1 in 10 and Still Counting:  Communitarian Approach to Corporate Social Responsibility in Pharmaceutical Companies

by Cheyenne Ford

Pharmaceuticals have brought countless health benefits to developed and developing countries, such as the improvement of health through treatment and therapy. However, a pharmaceutical manufacturer’s responsibility beyond this has been constantly questioned as society expresses that they place profitability over human life and well- being. With the continuous criticism expressing the lack of concern for the communities they serve, pharmaceutical manufacturers are ultimately left alone in defining what their responsibility is as a corporation to the community and how this can be balanced with the obligations they have to shareholders. Specifically, the responsibility to society is known as corporate social responsibility, a term that has yet to be adequately defined by the pharmaceutical industry.

In my paper, I will attempt to clarify the obligations and or responsibilities pharmaceutical manufacturers have to promote the general welfare of society. Furthermore, I will provide a detailed outline of the process manufacturers go through when pricing a medication as well as why this process through a communitarian perspective is unreliable because corporations have a social responsibility that should hold human life and well- being over corporate profitability. The definition I will utilize in my paper for corporate social responsibility (CSR) is one provided by Klaus M. Leisinger that states at a minimum CSR is the provision of products or services in a fair quality, compliance with laws and regulations, profit- making, and wise strategic decisions. However, corporations should do more than the minimum, such as being responsible for legitimate concerns and fulfilling societal expectations as much as possible. 

In recent years, society has expected the pharmaceutical industry to be more “socially responsible” to meet its responsibilities toward society. However, what corporate social responsibility is has yet to be defined due to a wide pluralism of values, resulting in many definitions of the term. Nevertheless, pharmaceutical companies do have a responsibility to society that is described by Klaus M. Leisinger in his article titled, “The Corporate Social

Responsibility of the Pharmaceutical Industry: Idealism Without Illusion and Realism Without Resignation.”[i] In principle, the term describes corporate social responsibility as the idea of a “social contract.” Within this contract, a “business enterprise has a responsibility not just to their shareholders but also other stakeholders, such as individuals, groups, and society as a whole, including future generations.”[ii]

The first responsibility of any pharmaceutical company that Leisinger highlights is to inform itself about its impact on society’s various needs and goals.[iii] The pharmaceutical industry’s other remaining social responsibilities fall within other sectors, encompassing responsibilities differing in degrees of obligations. The distinction of sectors can be drawn among what is: required of business by society (the “must do” dimension), expected of business by society (the “ought to do” dimension), and desired of business by society (the “can do” dimension).

What is required of business by society, also known as the “must do” dimension encompasses the basic responsibilities of any pharmaceutical corporation. These responsibilities include the provision of products or services in good quality and at a fair price, compliance with laws and regulations, employment at fair wages with decent working conditions, profit making, and wise strategic decisions.[iv] The compliance with this dimension is the minimum standard necessary for a corporation’s sustainable existence within the industry of medicine.

The second distinction also known as the “ought to do dimension” comprises legal obligations. Such obligations include avoiding questionable practices, being fair, and responsive to legitimate concerns of fair- minded stakeholders.[v] The social responsibility of the pharmaceutical industry explained in this dimension is covered by the ten principles of the United Nations Global Compact, that addresses corporate sustainability through a principled approach to doing business with a value system. For the UN Global Compact this means operating in ways, that at a minimum meet fundamental responsibilities in the areas of human rights, labor, environment, and anti- corruption.[vi] With the incorporation of these ten principles within a corporation’s strategies, policies, and procedure, the UN Global Contact contends that companies will not only uphold their basic responsibility to people but also have long term success.

