Understanding Pharmaceutical Research Manipulation in the Context of Accounting Manipulation

Abstract

Good decision-making — for stock holders and medical practitioners alike — requires reliable information. As for profit, publicly traded companies whose business is discovering, manufacturing, and marketing drugs; pharmaceutical companies sit at the nexus of business and medicine. In medicine, relevant information comes from clinical trials and other forms of scientific research. Because the science underlying the products the pharmaceutical industry sells is inherently highly ambiguous, it is vulnerable to manipulation. This manipulation is in the service of what is essentially accounting fraud — the omission of material information that affects the valuation of the enterprise. This article places these behaviors in the wider context of information manipulation in the pursuit of accounting profits. This framework helps us consider how best to improve the quality of medical research and analysis, given the current system of scientific information production. In particular, I identify three ways to better identify — or prevent — misinformation at three points in the information production process.

Keywords: pharmaceutical research, accounting fraud, research fraud, public policy

JEL Classification: I12, I18, I19