Rita Young Allen, MA, MS

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Rita Young Allen
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Marketing Ethics in Managed Care

Rita Y. Allen






Medical Ethics for Health Care Organizations have evolved out of necessity.  The drive to redirect consumerism of the medical profession back to the best interest of the patient demands some specifics in marketing ethics.  The present-day relationship between health professionals and pharmaceutical companies is headed for disaster.  The pharmaceutical companies are buying our doctors with a sample and the doctors are medicating America like robots of the pharmaceutical companies.  Something must change, and quickly





The past three decades have witnessed a dynamic growth in marketing and consequently, a strong need for new marketing ethics guidelines.  At the forefront of this need are the pharmaceutical companies who have made a very lucrative business out of the business of marketing.  The techniques they have used, and are using, present a number of ethical problems for the healthcare professional and the patient.  Managers in the industry do realize the severity of the problems, but have been almost helpless to change the direction of this steam-filled train headed downhill. This paper explores how this is taking place and brings awareness to how we might change our course of direction.



According to Dr. Joseph Rohan Lex, Jr., MD (2003), assistant professor of emergency medicine at Temple University School of Medicine, the relationship between physicians and pharmaceutical marketing representatives “results in inevitable and irreconcilable conflicts of interest” at which the patients are ultimately the losers.  The fiduciary position that physicians hold, demands that they not be bought with free pen or pad.  That position means that they hold a position of trust, avoiding positions of conflict of interest.  Drug companies are the most profitable business in the world using techniques of the subconscious that “capture free advertising space on our shirt, our coffee mug, our pen, our notepad, our stethoscope.”  The reason they use these techniques is because they work.  Doctor’s don’t want to admit it, but they seem to be subjects of a marketing technique that is unavoidable and unconscious.  Physicians write prescriptions.  Healthcare costs are rising at about 10% a year and the largest segment of that is the cost of drugs. Why wouldn’t the pharmaceutical companies want to woo the physicians!  Conflict of interest is where the influence of a primary interest is unduly influenced by the influence of a second interest.  A standard procedure of academic programs around the country is to allow a drug company to purchase the lunch for a faculty lecture giving them the opportunity to stand in front of the group and demonstrate their product.  Recordings were made of these demonstrations revealing a startling number of inaccurate statements.  All of the inaccurate statement favored the drug companies (Lex, 2003).


Dr. Lex quotes the Widener Law Symposium Journal of 2001 as saying, “Conflicts of interest are institutional weeds. They take root below the surface; they become pervasive problems long before they show their ugliness.”  For this very purpose, in my present position at an upscale retirement community (where almost every resident is independently wealthy) no employee or associate is allowed to receive any tip, ever, nor are they allowed to receive anything of value.  Free gifts can buy many intangible things.  According to Dr. Lex the drug companies are subconsciously leading our nation’s physicians down a fatal road of the medicating of America.  Not only do the doctors not have a problem receiving freebies, even textbooks, golf balls, free lunch, happy hour…they have come to expect it (Lex, 2003).

            For all industries in the United States the percent of revenue median profit has been between 2% and 5%.  The drug companies profit percent of revenue is 19%, and it is going up every year.  We have bought into this insatiable bottomless pit and we are paying the price.  39% of the cost of drug expenditures going up each year is due to physicians writing more prescriptions.  We are a medicated society; we want a quick, simple fix.  Many Americans do not want to pay the price of self discipline and altered lifestyle to bring health to their body; they want to take a pill.  They want a name given to their illness so they can feel special.  That’s why the medical profession’s DSM manual is about four inches think today.  The first DSM manual was not quite inch thick. Additionally, the doctor really doesn’t want to spend the time to labor over the working process of bringing forth the optimum life when they can write a prescription in 15 seconds (Lex, 2003).                                                                                                                                    4

            A study was done giving a group of 35 doctors a series of hypothetical scenarios such as uncomplicated urinary tract infection, high blood pressure and depression.  Ninety percent of the doctors agreed on the treatment medication to begin with.  Then the drug companies came in giving samples of freebies of a more expensive medication for the same illness.  32 of those 35 doctors gave the more expensive samples than the inexpensive drug that said they would have started the patient on.  They never switched back to the less expensive drug, which would probably have alleviated the problem as well.  Drug companies freely provide samples because they know physician’s behavior.  Additionally, half of the drug reps are handing out drugs to nonphysicians and 26% of them are swapping drugs with other drug reps.  What ethics?  (Lex, 2003).

