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Strategic Corporate Social Responsibility and Orphan DrugDevelopment: Insights from the US and the EUBiopharmaceutical Industry
Olga Bruyaka • Hanko K. Zeitzmann •
Isabelle Chalamon • Richard E. Wokutch •
Pooja Thakur
Received: 6 January 2012 / Accepted: 13 September 2012 / Published online: 27 September 2012
� Springer Science+Business Media Dordrecht 2012
Abstract In recent years, the biopharmaceutical industry
has seen an increase in the development of so-called
orphan drugs for the treatment of rare and neglected dis-
eases. This increase has been spurred on by legislation in
the United States, Europe, and elsewhere designed to
promote orphan drug development. In this article, we
examine the drivers of corporate social responsibility
(CSR) activities in orphan drug markets and the extent to
which biopharmaceutical firms engage in these activities
with a strategic orientation. The unique context of orphan
drugs constitutes a research opportunity to test the appli-
cability of existing theoretical perspectives on CSR and
strategic CSR. Using Schwartz and Carroll’s (Bus Ethics
Q, 13(4):503–530, 2003) three-domain approach to CSR
and the literature on strategic CSR as a theoretical back-
ground, we employ a combination of semi-structured
interviews and a quantitative website content analysis to
study practices of biopharmaceutical firms in the United
States and European Union. Our findings show that both
US- and EU-based companies engaged in orphan drugs
development perceive their involvement as a responsible
business activity beyond the economic dimension of CSR.
However, for the majority of these companies their CSR
activities do not qualify as strategic according to the cri-
teria established in the literature. We also find significant
differences between larger and smaller firms in their use of
CSR. Based on these findings, we make several suggestions
regarding orphan drug legislation and other measures that
might help firms exploit strategic CSR benefits.
Keywords Biopharmaceutical industry � Corporate social
responsibility (CSR) � European Union (EU) � Orphan
drugs � Rare diseases � Strategic CSR � United States (US)
Introduction
‘‘One for all and all for one,’’ the famous call for action
from Alexandre Duma’s novel The Three Musketeers, aptly
describes the social implications of developing orphan
drugs for the treatment of rare disorders—–life-threatening
or chronically debilitating diseases affecting fewer than
200,000 persons in the United States and 1 person out of
2,000 in Europe. These drugs are ‘‘orphaned’’ in the sense
that no one wanted to ‘‘adopt’’ or manufacture them on a
large-scale basis because of weak economic incentives and
their lack of commercial value (Wizemann et al. 2009).
Historically, patients suffering from rare diseases had little
hope of receiving appropriate treatment due to financial
considerations of developers of such treatments. The
enactment of the Orphan Drug Act (ODA) in the USA in
1983, and similar statutes subsequently in other countries
[Japan in 1993, Australia in 1997 and the European Union
(EU) in 1999], designed to overcome market failure,
O. Bruyaka � H. K. Zeitzmann � R. E. Wokutch (&) � P. Thakur
Department of Management, Virginia Tech, 2007 Pamplin Hall,
Blacksburg, VA 24061, USA
e-mail: [email protected]
O. Bruyaka
e-mail: [email protected]
H. K. Zeitzmann
e-mail: [email protected]
P. Thakur
e-mail: [email protected]
I. Chalamon
Department of Marketing, Inseec Business School,
21, Rue Alsace Lorraine, 69001 Lyon, France
e-mail: [email protected]
123
J Bus Ethics (2013) 117:45–65
DOI 10.1007/s10551-012-1496-y
Page 2
offered financial incentives to pharmaceutical companies
and brought hope to patients with rare diseases. Thus, the
broader society (the ‘‘all’’) started taking care of patients
suffering from rare diseases (the ‘‘one’’). At the same time
developing orphan drugs represents a path for developing
breakthrough innovations that not only allow treating rare
diseases (affecting the ‘‘one’’) but can also lead to medic-
inal solutions for more common diseases (impacting the
‘‘all’’) (Maeder 2003). Supplementing the economic
incentives, patient organizations have raised questions
about the ethical responsibilities of pharmaceutical firms
and society as a whole to help patients with rare diseases
who are in need of special assistance.
