Business Law: The Case of Pharmacare


Business law entails various legislations that determine how to start and conduct a business. The choice of an enterprise dictates the kind of laws that apply to that particular entity. For instance, it determines if the business will be sole entrepreneurship or a partnership. When the business is determined, one has to consider the name of the business. To avoid breaching intellectual property law, the chosen name should not be owned by another business. One has to consider if the state allows advertisement of the kind of goods to be offered. This aspect forms a necessary provision under the consumer protection law. Since different business laws govern every aspect of business activity, this paper will examine a case at the law firm of Dewey, Cheatum, and Howe. The essence of this analysis will be to screen the case of John, a former researcher at PharmaCare, to see whether he has intellectual rights to the AD23 drug produced and distributed by PharmaCare. Other issues arising from this case will also be addressed.

Ethical considerations

Currently, ethical considerations in marketing, advertising, product safety, and intellectual property prevail in covering various ethical issues in the business world. Ethics targets settling the concerns of society by addressing their demands regarding products and services offered in the marketplace. First, this paper discusses ethical issues regarding marketing and advertising. Direct-to-Consumer (DTC) marketing by drug companies is the primary ethical issue that many companies exploit to make profits, particularly used by pharmaceutical firms (Halbert, Ingulli, & Frey, 2015). Direct to consumer marketing criteria enable pharmaceutical products and other firms to reach directly the consumer market without undergoing quality checks by registered bodies such as the Food and Drug Administration.

The ethical issues about intellectual property manifest that the employer has the ownership rights to that company. Ethical issues concerning intellectual property emerge if a member’s contributions towards a certain project deserve to be awarded if a study results in a patent. In this case, PharmaCare violated the intellectual property by failing to reward or rather involve John in the production of the AD23 drug because he was involved in the research project that pioneered the production of that drug. Furthermore, John had the right to recoup the expenses and time lost in developing the drug; thus, he had the right to sign to protect the invented drug with a patent.

In 2009, the United States Congress passed a law that gave the FDA mandate to oversee product safety through screening all products entering the consumer market. Despite these efforts by the U.S Congress to protect its citizens, firms such as PharmCare utilize the gaps in legislation to pursue their malicious interests through supplying drugs to patients without undergoing quality screening by an independent body. Ethical concerns imply that PharmaCare should only market products that are tested for safety. Therefore, PharnaCare violates the ethical concerns of product safety by avoiding the FDA.

Direct-to-Consumer marketing strategy (DTC)

DTC marketing should be alleviated for several reasons. First, the commercials aired on broadcasting platforms do not educate the patients about the use and side effects of their products but only focus on creating the demand for the drugs (Maříková, Rolínek, Kubecová, & Vrchota, 2015). PharmaCare targets effective marketing to convince patients to use their products rather than addressing the patient’s medical requirements. Second, most advertised drugs are often ineffective and possess adverse side effects that are concealed by manufacturers through advertising (Mead, Sagar, & Bampton, 2008). Just like PharmaCare’s AD23, advertised drugs have enormous profits that invite the attention of political movements to facilitate the market demand before such drugs suffer adequate scientific scrutiny.

In this case, PharmaCare seeks to benefit by avoiding the FDA and violating the ethical considerations to offer discounted drugs to consumers regardless of their questionable quality. The company purports to act for the good of the consumers, but this is not the case since measures of quality standards are undermined. Allowing Pharmacare to engage directly with the patients has a huge potential to foster adverse effects to the patients. Pharmacare has little time to examine the patients’ needs and rarely takes the time to conduct proper research to establish the side effects of their products before releasing them for patient use. However, DTC encourages PharmaCare to overlook this fundamental phase of drug prescription. Moreover, the DTC strategy encourages patients to self-medicate risking severe side effects due to inadequate medical attention (Michalowski, 2015).

Pharmaceuticals regulating bodies

Food and Drug Administration is a state board that oversees the rationing, preparation, packaging, and advertising of all drugs within the United States. The role of compounding pharmacies involves the production and distribution of particular drugs requiring defined standards regarding milligrams or quality. This unique product helps to consider individual prescriptions given by a doctor. Compounding must be scrutinized to ensure that drug production standards are met (Peterson, 2012).

