ETHICS OF OFFSHORING: NOVO NORDISK AND CLINICAL TRIALS IN
EMERGING ECONOMIES

On a wann day in early spring 2008, the telephone is ringing in
the office of Anders Dejgaard, chief
medical officer of Novo Nordisk, a leading developer and
manufacturer of insulin and related products. A
business journalist of the Danish national newspaper Berlingrke
Tidende is on the line and asking for an
interview. Dejgaard knows her from several conversations relating
to business practices in the
pharmaceutical industry.
The joumalist is investigating the offshoring of clinical trials by
Danish companies. A report recently
published in the Netherlands alleges that multinational
pharmaceutical companies routinely conduct trials
in developing countries under allegedly unethical conditions. Also,
the Danish National Committee on
Biomedical Research Ethics has expressed concerns because Danish
pharmaceutical companies are not
obtaining ethical reviews in Denmark for such trials despite the
offer from this committee. Thus, she wants
to discuss Novo Nordisk‘s position on these issues.
Dejgaard reflects on how to react. Several articles on ethical
aspects related to medical research in the
Third World had appeared in the Danish press in recent months,
creating an atmosphere of suspicion
towards the industry.‘ Should he meet with the journalist and if
so, what should he tell her? Or should he
rather focus on his forthcoming business trip to new production
facilities and send Novo Nordisk’s press
officer to meet the joumalist? In his mind flashes the possibility of
derogatory headlines in the tabloid
press. As a company emphasizing corporate responsibility, the
interaction with the media presents both
opportunities and risks to Novo Nordisk

Novo Nordisk A/S had been created in 1989 through a merger
between two Danish companies, Novo
Industri A/S and Nordisk Gentofte A/S. Both had been established in
the 1920s as manufacturers of
insulin, a crucial medication for diabetes. Over decades of fierce
competition, they had become leading
providers of insulin and related phannaceutical products. Novo
lndustri had been pursuing an
internationally oriented strategy from the outset, and by 1936 was
supplying insulin to 40 countries. A
significant step in the internationalization of the company was a
major push into the U.S. market in 1979.
At the time, Food and Drug Administration (FDA) regulations
required Novo Industri to replicate its
clinical studies in the United States to obtain the approval of the
marketing of their new products. In 1989,
the two companies merged and in 2000 the merged company spun off
the enzyme business “Novozymes.”
In 2008, Novo Nordisk presents itself as a focused company within
the healthcare industry and a world
leader in diabetes care. It claims the broadest and most innovative
diabetes product portfolio in the
industry, including the most advanced insulin delively systems. In
addition, Novo Nordisk holds leading
positions in areas such as haemostasis management, growth hormone
therapy and hormone replacement
therapy. Sales reached DKr4l.8 billion (about US$8 billion) in
2007, of which DKr3O.5 billion were in
diabetes care and DKrl 1.4 billion were in
biopharmaceuticals.
Innovation is considered pivotal to the success of Novo Nordisk, as
it was to its predecessor companies.
Continuous innovations allow the development of more refined, and
thus more effective, insulin
preparations, and new delivery systems, such as Novopen®, that
facilitate the administration of the
treatment, including self-administration by patients. In 2008,
about 18 per cent of employees are working
within research and development.
In 2008, Novo Nordisk holds market shares for insulin of about 56
per cent in Europe, 41 per cent in North
America and 73 per cent in Japan and employs about 26,000 people,
of whom 12,689 are located in
Denmark, 3,411 in the rest of Europe, 3,940 in North America and
the remainder in Asia Pacific and the
rest of the world. Production facilities are located in six
countries and products are marketed in 179
countries.
The shares of Novo Industri were first listed on the Copenhagen
Stock Exchange in 1974 and on the
London Stock Exchange in 1981 as the first Scandinavian company to
be listed in London. In 2008, Novo
Nordisk’s B shares are listed on the stock exchanges in both
Copenhagen and London, while its American
depositary receipts (ADRs) are listed on the New York Stock
Exchange.
Novo Nordisk emphasizes corporate social responsibility as part of
its image, pursing a triple bottom line
approach: environmental and social responsibility along with
economic viability. This commitment is
demonstrated through its values and its environmental and social
responsibility policies that are reported
on its website (see Appendix 1).
Critical milestones in Novo Nordisk’s ambition to be recognized as
a leader of corporate sustainability
include the publication in 1994 of its Environmental Report. It was
the first company in Denmark and one
of the first in the world to do so. This was followed in 1999 by the
first annual Social Report. In 2001,
Novo Nordisk established the World Diabetes Foundation, a charity
aiming to improve diabetes care in
developing countries, where diabetes is becoming an epidemic as it
had in Europe and North America a
few decades earlier

