Pharmaceutical Companies and Supply of Essential Drugs to Least Developed Countries - Assignment Example

Pharmaceutical companies and the supply of essential drugs to least developed countries (LDCs) – GlaxoSmithCline in South Africa Executive Summary The success of businesses worldwide is commonly related to their profitability. However, in certain sectors a different approach needs to be used. Reference is made, for example, to the pharmaceutical industry where the effectiveness of a business is related to its potential to promote ethical behaviour. The specific issue is explored in this paper. Reference is made to a popular firm of the global pharmaceutical industry, GlaxoSmithCline, and its performance in promoting CSR in South Africa. The case of the firm’s practices in regard to the treatment of HIV/AIDS is used as an example for showing the level at which the firm is willing to promote ethics and to ignore the relevant effects on its profitability. The review of the firm’s practices in supporting the patients of HIV in South Africa has revealed the following facts: the firm has taken initiatives for promoting public health, or, else, public good, in the specific regions. However, the performance of the business in fully promoting CSR can be doubted, a view that it can be verified by the allegations that the firm has faced in the past for violating ethics. On the other hand, the measures that the firm took for supporting people in poor countries cannot be ignored. Thus, it could be concluded that the firm is willing to promote CSR but it could not achieve such target without making alterations in its CSR, as suggested below. Table of contents HIV/ AIDS in South Africa 4 GlaxoSmithKline in South Africa 5 Introduction 6 Theories and concepts 8 Business ethics theory 8 Common good theory 9 Policy, practices and initiatives 10 Conclusion and Recommendations 12 References 13 Appendices 15 HIV/ AIDS in South Africa The expansion of HIV/AIDS in South Africa is quite rapid. In the map in Figure 1 (Appendices) the infection from HIV globally is presented; through this map it is made clear that South Africa holds the first place, along with other African countries of the mid-Africa region, in regard to the infection from HIV. In South Africa the expansion of HIV seems to be related mostly to young girls who become victims of sexual exploitation by old men (BBC News 2013). The graph in Figure 2 (Appendices) presents the percentage of girls as compared to boys affected from HIV in Kenya; the difference between the two categories is clear. According to a report published in March of 2013 a percentage of about ‘25% school-girls in South Africa’ (BBC News 2013, par.1) has been infected by HIV/AIDS after suffering a sexual assault. The relevant research refers to young girls up to 14 years. In fact, in South Africa women are more exposed to the risk of HIV/AIDS than men: women in South Africa are infected by HIV/ AIDS at a percentage of 23.2% while for men the relevant percentage is significantly lower, about 18.8% (BBC News 2014, par.4). Today, about 1.5 million people in South Africa are under treatment for HIV/AIDS; the ‘anti-retroviral (ARV) drugs’ (BBC News 2013, par.5) are the most common type of drugs involved in the treatment of HIV/AIDS in South Africa. The total percentage of local people who have infected with HIV/AIDS reaches the 10%, with trends for increase (BBC News 2013). In addition, the mortality of people who have infected by HIV/AIDS is quite high: in 2012 the number of people died from HIV/AIDS in South Africa reached the 50% of the country’s total deaths (BBC News 2013, par.14). The total number of people in South Africa who have ‘infected by HIV/AIDS reaches the 6,4 million’ (BBC News 2014, par.3). The Health Minister of South Africa has made a speech before of ‘the public of Carolina, a town in South Africa’ (BBC News 2013, par.8) and noted that the government has made every effort to ensure the availability across the country of ARV drugs; he has also explained that the limitation of the disease requires the introduction of severe punishment against the old men who exploit young girls and who hold the key part of responsibility for the expansion of HIV/AIDS in South Africa (BBC News 2013, par.10). In 2012 the government of South Africa signed a contract with pharmaceutical firms that specialize in ARV drugs; the relevant contract had a duration of two years, meaning that within 2014 the terms of cooperation between the government of South Africa and the pharmaceutical firms that have entered the market of South Africa will be reviewed and updated (BBC News 2014, par.11). In Figure 3 (Appendices) the percentage of population with access to ARV therapy in South Africa during 2011 is presented in comparison with the relevant figures of 2001; also, the data related to the access to ARV theory at global level are presented (Figure 3, Appendices). Through the above figures, the effectiveness of the efforts of the local government for securing the accessibility of local people to appropriate drugs cannot be doubted. GlaxoSmithKline in South Africa The role of GlaxoSmithCline in the control of HIV/AIDS in South Africa