Concerning the PharmaCare case that exposed many people to serious adverse effects, and the death of John’s wife, it is critical to issue the FDA with more authority. The FDA acts as the sole state agency involved with overseeing drug production in the U.S. Following the rapid increase in the number of pharmaceuticals, the work of supervision is overwhelming the FDA. Thus, including the FDA in the federal board to discuss the expansion of its reach will help in facilitating fast coverage and close monitoring of all phases of manufacturing to distribution. The extra authority needed to boost the operation of the FDA includes the right to examine drugs compounded by an authorized pharmacist to fill the gaps currently exploited by PharmaCare. Additionally, the FDA should be granted the mandate to halt a compounding procedure if there is evidence that substandard drugs are being manufactured. The FDA should also be vested with the power to stop any compounding process that is perceived to breach ethical, intellectual, and safety protection guidelines.

PharmaCare’s legal obligation

Undoubtedly, PharmaCare should face legal authorities for blatantly ignoring ethical considerations governing the business operations. First, PharmaCare has a moral and legal obligation to sensitize the public about their products before they administer them to patients. Customers have the right to know not only the benefits but also the effects of products presented to them by the manufacturers (Silverstein & Hohler, 2010). Following the provision of evidence linking AD23 with potential adverse effects, PharmaCare did not bother to stop the production. Furthermore, PharmaCare sold CompCare to WellCo immediately after reports were released linking AD23 with more than 200 cardiac-related deaths. This calculated move implies that PharmaCare was guilty of the unscrupulous endeavors taking place within its production.

Even though PharmaCare was legitimized by the intellectual property right to operate, the practices were malicious and immoral because the products were questionable and no measures were taken to address the quality of AD23. PharmaCare ignored the ethics of care by failing to respond to the public outcry about the effectiveness of AD23. This implies that the entire company’s activities were questionable. Moreover, despite John and the project team offering a memo describing the possible concerns with AD23, the company went ahead to produce and market the drug. Thus, failing to utilize the provided evidence to conduct further research and eliminate the dangers associated with AD23 is clear negligence of its responsibilities about public safety.

How PharmaCare uses U.S law to cushion intellectual property

PharmaCare manifests a clear understanding in the way it observes the United States law to safeguard its intellectual property. PharmCare has legal counsel that formulates a detailed protection criterion by U.S law. PharmCare ensures that all organizations that it relates with are legally authorized to operate in their current capacities. PharmaCare has an organized system that scrutinizes the legality of all foreign partners to secure a good reputation abroad. Furthermore, PharmaCare has licensed and secured patent rights, trademarks, and combated illicit trafficking of its products. In this way, PharmaCore is hardly shaken by negative publicity since it believes that its operation meets the requirements of U.S law.

Ways PharmaCare can use to compensate John

Since John was involved in the research project leading to the production of AD23, he has the right to the patents. First, PharmaCare should allow John to sign a partnership to the intellectual property rights to protect the further exploitation of his invention. Second, the company should compensate John for all expenses incurred and time used during the research work. Since PharmaCare has financially benefited from Johns invention, further compensation should be made proportionately to the duration of its operation. The amount of compensation should target covering all losses incurred by the patentee. In case John and PharmaCare fail to reach a consensus, the compensation may be decided based on profits earned during the infringement period.

Third, in honor of the late John’s wife, the company should embark on education programs to enlighten the population on the risk factors of AD23 and other products the company might have released in the market. This move is desirable to both John and society to curb deaths that can be avoided. Following increased awareness of PharmaCare products among the public, those responsible for the production process of AD23 will be compelled to ensure ethical and moral issues are addressed adequately. In this light, the production of quality products addressing patients’ care needs could be a possibility.

Fourth, Pharmacare may respond by issuing a letter requesting John to grant them a license to continue operations. In return, the company can offer to pay a royalty fee to John. This decision might be considered a step forward given that the use of the intellectual property was not in competition with John’s business. Alternatively, PharmaCare might decide to stop infringing the intellectual property after paying the agreed compensation.