In recognition of its sustainability engagement, Novo Nordisk
had been included in the Dow Jones Global
Sustainability lndices, where it was ranked as “best in class” in
the healthcare category in 2007. At home,
Novo Nordisk is frequently ranked as having the most highly
regarded corporate image by Danish
magazines Berlingske Nyhedmagasin, Barsen and Ingeniaren.
New Medications: Development and Approval
Novo Nordisk, like other phannaceutical and medical companies,
heavily invests in the development of
new medications offering more effective, safe and user-friendly
treatments. New product development
involves the creation of new drugs or modifications in their use,
for instance their dosage and the form of
administration.
To bring new drugs or medical devices to market, they must be
approved by the relevant authorities — the
FDA in the United States and European Medicines Agency (EMEA) in
the European Union. The approval
of drugs and medical devices requires proof of their efficacy and
their safety. Efficacy refers to scientific
evidence that the dmg improves patients’ conditions as claimed by
the manufacturer. Safety refers to the
absence of substantive negative side-effects. Thus, to obtain
approval, pharmaceutical companies have to
provide scientific evidence that the drug improves the conditions of
patients and is free of disproponional
side-effects.
This evidence has to be based on, among other data, clinical trials
in which the drug has been tested on
actual patients. The clinical trials are normally conducted in four
stages. Phase 1 involves a small number
of healthy volunteers and serves to assess the kinetic properties
and tolerability of the dmg. Phase 2 is
performed on larger groups of patients to assess how well the drug
works and to establish the doses that
give the desired effect and to continue its safety assessment.
Phase 3 trials often involve thousands of
patients and aims to provide a definitive assessment of how
effective and safe the drug is. All data
generated in the three phases form an essential part of submissions
to the regulatory authorities (FDA,
EMEA and their counterparts in other countries) for drug approval.
With this approval, the drug can then
be marketed for the approved indications. Further trials, in phase
4, may be required to obtain permission
to extend the labelling of a drug to new indications (e.g. a
different disease) or specific groups, such as
children or pregnant Women.
Phase 3 and 4 trials require a large number of patients with the
specific disease that the drug is to improve.
A typical approval process conducted by Novo Nordisk might require
six to eight different phase 3 trials
with different patient groups or combinations of the drug
component, each involving about 400 to 800
patients. Such trials are often conducted as multinational studies
involving up to 15 countries. With
increasing requirements for patient exposure for approval and
increasing numbers of drugs being tested,
the recruitment of patients is often a major challenge. Typically,
trials are conducted at multiple hospitals
that all must follow the same trial protocol to ensure the
consistency of data and compliance with existing
“good clinical practice” (GCP) guidelines. Multi-site trials also
facilitate the recruitment of patients with
diverse backgrounds, for instance different ethnicities and diets,
while helping to demonstrate their
universal properties. Doctors and nurses but not patients are
nonnally paid for this work and hospitals often
find it attractive to participate in trials that allow access to new
medications and front line research.
Clinical trials, especially phase 3, are a major cost factor in the
development of new medications and they
often take many years to conduct (on average eight years).

