CSR management

The allegations

The controversy surrounding pharma is manifold, relating to drugs trials, political lobbying, pricing, patents and access to drugs not to mention research and development. On October 31 this year, Consumers International, the global confederation of consumer organisations, published a report – Drugs, Doctors and Dinners (see News A) – on the sales techniques (free motorbikes, not pens) pharmaceutical companies allegedly use in the developing world to encourage doctors to prescribe their products.

Pharma’s most recent PR casualty was Novartis after it tried, and failed, to put legal pressure on India to change its patenting laws to include incremental improvements as patentable. Critics argue that the move was an attempt to deny vital medicines to patients who could not afford to pay – an increasingly common accusation leveled at an industry whose profits run into the billions.

The issue of access to medicines is arguably the most pressing corporate responsibility issue facing the pharmaceutical industry today. International medical charity Médecins Sans Frontières reported in 2001 that while people in developing countries make up about 80% of the population, they only account for 20% of medicine sales worldwide. The same year 39 pharmaceutical companies notoriously filed a lawsuit against Nelson Mandela’s South African government over the enactment of a law that allowed generic drugs to be imported in an effort to address the HIV/Aids pandemic. Global outrage ensued and they were subsequently forced to drop the case, which the CEO of GlaxoSmithKline (GSK) – one of the companies involved – admits was a “public relations disaster”.

In another high profile scandal, Pfizer was alleged to have conducted illegal drugs trials on Nigerian children during the 1996 meningitis outbreak. Pfizer lacks written authority from the parents and was accused of forging local authority permission for the trial. A case against Pfizer was thrown out of US courts in 2005, only for an illusive Nigerian report to have emerged last year accusing Pfizer of violating international law.

The defence

Pharmaceutical companies are not charitable foundations. Research is expensive and competition fierce, GSK notes that the dilemma is to find ways to meet global healthcare challenges while remaining competitive and profitable. In pharma’s defence, a 2005 PriceWaterhouseCoopers report declares that what is being expected of the pharmaceutical industry “is a call for action far beyond the mandate of the ordinary profit-making company”.

And yet to various degrees, the industry is responding. GSK supports preferential pricing arrangements for developing countries and champions voluntary licensing agreements, whereby generic companies are given the rights to produce patented drugs. The company also works with NGOs and international bodies to research and produce vaccines and treatments for diseases that primarily affect developing countries, such as malaria, TB and HIV/Aids – the top three WHO priority diseases.

The accusations against Novartis following the lawsuit in India are laid at the door of a company that claims to provide the contested drug to 99% of patients for free, and who was ranked the healthcare sector leader in the 2006 Dow Jones Sustainability Index.

While the decision to take legal action against the Indian government was arguably a lesson in public relations Novartis didn’t need to learn, it does not necessarily make the company socially irresponsible. Pfizer meanwhile maintains that they had “verbal consent” from the parents and were merely acting altruistically in a bid to save lives.

The verdict

As contentious industries go, the pharmaceutical business is a moral minefield. Charged with reconciling the dual aims of saving lives and making a profit, pharma doesn’t exactly have it easy when it comes to being seen as socially responsible. While the industry has undoubtedly made some mistakes, the ultimate defence is that if pharma did not charge high prices, there would be no incentive to research new medicines. But, as some of the examples detailed here show, this is not a black and white issue. Progress is still patchy, but companies are starting to take responsibility where they can and in some cases are making a real and positive difference.