Although corporate social responsibility (CSR) related
to the pharmaceutical industry has received quite sub-
stantial attention in academic publications (e.g., Balotsky
2008; Cheah et al. 2007; Flanagan and Whiteman 2006;
Leisinger 2005; Nussbaum 2009; O’Riordan and Fairbrass
2008; Vachani and Smith 2004), the niche market of
orphan drugs remains relatively unexplored [one exception
is Hemphill’s (2009) analysis of CSR considerations
regarding pricing issues]. We suggest CSR implications of
biopharmaceutical firms’ orphan drug activities merit fur-
ther investigation for the following reasons: On the one
hand, the issue of orphan drugs raises intriguing questions
about social responsibilities of biopharmaceutical firms
with respect to rare diseases especially as these represent a
minority of unmet medical needs. According to recent
research, only 6–7 % of the population in developed
countries is affected by rare diseases (Melnikova 2012). Of
this small affected population only 10 % of the patients
have treatment available for their rare diseases (Field and
Boat 2011). And even though the effects of these diseases
can be quite devastating to the victims, these patients often
have a much harder time getting their voices heard than
those suffering from more common and frequently occur-
ring diseases. Thus, problems such as high prices and
limited patient access to life-saving treatments become
magnified in the context of orphan drugs.
On the other hand, because of legislative incentives to
develop orphan drugs this activity is no longer seen as
purely philanthropic. However, given specific challenges
and risks of developing orphan drugs as compared to
common drugs (e.g., little or no knowledge about the dis-
ease, difficulty to diagnose the disease and identify the
affected population, narrow market), development of
treatment for rare diseases is not purely an economic
activity either. Thus, it is unclear what motivates firms’
involvement in orphan drug innovation.
Our research goal is to study:
1. What drives CSR activity in orphan drug development,
and
2. The extent to which US and European companies
strategically use their CSR activities in this arena.
We address the above questions by drawing on the
three-domain model of CSR developed by Schwartz and
Carroll (2003) and by integrating the concept of strategic
CSR (Burke and Logsdon 1996). Schwartz and Carroll’s
(2003) model presents the economic, legal, and ethical
domains of responsibility in a Venn diagram highlighting
the overlapping nature of the domains and the resultant
creation of seven categories in which CSR may be illus-
trated, conceptualized, and analyzed. Strategic CSR has
been defined as any ‘‘responsible’’ activity regardless of
motive (i.e., to serve society at the cost of profits or to
serve the bottom line) that potentially allows a firm to
achieve a competitive advantage (McWilliams and Siegel
2011). Existing literature has developed three criteria—
centrality, specificity, and visibility—that help one to
evaluate a firm’s strategic use of CSR (Burke and Logs-
don 1996). The first criterion is centrality which looks at
how closely aligned CSR activities are with the overall
strategy of the firm. The second is specificity which refers
to the direct benefits that accrue to the firm as compared
to those that accrue to the society. Finally, visibility is
used to gauge the enhancement of the firm’s reputation as
a result of the CSR activities. While Schwartz and Car-
roll’s (2003) model is mainly concerned with what moti-
vates a firm’s actions, the concept of strategic CSR
disregards the relative emphasis on economic, legal, and
ethical motivations for undertaking CSR and instead
focuses on how the firm can identify and implement CSR
activities that utilize its core competencies to achieve
competitive advantage while at the same time benefitting
society (Burke and Logsdon 1996; Porter and Kramer
2006). Thus, we argue that the two theoretical approaches
are complementary. We suggest that in the orphan drug
arena when a firm’s activities are motivated simulta-
neously by the bottom line, the legal system, and ethical
principles they can be considered as strategic CSR activ-
ities based on the criteria of centrality, specificity, and
visibility (Burke and Logsdon 1996).
We studied our research questions by using both quali-
tative and quantitative methods. First, we conducted a
series of interviews (we interviewed 20 managers from 9
biopharmaceutical companies in the US and the EU). Data
collected from the interviews were complemented with
publically available secondary data (i.e., official video
presentations of firms’ managers, press releases, academic
and industry publications, etc.) on CSR activities of other
firms in the biopharmaceutical industry. The semi-struc-
tured interviews allowed us to ascertain economic, legal,
and ethical domains of biopharmaceutical companies’ CSR
activities in orphan drug development and to identify the
46 O. Bruyaka et al.
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extent of the alignment of these activities with the com-
panies’ core strategy (principles of centrality and speci-
ficity). Second, to illustrate the principle of visibility of the
companies’ actions related to orphan drug development, we
complemented our interviews with a quantitative study of
100 biopharmaceutical firms. Using their websites, we
obtained more detailed information on whether and how
these firms communicate about their CSR actions in gen-
eral and orphan drug development in particular.
