r t after it. I g n o r e h o w m a n y d o l l a r s o r h o w m a n y p e o p l e are classified a s d e v o t e d t o c o m p l i a n c e o r 'social r e s p o n s i b i l i t y ' f u n c t i o n s . F o r g e t how 'socially c o n c e r n e d ' t h e ' a t t i t u d e s ' o f t o p m a n a g e m e n t a p p e a r t o be. T h e n a s k t h e following q u e s t i o n s : 1 Is t h e c h i e f e x e c u t i v e officer actively involved in s e t t i n g c o m p l i a n c e and social r e s p o n s i b i l i t y goals for t h e c o r p o r a t i o n ? 2 D o S O P s e s t a b l i s h c o n t r o l s w h i c h m a k e v i o l a t i o n o f t h e law difficult? ( m u l t i p l e a p p r o v a l s , a s s u r a n c e s that bad n e w s will rise t o t h e t o p , e t c . ) 3 A r e t h e r e c o m p l i a n c e g r o u p s with o r g a n i s a t i o n a l m u s c l e ? 4 C a n t h e c o r p o r a t i o n d e m o n s t r a t e a history of effectively sanctioning e m p l o y e e s who violate SOPs designed to prevent crime? 5 D o e s t h e c o r p o r a t i o n w r i t e d o w n only t h e good n e w s ? A r e u n s p o k e n u n d e r s t a n d i n g s t h e basis o n w h i c h sensitive d e c i s i o n s a r e m a d e ? O r are t h e r e a s s u r a n c e s that i t r e c o r d s m e t i c u l o u s l y a n d w r i t e s d o w n e t h i c a l d i l e m m a s and how t h e y are resolved? 6 D o e s t h e ' c o r p o r a t e case law' w h i c h can be a b s t r a c t e d from t h e latter recorded decisions embody scrupulous commitment to t h e l e t t e r and t h e spirit o f t h e law?

The role ofthe board of directors

R e a d e r s will h a v e n o t i c e d t h a t i n all o f t h e d i s c u s s i o n t o d a t e , t h e r o l e o f t h e b o a r d o f d i r e c t o r s has b e e n c u r i o u s l y a b s e n t . L a r g e l y this is b e c a u s e in all o f t h e c a s e s t u d i e s of c o r p o r a t e c r i m e a n a l y s e d in the b o o k , the board of directors played an inconsequential role. M u c h p r i n t e r ' s ink i n t h e U n i t e d S t a t e s has b e e n d e v o t e d t o t h e i m p o r t a n c e o f h a v i n g o u t s i d e r s o n t h e b o a r d s o f major c o r p o r a t i o n s , " e v e n t h o u g h t h e U n i t e d S t a t e s has h i g h e r p r o p o r t i o n s o f n o n - e x e c u t i v e d i r e c t o r s o n its b o a r d s t h a n i n any o t h e r c o u n t r y
2

( V a n D u s e n W i s h a r d , 1 9 7 7 : 2 2 8 ) . Y e t , w i t h all t h e c o m p a n i e s from m a n y i n d u s t r i e s w h i c h d i s c l o s e d foreign b r i b e r y t o the S E C , i n not 362

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o n e c a s e w a s i t d i s c o v e r e d t h a t a n o u t s i d e d i r e c t o r had b e e n a p p r i s e d o f t h e p r o b l e m . " I n c o n t r a s t , i n o v e r 4 0 per cent o f t h e S E C foreign p a y m e n t s d i s c l o s u r e s , i t w a s r e v e a l e d t h a t s e n i o r m a n a g e m e n t w a s a w a r e o f t h e p a y m e n t s and t h e s u r r o u n d i n g c i r c u m s t a n c e s ( C o f f e e , 1977: 1105). W h i l e m o s t law s c h o o l s e d u c a t e t h e i r s t u d e n t s a b o u t t h e b o a r d a s t h e f u n d a m e n t a l decisionm a k i n g unit o f t h e c o r p o r a t i o n and o f t h e d u t i e s o f d i r e c t o r s , e m p i r i c a l o b s e r v e r s o f c o r p o r a t e reality c o n t i n u e t o c o n c l u d e t h a t t h e b o a r d ' s influence i s feeble ( M a c e , 1 9 7 1 ; E i s e n b e r g , 1976). Coffee ( 1 9 7 7 : 1148) has p o s i t e d a m e t a p h o r w h i c h c a p t u r e s the i r r e l e v a n c e of the board to most c o r p o r a t e crime in the pharmac e u t i c a l i n d u s t r y . C o n v e n t i o n a l l y , t h e b o a r d i s viewed a s t h e corp o r a t i o n ' s ' c r o w ' s n e s t ' . A s s u c h , i t can spot i m p e n d i n g p r o b l e m s o n t h e h o r i z o n , b u t can hardly d i s c o v e r or c o r r e c t t r o u b l e in t h e ship's b o i l e r r o o m b e l o w . C o r p o r a t e c r i m e o c c u r s i n t h e boiler r o o m and w o u l d r a r e l y be n o t i c e d by d i r e c t o r s w h o s e j o b it is to scout the h o r i z o n l o o k i n g for n e w i n v e s t m e n t o p p o r t u n i t i e s , s o u r c e s o f f i n a n c e , p o s s i b l e m e r g e r s , j o i n t v e n t u r e s , and t h e like. O r , in the w o r d s of one informant: T h e b o a r d all s u p p o r t quality in p r i n c i p l e . It's like m o t h e r h o o d . B u t t h e y m a k e d e c i s i o n s at a different level. T h e y d e c i d e w h i c h d i r e c t i o n t h e c o m p a n y will t a k e , w h e t h e r or not a n e w plant s h o u l d b e built. T h e y d e c i d e w h e r e t h e m o n e y will b e s p e n t , not h o w to s p e n d it. T h e y pay p e o p l e to do t h a t for t h e m . Q u a l i t y of course c o m e s in at the i m p l e m e n t a t i o n stage. T h e p o i n t a b o u t C o f f e e ' s use o f t h e c r o w ' s nest a n a l o g y i s that c o m m u n i c a t i o n s from b o t h t h e c r o w ' s nest and t h e boiler r o o m run to the b r i d g e , w h e r e top m a n a g e m e n t holds the helm. Strategic r e f o r m s will t h e r e f o r e s h e e t r e s p o n s i b i l i t y h o m e t o t h e b r i d g e , and e n s u r e t h a t c o m m u n i c a t i o n c h a n n e l s t o t h e b r i d g e from t h e boiler r o o m a r e free ( r a t h e r t h a n a t t e m p t t o e s t a b l i s h radically n e w c o m m u n i c a t i o n c h a n n e l s from t h e boiler r o o m t o t h e c r o w ' s n e s t ) . E v e n i f t h e s e n e w c h a n n e l s can b e m a d e t o w o r k , all t h e c r o w ' s nest c a n d o i s s h o u t , w h i l e t h e b r i d g e can t a k e c o r r e c t i v e a c t i o n . B e c a u s e o f t h i s f u n d a m e n t a l r e a l i t y , laws w h i c h i m p o s e individual liability on t h e c h i e f e x e c u t i v e officer s e e m of infinitely g r e a t e r p r e v e n t a t i v e v a l u e t h a n t h o s e w h i c h i m p o s e liability o n d i r e c t o r s . C o n c o m i t a n t l y , i t i s m o r e i m p o r t a n t t h a t r e p o r t s from c o r p o r a t e c o m p l i a n c e g r o u p s a r e read and acted u p o n b y t h e chief e x e c u t i v e officer t h a n b y s o m e social r e s p o n s i b i l i t y c o m m i t t e e o f t h e b o a r d . 363

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U n d o u b t e d l y , b o t h w o u l d b e d e s i r a b l e . B u t since b o t h b o a r d and c h i e f e x e c u t i v e officer typically suffer from an i n f o r m a t i o n overl o a d , c h o i c e s m u s t b e m a d e . Since t h e chief e x e c u t i v e c u r r e n t l y a l r e a d y h a s t h e g r e a t e r ability t o k n o w a b o u t and c o r r e c t lawb r e a k i n g , m e a s u r e s t o i m p o s e a s s u r a n c e s that t h e t o p will k n o w , a n d m e a s u r e s to define r e s p o n s i b i l i t i e s to act, should also be d i r e c t e d a t t h e chief e x e c u t i v e . O b v i o u s l y , t h e r e are e x c e p t i o n s to t h e d e s i r a b i l i t y of such a p r i n c i p l e . It is surely p r e f e r a b l e for t h e b o a r d , or an a u d i t c o m mittee c o m p o s e d of outside directors, to review matters which t o u c h o n t h e p e r s o n a l financial i n t e r e s t s o f t h e chief e x e c u t i v e officer, such as l o a n s to c o m p a n i e s in w h i c h t h e latter has an interest or t h e c h o i c e of a c c o u n t i n g s y s t e m s w h i c h influence b o n u s e s to be paid to the chief e x e c u t i v e . " A f u n d a m e n t a l p r o b l e m in W e s t e r n s o c i e t i e s g e n e r a l l y is a split b e t w e e n p o w e r and accountability. Under Westminster-style g o v e r n m e n t s civil s e r v a n t s often wield t h e real p o w e r w h i l e m i n i s t e r s a r e held a c c o u n t a b l e for d e c i s i o n s they m i g h t not e v e n k n o w a b o u t . S i m i l a r l y , t h e o u t d a t e d legal t r a d i t i o n s o f c o m p a n y law p r i m a r i l y hold d i r e c t o r s r a t h e r t h a n m a n a g e r s a c c o u n t a b l e . Princ i p l e s of p u b l i c a c c o u n t a b i l i t y need to be b r o u g h t b e t t e r in line with t h e r e a l i t i e s o f secret p o w e r . S o m e e x e c u t i v e s i n this study a r g u e d t h a t a t t e m p t s t o place r e s p o n s i b i l i t y for c o m p l i a n c e m o r e s q u a r e l y i n t h e h a n d s o f t h e b o a r d w o u l d only serve t o e x a c e r b a t e t h e split b e t w e e n p o w e r and accountability. A practical constraint upon corporate compliance groups reporting to a s u b c o m m i t t e e o f t h e b o a r d r a t h e r t h a n to t h e chief e x e c u t i v e i s t h a t for m o s t b o a r d m e m b e r s t h e m o n t h l y m e e t i n g i s a s m u c h t i m e a s t h e y a r e p r e p a r e d t o invest i n t h e i r r e s p o n s i b i l i t i e s . O n e also s u s p e c t s t h a t such a r e p o r t i n g r e l a t i o n s h i p w o u l d e n c o u r a g e t h e c h i e f e x e c u t i v e t o i n t e r v e n e t o filter w h a t w e n t u p t o t h e b o a r d . I n s t e a d of a frank and efficient r e p o r t i n g system which g u a r a n t e e s t h a t someone at t h e t o p is formally put on n o t i c e of a c r i m e , we i n c r e a s e t h e risks of a filtered s y s t e m w h i c h e n s u r e s t h a t no o n e is f o r m a l l y notified. T h e chief e x e c u t i v e officer is informally notified (in h i s / h e r s e c r e t role as c e n s o r ) , but will rarely be held legally a c c o u n t a b l e b e c a u s e t h e c o m p a n y rules a l l o c a t e r e s p o n s i b i l i t y t o t h e b o a r d . As well as b e i n g inefficient in a d d i n g a n o t h e r layer of b u r e a u c r a c y , t h e s y s t e m c o u l d o p e r a t e t o t a k e t h e heat off t h e chief executive. O u t s i d e directors have 364 little i n t e r e s t i n c h a l l e n g i n g t h e chief

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e x e c u t i v e officer to s t o p i n t e r f e r i n g with t h e flow of i n f o r m a t i o n to t h e m . M o s t o f t h e m a r e o n t h e b o a r d b e c a u s e t h e chief e x e c u t i v e p u t t h e m t h e r e . S o m e m i g h t h a v e t h e chief e x e c u t i v e o n t h e i r o w n b o a r d . T a c i t u n d e r s t a n d i n g s a b o u t "you k e e p i n g y o u r n o s e out o f m y i n t e r n a l affairs a n d m e k e e p i n g m y nose o u t o f y o u r s ' d e v e l o p . T h e b o l d i n i t i a t i v e w h i c h has b e e n r e c o m m e n d e d b y N a d e r and o t h e r s t o cut t h r o u g h t h i s c r o n y i s m i s t h e g o v e r n m e n t - a p p o i n t e d p u b l i c - i n t e r e s t d i r e c t o r . If t h e p u b l i c - i n t e r e s t d i r e c t o r is to get a m e a n i n g f u l p i c t u r e of w h a t is g o i n g on in t h e c o r p o r a t i o n s/he will n e e d a n i n v e s t i g a t i v e staff t o dig o u t t h e facts. M a n a g e m e n t e x p e r t s a r e g e n e r a l l y r e l u c t a n t a b o u t t h e a d v e r s e c o n s e q u e n c e s for o r g a n i s a t i o n a l e f f e c t i v e n e s s of t h e t e n s i o n s a r i s i n g from "shadow staffs' a t t a c h e d to board m e m b e r s without being answerable to the chief e x e c u t i v e . E i s e n b e r g ( 1 9 7 6 : 390) b e l i e v e s t h a t such staffs w o u l d have an 'institutionalised obligation to second-guess the m a n a g e m e n t , b u t very l i m i t e d r e s p o n s i b i l i t y for r e s u l t s ' , while D r u c k e r ( 1 9 7 3 : 538) s u g g e s t s t h a t s h a d o w staffs for b o a r d m e m b e r s t e n d t o e l i t i s m and ' c o n t e m p t ' for o p e r a t i n g staff. T h e i r a d v i c e is f r e q u e n t l y o r i e n t e d t o w a r d s p l a c a t i n g t h e powerful b a r o n s t h e y s e r v e , and h e n c e f u n c t i o n s s i m p l y t o inject m o r e confusion into m a n a g e r i a l e n v i r o n m e n t s which d e m a n d decisiveness. T h e s e efficiency d e b i t s o f t h e p u b l i c - i n t e r e s t d i r e c t o r c o n c e p t a r e n o t fully a n s w e r e d b y s u p p o r t e r s such a s S t o n e ( 1 9 7 5 ) . S t o n e s u g g e s t s t h a t p u b l i c i n t e r e s t d i r e c t o r s and t h e i r staffs should be part o f t h e c o r p o r a t e t e a m in most normal respects. The public-interest d i r e c t o r s h o u l d a l s o be a d i r e c t o r / o r t h e c o r p o r a t i o n in t h e sense of a s s i s t i n g w i t h g e n e r a l c o r p o r a t e g o a l s such a s profit and g r o w t h . A l t h o u g h the public-interest director is appointed by g o v e r n m e n t , n o o n e s h o u l d b e a p p o i n t e d w h o i s not a c c e p t a b l e t o t h e b o a r d . S t o n e s u g g e s t s t h a t p u b l i c - i n t e r e s t d i r e c t o r s should not t u r n o v e r information u n c o v e r e d in the course of their investigations to public a u t h o r i t i e s . Only if the company indicates an unwillingness to i m p l e m e n t the reforms suggested by the public-interest director to rectify a s i t u a t i o n s h o u l d s/he go p u b l i c or r e p o r t t h e situation to t h e government. C e r t a i n l y t h e r e is a difficult c h o i c e to be m a d e . C o n s u m e r s can h a v e a d i r e c t o r r e p r e s e n t i n g their interests w h o is no longer a c c o u n t a b l e t o t h e p u b l i c , sufficiently t a m e t o b e a c c e p t a b l e t o m a n a g e m e n t , and therefore in considerable danger of co-optation. O r t h e y can h a v e a n a g g r e s s i v e p u b l i c - i n t e r e s t d i r e c t o r w h o i s c o n s e q u e n t l y frozen o u t o f i n t e r n a l d e c i s i o n - m a k i n g and w h o 365

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d i s r u p t s m a n a g e m e n t efficiency. T h e l a t t e r t w o deficiencies are r e l a t e d . If staff of t h e m i s t r u s t e d p u b l i c - i n t e r e s t d i r e c t o r insist on a t t e n d i n g a scheduled meeting, than a second (discreet) gathering will h a v e t o b e c o n v e n e d t o c o v e r t h e s a m e g r o u n d . O n e w o n d e r s w h e t h e r t h e p u b l i c i n t e r e s t w o u l d b e b e t t e r served i f c o n s u m e r i s t s , u n i o n i s t s , and e n v i r o n m e n t a l i s t s resisted c o o p t a t i o n and fought c o r p o r a t e a b u s e s u n m u z z l e d from o u t s i d e the c o r p o r a t e w a l l s . N a t u r a l l y , c o r p o r a t e c o m p l i a n c e g r o u p s which are u n d e r c h i e f - e x e c u t i v e c o n t r o l are m o r e likely t o have their r e c o m m e n d a t i o n s i g n o r e d t h a n i f a r e p r e s e n t a t i v e o f t h e p u b l i c interest w e r e t o k n o w o f t h e r e c o m m e n d a t i o n s . H o w e v e r , t h e former kind of c o m p l i a n c e g r o u p is m o r e likely to get t h e c o - o p e r a t i o n to e n a b l e it to have something worthwhile to r e p o r t .
4 5

It m i g h t be b e t t e r to h a v e a c o m p l i a n c e g r o u p w h i c h is 'in the k n o w ' , a n d w h i c h t a i n t s t h e chief e x e c u t i v e with k n o w l e d g e o f i l l e g a l i t i e s by p l a c i n g w r i t t e n r e p o r t s on his or her desk. P u b l i c interest m o v e m e n t s could then c o n c e n t r a t e on enticing insiders to l e a k s t o r i e s o f chief e x e c u t i v e officers i g n o r i n g c o m p l i a n c e g r o u p r e p o r t s . T h e y c a n m a k e a l l e g a t i o n s and call o n the c o m p a n y t o deny t h e m . They can e n c o u r a g e whistle blowing. Constructing an artificial c o n s e n s u s b e t w e e n b u s i n e s s a n d c o n s u m e r g r o u p s b y h a v i n g public-interest directors as dedicated m e m b e r s of the company t e a m may b e less p r o d u c t i v e o f c o r p o r a t e r e s p o n s i b i l i t y t h a n o u t r i g h t conflict. P u t t i n g p e o p l e i n s i d e may h a v e less p u n c h t h a n m a n d a t i n g o r g a n i s a t i o n a l r e f o r m s w h i c h m a k e i t m u c h m o r e difficult t o hide a b u s e s from t h e o u t s i d e . G o v e r n m e n t r e g u l a t i o n m i g h t b e b e t t e r served b y r e q u i r i n g c o m p a n i e s t o h a v e effective c o m p l i a n c e g r o u p s r e p o r t i n g t o t h e c h i e f e x e c u t i v e , n o m i n a t e d a c c o u n t a b i l i t y , free c h a n n e l s o f c o m m u n i c a t i o n and c o r p o r a t e o m b u d s m e n to ensure the spread of t h e t a i n t o f k n o w l e d g e . I n o t h e r w o r d s , g o v e r n m e n t might audit the c o m p l i a n c e s y s t e m s b u t not t h e s u b s t a n c e o f c o r p o r a t e d e c i s i o n m a k i n g . I t w o u l d t h e n k e e p its ear t o t h e g r o u n d and w h e n e v i d e n c e g a t h e r e d t h a t a p a r t i c u l a r c o r p o r a t i o n w a s i g n o r i n g its own c o m p l i a n c e w a r n i n g s , g o v e r n m e n t i n s p e c t o r s w o u l d s w o o p o n that corp o r a t i o n i n g r e a t n u m b e r s . T h e n they w o u l d a u d i t t h e s u b s t a n c e o r c o r p o r a t e d e c i s i o n s - t h e c o r p o r a t e case law. C r i t i c s of p u b l i c - i n t e r e s t d i r e c t o r s h i p s h a v e l i k e n e d t h e idea to p u t t i n g virgins into b r o t h e l s . " Since t h e b o a r d i s n e v e r i n c h a r g e o f t h e m o d e r n c o r p o r a t i o n , a m o r e a p p r o p r i a t e a n a l o g y might b e a p p o i n t i n g a pacifist as an a d v i s o r to t h e g e n e r a l on h o w t h e t r o o p s 366

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a r e p e r f o r m i n g . W h i l e it d o e s a p p e a r in s o m e w a y s to be a struct u r a l l y n a i v e s o l u t i o n , it is o n e w h i c h s h o u l d be piloted on a few c o m p a n i e s a n d e v a l u a t e d . " T h e a r m c h a i r e v a l u a t i o n indulged i n a b o v e is no s u b s t i t u t e for e m p i r i c a l o b s e r v a t i o n of w h a t h a p p e n s in a c o m p a n y w h e n t h e p u b l i c - i n t e r e s t d i r e c t o r i n t e r v e n e s . T h e reform has n o t b e e n tried and found w a n t i n g , but found w a n t i n g for lack of having been tried.

Socialism
A p a r t from t h e U S S R a n d o t h e r socialist e n c l a v e s , m a n y c o u n t r i e s have established state-owned pharmaceutical companies. A m o n g t h e m are Australia,"* C a n a d a , F r a n c e , Italy, N o r w a y , Sweden, B u r m a , E g y p t , I n d i a , I n d o n e s i a , I r a n , M e x i c o , B r a z i l , and Sri L a n k a . C o u n t r i e s such a s E g y p t and M e x i c o h a v e seen a b o r t i v e a t t e m p t s to nationalise the industry completely. The latter option h a s b e e n f o u n d a t t r a c t i v e b y few c o u n t r i e s b e c a u s e t h e hard reality r e m a i n s t h a t m o s t o f t h e r e s e a r c h t a l e n t w h i c h p r o d u c e s major t h e r a p e u t i c b r e a k t h r o u g h s is employed in the transnational comp a n i e s . F e w c o u n t r i e s can afford to c o m p l e t e l y cut off t h e i r ties with the t r a n s n a t i o n a l s . T r a n s n a t i o n a l s d e f e n d t h e c a p i t a l i s t way as best by p o i n t i n g out t h a t few t h e r a p e u t i c b r e a k t h r o u g h s o f any i m p o r t a n c e have e m e r g e d from t h e socialist c o u n t r i e s . T h e y prefer to live off the t h e r a p e u t i c a d v a n c e s made in the capitalist world, while devoting t h e i r scientific i n v e s t m e n t t o o t h e r p r i o r i t i e s (like d e v e l o p i n g m o r e sophisticated nuclear s u b m a r i n e s and better ways of training O l y m p i c a t h l e t e s ! ) . T h a t t h e Soviet U n i o n c h o o s e s not t o invest h e a v i l y i n d r u g r e s e a r c h says n o t h i n g a b o u t t h e i n h e r e n t scientific inefficiency o f s o c i a l i s m . T h e r e a r e a r e a s o f science w h e r e t h e U S S R l e a d s t h e w o r l d . W i t n e s s t h e following p r o x y s t a t e m e n t from the C o n t r o l D a t a C o r p o r a t i o n defending trade with Russia: 'The S o v i e t U n i o n i s c r e a t i n g m o r e basic t e c h n o l o g y [ k n o w l e d g e ] t h a n t h e U n i t e d S t a t e s b e c a u s e they h a v e m o r e scientists e n g a g e d i n r e s e a r c h ' ( q u o t e d i n P u r c e l l . 1979: 4 4 ) . A s t r o n g c a s e c a n be m a d e t h a t socialist e n t e r p r i s e s investing p r o p o r t i o n s o f t h e i r sales r e c e i p t s i n r e s e a r c h e q u i v a l e n t t o t h e i n v e s t m e n t s o f p r i v a t e c o m p a n i e s could b e m u c h m o r e efficient s e r v a n t s o f t h e c o m m u n i t y ' s h e a l t h t h a n t h e latter. T o t h e e x t e n t t h a t socialist e n t e r p r i s e s w e r e d r i v e n b y t h e goal o f i m p r o v i n g h e a l t h r a t h e r t h a n m a k i n g profits, fewer r e s o u r c e s w o u l d g o t o 367

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c r e a t i n g artificial n e e d s a n d fostering 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 w i t h p s y c h o t r o p i c d r u g s ) , fewer r e s o u r c e s w o u l d g o t o d e v e l o p i n g m e - t o o drugs and m o r e to genuine i m p r o v e m e n t s in therapy. Many o f t h e e c o n o m i c w i n n e r s a r e t h o s e t h a t offer little o r n o t h e r a p e u t i c g a i n , w h i l e t h e r e i s n o p r o f i t t o b e m a d e from d r u g s t o cure s o m e o f t h e h o r r e n d o u s d i s e a s e s w h i c h t a k e such a heavy toll o n t h e p o v e r t y s t r i c k e n s e g m e n t s of T h i r d W o r l d p o p u l a t i o n s . " The justification f o r e s t a b l i s h i n g most of the national p h a r m a c e u t i c a l c o m p a n i e s h a s b e e n m o r e b a s i c . P h a r m a c e u t i c a l s are highly p r o f i t a b l e , a n d d o n o t r e q u i r e g r e a t a m o u n t s o f c a p i t a l . M u c h o f the p h a r m a c e u t i c a l s ' p r o f i t s a r e paid b y g o v e r n m e n t s w h i c h subsidise h e a l t h c a r e . T h u s t h e r e i s a d o u b l e e c o n o m i c justification for g o v e r n m e n t s t o get a p i e c e o f t h e a c t i o n . T h e r e are s u b s i d i a r y r a t i o n a l e s i m p r o v i n g b a l a n c e - o f - p a y m e n t s difficulties, and gaining i n s i d e k n o w l e d g e o f r a w m a t e r i a l t r a n s f e r p r i c e s s o t h a t b a r g a i n ing w i t h t r a n s n a t i o n a l s o v e r t r a n s f e r p r i c e s can be g r o u n d e d in a firmer knowledge b a s e . S o c i a l i s t c r i m i n o l o g i s t s t e n d t o a r g u e t h a t since profit i s t h e m o t i v e for c o r p o r a t e c r i m e , socialism w o u l d r e d u c e t h e p r o b l e m . T o t h e e x t e n t t h a t p r o f i t i s t h e m o t i v e for offences, i t p r o b a b l y w o u l d . B u t w h a t h a s b e e n s h o w n i n this b o o k i s t h a t m a x i m i s i n g c o r p o r a t e profit i s n o t t h e m o t i v e for m a n y c o r p o r a t e c r i m e s . I t i s i m p o s s i b l e t o say w h a t p r o p o r t i o n i s m o t i v a t e d b y profit, w h a t proportion by corporate growth, subunit growth, personal a m b i t i o n , and other f a c t o r s . I n b o t h c a p i t a l i s t a n d s o c i a l i s t s o c i e t i e s , c o r p o r a t i o n s (or t h e i r s u b u n i t s ) b r e a k r u l e s b e c a u s e t h e y a r e set c e r t a i n i m p o r t a n t goals w h i c h t h e y m u s t a c h i e v e ( G r o s s , 1978). I n a c a p i t a l i s t s o c i e t y , a n o r g a n i s a t i o n m i g h t be s e t t h e goal of a c h i e v i n g a c e r t a i n level of profit; in a s o c i a l i s t s o c i e t y , t h e goal m i g h t be m e e t i n g a p r o d u c t i o n t a r g e t set b y t h e s t a t e . U n d e r b o t h s y s t e m s t h e r e will b e o c c a s i o n s w h e n o r g a n i s a t i o n a l a c t o r s are unable t h r o u g h legitimate means t o a c h i e v e t h e g o a l . T h e y will t h e n b e u n d e r p r e s s u r e , a s M e r t o n ( 1 9 5 7 ) first p o i n t e d o u t , t o r e s o r t t o i l l e g i t i m a t e m e a n s o f goal a t t a i n m e n t . T h e s o c i a l i s t m a n a g e r m u s t m e e t p e r f o r m a n c e stand a r d s , j u s t as m u s t t h e c a p i t a l i s t . If a socialist m a n a g e r is told to cut c o s t s , s/he m a y b e u n d e r a s m u c h t e m p t a t i o n a s the capitalist, for i n s t a n c e , t o r e d u c e c o s t s b y c u t t i n g c o r n e r s o n quality c o n t r o l . O n e would expect a s o c i a l i s t researcher who must meet a deadline
5 0

for t h e c o m p l e t i o n of c e r t a i n t e s t s to be no less likely t h a n a c a p i t a l i s t s c i e n t i s t t o d o s o b y ' g r a p h i t i n g ' s o m e trials. O n the o t h e r 368

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h a n d , t h e g r e a t h o p e of socialism is t h a t it w o u l d see a t r a n s i t i o n to a less e g o i s t i c society ( B o n g e r , 1916) - o n e w h e r e i n d i v i d u a l s evaluate t h e i r a c t i o n s a c c o r d i n g t o t h e i r c o n t r i b u t i o n t o t h e w h o l e c o m m u n i t y rather than in terms of narrow personal or peer-group ambitions. S u c h a t r a n s i t i o n , h o w e v e r , can n e v e r be c o m p l e t e . I n d e e d , in e x i s t i n g socialist s o c i e t i e s , t h e r e is little e v i d e n c e of it e v e n beginn i n g . I t i s h o p e d , t h e r e f o r e , t h a t m a n y o f t h e lessons o f t h i s b o o k h a v e a s m u c h r e l e v a n c e t o socialist a s t o c a p i t a l i s t c o r p o r a t i o n s .

