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  • Writer's pictureKirk Hartley

One Fact Pattern Relevant for Thinking About Ethical Issues When A Settlement is to Be Funded By Con

What ethical missions can appropriately intersect with corporate profits in the context of mass tort settlements that call for continuing sales of products that involve controversies of some kind? When settlements call for continuing sales of controversial products, how should societies think about those questions? Issues of this sort are on more and more radar screens today because some past and contemplated mass tort settlements involve continuing sales of products that are controversial in one way or another.

One controversial settlement involved cancers caused by smoking, and the related expenses. Specifically, the national tobacco settlement in the US addicted states to cigarette sales tax revenue. The settlement thus insured continuing existence of the companies and sales of cigarettes at increased prices shifted much of the financial burden of the settlement from shareholders to smokers paying higher prices for cigarettes.

Currently, one reads stories about possible structures for resolving opioid claims through some form of public interest owned entity that would continue to sell opioids and channel profits to pay claims for current opioid harms (or alleged harms).  In that light, it’s interesting to read and think about a September 30, 2019 Financial Times article that explores some of the issues/conflicts inherent within the ownership structure of a major diabetes drug maker, Novo Nordisk.  In short, the article addresses perceived or actual conflicts between Novo’s diabetes drug prices and the “scientific and humanitarian mission” of the Novo Nordisk Foundation that owns 76% of the shares of the profit-making entity and manufacturer, Novo Nordisk.

Among other things, the article presents the following facts, which all seem relevant to the seemingly inevitable conflicts between current and future claimants that arise when ongoing product sales are intended to fund payments for settlement of claims involving past actions:

“For the most part, Novo Nordisk’s story over the decades has been one of sustained profits and a rising share price. Over the past 25 years it has outperformed the global pharma sector in total shareholder return more than sixfold, according to FT calculations, by over 70 per cent in the past decade, but only by 1 per cent in the past five years.

The company hit a significant bump in the road in 2016, which served to test the durability of its “profits with a purpose” approach. Shares tumbled 15 per cent in a day after it halved its long-term financial targets, warning of the impact of pricing pressures in the US, and it was forced to make 1,000 staff redundant.”

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