Perrigo and Price Collusion

Perrigo Co.: Involvement in Possible Price Collusion (2017)

Controversy

Perrigo Company Logo

Perrigo Co. is one of the largest manufacturers of over the counter pharmaceuticals. Recently the company is under investigation for possible price collusion in the generic drug business. For the past two years, the company’s drug pricing has been looked into for its involvement in price collusion with other drug manufacturers. It was found that Perrigo and other manufacturers would drive generic drug prices up by working with other companies to control the prices of fluocinonide, desonide, and clobetasol. Doing this would force consumers and other companies to adjust to the high prices so they could either treat their skin problems or stay in the market.

The investigation began according to Eric Duhs online article titled DOJ Raids Perrigo In Generic Drug Price-Fixing Probe because Heritage Pharmaceuticals was found, “to be conspiring to fix prices, rig bids and divvy up customers for an antibiotic and a diabetes medicine.”After this several states looked into pharmaceutical manufacturers that were located in their state. Eventually multiple states filed complaints against multiple Pharmaceutical manufacturers for issues related to price control. Trying to fight against the charges, Perrigo dropped the prices of fluocinonide, desonide, and clobetasol. These drugs are for skin conditions such as eczema. A dozen companies involved in the price collusion scandal have received subpoenas and they are also required to cooperate with law officials. Perrigo being one of the several defendants denied all allegations and stated that all their drug prices were appropriate.

Stakeholders

Outbreak of Eczema and Psoriasis

Stakeholders are the people primarily impacted by the company's decisions and actions. In this situation one of the multiple stakeholders are customers who can not afford the drugs because of pricing. People with skin diseases such as eczema or psoriasis will now have go without or adapt to the price of fluocinonide, desonide, and clobetasol. Often when eczema and psoriasis go untreated people will develop or be more prone to asthma and hayfever. In severe cases eczema can last for multiple weeks or even longer and cause the person extreme discomfort. Fluocinonide, desonide, and clobetasol are all steroid based creams that help deal with skin diseases such as eczema and psoriasis. Perrigo controls the prices of these steroid based creams which in terms also controls customers comfort and discomfort. If the price is increased many consumers will not be able to afford the creams made by Perrigo.Other pharmaceutical businesses who have engaged in price collusion with Perrigo will be outed and possibly pursued by greater law repercussions. Mylan NV, Lannett Co. Inc., Impax Laboratories Inc., Par Pharmaceutical Cos. Inc., Allergan PLC and Taro Pharmaceuticals USA Inc were all given summons to attend court in relationship to price collusion. Many of these pharmaceutical manufacturers also suffered a great lost in stock prices and are dealing with the repercussions of their actions. There are agents working for the Justice Department and the employees who work for Perrigo who will now be working more in the possible investigation or possible working less because of Perrigo plummet in stock prices.There are also stockholders who had to sell stock to deal with the halt of growth within the company and the other stockholders who are now at a loss because of this. Stakeholders are all the people who are affected by Perrigo's

unethical decisions and actions.

Perrigo Stock Price

Individualism

Fluocinonide for Eczema and Psoriasis

According to The Case Manual, by Heather Salazar, individualism is when the, “Business

actions should maximize profits for the owners of a business, but do so within the law”(Salazar 17). In this situation, Perrigo pursued profit maximization through over pricing pharmaceuticals. They would work with other companies who also manufacture fluocinonide, desonide, and clobetasol and drive up the prices so they could make more money. The consumers of these steroid based creams would be unable to buy because of how expensive they were. Price collusion is illegal in the United States, so because of Perrigo’s actions they are in violation of the first rule of individualism. On the other hand, if Perrigo was able to maximize profit but do so within the guidelines of the law then they wouldn’t be breaking the rules of individualism. Furthermore, an individualist would consider Perrigo's actions unethical and wouldn’t support their choices. Price collusion is essentially the opposite of dumping so instead of putting companies out of business by lowering prices they are gaining a competitive advantage over other companies by controlling prices. Under United States law, companies are not allowed to work together and control pricing to gain advantages.

Utilitarianism
According to An Introduction to Business Ethics, Joseph DesJardins says that utilitarianism is the action of, “maximizing the overall good” or, “the greatest good for the greatest number” (29). In other words, utilitarianism is the greatest sum of overall happiness with the least consequences. In this situation, Perrigo has been increasing overall price through price colluding with other pharmaceutical manufacturers. Moreover, the increase in prices impacts other drug manufacturers who are not colluding as well as individuals who need the drugs. In Perrigo’s case, they are not following utilitarian ethics and instead are creating an extreme amount of dissatisfaction for all of their customers who need fluocinonide, desonide, or clobetasol to treat eczema and psoriasis. These are steroid based creams and help alleviate the symptoms from these diseases. Therefore, when these individuals can not afford these creams they are unable to treat their eczema or psoriasis. When Perrigo and other companies participate  in collusion they are the only ones benefiting anything and as a result it doesn’t maximize overall happiness. In addition, they are also affecting other generic drug companies and gaining an unfair competitive advantage over them. These companies who are not participating in price collusion will be forced to raise prices or they will be driven out of business. Overall, in other words, another person or company is impacted in a negative way. Furthermore, stockholders were also impacted negatively because many of them let go of their stock in Perrigo causing other stockholders a loss of money. Ultimately, Perrigo created very little happiness for a much bigger loss and in turn didn’t follow the rules of utilitarian ethics.