Our study makes several contributions to CSR research
and practice. First, it clarifies theoretical links between
Schwartz and Carroll’s (2003) model and the concept of
strategic CSR (Burke and Logsdon 1996) and it illustrates
the applicability of these theoretical frameworks to the
specific case of orphan drug development. Second, it
promotes understanding of the extent to which biophar-
maceutical firms perceive their involvement in orphan
drug development as a CSR activity and use it strategi-
cally. This can inform the literature on CSR about what
firms actually do in terms of CSR as opposed to what
firms should do according to the prescriptions of CSR
models, a disconnect in the literature pointed to by
O’Riordan and Fairbrass (2008). Third, it informs man-
agers and founders of biopharmaceutical companies about
new ways to build and enhance their companies’ perfor-
mance and competitive advantage. It does this by
exploring the concept of strategic CSR as a tool that
builds on a company’s core competencies, enhances its
image, and improves its relationships with various stake-
holders (Burke and Logsdon 1996; Porter and Kramer
2006). Actively communicating about CSR activities to a
company’s important stakeholders is a way of using CSR
strategically (Burke and Logsdon 1996). Surprisingly,
studies about firms’ communication methods are largely
absent from the social responsibility literature (O’Riordan
and Fairbrass 2008). Our analysis of how biopharmaceu-
tical firms in the US and the EU communicate about their
involvement in orphan drug development contributes to
closing this gap. Fourth, the reasons why firms commit to
projects in the area of orphan drugs can inform both
policy making as well as the activities of grassroots
movements which historically have played an important
role in creating awareness and developing legislation in
this area. In this respect, the relationships among bio-
pharmaceutical firms’ corporate strategy, economic via-
bility of projects, and CSR as related to orphan drugs are
important matters to consider. Finally, research on CSR
and social issues in management tends to ignore the reg-
ulatory contexts in which CSR practices emerge (Murray
and Vogel 1997; Guthrie and Durand 2008). As such, this
article compares the US and the EU regulatory contexts
that affect shareholder relations in the social environment
of orphan drug development.
Empirical Context: Biopharmaceutical Industry,
Orphan Drug Market
The biopharmaceutical industry is a particularly interesting
and relevant research setting to study firms’ CSR as this
industry is under constant scrutiny regarding the way it
operates (Nussbaum 2009). Biopharmaceutical companies
have been criticized for a range of reasons including their
allegedly excessive profit levels, high price levels and price
fixing, unethical drug development, and limited patient
access to life saving/extending/enhancing drugs (O’Rior-
dan and Fairbrass 2008). Thus, for companies deriving
their profits from what constitutes a basic human need—
health—the pressure for doing business in accordance with
CSR principles is high.
While there are many studies on the topic of CSR in the
biopharmaceutical industry, the specific market for orphan
drugs treating rare diseases has received far less attention.
We consider this to be a major gap in the literature and
suggest that specific characteristics of the orphan drug
market make it a unique and different context than markets
for conventional drugs. Therefore, it is worth examining
whether existing theoretical perspectives on CSR, and
strategic CSR in particular, apply to the companies
engaged in orphan drug development. Below, we briefly
describe what orphan drugs are and how they are different
from conventional drugs. We also discuss key legislation
regulating the industry in the US and the EU.
Orphan Drugs versus Conventional Drugs:
Understanding the Differences
An orphan drug is defined as a medicinal product intended
for the diagnosis, prevention, or treatment of a rare disease.
