CHAPTERCASE Ethics of Offshoring

Novo Nordisk and Clinical Trials in Emerging Economies Institute for Entrepreneurship Bached ivary School of Business Ivey The essas developing countries under allegedly unethical condi- tions. Also, the Danish National Committee on Biomed- Professor Klaus Meyer wrote this case solely to ical Research Ethics has expressed concerns because provide material for class discussion. The author. Thus, she wants to discuss The author may have disguised certain names Novo Nordisk's position on these issues. and other identifying information to protect Dejgaard reflects on how to react. Several articles confidentiality on ethical aspects related to medical research in the Ivey Management Services prohibits any form Third World had appeared in the Danish press in recent months, creating an atmosphere of suspicion of reproduction, storage, or transmittal without toward the industry.' Should he meet with the journal- its written permission. Reproduction of this ist and if so, what should he tell her? Or should he material is not covered under authorization by rather focus on his forthcoming business trip to new any reproduction rights organization. To order production facilities and send Novo Nordisk's press copies or request permission to reproduce mate- officer to meet the journalist? In his mind flashes the rials, contact Ivey Publishing, Ivey Management possibility of derogatory headlines in the tabloid press. Services, do Richard Ivey School of Business, As a company emphasizing corporate responsibility, The University of Western Ontario, London, the interaction with the media presents both opportu- Ontario, Canada, N6A 3K7; phone (519) nities and risks to Novo Nordisk 661-3208; fax (519) 661-3882;y.uwo.ca Novo Nordisk Copyright 2008, Ivey Management Services Novo Nordisk AS had been created in 1989 through Version: (A) 2009-01-09 a merger between two Danish companies, Novo Industri A/S and Nordisk Gentofte A/S. Both had n a warm day in early spring 2008, the tele- been established in the 1920s as manufacturers of phone is ringing in the office of Anders insulin, a crucial medication for diabetes. Over dec- Dejgaard, chief medical officer of Novo ades of fierce competition, they had become leading Nordisk, a leading developer and manufac- providers of insulin and related pharmaceutical prod- turer of insulin and related products. A business jour- ucts. Novo Industri had been pursuing an internation- nalist of the Danish national newspaper Berlingske ally oriented strategy from the outset, and by 1936 Tidende is on the line and asking for an interview. was supplying insulin to 40 countries. A significant Dejgaard knows her from several conversations relating step in the internationalization of the company was a to business practices in the pharmaceutical industry. major push into the U.S. market in 1979. At the time, The journalist is investigating the offshoring of clini- Food and Drug Administration (FDA) regulations cal trials by Danish companies. A report recently pub- required Novo Industri to replicate its clinical studies lished in the Netherlands alleges that multinational in the United States to obtain the approval of the mar- pharmaceutical companies routinely conduct trials in keting of their new products. In 1989, the two O