            According to the pharmaceutical promotional magazine, Script, there are four different kinds of doctors.  There are specific instructions of how to approach each category of doctors because the approach is different for each one.  The categories are: (1) the sheep who are interested in conforming. (2) The wolves who are interested in making money. (3) The bunnies who really do like to take care of sick people. (4) The “dodos” that are burned out and only in it for survival.  This brings up the subject of promotional honesty.  A study was done over a seven-month period of all the materials left behind or mailed to physicians by drug companies.  42% of this material failed to comply with at least one of the FDA regulations (Lex, 2003).

            This unethical marketing even extends to celebrity endorsement.  If Brad Pitt takes this drug then I should take it too so I will, hopefully, be more like Brad Pitt.  It’s psychological and subconscious (Lex, 2003).


Winkler and Gruen (2005), propose four principles:  (1) provide care with compassion, (2) treat employees with respect, (3) act in a public spirit, (4) spend resources reasonably.  With these four principles, medical ethics becomes more feasible although not as simply as it is written on paper.  For example, physicians have a responsibility to their patients while organizations have a responsibility to their whole healthcare population.  This ethics responsibility has many levels.  As usual, organizations are more prone to promote ethical behavior if their leaders encourage and model that behavior.  A key component is to openly reward ethical behavior and discipline the unethical behavior (Winkler & Gruen, 2005).

The Joint Commission on Accreditation of Healthcare Organizations (JCAHO) is responsible for much of the recent organizational ethics in the healthcare industry.  A wide variety of programs have been developed including formal procedures for addressing an organization’s ethical problems, combining ethics and compliance programs, developing processes to clarify the organization’s behavior, training of ethical behavior and offering feedback on ethical performance (Winkler & Gruen, 2005).

            On July 1, 2002, a new marketing code took effect.  This code, designed by the Pharmaceutical Research and Manufacturers of America (PhRMA), was to stop gifts and dinners to doctors and their staff.  It was even going to stop cash give-always.  Trouble was, there was no accountability to the code; it was voluntary.  Dr. Samuel Packer, MD, a Long Island, NY ophthalmologist (chair of the ethics committee of the American Academy of Ophthalmology) states that the reason for the new code was two-fold.  First, it was to help end criticism of drug companies whose marketing techniques had


developed into predominantly cash and gift incentives, and secondly, as an attempt to self-regulate in an effort to try to keep the government from regulating.  Dr. Packer was concerned that the new code lacked teeth because it was voluntary.  He was right.  Because of the federal anti-trust law, the new code could not be made mandatory.  The code was quite specific.  “Companies should generally not provide entertainment or recreational activities to healthcare professionals. Thus, companies should not invite healthcare professionals to sporting events, concerts, or shows, or provide them with recreational activities such as hunting, fishing, boating, ski trips, or golf outings, even if those entertainment events or recreational activities are used to facilitate informational interchanges between the [pharmaceutical] company representative and the healthcare professional.”  It’s sad that we have to have a code to tell our physicians not to allow these things to affect the quality of treatment they deliver to those who have entrusted their lives to them (Nozar, 2002).