The increasingly transnational nature ofcorporate crime

A s m o r e o f w o r l d t r a d e b e c o m e s c o n c e n t r a t e d i n the h a n d s o f fewer 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 , the c o r p o r a t e crime problem increasingly a s s u m e s a t r a n s n a t i o n a l c h a r a c t e r . T h i s b o o k has s h o w n that t h e c o n s t r a i n t s o f law are d e a l t w i t h b y 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 less by o u t r i g h t law v i o l a t i o n t h a n by i n t e r n a t i o n a l lawe v a s i o n s t r a t e g i e s . I f d e v e l o p e d c o u n t r i e s h a v e t o u g h laws t o c o n t r o l the testing of e x p e r i m e n t a l drugs on h u m a n beings, then the testing can be d o n e in the Third W o r l d . If one country bans a p r o d u c t , t h e n s t o c k s can b e d u m p e d i n a m o r e p e r m i s s i v e c o u n t r y . A c o u n t r y t h a t has t o u g h G M P r e g u l a t i o n s , o c c u p a t i o n a l safety and h e a l t h a n d e n v i r o n m e n t a l c o n t r o l s c a n b e f o r s a k e n for o n e that d o e s n o t . T h e use o f c o m p u t e r s i m u l a t i o n s and P E R T d i a g r a m s t o find t h e line o f least r e s i s t a n c e t h r o u g h different n a t i o n a l d r u g - a p p r o v a l s y s t e m s i n d i c a t e s t h e level o f s o p h i s t i c a t i o n w h i c h has b e e n a t t a i n e d in the international law-evasion game. In t h e face o f t h e s e e m i n g l y e n d l e s s p o s s i b i l i t i e s for i n t e r n a t i o n a l l a w e v a s i o n , it is a m i s t a k e to be o v e r l y pessimistic a b o u t t h e r e g u l a t i o n o f 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 n s i d e r the e v a s i o n o f t a x l a w s b y t r a n s f e r p r i c i n g . I n t e r n a l c o m p a n y politics frequently d o n o t p e r m i t a c o r p o r a t i o n to set t h e o p t i m a l t r a n s f e r p r i c e s s u g g e s t e d by its c o m p u t e r s i m u l a t i o n s . T h e g e n e r a l m a n a g e r of a powerful s u b s i d i a r y m i g h t b e u n w i l l i n g t o see h i s / h e r p a p e r profits d i m i n i s h e d t o b o l s t e r t h e profits o f a n a d v e r s a r y w h o r u n s a n o t h e r s u b s i d i a r y . S o m e c o m p a n i e s e n t i r e l y i g n o r e t h e i m p a c t o f t a x e s o n transfer p r i c e s , a r g u i n g t h a t s i m p l e and c o n s i s t e n t pricing p r a c t i c e s t e n d t o m i n i m i s e t a x - i n v e s t i g a t i o n p r o b l e m s ( S h u l m a n , 1969; H e l l m a n n , 1977: 5 0 ) . T h e r e h a v e b e e n s e v e r a l i l l u s t r a t i o n s i n this b o o k o f t h e less t h a n p e r f e c t c a p a c i t y w h i c h t r a n s n a t i o n a l s h a v e to shift their activities 369

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a r o u n d t h e w o r l d t o e v a d e legal c o n s t r a i n t s . T h e C o s t a R i c a n e x a m p l e s in C h a p t e r 7 show h o w s t r a t e g i c g o v e r n m e n t action can t r a n s f o r m l o w e s t - c o m m o n - d e n o m i n a t o r r e g u l a t i o n into highestc o m m o n - f a c t o r r e g u l a t i o n . T h e cost o f s u s t a i n i n g m u l t i p l e stand a r d s can often be g r e a t e r t h a n that of m a i n t a i n i n g a uniform h i g h e r s t a n d a r d . W h e r e a s t r a t e g i c lifting of s t a n d a r d s by a single c o u n t r y is n o t e n o u g h , r e g i o n a l c o - o p e r a t i o n is often sufficient to t h w a r t t r a n s n a t i o n a l law e v a s i o n . If all o f t h e c o u n t r i e s in a region lift their o c c u p a t i o n a l h e a l t h and safety s t a n d a r d s , m a n u f a c t u r e r s may b e u n l i k e l y t o m o v e e n t i r e l y out o f t h e r e g i o n t o a n o t h e r part o f t h e w o r l d . T h u s t h e r e a r e m a n y m e c h a n i s m s for t h w a r t i n g i n t e r n a t i o n a l law e v a s i o n w h i c h do not involve t h e difficulties of perfect intern a t i o n a l h a r m o n i s a t i o n of s t a n d a r d s . If t h e out and out h a v e n s for p o l l u t i o n a n d o t h e r d a n g e r o u s p r a c t i c e s can b e u p g r a d e d , less d r a m a t i c differences b e t w e e n the standards of other countries m i g h t not be so g r e a t as to justify the d i s l o c a t i v e costs of t h e international evasion game. C o n s e q u e n t l y , i n t e r n a t i o n a l h a r m o n i s a t i o n o f r e g u l a t o r y stand a r d s only has to be partially successful to be totally effective. W H O a n d t h e F D A a r e t a k i n g t h e l e a d e r s h i p roles i n m o v i n g t o w a r d s i n t e r n a t i o n a l harmonisation. W h e n the F D A sends inspect o r s to a s s e s s foreign p l a n t s w h i c h are s e e k i n g p e r m i s s i o n for e x p o r t to t h e U n i t e d S t a t e s or foreign l a b o r a t o r i e s which wish to use their d a t a in A m e r i c a n n e w d r u g a p p l i c a t i o n s , this o b v i o u s l y has a significant h i g h e s t - c o m m o n - f a c t o r impact on international standards. N e v e r t h e l e s s , w h e n t h e s e foreign i n s p e c t i o n s t a k e p l a c e , the p a r e n t c o m p a n y t y p i c a l l y s e n d s out e x p e r t s t o c o a c h t h e subsidiary o n h o w t o h a n d l e F D A i n s p e c t o r s and g e n e r a l l y t o c h e c k t h a t things are a t least t e m p o r a r i l y p a t c h e d u p t o A m e r i c a n s t a n d a r d s . T h e crucial d i f f e r e n c e b e t w e e n t h e foreign i n s p e c t i o n s and local U S i n s p e c t i o n s i s t h a t w h i l e t h e f o r m e r a r e subject t o i n v i t a t i o n and f o r e w a r n i n g , the latter occur without warning. T h e r e are certain respects in which international harmonisation of r e g u l a t i o n is also in t h e i n t e r e s t s of m a n u f a c t u r e r s . This is particularly evident in the area of product registration where meeting t h e d i s p a r a t e r e q u i r e m e n t s o f different n a t i o n a l s y s t e m s i m p o s e s g r e a t d u p l i c a t i v e c o s t s o n i n d u s t r y ( I F P M A , 1979). E s s e n t i a l l y t h e s a m e set of a n i m a l or h u m a n trials m a y have to be r e p e a t e d in a slightly different f o r m a t to satisfy t h e i d i o s y n c r a t i c r e q u i r e m e n t s of o n e c o u n t r y . S u c h d u p l i c a t i v e t e s t i n g t a k e s a t e r r i b l e toll in unn e c e s s a r y suffering of l a b o r a t o r y a n i m a l s . T h i s might seem a trivial 370

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c o n s i d e r a t i o n t o s o m e . H o w e v e r , not m a n y p e o p l e w h o have w a l k e d t h r o u g h t h e r o w s u p o n rows of dying a n i m a l s in a large t o x i c o l o g y l a b o r a t o r y w o u l d feel t h a t w a y . " T h e m o n k e y s w h o s p e n d a c o n f i n e d e x i s t e n c e h o o k e d up to all m a n n e r of t u b e s and w i r e s , t h e r a b b i t s i n s t o c k s w i t h c h e m i c a l s being d r o p p e d into their r o t t e d , e m a c i a t e d e y e s . M o r e m o r a l l y d i s t u r b i n g are t h e d i s e a s e d h u m a n b e i n g s w h o a r e given p l a c e b o s for t h e s a k e o f a n u n n e c e s sarily d u p l i c a t i v e scientific e x p e r i m e n t , w h e n t h e y might have b e e n g i v e n a n a c t i v e d r u g w h i c h w o u l d h a v e i m p r o v e d their c o n d i t i o n . S u r e l y t h e w o r l d c o m m u n i t y can a g r e e o n i n t e r n a t i o n a l r e c o g n i t i o n o f d a t a w h i c h m e e t a p p r o p r i a t e s t a n d a r d s and c e r t a i n uniform t y p e s of s t u d i e s w h i c h will be r e q u i r e d for r e g i s t r a t i o n in all c o u n t r i e s . I n d i v i d u a l c o u n t r i e s m u s t , o f c o u r s e , b e able t o i m p o s e a d d i t i o n a l r e q u i r e m e n t s a b o v e this i n t e r n a t i o n a l l y a g r e e d m i n i m u m . 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 n e e d for efficient i n t e r n a t i o n a l communication of adverse reactions. International communication b r e a k d o w n s a r e still c o m m o n e n o u g h t o d a y . O n e m e d i c a l d i r e c t o r told o f his e m b a r r a s s m e n t w h e n a n F D A officer asked him h o w t h e c o m p a n y w a s c o p i n g with t h e p r o b l e m s o f t h e baby d e a t h s c a u s e d by one of their drugs in Australia. The parent company knew n o t h i n g a b o u t t h e p r o b l e m . W h i l e t h e F D A had b e e n i n f o r m e d o f t h e b a b y d e a t h s t h r o u g h W H O ' s C e n t e r for M o n i t o r i n g A d v e r s e R e a c t i o n s t o D r u g s , t h e c o m p a n y ' s newly a p p o i n t e d m e d i c a l d i r e c t o r i n A u s t r a l i a had n e g l e c t e d t o inform t h e p a r e n t . I n a n o t h e r c a s e , a p r o d u c t w a s i n a d v e r t e n t l y k e p t on t h e m a r k e t for y e a r s in A u s t r a l i a after t h e A u s t r a l i a n m a n a g i n g d i r e c t o r n e g l e c t e d t o a t t e n d to an i n s t r u c t i o n from t h e B r i t i s h p a r e n t to w i t h d r a w t h e p r o d u c t . A p a r t from n e g l e c t , i f a c o m p a n y i n t e n t i o n a l l y w i s h e s t o o b s c u r e a d v e r s e r e a c t i o n s from o t h e r p a r t s o f t h e world this i s e a s i l y d o n e . T h e y can e v e n b e r e p o r t e d t o o t h e r g o v e r n m e n t s , but in t h e m i d s t of such m a s s e s of o t h e r i r r e l e v a n t d a t a from a r o u n d the g l o b e t h a t t h e i r significance i s o v e r l o o k e d . T h e s e p r o b l e m s can b e d e a l t w i t h , i n p a r t , b y e x t e n d i n g t h e a p p l i c a t i o n o f the p r o p o s e d A m e r i c a n law t o p u n i s h failure t o r e p o r t t o t h e g o v e r n m e n t h a z a r d s f o u n d to be a s s o c i a t e d w i t h a p r o d u c t . H a z a r d s d i s c o v e r e d by s u b s i d i a r i e s in o t h e r p a r t s of t h e w o r l d should be i n c l u d e d . O b v i o u s l y , t h e p o s s i b i l i t i e s for o r c h e s t r a t e d b r e a k d o w n s of intern a t i o n a l i n t r a - c o r p o r a t e c o m m u n i c a t i o n s a r e s o e x t r a o r d i n a r y that for legal c o m p u l s i o n t o w o r k c o u r t s m u s t c o u n t e n a n c e t h e c o n c e p t of 'wilful b l i n d n e s s ' as e q u i v a l e n t to k n o w l e d g e ( W i l l i a m s , 1961: 1 5 7 - 9 ) ; W i l s o n , 1979. 371

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T o p r e v e n t d o u b l e s t a n d a r d s i n p r o m o t i o n a l claims for d r u g s i n different p a r t s o f t h e w o r l d o f t h e kind d e m o n s t r a t e d b y S i l v e r m a n ( 1 9 7 6 ) a n i n t e r n a t i o n a l r e g u l a t o r y s t a t u s d o c u m e n t could b e r e q u i r e d by individual countries. This d o c u m e n t , prepared by the c o r p o r a t i o n in a c c o r d a n c e with an internationally agreed format, w o u l d p r o v i d e an u p - t o - d a t e list o f t h e c o u n t r i e s in w h i c h the drug is a p p r o v e d , a n d t h e i n d i c a t i o n s , c o n t r a - i n d i c a t i o n s . side-effects and w a r n i n g s w h i c h a r e r e q u i r e d i n e a c h o f t h o s e c o u n t r i e s . This w o u l d be a useful r e s o u r c e to t h e 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 as w e l l a s t o c o u n t r i e s w h i c h c a n n o t afford s o p h i s t i c a t e d i n f o r m a t i o n gathering systems. O n e o f t h e c e n t r a l q u e s t i o n s for c r i m i n o l o g y must b e the implic a t i o n s for t h e a l l o c a t i o n of r e s p o n s i b i l i t y in large o r g a n i s a t i o n s of t h e i n c r e a s i n g l y t r a n s n a t i o n a l c h a r a c t e r o f b u s i n e s s . I t has a l r e a d y b e e n seen that the international nature of c o m m e r c e creates dramatically enlarged opportunities for c o m m u n i c a t i o n filters w h i c h e n s u r e t h a t t h e taint o f k n o w l e d g e a b o u t u n s a v o u r y m e t h o d s o f a c h i e v i n g o r g a n i s a t i o n g o a l s d o e s not r e a c h t h e t o p . A n d i t has a l s o b e e n s h o w n h o w t r a n s n a t i o n a l o r g a n i s a t i o n o p e n s u p extrao r d i n a r y n e w p o s s i b i l i t i e s for l a w - e v a s i o n s t r a t e g i e s . But h o w is t h e a l l o c a t i o n of r e s p o n s i b i l i t y in 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 really o r g a n i s e d ? P e r l m u t t e r (1969) has identified t h r e e t y p e s o f p a r e n t o r i e n t a tions towards subsidiaries in t r a n s n a t i o n a l : ethnocentric (homecountry oriented), polycentric (host-country oriented) and g e o c e n t r i c (world o r i e n t e d ) . The e t h n o c e n t r i c attitude is that h o m e - c o u n t r y e x e c u t i v e s are m o r e s o p h i s t i c a t e d and d e p e n d a b l e t h a n local m a n a g e r s i n s u b s i d i a r i e s . G o a l s a n d S O P s are set according t o h o m e - c o u n t r y s t a n d a r d s . 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 , n e i t h e r t h e A m e r i c a n n o r t h e E u r o p e a n f i r m s fit this m o d e l . E u r o p e a n firms a p p r o a c h c l o s e r t o i t i n t h e sense t h a t they arc m u c h m o r e likely t o h a v e E u r o p e a n g e n e r a l m a n a g e r s i n t h e i r s u b s i d i a r i e s . O n t h e o t h e r h a n d , w h i l e A m e r i c a n c o m p a n i e s p r e d o m i n a n t l y use l o c a l s , t h e y g o t o g r e a t e r l e n g t h s t o b r i n g t h e s e p e o l e into h e a d q u a r t e r s to i n d o c t r i n a t e t h e m with a h e a d office v i e w p o i n t ; t h e y s e n d o u t m o r e p e o p l e from h e a d q u a r t e r s t o r e p o r t o n what i s going o n i n t h e s u b s i d i a r y ; a n d they i m p o s e m o r e rules and r e g u l a t i o n s from h e a d q u a r t e r s t h a n d o the E u r o p e a n s . F r o m a c o r p o r a t e c r i m e p o i n t of v i e w , t h e d a n g e r of firms b e i n g t o o e t h n o c e n t r i c is that s u b s i d i a r i e s c a n e s c a p e a c c o u n t a b i l i t y for their own a c t i o n s . T h i s d a n g e r is e p i t o m i s e d in t h e following s t a t e m e n t by S t o n e ( 1 9 7 5 : 4 4 ) :
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T h e p o t e n t i a l for future lawsuits - t h a t is, t h e possibility that the c o n t r o l l e r o f t h e c o r p o r a t i o n will s o m e day h a v e t o w r i t e s o m e plaintiff a c h e q u e from c o r p o r a t e h e a d q u a r t e r s ( p e r h a p s five or six y e a r s t h e r e a f t e r , given t h e d e l a y s of litigation) - is not m e r e l y a d i s t a n t e v e n t to t h e life o f t h e p r o d u c i n g p l a n t : it is not e v e n a part o f i t s r e a l i t y . A t t h e o t h e r e x t r e m e , the p o l y c e n t r i c firm a s s u m e s that local p e o p l e a l w a y s k n o w w h a t i s best i n t h e i r c u l t u r a l c o n d i t i o n s , and t h a t it is t h e r e f o r e d e s i r a b l e to g r a n t s u b s i d i a r i e s total a u t o n o m y . A p o l y c e n t r i c firm is a k i n to a c o n f e d e r a t i o n of q u a s i - i n d e p e n d e n t s u b s i d i a r i e s . I d e n t i f y i n g p o l y c e n t r i c firms 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 i s also difficult. T h e r e l a t i o n s h i p b e t w e e n t h e U S s u b s i d i a r i e s a n d h e a d q u a r t e r s o f E u r o p e a n f i r m s p e r h a p s fits t h e m o d e l q u i t e well ( e . g . b e t w e e n C u t t e r a n d B a y e r ) . H o w e v e r , generally, as one informant c o m m e n t e d , 'The entrepreneurial s u b s i d i a r y of a m u l t i n a t i o n a l c o m p a n y t h e s e days is a very rare thing.' F r o m a crime-control perspective, the danger of polycentric o r g a n i s a t i o n i s t h a t a b s o l u t e s t a n d a r d s o f e t h i c s , quality and legality a r e sacrificed to a glib m o r a l r e l a t i v i s m : H e a d q u a r t e r s m a y insist t h a t t h e i r s u b s i d i a r i e s m e e t c e r t a i n profit ( o r o t h e r ) g o a l s , w h i l e a t t h e s a m e t i m e m a k i n g i t clear that h e a d q u a r t e r s can hardly be intimately a c q u a i n t e d with the laws of f o r e i g n c o u n t r i e s . H e n c e , u n d e r t h e guise o f local a u t o n o m y ( w h i c h m a y be h a i l e d as t h r o w i n g off t h e s h a c k l e s of c o l o n i a l i s m by local e n t h u s i a s t s ) , t h e s u b s i d i a r y m a y be forced to e n g a g e in c r i m e for w h i c h t h e y will be held r e s p o n s i b l e by t h e i r g o v e r n m e n t s ( G r o s s , 1978: 2 0 9 ) . P e r l m u t t e r s ' s t h i r d m o d e l , g e o c e n t r i s m , c h a r a c t e r i s e s most o f t h e firms in the transnational p h a r m a c e u t i c a l industry. The geocentric firm h a s a g l o b a l s t r a t e g y w h e r e b y s u b s i d i a r i e s and h e a d q u a r t e r s follow a w o r l d w i d e a p p r o a c h w h i c h c o n s i d e r s s u b s i d i a r i e s as n e i t h e r s a t e l l i t e s n o r i n d e p e n d e n t c i t y - s t a t e s , but a s p a r t s o f a w h o l e w o r l d p l a n . E a c h part o f t h e system m a k e s its u n i q u e c o n t r i b u t i o n w i t h its p e c u l i a r c o m p e t e n c e . G e o c e n t r i s m m a k e s possible t h e synergistic benefits of transnational organisation. The P E R T d i a g r a m to dictate the sequence in which new product registration will be s o u g h t in different c o u n t r i e s is a m a n i f e s t a t i o n par excellence o f t h e g e o c e n t r i c c o r p o r a t i o n . I t i s g e o c e n t r i s m which m a k e s p o s s i b l e t h e i n t e r n a t i o n a l l a w - e v a s i o n s t r a t e g i e s t o which s o m u c h 373

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crime polycentrism new product which flows t h e costs of bureaucracy.

a t t e n t i o n has b e e n d i r e c t e d . F i r m s w h i c h a r e closer t o than g e o c e n t r i s m allow subsidiaries to market a w h e n e v e r t h e y c h o o s e , a n d t h e r e b y m i s s t h e synergy from a w o r l d p l a n . On t h e o t h e r h a n d , they save g e o c e n t r i s m i n t r a v e l , c o m m u n i c a t i o n , and head-office

My i m p r e s s i o n is t h a t life in t h e s u b s i d i a r i e s of g e o c e n t r i c pharm a c e u t i c a l firms is a c o n s t a n t struggle to assert subsidiary i n t e r e s t s over those of the world g a m e plan. W h e n the world g a m e plan d e m a n d s t r a n s f e r p r i c e s t h a t will l o w e r s u b s i d i a r y profits, this will be resisted; w h e n the world plan requires reduced manufacturing g r o w t h in o n e part o f t h e world so that expansion can take place e l s e w h e r e , t h e r e m i g h t b e b i t t e r s t r u g g l e . Subsidiary h e a d s e v e n p a i n t e x a g g e r a t e d p i c t u r e s o f t h e s t r i n g e n c y o f local laws i n o r d e r t o c o m p r o m i s e the edicts of h e a d q u a r t e r s : H e a d office, t h e y t h i n k I can be p r o s e c u t e d and lose my license [in fact t h e r e is no p r o v i s i o n for this in A u s t r a l i a for G M P v i o l a t i o n s ] . I d o n ' t tell t h e m o t h e r w i s e b e c a u s e i t d o e s n ' t suit m e . W h e n I w a n t s o m e t h i n g , if I say t h e H e a l t h D e p a r t m e n t i n s p e c t o r s h a v e a s k e d for it, t h e y c a n ' t say n o ! ( A u s t r a l i a n general manager). U l t i m a t e l y , i n t e r n a t i o n a l s a n c t i o n i n g m e t h o d s are n e c e s s a r y t o c o n t r o l a c t i v i t i e s w h i c h e i t h e r fall b e t w e e n t h e c r a c k s o f n a t i o n a l l a w s or s p r e a d o n e offence a c r o s s a p a t c h w o r k of n a t i o n a l j u r i s d i c t i o n s . P l a t i t u d i n o u s c o d e s 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 have been a d o p t e d by the International C h a m b e r of C o m m e r c e , " the O E C D " and the Organisation o f A m e r i c a n S t a t e s . " A m o r e significant h o p e i s t h e U N 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 d i s c u s s e d a t t h e end o f C h a p t e r 2 . I t w a s a r g u e d t h e r e t h a t t h e r e are w o r t h w h i l e possibilities for a panel o f e x p e r t s h e a r i n g c a s e s o n v i o l a t i o n s o f t h e C o d e c r e a t i v e l y t o use i n t e r n a t i o n a l p u b l i c i t y s a n c t i o n s and s a n c t i o n s t o b e i m p o s e d b y n a t i o n s (or p e r h a p s t r a d e u n i o n s ) w h i c h are victims o f t h e v i o l a t i o n . While the history of nations imposing sanctions is discouraging, p e r h a p s w h e n r e l i a n c e i s p l a c e d specifically o n n a t i o n s w h o a r e v i c t i m s of a p a r t i c u l a r offence t h e r e a r e g r e a t e r g r o u n d s for o p t i m i s m . T h i s i s e s p e c i a l l y t r u e w h e r e t h e n a t i o n benefits e c o n o m i cally from t h e i m p o s i t i o n o f t h e r e c o m m e n d e d s a n c t i o n ( e . g . t h r o u g h i n c r e a s e d tax r e c e i p t s ) . A n i n t e r n a t i o n a l i s a t i o n o f t r a d e u n i o n i s m and a n i n t e r n a t i o n a l i s a t i o n o f c o n s u m e r i s m a r e n e e d e d a s c o u n t e r v a i l i n g forces 374

