Ethical Dilemma at Tap Pharmaceuticals: A Case Study

In 1995, Douglas Durand became the vice-president of sales at Tap Pharmaceuticals. After discovering unethical practices involving bribery with urologists to promote the Lupron drug for prostate cancer, he meticulously documented his findings over six years and submitted them to federal prosecutors. The evidence led to Tap Pharmaceuticals pleading guilty to colluding with doctors and defrauding the government, resulting in a $875 million fine. Durand received 14% of the settlement for his efforts in addressing the issue.

The symptoms in the Tap Pharmaceuticals case are primarily driven by numbers and monetary rewards.

The top sales reps were incentivized to sell or distribute more in order to receive larger monetary rewards. Durand attempted to create a more structured environment to address the illegal practices he encountered, such as inaccurate tracking of Lupron samples given to doctors. He offered sales reps a year's salary to ensure accurate record-keeping, which was successful until upper management discontinued the bonus program. As a result, the reps reverted back to their previous behaviors.

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The symptoms of dishonesty, unethical behavior, inadequate record-keeping, involvement of crooked doctors, and a disregard for government laws and regulations stem from poor upper management at Tap Pharmaceuticals.

Durand found that the root cause of the unresolved issues at Tap Pharmaceuticals is the monetary driven culture created by president Yasu Hasegawa and senior management. When Durand tried to implement new policies or practices, he was either not supported by Hasegawa and sales reps, or undermined by senior management. Tap Pharmaceuticals' primary sales strategy involved bribing and offering incentives to those who prescribed their drugs, such as televisions, vacations, and office equipment.

Unethical practices at Tap Pharmaceuticals resulted from a lack of ethical leadership and absence of ethical standards and practices. The company failed to have a house counsel to ensure ethical practices and compliance with government requirements, as it was viewed as a department that hindered sales. Durand was eventually sidelined from marketing and sales discussions, with his lack of understanding of the company culture cited as the reason. The absence of ethical leadership within Tap Pharmaceuticals is the underlying cause of the unresolved issues identified by Durand.

Examine and assess different options.

Choose the most credible option and provide suggestions.

When considering other options, people look at different choices that could lead to a different result than what is currently expected. When Durand was offered the Vice President of Sales position at Tap Pharmaceuticals, he was unaware of the situation he was stepping into. All he saw was an opportunity for advancement in an industry where he had already established himself. Durand had a few alternatives in this ethical dilemma. He could have stayed silent and followed Tap Pharmaceuticals' unethical policies and procedures. However, this choice could have had negative consequences for Durand. If Durand had allowed Tap Pharmaceuticals to continue its unethical practices in sales, eventually the federal government would have detected it and imposed penalties on both the company and Durand.

Mr. Durand observed unethical practices at Tap Pharmaceuticals, risking prosecution for the illegal actions he saw. The company's instruction to overlook the law to boost sales and give away medicine samples raised ethical concerns. Despite Tap Pharmaceuticals' plan to increase profits by ignoring industry regulations, Mr. Durand stood firm in his choice not to engage in these unethical behaviors. Pondering his next steps in reaction to the widespread corruption he discovered, he wrestled with the dilemma.

Mr. Durand faced a difficult decision: whether to leave his job at Tap Pharmaceuticals and jeopardize his family's financial security. He struggled with the idea of giving up a high-paying position at a prestigious company, concerned about how it would affect his children and their upbringing. It seemed easier to ignore any possible wrongdoing than to start anew and climb the corporate ladder once again, as he had done two decades ago at Merck & Co.

When faced with an ethical dilemma, Mr. Durand felt trapped and uncertain about his options. However, he ultimately chose to pursue legal action against Tap Pharmaceuticals due to the company's violations of the law and potential harm to others. Given his expertise in the pharmaceutical field, Mr. Durand believed it was his responsibility to expose any fraudulent activities or government and Medicare involvement by Tap Pharmaceuticals.

TAP Pharmaceuticals, a doctor, and seven employees of the company were charged with offering kickbacks to physicians in exchange for using Lupron. The federal grand jury also convicted them of Medicare fraud and breaking the Prescription Drug Marketing Act. According to PSA-Rising (2001), those named in the indictment include: Alan Mackenzie, Janice Swirski, Henry Van Mourick, Donna Tom, Kimberlee Chase, David Guido, and DR.

John Romano, a urologist aged 48, operates a practice at 110 Long Pond Road in Plymouth, Massachusetts.

Before the aforementioned indictment, four more doctors were charged. TAP Pharmaceuticals motivated urologists to prescribe Lupron by offering perks like big screen TVs, golf vacations, and free samples of Lupron. Sales reps also gave doctors complimentary samples and urged them to bill Medicare at full price.

Durand's attempts to change the way Tap Pharmaceuticals operated were unsuccessful, as new structural changes led employees to revert back to old practices. Implementing accurate bookkeeping was crucial for tracking sample distribution to doctors and pharmacies, as without proper records it was impossible to determine representative payment. Adherence to new rules and regulations is essential for successful implementation of new ideas. When a leader lacks business ethics like Yasu Hasegawa did, it influences employees negatively. A good leader sets a positive example for others, as actions speak louder than words; allowing morally weak individuals to lead can cause other employees to compromise their values.

Durand's attempt to drive cultural change was unsuccessful, as senior management and veteran sales representatives resisted improving the company. Their long-standing practices were more appealing than the potential rewards of change. It was easier to engage in questionable business tactics than to maintain accurate records of sample distributions and purchases. If the company president himself refused to adapt his methods, it was unreasonable to expect employees to embrace change.

In a healthcare business, the patients should always be the top priority. Neglecting them in favor of personal gain led to a costly lawsuit. Durand's proposed changes can only work with a complete management overhaul. Starting fresh would be necessary to remove all unethical employees. This process would be time-consuming and expensive. Despite Durand's whistle-blowing on Tap Pharmaceuticals resulting in fines, there are likely guilty employees who escaped prosecution.

At TAP Pharmaceuticals, there was a culture of misalignment, where profit was valued over ethics. The CEO and upper management set a tone of weak unethical leadership, showing no interest in creating formal cultural systems. The focus was solely on the bottom line, with little concern for how profits were achieved. When Durand tried to implement a "Reward System" to bring positive changes, upper management shut it down and labeled him as a troublemaker. TAP was resistant to positive ethical change, as seen in their participation in unethical gift-giving to urologists and doctors.

Summary: Tap underwent significant consequences in the pharmaceutical sector, resulting in a comprehensive transformation of its reputation and activities. Seven top officials faced severe repercussions for their participation in the Lupron controversy. Despite beginning anew in a less lucrative position, Douglas Durand managed to secure a sizable compensation under the Whistle-Blowers Act from federal authorities. Currently retired, he lives in Florida.

References:

Barrett, A. (2002, June 24). A Whistle-Blower Rocks an Industry. Business Week. Retrieved June 19, 2007, from http://www.fairness.com/resources/relation?relation_id=9650 Nelson, K., & Trevino, L. (2004). Managing business ethics: Straight talk about how to do it right (3rd ed.) . New York: Wiley.

On October 3, 2001, TAP Pharmaceuticals Products Inc. and seven others were charged with health care crimes. The company agreed to pay $875 million to settle charges. Retrieved on June 22, 2007 from http://www.psa-rising.com/wiredbird/tap102001.php