Examples of intellectual property theft

Intellectual property theft is defined as systematic theft in which a company or individual ignores the business law of securing a license from property owners before they use their products (Mead et al., 2008). For instance, Google has been sued on various occasions for illegally obtaining private information and patents rights from different institutions. The most recent of this systematic theft by Google is PayPal’s patent lawsuit against Google Wallet. On May 26, 2011, Google introduced the Google Wallet, a product that would enable consumers to pay bills and download tickets at the click of a button. PayPal Inc. sued Google Inc. over allegations that it misused trade secrets from PayPal’s mobile-payment system. Additionally, BBC investigations revealed that Google was advertising counterfeit Olympic tickets in the 2012 London Summer Olympics.

A second case includes BuySafe, a company that offers online shopping services. BuySafe sued Google in 2010 for allegedly misappropriating its patents. BuySafe argued that Google employed its former staff member, Tom Fallows, as a Group Product Manager. BuySafe claims that Tom had profound knowledge about BuySafe’s business. This unethical behavior by Google has led to a series of losses incurred because of financial compensations to the patentee. The evasion of legal and ethical considerations that could have curtailed such practices has created mistrust from consumers who once recognized Google as a leading technology industry. The subsequent defeats in lawsuits and further revelations have made many consumers believe that Google products are often created out of stolen patents to make profits by taking advantage of vulnerable firms such as PayPal.

Potential litigants against PharmaCare

The death of John’s wife is largely attributable to the unethical behavior characterizing the PharmaCare Company. The company’s ignorance to conduct intensive research before administering AD23 drugs implies a lack of care towards humanity. This implies that PharmaCare is primarily motivated by the urge to make profits rather than to address the issue of patients’ wellbeing. However, John has a genuine case to present in the lawsuits against PharmaCare for administering substandard drugs. Because John has evidence of potential effects of AD23 and information indicating PharmaCare’s interest to go on with marketing despite the quality concerns, this can serve as a basis for other litigants to file cases. The population affected by the AD23 has the right to go to court and seek compensation for health damages caused. Besides, shareholders who might want to quit PharmaCare due to its bad reputation can also succeed in suits against the company. This is because PharmaCare failed its moral and ethical obligations to create awareness of their products. Additionally, the company allowed the trade of substandard drugs.


John possesses an internal company memo outlining possible problems with AD23, and information indicating the company’s agenda to proceed with the marketing of unproven drugs. John demonstrates the willingness to speak out about the effects of AD23 for the benefit of the public. John can brand PharmaCare as thieves for misappropriation of his intellectual property. John deserves protection as a whistleblower because PharmaCare has failed to meet the legal and ethical obligations. Moreover, the products of PharmaCare have been proven a threat to public health and safety. John has the right to report any victimization that may arise due to his whistleblowing activity.


This analysis shows that PharmaCare is acting against its commitment to ensuring quality health care by administering AD23 that ignores the ethical test. PharmaCare evades the FDA approval for the AD23 drug and exploits the gaps in the law to establish CompCare to work as a compounding pharmacy and sell the AD23 to patients on a prescription basis. In the future, PharmaCare should consider working closely with the FDA to ensure their products are of quality standards and safe for human use. This goal can be achieved if the organization fosters a culture that promotes ethical behavior and adherence to laws that define the pharmaceutical industry.


Halbert, T., Ingulli, E., & Frey, A. (2015). Law and ethics in the business environment with readings from essentials of contract law. Mason, OH: Cengage Learning.

Maříková, M., Rolínek, L., Kubecová, J., & Vrchota, J. (2015). Relationship between the extent of implementation of the process management principles and the legal form of the business and business activity. Serbian Journal of Management, 10(1), 109-116.

Mead, L., Sagar, D., & Bampton, K. (2008). Fundamentals of ethics, corporate governance and business law. Philadelphia, PA: Elsevier.

Michalowski, S. (2015). Doing Business with a Bad Actor: How to Draw the Line between Legitimate Commercial Activities and Those that Trigger Corporate Complicity Liability. Texas International Law Journal, 50(3), 403-464.

Peterson, E. (2012). Compliance and ethics programs: competitive advantage through the law. Journal of Management & Governance, 17(4), 1027-1045.

Silverstein, D., & Hohler, D. (2010). A Rule-of-Law Metric for Quantifying and Assessing the Changing Legal Environment of Business. American Business Law Journal, 47(4), 795-853.

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LawBirdie. "Business Law: The Case of Pharmacare." March 22, 2023.