CORPORATE CRIME in the pharmaceutical industry By the same author Inequality, Crime and Public Policy CORPORATE CRIME in the pharmaceutical industry John Braithwaite Routledge & Kegan Paul London, Boston, Melbourne and Henley First published in 1984 by Routledge & Kegan Paul pic 39 Store Street, London WC1E7DD, England 9 Park Street, Boston, Mass. 02108, USA 464 St Kilda Road, Melbourne. Victoria 3004, Australia and Broadway House, Newtown Road, Henley-on-Thames, Oxon RG91EN, England Photoset in 10 on 12 Times Roman by Kelly Typesetting Ltd, Bradford-on-Avon, Wiltshire and printed in Great Britain by Billing and Sons, Worcester ©John Braithwaite 1984 No part of this book may be reproduced in any form without permission from the publisher, except for the quotation of brief passages in criticism Library of Congress Cataloging in Publication Data Braithwaite, John. Corporate crime in the pharmaceutical industry. Bibliography: p. Includes index. 1. Commercial crimes - Case studies. 2. Corporations - Corrupt practices - Case studies. 3. Drug trade - United States - Employees - Corrupt practices - Case studies. 4. Professional ethics. 5. White collar crimes. I. Title. [DNLM: 1. Drug industry-Standards. 2. Crime. QV773B814cJ HV6769.B7 1983 364.1'68 83-11149 ISBN 0-7102-0049-8 Contents Preface vii 1 Introduction: an industry case study of corporate crime 1 2 Bribery 11 3 Safety testing of drugs: from negligence to fraud 51 4 Unsafe manufacturing practices 110 5 Antitrust 159 6 The corporation as pusher 204 7 Drug companies and the Third World 245 8 Fiddling 279 9 Strategies for controlling corporate crime 290 Appendix Getting interviews with corporate executives 384 Notes 389 Bibliography 408 Index 428 V Preface This book is an industry case study of corporate crime. It attempts to describe the wide variety of types of corporate crime which occur within one industry. When I taught a course on corporate crime at the University of California, Irvine, in 1979 I found that students had an amorphous understanding of the subject as an incompre- hensible evil perpetrated by the powerful. They were at a loss to describe particular examples. Part of the purpose of this book is to fill this gap by describing many examples of corporate crime, examples which show the depth and seriousness of the crime problem in the pharmaceutical industry. The book also has an analytical purpose which is more important than its descriptive function. This is to use the pharmaceutical industry's experience to tentatively explore the effectiveness of different types of mechanisms for the control of corporate crime. Most of the chapters have a first section which describes several corporate crimes, followed by an interpretive section which uses information gained from interviews with corporate executives and others to cast light on possible policy implications from these case studies. Some of my informants will not be pleased with the way I have written the book. They will think it a one-sided account which focuses attention on pharmaceutical industry abuses to the exclu- sion of all the worthwhile things the industry has achieved for mankind. After all, the pharmaceutical industry has been respon- sible for removing tuberculosis, gastroenteritis, and diphtheria from among the ten leading causes of death in developed countries. Unfortunately, it is the job of criminologists to explore the seamy vii Preface side of human existence. If a criminologist undertakes a study of mugging or murder, no one expects a 'balanced' account which gives due credit to the fact that many muggers are good family men, loving fathers who provide their children with a Christian upbring ing, or perhaps generous people who have shown a willingness to help neighbours in trouble. Yet criminologists are expected to provide such 'balance' when they study corporate criminals. The fact that I have not emphasised their good deeds does not mean that I am not greatly appreciative of the assistance and hospi tality afforded me by informants from the industry. I owe an intel lectual debt to many who have done previous research on the pharmaceutical industry. It would be impossible to mention all by name. Particularly useful, however, have been the investigative journalism of Morton Mintz of the Washington Post, the work on thalidomide of the Insight Team of The Sunday Times of London, and the scholarship of Milton Silverman and Gary Gereffi. Discussions and correspondence with Brent Fisse and Bud Loftus were influential in changing the direction of my thinking on key dilemmas. I am also indebted to David Biles, Richard Gaven, Bill Gibson, Roy Harvey, Katherine Pitt, Ivan Potas, Peter Rheinstein, Bruce Swanton and Grant Wardlaw for critical comments on earlier drafts of the manuscript. Valerie Braithwaite and Gil Geis provided great assistance during the American fieldwork stage of the research. Appreciation is also due to Janina Bunc and Annette Waters for their painstaking and accurate typing of the manuscript. I am grateful to the Australian-American Educational Foundation for support with a Fulbright Fellowship to conduct the fieldwork and to the Australian Institute of Criminology for supporting the project in Australia. vm 1 Introduction: an industry case study of corporate crime The majority of people who work in the pharmaceutical industry subscribe to high standards of integrity and do everything in their power to stay within the constraints of the law. In the course of this research, I met pharmaceutical executives who impressed me with the sincerity of their commitment to the public welfare much more than many of the industry's critics in politics, regulatory agencies, the public interest movement, and academia. Valerie Braithwaite accompanied me to many pharmaceutical companies, forever constraining me from driving on the wrong side of the road. One day, as we drove back to New York, she said: 'But these people are so nice, John. Do you think they really are corrupt?' My