Pharmaceutix Ltd, is a leading contract manufacturer and supplier of pharmaceutical products and packaging in South Africa. Founded in 1988, the company has extensive experience in pharmaceutical production and know the needs of the South African market. With a world-class facility and skilled experts on staff, Pharmaceutix continuously push the boundaries of quality and innovation to bring you the best products possible. Pharmaceutix always strives to do the right thing and comply with Principles of KING IV and Corporate Governance. A strong component of Pharmaceutixs business relates to original medications which were developed by Pharmaceutix and, in respect of which Pharmaceutix holds the patents. Pharmaceutix has experienced a decline in profit, mainly because of competitors who manufacture more affordable generic medicines after the patent term of the original product has come to an end. Generic Medicines are products produced by competitors which are remarkably similar to the original medications, and which use the same active pharmaceutical ingredients (API). Because they are not identical copies of the original, competitors are able to bypass the patents when producing generics. Generics are generally cheaper, although there are arguments in the industry as to whether generics are as effective as the original Medications. Evergreening refers to an original manufacturer modifying an existing, already patented product and then renewing the patent in order to extend its lifetime. As you know, some of the cancer products are close to the end of the patent protection term which will most definitely lead to competition from other drug companies producing and selling generic versions of the drugs. Mr Monroe, the CEO asked the CFO, Ms. Rhona Martins (CGMA, ACMA) how the company can ensure sustained profitability from these products. Her response was as follows I think that if we move quickly before the patent law is amended to accommodate the new patent law, we have two choices. We can either reformulate the drugs slightly and register another patent, or we can license an associate company to sell the generic drugs under the original patent. The reformulation of the drugs and the registration of another patent may not prevent competitors from producing generic products based on the original patent, but there are of course ways to deal with this. We can increase our entertainment budget to ensure that medical practitioners rather prescribe the reformulated product, and we can also distribute misinformation in the market on the original product. It is also almost standard practice to decrease the price of the product when it is nearing the end of the registered patent REQUIRED: a) Explain in detail if there are any ethical issues around Ms Martinss suggestions on how to ensure sustained profitability on products nearing the end of the patent term. (5) b) Advise how can these ethical considerations from a) above be addressed with Mrs Martins (10) As per example below The following comments detail the specific suggestions: Ethical Considerations How to address ethical considerations Reformulate the drugs slightly and register another patent. This will only be in the interest of consumers if the new formulation represents a significant improvement in the drugs ability to be effective and save lives or improve the wellness of cancer patients