Incentive Conflicts in the Pharmaceutical Industry

Subject: Management
Pages: 1
Words: 323
Reading time:
2 min
Study level: Master

Incentive conflicts are a largely inevitable part of management and governance. As they are potentially detrimental to the successful ongoing functioning of an organization, preventing and addressing them is a key aspect of risk management in general. As in any other sphere, those employed in the pharmaceutical industry can face conflicts of interest between their obligation to the organization and other involved stakeholders and their personal needs and goals. The three main strategies to address conflicts of interest, including incentive conflicts, are prevention, regulation, and sanctions (Rodwin, 2019). While each of these has its benefits – both in general terms and for the pharmaceutical industry alike – only a combination of all three can yield the best results.

Prevention strategy aims to create conditions under which key actors will have less chance of encountering incentive conflicts. It requires an acute awareness of human and cultural factors that can produce such conflicts but, even so, it is impossible to foresee every possible conflict (ISO, 2018). Regulation has the advantage of being more nuanced because it addresses issues when they occur and, thus, only regulates those conflicts of interest that are detrimental to the organization (Rodwin, 2019). Its main disadvantage is that it requires constant oversight of all key actors and continuous evaluation of their respective situations and, as such, can be resource-consuming. Fortunately, it is less inconvenient in the pharmaceutical industry due to the relatively low employee number per organization as compared to other spheres.

Finally, sanctions are a necessary component for addressing incentive conflicts that had proved harmful because the organization that strives for efficiency cannot let the misconduct slide. Organizations can favor this strategy due to its simplicity and the opportunities for blame-shifting it provides because finding and punishing a guilty party is easier than addressing structural issues provoking misconduct. However, being essentially a damage control strategy rather than a proactive one, sanctions are not and cannot be sufficient on their own.


International Standardization Organization [ISO]. (2018). Risk management – guidelines. Web.

Roswin, M. A. (2019). Conflict of interest in the pharmaceutical sector: A guide for public management. DePaul Journal of Healthcare Law, 21(1), 1-32.