Skip to main content

Advertisement

SpringerLink
Log in

Strategic Corporate Social Responsibility and Orphan Drug Development: Insights from the US and the EU Biopharmaceutical Industry

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

In recent years, the biopharmaceutical industry has seen an increase in the development of so-called orphan drugs for the treatment of rare and neglected diseases. This increase has been spurred on by legislation in the United States, Europe, and elsewhere designed to promote orphan drug development. In this article, we examine the drivers of corporate social responsibility (CSR) activities in orphan drug markets and the extent to which biopharmaceutical firms engage in these activities with a strategic orientation. The unique context of orphan drugs constitutes a research opportunity to test the applicability of existing theoretical perspectives on CSR and strategic CSR. Using Schwartz and Carroll’s (Bus Ethics Q, 13(4):503–530, 2003) three-domain approach to CSR and the literature on strategic CSR as a theoretical background, we employ a combination of semi-structured interviews and a quantitative website content analysis to study practices of biopharmaceutical firms in the United States and European Union. Our findings show that both US- and EU-based companies engaged in orphan drugs development perceive their involvement as a responsible business activity beyond the economic dimension of CSR. However, for the majority of these companies their CSR activities do not qualify as strategic according to the criteria established in the literature. We also find significant differences between larger and smaller firms in their use of CSR. Based on these findings, we make several suggestions regarding orphan drug legislation and other measures that might help firms exploit strategic CSR benefits.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

Notes

  1. An excellent critique of the inconsistencies and ambiguities in Friedman’s perspective on CSR is provided by Thomas Carson (1993).

  2. To get a better idea of the orphan drug market, we also talked to main stakeholder groups including national and regional patient organizations [e.g., National Organization for Rare Diseases (US)], and the following French organizations—Eurordis, Alliance for Rare Diseases, Vaincre La Mucoviscidose (for cystic fibrosis), Association de l’osteogenese imparfaite (for osteogensis imperfecta), Association Le Goeland (for X fragile syndrome), and Association Française contre les myopathies (for muscular dystrophy). We also interviewed representatives of regulatory authorities including the French Mission des Medicaments Orphelins (Mission for Orphan Drugs), members of the French Direction of Hospitalization and Healthcare Organization (DHOS), and members of the French Health Authority, responsible for the price of medicines in France. Given limited space, we do not report the summaries of our interviews with the above-mentioned stakeholders.

  3. We report the firms’ profit margins in 2010.

  4. Abuse of legislation in this context refers to a technique known as “salami slicing” wherein a biopharmaceutical firm narrowly defines treatment groups for its orphan drugs and later adds new orphan designations for different indications of the drug. Thus, the same drug can be approved by the FDA to treat large populations of patients (>200,000), but still retain its orphan drug status and associated benefits, if each subsequent application receives its own designation.

References

  • Balotsky, E. R. (2008). Where strategy and ethics converge: Pharmaceutical industry pricing policy for medicare Part D beneficiaries. Journal of Business Ethics, 84, 75–88.

    Article  Google Scholar 

  • Basara, L. R., & Montagne, M. (1994). Searching for magic bullets: Orphan drugs, consumer activism, and pharmaceutical development. Binghamton, NY: Pharmaceutical Products Press (an imprint of The Haworth Press, Inc.).

    Google Scholar 

  • Berthon, P., Lane, N., Pitt, L., & Watson, R. T. (1998). The world wide web as an industrial marketing communication tool: Models for the identification and assessment of opportunities. Journal of Marketing Management, 14(7), 691–704.

    Article  Google Scholar 

  • Bowen, H. R. (1953). Social responsibilities of the businessman. New York: Harper.

    Google Scholar 

  • Burke, L., & Logsdon, J. M. (1996). How corporate social responsibility pays off. Long Range Planning, 29(4), 495–502.

    Article  Google Scholar 

  • Carroll, A. B. (1979). A three-dimensional conceptual model of corporate performance. The Academy of Management Review, 4(4), 497–505.

    Google Scholar 

  • Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), 39–48.