All drug candidates need to go through the same process of
three phases of clinical trials (phase 1 determines the safety
of the compound, phase 2 tests the efficacy of the drug, and
phase 3 tests for the efficacy and costs/benefits associated
with the drug), in the regulatory agency drug approval
process (Lee et al. 2008). However, various barriers related
to the development of orphan drugs exist at every stage of
the drug development process. These barriers, while pres-
ent to a degree in the development of conventional drugs,
are amplified in orphan drug development. Thus, the
orphan drug development process is particularly challeng-
ing as compared to the development of conventional drugs
in the following ways. First, the lack of knowledge about
the mechanisms underlying a rare disease and the natural
course of the disease is a bigger problem at the beginning
of the research and development process (Maeder 2003;
Stolk et al. 2005). Second, during the pre-clinical step,
animal models for rare diseases are often absent or rarely
available because only little research has been carried out
Strategic CSR and Orphan Drug Development 47
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on the pathogenesis of rare diseases (Moors and Faber
2007). Finally, during the clinical experiments, it is diffi-
cult and costly to recruit a sufficient number of patients for
the trials because the population of patients affected by the
diseases is small and spread across regions and countries
(Moors and Faber 2007). In addition, there is no clear
consensus on the appropriate trial methodology and out-
come parameters. Biopharmaceutical companies develop-
ing orphan drugs, therefore, potentially face significant
liability concerns and a high level of uncertainty (Basara
and Montagne 1994).
In sum, biotechnology and pharmaceutical firms face
higher risks, uncertainty, and costs when developing an
orphan drug as compared to a conventional drug
(Drummond et al. 2007). Given the above-mentioned
challenges, the biopharmaceutical industry had failed to
satisfy the need of patients for treatment and cure of rare
diseases. This market failure led governments to adopt
specific legislative provisions offering financial incentives
to biopharmaceutical firms to enhance the availability of
medicinal solutions for people with rare disorders.
Orphan drug legislation, which was first adopted in the
US and then in Singapore, Japan, Australia, and the EU,
is part of the regulatory context that affects biopharma-
ceutical companies’ involvement in orphan drug devel-
opment. In this article, we chose to focus our analysis on
the US and the EU orphan drug market primarily due to
the pioneering role of countries in these regions in
encouraging orphan drug research measured in terms of
total compounds that received support. The following
section briefly describes orphan drug legislation in the
US and the EU.
Orphan Drug Legislation in the US and the EU
The US ODA that set the precedent for the development of
orphan drug legislation in many other countries started as a
result of patient organizations’ activism following the fight
of Abbey Meyers. Meyers became a patient advocate in the
early 1980s as a response to her daughter’s illness—Tou-
rette syndrome, a disturbing neurological disorder that had
no treatment at the time and from which few people suffer.
Meyers is considered the primary consumer advocate
behind the passage of the ODA in 1983 (Raber 2006). In
the 1990s, encouraged by the US policy and local patient
organizations, the governments of Singapore (in 1991),
Japan (in 1993), and Australia (in 1997) followed suit by
establishing new legislation promoting orphan drug
development. More recently—in December 1999—and on
the basis of a social movement emerging from France,
European legislation encouraging orphan drug develop-
ment was put in place (Huyard 2009).
These laws all have the same purpose: to establish
incentives for biopharmaceutical companies to overcome
barriers associated with orphan drug development (Wast-
felt et al. 2006; Wizemann et al. 2009). Table 1 compares
orphan drug legislation in the US and the EU.
One incentive, the market exclusivity provision, is
intended to address the limited revenue potential of these
drugs: firms awarded exclusive marketing rights become
monopoly providers, able to charge a monopoly or near
monopoly price due to insulation from competition (Moors
and Faber 2007). Here, a major difference between the US
and the EU is that in the latter, the European Medicines
Agency (EMA) is allowed to strip the orphan drug of its
designation and accompanying privileges after 5 years if
the drug is found to be extraordinarily profitable (Cheung
et al. 2004). Another important incentive included in
orphan drug legislation is a tax credit, which is offered to
lower the cost of conducting human clinical trials on such a
small population. Under the ODA in the US, the biophar-
maceutical firms that receive an orphan drug designation
are entitled to a 50 % tax credit for clinical trial expenses.
Although the EU legislation does not provide an umbrella
tax incentive, individual member countries of the EU do
offer their own separate tax incentives to firms.
From the above discussion of differences that exist in
certain provisions of the orphan drug laws in the US and
the EU and given that the level of emphasis put on CSR
differs between Anglo-Saxon firms and continental Euro-
pean companies (Maignan and Ralston 2002), we account
for the role of regulatory context in designing our research
to include and differentiate between biopharmaceutical
companies from the US and the EU.