Though this dimension’s responsibilities or duties are less binding than the ones mentioned prior in the first dimension, most of society, as well as large enterprises regard these as “good corporate citizenship.” Corporate citizenship involves the social responsibilities of businesses to the extent to which they meet legal, ethical, and economics responsibilities, as established by shareholders.[vii] Fundamentally, the goal is not only to produce a higher quality of life for the communities that surround the corporation but also maintain profitability for shareholders. While all businesses have some form of ethical and legal responsibilities, most if not all establish a strong belief in corporate citizenship. The commitment to this responsibility proves a business’s dedication to ethical behavior through the balancing of their responsibility to shareholders and the needs of the community they serve.

The third and final distinction that encompasses the social responsibilities of the pharmaceutical industry, is the “can do” dimension. This dimension lays out what is desired of business by society. The fulfillment of this dimension includes the commitment to corporate philanthropy, community neighborhood programs, volunteering, and donating.[viii] As most

pharmaceutical corporations fulfill this commitment to a certain extent, it does not meet all of the needs of the community the industry serves.

One of the most important needs that is not fulfilled by the pharmaceutical industry is the easy and fair access to medicine. According to organizers of the third International Conference on Improving Use of Medicines (ICIUM), “two billion people are unable to access essential drugs, and the high cost of drugs pushes 150 million people below the poverty line each year.”[ix] Furthermore, researchers utilized data from the 2013 Prevention’s National Center for Health Statistics and found that 7.8% of adults admitted not taking medication as recommended because of high cost and nearly 1 in 10 American adults do not take their medication as prescribed because they cannot afford to.[x] Even then, when U.S. adults ask their doctors for a lower costing alternative the results are fairly the same.

Throughout recent years, pharmaceutical pricing has risen consistently and though the reason is not clear to the public, pharmaceutical manufacturers explain that it is due to research and development (R&D), a process that takes on average 10 to 15 years. For a drug to be approved and moved to shelves for consumer purchase, it has to go through numerous phases of development. Specifically, in cases of drugs, the Food and Drug Administration (FDA) is responsible for approving any drugs for public sale and require pharmaceutical manufacturers to follow a path of approval.

Prior to conducting clinical trials, pharmaceutical manufacturers have to submit an Investigational New Drug Application (IND).[xi] Current Federal law requires that every drug has an approved marketing application before it is transported or circulated across state lines. The FDA’s role in all of this begins when a drug’s manufacturer wants to test a new drug and its therapeutic potentiality on humans, after completing a screening for pharmacological activity and acute toxicity potential in animals.[xii]

The IND application has to contain specific information in three broad areas. These areas include animal pharmacology and toxicology studies, manufacturing information, and clinical protocols and investigator information.[xiii] Within the first area, a pharmaceutical company has to provide data to permit the assessment as to whether the drug is fairly safe for the initial testing on humans. The second area encompasses information pertaining to the composition and stability of the drug. This information is used as evidence to ensure that a company can sufficiently produce and supply the drug consistently during production. Finally, clinical protocols and investigator information are detailed protocols for future clinical studies to assess whether initial-  phase trials will expose potential subjects to unnecessary risk. This area also includes information on the qualification of the clinical investigators who oversee the administration of the drug to participants, the commitment to obtain informed consent from the research participants, review by an institutional review board (IRB), and a duty to adhere to the investigational new drug regulation.

Depending on what a pharmaceutical manufacturer is seeking, determines which IND application the company will submit, as there are three IND types.[xiv] The first type is submitted by a physician who both starts and conducts an investigation of an experimental drug. In this case, a physician might submit this IND type in order to propose studying an unapproved or approved drug for a new implication or in a new patient population. The second type, also known as the Emergency Use IND allows the FDA to approve an experimental drug in an emergency situation. This type also applies to patients who do not meet the preexisting study protocol or when a study protocol does not exist. Thirdly, a treatment IND application is submitted only when an experimental drug shows promising results in clinical testing for immediate or serious life- threatening conditions. Once the proper application is submitted with adequate information from the three areas mentioned prior, the pharmaceutical manufacturer must wait 30 days before initiating any clinical trials. During this time the FDA reviews the IND and either approves or disapproves an application.