    Article  Google Scholar 

  • Carroll, A. B. (1999). Corporate social responsibility: Evolution of a definitional construct. Business & Society, 38(3), 268–295.

    Article  Google Scholar 

  • Carson, T. (1993). Friedman’s theory of corporate social responsibility. Business and Professional Ethics Journal, 12(1), 3–32.

    Article  Google Scholar 

  • Cheah, E. T., Chan, W. L., & Chieng, C. L. L. (2007). The corporate social responsibility of pharmaceutical product recalls: An empirical examination of US and UK markets. Journal of Business Ethics, 76, 427–449.

    Article  Google Scholar 

  • Cheung, R. Y., Cohen, J. C., & Illingworth, P. (2004). Orphan drug policies: Implications for the United States, Canada, and developing countries. Health Law Journal, 12, 183–200.

    Google Scholar 

  • Coupland, C. (2005). Corporate social responsibility as argument on the Web. Journal of Business Ethics, 62(4), 355–366.

    Article  Google Scholar 

  • Davis, K., & Blomstrom, R. L. (1975). Business and society: Environment and responsibility. New York: McGraw-Hill.

    Google Scholar 

  • Deeter-Schmelz, D. R., & Kennedy, K. N. (2002). An exploratory study of the internet as an industrial communication tool: Examining buyers’ perceptions. Industrial Marketing Management, 31(2), 145–154.

    Article  Google Scholar 

  • Drummond, M. F., Wilson, D. A., Kanavos, P., Ubel, P., & Rovira, J. (2007). Assessing the economic challenges posed by orphan drugs. International Journal of Technology Assessment in Health Care, 23(01), 36–42.

    Article  Google Scholar 

  • Field, M. J., & Boat, T. F. (2011). Rare diseases and orphan products: Accelerating research and development. Washington, DC: The National Academies Press.

    Google Scholar 

  • Flanagan, W., & Whiteman, G. (2006). “AIDS is not a business:” A study in global corporate responsibility—securing access to low-cost HIV medications. Journal of Business Ethics, 73(1), 65–75.

    Article  Google Scholar 

  • Freeman, S., & Cavusgil, S. T. (2007). Toward a typology of commitment states among managers of born-global firms: A study of accelerated internationalization. Journal of International Marketing, 15(4), 1–40.

    Article  Google Scholar 

  • Friedman, M. (1970). The social responsibility of business is to increase its profits. The New York Times Magazine, 33, 122–126.

    Google Scholar 

  • Fuller, T., & Tian, Y. (2006). Social and symbolic capital and responsible entrepreneurship: An empirical investigation of SME narratives. Journal of Business Ethics, 67(3), 287–304.

    Article  Google Scholar 

  • Gelbmann, U. (2010). Establishing strategic CSR in SMEs: An Austrian CSR quality seal to substantiate the strategic CSR performance. Sustainable Development, 18(2), 90–98.

    Article  Google Scholar 

  • Griffin, J. J., & Mahon, J. F. (1997). The corporate social performance and corporate financial performance debate: Twenty-five years of incomparable research. Business & Society, 36(1), 5–31.

    Article  Google Scholar 

  • Guthrie, D., & Durand, R. (2008). Social issues in the study of management. European Management Review, 5(3), 137–149.

    Article  Google Scholar 

  • Hemphill, T. A. (2009). Extraordinary pricing of orphan drugs: Is it a socially responsible strategy for the US pharmaceutical industry? Journal of Business Ethics, 94(2), 225–242.

    Article  Google Scholar 

  • Huyard, C. (2009). How did uncommon disorders become “rare diseases”? History of a boundary object. Sociology of Health & Illness, 31(4), 463–477.

    Article  Google Scholar 

  • Kak, A. (2008). The eternal orphan. Express Pharma, August 31. Retrieved May 20, 2012 from http://www.expresspharmaonline.com/20080831/research01.shtml.

  • Kumar, R., Lamb, W. B., & Wokutch, R. E. (2002). The end of South African sanctions, institutional ownership, and the stock price performance of boycotted firms: Evidence on the impact of social/ethical investing. Business & Society, 41(2), 133–165.

