Pharmaceutical Executive Declares Price Gouging Moral: Why Business Needs Ethics

​The chief executive of Missouri-based Nostrum Laboratories has defended his decision to quadruple the price of an antibiotic used to treat bladder inflections by framing it as a moral decision.  Nirmal Mulye described the $2,392 price tag for Nitrofurantoin as the product of “a moral requirement to make money when you can….”  Men like Nirmal Mulye clearly do not understand the meaning of moral nor the meaning of ethical.  Perhaps, if capitalism was a religious cult, economies did not exist to serve the needs of people, and all people were sociopaths, Mulye would be correct, but his thinking is twisted, short-sighted, self-serving, and, quite frankly, dangerous.  Although one might argue business executives have an ethical obligation to employees and shareholders to ensure the sustainability of a business, Mulye was trying to deflect public outrage and rebrand price gouging as a common good.  As shocking and inhumane as Muyle’s reasoning is, however, his statement is actually a rare moment of honesty from a titan of industry.   

​In Mulye’s mind, competitive advantage and the capability of the marketplace to support a price increase morally negates the social cost of rising the price of a drug.  It would, therefore, be immoral to keep lifesaving drugs at an affordable rate for consumers who do not have adequate medical insurance.  The ability of people to pay for a lifesaving drug is, after all, not a moral factor.  While few are willing to be as open and honest about their controversial views for fear of certain public backlash, there are many among Muyle’s peers who simply do not empathize with those who depend on the products of industry.  Recalling the EpiPens Controversy and the “pharma bro” scandal, which Muyle cited as an example of someone doing something within his rights, it is clear greed often trumps human need in the minds of business leaders while the destination between legally right and morally right are far too often confused.
 
With that in mind, morality is tied to one’s religious views.  Morality is a difficult concept to define outside of offering examples of immoral and moral decisions, but it is certainty tied to how one’s behavior impacts the lives of other humans, not business entities.  Ethics, in contrast, are a lot easier to define, especially when it comes to business ethics.  Although the need for ethics may appear to be a moral issue wrapped in subjective reasoning, ethics are actually a major concern for any business viewed as an enduring entity designed to last.   Business ethics exist to ensure a firm does not undermine the integrity and longevity of a business or industry.  Ethics represent an attempt to address factors, which cannot be fully measured or understood, in order to ensure success now and in the future.  Business ethics exist to help promote top quality products and/or services at the best possible price, healthy competition, and strong community relations.  Without ethics, employers cannot expect employees to respect their firms nor can they expect customer loyalty.
 
Profit is supposed to be the measurement of how successful a business has been in what capacity it serves society.  For ethical professionals, whose goals are to build up an enduring entity with socially responsible behavior, profit is a secondary goal.  Profits represent a tool that incentivizes excellence for the benefit of our entire society instead of personal gains that fatten a handful of society’s most gluttonous.  Managers and investors have forgotten over the past few decades that a decent profit is still a profit, so massive, short-term grains are not necessary.  When profit is the primary or sole motivation, a firm cannot continue to be successful.  Regrettably, the immediate interests of a company's decision makers will be served by short-sighted profiteering, thus people like Mulye have come to believe their ways both define true success and moral righteousness.  
 
Under profit driven models, the existence of business is nothing more than cyclic, i.e. firms exist to exist.  It is, therefore, helpful to step back and understand why society supports the existence of commerce.  It is because it serves the interests of communities.  When economies and businesses no longer serve the needs and wants of people, they must eventually collapse or conflict with society.  Only when a company exists to fulfill its role in our society can it continue to exist.  Consequently, the primary motive of all businesses must be to serve their purpose better than all other firms with profits serving as a means of continuing operations in the short- and long-run.  Socially responsible and ethical businesses focus on their long-term and broader interests, so they can ensure their long-term survival and success.  
 
People are called consumers and customers to dehumanize them, so their general welfare can be equated to the profitability of business.  Because executives are the guardians of business and servants of shareholders, the profitability of the business is seen as the most pressing responsibility of business leaders, not the wellbeing of customers.  Although service-oriented business may see things differently and the specific example of Nitrofurantoin is particularly upsetting due to the medical nature of the product in question, the overall issue is that the human cost is rarely a factor in the minds of business leaders.  Profits cannot be the sole motivation for business while all businesses must be ethical.  Quite frankly, trying to justify gouging with moral arguments only cultivates the kind of self-destructive business culture that undermines all things good businesses help create.