If approved, the experimental drug is given legal status under the Federal Food, Drug, and Cosmetic Act to become a new drug subject to requirements of the drug regulatory system and may begin clinical trials. Also known as an interventional study, a clinical trial for the pharmaceutical industry involves giving participants drug therapies or treatment to study its effectiveness compared to preexisting ones. For testing, the experimental drug is administered to some patients while others are given a placebo, an inactive substance used as a control. In this context, a control is referred to anything that is, “used to be a standard of comparison for checking the results of a survey or experiment.”[xv] In all cases, clinical trials are overseen by a medical doctor.

During clinical trials, pharmaceutical manufacturers conduct timely tests explained by Tim Parker in the article, “8 Stages of New Drug Development” that are distributed in 4 phases.[xvi] During phase 1, trials test for safety. This includes processes such as reviewing the type of participants that will be involved, the scheduling of testing, the medication that will be used during this time, and length of the study. All of these factors must be carefully thought out, as the success of the study depends on it. Only after completing basic clinical trial protocol that was mentioned prior are healthy volunteers given the experimental drug to determine obvious side effects and how it is absorbed and excreted. Normally, in this phase, 20 to 80 participants participate.

The second phase determines if the drug works, and if so, how effective it is. Within this phase, pharmaceutical manufacturers are looking to see if the drug has a clinically significant outcome for the condition it is expected to treat. During this process, participants at random receive doses of the active drug while others receive a placebo. The number of participants that are involved in this phase range from a few dozen to sometimes more than 300.

The third phase addresses the issue of whether or not the experimental drug is better and more effective than currently available treatment. To accomplish this the FDA and the drug’s sponsor work together to design specific studies that are large in scope often involving tens of thousands of participants across the world. However, according to the FDA, most of the studies do not involve more than 3,000 participants. Because of the wide range of participants, the FDA and the drug’s sponsor often suggest that the drug is tested on different populations with different dosages, and in combination with other drugs.[xvii] These studies are often double- blind where neither the participants nor researchers are aware of who receives the active drug or the placebo in an attempt to eliminate bias if present. If the drug is found to be more beneficial for patients compared to current drug treatment and the side effects are manageable, a New Drug Application (NDA) is filed. 

The regulation and control of new drugs before U.S. commercialization in the United States has been based on the New Drug Application since 1938.[xviii] The NDA application is an attempt for drug sponsors to propose that the FDA approve a new pharmaceutical for sale and marketing within the U.S. The documentation required includes: results of clinical tests and studies, ingredients of the drug, how the drug reacts in the body, and how it is manufactured, processed and packaged. All of this information will then be reviewed by an FDA reviewer for possible approval.

The fourth and final stage a pharmaceutical manufacturer has to go through for a new drug development deals with the performance of more trials to study effects that might emerge once the drug is approved and reaches shelves for commercialization. If in fact, a side effect is reported in a significant number of consumers, a phase 4 study will be done to determine if the side effect is linked to the drug, the drug in combination with another, or with certain foods. This phase is done for assurance that the new drug is safe and reliable, and because of this, if a side effect is found that is linked to the drug, it will be removed from shelves.

According to the FDA, most drugs within the development stage do not end up on pharmacy shelves as any mistake within the clinical trials process jeopardizes its approval resulting in a loss of millions and even billions of dollars for pharmaceutical manufacturers.[xix] A report published in 2014 by the Tufts Center for the Study of Drug Development (CSDD) disclosed that the cost of developing a prescription drug that gains market approval costs $2.6 billion, a 145% increase, over the estimate the center made in 2003.[xx] Even then the study concludes that another $312 million is spent on post approval development. This development involves studies to test new indications, formulations, and dosage strengths that in all comes to $2.9 billion for the drugs life- cycle cost. 