Conceptual Background
The Three-Domain Model of CSR
The CSR concept has been the subject of a great deal of
debate regarding its meaning and definition over the years.
One of the earliest definitions of CSR implied that a busi-
ness decision maker has an obligation to make those deci-
sions and follow those lines of action that protect and
enhance society’s interests beyond just serving his/her own
business interest (Bowen 1953, as cited in Carroll 1999;
Davis and Blomstrom 1975). In an attack on these broader
notions of CSR, Milton Friedman wrote his classic New
York Times Magazine article where he concluded that
‘‘there is one and only one social responsibility of business:
to use its resources and engage in activities designed to
increase its profits so long as it stays within the rules of the
game, which is to say, engages in open and free competition
without deception or fraud’’ (Friedman 1970, p. 126).
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Friedman’s view of CSR has, however, been criticized on a
number of fronts.1 One of the key criticisms of his view of
CSR is his assumption that CSR activities will come at the
expense of corporate financial performance. Although the
findings have been mixed (Griffin and Mahon 1997; Or-
litzky et al. 2003; Kumar et al. 2002; Waddock and Graves
1997) there has been enough support for a positive rela-
tionship between CSR and corporate financial performance
to dramatically undercut Friedman’s assumption of a neg-
ative relationship between the two. Moreover, more recent
thinking articulated by Porter and Kramer (2006) of the
need to tie CSR to corporate strategy and the core compe-
tencies of the firm suggests that when conceptualized and
implemented appropriately CSR will enhance performance.
In this article, we define CSR using Schwartz and Car-
roll’s (2003) three-domain model consisting of economic,
legal, and ethical responsibility domains, which illustrates
the notion that responsibility of business in society includes
the simultaneous consideration of a profit motive and
compliance with governmental laws and regulations as
well as moral obligations and good corporate deeds
(Coupland 2005; Wood 1991). Schwartz and Carroll
(2003) build on Carroll’s earlier pyramid view of CSR
(1979, 1991) and address three main criticisms of Carroll’s
model including: (1) the confusion about the use of a
pyramid to depict the relationships among the four com-
ponents of the model—economic, legal, ethical, and phil-
anthropic; (2) the role of philanthropy as a separate
component in the model; and (3) the incomplete theoretical
development of the economic, legal, and ethical domains.
Carroll’s model for CSR has stood the test of time, having
been included in several frameworks explaining the par-
allel concept of corporate social performance including
those put forth by Wartick and Cochran (1985), Wood
(1991), and Swanson (1995), and it is a standard perspec-
tive utilized in many textbooks in the social issues in
management/business ethics area. Thus, we believe that
Schwartz and Carroll’s (2003) model that refines and fur-
ther develops Carroll’s (1979, 1991) model of CSR is an
appropriate framework for our study. Below, we briefly
describe each domain of Schwartz and Carroll’s (2003)
three-domain model.
Economic domain captures those activities which are
intended to have either a direct positive economic impact
(e.g., striving to increase sales, seeking cost reductions) or
indirect positive economic impact (e.g., improving
employees’ morale or the company’s public image) for the
firm in question. The positive impact is based on two
related criteria—the maximization of profits and/or the
maximization of shareholder value (Schwartz and Carroll
2003). The vast majority of a firm’s activities are economic
in nature except those that are not intended to maximize
profit (or minimize loss) or those in which firms are
engaged without any real consideration of the possible
Table 1 Comparison between US and European Union
USA European Union
Legal framework Orphan Drug Act (1983) Regulation (CE) N�141/2000 (2000)
Administrative authorities Federal Drug Administration/Office of
Orphan Products Development
Europeen Medecines Agence/Committee
for Orphan Medicinal Products
Prevalence of the disease (per 10,000 individuals)
required to justify orphan drug status
7.5 5
Estimation of affected population
(per 10,000 individuals)
20 million 25–30 million
7.3 6.6–8
Market exclusivity (years) 7 10
Tax credit Yes: 50 % for clinical studies Managed by EU member countries
Grants for research National Institutes of Health (NIH) and
other agencies
The Sixth Framework Program (FP6) and
national measures
Reconsideration of application for orphan
designation (renewal)
No Yes: every 6 years
Technical assistance for application Yes Yes
Accelerated marketing procedure Yes Yes (via a centralized procedure)
Total number of orphan drug designations 1,449 (from 1983 to 2008) 270 (from 1999 to 2005)
Total number receiving marketing approval 269 till 2005 23 till 2005
The data in this table were taken from the following sources: US Office of Orphan Products Development, http://www.fda.gov/orphan; ODA (
http://www.fda.gov/RegulatoryInformation/Legislation); Regulation (EC) No 141/2000 on orphan medicinal products (Official Journal of the
European Communities at http://www.europa.eu), Rinaldi (2005), Moors and Faber (2007), Orphanet, http://www.orpha.net
1 An excellent critique of the inconsistencies and ambiguities in
Friedman’s perspective on CSR is provided by Thomas Carson
(1993).
