International Legal & Ethical Issues in Business

International Legal & Ethical Issues in Business




The paper discusses antitrust law, with focus on the pharmaceutical industry. It discusses the importance of antitrust law in protecting the consumers against unfair trading practices and ensuring that there is competition among different companies. The paper focuses on the pharmaceutical industries, which have found ways of navigating through the law, and have managed to avoid competition despite the increase of generic drugs in the market. The brand name companies have found a way of avoiding competition from the generic companies, by paying them so that they do not introduce the generic variants in the market. This practice seems fairly common in the US, and both the generic and brand name companies seem to have accepted it. The paper highlights the situation in Britain, and notes that the law seems to be firmer compared to the laws in the US. The competition law in the UK is similar to the antitrust laws, in that its main aim is protecting the consumers.

International Legal & Ethical Issues in Business

The federal and different state governments have enacted antitrust laws in a bid to prevent monopolies and price fixing, thereby regulating trade and commerce. These laws encourage competition among different firms. The competing firms have to find ways of gaining a competitive advantage, and this leads to the production of high quality products and services. In addition, it benefits the consumers because companies are forced to lower their prices, so that they can gain more customers. Different firms and companies in diverse industries have found ways of navigating through the established legislation. Some companies find it hard to observe the laws because they want to set their prices high since this is the only way that they can make profits. This is especially the case with pharmaceutical companies, who have much to gain by limiting competition. Different countries have enacted laws similar in nature to the antitrust laws. They have done this for the reasons of discouraging monopolies and encouraging competition (Hylton, 2010).

The federal court investigated whether SmithKline Beecham, a British pharmaceutical company, violated the antitrust laws. The company had attempted to minimize competition of its anti depressant drug Paxil, which is its most profitable drug. The federal government conducted the investigations as it sought to determine whether the company had prevented the generic alternatives of the drug from entering the market (Guidera, 2000). The drug maker would want to stymie generic competition so that it would continue making profits from the sale of the drug. The company has realized increase in sales of the drugs for a while. This shows that more people are suffering from depression, and that the physicians are recommending the drugs for its effectiveness. Generic drugs are an alternative form of drugs, and they are cheaper compared to the other drugs. They have the same functions but they are cheaper, and customers would prefer them to the more expensive varieties. By hindering the generic companies, the firm is able to maintain a monopoly in the industry. This ensures that the consumers continue depending on the firm, and it often leads to exploitation.

Firms exploit the customers by increasing the prices of their products and services. It normally takes a long time for the drug companies to sell a drug in the market. The companies have to invest a lot of money in research and design. The government has to ensure that the drugs are effective before allowing the company to sell them. This often takes a lot of time, and it costs the drug companies a lot of money. On the other hand, generic brands do not have to go through numerous clinical trials, although the generic companies have to undertake research and pass the standards set by the authorities, showing that they are equivalent to the original brand name drugs. They do not have to pass the costs to the consumers and this makes their products cheaper. Generic brands intend to keep their costs low and they avoid taking measures such as advertising, which will make them incur additional costs.

An ethical issue presented in the case involves taking advantage of the patients by denying them the chance to have the drugs at an affordable price. SmithKline Beecham would be denying the consumers a chance to buy the generic drugs. People from lower income families who cannot afford to buy the drugs from SmithKline would have to stay without taking the drug. Affordable healthcare is one of the major concerns of people. People are concerned about finding ways of reducing the amount of money they spend on healthcare. Although pharmaceutical companies make profits, it would not be ethical of them to continue making profits by having a high price for their products.

SmithKline Beecham is a British company and it is subject to the British law. If the company were indeed guilty, it would have been in violation of the competition law in the UK. The company faces the same problems as another American company, Solvay pharmaceuticals did. The company was involved in an anti trust case in the US supreme court. The company had developed Androgel, which treats low testosterone in men. Two generic companies found ways of developing their own generic version. The brand name company, Solvay, agreed to pay the generic drug companies a lot of money to keep their products off the market. By doing this, Solvay ensured that it had the sole product in the market. It could continue selling the product at any price since it did not have any competition. This is an example of pay for delay case, in which US drug companies pay generic companies to keep generic drugs off the market. By doing this, the brand name companies continue to enjoy a monopoly in the market at the expense of the consumers (Goan, 2013).