We have much information about the four P’s in marketing:  Product, Price, Place, and Promotion.  Little has been said about the E of marketing, which is Ethics.  We are inundated today by the stories of where ethics is no longer a requirement for leadership.  Many healthcare organizations have adopted ethical behavior guidelines for membership. Healthcare Industry marketing guidelines have been developed by many organizations, including the American Hospital Association.  These guidelines have addressed issues such as using actors and models rather than real patients and staff; avoidance of making unsupported claims and creating unrealistic expectations; and the avoidance of creating demand for unnecessary services.  These guidelines also propose physician referrals


assuring that the patient is placed in the best location for their care. Ultimately, marketing is not simply for generating greater demand, in the healthcare industry, it is for meeting the needs of those in need.  Marketing is viewed by healthcare providers as a method of expanding or creating demand for services.  As new services are offered that will truly benefit the community, the marketing is very valid and beneficial.  When marketing turns to creating a demand for services that are redundant or less than what they project to be, then the practice becomes unethical (Gershon & Buerstatte, 2003)

Many companies are now establishing a newly-developed position within their company called the CPO (Chief Privacy Officer).  The American Health Information Management Association (AHIMA) has already endorsed its support of the position in the areas of healthcare and patient records.  This position was developed as a result of necessary control of the right and wrong ways to use personal information.  Many firms are finding that having a CPO is really good business as the CPO helps them create effective marketing strategies that adhere to all privacy laws.  The position of CPO must be highly qualified in the areas of technology, law, ethics and information.  They must also have the ability to effectively work with the marketing group of the organization where, in the past, the “bottom-line” was the focus of the marketing group.  Probably the most important component of the CPO position is monitoring the information systems of the company ensuring safety and privacy for all involved.  A CPO’s position will also include training staff on privacy issues and working with governmental agencies.  One of the main responsibilities is devising marketing strategies that ensure the customers privacy.  This is a monumental feat considering that customers desire a high level of


personal service while consequently maintaining privacy.  This combination of the right of privacy with the right of access to information by all involved in the healing process can be tricky.  The key direction for the CPO in marketing ethics is to maximize service and eliminate privacy risks (Pemberton, 2002).

The root of the establishment for many of the privacy laws today comes from the angry outcry of the public concerning companies that trade or sell their information to other companies.  The CPO must have the knowledge and intuition that although some actions may not be illegal, they could certainly be unethical.  Additionally, what is unethical today may be illegal tomorrow.  The CPO must anticipate privacy problems within the technology now in use.  As we move toward a value-based system, customers will look for organizations that are committed to the protection of their privacy.  The CPO is a now established vital cog in that wheel of service (Pemberton, 2002).



            Healthcare providers have been pushed from the coexistence of the past into aggressive competition.  Fewer patients, fewer acute care beds filled, and fewer reimbursement dollars have forced hospitals and physicians to market their services like any other commercial sellers; but have they crossed the ethical lines in the process?  In the article, Taking the Train to a World of Strangers: health care marketing and ethics, the question is asked if the marketing of healthcare can be a “moral exemption for business?”  Can healthcare providers take a train to a place where the relationship of healthcare professional and patient is “only casual or commercial?”  We are so close to


this today.  In most businesses, it is not unethical to conduct transactions at arm’s length, but in the industry of healthcare where the assumption is made that all decisions and transactions have the best interest of the patient at heart, the ethical indications are somewhat different than most businesses.  Ms. Schore sees patients as being different than other consumerism in three distinct ways.  First of all, the ill or injured are in a position of vulnerability and dependability.  They generally do not possess the knowledge of how to heal themselves and they depend upon the skill of a provider to restore them to health.  For the most part, they are also unable to judge the quality of medical care they receive.  Secondly, a patient’s quality of life and even life itself is in the hands of the provider.  A patient frequently discloses intimate information in order to facilitate recovery.  Thirdly, the history of the healing relationship between doctor and patient leads the patient to trust that the doctor has their very best interest at heart.  They do not perceive, nor believe, that a doctor will recommend open-heart surgery for the sole purpose of making money.  Providers are ethically obligated to put the health of the patient first.  Those who are sick have no way of judging the effectiveness of treatment as they do the effectiveness of deodorant.  Marketing ethics is very different in the world of healthcare than it is in the world of other consumerism (Nelson, Clark, Goldman & Schore, 1989).