In the early 2000s, major pharmaceutical industries increasingly
moved parts of their trials, especially
phases 3 and 4, to countries outside their traditional areas of
operations, especially to Eastern Europe,
South America, India and China. Hospitals in these areas provide
access to qualified medical staff and
larger numbers of patients with the specific conditions, while
potentially being able to administer a trial at
lower costs. Moreover, the efficacy of drugs may also vary across
contexts, for instance due to genetic,
dietary, climatic or other environmental conditions. In such cases,
multi-site trials help to establish the
efficacy of medications across contexts. Some countries, such as
Japan, India and China, in fact require
that trials are at least in part conducted locally to approve a new
medication in the respective countries.
However, the conduct of clinical trials in these areas also raises
a range of ethical issues.
Ethical Issues in Medical Research3
Ethical issues in the pharmaceutical industry have received
considerable media attention over several
decades, as the industly has failed to live up to the expectations
of some interest groups. In particular,
clinical trials raise a number of widely recognized issues. Medical
professionals, and with them many
NGOs and media, focus on the medical ethics grounded in the
Hippocratic oath that commits doctors to
treat each patient to the best of their abilities, never to cause
intentional harm and to maintain patient
confidentiality. Scientists and approval authorities have been
concerned about the scientific rigor of the
tests to provide solid evidence of the effects of a new drug, and
thus to protect potential future users of the
drug. At the same time, phannaceutical companies have to operate
with limited financial resources and to
satisfy shareholders and thus cannot spend more resources than
expected future revenues would justify.
Accordingly, the industry has been accused of performing trials in
developing countries with lower
attention to ethical principles — “ethical bribing,” with patients
acting as guinea pigs that do not
understand and/or care about the risk involved but just want to get
free medication and with investigators
not meeting the competence requirements, etc. Allegedly, all this
just serves to generate documentation for
compounds that are to be sold only in developed countries.
Medical (Hippocratic) ethics concern primarily the individual
patients that are participating in any
experiment. The relationship between the doctor and the subject
participating in a trial is thus govemed by
the doctor’s responsibility to care for his or her patient. Past
incidences where this principle had been
violated continue to affect popular perceptions of medical
research. Most infamously, the Tuskegee
syphilis study left 400 impoverished and unwitting African-American
men in Macon County, Alabama,
untreated to study how they developed the disease — an experiment
initiated in 1932 and terminated only
in the 19705.
To prevent such scandals, professional medical organizations have
developed guidelines and principles of
ethics to guide their research, notably the Helsinki Declaration of
the World Medical Association (see
Appendix 2). These widely accepted ethical principles aim to
protect subjects, e.g., patients, participating
in such research. These include:
0 Voluntag informed consent: Each patient has to agree voluntarily
to participate in the research based
on being fully informed about the purposes of the study and
potential risks for the individual. Sponsors
and local site investigators thus normally write an “informed
consent” document that informs potential
subjects of the true risks and potential benefits, which is signed
by each patient or their legal guardian
before any trial procedure.
3 This section draws in particular oh E.J. Emanuel, D. Wendler and
C. Grady, “What makes clinical research ethical?”
Journal of the American Medical Association, 283.’20, 2000, pp.
2701-2711, and Michael A. Santoro and Thomas M. Gorrie,
Ethics and the Pharmaceutical Industry, Cambridge University Press,
2005.