    Article  Google Scholar 

  • Lazonick, W., & Tulum, Ö. (2011). US biopharmaceutical finance and the sustainability of the biotech business model. Research Policy, 40(9), 1170–1187.

    Article  Google Scholar 

  • Lee, T. W. (1999). Using qualitative methods in organizational research. Thousand Oaks, CA: Sage.

  • Lee, K., Bacchetti, P., & Sim, I. (2008). Publication of clinical trials supporting successful new drug applications: A literature analysis. PLoS Medicine, 5(9), 1348–1356.

    Google Scholar 

  • Leisinger, K. M. (2005). The corporate social responsibility of the pharmaceutical industry: Idealism without illusion and realism without resignation. Business Ethics Quarterly, 15(4), 577–594.

    Article  Google Scholar 

  • Lewellyn, P. G. (2002). Corporate reputation: Focusing the zeitgeist. Business & Society, 41(4), 446–455.

    Article  Google Scholar 

  • Logsdon, J. M., & Wood, D. J. (2002). Reputation as an emerging construct in the business and society field: An introduction. Business & Society, 41(4), 365–370.

    Article  Google Scholar 

  • Maeder, T. (2003). The orphan drug backlash. Scientific American, 288(5), 80–87.

    Article  Google Scholar 

  • Mahon, J. F. (2002). Corporate reputation research agenda using strategy and stakeholder literature. Business & Society, 41(4), 415–445.

    Article  Google Scholar 

  • Maignan, I., & Ralston, D. A. (2002). Corporate social responsibility in Europe and the US: Insights from businesses’ self-presentations. Journal of International Business Studies, 33(3), 497–514.

    Article  Google Scholar 

  • Maximiano, J. M. B. (2007). A strategic integral approach (SIA) to institutionalizing CSR. Corporate Social Responsibility and Environmental Management, 14(4), 231–242.

    Article  Google Scholar 

  • McWilliams, A., & Siegel, D. S. (2001). Corporate social responsibility: A theory of the firm perspective. The Academy of Management Review, 26(1), 117–127.

    Google Scholar 

  • McWilliams, A., & Siegel, D. S. (2011). Creating and capturing value: Strategic corporate social responsibility, resource-based theory, and sustainable competitive advantage. Journal of Management, 37(5), 1480–1495.

    Article  Google Scholar 

  • Melnikova, I. (2012). Rare diseases and orphan drugs. Nature Reviews, 11(4), 267–268.

    Google Scholar 

  • Miles, M. B., & Huberman, A. M. (1994). Qualitative data analysis: An expanded sourcebook. Thousand Oaks, CA: SAGE.

    Google Scholar 

  • Miles, M. P., Munilla, L. S., & Darroch, J. (2006). The role of strategic conversations with stakeholders in the formation of corporate social responsibility strategy. Journal of Business Ethics, 69(2), 195–205.

    Article  Google Scholar 

  • Moors, E. H. M., & Faber, J. (2007). Orphan drugs: Unmet societal need for non-profitable privately supplied new products. Research Policy, 36(3), 336–354.

    Article  Google Scholar 

  • Murray, K. B., & Vogel, C. M. (1997). Using a hierarchy-of-effects approach to gauge the effectiveness of corporate social responsibility to generate goodwill toward the firm: Financial versus nonfinancial impacts. Journal of Business Research, 38(2), 141–159.

    Article  Google Scholar 

  • Newman, D. (1992). The great Taxol giveaway. Multinational Monitor, 14(5). http://multinationalmonitor.org/hyper/mm0592.html#taxol. Accessed Sept 20, 2012.

  • Nussbaum, A. K. (2009). Ethical corporate social responsibility (CSR) and the pharmaceutical industry: A happy couple? Journal of Medical Marketing, 9(1), 67–76.

    Article  Google Scholar 

  • O’Riordan, L., & Fairbrass, J. (2008). Corporate social responsibility (CSR): Models and theories in stakeholder dialogue. Journal of Business Ethics, 83(4), 745–758.