has been critical. In fact, in the particular region the firm has clearly proved its willingness to support public health and safety even if such practice would result to the limitation of organizational profits. For example, in 2003 the firm accepted to grant to four local pharmaceutical manufacturers a license for developing ARV drugs at low cost (BBC News 2003). These drugs would not have the brand name of the firm, i.e. they would be generic drugs, but they would have similar quality while their cost would be significantly lower (BBC News 2003). This decision was based on the claims of local people for lower prices, a demand to which the firm could not respond otherwise but only by issuing the license for production to local manufacturers (BBC News 2003). In July of 2009 the firm developed the ‘Positive Action for Children Fund’ (GSK 2009, par.1). Through this Fund $50-$80 million will be released in Sub-Saharan and South Africa within a period of 10 years (GSK 2009, par.1). The relevant funds will be used in the medical treatment of children. In the context of the above initiative, GSK also announced its intentions to develop strategic alliances with other pharmaceutical firms for fighting HIV/AIDS in South Africa and Sub-Saharan Africa (GSK 2009). In November of 2009 the firm announced a reduction of prices in its products related to HIV/AIDS; reference was made specifically to poor nations (Qudsiva 2009). In addition, it was announced that part of the firm’s profits in poor nations, about a percentage of 20% would be used by the firm for ‘the improvement of health infrastructure in those countries’ (Qudsiva 2009, par.7). Introduction The rapid expansion of HIV/AIDS in South Africa is considered as one of the country’s major problems. Local government has made extensive efforts to secure the access of patients to the drugs required; in this context the involvement of pharmaceutical firms in the provision of ARV drugs to people in South Africa is regulated through an agreement signed between the government of South Africa and these firms’ authorized representatives (BBC News 2014). In general, the control over HIV/AIDS in South Africa is difficult to be achieved mostly because of the following reason: the governmental practices for addressing the problem are not carefully designed; although drugs are secured for helping patients to survive the measures taken for preventing infection are quite limited. This view is verified through the following fact: in 2013 the Health Minister of South Africa admitted that the expansion of the specific disease in South Africa is rapid and that the key reason for this phenomenon is the trend held among old men to exploit young girls who are then left pregnant and, usually, infected by HIV/AIDS (BBC 2013). In addition, the Health Minister explained that the existing framework for the limitation of these incidents is ineffective and that measures should be taken as an emergent priority; however, no reference is made to the type/ characteristics of these measures or to the date when these measures would be ready to be introduced. Rather, emphasis is given to the agreements developed between the local government and major pharmaceutical companies for securing the provision to patients across South Africa of drugs used in the treatment of HIV/AIDS. Current paper focuses on the activities in South Africa of a particular pharmaceutical company: GlaxoSmithCline. The particular firm is already well established in the global market; in South Africa also the presence of the firm is significant, as also analyzed earlier. However, concerns have been developed as to the alignment of the firm’s practices in South Africa with the rules of Corporate Social Responsibility. In practice, the review of the firm’s operations in South Africa has revealed the existence of events that can be considered as opposed to ethics. Two theories are used in this paper for discussing the specific issue: the business ethics theory and the common good theory, as applied in business. The relevant findings are evaluated by referring to the policies and initiatives that are in progress in South Africa for the control of HIV/AIDS. GlaxoSmithCline seems to emphasize on ethics in regard to all aspects of its operations; still, failures in applying the firm’s strategy, as aligned with ethics, have not been avoided. It is probably for this reason that the particular firm has been related to violation of ethics, even at low level, in South Africa. Theories and concepts Business ethics theory The business ethics theory is based on the idea that the activities of all businesses are controlled ‘as of their rights and their wrongs’ (Badiyani 2013, p.17). In regard to this issue it has been noted by Higgins (2010) that a business can respect market’s rules but its practices may be opposed to ethics, as related to right in general. Moreover, in the context of business operations it is often difficult to identify the violation of ethics (Masdoor 2011). In regard specifically to the pharmaceutical industry, the need of the industry’s firms to respect ethics can be significantly higher compared to other market sectors (Russell 2009). The