0 Respect of patients: The privacy of the subject should be
protected and they should be free to withdraw
from the experiment at any time without reasoning. The doctor’s
professional responsibility to the
patient should take precedence over any other considerations.
0 Independent review: Any medical and pharmacological research has
to be assessed on its scientific
merits and ethicality by an independent review board (IRB) that is
independent from those involved in
or sponsoring the research.
Scientific ethics are concemed about the validity of the results of
the scientific inquiry and thus the
methodological rigour of the study. Thus, a study has to use valid
measurements and statistical techniques
and samples that are unbiased and sufficiently large that they can
generate trustworthy and valid results.
Such scientific rigour is important to anyone who may in the future
use an approved drug or medical
device. Awareness of the need for rigorous tests prior to launching
new medications had been triggered by
various scandals of the 1960s, notably the Thalidomide scandal
involving a pain killer used by women to
ease sleep problems and pregnancy sickness. Due to side-effects of
this medication, thousands of children
worldwide were born with incomplete anns or legs, before the drug
was withdrawn. In consequence to this
and other scandals, the licensing and approval procedures for drugs
have been tightened to ensure that only
drugs with scientifically proven efficacy and safety are
marketed.
Ethical businesses have to balance activities done in the interest
of the wider society with their pursuit of
profits. The late Nobel prize-winning economist Milton Friedman
famously declared that the primary
social responsibility of business is to make profits.“ Under
efficient markets, which he firmly believed in,
this would generate the most mutually beneficial outcome. Thus, he
argued, firms ought to give precedence
to shareholders over any other interest groups.
Others argue that firms should engage in corporate social
responsibility because it can be expected to
benefit their bottom line in the long run, for instance through
reputation effects. Yet others argue that firms
have an intrinsic, nonnative responsibility to use their influence
to do good for society and to aspire to the
highest moral standards, independent of the profit motive. However,
even so, their financial resources will
be limited. Like organizations in the govemmental or non-profit
sector, businesses have to make critical
decisions about how best to use their scarce resources.
Ethics of Placebo Experimentss
Particular concerns have arisen for placebo trials, that is, trials
where a control group of patients receives a
treatment without any active ingredient for the disease. The
purpose of placebo trials is, normally, to
provide evidence of product efficacy by showing statistically
significant improvements of the conditions of
patients receiving the active treatment, compared to those
receiving a placebo treatment.
Placebo trials are especially important for diseases that are
affected by the so-called placebo effect, that is,
patients’ conditions improving because of the positive effect of
receiving a form of treatment rather than
the specific medication. This has been shown to be quite
substantive, for instance, for schizophrenia and
4 M. Friedman, “The social responsibility of business is to
increase profits, ” The New York Times Magazine, September 13,

other psychiatric conditions. Both American and European
authorities thus often require placebo trials as
prerequisite for the approval of new medications.
Alternatives to placebo trials include the use of active controls,
in which the control groups receive a
previously marketed medication with known properties. Yet these
types of trials are often not sufficient to
provide the required rigorous evidence regarding the efficacy of the
medication.“ Placebo trials may create
risks for patients in the placebo group, in particular when
patients are denied a treatment that is known to
improve their condition. The Helsinki Declaration therefore
requires avoiding placebo experiments unless
very special reasons require them or no alternative treatment of
the illness is available (see Appendix 2,
item 29). Ethics review boards have become very restrictive in
permitting placebo trials. There have been
arguments from some groups that one reason for the pharmaceutical
industry to place studies in developing
countries is the possibility of performing placebo trials that
otherwise can be difficult to get approval for in
developed countries.
Novo Nordisk generally avoids placebo trials. Usually, they are
used only in phase l trials in healthy
volunteers when new drug candidates are being developed. These
trials are normally located near its main
research centres in Europe and rarely in non-Westem
countries.
Media Spotlights
In February 2008, a report from the Dutch NGO SOMO raised public
awareness of placebo trials
conducted by major phannaceutical companies in developing
countries.7 The report was critical of trials
that had been submitted to the FDA and the EMEA for dnig approval.
Its primary concern was that key
information about ethical aspects of these clinical trials was not
available to it as an external observer and it
found incidences where patients suffered serious harm after
receiving a placebo in a trial.
The report focused on three case studies of clinical trials for
recently approved drugs conducted in Eastern
Europe and Asia, based on publicly available information. It
concluded that
trial subjects in these countries are more vulnerable and their
rights are less secured than in
high income countries. Conditions such as poverty, illiteracy, poor
health systems and
inadequate research ethics committees result in international
ethical standards not being
met. Current EU legislation requires that results from unethical
clinical trials . . . not be
accepted for marketing authorization. With three case studies on
recently approved drugs
in the EU (Abilify, Olmetec, and Seroquel), SOMO demonstrates that
this principle is
being violated. European authorities devote little to no attention
to the ethical aspects of
the clinécal trials submitted, and they accept unethical trials as
well as trials of poor
quality.
5 An active-control trial infers efficacy from non-significant
differences of performance compared to the active-contro/
drug.
Such non-significance, however, can be caused by a number of other
influences. Moreover, this test is problematic if the
active-control drug is subject to large placebo effects varying
with study designs. On the merits and concerns of active-
control trials