initial response was: "You've spent the day being shown around and taken to lunch by the company's public relations staff. They're paid to be nice. Some people in these companies get paid a lot of money because they're good at being ruthless bastards, and others get big money to entertain people like you because they're good at being nice.' But really that was an inadequate answer. Irrespective of what they're paid to be. most ofthem in fact are principled people. There are three types of principled people in the pharmaceutical industry. First, there are those who directly participate in company activities which do public harm, but who sincerely believe the company propaganda which tells them that they are contributing to the improvement of community health. Second, there are people who perceive the company to be engaging in certain socially harmful practices and fight tooth and nail within the organisation to stop those practices. Third, there are people who have no direct I Introduction: an industry case study of corporate crime contact with socially harmful corporate practices. The job they do within the organisation produces social benefits, and they do that job with integrity and dedication. Most of the principled people in pharmaceutical companies are in this last category. Consider, for example, the quality control manager who is exacting in ensuring that no drug leaves the plant which is impure or outside specifica tions. It might be that the drug itself causes more harm than good because of side-effects or abuse; but the quality control manager does the job of ensuring that at least it is not adulterated. In hastening to point out that not all pharmaceutical executives are nice guys, I am reminded of one gentleman who had a sign, 'Go for the jugular', on the wall behind his desk. Another respondent, arguably one of the most powerful half-dozen men in the Australian pharmaceutical industry, excused his own ruthlessness with: in business you can come up against a dirty stinking bunch of crooks. Then you have to behave like a crook yourself, otherwise you get done like a dinner." Nevertheless, most corporate crimes in the pharmaceutical industry cannot be explained by the perverse personalities of their perpetrators. One must question the proclivity in an individualistic culture to locate the source of evil deeds in evil people. Instead we should "pay attention to the factors that lead ordinary men to do extraordinary things' (Opton. 1971: 51). Rather than think of corporate actors as individual personalities, they should be viewed as actors who assume certain roles. The requirements of these roles are defined by the organisation, not by the actor's personality. Understanding how 'ordinary men are led to do extraordinary things' can begin with role-playing experiments. Armstrong (1977) asked almost two thousand management students from ten countries to play the roles of board members of a transnational pharmaceutical company. The decision facing the board was a real-life situation which had confronted the Upjohn company:' should it remove from the market a drug which had been found to endanger human life? Seventy-nine per cent of the management student boards of directors not only refused to with draw the dangerous drug, but also undertook legal or political manoeuvres to forestall efforts of the government to ban it.* This was the same action as the Upjohn board itself took, an action which 97 per cent ofa sample of71 respondents classified as 'socially irresponsible' (Armstrong, 1977: 197). Using delaying tactics to keep a dangerous but profitable drug on the market is something 2 Introduction: an industry case study of corporate crime that ordinary people appear willing to do when asked to play the role of industry decision-makers. Hence, when people die as a result of the kinds of socially irresponsible manoeuvres of the Upjohn board in this case, to suggest that it happened because the Upjohn board is made up of evil men does little to advance explan ation of the phenomenon. The unquestionable artificiality of laboratory role-playing experiments may nevertheless share some of the very artificiality which is the stuff from which immoral corporate decisions are made: [T]he usual restraints on antisocial behavior operate through a self-image: T can't see myself doing that' In an institutional setting, however, that isn't being done by me but through me as an actor, a role player in an unreal 'game' that everyone is 'playing' (Stone. 1975: 235). People in groups behave in ways that would be inconceivable for any of them as individuals. Groupthink (Janis, 1971) and what Arendt (1965) referred to as 'rule by nobody' are important in corporate decision-making which results in human suffering. Bandura (1973: 213) explained the basic psychology of 'rule by nobody'. [One] bureaucratic practice for relieving self-condemnation for aggression is to rely on group decision-making, so that no single individual feels responsible for what is eventually done. Indeed, social organisations go to great lengths to devise sophisticated mechanisms for obscuring responsibility for decisions that affect others adversely. . . . Through division of labor, division of decision-making, and collective action, people can be contributors to cruel practices and bloodshed without feeling personally responsible or self-contemptuous for their part in it. There are a large number of psychological studies demonstrating that members of a group will risk more as group members than they will as individuals (Stoner. 1968; Wallach et al.. 1964; Bern et al.. 1965; Wallach and Kogan. 1965; Burnstein and Vinokur. 1973; Cartwright, 1973; Muhleman et al.. 1976; Shaw. 1976). Psycholo gists call this tendency for cautious individuals to support more hazardous group decisions the 'group risky shift phenomenon'.3 The phenomenon is far from ubiquitous, however. When cautious choices are more socially desirable, group pressures can actually 3