Reference no: EM131291786

AN UNETHICAL CULTURE IN NEED OF CHANGE: TAP PHARMACEUTICALS

In 1995, Douglas Durand was offered the position of vice president for sales at TAP Pharmaceuticals. TAP had been formed 25 years before by Takeda Chemical Industries of Japan and Abbott Laboratories. Durand, 50 years old at the time, had married his high school sweetheart and worked for Merck & Co. for 20 years, during which he moved up in the sales organization to senior regional director. TAP offered him the opportunity to earn 40 percent more per year (in addition to a $50,000 signing bonus) and help the company move from niche player to mass-market purveyor of ulcer and prostate cancer medicine. He took advantage of the opportunity and looked forward to the challenge.

But only a few months after arriving at TAP, he was shocked to find a very different culture from the one he had become accustomed to at Merck. Merck has long had a reputation for ethics and social responsibility, and these qualities had been borne out in Durand's two decades of experience. For example, at Merck, every new marketing campaign was evaluated by a legal and regulatory team before being launched, and drugs were pulled back if necessary. But TAP turned out to be very different.

It quickly became clear that this was a culture where only numbers mattered. On his very first day on the job, Durand learned that TAP had no in-house legal counsel. The legal counsel was considered a ‘‘sales prevention department.'' At one point, Durand found himself listening in on a conference call where sales representatives were openly discussing bribing urologists with an up-front ‘‘administration fee'' to doctors who prescribed Lupron, the company's new drug for prostate cancer. TAP sales representatives also gave doctors Lupron samples at a discount or for free; then they encouraged the doctors to charge Medicare full price and keep the difference. Durand overheard doctors boasting about their Lupron purchases of boats and second homes.

TAP offered a big-screen TV to every urologist in the country (10,000!), along with offers of office equipment and golf vacations. And reps weren't accounting for the free samples they gave away-as required by law. Durand knew that failure to account for a single dose can lead to a fine of as much as $1 million. Finally, rather than selling drugs based on good science, TAP held parties for doctors. One such party for a new ulcer drug featured ‘‘Tummy,'' a giant firebelching stomach. Durand soon became frantic and worried about his own guilt by association. Initially, he tried to change the culture. After all, he had been hired as a vice president. But everything he tried was resisted. He was told that he just didn't understand the culture at TAP.

When he talked about the importance of earning physicians' trust, the sales reps just rolled their eyes. He then tried to influence change ‘‘the TAP way'' by offering a bonus to reps who kept accurate records of their samples. The program actually worked, but then senior management discontinued the bonus-and, of course, the reps stopped keeping track. Over time, Durand began finding himself excluded from meetings, and he felt trapped. What would happen to him if he left this new job in less than a year? He wouldn't collect his bonus, and he wondered if anyone else would hire him. What would happen to his family?

But he also worried about becoming the corporate scapegoat. In desperation, Durand turned to an old friend he knew from Merck- Glenna Crooks, now president of Strategic Health Policy International. Appalled by what she heard, Crooks encouraged him to document the abuses he had observed and share the information with Elizabeth Ainslie, a Philadelphia attorney. Given the documented fraud against the U.S. government, Ainslie encouraged Durand to sue TAP under the federal whistle-blower program. Armed with documents, he filed the suit and federal prosecutors ran with it. Durand left TAP for Astra Merck in 1996.

But under the whistle-blower program, investigations are conducted in secret. Neither TAP nor Astra Merck was supposed to know about it. The investigation took years, and, when called to testify, Durand had to make excuses to take time off from his new job. He was uncomfortable living as a ‘‘double agent.'' In the end, TAP pleaded guilty to conspiracy to cheat the federal government and agreed to pay a record $875 million fine. In October 2001, Durand collected $77 million ($28 million went to taxes), his 14 percent share of the fine paid under the federal whistle-blower statute. He retired to Florida to be closer to his parents, but he had yet to face the unpleasant task of testifying against six TAP executives, some of whom had worked for him.

Case Questions
1. Analyze the ethical culture at TAP. Does the culture appear to be in alignment? Misalignment?

2. Based on the facts in the case and what you have learned in this chapter, evaluate the culture change effort that Douglas Durand undertook. What cultural systems did he target in the culture change effort? What systems were missing, if any?

3. Why did his culture change effort fail? What would it take for it to succeed?