India: Using Ethics to Build an Industry

Ethics professors like me are fond of what we call “state of nature” thought-experiments. If you want to understand the value of a particular ethical standard (or the value of ethics in general) try to imagine what life would be like “in the state of nature” — that is, try to imagine what life would be like in a world without it. For example, if you want to understand the importance of telling the truth, imagine a world in which no one ever felt required to tell the truth — a world in which no one ever felt any compulsion to be truthful.

Sometimes, of course, our imaginations fail. We’re so used to taking certain ethical standards for granted that it makes it hard to imagine life without them. That’s especially true with regard to business ethics: the standards are often complicated and the role they play in commerce often isn’t obvious. In some cases, though, we don’t need to rely on our imaginations, because we can look to less-developed economies where business ethics in the formal sense is still being developed.

See, for example, this story from the Times of India: Drug cos associations agree to strict enforcement of ethics code

On Tuesday, representatives of drug company associations agreed to the need for the creation of a combined code of ethics and its effective enforcement.

At a meeting with pharmaceutical secretary Ashok Kumar, under the chemicals and fertiliser ministry, the representatives said that most of them followed a code of ethics. They, however, “admitted” that some pharma companies did not have such a code.

They assured Kumar that they will get back to him within a month with a uniform code of ethics that will be followed by all drug companies….

The basic idea, here, is that reliable ethical standards for companies aren’t just good for consumers — they’re good for the companies, too. Pharmaceutical companies in India have realized this, and so they’re doing their best to convince the Indian government that they’re committed to ethics. Why? Three main reasons. First, while you can obviously make a lot of money in the short run by doing business unethically, you can usually make even more money, in the long run, by doing business ethically, and building a reputation as a trustworthy industry.

Secondly (though this isn’t mentioned in the story), Indian pharmaceutical companies need to establish a reputation as ethical because they want to be able to form partnerships with wealthy North American and European companies, and to gain access to the lucrative North American market. India is not a wealthy country. Most of its citizens can’t spend a lot on pharmaceutical products. But an Indian company that can show itself to be trustworthy is more likely to get the chance to sell its products in to relatively affluent North Americans. There is big, big money to be made there.

The third reason is suggested here:

[The drug companies] requested the government to refrain from any legal intervention in the matter and leave the matter to be sorted out by the pharma corporate bodies.

Government in general has an obligation to protect consumers. But when your company or industry is perceived as ethical, you can make a much better argument in favour of government taking a hands-off approach and allowing industry a significant degree of self-regulation. Of course, industries don’t always do a good job of making and enforcing their own rules; only time will tell how well the Indian pharmaceutical industry does in this regard. But in this story we see a nice example of the very genesis of a set of ethical rules within an industry, and an illustration of the idea that business ethics isn’t just about putting external constraints on businesses but also very often about the kinds of rules to which businesses have good reason to commit themselves.

2 comments so far

  1. Jim Gaa on

    ChrisThe focus of your comments is about what we might learn by the actions of companies in developing economies. But I have a problem with the last paragraph. As you know, the pharmaceutical companies in the developed world have a lot to answer for. I’m thinking specifically of the well-reported phenomenon of burying negative research results (concerning safety and efficacy of their drugs) that might have a negative impact on sales and profits. Consider the following sentence in your comment: “Of course, industries don’t always do a good job of making and enforcing their own rules; only time will tell how well the Indian pharmaceutical industry does in this regard.” You could substitute “developed-economy” for “Indian” and have an equally valid observation. So, I’m not sure what you’re suggesting. Unless you’re thinking that Indian pharmaceutical companies might do voluntarily what North American and European companies haven’t done so far?Your third reason, i.e., “[The drug companies] requested the government to refrain from any legal intervention in the matter and leave the matter to be sorted out by the pharma corporate bodies.” is reminiscent of experience in our domain. Do we have much evidence that “our” drug companies have demonstrated a strong commitment to acting ethically, in the absence of government action (or threats of action)?Jim Gaa

  2. Chris MacDonald on

    Jim:You’re absolutely right. The pharmaceutical industry (here in the developed world) has generally done a <>lousy<> job of self-regulating (or even of following rules set by governments).My “only time will tell” comment referred to the Indian pharma industry only because the story I’m pointing to was about that industry. There is indeed a much larger “only time will tell” point about entire developing economies. I actually don’t hold out much hope for pharma in this regard . Though I suppose that given the incentive of wanting to attract external investment, Indian pharma might do better than pharma in North America, in some ways. Perhaps just in terms of quickly ramping up some basic procedural guidelines: e.g., companies that can meet FDA standards and the supply-chain ethics standards of North American companies quicker will attract investment quicker (though that’s just one possible hypothesis). Again: we’ll see!Regards,Chris.

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