above issue is also highlighted in the study of Cooper et al. (2007). In the above study emphasis is given on the increased responsibility of the firms and the individuals involved in the pharmaceutical industry for respecting ethics (Cooper et al. 2007). It is implied that for this industry’s firms violations of ethics could not be easily tolerated even if the relevant incidents have occurred by mistake. The alignment of business operations with ethics is one of the key priorities for managers in GlaxoSmithCline. The particular fact is highlighted in the firm’s CSR Report (2012). The above report includes an interesting plan for keeping sales high while securing the accessibility to products that cover basic health needs (Singh 2013). On the other hand, the following fact should be mentioned: GlaxoSmithCline has not managed to avoid failures in regard to the quality of its products. Due to such failures the firm has paid an amount of $3 million as a fine for ‘having violating the rules of ethical business conduct’ (Singh 2013, par.11). Complaints in regard to the firm’s failure to provide information for the ingredients of its products have been also appeared so far, leading the organization to review its CSR strategy (Singh 2013, par.11). In the CSR report of 2012 the firm’s CEO presents the key plan of the firm for promoting CSR: emphasis is given not just to innovation but also to the return of part of the benefits to customers and the promotion of transparency/ integrity (Figure 4). Common good theory The specific theory is based on the ‘Aristotelian tradition’ (Carriga and Mele 2004, p.62) and promotes the idea that ethical behaviour is related to the efforts for securing the good for the public, or, else, the common good. A business that aims to promote common good has to focus on specific practices, such as the provision of its products to consumers in a fairness way (Carriga and Mele 2004). For example, a firm can keep its prices low so that all consumers can have access to its products (Carriga and Mele 2004). The CSR reports of firms usually focus on the promotion of public good, as an effort to protect their market image; however, the protection of public good by a firm’s activities should be proved in practice and not just included in its CSR report (Velentzas and Bron 2010). Also, in any case, public good is necessarily related to virtue, meaning that public good cannot be pursued by employing non-ethical practices (Gardiner 2003). Even when a business strictly follows the rules related to business ethics it is still possible for this business to violate the moral law, an issue highlighted in the common good theory. In the case of GlaxoSmithCline the existence of such problem would be verified through the following fact: in the past, meaning in the pre-2001 period, the firm used to keep the price of his drugs standardized globally. This practice was also held in Africa. However, in 2001 NGOs and people brought the case before the local courts: the claim was related to the reduction of prices of drugs available in Africa, especially those drugs used in the treatment of HIV (BBC News 2001). The court decided in favour of people and NGOs and ordered the pharmaceutical firms involved in the treatment of HIV in Africa to reduce their prices (BBC News 2001). GlaxoSmithCline should adopt this practice earlier, before the issue is discussed before the Courts. At this point, i.e. in regard to its failure to show understanding for patients of HIV in Africa, the firm can be considered as having violated the moral law, as promoted by the virtue ethics theory. According to the above the reduction of the price of the firm’s products later, i.e. in 2003 and 2009, as explained earlier, cannot be considered as an indication of willingness for support public health but as an obligation of the firm, according to the relevant Court’s orders. At this point, the following fact should be highlighted: in 2001 the firm had adopted a unique strategy in regard to the pricing of its products in poor countries. In such countries, about 100 in total, ‘the drugs of the firm are sold at the cost level’ (Business Week 2007, par.2). Thus, by 2001 the firm has adopted a reduction of price strategy worldwide, not just in Africa where a Court decision has been developed accordingly. Recently, the firm announced its intention to invest a total of ‘$216m in Africa’ (Hirschler, 2014, par.1) for the improvement and the development of local drug manufacturing units, a fact that further indicates the firm’s willingness to promote common good. Policy, practices and initiatives HIV/AIDS is a disease that has infected an important part of the global population: according to a report published by the World Health Organization in 2013, the average number of patients of the above disease in 2012 ‘reached the 35.3 million’ (WHO 2013, par.1). South Africa represents a high part of the above figure; in fact, a percentage of 69% of total patients, as estimated at global basis, live in South Africa (WHO 2013, par.3). For this reason, the specific country has become a field for research for identifying the causes of HIV/AIDS and its potential treatment. Moreover, because