    Article  Google Scholar 

  • Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and financial performance: A meta-analysis. Organization Studies, 24(3), 403–441.

    Article  Google Scholar 

  • Pfeffer, J. (1981). Management as symbolic action: The creation and maintenance of organizational paradigms. In L. L. Cummings & B. M. Staw (Eds.), Research in organizational behavior (Vol. 3, pp. 1–52). Greenwich, CT: JAI Press.

    Google Scholar 

  • Porter, M. E., & Kramer, M. R. (2006). Strategy and society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, 84(12), 78–92.

    Google Scholar 

  • Raber, L. R. (2006). Drugs for rare diseases: Patient advocate finds orphan drugs are key to pharma's future. Chemical and Engineering News, June 19. Retrieved from http://pubs.acs.org/cen/pharma/8425meyers.html. Accessed Sept 20, 2012.

  • Ramachandran, V. (2011). Strategic corporate social responsibility: A “dynamic capabilities” perspective. Corporate Social Responsibility and Environmental Management, 18(5), 285–293.

    Article  Google Scholar 

  • Rinaldi, A. (2005). Adopting an orphan. EMBO Reports, 6(6), 507–510.

    Article  Google Scholar 

  • Rindova, V. P., & Fombrun, C. J. (1999). Constructing competitive advantage: The role of firm-constituent interactions. Strategic Management Journal, 20(8), 691–710.

    Article  Google Scholar 

  • Rzakhanov, Z. (2008). Regulatory policy, value of knowledge assets and innovation strategy: The case of the Orphan Drug Act. Research Policy, 37(4), 673–689.

    Article  Google Scholar 

  • Schaefer, A. (2004). Corporate sustainability—integrating environmental and social concerns? Corporate Social Responsibility and Environmental Management, 11(4), 179–187.

    Article  Google Scholar 

  • Schwartz, M. S., & Carroll, A. B. (2003). Corporate social responsibility: A three-domain approach. Business Ethics Quarterly, 13(4), 503–530.

    Article  Google Scholar 

  • Siegel, D. S., & Vitaliano, D. F. (2007). An empirical analysis of the strategic use of corporate social responsibility. Journal of Economics & Management Strategy, 16(3), 773–792.

    Article  Google Scholar 

  • Sirsly, C.A. T., & Lamertz, K. (2008). When does a corporate social responsibility initiative provide a first-mover advantage? Business & Society, 47(3), 343–369.

    Article  Google Scholar 

  • Spence, L. J., Schmidpeter, R., & Habisch, A. (2003). Assessing social capital: Small and medium sized enterprises in Germany and the UK. Journal of Business Ethics, 47(1), 17–29.

    Article  Google Scholar 

  • Stolk, P., Willemen, M., & Leufkens, H. G. (2005). Rare essentials? Drugs for rare diseases on the essential medicines list. A discussion paper prepared for the WHO expert committee on the selection and use of essential medicines (pp. 1–22). Utrecht Institute for Pharmaceutical Sciences (UIPS), The Netherlands.

  • Swanson, D. L. (1995). Addressing a theoretical problem by reorienting the corporate social performance model. The Academy of Management Review, 20(1), 43–64.

    Google Scholar 

  • Vachani, S., & Smith, N. C. (2004). Socially responsible pricing: Lessons from the pricing of AIDS drugs in developing countries. California Management Review, 47(1), 117–144.

    Article  Google Scholar 

  • Waddock, S. A., & Graves, S. B. (1997). The corporate social performance-financial performance link. Strategic Management Journal, 18(4), 303–319.

    Article  Google Scholar 

  • Wartick, S. L., & Cochran, P. L. (1985). The evolution of the corporate social performance model. The Academy of Management Review, 10(4), 758–769.

    Google Scholar 

  • Wästfelt, M., Fadeel, B., & Henter, J. I. (2006). A journey of hope: Lessons learned from studies on rare diseases and orphan drugs. Journal of Internal Medicine, 260(1), 1–10.