158 Part 1 Foundations of Multinational Management companies merged and in 2000 the merged company In 2008, Novo Nordisk holds market shares for insulin spun off the enzyme business ""Novozymes."" of about 56 percent in Europe, 41 percent in In 2008, Novo Nordisk presents itself as a focused North America and 73 percent in Japan and employs company within the healthcare industry and a world about 26,000 people, of whom 12,689 are located in leader in diabetes care. It claims the broadest and most Denmark, 3.41 1 in the rest of Europe, 3,940 in North innovative diabetes product portfolio in the industry, America, and the remainder in Asia Pacific and the rest including the most advanced insulin delivery systems. In of the world. Production facilities are located in six addition, Novo Nordisk holds leading positions in areas countries and products are marketed in 179 countries. such as haemostasis management, growth hormone The shares of Novo Industri were first listed on the therapy, and hormone replacement therapy. Sales Copenhagen Stock Exchange in 1974 and on the London reached DKr 41.8 billion (about US$8 bilion) in 2007, of Stock Exchange in 1981 as the first Scandinavian com- which Dkr 30.5 billion were in diabetes care and pany to be listed in London. In 2008, Novo Nordisk's B DKr 11.4 billion were in biopharmaceuticals. shares are listed on the stock exchanges in both Copen- Innovation is considered pivotal to the success of hagen and London, while its American depositary receipts Novo Nordisk, as it was to its predecessor companies. (ADRS) are listed on the New York Stock Exchange. Continuous innovations allow the development of Novo Nordisk emphasizes corporate social respon- more refined, and thus more effective, insulin prepara- sibility as part of its image, pursuing a triple bottom line tions, and new delivery systems, such as Novopen, approach: environmental and social responsibility that facilitate the administration of the treatment, along with economic viability. This commitment is including self-administration by patients. In 2008, demonstrated through its values and its environmental about 18 percent of employees are working within and social responsibility policies that are reported on research and development. its website (see Appendix 1). Appendix 1 Corporate Sustainability at Novo Nordisk (Extracts) At Novo Nordisk, we refer to corporate sustainability as companies' ability to sustain and develop their busi- ness in the long-term perspective, in harmony with society. This implies a more inclusive view of business and its role: one in which engagements with stakeholders are not just used to legitimize corporate decisions, but rather the foundation for how a company conducts and grows its business. It is about innovation, oppor- tunity and planning for the long term. The Triple Bottom is the principle behind our way of doing business. The company's Articles of Association state that it strives to conduct its activities in a financially, environmentally and socially responsible way."" This is a commitment to sustainable development and balanced growth, and it has been built into corporate gover- nance structures, management tools and methods of assessing and rewarding individuals' performance.... The stakeholder dimension: Novo Nordisk needs to stay attuned to emerging trends and hot issues' on the global agenda in order to respond and to contribute to the debate. Stakeholder engagement is an inte- grated part of our business philosophy. We have long-standing engagements with stakeholders that are vital for building trust and understanding of a variety of issues. By involving stakeholders in the decision-making processes, decisions are better founded and solutions more likely to succeed. Stakeholders are defined as any individual or group that may affect or be affected by a company's activities. Translating commitment to action: Corporate sustainability has made a meaningful difference to our business, and we believe it is a driver of our business success. This is best illustrated in three examples: Business ethics: Surveys indicate that ethical behavior in business is today the number one driver of reputation for pharmaceutical companies. Any company that is not perceived by the public as behaving in an ethical manner is likely to lose business, and it takes a long time to regain trust. While the Novo Nordisk Way of Management is a strong guide to our behavior, we decided we needed more detailed guidance in the area of business ethics. In 2005 we therefore framed a new business ethics policy, in line with universally accepted high standards, backed by a set of procedures. Since then we have trained managers and employ- ees, held workshops, and offered e-learing on the new policy. continued

Chapter 4 Managing Multinational Ethics 159 Appendix 1 Continued Climate change: We need to act to put a brake to human-induced climate change. While the implications of climate change pose major business risks, there are also opportunities. We have partnered with the WWF [World Wildlife Fund) in the Climate Savers program and set an ambitious target to achieve a 10% reduction in our company's CO2 emissions by 2014, compared with 2004 emission levels. This will occur through opti- mized production, energy savings, and greater use of renewable energy supplies. The diabetes pandemic: Today, diabetes is recognized as a pandemic. Novo Nordisk responds to this major soci- etal challenge by working in partnerships with many others to rally the attention of policy-makers and influencers to change diabetes. We have made a promise of Changing Diabetes and have framed a strategy for inclusive access to diabetes care. We established the World Diabetes Foundation, and have made several initia- tives to advocate for change and build evidence of diabetes developments. The National Changing Diabetes program and DAWN are examples of education and awareness programs implemented by Novo Nordisk affiliates in their respective countries. Our Changing Diabetes Bus that promotes Novo Nordisk's global Changing Diabetes activities had reached 86,000 people by the end of 2007 during its world tour. Its primary goal is to support the UN Resolution on diabetes, which was passed in December 2006. Source: www.novonordisk.com, accessed November 2008 Critical milestones in Novo Nordisk's ambition to be their safety. Efficacy refers to scientific evidence that recognized as a leader of corporate sustainability include the drug improves patients' conditions as claimed by the publication in 1994 of its Environmental Report. It the manufacturer. Safety refers to the absence of sub- was the first company in Denmark and one of the first stantive negative side-effects. Thus, to obtain approval, in the world to do so. This was followed in 1999 by the pharmaceutical companies have to provide scientific first annual Social Report. In 2001, Novo Nordisk estab evidence that the drug improves the conditions of lished the World Diabetes Foundation, a charity aiming patients and is free of disproportional side-effects. to improve diabetes care in developing countries, where This evidence has to be based on, among other diabetes is becoming an epidemic as it had in Europe data, clinical trials in which the drug has been tested and North America a few decades earlier. on actual patients. The clinical trials are normally con- In recognition of its sustainability engagement, Novo ducted in four stages. Phase 1 involves a small number Nordisk had been included in the Dow Jones Global of healthy volunteers and serves to assess the kinetic Sustainability Indices, where it was ranked as ""best in properties and tolerability of the drug. Phase 2 is per- class"" in the healthcare category in 2007. At home, formed on larger groups of patients to assess how well Novo Nordisk is frequently ranked as having the most the drug works and to establish the doses that give the highly regarded corporate image by Danish magazines desired effect and to continue its safety assessment. Berlingske Nyhedmagasin, B�rsen, and Ingeni�ren Phase 3 trials often involve thousands of patients and aims to provide a definitive assessment of how effective New Medications: Development and safe the drug is. All data generated in the three and Approval phases form an essential part of submissions to the regulatory authorities (FDA, EMEA, and their counter- Novo Nordisk, like other pharmaceutical and medical parts in other countries) for drug approval. With this companies, heavily invests in the development of new approval, the drug can then be marketed for the medications offering more effective, safe, and user- approved indications. Further trials, in phase 4, may friendly treatments. New product development involves be required to obtain permission to extend the labeling the creation of new drugs or modifications in their use, of a drug to new indications (e.g. a different disease) or for instance their dosage and the form of administration specific groups, such as children or pregnant women. To bring new drugs or medical devices to market, they Phase 3 and 4 trials require a large number of patients must be approved by the relevant authorities�the FDA with the specific disease that the drug is to improve. A in the United States and European Medicines Agency typical approval process conducted by Novo Nordisk (EMEA) in the European Union. The approval of drugs might require six to eight different phase 3 trials with dif- and medical devices requires proof of their efficacy and ferent patient groups or combinations of the drug

