The Pharmaceutical Industry: Possibility of Corporate Social Responsibility?

The pharmaceutical industry is constantly criticized for not taking a greater role in the access to life-saving drugs, particularly in developing nations. The arguments are plentiful, ranging from focusing research and development (R&D) efforts on health issues for rich countries to pricing drugs at unaffordable levels. It is easy to make the case for why pharmaceutical companies should be more involved in providing access to drugs, especially from the moral perspective that all humans should have the right to health. More recently, under the pressure of advocacy groups, non-governmental organizations (NGOs), etc., the pharmaceutical industry has been increasing its role in facilitating access to drugs in the developing world. Critics would say that its role has been insufficient, but at what point would it be sufficient? While the facts criticizing the pharmaceutical companies are valid, the following discussion will provide a different perspective on the pharmaceutical industry’s engagement in corporate social responsibility.

The question of corporate social responsibility has two dimensions – one that is related to promoting social ends and the other to the business of making profits. The main conflict for drug companies is between providing a potential cure or treatment for very sick people or maximizing shareholder returns. Much of the focus has been on high drug prices and low manufacturing costs of drugs, but not on the fixed costs. Often times, the criticism focuses on the lack of R&D on diseases that plague developing countries, but does not explain the high costs and risks of the R&D process. For example, it typically takes 10 to 15 years to develop one drug and costs between $800 million to $1.3 billion. Yet, since drug patents expire 20 years from the date of filing, companies only have a few years to “recoup their losses” because generic competitor drugs lead to decreases in profits of over 90% in the branded versions. While drug companies consider R&D costs sunk, only two of ten marketed drugs ever return revenues that match or exceed R&D costs.[1] These statistics show risky the R&D process is, and how difficult it is for pharmaceutical companies to generate returns. More recently, the pharmaceutical industry has been experiencing challenges. Blockbuster drugs, those generating sales of over $1 billion, are becoming more and more rare. The industry has been consolidating, partly to capitalize on synergies across companies. These industry issues paired with the continuing challenges of the R&D process have left pharmaceutical companies scrambling for ways to lower their high fixed costs or generate new sources of revenues.

Despite the challenges that the pharmaceutical industry faces, it has been involved in a number of global health initiatives. Often times, this means that companies are donating drugs, cutting prices and developing partnerships with local governments and NGOs. One recent example is the agreement by Pfizer to improve access through a 60% price decrease per dose on a drug to treat tuberculosis in patients taking second-line HIV/AIDS medications. Pfizer CEO, Jeff Kindler stated, “Pfizer is pursuing numerous global health projects like this one with the Clinton HIV/AIDS Initiative to find new ways to connect people to medicines they need. We are working on innovative solutions to bring health care to customers who have often been neglected in the past and do this in a socially responsible, sustainable and commercially viable way.”[2]

A rare example is the case of river blindness, or onchocerciasis. Over 20 years ago, Merck faced the question of whether or not to invest in R&D for a drug that could help treat onchocerciasis. The total potential market would be limited to sick populations in poor, remote areas of developing countries – approximately 80 million people, less than two percent of the world’s population. The potential patient population for onchocerciasis would be unable to afford the drugs and there would be no affluent patients of this disease to subsidize the treatment for the poor sick population. This investment would be unprofitable since the end users could not pay for the drug. The countries themselves were poor and would not be able to subsidize the costs of the drugs for the patients. Even if an effective drug could be produced, it would not have the distribution channels or infrastructure to deliver the drugs, nor would it have medical care providers to administer the drugs. Despite all these challenges, Merck went ahead with the R&D to develop the drug MECTIZAN. When it was time to distribute and administer the drug, neither governments nor NGOs were willing to invest the necessary resources. In response, Merck decided to not only give away the drugs for free, it also set up the initial distribution, eventually creating a donation program. Since the program was developed, Merck has donated 2.5 billion tablets of MECTIZAN, with nearly 700 million treatments approved since 1987. To date, Merck has invested approximately $35 million dollars in direct financial support for the MECTIZAN Donation Program, in addition to donating $3.9 billion worth of tablets.[3] While this is an atypical case, the purpose is to show that companies are not always solely driven by profits.

For a video explaining Merck’s decision to invest in R&D for onchocerciasis and its MECTIZAN Donation Program, see:

For an economic evaluation on the distribution of MECTIZAN, see:

The purpose of this discussion is not to praise the pharmaceutical industry for its participation in alleviating problems in access to drugs in the developing world. Nor is it to defend it from critics, justifying it because of industry challenges. The purpose is to outline the realities that the industry faces, and to present a case for why the solution for delivering life-saving drugs to the most vulnerable populations must not lie solely in the philanthropy of the drug industry. Even if drug companies lower the prices of their drugs to make them more affordable, the poor still cannot pay for the necessary drugs. Therefore, the solution must be greater than the a few players in the global health arena, but encompass a long-term, sustainable partnership across all the players.

[1] The Pharmaceutical Research and Manufacturers of America (PhRMA), “Industry Profile 2009,” Available online at:

[2] “President Clinton, Pfizer and Mylan Announce New Agreements to Lower Prices of Medicines for Patients with Drug-Resistant HIV in Developing Countries,” Reuters, August 6, 2009. Available online at:

[3] Merck MECTIZAN Donation Program, Available online at:


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s