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against the internationalisation ofcapital. * Knowledge is power in n e g o t i a t i o n s w i t h 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 . A t the m o m e n t , k n o w l e d g e i s o n e - s i d e d . T h e t r a n s n a t i o n a l k n o w s exactly w h a t o c c u p a t i o n a l h e a l t h s a f e g u a r d s it p r o v i d e s for its w o r k e r s in different p a r t s of t h e w o r l d . If w o r k e r s w h o enjoy few of such s a f e g u a r d s k n e w o f t h e s u p e r i o r c o n d i t i o n s p r o v i d e d for their p e e r s i n o t h e r p a r t s o f t h e w o r l d , this k n o w l e d g e could b e used t o d e m a n d e q u a l p r o t e c t i o n s . H o p e f u l l y , w e m i g h t b e g i n t o see s i t u a t i o n s w h e r e t r a d e u n i o n s and c o n s u m e r g r o u p s r e g u l a r l y b r i n g g r i e v a n c e s of this k i n d b e f o r e t h e p a n e l of j u d g e s for t h e C o d e of C o n d u c t for Transnational Corporations. T h e facile c o n c l u s i o n w h i c h m u s t be m o s t positively resisted is t h a t b e c a u s e c a p i t a l i s n o l o n g e r n a t i o n a l but i n t e r n a t i o n a l w e must t r a n s f e r t h e p o w e r s t o r e g u l a t 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 s from national g o v e r n m e n t s to some international regulatory authority. It m a y be t h a t at s o m e future point in w o r l d history this will be a w o r k a b l e p o l i c y . B u t t h e fact is t h a t if an agency is to be at all effective in r e g u l a t i n g an e n t i t y so p o w e r f u l as 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 n it m u s t have b a r g a i n i n g tools at its disposal w h i c h it c a n use as p o i n t s of l e v e r a g e in n e g o t i a t i o n s o v e r r e g u l a t i o n . N a t i o n a l s t a t e s h a v e such b a r g a i n i n g t o o l s - they set c o m p a n y t a x e s a n d tariffs, g i v e i n v e s t m e n t a l l o w a n c e s , influence t h e w a g e - d e t e r m i n a t i o n p r o c e s s , a p p r o v e p r o d u c t s for h e a v y g o v e r n m e n t subs i d i e s and h a v e c o n t r o l o v e r m a n y o t h e r a l l o c a t i v e d e c i s i o n s w h i c h vitally affect t h e i n t e r e s t s of t r a n s n a t i o n a l c o m p a n i e s . It may be that n a t i o n a l g o v e r n m e n t s d o n o t a l w a y s use t h e s e b a r g a i n i n g t o o l s very s t r a t e g i c a l l y to limit c o r p o r a t e a b u s e s of p o w e r , but a s u p r a national regulatory authority would not even have the potential to u s e s u c h b a r g a i n i n g i m p l e m e n t s . I t i s h o p e d t h a t i n s o m e future e p o c h o f w o r l d h i s t o r y t h e r e will exist i n t e r n a t i o n a l b a r g a i n i n g t o o l s w h i c h can b e u s e d t o further t h e p u b l i c i n t e r e s t s o f t h e w h o l e world c o m m u n i t y a g a i n s t e x p l o i t a t i v e acts c o m m i t t e d for p r i v a t e g a i n . I n the context o f t h e c o n t e m p o r a r y world system, h o w e v e r , we must b e p o l i t i c a l r e a l i s t s a n d s u p p o r t t h e c o n c l u s i o n o f B a r n e t and M u l l e r (1975:372-3): R e g u l a t i o n o f g l o b a l c o r p o r a t i o n s b y a n i n t e r n a t i o n a l agency s o u n d s p l a u s i b l e and p r o g r e s s i v e . W h y not a n i n t e r n a t i o n a l body t o act a s c o u n t e r p a r t and c o u n t e r w e i g h t t o t h e global c o r p o r a t i o n ? T h e p r o b l e m , of course, is that present i n t e r n a t i o n a l a g e n c i e s or any n e w a g e n c y in t h e f o r e s e e a b l e 375

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future a r e t o o w e a k t o r e g u l a t e t h e c o r p o r a t e g i a n t s . T o p r e t e n d o t h e r w i s e is to settle for the p a t i n a of r e g u l a t i o n instead o f t h e s u b s t a n c e . I n d e e d , from a c o r p o r a t e s t a n d p o i n t , t h e best way to e s c a p e r e g u l a t i o n from such o u t m o d e d n a t i o n a l a g e n c i e s a s t h e I n t e r n a l R e v e n u e S e r v i c e and t h e A n t i - T r u s t D i v i s i o n is to shift t h e b u r d e n t o a n i n t e r n a t i o n a l a g e n c y with b r o a d u n e n f o r c e a b l e p o w e r s and a modest budget.

Conclusion: clout is what counts

L a w e n f o r c e m e n t c o n s t i t u t e s only a part of t h e solution to t h e p r o b l e m s addressed in this book. The antitrust chapter d e m o n strated that structural reforms (abolition or limitation of patents or brand names, repeal of anti-substitution laws, compulsory l i c e n s i n g , e t c . ) a r e m o r e c o s t - e f f e c t i v e , less b u r e a u c r a t i c w a y s o f f o s t e r i n g c o m p e t i t i o n i n t h e p h a r m a c e u t i c a l industry t h a n a n t i t r u s t litigation. Physicians have an important crime prevention role, particularly w i t h r e s p e c t t o r e p o r t i n g f r a u d u l e n t sales r e p r e s e n t a t i v e s t o e i t h e r the g o v e r n m e n t or world h e a d q u a r t e r s of the representative's c o m p a n y . W h e n i n d i v i d u a l c o n s u m e r s a r e given t h e t o o l s o f class a c t i o n s s u p p o r t e d by p r o v i s i o n for c o n t i n g e n t fees for their l a w y e r s , t h e y t o o c a n influence t h e e v e n t s w h i c h victimise t h e m . I m p o r t a n t a s i s p o w e r t o p h y s i c i a n s and c o n s u m e r s , t h e g r e a t e s t n e e d i s for g u a r a n t e e s t h a t r e g u l a t o r y a g e n c i e s have b a r g a i n i n g p o w e r i n t h e i r n e g o t i a t i o n s with m a n u f a c t u r e r s . T o d a y i t i s inconc e i v a b l e t h a t t h e following kind o f c o m m e n t from a n A m e r i c a n production manager would be made. I tell y o u , we d o n ' t h a v e a n y t h i n g to w o r r y a b o u t . To this d a y , t h a t s e c t i o n o f t h e law [ G M P s ] is not well defined. Y o u can stand a n d piss i n t h e b a t c h and t u r n a r o u n d and s h a k e t h e F D A i n s p e c t o r ' s h a n d . H e ' s going t o tell you t h a t ' s not r i g h t , but w h e n y o u go to c o u r t , t h e y w o n ' t find you guilty. . . . T h e y have not b e e n a b l e t o m a k e this law stick! ( K r e i g , 1967: 9 1 ) . G i v e n t h a t t h e last d e c a d e has not s e e n a successful criminal p r o s e c u t i o n a g a i n s t 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 for a G M P v i o l a t i o n , a n d c o n s i d e r i n g t h e d i s m a l failure o f the A b b o t t p r o s e c u t i o n ( C h a p t e r 4 ) , o n e can q u e s t i o n w h e t h e r t h e F D A h a s t h e legal m u s c l e t o d a y t o m a k e t h e law stick. B u t t h e a b o v e kind o f s t a t e m e n t w o u l d b e i n c o n c e i v a b l e n o w not b e c a u s e t h e F D A h a s 376

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m a d e legal m u s c l e w o r k for it but b e c a u s e it has used b a r g a i n i n g m u s c l e m o r e effectively. T h i s b o o k has s h o w n t h a t most o f t h e c o r p o r a t e c r i m e s 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 c o n t r o l l e d b y n e g o t i a t e d s a n c t i o n s r a t h e r t h a n litigated s a n c t i o n s . F u r t h e r , i t has b e e n a r g u e d t h a t this i s b o t h i n e v i t a b l e and d e s i r a b l e . " T h e cost o f consistent p r o s e c u t i o n of corporate crime in the pharmaceutical i n d u s t r y w o u l d b e m e a s u r e d i n b o t h t h e ill-health o f victims w h o w o u l d c o n t i n u e to suffer w h i l e legal w h e e l s slowly t u r n e d and b u r d e n s o n c o u r t s w h i c h w o u l d b e b e y o n d t h e fiscal c a p a c i t y o f even the wealthiest nation in the world. H o w t h e n d o r e g u l a t o r s n e g o t i a t e c o n t r o l s and s a n c t i o n s ? T h e b e s t i l l u s t r a t i o n i n this b o o k i s t h e story o f t h e a n o n y m o u s t r a n s n a t i o n a l w i t h a sterility p r o b l e m ( C h a p t e r 4 ) . De facto s a n c t i o n s w e r e n e g o t i a t e d w h i c h cost t h e c o m p a n y m a n y m i l l i o n s o f d o l l a r s a n d a c o u p l e o f m a n a g e r s t h e i r j o b s . P h a r m a c e u t i c a l e x e c u t i v e s are full o f ( s o m e t i m e s b i t t e r ) a n e c d o t e s o f h o w F D A p e r s o n n e l use t h e i r b a r g a i n i n g p o w e r t o lever c o m p l i a n c e . S o m e c o m p a n i e s c o m p l a i n e d o f s i t u a t i o n s w h e r e t h e y had r e s i s t e d a n F D A r e q u e s t t o c o m p l y w i t h a p a r t i c u l a r r e g u l a t i o n and had c o n s e q u e n t l y b e e n d e l u g e d w i t h w e e k l y F D A i n s p e c t i o n s for a t i m e after, it w a s n ' t w o r t h it. We w o n t h e b a t t l e but lost t h e war. E v e r y plant in this c o u n t r y has v i o l a t i o n s t h a t can be d u g up if t h e i n s p e c t o r l o o k s h a r d e n o u g h . If t h e y a r e after you t h e y can m a k e it very difficult.' Regulatory-affairs executives of other c o m p a n i e s indicated that t h e y w o u l d often p r e v e n t p l a n t s from b u c k i n g F D A r e q u e s t s o n r e l a t i v e l y i n e x p e n s i v e m a t t e r s b e c a u s e o f their d e s i r e t o m a i n t a i n h a r m o n y w i t h t h e a g e n c y w h i c h w o u l d assist with i m p o r t a n t conflicts ( s u c h as o v e r a n e w d r u g a p p r o v a l ) . R e g u l a t o r y a g e n c i e s t h e r e f o r e h a v e m o r e b a r g a i n i n g p o w e r i f they have r e s p o n s i b i l i t y o v e r a w i d e r a n g e of a c t i v i t i e s in t h e o n e i n d u s t r y . H e a l t h r e g u l a t o r y a g e n c i e s h a v e m o r e b a r g a i n i n g p o w e r t h a n say e n v i r o n m e n t a l a g e n c i e s b e c a u s e t h e i r i m p a c t i s not limited t o o n e a r e a ( e n v i r o n m e n t a l c o n t r o l s ) . T h e y a p p r o v e n e w d r u g s , w i t h d r a w old o n e s , force p r o d u c t r e c a l l s , c o n t r o l G M P s , G L P s , a d v e r t i s i n g , and often, prices. B o t h p a r t i e s t o t h e b a r g a i n i n g g a m e s prefer n e g o t i a t i o n t o litigat i o n . W h e n I a s k e d a B r i t i s h official, with r e s p o n s i b i l i t y for setting N H S drug prices, what h a p p e n e d w h e n c o m p a n i e s m a d e fraudulent s t a t e m e n t s o n p r o d u c t i o n and o t h e r c o s t s , h e said: i t m i g h t b e f r a u d , b u t w e w o u l d n e v e r p r o s e c u t e . I t m i g h t b e found out w h e n f o r e c a s t s d o not c o m e t r u e . T h e n they had b e t t e r w a t c h o u t next 377

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t i m e we c o n s i d e r t h e i r p r i c e s . ' At all levels, o n e finds a p r e f e r e n c e for t h e efficiency of b a r g a i n i n g p r e s s u r e o v e r legal c o m p u l s i o n . A s e n i o r F D A official c o m p l a i n e d o f t h e fact t h a t F D A had n o legal stick to force h o s p i t a l s and u n i v e r s i t i e s to h a v e diligent r a t h e r t h a n n o m i n a l 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 t o s u p e r v i s e clinical investig a t i o n s . B u t t h e n , h e w e n t on: ' W e h a v e c o n s i d e r e d e x e r t i n g p r e s s u r e t o w a r d s h a v i n g c e r t a i n funding b o d i e s which w e might i n f l u e n c e t u r n off t h e t a p a bit to i n s t i t u t i o n s with w e a k review systems.' T h e i n t e n t i o n o f t h e a b o v e e x a m p l e s i s not t o s h o w that h e a l t h regulatory agencies have phenomenal bargaining power. They do n o t . H o w e v e r , to t h e e x t e n t t h a t t h e y do win significant c o n c e s s i o n s from t h e i n d u s t r y a n d i m p o s e s a n c t i o n s on t h e m , it is n o r m a l l y 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. T h e e x t e n t t o w h i c h r e g u l a t o r y a g e n c i e s h a v e b a r g a i n i n g clout v a r i e s e n o r m o u s l y with c i r c u m s t a n c e s . W i t h r e s p e c t t o G L P r e g u l a t i o n , F D A has a m u c h g r e a t e r c a p a c i t y t o m a k e its d e m a n d s stick w h e n t h e p r o d u c t being t e s t e d has not yet b e e n a p p r o v e d b y t h e a g e n c y . O n tests being c o n d u c t e d to c h e c k for h a z a r d s o n c e a p r o d u c t is a l r e a d y on the m a r k e t , ' F D A has m u c h less b a r g a i n i n g p o w e r and i n d u s t r y t e n d s t o d r a g its feet.' If we want better control of corporate crime in the p h a r m a c e u t i c a l i n d u s t r y , a n d if t h e h a r d reality is that c o n t r o l is m o r e likely to e m a n a t e from n e g o t i a t i o n t h a n from legal e n f o r c e m e n t , t h e n it is i m p o r t a n t t o give h e a l t h r e g u l a t o r y a g e n c i e s m o r e n e g o t i a t i n g c l o u t . P u t t i n g b a r g a i n i n g chips i n t h e c o r n e r o f r e g u l a t o r y a g e n c i e s and w e a k e n i n g the bargaining position of industry is much more i m p o r t a n t for p r o t e c t i n g c o n s u m e r s t h a n law reform. Since the b a r g a i n i n g s t r e n g t h o f g l o b a l c o r p o r a t i o n s i n e x o r a b l y g r o w s with t h e i r i n c r e a s i n g e c o n o m i c m i g h t , t h e only h o p e i s t o a t t e m p t t o r e d r e s s t h e b a r g a i n i n g b a l a n c e o n t h e g o v e r n m e n t side. T h a t big b u s i n e s s m u s t b e m a t c h e d w i t h big g o v e r n m e n t might b e a r e a l i s t i c a p p r a i s a l , but it h a r d l y e x u d e s t h e ring o f p o l i t i c a l a p p e a l . D o w e really w a n t h u g e b u r e a u c r a c i e s w i e l d i n g vast d i s c r e t i o n a r y p o w e r s w i t h c a v a l i e r d i s r e g a r d for p r i n c i p l e s of due p r o c e s s ? Is it r e a l l y t o l e r a b l e to h a v e a r e g u l a t o r y a g e n c y t h a t can send a c o m p a n y like I B T to t h e wall s i m p l y by a l e t t e r i n d i c a t i n g that d a t a from this c o m p a n y will b e s u b j e c t e d t o special s c r u t i n y ? O n e a n s w e r might b e t h a t large c o m p a n i e s t h e m s e l v e s t r e a t o t h e r c o m p a n i e s n o differe n t l y . A s J o h n Z . D e L o r e a n said o f his former e m p l o y e r . G e n e r a l Motors: 378

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S u p p l i e r s often feel t h e b r u n t of c o r p o r a t e p o w e r , p r e s s u r e and i n f l u e n c e . A GM d e c i s i o n to s t o p b u y i n g o n e part from a p a r t i c u l a r c o m p a n y can send t h a t firm into b a n k r u p t c y . G M and its a u t o c o m p a n y c o h o r t s hold t h e p o w e r o f life and d e a t h over many o f t h e i r suppliers. In most cases that power is exercised r e s p o n s i b l y . In s o m e cases it is not ( W r i g h t . 1979: 6 6 ) . T h i s b e g s t h e q u e s t i o n of w h e t h e r it is a c c e p t a b l e for big g o v e r n m e n t to play big b u s i n e s s at its own g a m e . Do we not w a n t to set h i g h e r s t a n d a r d s of integrity and p u b l i c a c c o u n t a b i l i t y for g o v e r n m e n t t h a n for b u s i n e s s ? I t h i n k we s h o u l d . It is p o s s i b l e to be a political p r a g m a t i s t , to r e c o g n i s e that effective p r o t e c t i o n of c o n s u m e r h e a l t h c a n only c o m e from giving m o r e b a r g a i n i n g c l o u t t o g o v e r n m e n t , w h i l e insisting that such b a r g a i n i n g p o w e r b e e x e r c i s e d m o r e o p e n l y . T h a t is, bigger g o v e r n m e n t w h i c h is m o r e s u s c e p t i b l e to critical scrutiny from elected r e p r e s e n t a t i v e s and affected c o n s u m e r s can b e a d v o c a t e d . Bureaucrats want a lot of bargaining tools and few checks on how they are used. T h i s n a t u r a l b u r e a u c r a t i c proclivity for vast secret p o w e r s i s o b v i o u s l y i n t o l e r a b l e . B u r e a u c r a t s should b e forced t o m a k e m o r e o f t h e i r d e a l s o u t s i d e smoke-filled r o o m s . M i n u t e s o f c r u c i a l n e g o t i a t i n g m e e t i n g s b e t w e e n r e g u l a t o r y a g e n c i e s and c o r p o r a t i o n s s h o u l d be publicly a v a i l a b l e u n d e r freedom of inform a t i o n s t a t u t e s . C o n s u m e r and t r a d e - u n i o n r e p r e s e n t a t i v e s should h a v e r i g h t s t o a t t e n d formal n e g o t i a t i n g m e e t i n g s b e t w e e n g o v e r n m e n t and b u s i n e s s . E l e c t e d r e p r e s e n t a t i v e s s h o u l d step u p their oversight of the discretionary p o w e r of the bureaucracy through congressional or parliamentary committees. In other words, we h a v e i n t h e d e m o c r a t i c political p r o c e s s a n a l t e r n a t i v e t o legal due p r o c e s s w h i c h , for c e r t a i n p u r p o s e s , is a m o r e efficient and effective c o n s t r a i n t on the unbridled abuse of discretionary power. The more m a s s i v e t h e p o w e r o f t h e a d v e r s a r i e s , t h e m o r e viable i s political ( p a r t i c i p a t o r y ) c o n t r o l o f d i s c r e t i o n o v e r legal c o n t r o l o f d i s c r e t i o n . Business wants bureaucrats to have few bargaining tools and few checks on how they are used. B u s i n e s s o b v i o u s l y favours i m p o t e n t r e g u l a t o r y b u r e a u c r a c i e s . H o w e v e r , it is not k e e n to see such disc r e t i o n a s b u r e a u c r a t s m i g h t have subject t o t h e disinfectant p o w e r of sunlight. Some o f t h e mutually comfortable resolutions negotia t e d b e t w e e n b u s i n e s s and g o v e r n m e n t m i g h t p r o v e e m b a r r a s s i n g i f e x p o s e d t o t h e light. Liberal bleeding hearts want bureaucrats to have few bargaining 379

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tools and many checks on how they are used. Since I s u s p e c t t h a t l i b e r a l b l e e d i n g h e a r t s c o n s t i t u t e t h e g r e a t e s t m a r k e t for this b o o k , I a p o l o g i s e to r e a d e r s w h o are offended by t h e d e s c r i p t i o n . M a n y l a w y e r s for w h o m t h e political p r o c e s s is o d i o u s w h i l e legal due p r o c e s s is s a c r o s a n c t fall into this c a t e g o r y . S o m e have an i d e o l o g i c a l a v e r s i o n t o big g o v e r n m e n t w h i c h they are p r e p a r e d t o a l l o w to s t a n d in t h e way of saving h u m a n lives. T h e y w o u l d prefer t a x p a y e r s t o s p e n d vast s u m s o n r e g u l a t o r y a g e n c i e s w h i c h have n o t e e t h , b u t w h i c h dutifully b r u s h their g u m s twice a d a y . W o v e n t h r o u g h o u t this b o o k has b e e n a c o n s i s t e n t a r g u m e n t a b o u t t h e use and c o n t r o l o f a d m i n i s t r a t i v e d i s c r e t i o n b y b u s i n e s s r e g u l a t o r s . P e r h a p s s o m e r e a d e r s have b e e n p e r s u a d e d t o favour regulatory agencies which have a lot of bargaining tools and a lot of checks on how they are used. T h e best g u a r a n t e e s a g a i n s t the a b u s e o f a d m i n i s t r a t i v e d i s c r e t i o n a r e p r o v i d e d b y diligent i n v e s t i g a t i v e j o u r n a l i s t s , active oversight committees of elected representatives, vocal c o n s u m e r and t r a d e - u n i o n m o v e m e n t s , aggressive industry a s s o c i a t i o n s w h i c h are willing to use t h e political p r o c e s s to defend t h e i r m e m b e r s a g a i n s t such a b u s e s , f r e e d o m o f i n f o r m a t i o n s t a t u t e s w i t h t e e t h , free a c c e s s o f t h e scientific c o m m u n i t y t o t h e r a w d a t a o n w h i c h r e g u l a t o r y d e c i s i o n s are b a s e d , and r e q u i r e m e n t s that r e g u l a t o r y a g e n c i e s publicly justify their d e c i s i o n s and publicly h e a r appeals against them. It has b e e n seen t h a t t h e best w a y to give a r e g u l a t o r y agency b a r g a i n i n g c l o u t is to p r o v i d e it w i t h a w i d e r a n g e of r e g u l a t o r y p o w e r s over one i n d u s t r y . " In A m e r i c a , the F D A is s o m e w h a t u n u s u a l i n t h i s c o n t e x t . T h e n o r m has b e e n t o fragment r e g u l a t i o n by f u n c t i o n i n s t e a d of by i n d u s t r y - so t h e E P A is r e s p o n s i b l e for e n v i r o n m e n t , O S H A for o c c u p a t i o n a l safety and h e a l t h , the F T C for a n t i t r u s t , t h e C P S C for p r o d u c t safety, and so on. As so m a n y i n f o r m a n t s p o i n t e d o u t , i n s p e c t o r s from t h e s e functionally specialised a g e n c i e s c o n s e q u e n t l y h a v e less b a r g a i n i n g m u s c l e . A n intere s t i n g c o u n t e r v a i l i n g p o i n t has b e e n p o s i t e d in t h e c o n t e x t of a c o n s e r v a t i v e a n a l y s i s o f r e g u l a t i o n b y W e a v e r (1978: 2 0 1 ) .

T h e l i t e r a t u r e o n r e g u l a t i o n also says t h a t r e g u l a t o r y a g e n c i e s are p r o n e t o c o o p t a t i o n b y t h e r e g u l a t e d i n t e r e s t s , b e c a u s e they are o r g a n i z e d b y i n d u s t r y . T h a t m a y b e t r u e o f t h e Old R e g u l a t i o n , b u t i t isn't t h e case w i t h t h e N e w . T h e n e w r e g u l a t o r y a g e n c i e s w e r e d e l i b e r a t e l y o r g a n i z e d along functional lines, and t h e i r j u r i s d i c t i o n s t h e r e f o r e cut a c r o s s i n d u s t r y b o u n d a r i e s . T h e E P A , 380

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for e x a m p l e , d e a l s w i t h p o l l u t i o n p r o b l e m s c r e a t e d b y all i n d u s t r i e s , and O S H A r e g u l a t e s safety a n d h e a l t h c o n d i t i o n s for w o r k e r s i n all i n d u s t r i e s . T h e C o n s u m e r P r o d u c t Safety C o m m i s s i o n c o n t r o l s t h e safety o f virtually every c o n s u m e r p r o d u c t on t h e m a r k e t , and so i n v o l v e s itself in the design and m a r k e t i n g o f e v e r y t h i n g from rag dolls t o lawn m o w e r s . T h e n e w r e g u l a t o r y a g e n c i e s a r e a c c o r d i n g l y r e s i s t a n t t o c o o p t a t i o n b y any s i n g l e i n d u s t r y . If t h e y a r e v u l n e r a b l e to c o o p t a t i o n at all (and t h e y a r e ) , it is to c o o p t a t i o n by safety- or e n v i r o n m e n t - o r i e n t e d g r o u p s , not b y b u s i n e s s o r g a n i z a t i o n s . W e a v e r ' s p o i n t a b o u t c o - o p t a t i o n i s o v e r s t a t e d but not w i t h o u t v a l i d i t y . W h a t i t i m p l i e s for t h e r e f o r m e r w h o i s i n t e r e s t e d i n m o r e r e g u l a t o r y clout is t h a t t h e r e a r e a d v a n t a g e s for a r e g u l a t o r y a g e n c y in h a v i n g both d e p t h of r e s p o n s i b i l i t i e s w i t h i n an industry and b r e a d t h of responsibilities across industries. In other w o r d s , advant a g e s a t t a c h t o t h e i d e a o f a s u p e r r e g u l a t o r y a g e n c y . W h a t this m i g h t m e a n i n t h e A m e r i c a n c o n t e x t i s shifting t h e F D A from the H e a l t h a n d H u m a n S e r v i c e s u m b r e l l a and p u t t i n g i t with O S H A , E P A and others under a D e p a r t m e n t of Business Regulation. It is difficult to see any efficiency d i s a d v a n t a g e s in such a r e o r g a n i s a t i o n . On t h e c o n t r a r y , S a x o n (1980: 46) has s u g g e s t e d t h a t a ' f a c t o r h a m p e r i n g i n v e s t i g a t i v e efforts at t h e federal level is t h e n u m b e r o f law e n f o r c e m e n t a n d r e g u l a t o r y u n i t s trying t o c o n t r o l w h i t e c o l l a r c r i m e . I t i s a r g u e d t h a t b e c a u s e t h e r e are s o m a n y e n f o r c e m e n t a g e n c i e s , t h e r e i s a g r e a t deal o f o v e r l a p and n e e d l e s s d u p l i c a t i o n o f effort.' B r i n g i n g federal r e g u l a t i o n u n d e r t h e o n e r o o f m i g h t h e l p r e s o l v e s o m e o f t h e c o m p l a i n t s o f industry a b o u t c o n f l i c t i n g d e m a n d s from different r e g u l a t o r y a g e n c i e s . I t would c u t d o w n d u p l i c a t i v e p a p e r w o r k r e q u i r e m e n t s i m p o s e d b y different a g e n c i e s . O n e o f t h e m a i n r e a s o n s for d u p l i c a t i v e d a t a g a t h e r i n g i s c o n f i d e n t i a l i t y p l e d g e s w h i c h p r e v e n t g o v e r n m e n t a g e n c i e s from s h a r i n g information with each other. A frequent complaint in the U n i t e d S t a t e s h a s b e e n t h a t 'six a g e n c i e s r e g u l a t e c a r c i n o g e n s u n d e r 2 1 d i f f e r e n t s t a t u e s ' ( N e u s t a d t , 1980: 138). M e c h a n i s m s for a d m i n istratively adjudicating c o m p e t i n g regulatory d e m a n d s have been l a c k i n g : 'A m e a t - p a c k i n g p l a n t w a s told by o n e federal a g e n c y to w a s h its floors s e v e r a l t i m e s a day for c l e a n l i n e s s and w a s told by a n o t h e r federal a g e n c y to k e e p its floors dry at all t i m e s , so its e m p l o y e e s w o u l d n o t slip a n d fall' ( N e u s t a d t , 1980: 131). F r o m i n d u s t r y ' s p o i n t o f v i e w , a s u p e r r e g u l a t o r y a g e n c y w o u l d also m a k e 381