Despite advances in the biomedical medicines, developing new drugs is still complex. According to PhRMA, because the development of new medicines as treatments are tailored to the uniqueness of individual patients, setbacks are inherent as the odds of success are low.[xxi] So low that just 12 percent of drugs entering into clinical trials ever make it to patients and thousands will not even pass the early discovery and pre- clinical stages. For this reason, pharmaceutical manufacturers say the steep rise in costs bring efficiency to pharmaceutical research and development.[xxii]

 

Because costs are high for pharmaceutical companies for the development of new drugs, some authors, such as Pedro Cuatrecsas blame maintaining profitability for shareholders as the reason why rather than research and development, a claim manufacturers make to explain costs.[xxiii] Within the article, “Drug Discovery in Jeopardy” Cuatrecasas argues that despite advances within the field of science, the flow of new drugs has slowed due to the responsibilities and obligations pharmaceutical manufacturers have to shareholders. Specifically, manufacturers maintain profitability by, “[m]arkedly increasing drug prices, increasing spending on advertising and promotion, direct-to- consumer advertising, and limiting safety studies with alternative drugs.”[xxiv]

When placing a higher value on profitability through the increase of drug prices, pharmaceutical corporations seem to put less emphasis on their public responsibility. Today, most research and development is done in for- profit corporations compared to nonprofit institutions. For Cuatrecsas this is problematic because most corporations’ top management do not understand the complexities of science and as a result constrain possible creativity and innovation.[xxv] Rather than allowing their research and development staff to pursue objectives, such as the discovery of new drugs, corporations limit their research to only profitable treatment, something that did not occur prior to the 1980’s in small drug companies due to their focus on contributing to the improvement of human health. Today’s pharmaceutical corporations are primarily based on economic benefit, such that profitability is not balanced with public responsibility, a problem society has grappled with for years.

Contributing to the improvement of human health has always been a goal as well as a responsibility of any pharmaceutical corporation. Even more so, the pharmaceutical industry has what Leisinger terms, “non-negotiable responsibilities.” These responsibilities “are to provide goods and services that effectively meet customer demands and that can be sold at prices that are competitive and in the best interest of the corporation.”[xxvi] As long as these responsibilities are done in accordance with the law, a corporation’s conduct is likely to be seen as responsible without question. Unfortunately, this narrow perception stems from the lack of understanding by pharmaceutical corporations when it comes to recognizing what their corporate social responsibility is.

The difficulty in defining corporate responsibility arises from the wide pluralism of values, resulting in various definitions. Despite this, corporations have a social responsibility to individuals, groups, and society as a whole including future generations that involve more than the basic goods and services that are provided in relation to improving human health. This is based on the idea of the “social contract” a pharmaceutical corporation has with not only their shareholders but also the society it serves. However, a corporation’s social responsibility cannot be defined without a consensus influenced by dialogue with relevant companies and individuals who affect or are affected by pharmaceutical corporation’s activities, such as overpricing. To address this argument, I will first utilize a communitarian perspective to highlight the importance of the common good. Secondly, I will incorporate the ideology of communitarianism in relation to pharmaceutical manufacturer’s corporate social responsibility. Finally, I will offer a compelling solution that is based on the idea that pharmaceutical corporation’s ethos should be based on the values of the population it intends to serve, a communitarian approach informed by Michael Walzer and Galvin H. Mooney.

Simply stated by Mooney, “[t]he focus of communitarianism is public life and the community.”[xxvii] Different from other philosophies, an individual is not a “free- floating atom”[xxviii] but rather a social being that is a member of a community, or several. Within this community, individuals focus on the common good and the well- being of those around them. Being a part of the community matters, and because of this unity between members, individuals form their identities. As Mooney highlights, “this involvement is not only out of self-interest, but also out of a sense of ‘community interest’, and the two merge.”[xxix] However, that is not to say individuals within these communities are homogenous. Individuals do have autonomy, but the notion of community as well as social autonomy is prevalent.

