More than CSR
A Guest Blog by Alanna Shaikh, global health professional
Pharmaceutical companies want to make money. That’s understandable. They’re companies. It’s what they’re supposed to do. Historically, the obvious way to make money is buy low and sell high, which usually means selling to relatively wealthy people. The problem here, of course, is that poor people need new drugs just as much as rich people do. We need pharmaceutical companies to look at profit in new ways. There are, I think, two main ways to take that on.
We can push them to take a social approach to their work, and recognize that global health means everyone. The diseases of poor countries affect rich countries – and rich people – too. New drugs for poor people will benefit the wealthy by making the world a safer place, and by helping poor markets develop into richer markets. Glaxo Smith Kline is going that way; it now has an explicit social good approach to its business.
The social good approach is highly laudable. GSK has been doing some very innovative things, including information sharing, and patent pools. From almost all drug companies, we’ve seen amazing impact from drug donations and corporate philanthropy, especially with regard to neglected tropical diseases.
My concern about promoting social responsibility in drug companies as a solution to encouraging new drugs for the developing world is that companies still have shareholders, no matter what their corporate philosophy may be. Shareholders can force changes in direction. No CSR focus is guaranteed to last forever; it’s just what the company is doing right now. In times of economic crisis, it is especially difficult for a major corporation to maintain a social mission. Long term market development is a hard sell to individual stockholders who may not even live to see that market realized.
Alternately, we can find a way for drug companies to make money off the poor, right now. This strikes me as the most sustainable approach. If there is one thing we know about multinational corporations, it’s that they will always want to make a profit. As long as the capitalist system endures, we can depend on the profit motive. In the long-term, research and development of drugs for the developing world is only going to happen if those drugs make a substantial profit for pharmaceutical companies in return.
The current state of global health presents an opportunity for a new kind of drug company to find those profits. We are shifting from a world of rich and poor countries to a world of rich and poor populations. At the same time, those populations have more and more health issues in common. Poor populations face chronic illness like diabetes, obesity, and heart disease even as infectious diseases we associate with impoverished populations spread to wealthy individuals. If unchecked, this is going to have a brutal impact on human health, and drug companies can be on the forefront of minimizing the impact while making respectable profits.
Several major multinational corporations have pioneered products intended to earn profits by selling to poor people. Look at Coca-cola, for example; North American and European sales are dwarfed by the rest of the world. And in 2008, 40% of Colgate-Palmolive’s profits came from “emerging markets.” Access to drugs that poor countries need is going to depend on bringing that model to pharmaceutical companies.
How could that happen? I don't have an obvious answer here, but I do have some guesses.
Like Colgate and Coca-Cola, it would need to involve rethinking pharmaceuticals as fast moving consumer goods - making a small profit on a lot of units -which actually works well for the diseases of poor people. That might mean that it takes longer to recoup R&D costs – no single splashy launch will earn it all back. But it is still profitable. That may also mean manufacturing more in the developing world, where costs are lower. China and India are the obvious first steps, but over time that may also mean manufacture in Africa and Latin America. This would mean that new drugs were of double benefit, as they’d also bring jobs.
That doesn’t mean that it’s an easy solution. If the pharmaceutical industry could make the shift on its own, it would have. Corporations, as previously discussed, exist to make money. They will need support from outside the private sector to make the shift, including innovative partnerships with government, academia, UN agencies, and NGOs, regulatory support, and international agreements.
One form of support would be more government subsidy of early stages of pharmaceutical research. More than half of all drugs from the US were developed with government research support in the early stages, often by public universities. Shifting that public money to support drugs for the disease of poor people would have a substantial impact. The new Obama administration Federal Research Center is one prime example of a promising public initiative.
This is an opportunity for the pharmaceutical industry. The division between diseases of the rich and diseases of the poor is eroding daily. Diabetes is a major problem in Mexico and Kenya. Florida now has indigenous dengue fever. The globalization of both infectious and chronic diseases is a major opportunity for the pharmaceutical industry to have major impact in improving global health and open up a whole new venue for profit. If it’s going to seize that opportunity, public sector support will need to be paired with a new kind of corporate leadership. Leadership with a new vision for how to make money, and the willingness to make the changes needed to prosper in this next context.