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c o n t r o l o f t h e cost o f r e g u l a t i o n e a s i e r t o m o n i t o r . N e e d l e s s t o say, h o w e v e r , t h e s e v i r t u e s w o u l d not b e sufficient t o e n r a p t u r e industry w i t h a p r o p o s a l w h i c h w o u l d e n h a n c e r e g u l a t o r y clout. F o r t h o s e for w h o m a D e p a r t m e n t o f B u s i n e s s R e g u l a t i o n w o u l d be a socialist A r m a g e d d o n , ' " t h e p r e s e n t analysis might still have s o m e l e s s o n s . T h e q u i t e m o d e s t r e c e n t initiatives i n the U n i t e d S t a t e s t o facilitate t h e r e p o r t i n g o f E P A and O S H A offences b y F D A i n s p e c t o r s , and vice v e r s a , clearly m i g h t increase s o m e w h a t t h e b a r g a i n i n g c l o u t of i n s p e c t o r s from all t h r e e a g e n c i e s . T h e p r o p o s a l s of N a d e r et al. (1976) for federal c h a r t e r i n g of g i a n t US c o r p o r a t i o n s w o u l d also p r o v i d e a useful b e g i n n i n g . A m o r e r e l e v a n t policy q u e s t i o n t h a n e s t a b l i s h i n g a D e p a r t m e n t o f B u s i n e s s R e g u l a t i o n c o n c e r n s efforts b y t h e p h a r m a c e u t i c a l industry to push the bureaucratic organisation of regulation in exactly the o p p o s i t e direction. This has already happened in Mexico in a p r e s i d e n t i a l d e c r e e of N o v e m b e r 1978. R e s p o n s i b i l i t y for regul a t i o n 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 has essentially b e e n r e m o v e d from t h e M i n i s t r i e s of H e a l t h and C o m m e r c e and given to the M i n i s t r y of P a t r i m o n y . As t h e i n d u s t r y n e w s l e t t e r . Scrip (4 A p r i l 1979) p o i n t e d o u t : ' T h i s is v i e w e d as a positive m o v e , since this M i n i s t r y i s c o n c e r n e d w i t h t h e industrial d e v e l o p m e n t o f M e x i c o , a s o p p o s e d to the Ministry of C o m m e r c e whose main concern is to k e e p p r i c e s d o w n , a n d t o t h e H e a l t h M i n i s t r y , which views t h e d r u g industry simply as a c o m p o n e n t o f t h e Health System.' In Australia, c o n c e r t e d l o b b y i n g a t t e m p t s h a v e b e e n m a d e i n the past d e c a d e t o s t r i p t h e H e a l t h D e p a r t m e n t of s o m e of its n e g o t i a t i n g chips - for i n s t a n c e , by having them hand control over Pharmaceutical B e n e f i t s S c h e m e p r i c e s t o t h e i n d e p e n d e n t P r i c e s Justification Tribunal. R e a l p o l i t i k therefore dictates that the immediate concern in most c o u n t r i e s is to d e f e n d h e a l t h r e g u l a t o r y a g e n c i e s from industry efforts t o r e d u c e t h e i r b a r g a i n i n g p o w e r . N e v e r t h e l e s s , c o n s u m e r ists will h a v e t h e i r o p p o r t u n i t y t o t u r n d e f e n c e into a t t a c k . T h e g r e a t l e s s o n from t h e history of r e g u l a t i o n 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 i s t h a t m a s s i v e reforms can o c c u r following a c r i s i s . In s o m e m e a s u r e , t h e w o r l d ' s r e g u l a t o r y s y s t e m s are a m u d d l e b e c a u s e t h e y w e r e b o r n o f hasty r e a c t i o n s t o c r i s e s . H o p e fully, r e f o r m e r s will h a v e a c o h e r e n t r e g u l a t o r y b l u e p r i n t to c h a l l e n g e i n d u s t r y d o m i n a n c e r e a d y for i m p l e m e n t a t i o n i n the w a k e o f t h e n e x t m a j o r crisis. T h i s b o o k has not p r o v i d e d e v e n a b e g i n n i n g to such a b l u e p r i n t . 382

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E x p e r t s with a d e t a i l e d u n d e r s t a n d i n g of food and d r u g law, p h a r m a c o l o g y , a n d o t h e r d i s c i p l i n e s will be r e q u i r e d for t h a t . All I h a v e a t t e m p t e d is a t e n t a t i v e a s s e s s m e n t o f t h e c h o i c e s that m u s t be m a d e a b o u t t h e b r o a d form o f any s c h e m e t o c o n t r o l c o r p o r a t e crime.

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Getting a foot in the door

M a n y e x e c u t i v e s w i t h w h o m I s o u g h t i n t e r v i e w s refused t o see m e . N e v e r t h e l e s s , at t h e end o f t h e d a y , I had r e a s o n to be b o t h pleased a n d s u r p r i s e d with t h e success r a t e . A m o n g t h o s e w h o w e r e a p p r o a c h e d , m o r e a g r e e d t o talk t h a n refused. A l m o s t all o f t h e i n t e r v i e w s w e r e a r r a n g e d b y t e l e p h o n e w i t h o u t a p r e l i m i n a r y l e t t e r . An e x c e p t i o n to this w a s with t h e i n t e r v i e w s in M e x i c o and G u a t e m a l a for w h i c h l e t t e r s w e r e sent p r i o r t o m y visit. Of forty l e t t e r s w r i t t e n to e x e c u t i v e s in M e x i c o and G u a t e m a l a , o n l y o n e a t t r a c t e d a r e p l y . Effectively t h e n , t h e s e i n t e r v i e w s w e r e also arranged by t e l e p h o n e . T h e f i r s t i n t e r v i e w s i n A u s t r a l i a w e r e t h e m o s t difficult. A u d a c i t y w a s r e q u i r e d ; yet in t h e early days I w a s lacking in c o n f i d e n c e . F o r t u n a t e l y , h o w e v e r , I quickly struck u p o n the strategy of m e n t i o n i n g s o m e o n e e l s e ' s n a m e . E v e n i f t h a t s o m e o n e w a s not a f r i e n d , t h e n a m e could still be t u r n e d to a d v a n t a g e . W i t h the early i n t e r v i e w s , I m e n t i o n e d the n a m e of a powerful H e a l t h D e p a r t m e n t official (with his a p p r o v a l ) : ' H e gave me t h e g o v e r n m e n t ' s side of t h e p i c t u r e , a n d he s u g g e s t e d t h a t you w o u l d be a well informed p e r s o n t o g i v e t h e i n d u s t r y ' s side o f t h e s t o r y . ' M a n y o f t h e m w e r e k e e n t o set m e straight o n w h a t t h e y t h o u g h t t h e H e a l t h D e p a r t m e n t w o u l d h a v e told m e . S i m i l a r l y , c o m p a n i e s w h i c h had b e e n the s u b j e c t of s o m e p u b l i c vilification in r e c e n t t i m e s w e r e also often a n x i o u s t o tell t h e i r side o f t h e story. O n c e t h e ball w a s r o l l i n g , m a i n t a i n i n g t h e m o m e n t u m w a s not s o difficult. A f t e r an o u t s t a n d i n g l y g o o d i n t e r v i e w , I w o u l d ask t h e 384

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r e s p o n d e n t to suggest names of other people in other companies w h o c o u l d t a l k to me a b o u t t h e s a m e subject. T h e n it w a s simply a m a t t e r of s a y i n g : ' M r X s u g g e s t e d I talk to y o u . ' In every c o u n t r y I e n c o u n t e r e d early k n o c k b a c k s w h o s u g g e s t e d that I should talk to 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 first. W i t h m u c h t r e p i d a t i o n I did go and talk to t h e P M A (or its e q u i v a l e n t ) in e a c h c o u n t r y , k n o w i n g that if an unfavourable impression was created w i t h t h e m , w o r d w o u l d quickly s p r e a d that i t w o u l d b e unwise t o t a l k w i t h m e . S u b s e q u e n t to t h e s e d i s c u s s i o n s , I w a s able to say: i s p e n t q u i t e a bit of t i m e t a l k i n g to p e o p l e at F D A , but t h e n I s p o k e to Mr X a n d Mr Y at t h e P M A a n d t h e y s u g g e s t e d that I really s h o u l d talk t o s o m e p e o p l e w i t h p r a c t i c a l e x p e r i e n c e i n t h e i n d u s t r y . ' B e t t e r still, s o m e P M A officers s u g g e s t e d n a m e s o f e x e c u t i v e s i n m a n y different c o m p a n i e s w h o w o u l d b e w o r t h t a l k i n g t o , a n d w h e n t h e s e n a m e s c o i n c i d e d with t h o s e o f p e o p l e I w a n t e d to t a l k t o , I could say: ' M r X from P M A s u g g e s t e d I talk to y o u . ' I s u s p e c t t h a t o n c e or t w i c e , t h e y r a n g Mr X a n d Mr X could only v a g u e l y r e m e m b e r w h o I w a s . O n e has t o play t h e o d d s . W h a t did I tell t h e m w h e n I s p o k e to t h e m on t h e t e l e p h o n e ? My i n t e r e s t , I said, w a s in h a v i n g a chat a b o u t t h e effectiveness of r e g u l a t i o n 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 and t h e costs o f regulat i o n , b e c a u s e m y c o n c e r n was t o 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 a s a c a s e study to d r a w o u t s o m e g e n e r a l p r i n c i p l e s of cost-effectiven e s s in g o v e r n m e n t r e g u l a t i o n . All t h i s , as is clear from r e a d i n g t h e b o o k , w a s t r u e . I d e s c r i b e d myself as a sociologist r a t h e r t h a n a c r i m i n o l o g i s t . F o r t h e A u s t r a l i a n i n t e r v i e w s , I initially d e s c r i b e d m y s e l f as a F u l b r i g h t s c h o l a r a b o u t to go to t h e U n i t e d S t a t e s to look at r e g u l a t i o n and w h o w a s i n t e r e s t e d in g e t t i n g a good g r a s p on t h e A u s t r a l i a n s y s t e m first. O n c e e x e c u t i v e s had a g r e e d t o t h e interv i e w , h o w e v e r , I a l w a y s i n f o r m e d t h e m that I w o r k e d for the Australian Institute of Criminology. O v e r s e a s , I did not m e n t i o n to c o m p a n i e s t h a t I w o r k e d for the 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 . I w a s on leave w i t h o u t pay from t h e I n s t i t u t e , so I could q u i t e l e g i t i m a t e l y d e s c r i b e myself as a F u l b r i g h t F e l l o w affiliated w i t h t h e U n i v e r s i t y o f C a l i f o r n i a . T h e novelty of being an A u s t r a l i a n was an a d v a n t a g e in interesting some foreign executives in talking to me. A n d my nationality perhaps m a d e it m o r e t r o u b l e t h a n it w a s w o r t h to c h e c k up on my backg r o u n d . W h e n A m e r i c a n e x e c u t i v e s a s k e d w h a t part o f A u s t r a l i a I c a m e from or w h a t I did t h e r e , I simply t a l k e d at great length a b o u t h o w I w a s b r o u g h t up in Q u e e n s l a n d and did my P h D in sociology at 385

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t h e U n i v e r s i t y of Q u e e n s l a n d . I t h o u g h t it n e i t h e r a d v a n t a g e o u s n o r a p p r o p r i a t e t o directly a s s o c i a t e t h e A u s t r a l i a n I n s t i t u t e o f C r i m i n o l o g y w i t h s o m e t h i n g I was d o i n g w h i l e on leave.

O n c e inside I n t e r v i e w s of fewer t h a n 30 m i n u t e s d u r a t i o n w e r e a w a s t e of t i m e . In t h e e n d , if p e o p l e w o u l d only offer 15 m i n u t e s of their t i m e , I w a s t u r n i n g t h e m d o w n . On t h e o t h e r h a n d , I found t h a t a 3 0 - m i n u t e i n t e r v i e w c o u l d n o r m a l l y run for o v e r an h o u r if o n e m a d e special efforts t o m a k e t h e d i s c u s s i o n i n t e r e s t i n g t o t h e r e s p o n d e n t . This w a s e a s i e r late i n t h e r e s e a r c h p r o g r a m m e t h a n i n t h e b e g i n n i n g . U l t i m a t e l y , i n t e r v i e w s b e c a m e a l m o s t a s v a l u a b l e t o the r e s p o n d e n t s as t h e y w e r e to m e , as I w a s able to tell t h e m s o m e t h i n g s they did n o t k n o w a b o u t w h a t o t h e r c o m p a n i e s w e r e d o i n g t o deal with t h e p r o b l e m s u n d e r d i s c u s s i o n . O f c o u r s e this w a s d o n e w i t h o u t b r e a c h i n g confidences or m e n t i o n i n g the n a m e s o f t h e c o m p a n i e s I w a s t a l k i n g a b o u t . E x e c u t i v e s w e r e also i n t e r e s t e d t o talk t o s o m e o n e w h o k n e w a little o f h o w the r e g u l a t o r y a p p a r a t u s w o r k e d i n other parts o f t h e world. A c o u p l e of i n t e r v i e w s w e r e t a p e d , b u t I found t h a t the i n h i b i t i o n of r a p p o r t from a r e q u e s t to t a p e t h e i n t e r v i e w w a s not in t h e i n t e r e s t s of q u a l i t y d a t a . F o r m o s t o f t h e early i n t e r v i e w s I t o o k a t a p e r e c o r d e r i n m y b r i e f c a s e , and a s s o o n a s t h e i n t e r v i e w w a s o v e r I w o u l d go to a p a r k or a toilet and tell t h e t a p e r e c o r d e r e v e r y t h i n g I could r e m e m b e r . As the research p r o c e e d e d , interviews produced d i m i n i s h i n g r e t u r n s . I w a s h e a r i n g t h e s a m e t h i n g s a b o u t t h e costs o f regulation over and over again. F r o m most interviews of an hour's d u r a t i o n I w o u l d c o m e o u t w i t h only o n e o r t w o s t a t e m e n t s w o r t h remembering. I also b e c a m e m o r e e x p e r t at using my n o t e p a d . A s k i n g if I could t a k e n o t e s often i n h i b i t e d r a p p o r t a t t h e b e g i n n i n g o f a n i n t e r v i e w . So w h a t I b e g a n to do w a s w a i t until t h e r e s p o n d e n t said s o m e t h i n g t h a t h e o r s h e w o u l d really like m e t o r e m e m b e r . ' D o you realise t h a t we did a study which found t h a t this n e w r e g u l a t i o n cost us $ 5 , 3 0 0 , 0 0 0 to c o m p l y w i t h ? ' ' R e a l l y ' , I w o u l d say, i m u s t write t h a t figure d o w n b e c a u s e I h a v e a t e r r i b l e m e m o r y for figures.' T h e n o t e b o o k w o u l d t h e n be out sitting on my k n e e . I w o u l d m a k e an effort t o w r i t e d o w n t h i n g s t h a t t h e y t h o u g h t w e r e i m p o r t a n t . W h e n t h e r e s p o n d e n t said s o m e t h i n g i n d i s c r e e t t h a t I t h o u g h t to be i m p o r t a n t , I w o u l d not w r i t e t h i s d o w n . I n s t e a d I w o u l d r e p e a t the 386

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s t a t e m e n t o v e r a n d o v e r in my mind as t h e 90 per cent of the i n t e r v i e w w h i c h w a s o f n o i n t e r e s t t o m e p r o c e e d e d . W h e n the r e s p o n d e n t said s o m e t h i n g else t h a t he or she w o u l d like me to w r i t e d o w n , m y p e n w e n t t o p a p e r a g a i n , but i n s t e a d o f writing w h a t the r e s p o n d e n t w a s s a y i n g , I w a s p u t t i n g d o w n t h e i n d i s c r e t i o n of a few m i n u t e s earlier. I n t e r v i e w s w i t h m o r e t h a n o n e p e r s o n at a t i m e w e r e g e n e r a l l y a w a s t e of t i m e . It w a s difficult to use t h e n o t e b o o k discreetly with a g r o u p o f p e o p l e . B u t m o r e i m p o r t a n t l y , i n front o f their p e e r s , e x e c u t i v e s w e r e m o d e l s o f d i s c r e t i o n . A n e x c e p t i o n t o this w a s w h e n o n e g o t t o g e t h e r w i t h s e v e r a l e x e c u t i v e s o v e r lunch with a c o u p l e o f b o t t l e s o f w i n e . E v e n t h o u g h o n e could not t a k e n o t e s , t h e m o r e i n f o r m a l social s i t u a t i o n w a s i n v a r i a b l y p r o d u c t i v e . In t h e early i n t e r v i e w s I w a s a l w a y s sure to g u a r a n t e e a n o n y m i t y and confidentiality at the c o m m e n c e m e n t of the interview. Howe v e r , I felt t h a t t h i s p u t r e s p o n d e n t s on t h e i r g u a r d t h a t they might b e grilled a b o u t s e n s i t i v e m a t t e r s . I t w a s b e t t e r t o e a s e into t h e m o r e s e n s i t i v e m a t t e r s , raise t h e m in a r e l a x e d and w o r l d l y - w i s e fashion w h e n t h e y s m o o t h l y s l i p p e d into t h e flow o f t h e d i s c u s s i o n . W h y s h o u l d y o u give g u a r a n t e e s o f a n o n y m i t y w h e n all you w e r e asking for w a s a c h a t ? Of c o u r s e t h e r e w o u l d be o c c a s i o n s later in t h e d i s c u s s i o n w h e n it m i g h t be a p p r o p r i a t e to say that a n y t h i n g said w o u l d b e t r e a t e d a n o n y m o u s l y b o t h w i t h r e s p e c t t o the p e r s o n and t h e c o m p a n y from w h e n c e i t c a m e . T h e giving o f t h e g u a r a n t e e s w a s p l a y e d by ear. In fact, all i n f o r m a t i o n p r o v i d e d by r e s p o n d e n t s in t h i s s t u d y has b e e n t r e a t e d a n o n y m o u s l y , and t h e identity o f t h e c o m p a n y for w h i c h t h e r e s p o n d e n t w o r k e d is in a l m o s t all cases s u p p r e s s e d . T h e only e x c e p t i o n t o t h e policy o f c o r p o r a t e a n o n y mity was w h e r e an executive was explaining the c o m p a n y ' s point of v i e w on s o m e law v i o l a t i o n t h a t w a s a m a t t e r of p u b l i c r e c o r d . A n d o f c o u r s e t h e policy w a s n e v e r b r e a c h e d i n s i t u a t i o n s w h e r e corp o r a t e a n o n y m i t y was g u a r a n t e e d in the interview. I found t h e m o s t useful i n f o r m a n t s to be p e o p l e w h o w e r e disg r u n t l e d w i t h t h e c o m p a n y in s o m e w a y , and in t i m e I d e v e l o p e d a n o s e for sniffing o u t d i s g r u n t l e d e m p l o y e e s . S o m e t i m e s r e s p o n d e n t s w o u l d tell m e a b o u t t h e t r o u b l e m a k e r w h o had b e e n i n his o r h e r j o b b e f o r e , b u t w h o t h e c o m p a n y had got rid of. I w o u l d t h e n try t o c h a s e u p t h e s e t r o u b l e m a k e r s . E v e n i f r e s p o n d e n t s w e r e not d i s g r u n t l e d w i t h t h e i r p r e s e n t c o m p a n y , p e r h a p s t h e y w e r e disg r u n t l e d w i t h o n e o f t h e i r f o r m e r e m p l o y e r s i n the p h a r m a c e u t i c a l industry. M a n y senior pharmaceutical executives have been mobile 387

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d u r i n g t h e i r c a r e e r s , w o r k i n g for p e r h a p s t h r e e o f four different 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 s e n s e d a d i s e n c h a n t m e n t with o n e of t h e s e f o r m e r e m p l o y e r s , I w o u l d d i r e c t my line of q u e s t i o n ing at t h e old c o m p a n y . E x e c u t i v e s w e r e r e m a r k a b l y free with s t a t e m e n t s i n t h e n a t u r e of: ' W e w o u l d n e v e r d o t h a t h e r e , but w h e n I w o r k e d with C o m p a n y X. . . .' I w e n t to the first i n t e r v i e w with a s e m i - s t r u c t u r e d i n t e r v i e w s c h e d u l e . T w o i n t e r v i e w s later this w a s t h r o w n i n the w a s t e p a p e r b a s k e t . U l t i m a t e l y , w h a t I did w a s simply to let the i n t e r v i e w flow in a n y a n d e v e r y d i r e c t i o n and t a k e o p p o r t u n i t i e s a s they a r o s e t o ask q u e s t i o n s r e l a t i n g to t h e r a n g e of t o p i c s discussed in this b o o k . I soon d e v e l o p e d an appreciation of how narrow is the breadth of k n o w l e d g e o f a n y o n e p e r s o n i n a large and c o m p l e x o r g a n i s a t i o n . G e n e r a l l y it is p o i n t l e s s to ask a finance d i r e c t o r a b o u t unsafe m a n u f a c t u r i n g practices or a manufacturing m a n a g e r about bribes. It is s i m p l y a m a t t e r of g e t t i n g as m a n y i n t e r v i e w s as possible with p e o p l e i n p o w e r f u l p o s i t i o n s , and t a i l o r i n g q u e s t i o n s t o their special competences. T h e m o s t c r u c i a l lesson from this r e s e a r c h has b e e n t h e i m p o r t a n c e o f k n o w i n g h o w the i n d u s t r y w o r k s . I f o n e i s well informed a b o u t t h e i n d u s t r y , and a b o u t the forms t h a t l a w - b r e a k i n g t a k e s w i t h i n it, o n e ' s d e m e a n o u r can b e t h a t o f a p e r s o n w h o i s ' n o b a b e i n t h e w o o d s ' . U n l e s s k n o w l e d g e and s o p h i s t i c a t i o n c o n c e r n i n g t h e s u b j e c t m a t t e r i s e s t a b l i s h e d early i n t h e i n t e r v i e w , t h e r e s p o n d e n t will r e g a r d t h e i n t e r v i e w as a p u b l i c r e l a t i o n s exercise and n o t h i n g b u t i n d u s t r y p r o p a g a n d a will c o m e o f t h e d i s c u s s i o n . O n t h e o t h e r h a n d , e x e c u t i v e s d o n o t enjoy t h e d i s r e s p e c t that c o m e s from b e i n g r e g a r d e d as an unthinking m o u t h p i e c e of industry d o g m a by someo n e w h o k n o w s t h e i n d u s t r y . T h e y , like e v e r y o n e e l s e , a r e k e e n t o i m p r e s s e v e n s t r a n g e r s with t h e i r u n i q u e l y s o p h i s t i c a t e d u n d e r s t a n d i n g o f h o w t h e i n d u s t r y really w o r k s .

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Chapter 1 Introduction: an industry case study of corporate crime

1 The decision concerned the fixed-ratio drug, Panalba. which the F D A ultimately forced Upjohn to withdraw from the US market For a discussion of the case see Mintz (1969) and Green (1978: 129-35). In addition to 12 reported and many unreported deaths. Panalba was estimated by the F D A to have caused 475.000 cases of blood dyscrasias. 9 million hypertensive reactions, and 475,000 liver disturbances (Green, 1978:130). 2 This applied to the control group of the study. More socially responsible decisions resulted when the students were asked to role-play boards which included public-interest directors and other structural modifications. 3 As Coffee (1980: 466-7) has pointed out, the group risky shift phenomenon is o n e reason to question the assumption of economic theorists of corporate crime that corporate officials are risk averters (see particularly Elzinga and Breit, 1973, 1976). Anyone who has interviewed corporate criminals would c o m e to the conclusion that while business people might generally be risk averters, those particular business people who become involved in corporate crime are more likely to be risk preferrers. 4 In fact, LG. Farben was initially broken up into five companies: Hoechst, B A S F , Bayer, Cassella and Huels. Bayer was given 100 per cent of a sixth company, Agfa. Bayer also later absorbed Cassella and took a controlling interest in Huels. 5 T h e LG. chemical empire also turned its talents to producing Z y k l o n B , the extermination gas used at Auschwitz. 6 For criticisms of this view, see Tappan (1947), Burgess (1950). Kadish (1963) and Orland (1980). In suggesting that the focus of white-collar crime be restricted to offences punished under criminal law, the critics would constrain criminology within class-biased analyses. One of the defining features of the ruling-class exercise of power is that it manages to have ruling-class wrongs regulated and punished civilly, while 389

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working-class wrongs are placed under criminal jurisdiction. While to countenance as corporate crime any corporate abuse of power, whether legal or illegal, is to substitute polemics for scholarly rigour, to excise civilly punished corporate illegalities from the study of corporate crime is to succumb to tunnel vision conditioned by a ruling-class social construction of criminality.