From a communitarians perspective, trust is important. Compared to individualistic societies where trust is less likely to occur, communitarians give priority to participation and cohesion, qualities that are highly favored and linked to the idea of justice and fairness. As Rawls stated in 1971 in his theory of justice, communitarians view justice and social values embedded within a society.[xxx] As communitarians often link the two ideas together, it reflects the value of the common good and the well- being of the community at large. 

How trust is built is through a sense of unity and “fellow feeling,” a term used by Hume to explain one’s emotional ability to identify with another.[xxxi] Furthermore, Hume emphasizes that our capacity to fellow feel causes us to contribute to one’s welfare when we encounter someone who is not only far removed from our own personal lives but also who is in an unfavorable circumstance. While this idea of fellow feeling is already reflected through society today, bringing attention to our ability to identify with each other can be a starting point for recognizing a corporation’s social responsibility. Though in the context of our ability to fellow feel, unity is used on a small scale, applying this idea through a communitarians perspective can be beneficial to pharmaceutical manufacturers.

Communitarianism is only good if the community it draws on is good. Applied to the pharmaceutical industry, a communitarian perspective emphasizes the many obligations other than the non- negotiable responsibilities mentioned by Leisinger when relevant to the common good. However, that is not to say that pharmaceutical corporations do not contribute to the common good of the community it serves. The goods and services that are provided by pharmaceutical manufacturers to meet the demands of customers ultimately create various values for society, such as medicines and therapies.

On the other hand, while the goods and services that pharmaceutical corporations provide do contribute to society as a whole, the overpricing of drugs does not benefit anyone except manufacturers and their shareholders. As Leisinger points out, “Being a successful pharmaceutical corporation therefore means not only being profitable but also raising the quality of life of sick people, avoiding costly hospitalization, and allowing people to go back to normal lives instead of being bedridden.”[xxxii] As pharmaceutical corporations believe that this is done effectively in the developed world, they tend to dismiss the needs and their responsibilities to those in developing countries.

Michael Kramer in his article titled, “Pharmaceuticals and the Developing World” discusses the shortcomings of the pharmaceutical industry. While developing countries have obtained substantial benefits from pharmaceuticals that are developed for rich countries, such as the U.S., little to no research is done on diseases that affect poorer countries, such as malaria.[xxxiii] Instead, research tends to focus on products that are best suited for rich countries where customers are known to be able to afford treatment. As for developing countries that do not have access to medicine due to costs, they are at the mercy of pharmaceutical manufacturers to donate. As one of the many important and recent issues of the pharmaceutical industry, lack of access is a huge part of social responsibility. Manufacturers should have a sense of fellow feeling for those who go without, and even so, those who do not benefit from the research and development of drug therapies.

As pharmaceuticals have brought immense health improvements to the public, defining social responsibility is still a problem as corporations tend to place their responsibility and obligations to shareholders over the community it serves. Delving into this idea deeper through a communitarian perspective Mooney within his article, “The Solution in Health Care” provides the key to a just society that properly deals with health problems. Within his argument, it is highlighted that there needs to be a clear recognition of where power lies in health care decision making and that power must be transferred to the community and society served by the health services.[xxxiv] This argument rests on the fact that there should be transparency to the public, but also there should be a goal to benefit those within the society. For communitarianism, a health care system should be based on the values of the population because the application of this is helping to build a more united society from the inside out through understanding societies values and need. This same line of thinking can easily be applied to pharmaceutical manufacturers as they have a social contract with the community they serve. Rather than owners of pharmaceutical companies controlling every decision, some decisions should be influenced by the thoughts of the community.