In its conclusions, the report alleges that local regulation and
the enforcement of ethical principles are less
strict, partly because local independent review boards are less
qualified and partly because they are less
keen on restricting what is potentially a revenue eamer. The
authors thus advocate global harmonization of
ethical criteria along the principles currently used by ethics
committees in Europe: “ . . . there must be no
discrepancy between the ethical criteria used to approve research
protocols in Western Europe and in low
and middle income economies to avoid the creation of ‘easy
countries.”’9
The media picked up, in particular, the case of a schizophrenic
patient committing suicide while
participating in a trial of the anti-schizophrenia medicine
Seroquel by Astra-Zeneca. Moreover, media
reported that IO per cent of recipients in the placebo group had to
be hospitalized because of worsening
conditions. Careful reading of the original report suggests that
8.3 per cent (p. 64) of a group of 87 patients
(p. 62) were affected, which adds to seven persons. No assessment
of the likelihood of such incidents
under alternative medication available at the time had been
included in the report.
Concerns have also been raised by the Danish National Committee on
Biomedical Research Ethics.’° In
particular, the committee criticizes the industry for not accepting
the committee’s offer to provide
independent ethical reviews before submitting to local ethics
committees as a service to the industry. The
chairperson for the committee, Johannes Gaub, chief medical officer
at Odense Hospital, told the media:
Like production companies locate their factories in low wage areas,
the medical industry is
outsourcing its scientific experiments in the same way. The costs of
conducting medical
trials in developing countries are only a fraction of what they are
in the West because of
the low wages . . . In the USA it costs about DKI 150,000 to move
one patient through a
trial. In Denmark, it costs DKr 80,000. I don’t really know the
price in developing
countries, but it is a fraction of that.
Gaub also rejects the concem of the industry that hospitals in
Denmark would not be able to conduct trials
of the necessary scale, given the growing requirements worldwide to
provide clinical trial data for
approvals around the world:
We have considerable spare capacity in Denmark. Despite the high
costs we have a well-
functioning health system. We have data about patients because of
our national identity
number system, and there are many clinical researchers in the
hospitals who would be
happy to participate in the trials of new medications . . . It is
actually won’ying that we do
not receive more applications in Denmark. We need clinical research
to maintain the high
level of health science that we so far have had in the
country.”
Danish politicians also joined the debate. In a statement to the
health committee of the national parliament,
the minister for health emphasized that E.U. regulation for the
approval of new medicines requires that
trials conducted outside the European Union have been implemented
in accordance with the European
Union’s own rules as well as with ethical principles such as the
Helsinki Declaration. The minister thus
concluded:

I find no reason to take initiatives to constrain research
projects by the Danish medical
industry outside the EU. In this context, I consider it important
to emphasize that all
clinical trials that shall be used as a basis for applications for
approval of marketing of a
medication in the EU must comply with the EU’s laws on good
clinical practice and the
ethical principles regarding medical research with human subjects.
‘2
Also, other politicians joined the debate. For example, Member of
Parliament Birgitte Josefsen (V)13 urged
Danish phannaceutical companies to hold the ethical flag high: “The
medical industry ought to be very
careful about whom they use as test persons. That should be people
who have resources to say ‘no’. A poor
Indian mother with three children is not the right one to become a
test person.” 14
Novo Nordisk‘s Position on Clinical Trials
Anders Dejgaard is pondering the complexity of the ethical issues.
As corporate sustainability features
highly on Novo Nordisk’s agenda, the ethically appropriate handling
of clinical trials is important to the
company. It conducts clinical trials globally to test the safety
and efficacy of new drug candidates in order
to obtain global marketing authorization. These trials always
follow a common protocol and thus the same
standards at all trials sites. Trials sites are selected based on a
variety of criteria, including the quality of
regulatory authorities, ethical review processes and medical
practices. Moreover, drugs have to be tested
on the types of patients who will later become users of the drug
and trial subjects should have access to the
drugs after the process has been completed. In addition, Novo
Nordisk will only conduct trials in countries
where it has affiliates with the necessary competence to arrange
and monitor the trials. In 2008, these
criteria were met in about 65 countries worldwide.
Novo Nordisk has adapted the global guidelines and recommendations
by all the professional bodies and
publishes its policies on clinical trials on its website (see
Appendix 3). This includes enhanced global
exposure of investigated products through its own website as well
as websites sponsored by the FDA (see
Appendix 3). Novo Nordisk conducts research in therapies that
require global trials and the inclusion of
different ethnic populations. The company also anticipates a need
to increase the number of clinical trials
due to an expanding pipeline and more extensive global and local
regulatory requirements. Its ethical
principles and standard operating procedures, which apply globally,
are designed to ensure due respect for
the safety, rights, integrity, dignity, confidentiality and
well-being of all human beings participating in
Novo Nordisk-sponsored trials. Novo Nordisk is auditing 10 per cent
of all trials, while at the same time
the American and European authorities, FDA and EMEA, are making
random checks of about one per cent
of Novo Nordisk’s clinical trials. These random checks have never
identified ethical problems in clinical
trials in developing countries. Since trials are nonnally conducted
in multiple countries, the same standards
are applied everywhere, for both ethical and scientific reasons
(consistency of results).
At the same time, Dejgaard is irritated about the request for an
additional ethics approval by the Danish
National Committee on Biomedical Research Ethics. He estimates that
it would add three months to the
preparation of each new trial. In his own experience, the ethical
reviews in those locations he worked in are
as rigorous as in Western countries and he does not recognize an
added benefit, as the Danish committee