Chapter 2

Bribery

1 'Another industry source said "bribes" of a few thousand dollars were all that was needed in Rome to get full copies from the Ministry of Health of new drug registration files. This eased the way for "pirates", usually small manufacturers, to deal in products based on patent infringement' (New York Times, 21 March 1976, Section 3, p. 1, p. 6, 'Drugs in Europe: Collision of Interests'). 2 To the extent that policing of such 'bath tub' operators does occur, it is undertaken by the large companies who act to protect their interests by occasionally collecting evidence of the failure of small competitors to meet the regulations and placing this before the authorities. 3 Such leading questions of the 'have you stopped beating your wife?" type have conventionally been regarded as methodologically unsound. Kinsey's et al.'s (1948) justification for using leading questions to elicit self-reports of masturbation and other sensitive behaviour provides a rationale for exceptions from this methodological principle. The problem is often one of the 'ordinary person' being intimidated into telling the higher-status researcher what the latter wants to hear. In this case, senior executives, some of them on a six-figure income, were not about to be intimidated by a 'snivelling little Australian academic', as one of them uncharitably referred to me. 4 US v. Olin-Mathieson Chemical Corp.. No. 63 Cr 21.7 (S.D.N.Y., 23 Sept. 1965). 5 Morton-Norwich also disclosed payments to employees' unions. 6 This type of offence has been reported in other countries. 'Again in Italy according to a source familiar with the situation, one multinational got authority, after bribing fiscal inspectors, to sell throat lozenges - at import prices - that it men arranged to make locally at low c o s t The practice was said to continue for around 15 years in the 1950's and 1960's before the company decided it would "regularize" its position' (New York Times, op. cit). 7 For a discussion of the role of the OA in orchestrating the coup which brought Guatemala its present form of government see Horowitz (1971: Chapter 10). 8 At the Crossroads of Destiny, 1977, Annual Report of (he Camara National de la Industria de Laboratories Quimico Farmaceuticos, Mexico City. 9 It may also have been bound up with a desire of the new regime to get rid of certain Social Security bureaucrats which it did not like. 10 SEC v. American Hospital Supply Corporation, Unreported Final Judgment of Permanent Injunction and Ancillary Relief, United States 390

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District Court for the District of Columbia. 28 Dec. 1976. Herlihy and Levine (1976: 623) outline some of the other requirements which have generally been mandated by the consent decrees: Moreover, all consultants should be required to file affidavits with the company indicating that the consultant will not remit any portion of the fee received directly or indirectly to the company or its employees or make illegal or improper payments to third parties. Checks made payable to 'bearer' or to 'cash' should not be delivered to agents, consultants or their representatives. These should be a system of multiple approvals of all company disbursements above a certain minimum level. Records of contacts between corporate and governmental officials should be maintained and made available for inspection. In the event of a deliberate or flagrant breach of these policies by an employee, the employee should be dismissed promptly by the m a n a g e m e n t 11 Gereffi (1979: 13) lists Lilly as only number 10 among all companies in worldwide pharmaceutical sales. 12 For a critique of the lack of definition and certainty as to the interpretation of the Foreign Corrupt Practices Act see Gustman (1979). 13 Because of the meaninglessness of subsidiaries' profits in the face of the artificial transfer prices charged within pharmaceutical transnationals. performance in many companies tends to be evaluated more in terms of sales than profits. 14 See New York Times, op. cit., and also many of the oil industry disclosures. 15 See Rogow and Lasswell (1963). Wraith and Simpkins (1964), Heidenheimer (1978). Scott (1972), Jacoby et al. (1977), Rose-Ackerman

(1978).
16 This relationship may well be a reciprocal o n e , with impoverishment fostering corruption as well. See Wraith and Simpkins (1964). 17 F o r a discussion of the extraterritoriality of Swedish anti-corruption law see Bogdan (1979) and for extraterritoriality under the US Foreign Corrupt Practices A c t see Lashbrooke (1979). 18 S e e , for example, UN Commission on Transnational Corporations ( D e c e m b e r 1978).

Chapter 3 Safety testing of drugs: from negligence to fraud

1 T h e details of the criminal action against Grunenthal will be discussed later in this chapter. Laying manslaughter charges against a large corporation has, of course, a more recent precedent in the United States with the defeated case against Ford concerning the alleged lack of safety of Pinto fuel tanks. 2 See Congressional Record, 27 July 1979. E3922-3. 3 US v Andreidas, 366 F.2d 423 (2d Cir. 1966). cert, denied, 385 US 1001

(1967).
4 S e e , for example, Jones (1979). 391

Notes 5

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68-92

Peripheral neuritis is a serious illness. It may occur anywhere in the body. For example, it may begin with a prickly feeling in the toes, followed by a sensation of numbness and cold. The numbness spreads, often above the ankles, and eventually is followed by severe muscular cramps, weakness of the limbs, and a lack of coordination. The patient becomes unable to judge the position of his limbs by their feel, and his gait becomes unbalanced and uncoordinated. Some of these symptoms improve or disappear when the cause is removed, but much of the damage is irreversible (Knightley et al., 1979: 32).

6 The case was that of Peggy McCarrick, heard in the Los Angeles County Court between March and June, 1971. Richardson-Merrell had asked that if the jury should find them liable, damages should not exceed $187,000. The jury found Richardson-Merrell negligent and awarded total general and punitive damages of $2.75 million. 7 I am grateful to James M. Denny. Senior Vice President of G. D. Searle, for providing data on financial trends at Searle from a number of sources including Value Line, Standard and Poors and 3-Trend Cycli-Graphs. 8 This was revealed in a letter to Richard D. Wilson, Deputy Assistant Administrator for General Enforcement Environmental Protection Agency on 25 August 1977 from A . J . Frisque, President of 1BT. 9 A large part of the problem is the tendency of many busy university researchers to completely entrust day-to-day administration of their laboratories to relatively junior and inexperienced staff. 10 Concomitantly, the minor manipulation may have produced some surprising disadvantages over the parent which are not at first apparent 11 The purpose of giving a control group a placebo is to ensure that any observed effect on the well-being of patients in the study is not simply a psychological response to a belief that they are being 'given a pill to make them better'. 12 21 A p p Div. 2d 495,251 N . Y . S . 2d 818. rev'd, 15 N . Y . 2d 317.206 N . E . 2d 3 3 8 , 2 5 8 N . Y . S . 2d 397 (1965). 13 Institutional Review Boards, or Institutional Review Committees as they used to be called, are committees of professional peers who work in an institution where clinical testing is being undertaken. The Boards are rarely subjected to F D A inspection. Between 1971 and 1974, 25 IRBs were inspected: Of the 25 committees inspected by F D A . two had no deficiencies. Of the remaining 23 inspections, F D A found that 13 committees had approved faulty consent forms. In 11 of the 13 cases, exculpatory language was used. In eight instances the form failed to advise test subjects that they were free to withdraw from the experiment at any time - a point that seems important when considering the potential for abuse and exploitation of institutionalized test subjects. F D A found that 8 of the 25 committees inspected did not review the investigational drug study after initial approval: 5 kept no minutes of meetings, records, or documents; and 4 had incomplete or extremely sketchy records. Seventeen committees failed to include persons from one or more of the backgrounds required by F D A regulation.

392

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F D A believes institutional review committees should be independent of the drug firm sponsoring, or the individual performing, the clinical investigation. Yet members of three of the committees were paid for their services by the sponsor or clinical investigator. At one prison the clinical investigator paid the committee chairman $4,000 per year and each member of the committee $2,000 per year. At two other prisons the committee members were paid an unspecified amount by the sponsor or investigator (Subcommittee on Health, 1976a: Part I I 3 7 5 ) . 14 This document written by Robert S. Janicki. Abbott's Vice-President of Medical Affairs, was the basis of Janicki's testimony before Senate oversight hearings on the FDA's process for approving drugs in July 1979. The testimony was before the Subcommittee on Science. Research and Technology H o u s e Committee on Science and Technology. 15 In Australia, for example, the homicide rate in 1977-8 was 4.7 per 100,000 population, the serious assault rate 29.3 per 100,000 and the robbery rate 25.3 per 100,000 (Biles, 1979). 16 Even in Britain, neither government approval nor notification is required for Phase I studies - pilot testing on very small samples (perhaps 10-30) of healthy humans. 17 More formally, in economic terms: T h e operations of firms, or the doings of ordinary people, frequently have significant effects on others of which no account need be taken by the firms, or the individuals, responsible for them. Moreover, inasmuch as the benefits conferred and the damages inflicted - or 'external economies' and 'external diseconomies' respectively - on other members of society in the process of producing, or using, certain goods do not enter the calculation of the market price, one can no longer take it for granted that the market price of a good is an index of its marginal value to society. . . . It follows that an apparently efficiently working competitive e c o n o m y , one in which outputs are quickly adjusted so that prices everywhere tend to equal private marginal cost, may lead the economy very far indeed from an optimal position as defined. Such an optimal position in fact requires that in all sectors production be such that prices are equal to social marginal cost (Mishan, 1969:82-3). 18 T h e prototypical matrix management system is the interdepartmental committee. Where study directors are drawing on people from different departments, some of which might have greater organisational power than their own. their capacity to keep the lid on any problem is further attenuated. Chapter 4 Unsafe manufacturing practices

1 It is doubtful whether GMPs have any legal status in Australia. They are promulgated as a voluntary code by the Commonwealth Health D e p a r t m e n t States have the power to revoke licences to manufacture 393

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pharmaceutical products. Presumably states might use violation of GMPs as the basis for such a revocation action. However, whether the courts would regard such a voluntary code as relevant in a licence revocation is yet to be tested. 2 In 1973 a district court initially threw out the indictment because of prejudicial pre-trial publicity released by the F D A and the Justice Department. This included reference to 'fifty deaths' alleged to have been caused by the intravenous solutions. The defence asserted that even if this were true, evidence that the solution had caused septicaemia deaths would be inadmissible in a trial upon the charge of distributing adulterated and misbranded drugs in interstate commerce. However, the prosecution successfully appealed against this district court decision and (he case proceeded (US v. Abbott Laboratories 505 F.2d 565 (4(h Cir. 1974). cert, denied, 420 US 990 (1975)). 3 Pyrogens are fever-forming contaminants. 4 The fear of adverse consequences for the community at large is a recurrent problem with the sanctioning of corporate crime. See. for example. Boomer v. Atlantic Cement Co. 257 NE 2nd 870 (1970). 5 T h e US R I C O (Racketeer Influenced and Corrupt Organisations) statute is one innovative attempt to break out of this reality. It provides for putting many members of a corrupt organisation on trial at once. The Court is invited to look at a pattern of offences within the organisation rather than at a particular act. See Schmidt (1980). 6 Mr Loftus. former F D A Director of Drug Manufacturing, in his criticisms of my draft, took exception to this reference: I do believe your reference to the prospective defendant as a friend of the [ F D A officer] is cruel, not important to your thesis, and terribly misleading. In my opinion, his decision was in no way influenced by his knowing the prospective defendant. I hope I am correct I have no w a y of knowing whether the personal friendship between the accused and the government official influenced the latter's judgment in any way. Probably Mr Loftus's assessment of the integrity of the official is absolutely correct It is important in such cases, however, that justice not only is done but also is seen to be done. 7 Mr Loftus also argued that my use of the expression 'smoke-filled room' is inappropriate, even though this was the very expression used by another informant: T h e term smoke filled room connotes secrecy, unrecorded activities. An awful lot of that goes on in the political arena. Nothing like that happened in the case history you discussed. Every meeting was memorialized by very detailed memoranda which went into the official files. No meeting was ever held with a representative of the firm without a representative of the F D A District Office being present 8 Footnote 40 in the quote refers to US Public Health Service. Centre for Disease Control (1977), Morbidity and Mortality Weekly Report, 1 April. 394

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9 I asked one Guatemalan production manager: "Do you think of the internal quality auditors from headquarters as adversaries or part of the same team as you?" T h e production manager gave perhaps the most succinct representation of the relationship between production people and auditors when he replied: I think of them as a pain in the ass.' 10 This is not to deny that the following statement from Crosby (1979:84) is inaccurate. It simply means that there will be exceptional situations where the "short-range" benefit will exceed the costs of the "long-range headache". Speaking of integrity, let me make a very exact statement I do not know of a single product safety problem where the basic cause was something other than a lack of integrity judgement on the part of some management individual. Usually the objective was to achieve a short-range goal by cutting corners. The result was a long-range and unprofitable headache. 11 In Britain G M P s are not legally enforceable. Companies cannot be fined for violating them. Nevertheless, the ultimate sanction of withdrawing the company's licence to manufacture is available but never used. 12 US v Morton-Norwich Products. Inc. 461 F. Supp. 760 (N.D.N.Y. 1978). 13 Similar kinds of pressures can be placed on product development managers before a new druggets to the production stage. One managing director explained that the production division might come to the product development manager with a request like 'Can't you make it a little cheaper by including such and such an ingredient which is less expensive', or. "That's difficult to make. Can't we cut a corner here?'. 14 Crosby (1979: 11) argues for the use of tokens such as pins in these programs: "Cash or financial awards are not personal enough to provide effective recognition.' 15 Realising that F D A inspections of small companies are less frequent, the Pharmaceutical Manufacturers' Association (representing the large firms) has urged before Congressional committees that government purchases of drugs should not be made from companies whose plants have not had an F D A inspection in the previous twelve months. Chapter 5 Antitrust

1 In Canada also in 1976. 36 Canadian pharmaceutical companies expended 21.8 per cent of net sales on advertising and promotion (Pharmaceutical Manufacturers Association of Canada. Marketing Expenditures in the Pharmaceutical Industry, Ottawa, Canada, 1977). In Australia the figure is about 19 per cent (Australian Department of Health, 1978:67). Slatter( 1977: 102) found promotional expenditure as a proportion of sales in 12 countries to range between 15 per cent and 22 per cent. 2 Italy is believed to be considering reversing its no-patent policy. 395

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165-86

Dr Solomon Garb has explained what would happen if drug manufacturers were responsible for t h e marketing of baked b e a n s : . . . T h e y would all stop using the word'beans'and each would give the product a new coined name Picture the confusion in the grocery store if beans were no longer named 'beans', but if each maker gave a completely new name to his product Further, try to imagine what would happen if there were 300 to 500 additional new names of this type in the grocery store every year. This is approximately what is happening in medicine, and it is becoming exceedingly difficult for physicians to keep things clear (Quoted in Aftcrman, 1972: 38).

4 T h e Kefauver hearings showed that in the late 1960s the situation was, if anything, worse. Serpasil sold for $39.50, while Modern Medical Supply and Darby sold the product for $0.58 and $0.59 respectively (Subcommittee on Monopoly, 1972: 10-11). Reserpine is an interesting example of a bulk-supply monopoly. While finished reserpine is offered by at least sixty suppliers, the sole manufacturer of the active ingredient is S. B. Penick (Gereffi. 1979: 25). 5 Geis (1967) reported something similar among executives who participated in the heavy electrical equipment price-fixing conspiracy. They did not see their illegal behaviour as harmful; they saw it rather as a beneficial way of 'stabilising prices', a 'duty' to their corporation. See also McCormick(1977). 6 For example, some have argued that the Australian market is so small that economies of scale make it appropriate for an industry to be monopolised by a single firm (e.g. Conlon, 1975; McGuinness, 1975). In contrast Walker (1976: 571) has argued that ensuring domestic competition through the Trade Practices A c t is more important in Australia than in comparable countries because its geographic isolation reduces competition from imports. 7 The Monopolies Commission (1973), Chlordiazepoxide and Diazepam, H . C . Paper. 197. 8 Regulation of Prices (Tranquillizing Drugs) N o . 3 Order 1973, S. L 9 Hoffman-La Roche v. S. ofS. for Trade and Industry (1975) A. C. 295. 10 Between 1960 and 1965 Pfizer instituted 33 different infringement suits to defend its tetracycline p a t e n t Apart from McKesson, in every case the entrant w a s forced, at least initially, to withdraw from the market because, as one executive explained, 'we do not have the financial capability to fight such a giant as P f i z e r . . . and so we never had our day in court' (Costello, 1968:34). 11 US v. Pfizer et al, 426 F.2d 32 (2 Cir. 1970). 12 US\. Pfizer etai, 404 US 548,92 S.Ct.731, 30 L.Ed. 2d 721 (1972). 13 USv. Pfizer et al., 367 F. Supp. 91 (S.D.N. Y. 1973). 14 US v.Morgan, 118 F. Supp. 621,634 ( S . D . N . Y. 1953). 15 US v. Buchalter, 88 F.2d 625, 626 (2 Cir.) cert, denied, 301 US 708 (1937). 16 American Cyanamid Co., 63 FTC. 1747, 1755 (1963). 17 American Cyanamid Co. v FTC, 363 F.2d 757 (6 Cir. 1966). 396

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186-211

18 American Cyanamid Co., 72 FTC, 623,694 (1967). 19 Pfizer v. f T C , 401 F.2d 574 (6th Cir. 1968). cert, denied. 394 US 920 (1969). 20 US v. Pfizer et al., US District Court for the Eastern District of Pennsylvania. C.A. N o . 78-1155,18 August 1980. 21 The advantage of licensing the me-too competitor in this situation is typically that the promotional activities of the competitor may tap a different market to that canvassed by the patent-holder. For example, the former may have large teams of detailers in countries in which the latter has no presence. 22 Resale price maintenance means practices which discriminate against resellers (generally retailers) who refuse to sell at the uniform price recommended by the manufacturer. 23 This argument applies not only to the resources and talent of pharmaceutical companies. Universities spend more of their scarce resources in training pharmacologists because pharmacology graduates can obtain jobs as researchers in the pharmaceutical industry. 24 T h e Indian policy applies only to essential drugs, though exceptions are made for patented and imported products. Trade names were abolished entirely in Pakistan in 1972, but there was a retreat from this position in 1976 w h e n some brand names were allowed ( U N Centre on Transnational Corporations, 1979:48). 25 Of course in totalitarian societies, these arguments about the checks and balances of political democracy do not apply. But then neither do arguments about independence and procedural safeguards in the courts. 26 Clearly, 'political' and 'administrative' are not mutually exclusive categories. There is a continuum At one extreme is administrative discretion which is exercised in secret and without reference to, or oversight by, elected officials. At the other pole are decisions voted in the legislature. Between are various shades of monitored delegation to administrators, administrative discretion subject to political over-ruling, and detailed instructions from politicians to civil servants.

Chapter 6 The corporation as pusher 1 [An infectious disease seminar] was presented by McKesson Laboratories. Those attending would stay at the Southampton Bermuda Princess Hotel, Golf Beach Club. That is on the cover of it It has the pictures of the swimming pool and golf course. It offers 5 nights and 6 days in Bermuda. It offers guest lectures and tells the site of the meeting on one side, and tells you here what you do to take advantage of it A n d it describes other 'side benefits': the round trip air transportation with complimentary drinks, all gratuities and taxes, a welcome rum swizzle, deluxe accommodations, and so on. It also has seminar registration and a certificate of attendance, but these are described in small print at the bottom of the pamphlet Neither specifies that you must attend the courses in order to receive the certificate. A l s o , you may include your wife (Senator Edward Kennedy, Subcommittee on Health, 1974:754). 397

Notes 2

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213-66

One program that we carried at Pfizer was known as the 'Vistaril Dinner.' Money was set aside from the budget to entertain a group from the medical community at dinner. During this dinner we attempted to direct the conversation to the subject of Vistaril and its uses. At the conclusion of the evening our guests were presented with a Vistaril Kit' which included a paper carrying case, a pen, perfume, and s o m e clinical papers on VistarU. The object, of course, was to sell the drug and also to get to know these people better so that we could talk to them about our products the next time that we saw them (Former Pfizer sales representative. Subcommittee on Health. 1974: 755).

3 Sainsbury Report (1967). London, Cmnd 3410. H M S O . : 66. 4 See, for example, the Diabinese case study in Afterman (1972:45). 5 Other regulators of advertising confront similar problems. Jack Goldring informs me that advertisers in the US sometimes run saturation one-day campaigns which blatantly contravene the law. By the next day, when FTC acts to stop the advertising, the campaign is over. 6 These and the following data were kindly provided by Dr Peter Rheinstein, Director of the FDA's Division of Drug Advertising. 7 T h e British Medicines Act of 1968 does in fact in a general way prohibit false and misleading drug advertisements. However, the act is not enforced in this respect, reliance being placed on industry selfregulation. 8 One advertising person expressed the unimportance of the small print in an article entitled 'Ogilvy Tips: Creating Ads that Sell': On the average, five times as many people read the headline as read the body copy (in advertisements). It follows that, if you don'i sell the product in your headline, you have wasted 80 percent of your money. That is why most Ogilvy and Mather headlines include the brand name and the promise (quoted in Medawar. 1979:66). 9 In the past patient labelling has been limited to special cases such as oral contraceptives. 10 One suspects that the real concern among both the industry and doctors is that the information in patient labelling might encourage product liability and malpractice suits against them. On the other hand, some suits might be avoided by the implied informed consent of the patient deciding to take the drug having read the warnings and possible sideeffects. Chapter 7 Drug companies and the Third World

1 A number of transnationals have the kind of function for the internal regulation of promotion described above organised at a regional (e.g. Asia and the Pacific) rather than corporate level 2 An executive of an American transnational explained: 'If they can see that there are adverse reactions being widely recorded in Hong Kong. 398

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say. then they will save the expense of clinically testing the drug on humans in the United States.' 3 Admittedly though. Third World countries have been loath to participate in the W H O adverse-reaction-reporting scheme partly because it is perceived as concentrating on newer, 'rich man's drugs'. 4 For example, Egypt, Kuwait, the Sudan and all the Central American countries require certificates of free sale. Chapter 8 Fiddling

1 For the most complete of the many accounts of 'Coster's' life, see Keats (1964). 2 Boyd (1973:137-8) illustrates how this can be done with the 'Confession of an anonymous mergerer': 'A good merger is like marrying a rich woman and taking her money. It's as sweet as that, sweeter even, because you can have as many of these brides as you w a n t . . . Or it's like politics. You can often get control and speak for the majority with only 10 percent of the voting stock, because you're organized while the mass of stockholders are strung out and don't pay much attention. Best of all, you do it with borrowed money. Never use your own. 'You start out with control of a little fleabag company that's ready for the receivers. Then you find a fat corporation that's been selling its assets and is sitting on lots of cash. You send in a spy to find out where the 'control stock' is; usually it's held by directors of the company. Y o u bribe them, in a manner of speaking, by offering to buy the company stock they hold at a price much higher than it's worth; in return, they agree to resign and appoint your men in their places. Then you go to your bank, let them in on the deal, offer their key men personal stock options and other side deals - and they'll loan you all you need to buy out the directors. Once you're in control of the new company, you use some of its assets to pay off your bank and divvy up what's left with your insiders. The only way you can do that legally, of course, is to merge your new company with the old one you've just about bankrupted. That way t h e new entity assumes all your old debts. 'Stockholders? They don't know anything about it, really. You've already bought out their leaders. All they see is what's on the proxy statement - and you're the fellow w h o puts it out, because you're the management now. Hide your old company's debts, doctor up the figures, hire one of those N e w York evaluating firms to back you up. and always promise the exact opposite of what you plan to do. Like I said, it's just like politics.' 3 Overpricing was defined relative to average world prices for the product 4 T h e cost to the patient of most Australian prescription drug sales is subsidised by the Pharmaceutical Benefits Scheme (PBS). PBS therefore has de facto price-fixing power over all companies w h o wish to sell their products under the scheme. 399

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Chapter 9

Strategies for controlling corporate crime

1 In 1978. drugs approved by F D A which were classified as "important or modest therapeutic gains' had taken an average of 22.4 months being processed by the agency, while 'new molecular entities that are of little or no therapeutic advance' took a mean 32.7 months. New drug applications which were not classified as new molecular entities took even longer (figures supplied by the FDA's Bureau of Drugs). 2 A Business Roundtable study of 48 companies (including Lilly and SmithKline) found that in 1977 incremental costs of $2.6 billion were met under requirements imposed by six federal regulatory agencies. See Arthur Andersen & Co, Cost of Government Regulation Study for the Business Roundtable, March 1979. The PMA has completed a follow-up to this study focusing specifically on the pharmaceutical industry; see PMA. Economic Costs of FDA Regulations, March 1981. 3 Douglas M Costle, chairperson of President Carter's Regulatory Council and Administrator of the Environmental Protection Agency, has made an attempt: Those benefits run from savings in lives at one end of the spectrum, to aesthetic benefits at the other. In between, you find benefits ranging from savings in property maintenance - not having to paint your house or clean your clothes as often - to the protection of farm and timber crops from saline soils and acid rains. Despite the difficulties, some economists are beginning to measure the benefits of regulation. In 1977, for example, after evaluating existing studies, the American Lung Association estimated that air pollution could be costing us $10,000 million annually in health damages. Dr. Lester Lave, chairman of the department of economics at Carnegie-Mellon University, and Dr. Eugene Seskin, a senior research associate at Resources for the Future, have published their study on Air Pollution and Human Health. They estimate that the annual health benefits of controlling pollution from factories could be as much as $20.2 thousand million in 1976 dollars. In a forthcoming study. Dr. Edwin Mills of Princeton University has estimated the recreational, aesthetic and ecological benefits of water quality improvements to be of approximately the same magnitude. T h u s , now that economists have been asked to look for figures, they are beginning to find that health, safety and environmental regulations have a sound economic base. To place such benefits on a more human scale, let me quote examples cited by Dr. Stewart Lee, chairman of the department of economics at Geneva College. He finds that in the regulated products groups, safety packaging requirements have produced a 40 percent drop in ingestion of poisons by children over a four-year-period. Since the safety standards for cribs became effective in 1974, crib deaths have fallen by half, and injuries by 45 percent The Burn Institute in Boston reports that in 1971 - prior to the children's sleepwear standards - 34 percent of its flamebum injuries involved sleepwear. In 1977 the figure was zero. According to the U.S government's General Accounting Office, 400

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297-324

28,000 lives were saved between 1966 and 1974 because of federal motor vehicle safety regulations. The same report showed that in one state, where a detailed analysis was conducted, there was also a substantial reduction in the frequency and severity of injuries. With auto accidents the number one cause of paraplegia in the United States, these figures are significant (Costle, 1979: 13). 4 One senior F D A official made the following comment on the way 'minor violations' has been interpreted in practice: Note that the expression 'minor violations' is not defined. In the regulatory tradition that I came from, prosecutors always had the right to use discretion. In US\. Dotterweich, one of the famous F D A Supreme Court decisions, the Court said we should rely on the good sense of prosecutors. (I would never rely on the good sense of a prosecutor -1 use this reference to get across the point mat the Supreme Court of the United States recognized the right of prosecutors to not prosecute some violations.) In the FDA which employed me for 29 years, the agency always used discretion and did not worry itself about what a 'minor' violation was. If the Commissioner, or the General Counsel, or a Compliance Chief at Headquarters decided, for whatever reasons (they had to be ethical) that a case was not to be prosecuted, it was not prosecuted. 5 For recent treatments of the questions of administrative discretion and consistency within regulatory reform see Kagan (1978) and Yale Law Journal (1980). 6 See Argyris (1978) for a discussion of the futility of this approach to regulation. 7 USY. Park, 7 4 - 2 1 5 , 9 5 S. Ct 1903 (1975). 8 US\. Dotterweich, 320 US 277,64 S. Ct 134,88 L. Ed. 48 (1943). 9 Business Week magazine concluded (hat the Park decision, together with the FDA's intensified efforts to notify chief executives of violations, have 'succeeded spectacularly at "executive consciousness-raising" '. (Business Week. 10 Mar., 1976, p. 111.) 10 For a detailed discussion of the relevant American law to all the issues discussed in this paragraph see Harvard Law Review (1979: 1264-70). 11 Naturally, however, corporations should not be prosecuted for corporate crimes committed by individual employees who violate the law against the wishes of the corporation and when the corporation has diligently taken every possible step to ensure that such individual crimes do not occur. Individual criminal liability is appropriate for such cases. 12 Various commentators have recently argued that corporations do not have a track record of effectively sanctioning guilty individual employees following corporate crime convictions (e.g. Orland, 1980: 5 1 4 - 1 5 ; Coffee, 1980: 459). Executives found guilty of crimes in the heavy-electrical equipment and Watergate investigations were generally reappointed by their companies. In fact, however, it is more common for individual employees convicted of corporate crimes not to be kept on by their companies. W h e n the chairman and president of the Fruehauf 401