of the expansion of the problem the funds invested by the government of South Africa in the prevention/ treatment of AIDS are quite high, reaching almost the ‘2% of GDP’ (United Nations 2001, par.5). However, the potentials of the local government to control the specific disease is limited, mostly because there are no mechanisms for checking whether the development of the relevant plans is fully aligned with ethics. Therefore, the involvement of NGOs in the control of the problem has been unavoidable. In South Africa the control of HIV/AIDS can be characterized as a challenging target. The country’s government has tried to secure the accessibility of local people to necessary drugs but it is clear that more action is required, especially in regard to the prevention of the above disease. A well-known international body, the Medecins Sans Frontieres cooperates with a local organization ‘the Treatment Action Campaign, TAC’ (Department for International Development, 2009, par.1), for promoting the rights of HIV/AIDS patients. It should be noted that TAC is considered as the most known organization in South Africa in the field of HIV/AIDS control (Department for International Development, 2009). The organizations mentioned above focus on the following issues: the provision of information to patients of HIV/AIDS in regard to the treatment available and the process required for acquiring the necessary drugs, the provision of psychological support to patients, especially in the case that the infection has been resulted because of a sexual assault and the organizing of events and programmes for informing people in urban and rural areas for the implications of HIV/AIDS and the ways in which an individual can be infected (Department for International Development, 2009). In 2012 an international conference was organized for assessing the level of expansion of HIV/AIDS especially as related to the violation of human rights (Pillay 2012). Through the material presented in the above conference it was made clear that the increase of HIV/AIDS cases worldwide is a phenomenon based on the continuous and severe violation of human rights: reference is made not only to poor countries but also to developed countries which present a similar trend in regard to the expansion of AIDS: in both areas HIV/AIDS has been related to sexual assaults against women, who are vulnerable and who cannot protect themselves (Pillay 2012). Conclusion and Recommendations The review of the practices of GlaxoSmithCline in South Africa has led to important findings: the firm has tried to secure public health, as verified by the reduction of the prices of its products and the provision of license to local manufacturers in regard to ARV drugs. Still, the relevant initiatives of the organization have been developed with a bit of delay. Reference is made especially to the Court decision, in 2001, that ordered a series of pharmaceutical firms to reduce the price of their products and to allow the production of generic drugs locally. In addition, the firm has been found to be involved in violations of business ethics, especially in regard to the quality of its products and to the provision of information of the materials used in the manufacturing of its drugs. In the above context, the performance of GlaxoSmithCline as of the promotion of CSR could be characterized as average; the willingness of the firm to support CSR and to respect ethics cannot be doubted but the means used by the firm to achieve the above targets have been proved ineffective. Under these terms, it is suggested to the organization to alternate its existing CSR framework at the following point: the targets set should be defined more clearly, using specific deadlines for the achievement of each one of them. Also, the means used for promoting CSR should be changed: instead of focusing on cooperation with competitors, i.e. on strategic alliances, the firm should use the following practice: a mechanism of control would be established for checking the realization of the firm’s CSR strategy as of each one of its phases. In this way, failures would be identified instantly while appropriate measures would be introduced with no delay, a fact that would protect the firm from major failures. At the same time, the collaboration with NGOs operating in the health sector should be increased; in this way, the firm’s managers would be able to identify the actual needs of their customers worldwide. 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Available at http://www.who.int/mediacentre/factsheets/fs360/en/ Zewdie, D. (2005). “The HIV/AIDS Epidemic in Africa: Implications for Development.” United Nations Commission on Population and Development. United Nations, New York, 5 April 2005, Available at http://www.un.org/en/development/desa/population/pdf/commission/2005/keynote/zewdie.pdf Appendices Figure 1 – HIV infection worldwide (source: Zewdie 2005, p.2) Figure 2 – HIV infection in Kenya, boys vs. girls (source: Zewdie 2005, p.4) Figure 3 – Percentage of access to ARV therapy in Africa, as compared to worldwide (source: WHO 2014, p.XX) Figure 4 – Creation of value in GSK (source: CSR report 2012, p.5) Read More