Organizational Marketing Ethics
Advanced Concepts and Topics in
Management
Rita Y. Allen
INTRODUCTION
Ethics is so multifaceted;
it is difficult to define in one precise way. In general, ethics “is the code of moral principles and values that
govern the behaviors of a person or group with respect to what is right or wrong (Daft & Marcic, 2007).” Ethics
is greater than moral conduct; it is greater than simply doing right or wrong. It is the internal values of an individual
and a corporate culture that determine respect and responsibility. An ethical issue can be one that potentially causes
harm or benefit to others.
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 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. 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 managers might change the course of direction.
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.
LEARNING
OBJECTIVES
·
Define ethics and ethical behavior.
·
How ethics behavior applies to management of the healthcare industry.
·
Explore ways that the pharmaceutical industry has violated ethical marketing procedures.
·
Examine how unethical marketing practices negatively impact all areas of society.
·
How ethical organizations are created through ethical leadership and organizational structures and systems.
·
Explore ethical marketing techniques
·
Social Responsibility.
BACKGROUND
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).
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.
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. 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)
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 statements 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. It is an established rule of our company
that any employee who accepts money or anything valued at more than $10 will be fired on the spot. $10 allows for nice
cards of Thank You should a resident choose to send one. Not long after I became employed here, one of our employees
at a sister community was fired for selling her paintings to a resident.
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 ¼ 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).
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). What organizational ethics?
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).
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).
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).
In 1992, because organizational
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).
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).
TIES TO
COURSE CONCEPTS
Managerial Ethics can be quite
a challenge. The basic criteria for ethical decision making has four basic approaches: the Utilitarian Approach, the
Individualism Approach, the Moral Rights Approach and the Justice Approach. Although these may vary in process, they
are basically the same in that managers should make decisions that benefit others and not just themselves. Ethical decisions
should treat others fairly. Both of these basic concepts are violated by the pharmaceutical industry. We could
say that the pharmaceutical companies are to blame, but they would not market the way they do if it were not working.
The managers, physicians, and health care professionals not only allow them to do it, but are willing partners in their unethical
marketing tactics. Exhibit 4.3 on page 129 of our textbook shows The Transparency International Bribe Payers Index of
2002. The United States scored 5.3. I would have thought the score would be much lower. In fact, if
we had an updated index for 2007, there would probably be a decrease. The social responsibility of a corporation begins
with economic responsibility, which is interpreted to be profitable. Second is the legal responsibility which means
to obey the law. Thirdly is ethical responsibility. If ethical responsibility came before economic responsibility, would
it make a difference? It’s obvious that our country is far more intent on making money than on being ethically
above board. What can we do to reverse this (Daft, Marcic, 2007)?
APPLICATION
A Fiduciary Model for Healthcare
Marketing Ethics is necessary for organizational leaders. 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).
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.
BRINGING
IT ALL TOGETHER
“There is no money in curing disease. There is money in mass-producing medication (Chandrasoma, 2001).”
The reason we are supposed to have pharmaceuticals is to cure illness and disease; no longer. The pharmaceutical industry
has become the modern-day dragon in 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, drugging them into America by unethical marketing practices. 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 (Chandrasoma, 2001).
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. 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).
CONCLUSION
The
patient’s health and well being has long been far from 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 by leadership to drive
the physicians
back to value-based, positive-sum
competition, our train will surely wreck. What do can we do to motivate providers to this new, unselfish, ethical place?
What do we do to motivate the marketing professionals and the healthcare professionals 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 no more unethical advertising who are willing to publicly implement
the value-based competition, could change the world.
I conclude with 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.
LEAD OFF AND FOLLOW-ON QUESTIONS
- As Marketing Director of your corporation, are you conducting all marketing activities
in a socially responsible way? If consumers partake of your goods, will they enhance the welfare of the public, the
interests of society and your organization as well?
- Are you hyping something beyond reality? Do you actually believe what you
are promoting/saying about a product? If not, why are you saying it?
- Are you promoting a product that could be harmful? Even if you really believe
in a product, are you reporting the down side as well as the up side? Although you are not personally responsible for
a harmful product, how would you feel if you had heavily promoted a product that ultimately caused pain, or even death?...especially
if you had suspected that something wasn’t safe from the beginning?
- Are the messages to the public realistic? Are they socially responsible?
- Are you promoting unrealistic images for the purpose of selling something?
For example, using the example mentioned earlier about Brad Pitt?
- If you market something that takes advantage of people, is that ever justified?
For example, stores that market to a disadvantaged social group such as pay-day loan companies that charge exorbitant interest.
Although mostly low-income people choose to use the companies, they are manipulated into these by their low economic condition
and then the companies further weaken their economic situation.
- Are you using research, consumer trials, taste tests that are gathered as objectively
as possible? Faulty data can be very deceiving.
- Are you deceptively creating the demand for unnecessary services? Are you
marketing a need where research has not supported the need?
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