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Corporation were convicted of tax fraud, undertaken on behalf of the corporation, Fruehauf conducted a survey of what other companies with similar experiences had done. Twenty-five companies whose officials had been prosecuted for crimes committed on behalf of the corporation between 1971 and 1978 were studied. Only 'about a third' of these executives retained their positions (Coffee, 1980:445). T h e fact remains, however, that corporations will sometimes choose not to discipline their own criminal employees. This is why courts must force them to do so. Economists such as Posner (1977) w h o assume that if courts sanction corporations, the latter can be trusted to automatically impose effective sanctions on their individual employees, are naive. One problem ignored by these writers is that sanctioned employees may 'blow the whistle' and bring new skeletons out of the corporate closet. For example, w h e n Gulf and Western dismissed its general Counsel, Joel Dolkart, for embezzling $2.4 million, Dolkart secured pleabargaining concessions by telling the SEC about various unrelated corporate activities (Coffee, 1980:459). 13 Coffee (1980: 456-8) takes an opposite tack. He suggest that concentrating prosecutorial resources on individual executives is more efficient because the expected benefit of the individual from a corporate crime is lower than that of the corporation. 'Axiomatically, although the corporation must act through its agents, the profit accrues primarily to the firm and its owners. Thus, the cost of deterring the agent may be less than that of detering the firm' (Coffee, 1980:456). The present book has shown that this is not 'axiomatic' at all. Profit gains for the corporation may be minor incentives compared to personal executive gains from impressing superiors, meeting production targets, getting a promotion, etc. Coffee (1980: 458) is also on shaky ground empirically when he suggests that because individuals cannot call upon the legal resources of a corporation, individual prosecutions will have lower transaction costs. In practice, it takes more resources to attempt to convict individual pharmaceutical executives than pharmaceutical corporations. One reason for this is the demonstrated willingness of corporations to put all their legal resources at the disposal of employees who are charged with committing crimes on behalf of the corporation. See, for example, the A b b o t t case study in Chapter 4. 14 Advocates of a 'just deserts' model might find this a compelling argument, as might devotees of classical economic models. Unless the monetary costs of getting caught can be set at a higher level than the gains from the crime divided by the probability of getting caught, it will be rational to continue committing the crime. H e n c e , the penalty for a crime which nets $1 million and only attracts a 1 in 10 probability of apprehension should be over $10 million. Since the collectability ceiling of fines against individuals is lower than for corporations, the possibilities for economically rational deterrents against individuals are less. 15 This happened in the Searle case study (Chapter 3) and also at Lockheed after the foreign bribery scandal. As the interim chairman of Lockheed conceded in 1977, 'People around here felt lower than snakes' (Kraar, 1977). 402

Notes

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16 Coffee (1980) may be correct when he points out that fining a wealthy person a fixed percentage of his income is a lesser deterrent than fining a poor person the same fixed percentage of his income even though the wealthy person pays a larger fine. This is because the poor person is taken closer to his bottom dollar by the fine and the utility of dollars increases in inverse proportion to how many of them you have. Another consideration is that the wealthy may be more adept at insulating themselves by securing assets in the hands of others. The more important fact remains, however, that with wealthy persons we are more likely to be able to collect a fine which is large enough to deter crimes with low risks of apprehension and large pay-offs. 17 Not only does the white-collar offender have more to lose, but he or she also has more to give back as restitution to the victim or reparation to the community. A doctor convicted of medical benefits fraud can be required to serve a rural community which has no physician for a specified period. Such reparation cannot be exacted from an unskilled offender. 18 Because white-collar offenders are more likely to be older family men with responsibilities for putting children through their education and other family obligations, a loss of earning capacity may also have wider social ramifications for them than for young traditional offenders wifh no dependants. Traditional offenders who do have dependants are, however, more vulnerable in this way than white-collar offenders because they generally have lesser financial reserves. 19 The United States, with higher crime rates than any other developed country, persists in sending its criminological experts to other countries with low crime rates to show them how to solve their crime problem. The American solution has been extraordinarily heavy use of imprisonment by international standards. Most American states have an imprisonment rate per 100,000 population more than ten times as high as the Australian jurisdiction in which the author lives. Now we are seeing American white-collar crime experts touting imprisonment as the means of controlling white-collar crime. 20 An obvious exception to this is with an antitrust conviction in which all (or most) members of the oligopoly are fined. 21 Hopkins' (1978: 12-13) conclusion that the conviction of Power Machinery for false advertising under the Australian Trade Practices Act produced favourable publicity for the company is an illustration. 22 For a more refined version of this general approach, see Fisse's (1973) development of the idea of court-imposed 'preventive orders'. 23 Fisse (1980) notes the use of adjournment of sentence as a 'back-door to enter the internal affairs of a corporate offender' by reference to Trade Practices Commission v. Pye Industries Sales Pty. Ltd. A.T.P.R. 40-089 (1978). 24 SEC v. Allied Chemical Corp., Civil Action No. 77-0373, at 2 (D.D.C. filed 4 March 1977). 25 For a thoughtful discussion of this question see Greenawalt and Noam (1979). 26 US\. Morton Salt Co., 338 US 632,652 (1950); quoted with approval in California Bankers Association v. Schultz, 416 US 21,65-6 (1974). 403

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27 Griswoldv. Connecticut. 381 US 479,484 (1965). 28 "While an individual may lawfully refuse to answer incriminating questions. it does not follow that a corporation vested with special privileges and franchises, may refuse to show its hand when charged with an abuse of such privileges" (Hale v. Henkel. 201 US 4 3 , 75 (1906). See also University of Pennsylvania Law Review (1964: 394). 29 Triplex Safety Glass Co. v. Lancegaye Safety Glass (1934) [1939] 2 K.B. 395. 30 Duncan v. Louisiana. 391 US 145 (1968). 31 Green v. US, 355 US 184, 187-8 (1957). 32 USv. Pfizeretal, 367 F. Supp. 91 ( S . D . N . Y . 1973). 33 Afterman (1972: 4 7 - 8 ) provides a variety of other examples which have not been discussed in this book. 34 N e w Zealand is a notable exception where the compensation scheme is funded from general government revenue. 35 As Goldring and Maher (1979:28) explain: Although in Daniels v White and in some American cases, evidence by the manufacturer of the "fool-proof nature of his operation has been sufficient to rebut the inference of negligence, and although judicial statements may be found (as in Daniels v White) that the duty of the manufacturer under English law is not to ensure that every article produced by him is perfect, but merely that he has exercised reasonable care in setting up the manufacturing process and supervising his employees, a plaintiff who can show that he has been injured by a defect in goods is in a reasonably strong position to establish a claim for damages in negligence. 36 Conversely, it can be argued mat strict liability removes incentives for the victim to invest in safety measures. This is a rather absurd objection in the case of drugs, because it is only manufacturers who are in a position to invest in safety. Another contrary argument is that strict liability might encourage careful companies to switch investment to industries where care avoids liability. 37 In fact, a somewhat ethnocentric view is being expressed here. Japanese chief executive officers are far less crucial under the Japanese collegial decision-making systems. As one Japanese businessman explained: In America, decisions can be reached quickly because there is always a guy w h o is in charge of some affair. There is none in Japan. There is nobody in a Japanese company w h o is really 'in charge' of anything - not even the president We do not have any very clear concept of chief executive officer or chief operating officer (Fortune, 'Japanese managers tell how their system works', November 1977: 126,130). 38 Under the incentive compensation plan introduced following Allied Chemical's Kepone disaster, 'about one-third of the plant managers' pay is based on safety performance' (Hayes, "Complying with EPA Rules", New York Times, 16 January 1980, D (Business).T). 404

Notes

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39 This is the essence of corporate decision-making defined by Kreisberg's (1976) "bureaucratic politics model'. 40 Quite apart from the peculiar features of business organisations which foster the filtering of bad news, there are more general principles of cognitive dissonance theory: recipients of information normally focus upon and relay only the information which conforms with preconceptions, while conflicting information is filtered (Festinger, 1957). Even absent the distorting impact of preexisting attitudes on information flow, experimental evidence suggests that serial relay of information results in significant information loss. Information theorists have formulated the rule that each additional relay in a communications system halves the message while doubling the "noise'. Significantly, some corporations have today between twelve and fifteen hierarchical levels between the first-line supervisor and the company president, suggesting that much 'noise' and only a very diluted message will reach the top through regular lines of communication. The economist Kenneth Boulding has phrased the problem the most pessimistically: 'the larger and more authoritarian the organization, the better the chance that its top decision-makers will be operating in purely imaginary worlds' (Coffee, 1977:1138). 41 Coffee (1977: 1142) suggests that the board 'performs the role of a miniature capital market, rewarding efficient divisions and penalizing inefficient ones - but thereby also encouraging lower echelons to avoid sanctions by withholding adverse information from the top.' 42 See, for example, the reviews by Leech and Mundheim (1976) and Sommer(1977). 43 Banking, Housing and Urban Affairs Committee, US Senate, Report of the Securities and Exchange Commission on Questionable and Illegal Corporate Payments and Practices. Washington D C , 94th Cong. 2D S e s s . , 1976. See also De Mott's (1977) account of how the government appointed Emergency Loan Guarantee Board failed to become aware of Lockheed's foreign bribery escapades. 44 Nevertheless, it is worth pointing out that in the Coster-Musica case study it was the full-time company treasurer w h o tracked down the president's crimes while the board remained oblivious to them. 45 This is a dilemma comparable to that over Q A U reports being available to government inspectors. 46 For example, James Q. Wilson, quoted in Demaris (1974:442). 47 Sommer (1977: 131) has made a beginning with an evaluation of such minor examples of 'public interest directors' as already exist The most famous instance is the court-mandated appointment of SEC-approved unaffiliated directors to the board of Mattel, Inc. 48 T h e Australian government sold its pharmaceutical company, Fawnmac, in late 1980. 49 W e l l c o m e , the British non-profit pharmaceutical enterprise, does devote a significant proportion of its profits to research on tropical diseases through the Wellcome Foundation. 405

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50 T h e socialist answer to this criticism is that the socialist manager is better able to resist such pressures by open appeal to the wider public interest Since all socialist organisations are justified ultimately by service to the public interest, such appeals can be articulated to official goals. No articulation of this sort is possible in the capitalist organisation where the ultimate goal is profit 51 In 1967, United States research consumed 57,700 primates, 106,200 ungulates (horses, cattle, pigs etc.), 361,000 dogs and cats, 504,500 rabbits, 2 million birds, and 30 million rodents (National Research Council, LEAR Survey of Laboratory Animal Facilities and Resources, 1968). 52 A study of transnationals operating in Brazil (Brandt and Hulbert, 1976) found US firms to be more likely than both Japanese and European companies to have their subsidiaries headed by Brazilians. 53 International Chamber of Commerce, Guidelines for International Investment (Proposal adopted by the Council of the ICC at its 120(h session, 29 November 1972); also. Extortion and Bribery in Business Transactions (Report adopted by the 131st Session of the Council of the I C C , 29 November 1977), ICC Publication N o . 315. See also Hellmann (1977:68-73). 54 Organisation for Economic Cooperation and Development, 'Guidelines for Multinational Enterprises', annexed to Declaration on International Investment and Multinational Enterprises, OECD Press Release A(76) 2 0 , 2 1 June 1976; also available in 75 International Legal Materials 967 (1976). 55 Organisation of American States, Permanent Council Resolution on the Behavior of Transnational Enterprises (10 July 1975); available in 14 International Legal Materials 1326 (1975). 56 T h e International Organisation of Consumers Unions now has over fifty national member organizations. The Nader organisation's MuItinational Monitor publication is also an important initiative to internationalise the consumer movement. 57 Moreover, one finds this inevitability in many other areas of business regulation. Schrag (1971) tells how when he took over the enforcement division of the New York City Department of Consumer Affairs, he imposed a litigious approach. In response to a variety of frustrations, especially the use of delaying tactics by defendants' lawyers, a 'direct action' model was eventually substituted for the 'judicial model'. Nonlitigious methods of pressuring companies into consumer redress became increasingly important These included threats and use of adverse publicity, revocation of licence, prosecution of technical breaches of legislation, giving aggrieved consumers clout in restitution negotiations, writing to consumers to warn them of company priorities and exerting pressure on reputable financial institutions and suppliers to withdraw support for the targeted company. 58 Jacobs (1974: 53) has suggested the following as a general postulate of organisation theory: 'organizations are controlled by those w h o comprise or control the organizations' most problematic dependencies. In

406

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Blau's terms (1964) organisations 'give compliance to those upon whom they are most d e p e n d e n t ' 59 As Franklin Roosevelt once observed: 'Big business collectivism in industry compels an ultimate collectivism in government' (quoted in Nader e t a l . , 1976:262).

407

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427

Index

A b b o t t Laboratories: advertising Placidyl. 217; backing Welch's j o u r n a l s , 2 2 0 ; cost of F D A r e g u l a t i o n s , o n . 9 7 - 8 ; failure o f c a s e a g a i n s t , 3 7 6 ; i n v e s t m e n t a n d profits i n P u e r t o R i c o , 2 8 5 ; p r o m o t i o n a l gifts from. 2 1 1 - 1 2 ; radioactive isotopes, p r o d u c i n g . 169; response to criticism. 2 3 1 ; unsafe manufacturing practices. 114-18.342 Abbott's Quality Alert Award Scheme. 152 a c c o u n t a b i l i t y , 3 0 8 , 3 2 4 ; see also liability, responsibility A c h r o m y c i n . 177 A c m e M a r k e t s . 320 Adams. Gordon, 16 A d a m s . Walter, 1% advertisements: misleading, 214-16, 2 1 7 - 1 9 . 2 3 1 ; remedial. 225. 232-4. 239 advertising, drug: mass media. 2 0 7 . 2 4 0 ; medical journal. 2 1 4 - 2 1 . 254; r e g u l a t i o n of. 2 3 5 - 8 , 2 9 5 Afterman, Leanna. 216. 2 2 3 , 2 3 3 . 2 3 4 A g a r w a l . Aril, 160, 173, 2 7 2 , 2 7 5 agranulocytosis. 250 A h a r t , G r e g o r y . 84 A H S . iee A m e r i c a n Hospital Supply Corporation AHS/Mexico. 26.27.32 Alcon, 32 Aldactone. 75-6 A l d o m e t , 12 allergic reaction. 344 Allied Chemical, 338 a l p h a m e t h y l d o p a . 12 Al-Thakeb, Fahad. 6

A M A . s American Medical Association A m e r i c a . U n i t e d S t a t e s of. see U n i t e d States A m e r i c a n H o m e Products: advertising expenditure. 207; disclosures to SEC. 20. 37; F D A complaints about. ID; Inderal, promoting. 2 1 1 ; marketing c o n t r a c e p t i v e s , 2 4 8 : profits. 1 5 9 - 6 0 American Hospital Supply Corporation ( A H S ) : disclosures to S E C , 2 4 - 8 , 3 2 . 4 0 - 1 , 3 3 8 ; t a x - e v a s i o n in, 2 8 8 A m e r i c a n Medical A s s o c i a t i o n . 218 aminopyrine. 250 aminopyrine-like butazones. 216 a m p h e t a m i n e s . 207 A m p h o j e l , 113 A - M - T , 113 analgesics, 1 6 2 , 2 1 6 . 2 3 0 , 2 5 0 anabolic steroids, 2 5 0 . 2 5 2 A n d e a n P a c t c o u n t r i e s , 156 Andre. John. 58 animals, laboratory: cancer testing on. 9 5 ; d o g s . 6 2 . 8 4 ; d r u g t e s t i n g o n . 102, 406; hamsters, 77; m o n k e y s , 6 0 - 2 . 3 7 1 ; N a p r o s y n t e s t s , in, 8 1 ; r a b b i t s . 3 7 1 ; rats. 6 2 , 7 5 . 7 7 ; suffering of, 370-1 A n t h o n y . Dr Marc. 230 a n t i a n g i n a l d r u g s . 165 antiarthritics, 162.215 a n t i b i o t i c s : batch p r o c e s s e s , 168; chloramphenicol, 210; F D A ' s d i v i s i o n . 2 2 0 ; Latin A m e r i c a n use of. 2 5 3 ; m a r k e t for. 175; s a m p l e s r e j e c t e d , 141. 142; U S m a r k e t b r e a k d o w n . 162; ' w o n d e r d r u g s ' . 5 antidiabetic drugs. 162. 2 4 6

428

Index
a n t i h i s t a m i n e . c o n t a m i n a t e d , 111 antihistamine, US market breakdown, 162 antihypertensive drugs, 2 4 6 , 2 5 1 antipyretic analgesics. 250 Antitrust Division o f t h e US Justice D e p a r t m e n t . 1%. 376 a n t i t r u s t lavv(s), 4 5 , 159. 1 6 6 . 2 8 7 A n t i v e n i n . 169 aplastic anaemia. 2 1 0 . 2 4 7 Applied Management Sciences, 234 Arendt. Hannah, 3 A r m s t r o n g . J. S c o t t , 2 A r n a u d . Dr. 22 a r t h r i t i s , d r u g s for, 5 4 ; see also antiarthritics A s a n t e . S . K. B.,47 a s c o r b i c a c i d , 162 Aspartame. 76-7 aspirin, 2 0 7 . 2 1 6 Asta W e r k e . 2 5 0 . 2 7 2 A t o m i c Energy Commission, 90 Auschwitz, 4 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 , see Health Department, Australian Australian Law Reform C o m m i s s i o n D i s c u s s i o n Paper. 347 Australian National Biological S t a n d a r d s L a b o r a t o r y . 141 A v a f o r t a n , 250 A v e n t y l . 208 Avery. C. K..229 A y a n i a n . R o b e r t . 160 Baldwin. William H.. 281 Bandura. Albert, 3 barbiturates. 207 Barnet. R. J.,375 Barofsky, I..241 B a r t s h . T h o m a s C , 189 BASF. 4 Bass. M.. 243 'bathtub'manufacturers of drugs. 390 112. behavioral drift. 2 0 8 - 9 behavioural disorders, 249 Bern. D . J . . 3 - 4 B e n n e t t . Sir F r e d e r i c k . 3 0 0 Bequai. August. 40-1 beri-beri, prisoners given, 89 Best, William R . . 2 2 2 B i b i l e , S e n a k a , 271 Biometric T e s t i n g Inc.. 80. 107,308 B i o r e s e a r c h M o n i t o r i n g P r o g r a m , see FDA Bishop. John. 70 Black. Justice. 340 B l a k e s l e e , A l t o n L.. 220 blood d a m a g e , drug-caused. 56 Blozan,CarIF.,82 B l u m b e r g . A b r a h a m S., 2 9 9 Board of R e g e n t s , N e w York. 91 Bobst. Elmer. 206 Boehringer-lngelheim. 225.250.251 B o n d . R o n a l d S . . 165 bone marrow disease, drug-caused. 56 Bonger, Willem, 369 B o o t s , profits of, 160 B o r k i n , J o s e p h , 4-5 Boyd. J. R..241 Braithwaite, John. 4 9 . 1 3 8 . 2 7 6 . 3 0 5 . 3 1 4 B r a i t h w a i t e . V a l e r i e . 1.14 brand n a m e s . 6 6 - 7 . 1 6 5 . 198-9 B r a z i l , d r u g i n s p e c t i o n s in. 2 7 5 Brandenburg, R . C . , 6 0 B r e i t . W i l l i a m . 325 Brennan. Bruce. 322 Brenner. S. N.. 4 9 . 3 5 1 Brewin. Robert. 2 0 7 . 2 0 9 . 2 2 1 . 2 2 6 . 3 0 0 . 316 bribery. 1 1 , 1 3 Briloff. A b r a h a m J., 2 7 9 B r i s t a c y c l i n e , 177 Bristol-Myers: advertising expenditure. 207; disclosures to S E C . 2 2 - 3 . 3 7 ; m e r g e r w i t h M e a d J o h n s o n . 1%; t h e t e t r a c y c l i n e price-fixing s t o r y . 1 7 6 - 9 0 B r o a d y . J o h n G . . 182 B r o m l e y , B r u c e . 317 B r o u g h t o n State H o s p i t a l . 2 2 9 B r o w n , C h a r l e s S., 231 B r o w n , Dr Ernest C, 57 B r u u n . Kettil. 206 B u r a c k . R i c h a r d . 6 7 . 1 6 0 . 172 Burnstein. E . , 3 Burroughs-Wellcome, 250,251 Buscopan C o m p o s i t u m , 250 B u s h . D r V . , 164 B u s i n e s s R e g u l a t i o n . D e p a r t m e n t of, 381-2 Business Week. 199. 2 8 5 butazones. 216

B a u m a r t . R . C , 351 B a x t e r - T r a v e n o l , 7 8 , 153 B a y e r : a p p o i n t m e n t of war-criminal by, 5 ; B r i t i s h M P d i r e c t o r of. 3 0 0 : C u t t e r Laboratories and. 2 8 4 . 3 7 3 ; d e s c e n d e d from I . G . F a r b e n , 4 ; heroin, marketing, 207; owns Netherlands Antilles holding company, 284 B e a c h , B r e w s t e r S., 281 Beall, S e n a t o r , 248 B e a m i s h . SirTufton H. 300 Becton-Dickinson. 32 Beecham. 160.300

429

Index
B u t c h e r . Sir H e r b e r t W . . 3 0 0 B u t t l e s . J o h n S . 11.285 Byron. W. J, 50 Calvert. E . J . . 2 4 3 C a m p b e l l . Sir J o h n . 2 0 6 Canadian Health Protection Branch. 137 Cancer Institute. US National. 105.341 c a n c e r m o r t a l i t y i n N e w J e r s e y . 135 cancer research experiments: animal. 95: human. 88.89 C a n e l l a . J u d g e . 183. 342 C a n t o n R o a d smuggling case. 206 Cantwell. Dr Nelson, 52-3 Cappalletti, M a u r o , 347 Caroline. Queen, 90 Carrtone Laboratories. 228. 229 c a r t e l s . 180. 1 9 1 - 5 C a r t e r - W a l l a c e . 3 7 . 160 Cartwright. D . . 3 Cass. Dr Leo J. . 5 8 - 9 Cass Research Associates. 59 C a t a p r e s . 251 C e d a r s of L e b a n o n Hospital. 355 C e n t e r . D r , 1 2 0 , 123 C e n t e r for D i s e a s e C o n t r o l . U S , 116 Centrafarm, 174-5,200 Certification S c h e m e on the Quality of Pharmaceutical Products M o v i n g in International C o m m e r c e , 275 C h a n d l e r . Geoffrey, 348 C h a s e . J u d g e , 183 C h a y e s , A b r a m , 313. 314 C h c m i e G r u n e n t h a l . see G r u n e n t h a l chloramphenicol: expired, 260; p r o m o t i o n of. 2 1 0 . 2 5 0 ; s i d e - e f f e c t s of. 2 1 0 . 2 4 7 ; s u b s t i t u t e d for tetracycline, 2 5 3 ; withheld in typhoid research. 89 Chloromycetin, 210.222,23 9.248.253 C h l o r o s t r e p . 248 C h l o r t e t r a c y c l i n e . 1 7 5 . 185 Christian D e m o c r a t i c Party. 17 Ciba, 222 Ciba (Switzerland), 300 Ciba ( U K ) , 3 0 0 C i b a - G e i g y : clioquinol in diarrhoea treatment. 253; marketing ofanabolic s t e r o i d s . 2 5 1 ; m e r g e r . 1%: price o f S e r p a s i l . 166: ' Q u a l i t y S e a l ' P r o g r a m . 1 5 3 ; w i t h d r a w a l from P a k i s t a n . 2 7 2 C l a r k s o n . K e n n e t h W . , 160 class actions, 3 4 6 - 8 C l a y t o n A c t . 1 8 4 . 186 Clinard. Marshall B.. 5. 15,329 clioquinol, 253,346 Clonidine,251 Clothier Report. 118-19 c o c a i n e . 207 C o c k s . D o u g l a s L . . 160. 2 9 2 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 Corporations, 47,374-5 C o f f e e , J o h n C o l l i n s , Jr. 329. 3 3 4 - 5 . 338,357.363 C o l l i n s . L . J.. 2 6 4 C o l o m b i a t r a n s f e r pricing. 2 8 5 C o m a n o r . W i l l i a m S.. 169 Commission ofthe European C o m m u n i t i e s . 191 C o m p a z i n e . 225 c o m p l i a n c e staff, c o r p o r a t e . 1 3 7 - 9 . 357-9 C o n o v e r p a t e n t , 189 C o n s e r v a t i v e P a r t y . B r i t i s h . 300 Console. Dr Dale. 165.224.227.255 C o n s u m e r P r o d u c t Safety C o m m i s s i o n , 380-1 Contac Mist, 359 Contergan (thalidomide). 6 6 . 6 8 , 6 9 c o n t r a c e p t i v e m a n u f a c t u r e , h e a l t h risks in. 1 3 4 - 5 c o n t r a c e p t i v e s , oral. 2 4 1 - 2 . 2 4 8 , 2 5 8 Conyers, Congressman, 55 C o o k C o u n t y Jail, 8 9 Cook. Jonathan D. 82,84 C o o p e r . R i c h a r d . 311 C o r d i s C o r p o r a t i o n , failure o f q u a l i t y c o n t r o l s t a n d a r d s at. 1 1 9 - 2 9 . 3 1 6 c o r t i c o s t e r o i d s , s y n t h e t i c , 168 c o r t i s o n e . 164 C o s t a R i c a , high s t a n d a r d s in, 2 7 7 . 3 7 0 C o s t e l l o . P e t e r M . , 198 C o s i e r . D r F . D o n a l d , 2 7 9 - 8 1 . 288 C o u n c i l o n E c o n o m i c P r i o r i t i e s . 114 C o u r t o f A p p e a l s , U S , 182. 186 C o u r t o f J u s t i c e o f the E u r o p e a n C o m m u n i t i e s . 174 C P S C , see C o n s u m e r P r o d u c t S a f e t y Commission Cranston, Ross, 3 2 5 , 3 3 3 - 4 Criminal C o d e Reform Act. 347 c r i m i n a l law. see law c r i m i n a l p r o s e c u t i o n , see p r o s e c u t i o n s C r i m i n o l o g y . A u s t r a l i a n I n s t i t u t e of, 385 C r o s b y . P h i l i p B . . 140. 149 Crouch. David, 300 Ciout. Dr Richard. 209 C u b a . N a t i o n a l M e d i c a l Library of. 2 6 3 C u l l i g a n . J o h n , 113 C u p r i m i n e , 169 Cutter Laboratories. 2 8 4 . 3 7 3 c y c l a m a t e s , 231 Cyanamid: disclosures to S E C , 3 2 , 3 7 ; d o m i n a t i n g a n t i b i o t i c m a r k e t . 175; D r

