Adopting orphan drugs
spurs social returns

It may be no surprise that pharmaceutical companies that are developing “orphan drugs” do so mainly for the business potential, albeit limited, of such drugs for rare diseases. But the companies also consider the effort as part of their corporate social responsibility, management researchers have found.

Olga Bruyaka
Olga Bruyaka studied the connection between pharmaceutical companies' orphan drug and social responsibility programs.

Scholars describe corporate social responsibility in terms of economic, legal, and ethical elements, says Olga Bruyaka, assistant professor of management. “The notion is that businesses have a responsibility to society to consider moral obligations and good corporate deeds simultaneously with the profit motive and compliance with government laws and regulations.”

Bruyaka, together with Isabelle Chalamon, of INSEEC Business School, and Virginia Tech researchers Hanko Zeitzmann, Richard Wokutch, and Pooja Thakur, co-authored a new study that explores how social responsibility factors drive orphan drug development. The study examines the extent to which firms take a strategic approach to social responsibility by integrating orphan drug development and social responsibility practices with core business activities to obtain both economic and non-economic benefits for the firm and its stakeholders.

Testing social responsibility theories

The social responsibility of firms in the pharmaceutical industry has been well studied, she says, but orphan drugs remain relatively unexplored. “They represent a good opportunity to test the applicability of theoretical perspectives on social responsibility,” she says, for a couple of reasons.

Firstly, orphan drugs — so called because “no one wants to 'adopt' or manufacture them on a large-scale basis because of weak economic incentives and their lack of commercial value” — raise intriguing questions about the social responsibilities of pharmaceutical firms with respect to rare diseases and the unmet medical needs of a minority, Bruyaka says.

Historically, those with rare diseases — affecting fewer than 200,000 people in the U.S. and 1 person out of 2,000 in Europe — had little hope of receiving appropriate treatment. But the 1983 Orphan Drug Act in the U.S. and similar laws passed in other countries in the 1990s offered financial incentives to pharmaceutical companies, which dramatically spurred work on such drugs, she says.

Secondly, Bruyaka says, orphan drug development is no longer seen as purely philanthropic, as a result of the legislative incentives and its potential as a path to technology innovations that can also lead to solutions for more common diseases.

“However, given the specific challenges and risks of developing such drugs (little or no knowledge about the disease, difficulty to diagnose the disease and identify the affected population, narrow market), developing treatment for rare diseases is not purely an economic activity either, she says. “Thus, it was unclear what motivates firms' involvement in orphan drug innovation.”

Many motivations for producing orphan drugs

In the study, Bruyaka and her co-investigators used qualitative and quantitative methods to analyze social responsibility practices of pharmaceutical firms in the U.S. and European Union. They conducted interviews with 20 managers of 9 drug companies and used publically available secondary data on social responsibility activities of other firms in the global pharmaceutical industry.

To examine the visibility of the companies' actions related to orphan drug development, the researchers undertook a quantitative study of 100 firms. “Using their websites, we obtained more detailed information on whether and how these firms communicate about their social responsibility actions in general and orphan drug development in particular.”

Chart of orphan drugs that are commonly developed

The findings show that economic motivations are clearly important, but they are not the only reasons firms get involved with orphan drugs, Bruyaka says. “All companies that we interviewed stressed that their entry into the orphan drug field was primarily motivated by the potential for technology breakthroughs and the business opportunity.

“But the majority also made it clear that, in order to successfully do business in the rare disease arena, a company needs to consider its ethical responsibilities. Smaller companies reflect this by explicitly stating their involvement in orphan drug development in their mission and vision statements and claim it to be an integral part of their organizational culture.”

Missed opportunity for building goodwill

The quantitative analysis of pharmaceutical firms' Internet communications, however, revealed that only a few mention their work on orphan drugs on their websites — though many of the websites discuss corporate social responsibility and the interviews showed that managers “plainly view” orphan drug development as a fundamental part of it.

Companies could better align their business activities with their social responsibility initiatives, or at least the communication of such efforts, to more fully reap the strategic benefits of the orphan drug work they already do, Bruyaka says. “The incremental costs for actually communicating what is ingrained in their culture are low and could lead to substantial benefits in terms of goodwill and public relations.”

The study also offers suggestions to policy makers, who should provide more support for orphan drug development, given the potential of new technological developments, Bruyaka says. Awards for excellence, for example, could be given to firms that make significant contributions. The government could also extend the exclusivity period for marketing of such drugs or treatments.

If firms can derive more strategic social responsibility benefits from developing orphan drugs, she says, these activities may grow, creating gains for patients, the firms, and society as a whole.

The study, "Strategic Corporate Social Responsibility and Orphan Drug Development: Insights from the U.S. and the EU Biopharmaceutical Industry,” has been published online in the Journal of Business Ethics.



Sources for table and timeline

  1. Kiran Meekings, Cory Williams, and John Arrowsmith, “Orphan Drug Development: An Economically Viable Strategy for Biopharma R&D,” Drug Discovery Today 17, no. 13/14 (2012): 660-664.
  2. Andrew Pollack, “Orphan Drug Law Spurs Debate,” New York Times, Apr. 30, 1990, http://www.nytimes.com/1990/04/30/business/orphan-drug-law-spurs-debate.html.
  3. Rashmi Shah, “Regulatory Framework for the Treatment of Orphan Diseases,” in Fabry Disease: Perspectives from 5 Years of FOS, ed. Atul Mehta et al. (Oxford: Oxford PharmaGenesis, 2006), http://www.ncbi.nlm.nih.gov/books/NBK11567.
  4. Aarti Sharma et al., “Orphan Drug: Development Trends and Strategies,” Journal of Pharmacy & BioAllied Sciences 2, no. 4 (2010): 290-299, http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2996062.
  5. Deborah Weinstein, “Orphan Drugs: Small is the New Big,” Medical Marketing & Media, Apr. 1, 2012, http://www.mmm-online.com/orphan-drugs-small-is-the-new-big/article/233445.
  6. Timothy Cote, et al., “Emergence of Orphan Drugs in the United States: A Quantitative Assessment of the First 25 Years,” Nature Reviews Drug Discovery 9, no. 7 (2010): 519-522, Academic Search Complete, EBSCOhost.

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