Strategic CSR and Orphan Drug Development 49
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economic consequences for the firm. The economic
responsibility of business is the basis for sustaining the
operation of the firm in the long run and allowing it to
fulfill other responsibilities (legal, ethical) both in the short
and the long run (Carroll 1991).
Legal domain pertains to the firm’s responsiveness to
legal expectations mandated and expected by society in the
form of federal, state, and local jurisdictions, or through
legal principles as developed in case law. In this context,
legality may be viewed in terms of three general catego-
ries: compliance, avoidance of civil litigation, and antici-
pation of the law (Schwartz and Carroll 2003). Legal
constraints can be seen as ‘‘codified ethics,’’ reflecting the
society’s idea of correct and fair behavior as communicated
through the legal and regulatory systems (Carroll 1991).
According to Schwartz and Carroll’s (2003) model, activ-
ities would fall outside of the legal domain when they take
place despite: (i) an awareness of non-compliance with the
law, (ii) an awareness of actual or potential civil negli-
gence, or (iii) merely passive compliance with the law.
Ethical domain refers to the ethical responsibilities of
business as expected by the general population and relevant
stakeholders. Three ethical standards are included in Sch-
wartz and Carroll’s (2003) model—conventional (i.e.,
formal codes of conduct), consequentialist (the principle of
utilitarianism or promoting the good of society), and
deontological (the principles of moral rights and justice).
Activities would fall outside of the ethical domain when
they: (i) are amoral in nature (i.e., with an unawareness or
indifference to the morality of the action), (ii) take place
despite an awareness that the action conflicts with certain
moral principles (i.e., are unethical), or (iii) are only
intended to produce a net benefit for the corporation and
not for the affected stakeholders (i.e., are only supported by
egoism) (Schwartz and Carroll 2003).
In Schwartz and Carroll’s (2003) model, the philan-
thropic dimension of CSR, originally part of Carroll’s
(1991) pyramid of CSR, is subsumed under ethical and/or
economic responsibilities. The main reasons for this
placement are the difficulty in distinguishing between
‘‘philanthropic’’ and ‘‘ethical’’ activities on both a theo-
retical and practical level, and the notion that philanthropic
activities might simply be based on economic interests.
In sum, Schwartz and Carroll’s (2003) conceptualization
of CSR, in contrast to some earlier views, does not restrict
CSR to just ethics/philanthropy and takes into account the
for-profit nature of business which is central to the concept
of strategic CSR that we discuss in the next section. By
differentiating responsibility into three broad domains,
Schwartz and Carroll’s (2003) framework allows for a fine
grained analysis of CSR. Different overlapping combina-
tions of the three domains lead to seven different categories
in which CSR may be visualized. This feature can be used
to develop a CSR ‘‘portrait’’ of the orphan drug industry,
subject to availability of industry-wide data, as well as to
investigate what motivates business activities at a firm
level. However, from a standpoint of the application of the
model in research, identifying the genuine motivation of an
activity can be very difficult especially when motivation at
the individual level (e.g., employee’s or owner’s motiva-
tion) differs from the motivation at the firm level (e.g., as
expressed in a firm’s vision/mission). In this case, the
concept of strategic CSR can be a useful complementary
framework as it focuses primarily on observing how a firm
aligns and integrates its economic, legal, and ethical
activities regardless of motive (i.e., to serve society at the
cost of profits or to serve the bottom line) (McWilliams and
Siegel 2011). Thus, integrating Schwartz and Carroll’s
(2003) model and the concept of strategic CSR will allow
the consideration of two key issues—why firms do what
they do and how they do it. In the next section, we briefly
define the concept of strategic CSR and draw parallels
between the three-domain model of CSR and the strategic
CSR framework.