    Article  Google Scholar 

  • Wizemann, T., Robinson, S., & Giffin, R. (2009). Breakthrough business models: Drug development for rare and neglected diseases and individualized therapies: Workshop summary. Washington, DC: The National Academies Press.

    Google Scholar 

  • Wood, D. J. (1991). Corporate social performance revisited. The Academy of Management Review, 16(4), 691–718.

    Google Scholar 

  • Yin, W. (2008). Market incentives and pharmaceutical innovation. Journal of Health Economics, 27(4), 1060–1077.

    Article  Google Scholar 

  • Yin, W. (2009). R&D policy, agency costs and innovation in personalized medicine. Journal of health economics, 28(5), 950–962.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Management, Virginia Tech, 2007 Pamplin Hall, Blacksburg, VA, 24061, USA

    Olga Bruyaka, Hanko K. Zeitzmann, Richard E. Wokutch & Pooja Thakur

  2. Department of Marketing, Inseec Business School, 21, Rue Alsace Lorraine, 69001, Lyon, France

    Isabelle Chalamon

Authors
  1. Olga Bruyaka
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Hanko K. Zeitzmann
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Isabelle Chalamon
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Richard E. Wokutch
    View author publications

    You can also search for this author in PubMed Google Scholar

  5. Pooja Thakur
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Richard E. Wokutch.

Appendix

Appendix

Interview Guide

Part 1: Personal Involvement in Orphan Drug Development

  1. 1.

    Please, describe your position/occupation at your organization. What is your involvement with orphan drug development? How long have you been with the company?

  2. 2.

    Why are you involved in orphan drug development?

Part 2: Company

  1. 3.

    What explains your company’s involvement in orphan drugs development?

    1. a.

      Expectations of superior profits?

    2. b.

      Moral and/or charitable motives?

    3. c.

      How important is the Orphan Drug Act in your considerations to pursue orphan drug development?

  2. 4.

    How is orphan drug development organized in your company?

    1. a.

      How is it different from R&D of traditional drugs?

    2. b.

      Who do you collaborate with in your orphan drug research?

    3. c.

      What is the nature of your interaction with patient associations?

    4. d.

      What is the nature of your interactions (if any) with other pharmaceutical companies regarding orphan drugs?

    5. e.

      What is the nature of your interactions with the FDA?

    6. f.

      How do you choose projects to pursue?

    7. g.

      Where do you get ideas about what projects to look at?

    8. h.

      How and where do you conduct clinical trials on orphan drugs? How different are clinical trials for orphan drugs versus traditional drugs?

  3. 5.

    What would you say is the biggest administrative/bureaucratic hurdle in orphan drug development?

  4. 6.

    Has your company ever undertaken the development of a drug that qualified for orphan drug designation? Would this drug have been developed without the Orphan Drug Act? Was this drug ultimately profitable to the company?

  5. 7.

    Are there benefits other than economic associated with orphan drug development? Which ones? Does your company get these benefits?

Part 3: Industry & Legislation & International

  1. 8.

    How would you evaluate economic potential of orphan drug development? Is it a lucrative activity?

  2. 9.

    Are there many competitors/pharmaceutical companies involved in orphan drug development?

  3. 10.

    How would you evaluate orphan drug development relative to a firm’s corporate social responsibility? Do you think pharmaceutical companies in general, and your company in particular, have moral responsibility to develop drugs for rare diseases even if their economic potential is uncertain?

  4. 11.

    In your opinion, what are current and emerging trends in orphan drug development in the US?

  5. 12.

    If you could change some policy, what regulation would you alter? OR If some components of the Orphan Drug Law could be changed to better promote orphan drug development what would you recommend?

  6. 13.

    How are they different from the conditions of orphan drug development in Europe?

Rights and permissions

Reprints and permissions

About this article

Cite this article

Bruyaka, O., Zeitzmann, H.K., Chalamon, I. et al. Strategic Corporate Social Responsibility and Orphan Drug Development: Insights from the US and the EU Biopharmaceutical Industry. J Bus Ethics 117, 45–65 (2013). https://doi.org/10.1007/s10551-012-1496-y

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-012-1496-y

Keywords

Search

Navigation