430

Index
Fox and. 12-13: e m p l o y e d Dr Smith. 5 3 ; 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 . 198; the tetracycline price-fixing story. 175-90 D a l k o n Shield. 258 Darvall, L. W . . 2 3 3 Darvon, 170,20 4.209.216 Davies. Wyndham. 12-13.300 Davis. K e n n e t h C . 306 D a w e s L a b o r a t o r i e s , 134 d e a t h s from: c h l o r a m p h e n i c o l . 2 1 0 ; contaminated intravenous solutions. 3 2 . 116; D a r v o n . 2 0 9 : d i - e t h y l e n e g l y c o l , 1 1 3 ; D o r n w a l , 5 6 ; elixir s u l f a n i l a m i d e . 110; F l e x i n , 56; i n c o r r e c t l y l a b e l l e d t a b l e t s , 110; Librium, 2 0 9 ; O p r e n , 56; Sudoxican. 54; thalidomide. 69; Valium, 209 D e c a d u r a b o l i n . 250 Delmas-Marty. Mireille. 284 De L o r e a n . John Z.. 378 D e p o - P r o v e r a . 258. 266 d e t a i l m e n . 212. 2 2 2 . 2 2 4 - 6 , 250 Dianabol,251 D i a n a v i t , 251 d i a z e p a m , 172. 199 d i - e t h y l e n e g l y c o l , 113 digitalis tablets, c o n t a m i n a t e d . I l l digoxin tablets, recalled. Ill d i h y d r o e s t r e p t o m i c i n e , 248 dipyrone, 250 director, public-interest. 365-6 d i r e c t o r s , r o l e of, 3 6 2 - 7 Distaval (thalidomide), 70 Distillers' Company. 6 9 - 7 0 , 7 4 , 106-7 diuretics. 162. 1 6 5 . 2 5 1 dogs in laboratories. 6 2 . 8 4 D o r s e n , N o r m a n , 301 Dotterweich, 321 D o u g l a s . Justice. 340 D o w , 196 D o w i e , Mark, 257-9 D r u c k e r , Peter F., 3 5 9 , 365 drug abuse, 207 D r u g A b u s e . N a t i o n a l I n s t i t u t e of. 2 0 9 d r u g r e c a l l s . 148. 1 4 9 , 1 5 3 , 158 D r u g R e g u l a t i o n Reform Bills. 2 6 2 - 3 . 294 Drug Research Corporation, 58 drugs: dumping. 2 5 8 - 6 1 , 3 6 9 ; expired, 2 6 0 ; m e - t o o , 164, 1 9 1 , 2 9 3 ; p r e s c r i p t i o n . 1 7 0 ; s e r v i c e , 169; s m u g g l i n g . 2 6 1 ; toxic effects. 208 d r u g - t e s t i n g , fraud in, 5 2 , 5 7 dry labelling'. 5 7 . 8 0 D u b o i s . P i e r r e . 152 E a t o n . J u d g e . 128. 129 ECOSOC.47 E d e l h e r t z . H e r b e r t . 192 Ehrlich. E u g c n . 342 Eisenberg. Melvin Aron. 363,365 Eklund. L. H . . 2 4 3 E l d e r , A l b e r t L . , 164 Elzinga. K e n n e t h , 1%, 325 E m p l o y e e Bill o f R i g h t s . 3 4 3 Engelberg. Dr. 63 Enterovioform. 253 Environmental Defense Fund. 263 E n v i r o n m e n t a l Protection A g e n c y . 103. 305.380-2 E P A . see E n v i r o n m e n t a l P r o t e c t i o n Agency E p s t e i n . S a m u e l S.. 9 5 . 1 0 6 , 108, 1 3 4 - 5 , 302 E r m a n n . D a v i d . 138 Eslamizadeh. DrShaikol. 43 e s t r a d i o l p r o g y n o n . 162 European Economic Community. 174 E u r o p e a n Free Trade Association. Evans, Florence, 65 Evans, Liam, 65 Evans Medical, 118-19

155. 156

Fair D e a l M o t o r s , 2 8 2 Far E a s t I n t e r n a t i o n a l C o r p . . 2 2 Farben, I . G . , 4 - 5 . 3 8 9 Fay.Judge.126 Federal Register, 91.242.243,315 Federal Trade C o m m i s s i o n , 186.380 F D A (Food and Drug Administration): A b b o t t Laboratories and, 115-18; advertising controls, 218; anonymous transnational case-history, 130-3; antibiotics division. 220; Bioresearch Monitoring Program. 7 9 . 8 2 - 3 ; B r i t i s h labs ask for i n s p e c t i o n by. 156. 277; Bureau o f B i o l o g i e s . 85; Bureau of Drugs, 209; chloramphenicol w a r n i n g , 2 1 0 ; Clinical Investigations Office of, 5 6 ; C o r d i s p a c e m a k e r s a n d , 119-29; decisions on drug safety, 2 9 2 , 349; discovers dishonest doctors, 53; Division of Drug Advertising. 235; D i v i s i o n o f D r u g M a n u f a c t u r i n g , 112; d o c t r i n e o f ' i n f o r m e d consent" formulated by. 9 0 - 1 ; D r u g A b u s e Staff. 2 0 9 ; D r u g P r o d u c t P r o b l e m Reporting Program. 110;GLPs d r a w n u p by, 7 9 ; Industrial B i o t e s t i n v e s t i g a t i o n , 8 1 - 2 ; i n n o v a t i o n , role in fostering, 96-7; inspections of t r a n s n a t i o n a l s , 157; i n s p e c t o r s offered bribes. 3 3 ; M E R / 2 9

431

Index
i n v e s t i g a t i o n . 6 0 - 5 ; patient labelling requirements. 2 4 2 ; relations with industry, 3 0 0 - 1 . 3 0 3 - 4 . 3 5 9 - 6 2 . 3 7 7 ; role of g u a r d i n g world health. 277, 3 7 0 ; Searle. case against, 7 5 - 8 ; seizures of R e g i m e n tablets, 57; survey of G L P compliance. 82-6; training i n s p e c t o r s , 3 9 ; use of i n j u n c t i o n s , 136; u s e o f p r o s e c u t i o n s . 3 1 7 . 3 2 0 ; use o f s e i z u r e , 3 3 7 ; use o f warnings, 307 FDA Consumer, 335 fine a s p u n i s h m e n t i n c o r p o r a t e c r i m e , 321,331-5 Fine, Sam, 320 Finkel, Dr Marion, 81 Firma Paracelsia, 68 Fisher, Nigel T.,300 Fisse, W. B., 4 9 , 1 3 8 , 3 2 7 . 3 3 6 , 3 3 9 Flagyl, 76 Flawn, A l e x a n d e r , 70-1 Flawn, John, 70 Flawn, Judith, 71 Fletcher, G e o r g e , 323 Flexin, 56 F o e g e , William H., 247 F o o d , Drug and Cosmetic Act (1938), 1 1 0 , 114 F o o d , Drug and Cosmetic Act (1962): effect on n e w drug approvals, 2 9 3 ; fear of, 3 4 6 ; i n f l u e n c e o f M E R / 2 9 a n d t h a l i d o m i d e o n , 108; limits e x p o r t s , 2 6 0 ; Park d e c i s i o n , 3 2 0 - 1 ; p e n a l t i e s for m i s l e a d i n g a d v e r t i s i n g , 2 3 1 - 2 ; prosecutorial discretion in, 306; p r o v i d e s for p u b l i c i t y , 3 3 5 ; r e g u l a t i o n s , 3 1 5 ; use of, 3 2 9 F o o d a n d D r u g A d m i n i s t r a t i o n . U S , see FDA Ford, Betty, 204 Foreign Corrupt Practices Act (1977), 40,42,44,46 Fortune Magazin e, 44 F o x , Dr Sidney Martin, 12-13 F r a n c e , i m p r o v i n g s t a n d a r d s in, 156 F r a n k e l , J u d g e M a r v i n , 182 F r a s e r , S., 4 F r e e d o m of Information Laws, 302 Frieberg, Arie, 6 F r i e d m a n , H o w a r d M . , 341 Friedman, Milton, 294 Frye, Dr William W., 228 Froman, June, 54 100,106. furosemide. 251 Gabbay. Edmond. 306 Gadsden, Henry W., 18,216 Gaedeke, R. M.,264 Gaffin, B e n , a n d A s s o c i a t e s . 2 1 8 G a l b r a i t h . John K e n n e t h . 332 G a r d n e r . S h e r w i n . 108 G e i g y , see C i b a - G e i g y Geis, Gilbert, 1 5 , 3 2 9 , 3 5 4 G e n e r a l A c c o u n t i n g Office, 8 4 , 8 5 G e r e f f i . G a r y , 2 0 , 160, 167, 168. 199. 272 Gerovital, 32-3 Gettinger, Stephen. 90 Gilley. Dr E. Wayne, 229 G l a x o , profits of, 160 Glover, Jonathan. 5 G L P s ( G o o d Laboratory Practices): c r i t i c i s m s of, 9 6 ; d r a w n u p b y F D A . 79, 108; F D A study of v i o l a t i o n s , 8 2 - 5 ; required in contract labs, 103; requirement f o r Q A U s , 99-100 G M P s ( G o o d Manufacturing Practices): Australian, 141; British, 141; i n t e r n a t i o n a l v a r i a t i o n s in, 110, 1 5 3 - 7 ; r e g u l a t i o n of, 3 1 5 ; v i o l a t i o n s b y A b b o t t . 117; v i o l a t i o n s i n I n d i a , 272 Goddard, Commissioner (FDA), 51.88 Goldring. John, 346 G o o d r i c h , W . W . , 115 Gordon, Benjamin, 87 Gorring, Pam, 173,204-5,222 g o v e r n m e n t p r i c e c o n t r o l s , 171 g o v e r n m e n t s u b s i d y s c h e m e s , 170 G r a b o w s k i , H e n r y G., 168, 1 6 9 , 2 6 6 , 292 graphiting', 57, 59 G r e e n , Mark J. . 3 1 6 - 1 7 Griffin, J o h n P . , 5 5 Griggs, D r B o y c e P . , 2 2 9 Gross, E., 95, 1 3 8 . 3 5 5 , 3 6 8 , 3 7 3 Gruenberg, Gladys W., 16 G r i i n e n t h a l . C h e m i e : c l a i m s for thalidomide, 257; delay publication of t e s t r e s u l t s , 107; effect o f t h a l i d o m i d e c a s e o n c o m p a n y , 7 4 , 107; p r o d u c e t h a l i d o m i d e . 6 7 - 8 ; p r o s e c u t i o n of, 5 5 , 7 2 - 3 ; withdraw thalidomide, 71 G r u n s p o o n and Stringer, 222 G u a t e m a l a : ' b a t h t u b ' m a n u f a c t u r e r s in, 1 1 2 ; b r i b e r y in, 12; l o w m a n u f a c t u r i n g s t a n d a r d s in, 1 5 3 - 4 ; r e g u l a t i o n s in, 274 G w a n d o , 206 H a g u e , S u p r e m e C o u r t i n t h e , 174

F T C , see F e d e r a l T r a d e C o m m i s s i o n Fuller, John G., 3 3 , 6 1 - 2 , 116-17.223 Fuller, Lon, 3 0 6 , 3 1 2 Functional B e h a v i o r P r o b l e m s , 222

432

Index
H a l p e r i n , J e r o m e A . . 241 H a m b e r g , D a n i e l . 198 Hamill, Richard, 78 H a m m o n d . H o m e r . 179 h a m s t e r s , laboratory, 77 Hansen, Judge, 316 H a n s e n . R o n a l d W . , 168 H a r r i s , R i c h a r d , 164 Hart. Senator, 2 2 8 . 2 3 0 Harvard Business Review, 49 Harvard Law Review, 138, 3 3 0 Harvard Law School Health Service, 59 H a r v e y , Sir A r t h u r V e r e , 3 0 0 Hazleton Laboratories, 76,79 Health Action International, 254 Health Department, Australian, 238, 239,244,286,317-18,384 Health Education and Welfare, Department of ( U S ) , 300 H e a l t h and H u m a n S e r v i c e s , Department of (US), 199.381 Health Protection Board, Canadian, 137 Health Research Group (US), 333 H e a l t h and Social Security. D e p a r t m e n t o f ( U K ) , 173 H e b e r g e r , A . I . , 179 Heller. T o m . 3 4 . 2 6 6 , 2 8 6 H e l l m a n n , Rainer, 369 H e l s i n k i , D e c l a r a t i o n of, 8 7 H e m m i n k i , Elina, 2 2 4 , 2 2 6 . 300 H e n r y F o r d H o s p i t a l , 116 Hentoff,N.,222 H e r b e r t . L . L . . 179 H e r l i h y , E d w a r d D . , 15. 1 6 . 3 7 , 3 5 8 heroin, 204-7 H e r s h e n s o n ( o f C o r d i s ) . 1 2 2 , 125 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 , 184. 186 H i n e s , Professor, 127-9 H o e c h s t : a p p o i n t m e n t of war-criminal b y , 5 ; d e s c e n d e d from I . G . F a r b e n , 4 ; t e t r a c y c l i n e p r i c e - f i x i n g a n d , 181: t e t r a c y c l i n e i n Sri L a n k a , 2 7 1 H o f f m a n - L a R o c h e : bribery in Kenya, 3 4 ; contact with doctors, 226; Dr S a v e r y a n d , 5 4 ; illegal d r u g t r a d e , i n v o l v e m e n t with. 2 0 6 ; international standards, 278; manufactures Tigan, 58; Moroccan executives jailed, 260; price o f L i b r i u m and V a l i u m , 172-4; p r o f i t s from h e r o i n a n d m o r p h i n e , 5 ; v i t a m i n C m a n u f a c t u r e r , 162 H o g a n , Brian, 325 H o o t e n , I n s p e c t o r . 122 H o p k i n s . A n d r e w , 111 h o r m o n a l products, health risks with, 134-5 hormone solutions, contaminated. I l l H o u s e of Lords Special Orders C o m m i t t e e , 173 H o x s e y Cancer Clinic v. F o l s o m , 234 Hughes, Richard, 2 0 7 , 2 0 9 , 2 2 1 , 2 2 5 , 300.316 H u g s t a d , P a u l S . , 232 Humphrey, Senator. 57,58 H u n t i n g t o n R e s e a r c h C e n t r e . 102 Hutt. F D A G e n e r a l - C o u n s e l , 337 Hutton.E. F.,355 imprisonment. 305,321-2, 328-30 I M S c o m p a n y , 195 I n d i a , d r u g c o u n t e r f e i t i n g i n , 112 I n d i a n D r u g s and P h a r m a c e u t i c a l s L t d , 270 Inderal, 211 'Indianisation' of pharmaceutical industry, 2 7 0 . 2 7 2 Indocid25,284 Indocin.215,216 Indomethacin, 52-3 I n d u s t r i a l B i o - T e s t . 8 0 - 2 . 107 influenza, Haemophilus. 210 i n j u n c t i o n s , use of, 126 inspectors, government/internal, 99, 137-H), 146-7 Institutional Review Boards, 9 2 , 3 7 8 . 392 insulin s a m p l i n g . 142 Internal R e v e n u e Service ( U S ) . 18.376 International Chamber of Commerce. 374 intravenous solutions, unsafe, 114-18 I r a n , c o r r u p t i o n in, 4 3 I r e l a n d , tax a d v a n t a g e s of, 2 8 5 Italy, bribery in, 12,17 J a c o b , Dr Stanley W . , 53 Jaehne, Friedrich, 5 Janis, J., 3 J a p a n : G M P s t a n d a r d s in, 1 1 3 : N a t i o n a l Redress Law. 346 Japan Times, 57 J a y e s E x p o r t , 281 Jayes H o l d i n g International. 281 Jewish Chronic Disease Hospital, 88 Johnson. Anita. 56,263 J o h n s o n and J o h n s o n : c o n t r a c e p t i v e trials, 2 6 5 ; d i s c l o s u r e s t o S E C , 3 7 ; D r Scheiner and, 53-4; McNeil Laboratories and, 56; marketing of oral c o n t r a c e p t i v e s , 2 4 8 - 9 ; s u e s drug c o m p a n i e s , 281 Jordan, Mrs Beulah, 6 0 - 1 , 357 Journal of the American Medical Association, 218, 234

433

Index
Journal of the Medical Society Jersey, 63 J o w c l l . Jeffrey. 312. 313 Joyce. C. R . B . . 2 4 2 Jung. Dr. 67 of New Lang. Dr Konrad. 68-9 Lang. Ronald W . . 3 0 0 Lantin.P.T.,Sr.89 Largactil. 252 Lasagna. Louis. 267 L a s i x a m p u l e s m i x u p . 113 law: c o d i f i c a t i o n of. 3 1 0 - 1 9 ; c r i m i n a l , 2 9 2 . 3 0 8 - 1 0 : e n f o r c e m e n t , 2 9 0 : fines. 3 2 1 , 3 3 1 - 5 ; prison s e n t e n c e s . 3 0 5 . 321 - 2 . 3 2 8 - 3 0 , 3 4 1 ; reform. 3 7 8 ; s u n s e t l e g i s l a t i o n . 2 9 5 - 6 ; use of. 2 9 0 - 1 : see also p r o s e c u t i o n s Law Reform C o m m i s s i o n Discussion Paper. Australian. 347 League ofNations Opium Advisory Committee. 206 L e a n . D a v i d F . . 165 Lederle Laboratories. 12. 179-82 L e d o g a r . R o b e r t J.. 2 0 8 . 2 5 7 L e e , P h i l i p R., o n : A b b o t t c a s e . 1 1 4 ; D o r n w a l case. 5 6 ; drug recalls. 1 1 1 - 1 2 : 1 m l i V i n c a s e . 2 1 5 ; Latin America. 2 5 6 ; production costs. 1 6 1 : 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 . 1 6 0 , 165 Lenz, Professor, 71 Lepetit. 181.250 letters. Dear Doctor. 2 3 2 . 2 3 3 . 2 3 9 Letters, Notice ofViolation. 233 Levine ( F D A C o u n s e l ) . 1 2 1 . 122. 125. 1 2 6 . 129 L e v i n e . T h e o d o r e A . . 15. L e y . D r H e r b e r t . 5 1 . 115 Ley. P.. 242 16.37.358

Kalos company. 253 K a n a / a w a District Court. 346 Kanouse. D. E.,243 Kansas State Penitentiary. 90 K a p p a m o d e l o f p a c e m a k e r . 128. 129 K a s t o r . H i l t o n . C h e s l e y . C l i f f o r d and A t h e r t o n . 58 K a t z , M u r r a y S., 241 K e f a u v e r , S e n a t o r . 108. 1 6 3 . 3 0 0 Kefauver hearings, 161.224 K e f a u v e r investigation into tetracycline p r i c e - f i x i n g . 1 7 6 , 181 Kelscy. Dr Frances. 7 1 . 298 K e n n e d y . Commissioner Donald. 85. 293 Kennedy. Senator Edward. 2 0 8 . 2 1 1 . 224.246 Kennedy, Tom, 16 K e n n e d y Subcommittee: allegations a g a i n s t G . D . S e a r l e at. 7 5 - 8 0 ; allegations of F D A pro-industry bias. 300; cross-examination discussed. 3 1 1 : effect on H a z l e t o n Laboratories. 7 9 ; gifts t o d o c t o r s , o n , 2 1 1 : I n d u s t r i a l Biotest and. 8 1 - 2 ; prisoners' affidavits t o . 9 0 ; transcripts. 8 K e p o n e pollution disaster. 339 kickbacks. 281 K i n g C o u n t y H o s p i t a l . 180 King, 'Dr' William. 6 1 . 6 4 K i n g Faisal Specialist H o s p i t a l . 25 K i n s l o w R e p o r t , 142 Kline. T e d , 358 K l o c r . B a l d w i n E . . 1 1 1 . 158 Knight. Frank A . . 197-8 K n i g h t l e y et al., 6 4 - 7 5 . 257 K o g a n . N. 3 K o r e a , d r u g c o u n t e r f e i t i n g in, 112: e x a m i n a t i o n o f p r o m o t i o n a l c l a i m s in. 249-50 Krajick. K e v i n , 90 K r e i g . M a r g a r e t . 112. 2 1 2 , 3 7 6 Kreisberg. S i m e o n M.. 307 Kugel. Yerachmiel. 16 kwashiorkor, 250.251 labelling, patient. 2 4 2 - 3 . 254 laetrile. 3 2 - 3 Lall. S a n j a y a . 160, 1 9 1 , 2 7 0 . 2 7 1 L a m b e r t . J o h n , 175 L a m b . Fred. 298 Lancet, The 7 1 . 107

liability, c o r p o r a t e / i n d i v i d u a l , 2 9 1 . 3 1 9 - 2 8 ; see also a c c o u n t a b i l i t y . responsibility liability, p r o d u c t , 3 4 4 - 6 Librium. 172 . 2 0 0 - 1 . 2 0 6 . 2 1 4 - 1 5 L i d o f f ( p a t e n t e x a m i n e r ) . 189 Lilly. Eli: A v e n t y l . p r o m o t i o n of. 2 0 8 ;
A

buy Distillers' pharmaceutical assets. 7 4 ; c o m m i t t e e d e c i s i o n - m a k i n g in. 358; D a r v o n . manufacture. 2 0 9 - 1 0 ; Guidelines of Company Policy, 195: i m p r o v e m e n t s to labelling. 2 5 6 ; Mexican manager gaoled. 38; model o f e x c e l l e n c e , 1 7 . 4 4 . 1 5 7 : m u s t a r d gas kit. 169; no c o r r u p t p a y m e n t d i s c l o s u r e s . 16; o b j e c t i o n s t o F o o d . D r u g and C o s m e t i c A c t . 2 6 0 ; O p r e n . manufacture. 5 6 ; prices o f D a r v o n . 170; qualified sales reps. 2 2 7 ; strategy in M e x i c o , 4 2 ; study on product r e c a l l s . 158 liver d a m a g e . d r u g < a u s e d . 5 4 . 5 6 , 2 5 0 liver p r e p a r a t i o n , m i s l a b e l l e d . 111 L o c k h e e d scandal. 11.40

434

Index
L o f t u s . B u d . 112. 1 1 7 . 3 9 4 L o h r . S t e v e , 153 L o n g , S e n a t o r . 181 Lord, Judge. 187-9 Los Angeles Times. 32.33 Louisiana State University School ol M e d i c i n e . 228 L S D . 207 L u n d b e r g . Dr Per O l a v . 66 L u n d m a n . R i c h a r d J.. 138 L y d e c k e r , Mia. 256 Mboya. Tom. 257 M c A d a m s . John P.. 1 3 8 . 3 3 2 M c A d a m s . Tony. 332 M c B r i d e . Dr William. 70. 71 McCallum. Alexander. 75 McCallum. Morag. 74-5 M c C o y . Alfred W.. 205 M a c D o n a l d and C o . , 206 Mace. M y l e s L . , 363 M c G a r i t y . T h o m a s O . . 106 McGuire. Matthew F. 64 M c K e e . D r J o h n . Jr. 2 2 9 M c K e s s o n and R o b b i n s . 1 7 6 . 2 7 9 - 8 1 . 289 McMaster (Associate Director of Clinical R e s e a r c h at W i l l i a m S. Merrell). 62-5 McNeil Laboratories. 56 McTaggart, Lynne, 53 Madaras. G. R . . 4 M a e s d a v . W a l t e r S.. 160 Maher.L. W..346 M a j o n e . G i a n d o m e n i c o . 310 malnutrition. 250 Mancil, 262 Mann. Kenneth. 319.330 M a n s f i e l d . E . . 169 m a r a s m u s . 251 marijuana. 207 M a r i o n L a b o r a t o r i e s , 160 Maronde. R. F..213 Marston. M. V..241 Maryland State Medical Journal 58 Massengill & C o . . 113-14 m a t r i x m a n a g e m e n t . 102, 3 5 8 M a y o Clinic, Minnesota. 64 M e a d J o h n s o n , 169. 196 Measurin. 59 measles. 246 Medawar. Charles. 251. 2 6 0 . 2 7 3 . 3 4 8 Medicaid. 282-4 M e d i n a . J u d g e . 183 M e d t r o n i c . 3 0 . 119. 124 M e e r . Fitz ter. 5 Mellaril. 225 M e l m o n . P r o f e s s o r K e n n e t h L . . 165 Melrose. Dianna. 251. 252 Merit Pharmaceutical C o m p a n y Inc.. 228 M E R / 2 9 : fraud i n t e s t i n g , 6 0 - 5 . 2 8 8 : p r o m o t i o n of. 2 2 2 - 3 . 2 2 6 : results o f c a s e . 108. 3 4 6 : s t o c k b r o k e r s a w a r e o f dangers. 355 M e r c k : A l d o m e t s t o l e n f r o m . 12; A u s t r a l i a n s u b s i d i a r y of. 144; contraceptive testing. 266; Cuprimine p r o d u c e r . 169: d i s c l o s u r e s t o S E C . 17-20. 3 4 . 3 7 ; doctors' relationships w i t h . 5 2 - 3 ; I n d o c i n a d v e r t i s i n g and p r o m o t i o n . 2 1 5 , 216; labelling i m p r o v e m e n t s . 2 5 6 ; p r o d u c t recalls by. 12; t e s t s M E R / 2 9 . 6 2 : transfer p r i c e s . 2 8 4 ; v i t a m i n p r o d u c e r . 162 Merck. Sharpe & D o h m e A G . . M e r r e l l . W i l l i a m S.. 6 0 - 5 Merrill. Richard. 316 M e r t o n . R o b e r t K., 3 6 8 m e s o r i d a z i n e . 225 M e t h a d o n e . 250 Mexaforma, 253 18

