Ethical dilemma

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Bio Hemi’s dilemma

Bio Hemi, Inc. is a large pharmaceutical and medical supplies company that includes a business segment that sells blood treatment products for hemophiliacs.  At the beginning of the AIDS epidemic, the federal Centers for Disease Control reported that several hemophiliacs had acquired the disease.  This gave epidemiologists a strong reason to believe that the disease was being spread through blood products. And that belief carried grave implications for the many thousands of hemophiliacs who routinely injected themselves with concentrate made from giant pools of donated plasma.  Because an AIDS test had not yet been developed, federal health officials had no idea how many plasma donors carried the disease.  By December 1983, the C.D.C. went so far as to warn that blood products "appear responsible for AIDS among hemophilia patients."

The unfolding story had not gone unnoticed at Bio Hemi Products headquarters. Bio Hemi Products’manager for plasma procurement had acknowledged in a letter in January, 1983 that “[t]here is strong evidence to suggest that AIDS is passed on to other people through … plasma products,” In July, 1983, the CDC reported that 74 percent of hemophiliacs who used an unemulsified plasma product were HIV positive.  The same CDC report indicated that an added process of “emulsification” prevented the problem of HIV contamination.

Sales of the unemulsified product were beginning to slip. In September 1983, Bio Hemi Products got more two more items of bad news: a competitor had begun to make an emulsified product and France decided to halt all imports until it could figure out what to do.  Fearing a loss of customers, Bio Hemi Products conceived a marketing plan that stopped well short of full disclosure: "We want to give the impression that we are continuously improving our product without telling them we expect soon to also have an emulsified product”.  Bio Hemi Products introduced its safer medicine in October 1983 as evidence mounted that the earlier version was infecting hemophiliacs with H.I.V.

At a November meeting, the product team reviewed the status of its non- treated product.  It found that it had an excess inventory of the old-version medicine -- more than 500,000 units, at a cost of more than 37.5 million dollars.  This version was increasingly unmarketable in the United States and Europe. Additionally, there were several large fixed-price contracts that would require that either that the company continue to make the old version of the product for these contracts to meet its profit margin or make the new version that would not meet the target return for their investment.  The company indicated that the product team needed to review international markets again to determine if more of this product can be sold. Bio Hemi had a sizable international market and had been marketing the product internationally, where information about the advances in hemophiliac treatments were not yet known. Whether Bio Hemi Products was behaving ethically also became an issue in internal company discussions. "Can we in good faith continue to ship non-treated coagulation products to Guatemala?" On the other hand, destroying the product would create a large loss for the company at a time in which other segment profit margins were tight.  This could have ramifications on the ability to fund research and development (which are discretionary costs) as well as negatively affect the company’s stock price and end-of-year bonuses. The charge to the team is two-fold: first, should the original product continue to be sold in Central and South America?  Second, should the company continue to produce the old product to meet the continuing fixed-price contracts, since no re-negotiation of the contracts is possible?

Assignment:

Assume that you are the accountant on the company product team that is reviewing the status of the old version of the product. You are a member of the Institute of Management Accountants and are, therefore, bound by the standards of ethical conduct (find this information on your own). Your assignment is to think about both your professional role as an accountant and the codes of ethics that apply. You should also think about your position working within a larger organization and the personal values that you hold.

Write an essay no longer than two pages (space and a half) that includes responses to the following:

1.      What are you going to recommend in the team meeting regarding sales of the old product and the completion of the fixed-price contracts?

2.      In your opinion, does the IMA ethical code address the type of ethical issue raised in your team meetings?

3.      Defend your perspective by quoting from the code.