The Concept of Strategic CSR
There are two approaches to defining strategic CSR. The
first relies on socially responsible activities being inte-
grated with the core business activities of a firm (Schaefer
2004; Maximiano 2007). In other words, firms are being
strategic about their social responsibility if they align their
inputs and processes with actions that are considered good
corporate citizenship. The second approach to defining
strategic CSR stresses potential and observed outcomes of
CSR activities in terms of profit maximizing and achieving
sustainable competitive advantage (for example by
increasing demand for a firm’s products and services,
increasing sales to consumers concerned about CSR, etc.)
(Ramachandran 2011; McWilliams and Siegel 2001). This
can be achieved in various sorts of ways such as devel-
oping ‘‘green products’’ that appeal to environmentally
conscious consumers (e.g., Toyota’s development of the
Prius and General Motors’ development of the Chevy
Volt). Another example of this is cause-related marketing
where a firm such as a credit card company will make a
contribution to a popular philanthropy for every purchase
made by consumers. Overall, scholars using both approa-
ches agree that ‘‘it is through strategic CSR that the com-
pany will make the most significant social impact and reap
the greatest business benefits’’ (Porter and Kramer 2006).
For the purpose of this study, we define strategic CSR as
the extent to which biopharmaceutical firms integrate
orphan drug development and associated CSR actions with
their core business activities with the intention to derive
economic and non-economic benefits for the firm and its
50 O. Bruyaka et al.
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stakeholders. This definition is consistent with existing
definitions of strategic CSR stressing that companies
engaging in strategic CSR anticipate benefits from these
actions (e.g., reputation enhancement, the ability to charge
a premium price for their output, or the use of CSR to
recruit, retain, and motivate high quality workers) (Siegel
and Vitaliano 2007) and that CSR actions could be aimed
at creating a capability leading to competitive advantage
(Ramachandran 2011). And in line with Schwartz and
Carroll’s (2003) model of CSR, we acknowledge the role
of firms’ motivations and intentions whether they are
successful or not.
Several criteria have been developed in the literature
that permit one to determine whether a firm uses its CSR
strategically. In line with Sirsly and Lamertz (2008), we
use the three most relevant strategic attributes of CSR
activities—centrality, specificity, and visibility—devel-
oped by Burke and Logsdon (1996).
Centrality
It refers to the idea that benefits of CSR activities and
associated reputational goodwill are related to the strategic
mission of the firm. CSR activities having high centrality
will, thus, fall in the categories overlapping with economic
domain in Schwartz and Carroll’s (2003) model. Where
CSR activities are unrelated to core strategy, the firm may
garner general goodwill and PR benefits but these do not
necessarily have strategic benefits. For example, general
non-targeted philanthropic activities would measure low on
the centrality dimension given that philanthropy is not
likely to be a central part of a firm’s mission (such activ-
ities will fall in the purely ethical domain in Schwartz and
Carroll’s model). However, a CSR initiative congruent
with corporate objectives, such as a program of helping
low-income patients with rare diseases established by a
biopharmaceutical firm dedicated to orphan drug develop-
ment, would have greater centrality (such an initiative
would fall within the intersection of economic and ethical
domains). These same initiatives might be undertaken for
altruistic reasons by another firm, such as a biopharma-
ceutical company not involved in orphan drug development
in which case they would have lower centrality.
Specificity
The strategic significance of CSR activities is maximized
when the firm is able to capture some of the benefits of the
program for itself rather than having these accrue to society
at large. By choosing CSR activities carefully, a firm may
be able to capitalize on the greater legitimacy or stronger
reputation it derives from producing these social benefits
(Lewellyn 2002; Logsdon and Wood 2002; Mahon 2002).
In the case of orphan drug development, specific legislation
guarantees certain benefits such as tax reduction, grants for
clinical trials, and market exclusivity to any company that
obtains an orphan drug designation. According to Schwartz
and Carroll’s (2003) model, development of orphan drugs
by firms that use this legislation opportunistically will be
considered as falling within the intersection of economic
and legal domains.
