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Com/295 - Ethics and Credibility in Business Communications - Questionable Ethics – the Valeant Company

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Ethics and Credibility in Business Communications

Chelsey Yarbrough

COM/295

June 15, 2015

Rodney Klein


Questionable Ethics – The Valeant Company

“Researchers find that nearly 70 percent of Americans are on at least one prescription drug, and more than half receive at least two prescriptions” (CBS News, 2013). Knowing the public’s reliance on pharmaceutical drugs, it is paramount that the pharmaceutical companies we depend on be above board. This paper will discuss Valeant’s unethical pharmaceutical practices and communication with the public.

Valeant’s Unethical Behavior

Valeant is a pharmaceutical company that was generating profit from slashing funds from their research and development (R&D) and purchasing smaller drug companies. This strategy seemed suspicious to those on Wall Street. However, Valeant’s stock was doing very well, and no many questioned it. The Valeant scandal began when Valeant purchased a company Philidor, a specialty pharmacy, without informing its shareholders. Valeant began to use Philidor pharmacies to adjust consumers prescribed medications from the generic brands to Valeant’s expensive brand name drugs (Gandel, 2015). Essentially, Valeant was committing price gouging and fraud.

Valeant’s Communication to Public & Effectiveness

The only communications from Valeant regarding the fraud issue was after Russell Reitz sued Valeant for the conspiracy to defraud. When a journalist, Roddy Boyd, found a court filing document which, contained evidence of fraud from Reitz’s lawsuit (Witt, 2016).  

According to Witt (2016), “On October 26, the company organized an emergency investor conference call, during which Pearson attempted to allay investor concerns. The revenues from Philidor were real, he said, though the company was not a subsidiary of Valeant. Nevertheless, he conceded, Valeant was Philidor’s only customer. The terms of this deal meant that Philidor’s sales were rolled into Valeant’s accounting, and therefore, Valeant reported its consolidated earnings to the SEC as if the two were one” (para. 48). The conference call did nothing to reassure investors and Valeant’s stock continued to fall. After this had failed conference call four days, later Valeant announced to the public that it was cutting ties with Philidor. By then the damage was already done, “Valeant was down 70 percent from its peak” (Witt, 2016, para. 52).

The communications that Valeant provided to the public did nothing but continue to damage their already fragile credibility. The company did not take ownership of their wrongdoing. Valeant instead backpedaled and chose to cut ties with Philidor.

Regaining Credibility

For Valeant to restore credibility with consumers, the company must show accountability and transparency. The first step to regaining credibility with the public is accountability. According to Cooper (2014), “A sense of accountability implies an obligation to meet the needs and wants of others. It also involves an enlarged vision of those affected by your business activities” (p.7). Valeant must take responsibility for those consumers they have harmed with their fraud. The second step to regaining the public’s trust is transparency. “Transparency is a principle that allows those affected by administrative decisions, business transactions or charitable work to know not only the basic facts and figures but also the mechanisms and processes. It is the duty of civil servants, managers, and trustees to act visibly, predictably and understandably” (Cooper, 2014, p. 9). If Valeant does not choose to be accountable and transparent going forward the company will not have a chance of regaining credibility with the public.

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