MGMT 8615M Week 3 Ethics Analysis Example

A Sixty-Year-Old Tablet Repriced Thirty-Fold: An Ethics Analysis Reading a Drug Maker's Price Increase Through Kant's Formula of Humanity, Stating the Verdict Before Its Price and Answering the Strongest Consequentialist Reply

Student Name

Walden University

MGMT 8615M: Financial Corporate Social Responsibility and Ethics

Instructor Name

Month Day, Year

A Sixty-Year-Old Tablet Repriced Thirty-Fold: An Ethics Analysis Reading a Drug Maker's Price Increase Through Kant's Formula of Humanity, Stating the Verdict Before Its Price and Answering the Strongest Consequentialist Reply

The Decision as a Matter of Record

In March 2024, Calvert Therapeutics, a composite specialty drug company, acquired the U.S. rights to an anti-infective tablet first approved in the 1960s and used mainly to treat a rare parasitic infection in patients with weakened immune systems. No generic version was on the market, because the small patient population, about 2,000 courses of treatment a year, had not attracted generic makers. Within two months Calvert raised the list price from $22 to $680 per tablet, about a thirty-fold increase, and moved distribution to a single specialty pharmacy. Calvert's investor presentation described the drug as "an underpriced asset with durable exclusivity." A complaint later filed by a state attorney general alleged that the restricted distribution was designed to keep would-be generic makers from obtaining samples needed for testing. Hospitals reported switching some patients to less suitable alternatives.

One Test Drawn From the Text

Kant's formula of humanity, set out in the Groundwork, requires that persons never be used only as instruments: the humanity in each of us, oneself included, must also be respected as an end (Kant, 1997). Bowie (1999) applied the formula to business, arguing that it does not forbid using others in exchange, which commerce requires, but forbids using them in ways they could not consent to, through coercion or deception. The test for this decision follows from that reading: could the patients who need the drug share the end the price increase serves, or does the increase use them merely as means to that end?

Application, Feature by Feature

The end the price serves, by Calvert's own account, is return on an acquired asset with durable exclusivity. The patients affected are severely ill, have few alternatives and cannot defer treatment. Their consent to the price is not meaningful consent in Bowie's sense: a patient facing a life-threatening infection, with no substitute, does not agree to a price so much as submit to it. This is the feature Kant's formula picks out as using a person merely as a means: the patient's need is the lever that produces the return.

The restricted distribution adds a second feature. If, as the complaint alleges, it was designed to block generic competition, it removed the one mechanism that would have given patients an alternative. That turns a high price into a lasting hold over people who cannot refuse.

A third feature cuts the other way. Calvert did not create the patients' need, and a high price on its own does not violate the formula; many medicines are expensive. The question is whether the patients could rationally share Calvert's end, and an end that depends on their lack of choice is not one they could share.

The Verdict

The formula of humanity forbids the decision as made: the price increase, maintained through restricted distribution, used patients' lack of alternatives as the means to Calvert's return.

The Verdict, Priced

Honoring the verdict would have meant pricing the drug at a level that covered Calvert's costs and a reasonable return on the acquisition without exploiting patients' lack of choice, and distributing it without blocking generic entry. At, say, $60 per tablet, a figure that still roughly tripled the previous price, Calvert's revenue from about 2,000 treatment courses averaging 100 tablets would be about $12 million a year instead of about $136 million at $680. The forgone revenue, about $124 million a year, is the price of the verdict, and it falls on Calvert's shareholders, who bought the asset at a price that assumed the increase.

Who Bears the Cost of the Decision as Made

The decision as made also has a price, borne by others. Hospitals and insurers absorb most of the higher list price, and patients bear it through coinsurance, delayed treatment or a switch to a less suitable drug. Any honest account of the decision sets the forgone revenue of the verdict against these costs, which fall on people with the least ability to refuse them.

The Strongest Reply

The strongest consequentialist reply is that high prices fund innovation. DiMasi et al. (2016) put the average outlay behind each new medicine that reaches approval at well over $2 billion, including the cost of failures, and argued that such costs require high returns on successful products. The reply has force for new medicines. It has little here: Calvert did not develop the drug, did not invest in research on it and did not commit the revenue to new research. Even on consequentialist terms, the harm to patients who switch to worse treatments must be weighed against benefits that the decision does not plausibly produce.

References

Bowie, N. E. (1999). Business ethics: A Kantian perspective. Blackwell.

DiMasi, J. A., Grabowski, H. G., & Hansen, R. W. (2016). Innovation in the pharmaceutical industry: New estimates of R&D costs. Journal of Health Economics, 47, 20-33. https://doi.org/10.1016/j.jhealeco.2016.01.012

Kant, I. (1997). Groundwork of the metaphysics of morals (M. Gregor, Trans.). Cambridge University Press. (Original work published 1785)