160 Part 1 Foundations of Multinational Management component, each involving about 400 to 800 patients companies have to operate with limited financial Such trials are often conducted as multinational studies resources and to satisfy shareholders and thus cannot involving up to 15 countries. With increasing require- spend more resources than expected future revenues ments for patient exposure for approval and increasing would justify. Accordingly, the industry has been accused numbers of drugs being tested, the recruitment of of performing trials in developing countries with lower patients is often a major challenge. Typically, trials are con- attention to ethical principles-ethical bribing,"" with ducted at multiple hospitals that all must follow the same patients acting as guinea pigs that do not understand trial protocol to ensure the consistency of data and com- and/or care about the risk involved but just want to get pliance with existing ""good clinical practice (GCP) free medication and with investigators not meeting the guidelines. Multi-site trials also facilitate the recruitment competence requirements, etc. Allegedly, all this just of patients with diverse backgrounds, for instance differ- serves to generate documentation for compounds that ent ethnicities and diets, while helping to demonstrate are to be sold only in developed countries. their universal properties. Doctors and nurses but not Medical (Hippocratic) ethics concern primarily patients are normally paid for this work and hospitals the individual patients that are participating in any experi- often find it attractive to participate in trials that allow ment. The relationship between the doctor and the sub- access to new medications and front line research. Clini- ject participating in a trial is thus governed by the cal trials, especially phase 3, are a major cost factor in the doctor's responsibility to care for his or her patient. development of new medications and they often take Past incidences where this principle had been violated many years to conduct (on average eight years). continue to affect popular perceptions of medical In the early 2000s, major pharmaceutical industries research. Most infamously, the Tuskegee syphilis study increasingly moved parts of their trials, especially phases left 400 impoverished and unwitting African-American 3 and 4, to countries outside their traditional areas of men in Macon County, Alabama, untreated to study operations, especially to Eastern Europe, South America, how they developed the disease an experiment initiated India, and China. Hospitals in these areas provide in 1932 and terminated only in the 1970s. access to qualified medical staff and larger numbers of To prevent such scandals, professional medical patients with the specific conditions, while potentially organizations have developed guidelines and princi- being able to administer a trial at lower costs. Moreover, ples of ethics to guide their research, notably the the efficacy of drugs may also vary across contexts, for Helsinki Declaration of the World Medical Association instance due to genetic, dietary, climatic, or other envi- (see Appendix 2). These widely accepted ethical princi- ronmental conditions. In such cases, multi-site trials help ples aim to protect subjects, e.g. , patients, participating to establish the efficacy of medications across contexts. in such research. These include: Some countries, such as Japan, India, and China, in fact require that trials are at least in part conducted locally to � Voluntary informed consent: Each patient has approve a new medication in the respective countries. to agree voluntarily to participate in the research However, the conduct of clinical trials in these areas based on being fully informed about the purposes of the study and potential risks for the individual. also raises a range of ethical issues. Sponsors and local site investigators thus normally Ethical Issues in Medical Research ite an informed consent"" document that informs potential subjects of the true risks and potential Ethical issues in the pharmaceutical industry have received considerable media attention over several dec- benefits, which is signed by each patient or their legal guardian before any trial procedure. ades, as the industry has failed to live up to the expecta- tions of some interest groups. In particular, clinical trials � Respect of patients: The privacy of the subject raise a number of widely recognized issues. Medical pro- should be protected and they should be free to fessionals, and with them many NGOs and media, focus withdraw from the experiment at any time without on the medical ethics grounded in the Hippocratic oath reasoning. The doctor's professional responsibility that commits doctors to treat each patient to the best of to the patient should take precedence over any their abilities, never to cause intentional harm, and to other considerations maintain patient confidentiality. Scientists and approval � Independent review: Any medical and pharma- authorities have been concerned about the scientific cological research has to be assessed on its scien- rigor of the tests to provide solid evidence of the effects tific merits and ethicality by an independent review of a new drug, and thus to protect potential future users board (IRB) that is independent from those of the drug. At the same time, pharmaceutical involved in or sponsoring the research.

