Welcome to the new Independent website. We hope you enjoy it and we value your feedback. Please contact us here.

Business Comment

Short-term cures without heed to ethics have long-term side effects


Outlook Ethics professors in the world's business schools traditionally play second fiddle to the harder-nosed management science wonks. Somewhere down among the blackboard wipers in the academic pecking order.

But surely these unsung heroes deserve to be promoted this week, given how the pharmaceuticals industry has thrown up such wonderful examples of the damage short-term profit-think does when ethics and social considerations are left behind.

The cudgelling Pfizer has had from scientists, MPs and the media over its bid for AstraZeneca has been almost entirely based on its ruthless cost-cutting, plant closures and reductions in R&D spend. Suddenly, the company's closure of its plant in Sandwich doesn't look so clever. It may have saved a few million dollars – but if the political row it has now created proves fatal for the Astra bid, how many billions of dollars of US tax avoidance will it cost Pfizer in the long term? On a personal level, if he fails to pull off this deal, it could even cost Ian Read his job.

Meanwhile, GlaxoSmithKline's quick-buck enthusiasm for grabbing a share of China has returned to bite it where it hurts, too. We will have to see how Mark Reilly, GSK's former China head, fares through the country's legal system – he may well, of course, be innocent of all wrongdoing.

But serious financial damage by the scandal has already been done. GSK, which has admitted some senior members of staff have broken the law in China, has lost millions. Revenues from China in the third quarter of last year alone were down 61 per cent as doctors opted to prescribe rival manufacturers' versions of its medicines.

And that's before we even begin to count the legal costs. China's new charges are bound to attract the renewed attention of those tenacious upholders of the US Foreign Corrupt Practices Act, the Department of Justice and Securities and Exchange Commission, let alone our own – albeit less fearsome – Serious Fraud Office. Fighting these organisations takes a lot of lawyers.

GSK has faced such ethical scrutiny before, of course, paying $3bn (£1.8bn) in fines in the US a couple of years back for, among other serious ethical transgressions, bribing doctors to prescribe its drugs and promoting its antidepressants for use on children and adolescents.

The fines and lost revenues from ethical breaches can be counted in dollars and cents. But the loss of long-term goodwill among potentially important communities – Britain's scientists, in Pfizer's case – can prove even more costly.