As Michael Walzer explains in his work, Spheres of Justice, “Human society is a distributive community.”[xxxv] What this entails is that everyone comes together to share, divide, and exchange. Using this idea and directly applying it to pharmaceutical manufacturers, one can see a discrepancy in the process of pharmaceutical commercialization. Once released to store shelves, consumers are able to purchase a new drug treatment of therapy, and in most cases, pay for a drug that is overpriced. They may question the price initially but if they do in fact rely on a certain drug to help with a non- communicable illness or disease, an illness or disease that unlike acute conditions, requires constant refills of a certain medication, the consumer has no other choice but to purchase it out of need. Yes, it is their decision to purchase the medication, but in light of this, a pharmaceutical corporation should price drugs at a reasonable price due to the business relying on reciprocity, the practice of exchanging things with others for some form of mutual benefit. Without consumers, pharmaceutical manufacturers will go out of business due to lack of profitability, therefore it would be worth giving thought to lowering prices so that both the industry and community can share, divide, and exchange in a manner that respects the social contract and responsibilities the pharmaceutical industry has with individuals, groups, society, and future generations.

While the overpricing of new drugs has been an issue for society more recently than ever due to the criticism of pharmaceutical corporations failing in their responsibilities to the public, a proposed solution is worth mentioning. I propose that without a consensus influenced by dialogue with relevant companies and individuals who affect or are affected by pharmaceutical corporation’s activities, the pharmaceutical industry will never know their corporate social responsibility. Because corporate responsibility includes the fulfilling of obligations to shareholders, it also involves the “enlightened willingness”[xxxvi] to cooperate with others who have something to contribute. Furthermore, dialogue between industry and community can result in effective and successful solutions that tackle the present problems and criticisms pharmaceutical manufacturers face.

Only when a corporation knows the entire spectrum of shareholder requirements and are sensitive to the demands of the community can they define their corporate social responsibility. When this is done correctly and openly a pharmaceutical manufacturer can make informed choices, be aware of any dilemmas that may arise, and be able to communicate effectively with both society and shareholders what they consider to be reasonable and why. With transparency, pharmaceutical manufacturers can reach a form of solidarity with the public but also be able to define their own responsibilities and obligations through the willingness to alter the ethos of the corporation from one that centers on profitability to one that is based on the values of the population it intends to serve- a communitarian informed approach.

One of the greatest intellectual challenges for a pharmaceutical manufacturer is coming up with a just definition of their own corporate social responsibility. However, companies alone cannot define corporate social responsibility without engaging in an intense dialogue with relevant stakeholder groups and individuals who are affected by the company’s decisions. As the pharmaceutical industry blames the process of research and development that does, in fact, require a substantial about of time and resources, the overpricing of drugs does not seem to justify the lack of obligations and responsibilities to the public. The failure to prioritize human life and well- being over profitability has resulted in the pharmaceutical industry being under heavy criticism for their failures and shortcomings. The pharmaceutical industry has failed to prioritize human life and well-being of the community over profitability of the corporation.

Nevertheless, pharmaceutical corporations do contribute to the common good, however this is done on a basic level. The minimum corporate social responsibility is the provision of products or services in a fair quality, compliance with laws and regulations, profit making, and wise strategic decisions. However, corporations should do more than just this and avoid questionable practice, be fair, responsible for legitimate concerns, and fulfill societal expectations as much as possible. The concept of responsibility implies that there are certain obligations that an individual and in this case a corporation is bound to, as well as certain rules of action they are bound to follow. In order to properly do this, a corporation has to be open to hearing the whole spectrum of shareholder and society demands in order to make an informed definition that justifies the obligations underlying their responsibility.

Pharmaceutical companies have an interest in society prospering as well as a responsibility to contribute to this goal. As the goals of the companies may differ from expectations of society, a communitarian approach will clearly define how pharmaceutical manufacturers should address the needs of the community as well as their own.

Communitarianism applied to this issue will not only help build a more united relationship between the corporation and community but also establish the underpinning values of the pharmaceutical industry, something that is not so clear to the society it serves. Adoption of a communitarian approach is not the only solution that can resolve this issue but with time, it is possible to decrease the overpricing of drugs, an issue that needs resolving if trust wants to be restored. 

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