Chapter 4 Managing Multinational Ethics 161 Appendix 2 Helsinki Declaration of the World Medical Association (Excerpts) 10. It is the duty of the physician in medical research to protect the life, health, privacy, and dignity of the human subject 13. The design and performance of each experimental procedure involving human subjects should be clearly formulated in an experimental protocol This protocol should be submitted for consideration, comment, guidance, and where appropriate, approval to a specially appointed ethical review committee, which must be independent of the investigator, the sponsor any other kind of undue influence. This independent committee should be in conformity with the laws and regulations of the country in which the research experiment is performed. The committee has the night to monitor ongoing trials. The researcher has the obligation to provide monitoring information to the committee, especially any serious adverse events. The researcher should also submit to the committee, for review, information regarding funding, sponsors, insti- tutional affiliations, other potential conflicts of interest and incentives for subjects. 14. The research protocol should always contain a statement of the ethical considerations involved and should indicate that there is compliance with the principles enunciated in this Declaration. 15. Medical research involving human subjects should be conducted only by scientifically qualified persons and under the supervision of a clinically competent medical person. The responsibility for the human subject must always rest with a medically qualified person and never rest on the subject of the research, even though the subject has given consent 16. Every medical research project involving human subjects should be preceded by careful assessment of predictable risks and burdens in comparison with foreseeable benefits to the subject or to others. This does not preclude the participation of healthy volunteers in medical research. The design of all studies should be publicly available 17. Physicians should abstain from engaging in research projects involving human subjects unless they are confident that the risks involved have been adequately assessed and can be satisfactorily managed. Physicians should cease any investigation if the risks are found to outweigh the potential benefits or if there is conclusive proof of positive and beneficial results. 18. Medical research involving human subjects should only be conducted if the importance of the objective outweighs the inherent risks and burdens to the subject. This is especially important when the human subjects are healthy volunteers. 19. Medical research is only justified if there is a reasonable likelihood that the populations in which the research is carried out stand to benefit from the results of the research. 20. The subjects must be volunteers and informed participants in the research project 21. The night of research subjects to safeguard their integrity must always be respected Every precaution should be taken to respect the privacy of the subject, the confidentiality of the patient's information and to minimize the impact of the study on the subject's physical and mental integrity and on the personality of the subject 22. In any research on human beings, each potential subject must be adequately informed of the aims, meth- ods, sources of funding, any possible conflicts of interest institutional affiliations of the researcher, the anticipated benefits and potential risks of the study and the discomfort it may entail. The subject should be informed of the right to abstain from participation in the study or to withdraw consent to participate at any time without reprisal After ensuring that the subject has understood the information, the physician should then obtain the subject's freely given informed consent, preferably in writing.. 23. When obtaining informed consent for the research project the physician should be particularly cautious if the subject is in a dependent relationship with the physician or may consent under duress. In that case the informed consent should be obtained by a well-informed physician who is not engaged in the investigation and who is completely independent of this relationship. continued.