            A Fiduciary Model for Healthcare Marketing Ethics is necessary.  This model projects that marketing representatives should be held to the same ethical standards as are the providers. “The main characteristics of this model concern the primacy of the patient's good, the avoidance of unnecessary services, high standards of honesty and


accuracy, and public accountability.”  Healthcare marketing should place the patient’s good above that of the provider’s economic advantage.  In the world of most commercial  marketing, the method of operation is to “create” the need or desire for a product where the need or desire was not present, but in the world of healthcare marketing this is unethical.  Some years ago a Nevada hospital stimulated occupancy by offering discount rates and a weekly drawing for a free vacation cruise.  Unethical.  The burden lies with the provider for high standards of honesty and accuracy.  It should not be the patient’s responsibility to weed through misleading information to find the truth.  An example of this was where a hospital advertised that it was “more than a safe place to have your baby.”  This particular hospital did not even have a newborn intensive care unit making it an unsafe place for a critically ill newborn.  Unethical.  A physician may attempt to recoup some of his losses for discounting services by performing unnecessary or marginal services.  Unethical.  There is a legitimate place for marketing in healthcare as long as it ethical (Nelson, et al., 1989).

In 1992, because marketing practices of pharmaceutical companies had become quite controversial, the American Medical Association (AMA) developed guidelines regarding appropriate interactions between pharmaceutical companies and the medical community.  At that time, the pharmaceutical industry was spending between $5,000 and $6,000 per year per physician on product promotion.  There was great concern that residents would have difficulty dealing objectively with the barrage of literature and enticements they would encounter (Brotzman & Mark, 1992).



In 2004 the pharmaceutical industry spent $21 Billon on promotion.  $18.4 Billion of that was direct marketing to physicians.  In 2004, there were approximately 600,000 practicing physicians in the United States, meaning that the drug companies were spending $30,000 per year, per physician in materials promotions.  Twelve percent of the drug company revenue goes to research and development.  30 percent goes to marketing and administration.  They combine these two together to disguise the massive percentage that actually goes to marketing (Lex, 2003).

In 1991 a study was done where directors of all 386 programs listed in the reprint of Accredited Graduate Residency Programs in Family Practice of the American Academy of Family Physicians (AAFP) were surveyed.  Inquiries were made about seven types of interactions between pharmaceutical representatives and residents.  The seven categories were:  (1) contact during working hours, (2) complimentary clinic drug samples, (3) drug samples for resident's personal use, (4) displays at residency activities or clinic sites, (5) distribution of literature, (6) gifts and social events, and (7) group presentations.  42% of the residency programs had no written policy in any of the seven activities; therefore, they had no guidelines and were free to accept anything they chose.  Additionally, the programs that did have guidelines were more concerned about regulating access and information than gifts.  Our residents are being programmed to receive gifts from the pharmaceutical companies from the beginning of residency (Brotzman, Mark, 1992).

            The article, Health as a Consumer Product, written by Shahin Chandrasoma (2001), cuts right through to the bone with his assertions that, “There is no money in


curing disease. There is money in mass-producing medication.”  The reason we are supposed to have pharmaceuticals is to cure illness and disease; no longer.  The pharmaceutical industry has become the modern-day Beowulf, demanding “blood” wherever he goes.  Mr. Chandrasoma calls it “disease-ism” elaborating on how they pick and chose which drug products to develop based on consumerism, not based on need.  For example, there is a plethora of drugs to treat allergies, hair loss and erectile dysfunction, but none to treat fatality in preterm labor.  The drug companies feel that the percentage of preterm labor is too small for research (will not produce enough profit).  Many times physicians have no choice but to use outdated or untested drugs on pregnant women.   He likens it to performing breast enhancements but ignoring the breast cancer.  On the other hand because every male with a Y chromosome is a candidate for Viagra, much research and development, and marketing has been invested, rendering very high profits (Chandrasoma, 2001).