 The brand name companies form an agreement with the generic companies but this agreement does not benefit the consumers. On the other hand, if the generic companies sell their drugs in the market, the consumer benefits because of the low prices and the brand name drug companies are forced to manufacture better and higher quality products because of increased competition. For instance, a brand name drug company fearing competition from the generic drugs will develop a product that is more effective, or one that has fewer side effects. The company will then advertise the product and market the improved version to the consumers.

The generic and brand name companies seem to be more relaxed in the US compared to Britain. There are strict guidelines regarding the payment of generic companies by brand name companies in a bid to avoid competition. Competition law ensures that companies do not form monopolies in the market (Pace, 2011). Many brand name and generic drug companies in the US seem to have accepted a pay for delay method. However, this is not the case in Britain. The generic companies are not supposed to accept any payments to slow down the production of drugs because this increases the tax payers’ burden. The practice constitutes abuse on the part of the brand name companies, which are not supposed to exploit the tax payers. The pharmaceutical industries in the two countries are different because of the different healthcare system. Individuals pay most of the bills in the US healthcare system because they have to purchase the drugs. In Britain most of the cost goes to the National Health Service. Therefore, by accepting any delays for payments, the generic companies are denying the National Health Service the chance to save money.

The UK competition law prohibits anti competitive agreements. These forms of agreements discourage competition of different companies, and this is often unfair to the consumers. No arrangement formed between different companies and no business practices should limit or restrict competition. Pay for delay agreements, which are used by the brand name and generic companies are a form of anti competitive agreements, and they constitute violation of the law. The competition laws prohibit the abuse of dominant market positions. Big companies should not take advantage of the consumers or abuse the markets by denying the consumers a chance to get better services at affordable prices (Pace, 2011).

Different factors influence managerial decisions within a company. Political issues within a country often end up influencing the laws made, although this is not often the case. The political differences present in a country can often compel managers to examine the issues at hand more critically, and this often compels them to take sides on different issues. However, managers assess to see the implications and the benefits they will get by making their decisions based on political perspectives. Company management considers the social perspective on issues when making decisions, although this is not a major decisive factor. The social perspectives often lean towards people’s opinions. Companies dealing with consumer products, and which are in a competitive environment, will often consider the social perspective. This is because it can have a direct impact on the company’s performance. Managers have to comply with the legal requirements, for them to be able to conduct their operations. The legal requirements are sometimes in contrast with the popular opinion, but it is mandatory for the management to comply. Ethical dilemmas present a seemingly impossible situation for the management. They force the management to take measures that may not favor many people (Sharma & Bhal, 2004).

Observance of antitrust laws or of any other such laws is important. The laws protect the consumers from unfair trading practices by companies that may want to take advantage of the consumers. From the cases highlighted concerning the drug companies, it is clear that the companies can take advantage of the consumers if given a chance. Although generic drugs are beneficial to the consumers, it is important to consider the efforts put by the brand name companies in researching and developing different drugs. Generic companies would not be able to make their drugs without the efforts of the brand name companies. The government can help in solving the problems between the two types of companies in different ways. It can reduce the amount of money that the brand name companies spend when researching and developing new drugs. Driving down the manufacturing costs will lead to price reduction.


Goad, B. (2013). Supreme Court urged to ban ‘pay for delay’ drug settlement. Retrieved from

Guidera, J. (2000). Of antitrust probe over Paxil. Retrieved from

Hylton, N. K. (2010). Antitrust law and economics. United Kingdom: Edward Elgar Publishing

Pace, F. L. (2011). European competition law: The impact of the commission’s guidance on article 102. United Kingdom: Edward Elgar Publishing

Sharma, P., & Bhal, K. T. (2004). Managerial ethics: Dilemmas and decision making. Thousand Oaks: SAGE

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