What can you say about the paper ?

What might affect the performance ?"

This paper will therefore look at the ethical issues and the corporate responsibilities regarding the clinical trials undertaken by Novo Nordisk mostly from the emerging markets. Here’s a summary and analysis of key points:The following is a discussion of important points and their implications:

 Summary of the Paper

 1. Ethical Concerns in Clinical Trials:Innovations in Interdisciplinary Clinical Research:

 Offshoring of Clinical Trials: The following are some of the questions that have been raised concerning some of the ethical issues of conducting clinical trials in developing countries that shall be addressed in this paper. Of the reservations that have been made on the process some of them include that of that it could be conducted in substandard facilities and that participants could be supplied or manipulated.

 Informed Consent: Another minimally required input is to ensure the provided participants have a perfect understanding of the risks and benefits of bearing of clinical trials. It turns to being unethical when participant information is not shared with them to the necessary extent or when they are compelled to take part.

 Respect for Participants: The rights of the participants are; privacy; The participants have a right to withdraw from the research at anytime without any reason.

 Independent Review: It also stated that trials should be assessed by an independent committee in order to determine that it includes ethical and scientific values and methods.

 2. Novo Nordisk’s Position and Actions: Novo Nordisk’s Position and Actions:

 Corporate Responsibility: It maintains the concern of corporate social responsibility and ethical business requirement like sustainability and management of sustainability, and managing and relating with stakeholders.

 Challenges and Risks: This means that the company has a number of issues for consideration in the area in question, as for instance the manner in which the clinical trials cost would be met without compromising the ethic of the business. Ethical issues are disastrous to the business if they are not well managed, hence resulting in negative publicity.

 Factors Affecting Performance

 1. Ethical Management:

 Compliance with Ethical Standards: In this case the ethical practices describe how well Novo Nordisk conducts its clinical trials, the kind of reputation the company gets in the society. It is easy to come across a number of best practices for participants; such as getting informed consent or answering participant’s rights.

 Transparency: Mainly in trial processes and result, improve trust among the employees and the public as well. This is because the various corporate activities may be concealed and lead to charges of wrong doing and erode the corporate image.

 2. Regulatory and Public Scrutiny:

 Regulatory Compliance: This paper also constitutes compliance with the local and international regulations as a factor towards efficiency as well as acceptability of clinical trials. The trials are supervised and scrutinised in terms of ethic issues in conducting the trials and also from the scientific perspective by some authorities.

 Media and Public Perception: This is so because the media links the actual image with the perceived image of the company; it is for this reason that the image or perception forming the public<|reserved_special_token_265|> of a firm will dictate the health of the financial status of the firm. In this case therefore, how the company Novo Nordisk addresses ethical issues and leads the public and stakeholders through the media, will either inspire confidence or otherwise in the organization.

 3. Operational Challenges:

 Trial Design and Execution: Contrary to what one would expect based on the geographical locations, multi-site trials pose their nature and logistical characteristics no matter where they are conducted to introduce a change to the quality of data. Trial management and supervision continue to be important factors on how to ensure that all trials afford only ethical and scientifically valid data.

 Resource Allocation: The main challenge is in how to attempt to serve the economic needs while still serving the ethical needs. Trials are going to be carried out by Novo Nordisk in large scale, and for this reason there is need to professionally coordinate its resources in such a manner that trials are going to be conducted in the right ethical practices all the time being conscious of the costs implications.

 4. Stakeholder Engagement:

 Engagement with Stakeholders: Patients, regulating bodies and the general public should be incorporated in to the organization, for better credibility. It is therefore the recommendation of this paper that Novo Nordisk should do well to take time and respond to such issues thereby portraying good ethical practice and corporate social responsibility.

 Conclusion

 Running through the paper is the idea of the need to maintain ethical practice in trials especially when taking business to emerging markets. Hence, ethical questionable issues, the regulatory frame work, transparency, and responsibility towards the shareholders impact performance of Novo Nordisk. Co-ordination of such factors will help in mitigation of risks as well as the reputation as well as operation success of the business will also be enhanced.