Would be no better in assessing a trial than a local ethics
committee. On the contrary, he finds the
suggestion more appropriate for a colonial empire. Moreover,
specific local issues, such as ethnic or
religious minorities, would be better understood by local
committees.
Yet various issues come to mind. Is Novo Nordisk doing its research
and development in an appropriate
manner or are there issues that could be done better in View of
Novo Nordisk’s triple bottom line
commitments? Are Novo Nordisk’s standard operating procedures being
properly implemented in all
developing countries that participate in the programs and how is
such compliance to be monitored? How
should Novo Nordisk manage its simultaneous relationships with
various regulatory authorities,
independent review boards at various sites and with the Danish
National Committee on Biomedical
Research Ethics?
Most pressing is the decision on how to handle the journalist.
Should he meet her in person, send a public
relations person or not meet at all and reply in writing, citing
the corporate website? If he is to meet her,
what should be the key messages that he should get across and how
should he prepare himself for any
questions she might raise during the meeting?

At Novo Nordisk, we refer to corporate sustainability as
companies’ ability to sustain and develop their
business in the long-term perspective, in hannony with society.
This implies a more inclusive View of
business and its role; one in which engagements with stakeholders
are not just used to legitimise corporate
decisions, but rather the foundation for how it conducts and grows
its business. It is about innovation,
opportunity and planning for the long term.
The Triple Bottom is the principle behind our way of doing
business. The company’s Articles of
Association state that it ‘strives to conduct its activities in a
financially, environmentally and socially
responsible way.’ This is a commitment to sustainable development
and balanced growth, and it has been
built into corporate governance structures, management tools and
methods of assessing and rewarding
individuals’ performance. . .
The stakeholder dimension: Novo Nordisk needs to stay attuned to
emerging trends and ‘hot issues’ on
the global agenda in order to respond and to contribute to the
debate. Stakeholder engagement is an
integrated part of our business philosophy. We have long-standing
engagements with stakeholders that are
vital for building trust and understanding of a variety of issues.
By involving stakeholders in the decision-
making processes, decisions are better founded and solutions more
likely to succeed. Stakeholders are
defined as any individual or group that may affect or be affected by
a company’s activities.
Translating commitment to action: Corporate sustainability has made
a meaningful difference to our
business, and we believe it is a driver of our business success.
This is best illustrated in three examples:
Business ethics: Surveys indicate that ethical behaviour in
business is today the number one driver of
reputation for pharmaceutical companies. Any company that is not
perceived by the public as behaving in
an ethical manner is likely to lose business, and it takes a long
time to regain trust. While the Novo
Nordisk Way of Management is a strong guide to our behaviour, we
decided we needed more detailed
guidance in the area of business ethics. In 2005 we therefore
framed a new business ethics policy, in line
with universally accepted high standards, backed by a set of
procedures. Since then we have trained
managers and employees,

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