“Clinical Trials” of CSR Showing Promising Results for Big Pharma
With healthcare costs rising rapidly, biotech companies are being pegged as the “bad guy” and are facing pressure to reduce drug prices and thus their profits. As a student interested in both biotech and CSR, I wonder where biotech companies fall within the realm of CSR and whether they should be doing more. While some companies focus on “lifestyle” drugs that many argue are not helping society, others are focusing their research on filling unmet needs to save lives, e.g. Gilead on AIDS and Genentech on cancer.
One question I find myself asking is whether it is the responsibility of biotech companies to continue R&D of drug candidates that do not promise financial returns even if they promise to save lives.
Today, the average cost to take a drug to market, including R&D and clinical trials, is in excess of $1.2 billion. If we expect biotech companies to continue to invest in R&D, then we can hardly blame them for not commercializing drugs that won’t yield any financial reward.
However, a few firms such as Roche, Sanofi Aventis, and Novartis, are starting to form partnerships with nonprofits such as the Institute for OneWorld Health to develop drugs for neglected diseases in the developing world. This is a smart strategic move for a couple of reasons.
First, these firms are opening up their proprietary compound libraries for nonprofits to screen for drugs that could yield treatments for diseases like diarrheal disease and malaria. Once molecules are identified, the nonprofit then takes on the responsibility of further research, clinical trials, and commercialization. This provides a viable path for off-patent drugs and idle intellectual property.
Second, it lessens the risk associated with drug R&D, as these partnerships bring in philanthropic money. The Gates Foundation, for example, has sponsored at least $42.6 million in research for malaria.
Finally, these partnerships are helping to rebuild the reputation of the industry and increase employee morale for those who entered biotech to make a difference.
As the blockbuster business model at firms is threatened, strategic partnerships will help firms evolve. I believe the future leaders in this industry will have to differentiate themselves and prove their value to society and CSR is one way to do this.