A pharmaceutical company has the exclusive patent for a life-saving medication that treats a rare disease affecting approximately 2,000 people globally. After a detailed financial review, the company's board approved a 400% price increase on the medication. In their announcement, the CEO stated: "This price adjustment ensures we maximize shareholder value while maintaining profitability targets. Our financial analysis shows this is the optimal price point given the inelastic demand for this essential medication and lack of alternatives. While we recognize this may create hardship for some patients, our primary obligation is to our investors who expect competitive returns."Which ethical framework is primarily reflected in the company's decision?

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BlackTom AI · Accepted Answer

Question restatement: A pharmaceutical company with an exclusive patent raises the price of a life-saving medication by 400% after a financial review, claiming it maximizes shareholder value and profitability, even though it may cause hardship for patients. The question asks which ethical framework is primarily reflected by the company's decision.

Option a: Virtue ethics - The company is demonstrating the virtue of financial prudence
  - This choice interprets the action as a display of character virtues (such as prudence or financial savvy). However, virtue ethics emphasizes the character of the actor and the cultivation of morally admirable traits over time, not a single strategic pricing decision aimed at profit. The statement focuses on a financial judgment rather than a character virtue, making this option an incomplete fit.
  - Additionally, virtue ethics would assess whether the action expresses virtuous traits (benevolence, justice, temperance) in the broader context, not merely labeling the decision as prudent. The emphasis on shareholder value alone does not clearly align with virtuous conduct toward patients or society.

Option b: None of them. The decision of the company is unethical.
  - This option asserts outright unethicality. Yet ethical frameworks may offer descriptive analyses of what framework best explains the action; the presence of an ethical lens (even if contested) means the decision can be analyzed within a framework such as deontology, utilitarianism, or virtue ethics. Declaring all frameworks inapplicable is too strong and closes the analytic door prematurely.

Option c: Deontological ethics - The company is fulfilling its duty to shareholders above all else
  - Deontological ethics centers on duties, rules, and obligations. If the primary duty identified is to shareholders, this choice frames the action as adhering to a perceived obligation to investors. The statement explicitly emphasizes obligations to shareholders and highlights a rule-based justification for the decision (maximize returns as a duty), which aligns with a deontological reading that prioritizes duty over consequences.
  - Critics might question whether a deontological approach should priority shareholders, but the option correctly maps the described emphasis in the CEO’s justification (duty to investors) to a deontological interpretation.

Option d: Utilitarian ethics - The company calculated the greatest good for the greatest number
  - Utilitarian ethics evaluates actions by their consequences, aiming to maximize overall welfare. A 400% price hike for a life-saving medication would likely reduce access and welfare for most patients, contradicting the greatest good narrative. The CEO’s statement does not present a calculation of overall utility that justifies the action; the justification centers on shareholder profits rather than aggregate well-being, making this option inconsistent with utilitarian reasoning.

Overall, option c is identified as the most fitting framework given the explicit emphasis on fulfilling a duty to shareholders above other considerations, which aligns with a deontological, rule-based interpretation of the company’s justification. The other options misalign with the core emphasis or mischaracterize the ethical lens implied by the decision, whether by focusing on virtue, denying any framework, or appealing to consequentialist maximize-good reasoning.

25_4 MGT3600 Ethical Leadership & Moral Development

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