            The government has taken a wonderful step in the right direction by offering incentives to pharmaceutical companies to develop research treatments of rare diseases.  It is called the Orphan Drug Act and can be accessed at http://www.fda.gov/orphan/oda.htm.   According to Mr. Chandrasoma it is too late for us to reverse the trend of increasing consumerized mass marketing.  He feels that the government will have to further step in with laws and regulations to equalize the trend.  The drug industry has taken discrimination to higher level; discrimination based on your disease.  Let’s face it; according to the drug industry it is more important for a man to



have an erection than to save the lives of those individuals with rare diseases (Chandrasoma, 2001).

            Advertisement can be very positively powerful…and truthful!  The very first, and most important aspect of marketing is educating the public.  Patients are the most powerful marketing tool.  If they are treated well, they can reach folks that would be impossible to otherwise reach.  They need a full understanding of all the services offered by their physician.  If they don’t know he treats acne, they may seek out a dermatologist.  If they don’t know he enjoys seeing children, they may seek out a pediatrician.  Education is primary.  Some ways to accomplish this is by mass mailing, email newsletters, brochures in the office, signs and banners in the waiting room, trade shows, seminars, keynote speeches, ads and much more.  Another way is to take a survey of the current patients asking them about expanded services that might be important to them, such as extended hours, treadmill testing, sports physicals, etc.  Make use of every possible opportunity to send welcomes, congratulations and best wishes, such as new patient, happy birthday, new baby, graduation, etc.  Always send out reminders.  Patients will equate that kind of organization with healthcare organization.  They will also equate waiting room/bathroom cleanliness with healthcare cleanliness.  Cleanliness and order are tremendous advertisements. Pay attention to how difficult it is for the patient to actually see the doctor.  Is there difficulty parking?  Is there a long walk to the door?  Are there too many forms to fill out?  Are they left too long unattended?  As for large scale advertising, perhaps the physician might consider billboards, newspaper ads, yellow



pages, radio ads and TV ads.  In large scale marketing, it is very important to identify the target audience (Giovino, 2002).

The economic and organizational aspects of healthcare are the prime focus of Leonard Weber’s book:  Business Ethics in Healthcare:  Beyond Compliance.  It deals with business ethics issues including conflicts of interest, employment, mergers, advertising and environmental issues.  Mr. Weber distinguishes the difference between health care organizations and other organizations because of the commitment to patients’ rights and health services.  He is in full agreement with our class textbook authors, Porter and Teisberg, that good quality healthcare can be the most economical.  I am not so sure that Ms. Werhane, the author of this article, has the same views as the author as she asserts that his “rights of individual patients seem to trump in almost all cases.”  Although she states at the end of the article that Mr. Weber has written a worthwhile book, she further states that this “preoccupation with individual rights” might work in a perfect world, but, in essence, not ours.  Isn’t this what healthcare is all about?  (Werhane, 2002).



I would like to quote from a previous post of mine.  “The patient’s health and well being has long been far from the center of the focus.  Porter and Teisberg understand that the only way for our system to truly be turned around is to bring the patient back to the center of the focus…With the dollar sign at the center of our health care system, we are symbolic of a train headed downhill.  Unless actions are taken to drive the physicians


back to value-based, positive-sum competition, our train will surely wreck.  This seems like such a monumental task as it must be enabled by each provider individually.  What do can we do to motivate providers to this new, unselfish place?  What do we do to motivate providers to work together for the sole purpose of facilitating health to all those who are sick (while truly believing in the payback of a value-based system)?  A few people who are willing to say no more crossed purposes and publicly implement the value-based competition could change the world.”

For my conclusion, I would like to make a vivid analogy of the ethical marketing complications of the healthcare system in today’s world.  It is much like endometriosis.  Like a complex interconnecting spider web, this disease works silently and painfully until is takes over the human body, eventually to the point of death if not stopped.  There is no cure for it, however, there is one thing that will stop its growth; that is childbirth.   Sometimes childbirth will kill the growth of endometriosis for life.  Until America conceives and labors over new life in our healthcare system, the web of destruction will continue to grow.