M e x i c o : b r i b e r y in. 3 6 - 4 0 , 4 2 ; c r u s a d e a g a i n s t c o r r u p t i o n in, 3 7 - 4 0 : reo r g a n i s a t i o n o f r e g u l a t i o n in. 3 8 2 : t y p h o i d e p i d e m i c in. 2 4 9 m i g r a i n e . 251 Migril,251 Miller. Arjay, 50 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 . 178 MIMS (Monthly Index of Medical Specialities). 250.251.254.256 m i n i s t e r s o f h e a l t h , bribery of. 3 4 - 5 M i n t z . M o r t o n : d o c t o r s ' conflict o f i n t e r e s t , o n , 2 2 8 - 3 0 ; drug p r i c i n g , o n . 1 6 2 ; F D A r e f u s e t r a n s c r i p t s t o . 115: Olin case, on the. 22; penicillin, o n . 164; p r o m o t i o n s , on. 2 1 3 . 2 2 0 : t e t r a c y c l i n e c a s e , o n t h e . 182: w o r k of. 5 7 - 6 0 Mitchell C o m m i t t e e . 3 2 4 . 3 2 8 Modern Medicine. 22\ M o d y . A m r u t V . . 152 Molander. E. A.. 49.351 M o n a h a n . John. 354 m o n k e y s , laboratory. 6 0 - 2 , 3 7 1 M o n o p o l i e s C o m m i s s i o n . B r i t i s h , 169. 173. 1 7 4 , 2 0 0 - 1 Monopoly. Subcommittee on, 248-9. 252 M o r e y . Richard S, 335 morphine. 111,206 Morris. L. A.. 243 M o r r i s . L o u i s . 241 Morris. N o r v a l . 307 M o r s e . Dr. 124-5

435

Index
M o r i o n - N o r w i c h , 143 Mother Jones. 5 4.2 5 8 - 9 M u h l e m a n . J. T . , 3 Muller. Mike, 251. 260, 2 6 5 . 2 7 1 , 2 7 4 Muller. R. E . . 375 M u n r o , C o l i n . 66. 344 muscle relaxants. 216 M u s i c a . Phillip. 280 Musto. David F.,207 Myers. E. D..243 Myers, MavenJ.,230 M y e r s o n . Bess, 348 Nader. Laura. 329 N a d e r . R a l p h : e m p l o y e e rights, o n . 3 4 3 . 3 5 3 : federal chartering p r o p o s a l s , 3 8 2 : f i n e s , o n . 3 3 2 . 3 3 3 : profits, o n . 160; p r o m o t i o n s , o n . 2 2 5 : publicinterest director suggestion. 365: V a l i u m s a l e s , o n . 172 Nader's Health Research Group. 76 Nagel. Trevor. 333 Najman. Jackob M 233 Naprosyn. 81 nasal s p r a y s , c o n t a m i n a n t s in, 359 N a t i o n a l C a n c e r I n s t i t u t e ( U S ) . 105 National Health Service ( U K ) , 173,238. 377 N a t i o n a l H i g h w a y Traffic S a f e t y Administration. 354 N a t i o n a l I n s t i t u t e for O c c u p a t i o n a l Safety and Health. 354 N e g r a m . 174 N e l s o n . S e n a t o r G a y lord. 1 0 4 . 2 0 7 . 2 1 9 N e l s o n S u b c o m m i t t e e . 210 Nestor. D r J o h n . 58 N e t h e r l a n d s A n t i l l e s tax h a v e n . 2 8 4 Neurosedvn (thalidomide). 66 N e u s t a d t . R i c h a r d M.. 2 0 2 . 2 9 6 . 3 8 1 N e w Drug Regulation. Review Panel o n . 301 New England Journal of Medicine, 115 N e w J e r s e y , c a n c e r m o r t a l i t y in, 135 New York Times, 221 N e w Y o r k U n i v e r s i t y L a w S c h o o l , 301 N e w Z e a l a n d p r o d u c t liability c a s e s . 3 4 6 Newsweek. 294 Nippon Chemiphar. 56-7 nitroglycerin tablets. I l l N o e l . P e t e r , 102 Norgesic. 59 Norpace, 77 Norvedan. 56 N o r w i c h , profits of. 1 5 9 - 6 0 Novaco. Ray, 354 N o w a k , N a n c y , 338 Noxidyn (thalidomide), 66 Nulsen. D r R a y O . , 7 2 N y l e n . Stig. 155 O c c u p a t i o n a l Safety and H e a l t h Administration. 134.380-2 O E C D , 374 oestrogen replacement therapy, 244 O g l e s b a y . I n s p e c t o r . 122 Ohio D e p a r t m e n t of Public Welfare. 283 O h i o State Penitentiary. 89 Olin M a t h i e s o n Chemical Corporation. 21-2 O M a l l e y . P a t , 159 Ondasil (thalidomide). 67 ophthalmic ointments, contaminated. Ill Opinion Research Corporation, 49 opium. 205. 206 O p i u m Advisory C o m m i t t e e . 206 O p p e n h e i m c r and C o . . 2 8 5 Opton.N.,2 O r e g o n State P e n i t e n t i a r y , 9 0 Organisation of American States. 374 O r g a n o n . 250 O r t h o - N o v u m b i r t h - c o n t r o l pills. 281 O S H A . see O c c u p a t i o n a l Safety and Health Administration o s t e o p o r o s i s . 250 O x a i n e - M . 113 o x y t e t r a e y e l i n e . 175 p a c e m a k e r s , heart. 2 7 , 3 0 , 119-29 Packer, Herbert L. 341 Pan A m e r i c a n Health Organisation. 275,297 Panalba. 3 1 6 . 3 8 9 P a n m y c i n , 177 Pappworth.M. H..89 Park c a s e . 3 0 8 , 3 2 0 - 2 . 3 5 2 Park. J o h n , 3 2 0 - 1 P a r k e - D a v i s : back W e l c h ' s j o u r n a l , 2 2 0 ; Chloromycetin promotion. 210,219, 222, 239, 247-8; chloramphenicol sales. 210, 255; cocaine, promoting. 207; contraceptive marketing. 249; d i s c l o s u r e s t o S E C . 2 0 ; m e r g e r . 196 P a t e l . B . V . . 140. 148 P a t e n t O f f i c e , 186 patents, 163-6, 175-6. 183-6. 197-8 patient labelling. 2 4 2 - 3 . 2 5 4 Paton. J..69 P a u l s . I \ n i n - M . I l l , 158 Paulson, P., 243 P D R . see P h y s i c i a n ' s D e s k R e f e r e n c e P c a r c e , F r a n k , 159 P e a r s o n C o m m i s s i o n , 345 Pckkanen,John, 207.214.215,228

436

Index
p e n i c i l l a m i n e . 169 p e n i c i l l i n : a l l e r g y t o . 2 3 0 ; m a r k e t for. 1 7 5 ; p r o d u c t i o n d u r i n g W o r l d W a r II. 1 6 4 . 197; w a t e r s u b s t i t u t e d for. 1 1 2 ; w i t h h e l d in syphilis research, 89 Pepinsky. Harold E., 327 peripheral neuritis, 6 8 - 9 , 392 Perlmutter. Howard V.. 372-3 P e s o n e n . Terttu, 224. 226. 300 P e t e r s e n . D a n . 355 Pfizer: b a c k s W e l c h ' s j o u r n a l s . 2 2 0 ; B o l i v i a n subsidiary. 2 6 1 ; British M P d i r e c t o r of, 3 0 0 ; d i s c l o s u r e s t o S E C , 21; Mancil.262;Sudoxican m a n u f a c t u r e r . 5 4 ; t e t r a c y c l i n e airlift. 2 7 1 ; the tetracycline price-fixing story. 1 7 5 - 9 0 . 1 9 8 ; tranquilliser advertising, 215; videotape p r o m o t i o n . 209; vitamin producer. 162 P f u n d e r . M a l c o l m R . , 196 Pharmaceutical Benefits Scheme.'286, 300 Pharmaceutical Manufacturers Association(s): Australian. 233,235: British, 233. 299; International F e d e r a t i o n of, 2 5 4 , 2 5 7 ; i n t e r v i e w e d , 9, 3 8 5 ; links with A M A , 2 1 9 ; lobby in U S A , 174; s u b c o m m i t t e e structures, 195 p h e n o t h i z i n e , 225 phenylpropanolamine 57 hydrochloride, Primobolan D e p o t . 250 prisoners, experiments on. 89-90 p r o c a i n e b e n z y l p e n i c i l l i n . f a k e . 112 product liability, 3 4 4 - 6 p r o s e c u t i o n s , c r i m i n a l : F D A u s e of, 317; F o o d , D r u g and C o s m e t i c A c t , u n d e r . 1 3 0 , 2 3 1 - 2 ; M e x i c o , in, 1 4 3 ; M o r t o n - N o r w i c h , of. 1 4 3 ; use of, 126, 130. 2 9 2 . 3 0 5 , 3 0 7 ; 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 , for, 136 p s y c h o s t i m u l a n t d r u g s . 162 psychotropic drugs. 5 3 , 2 4 6 P u e r t o R i c o , tax h a v e n . 285 Purcell, T h e o d o r e V . , 367 Quality Assurance Unit ( Q A U ) , 99-100,361 q u a l i t y c o n t r o l as a p r o f e s s i o n , 1501 quality control managers, 2 , 1 3 9 , 143-9, 327-8 q u a l i t y c o n t r o l staff, 149; see also c o m p l i a n c e staff Q u e e n ' s University of Belfast. 217 q u i n i n e d i h y d r o c h l o r i d e m i x u p , 113 Q u i n n e y . R i c h a r d . 150 R a n g n e k a r . M . K., 112 rats, l a b o r a t o r y . 6 2 , 7 5 , 7 7 r e c a l l i n g d r u g s , 1 4 6 - 9 , 1 5 3 , 158 R e e k i e , W . D u n c a n . 169 Regimen tablets. 57-8 regulatorv agencies. 2 9 8 - 3 0 5 . 3 7 7 - 8 . 380 Reisman, W. Michael. 1 1 , 3 7 . 4 0 . 4 3 , 4 9 Research Industries Inc., 53 r c s e r p i n e . I l l , 166 r e s p o n s i b i l i t y in c o m p a n i e s for law v i o l a t i o n s . 1 3 8 - 9 . 3 0 8 . 3 2 2 . 3 2 8 ; see also a c c o u n t a b i l i t y , liability restitution to victims. 291 R e v c o M e d i c a i d fraud. 2 8 2 - 4 Rheinstein, Peter H, 2 3 2 , 2 3 5 Rice. Thomas M., 61 R i c h a r d s o n - M e r r e l l : cost of M E R / 2 9 case. 346; disclosures to S E C , 32; d i s t r i b u t o r o f t h a l i d o m i d e for t e s t i n g . 7 2 ; effect o f t h a l i d o m i d e c a s e o n . 7 4 . 1 0 7 , 1 0 8 ; merger with D o w . 1%; M E R / 2 9 and William S. Merrell. 6 0 - 5 . 1 0 1 . 355; promoting M E R / 2 9 . 2 2 2 . 2 2 6 ; settlement with thalidomide victims. 73-4 R I C O statute. 310 Riker (pharmaceutical company). 94 Ritalin. 222 Roberts, Dr Kathleen E., 57 Robin. Dr Bennett A., 58 Robins, A. H.,32,160,258

P h i l a d e l p h i a C o l l e g e of P h a r m a c y and Science, 230 Phillip Bauer C o . , 22 Physician's Desk Reference. 247,248 P h y s i c i a n s ' R a d i o N e t w o r k . 221 Pines. W a y n e L.. 335 placebo(s).87.91,392 Placidyl. 2 1 2 . 2 1 7 plague, infecting prisoners with, 89 P l o u g h m e r g e r w i t h S c h e r i n g . 196 P M A , see P h a r m a c e u t i c a l Manufacturers Association Polanyi. Michael. 312 polio. 247 P o l y c y c l i n e , 177 Portillo, President (of M e x i c o ) , 3 8 - 9 . 155 Posner. Richard A.. 193.195, 196.314 P o w e r s ( o f P f i z e r ) , 185 p r e d n i s o n e . I l l , 164 PreeM.T.,233 Prensa, La, 32 Price. D a v i d E . C . , 300 Price W a t e r h o u s e , 280 price-fixing, 5, 175-83

437

Index
R o c h e , see H o f f m a n - L a R o c h e R o h r e r p r o f i t s , 160 R o n - A m e r Pharmaceutical C o . , 33 Rorer-Amchen, 28 R o s e n t h a l , A l e k A . . 169 R o s e n t h a l , Sherri, 16 Rotstein. Dr Jerome. 54 R o u s s e l . 162 Rumsfeld, Donald, 78.352 285; Puerto Rico contraceptives trials. 2 6 5 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 (SEC): consent decrees, 1 5 . 2 5 , 4 0 - 1 ; disclosures to, 1 3 - 1 4 , 1 7 - 2 4 , 3 0 - 2 . 3 4 , 37; Merck's disclosures to. 17-20; voluntary disclosure p r o g r a m m e . 14-17 Sedin ( t h a l i d o m i d e ) . 67 s e p t i c a e m i a from i n t r a v e n o u s s o l u t i o n s . 114. 115 Seralis ( t h a l i d o m i d e ) . 67 Scrax.217 Serentil. 225 S e r p a s i l . 166 s e r v i c e d r u g s . 169 Sessor. Stanford N. 2 1 6 Shapiro. Sidney A.. 106.208 S h a p o . M a r s h a l l S.. 8 8 . 9 3 . 106. 2 2 6 . 241-2 Shaw. M., 3 S h e r m a n A c t , 1 8 2 , 186 S h o r t . J a m e s F . . 138 Shulman.J.S..369 s i d e - e f f e c t s , harmful: a t t i t u d e s t o , 6 - 7 ; failure t o d i s c l o s e , 2 2 3 s i d e - e f f e c t s of: A l d a c t o n e . 7 5 - 6 ; anabolic steroids. 250; chloramphenicol, 210,241-8; contraceptives. 241-2. 249,258; D o r n w a l . 56; Flexin, 56; Indomethacin, 52-3; M E R / 2 9 , 6 0 - 5 ; thalidomide, 65-75 Silanes, Juan Lopez, 37 Silva. R a f a e l N. 181 Silverman, Milton, on: A b b o t t case, 114; d o c t o r s ' p e r k s , 2 1 1 ; D o r n w a l c a s e . 5 6 ; drug r e c a l l s . 1 1 1 . 112; 7Vir Drugging of the Americas. 247-50, 2 5 3 - 6 , 3 7 2 ; I n d o c i n c a s e . 2 1 5 ; Latin A m e r i c a , 2 5 2 , 2 5 6 ; production costs, 1 6 1 ; profits in p h a r m a c e u t i c a l i n d u s t r y . 160. 165 Simon. Charles E., 16 Sine-off, 3 5 9 Sjostrom and Nilsson, 6 6 , 6 9 S l a t t e r . Stuart S t P . , 160. 162. 165. 190 Slip ( t h a l i d o m i d e ) . 6 7 S l o a n e . Sir H a n s , 9 0 smallpox vaccination, 90 Smith. D u d l e y . 300 Smith. J. C. 325 S m i t h K l i n e & F r e n c h . 160 Smith, Dr R o n a l d C , 53 SmithKline. 2 2 0 . 2 2 5 . 2 2 8 . 2 8 5 . 300.359 S M O N , 253 Snyder. R a y m o n d E . , 19 S o l o m o n . Lewis D . , 338

s a b o t a g e , i n d u s t r i a l . 152 Sackett, D. L.,241 S a f e t y o f D r u g s , British C o m m i t t e e o n , 110 Sainsbury C o m m i t t e e , 217 S t A n t h o n y ' s H o s p i t a l , D e n v e r , 116 sales representatives (pharmaceutical). 2 1 3 , 2 2 2 - 7 . 2 5 0; see also d e t a i l m e n S a m m o n s . Dr James H.. 219 Sampei. Dr Harcio. 56 s a m p l e s , free, 212 Sandoz.53.225.249 Sanfer c o m p a n y . 253 S a r a b h a i C h e m i c a l s . 271 Sarett. L e w e i s H . , 2 7 0 Sargatz. John W . . 7 7 Savery. Dr Francois. 54 S a x o n . M i r i a m S.. 3 4 6 - 7 , 381 scapegoats, 44,324 Scheiner, Dr James. 53-4 S c h e r i n g - P l o u g h : buy estradiol p r o g y n o n . 162; British M P director, 3 0 0 ; c o n t r a c t w i t h s c i e n t i s t s , 107; disclosures to S E C . 2 4 ; drug marketing in Africa. 250; investment a n d profits i n P u e r t o R i c o . 2 8 5 ; m e r g e r . 1 % ; profits of, 1 5 9 - 6 0 , 285 schistosomiasis. 262 s c h i z o p h r e n i a , 225 Schmaltz. D r G u s t a v , 6 8 Schmidt (head of F D A ) . 75. 76. 300

103-4,

S c h m i d t . W h i t n e y L., 3 1 0 S c h r a g e r , L a u r a H i l l , 138 S c h u b e r t , P r o f e s s o r J a c k , 231 S c h w a r t z ( o f B r i s t o l ) , 185 S c h w a r t z m a n , D a v i d . 160, 1 6 2 . 2 9 2 S c i e n t i f i c R e s e a r c h . US Office of. 164 Scott. Joseph E., 6 SCRIP (newssheet). 43 Searle. G. D: Aldactone. 75-6; appointment of Rumsfeld. 352; Aspartame. 76-7; contraceptives marketing. 248; disclosures to SEC. 3 2 ; F D A investigation. 99; Flagyl, 76; K e n n e d y hearing and, 7 5 - 8 0 , 1 0 7 , 1 0 8 ; N o r p a c e . 7 7 ; profits of. 1 5 9 - 6 0 ,

438

Index
S o m e r s , D r . 106 SOPs (Standard Operating Procedures). 118-19.291.325-6.331. 348-50 Southam, Dr Chester, 88,91 Spellman, M. S..242 S q u i b b : B r i t i s h M P d i r e c t o r of, 3 0 0 ; d e v e l o p m e n t o f m e - t o o d r u g s , 165; disclosures to SEC, 2 1 - 2 , 3 7 ; endorsement, obtaining, 227; marketing chloramphenicol, 255; profits i n P u e r t o R i c o . 2 8 5 ; t h e tetracycline price-fixing story, 176-90 Sri L a n k a . 2 7 1 - 2 S t a t e 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 (Sri L a n k a ) . 271 state-owned pharmaceutical companies, 367-9 S t a u f f e r , T h o m a s R.. 160 S t e c l i n , 177. 179 Stelazine, 225 Stendin, 59 S t e r l i n g , 3 2 . 3 7 . 1 5 9 - 6 0 . 174 S t e r n e r . D r . 122 steroids, 216, 2 5 0 , 2 5 2 Stetler, J o s e p h , 299 Stolley, P. D . . 2 1 3 S t o n e . C h r i s t o p h e r D . . on: awards. 304-5; communication blockage. 1 0 0 - 1 . 3 5 5 - 6 ; diffused responsibility, 1 3 8 . 3 6 1 ; public-interest directors, 365 Stone, Julius, 317 S t o n e r , J a m e s A. F., 3 Stormont, Dr Robert T.. 64 S t r a i n , Dr T . E . . 2 2 9 streptomycin. 248 Strong, Colonel, 89 Sudoxican, 54 sulfa d r u g s , c o n t a m i n a t e d , 111 s u l f a n i l a m i d e , elixir, 110, 1 1 3 - 1 4 S u l i i i n t a b l e t s , 281 Sunday Times. 56 sunset legislation. 2 9 5 - 6 S u p r e m e C o u r t i n the H a g u e , 174 S u p r e m e Court o f t h e U n i t e d States. 318 Sutherland, Edwin H., 6,7 Sutton. A d a m . 314 S u v e g e s , L.. 243 Swedish Medical Journal, 66 Syntex: c o n t r a c e p t i v e trials. 2 6 5 - 6 ; disclosures to S E C , 2 9 - 3 0 ; labelling improvements, 256; Naprosyn t e s t i n g , 8 1 - 2 ; profits, 160 Taussig, Helen B., 66 tax e v a s i o n . 2 8 4 - 8 Teff. H a r v e y . 66. 3 4 4 tetanus. 247 t e t r a c y c l i n e : airlifted, 2 7 1 : c h l o r a m p h e n i c o l s u b s t i t u t e d for, 2 5 3 ; t h e price-fixing s t o r y . 1 7 5 - 9 0 , 192, 198.317.342 T e t r a c y n , 177 thalidomide: brand n a m e s problem, 6 5 - 6 . 199; disaster, 6 5 - 7 5 . 1 0 1 , 2 9 4 ; Dr Somers's e x p e r i m e n t s , 106-7; F D A ' s attitude to, 7 1 , 2 9 3 . 2 9 8 ; prosecution of Grunenthal e x e c u t i v e s . 5 5 ; results o f d i s a s t e r . 108. 231.344.371 thiomidazine,225 T h o m a s . Dr Joseph A . , 229 T h o r a z i n e . 164 3M Corporation. 94 thyroid disease, 252 T i e d e m a n n , Klaus. 284 Tigan, 58 Time m a g a z i n e , 89 Tocus. Dr Edward. 209 Todd. Harry F . , 3 2 9 T o w e r , Buck, 332 t r a d e n a m e s for d r u g s . 6 5 , 6 6 tranquillisers: D o r n w a l , 56; Largactil. 2 5 2 ; Librium, 1 7 2 - 1 ; Mellaril, 249; p a r e n t s ' u s e of, 2 0 7 ; U S m a r k e t b r e a k d o w n , 162; Valium. 172-4 transfer pricing, 2 8 4 - 8 , 2 8 9 transnational corporations: abuses in Third W o r l d . 2 4 5 ; G M P compliance s y s t e m s . 157; o p p o r t u n i t i e s for l a w evasion. 372; UN Centre on. 160-1. 167, 1 9 9 , 2 7 0 , 2 7 5 ; U N C o d e o f C o n d u c t for, 3 7 4 - 5 ; U N C o m m i s s i o n on. 4 7 . 4 8 , 5 0 Treda. 253 trial by j u r y , 3 4 0 trials, c l i n i c a l , 2 6 5 - 8 t r i m e t h o b e n z a m i d e , 58 t r i p a r a n o l , 60 Trythall, I. R . , 2 6 1 Turner. C. W . , 4 T u r n e r , D o n a l d F.. 194 T u r n e r . J a m e s S.. 1 4 2 . 2 2 0 , 2 3 1 typhoid fever, 89, 2 1 0 , 2 4 8 Udo-Aka.U.,264 u l c e r s , t h e r a p y for, 2 2 8 U N C T A D , 275 U N D P . 275 U n g a r . S a n f o r d J.. 6 2 . 6 4 U N I C E F . 275 UNIDO.275

T a g a m e t , 228 Talbot. Dr (of F D A ) . 63 T a n z a n i a , p r o m o t i o n o f d r u g s in, 2 5 0

439

Index
U n i t e d Nations Centre on Transnational Corporations, 160-1. 167, 1 9 9 , 2 7 0 , 2 7 5 U n i t e d N a t i o n s C o d e o f C o n d u c t for Transnational Corporations, 374-5 United Nations Commission on Transnational Corporations. 47,48. 50 University Clinic, B o n n . 69 U n i v e r s i t y of California. 385 University of Oregon Medical 53 285; marketing contraceptives, 248; m e r g e r w i t h P a r k e D a v i s . 196. 2 1 0 . president Elmer Bobst. 206 Washington Post. 3 2 . 115 Washington Wholesale Drug Exchange. 281 W e a v e r . Paul H . 3 8 0 . 381 W e b e r . M i c h a e l H . . 169 W e g m a r , Dr. 248 Weibert. R.,243 Weiner, Judge. 189-90 W e l c h , Henry, 220 Welt am Sonntag. 71 W e r n e r (Vice-President of William S. Merrell). 64 Wessling, A . . 2 4 3 W e s t m e a d H o s p i t a l . 153 Whistle Blowers' Protection Act, 343 W h i t t e n . Ira T a y l o r , 165 W H O . see W o r l d H e a l t h O r g a n i s a t i o n w h o o p i n g cough. 247 Wiggins, Steven Neil, 292 W i l c o x . K. R.. 103 Wild. Ron. 314 W i l l i a m s . G l a n v i l l e . 371 W i l s o n . F r a n k P . . 181 W i l s o n . Larry C. 371 W i l s o n ' s d i s e a s e . 169 Winkler, R o b i n C . 230.240 Winstrol. 250 W i n t h r o p , 1 7 4 . 2 5 0 , 300 Wolf. H e r b e r t G.. 2 2 W o l f e . D r S i d n e y M . , 87, 1 1 9 , 3 0 2 W o l f r a m . C h a r l e s W . . 187, 188. 189 W o r l d H e a l t h O r g a n i s a t i o n : C e n t e r for Monitoring Adverse Reactions to D r u g s , 3 7 1 ; Certification S c h e m e , 156; d e v e l o p i n g s i m p l e drug t e s t s , 2 7 5 ; l e a d e r s h i p r o l e , 3 7 0 ; list o f essential drugs, 272; survey on legislation, 2 2 3 ; Third World access to drugs, on. 270 W r i g h t . J. P a t r i c k . 3 7 9 W y a t t . J u d g e . 187 Wyeth ( A H P subsidiary).

School.

U n i v e r s i t y of Pittsburgh, 231 University of Q u e e n s l a n d , 386 U n i v e r s i t y of S o u t h e r n California Medical Center, 213 University of Virginia Medical Hospital. 116 U p j o h n : backs Welch's journals, 220; D e p o - P r o v e r a and. 258; disclosures to S E C , 2 1 ; e m p l o y e d Dr Smith. 53; marketing dangerous drug, 2 - 3 , 3 1 6 ; profits, 160; tests M E R / 2 9 , 6 2 ; the tetracycline price-fixing story, 176-90 V a i t s o s , Constantine V., 285 V a l i u m : a d d i c t i o n t o . 2 0 4 , 2 0 6 ; brand n a m e of. 1 9 9 ; 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 intervention on, 173-4, 2 0 0 , 2 0 1 ; p r i c e of, 1 7 2 - 4 ; p r o m o t i o n of, 2 0 9 , 2 1 4 Van Dusen Wishard. W.. 362 van M a a n e n . Dr Evert. 6 1 . 6 4 V a u g h a n . D i a n e . 282. 283 Verdil (thalidomide). 67 Vernon. John M.. 168.266 Vinokur. A., 3 Vistaril.215 von Hirsch, A n d r e w , 306 Voss, Dr Ralph, 68 W a d e and E l m e s survey, 217 W a l d r o n , Ingrid. 215 Walker. Hugh D.. 197.213.214 W a l k e r ( B r i s t o l c o u n s e l ) . 185 Wall Street Journal, 56 W a l l a c e L a b o r a t o r i e s , 231 Wallace andTiernan. 56 Wallach.M. A.. 3 W a r P r o d u c t i o n B o a r d . 164 Wardell. William M.. 2 6 7 . 2 9 2 W a r n e r - L a m b e r t : charged with h o m i c i d e . 133; disclosures to S E C . 2 0 , 3 7 ; investment in Puerto Rico.

113.

169.249

Yakowitz.M. L..275 Yale Law Journal. 138,323,338 Y o d e r , Stephen A., 336 Y o d o z o n o , 253 Yudkin, JohnS.. 34.250 Zanartu. J..266 Z a n d e r . P r o f e s s o r a n d M r s . 248

440