Kantianism

According to An Introduction to Business Ethics, author Joseph DesJardins says kantianism is, “our fundamental ethical duty … to treat people with respect” and, “treat them as equally capable of living an autonomous life” (38). In this situation, a kantian would say that people can self govern themselves, meaning that they have the choice of deciding whether or not they want to take the drugs or use fluocinonide, desonide, and clobetasol. However, because Perrigo is guilty of price collusion and were essentially controlling the prices of prescription pharmaceuticals and steroid creams, if a patient was prescribed medication and had to buy these pharmaceuticals they have no other option but to pay the cost so they could treat their disease. In Perrigo’s case, a Kantian might not be able to make the argument that the individual had a choice because they really don’t have a choice in this situation. With prescription based pharmaceuticals the individual is often required to take the medicine or their symptoms will worsen. As mentioned earlier, eczema and psoriasis will worsen and will become more severe depending on how long it is neglected and not treated. Moreover, if we take Perrigo and base their pricing off of morals, the moral thing to be done would be a price deduction. Increasing the price for patients who are forced to buy these pharmaceuticals is not moral and it is not treating them as equals. In fact, this could be seen as taking advantage of a disadvantage that the customers have, ultimately making Perrigo look like they don’t view their customers as equals but more as profit. Their disadvantage is that they need the medication and will have to purchase no matter what the cost.

Perrigo Drives Shareholder Value by, "Affordable Healthcare Products."

Virtue Theory
Virtue theory according to The Case Manual, author Heather Salazar states that Perrigo should value, “Character Traits that Promote Wellness or Flourishing of Individuals within a Society” (22). Perrigo acted out of greed. Greed is not something that is valued by all and helps in the flourishing of a society. In the United States, greed is partially responsible for the unequal distribution of wealth. Perrigo wanted more money for themselves at the expense of their customers. Many people who once used fluocinonide, desonide, and clobetasol now have to go without it or adjust to the prices. This did not promote wellness and also did not help any individual within the society or market of people taking these steroid based creams. The increase in pharmaceutical prices actually took money from people in need and made them buy pharmaceuticals that were overpriced and it took advantage of a situation that put their customers in jeopardy. Furthermore, virtue theory also states that Perrigo should follow the ethical rule to, “Act so as to embody a variety of virtuous or good character traits and so as to avoid vicious or bad character traits” (Salazar 22). Essentially, Perrigo acted in an egocentric manner and this is not valued in society nor does it live up to the standards of virtue theory. Perrigo was self centered and acting in ways that only benefited them while many individuals were faced with a loss of disposable income. Other companies were unable to go against the rising prices and were also forced to raise their prices or go out of business. By Perrigo deciding to control prices of pharmaceuticals was a completely self centered move and left many members of society at a disadvantage.   

References:

Bomey, Nathan. “Justice Department Raids Generics Maker Perrigo in Drug Price-Fixing

Probe.” USA Today, Gannett Satellite Information Network, 3 May 2017,

www.usatoday.com/story/money/2017/05/03/justice-department-perrigo-drug-raid/101234832/#.

Chen, Caroline. “Perrigo Offices Searched by U.S. Agents in Drug Price Probe.”Bloomberg.com,

Bloomberg, 2 May 2017,

www.bloomberg.com/news/articles/2017-05-03/perrigo-offices-searched-by-justice-depa

rtment-in-drugs-probe.

DesJardins, Joseph R. An Introduction to Business Ethics. McGraw Hill, 2014.

Knott, Dr Laurence. “What Is Eczema? Eczema Causes and Treatment. Information.” What Is

Eczema? Eczema Causes and Treatment. Information | Patient, Patient.info, 2 Dec. 2015,

patient.info/health/atopic-eczema.

Kroh, Eric. “DOJ Raids Perrigo In Generic Drug Price-Fixing Probe - Law360.” Law360 - The

Newswire for Business Lawyers, Portfolio Inc, 2017,

www.law360.com/articles/919989/doj-raids-perrigo-in-generic-drug-price-fixing-probe.

Plc, Perrigo Company. “Perrigo Discloses Investigation.” PR Newswire: News Distribution,

Targeting and Monitoring, PR Newswire Association LLC, 2 May 2017, www.prnewswire.com/news-releases/perrigo-discloses-investigation-300450244.html.

Salazar, Heather. The Business Ethics Case Manual. Blackwell Publishers, 1999.