Brotzman, G.L. & Mark, D.H. (1992, Jan).  Policies regulating the activities of

            Pharmaceutical representatives in residency programs. Journal of Family Practice,

Jan 1992 v34 n1 p54(4).  


Chandrasoma, Shahin (2001, Dec).  Health as a consumer product.  Commentary on the

Ethics of direct-to-comsumer advertising of prescription drugs.  The Western Journal Of Medicine, Dec 2001 v175 i6 p421(3). 


Gershon, H.J. & Buerstatte, G.E. (2003, Sept-Oct).  The E in marketing: ethics in the

            Age of misbehavior.  Journal of Healthcare Management, Sept-Oct 2003 v48 i5

p 292(3).  


Giovino, James M. (2002, Jan).  “You Should See My Doctor”:  Cost-Effective

            Marketing Ideas for Your Practice:  Marketing doesn’t have to be expensive,

            Complicated or unethical.  To begin, simply treat your current patients right. 

Family Practice Management, Jan 2002 v9 i1 p33.  


Lex, Dr. Joseph Rohan, Jr. (2003, Summer).  2005 Speaker Series:  Dr. Joseph Rohan

            Lex, Jr., M.D. FAAFM the physician-pharmaceutical industry relationship.

Journal of Law and Health, Summer 2003 v18 i2 p323(20).  



Nelson, L.J., Clark, H.W., Goldman, R.L. & Schore, J.E. (1989, Sept-Oct).  Taking the

            Train to a world of strangers: health care marketing and ethics.  The Hastings

Center Report, Sept-Oct 1989 v19 n5 p36(8).  


Nozar, Robert A. (2002, July 1).  Softer sell on deck for prescription drugs: PhRMA

            Adopts voluntary code that may end gifts, entertainment to influence doctors.

Ophthalmology Times, July 1, 2002 v27 i13 p1. 


Pemberton, J. Michael (2002, May-June).  Chief privacy officer:  your next career?

            CPOs are a necessity in today’s business environment, but no one envies their

            challenging role of upholding ethics and protectin consumer information.

Information Management Journal, May-June 2002 v36 i3 p57(2).  


Werhane, Patricia H. (2002, Jan-Feb).  Business Ethics in Healthcare: Beyond

            Compliance.  The Business Ethics within Bioethics.  The Hastings Center Report,

Jan-Feb 2002 v32 i1 p41(2). 


Winkler, E.C. & Gruen, R.L. (2005, March-April).  First principles:  substantive

            ethics for healthcare organizations.  Journal of Healthcare Management,

March-April 2005 v50 i2 p109(12).   

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Rita Young Allen Teaching Credentials.....
Master of Science in Management Leadership (Healthcare Administration)
Master of Arts in Liberal Studies (Counseling, Emergency Management, Public Administration)
Executive Director & Marketing Director for two National Healthcare Corporations
Bachelor of Science in Sociology, Minor in Music Education
Associate of Arts in Vocal Performance
Music School Owner for 24 years
Performed at Carnegie Hall with Private Choirs, 6 years
Church Music Minister, 30+ years
Published Author, "The Sheaf Dreamer"
Columnist, 20+ years
President of Alabama National Speakers Association, 3 years
Public & Private School Teacher, 10 years (Choral & Drama)
Pageantry, Top Ten, National Competition of Ms. Senior America & Alabama State Director

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Rita Young Allen, Keynote Speaking Professional / Concert Soloist / Published Author / Emcee

Master of Arts in Liberal Studies (Concentration in Counseling) from Jacksonville State University.

Master of Science in Management Leadership (Healthcare Administration) from Troy University.

Bachelor of Science in Sociology, Minor in Music, from Jacksonville State University.

Associate of Science in Music Education, Vocal Performance

Snead State College, Gadsden State College, and Wallace State College.


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