Visibility
Strategic CSR initiatives have high visibility and are
widely known by constituencies both within and outside of
the firm (Burke and Logsdon 1996). This is important for
the firm to derive benefits from enhanced goodwill and
reputation (Lewellyn 2002; Logsdon and Wood 2002;
Mahon 2002). Thus, significant efforts by a firm to reduce
emission of greenhouse gasses and other forms of pollution
may produce relatively few benefits for the firm in terms of
public goodwill or more favorable treatment by regulators
if few people know about these activities (Rindova and
Fombrun 1999). Communication about CSR is thus
important to realize its potential benefits for a firm. Miles
et al. (2006) studied the role of strategic conversations with
stakeholders in the formation of CSR strategy. Strategic
conversations are defined as ‘‘multi-directional multi-
dimensional communication mechanisms for better shaping
and integrating the strategic intent of top management with
both the firm’s capabilities and the competitive realities the
organization encounters.’’ The authors suggested that
explicitly engaging stakeholders in the CSR strategy-
making process, through the mechanism of strategic con-
versations, will minimize future stakeholder concerns and
enhance CSR strategy making. According to Schwartz and
Carroll (2003), external communication about a firm’s
socially responsible actions with an objective to improve
profits and/or share value is deemed to be economically
motivated as they will have an indirect impact on firms’
performance. At the same time, communication about a
rare disease and what a company does to treat it can be
considered an overlap between ethical and economic
domains of CSR in Schwartz and Carroll’s (2003) model,
when the objective is to help people recognize symptoms
of the disease early enough while helping a company to
identify a population of patients they will cater to.
Overall, CSR activities that meet the criteria of cen-
trality, specificity, and visibility are likely to receive sus-
tained backing within the firm because of the conformity
with the strategic goals and central values of the organi-
zation. The benefits of engaging in these activities will be
clearly visible to those within the firm and this will provide
a sound rationale for continuing to pursue them (Pfeffer
1981). Thus, where CSR is successfully used in a strategic
Strategic CSR and Orphan Drug Development 51
123
Page 8
manner the firm will create shared value for itself and for
various of its stakeholders or society as a whole. This is
most likely to occur where the firm has ethical, legal, and
economic motives as depicted at the intersection of these
three domains in Schwartz and Carroll’s (2003) model.
Research Methods and Analysis
With the objective of studying what drives CSR activities
in orphan drug development and whether biopharmaceuti-
cal companies in the US and the EU use their CSR stra-
tegically, we employed two complementary studies. Study
1 uses a qualitative method which is a combination of
semi-structured interviews with managers of the US and
the EU biopharmaceutical companies involved in the
development of treatments for rare diseases and an exten-
sive analysis of secondary qualitative data on biopharma-
ceutical companies such as publicly available press
releases, articles, and official videos related to the issues of
orphan drugs and CSR. The qualitative approach allows us
to better understand the motives of players in the industry,
and to evaluate the extent to which firms use their CSR
strategically. Study 2 is a quantitative study of 100 com-
panies’ websites and other online communication channels
that contain the information on strategic mission/vision,
CSR activities, and communication patterns of these
players. Study 2 complements Study 1 in that it allows us
to illustrate on a larger scale the criteria of centrality,
specificity, and visibility of strategic CSR. Together these
two studies offer new insights regarding the alignment
between values and communications of the firms.
Study 1 Methodology: Semi-structured Interviews
Qualitative research is most appropriate when little knowl-
edge exists about a phenomenon (Lee 1999). Furthermore,
such an approach allows for the study of complex phe-
nomena tightly related to the context where they occur
(Miles and Huberman 1994). Finally, qualitative research
has been found successful in providing an understanding of
how and why something occurs (Freeman and Cavusgil
2007). Past research on strategic CSR in the area of rare
diseases is scarce; therefore, a qualitative approach is most
appropriate for a study of an exploratory nature such as this
one. Semi-structured interviews with key informants were
used for data collection to allow for discussion and follow-
up questions. This method allows insight into the respon-
dents’ own interpretations of their environments and
improves the researchers’ potential understanding of
underlying or latent constructs (Miles and Huberman 1994).
The data collection process started in 2010 and contin-
ued until 2012. We interviewed 20 executive managers
representing 9 biopharmaceutical firms (5 from the US and
4 from the EU). In addition, we analyzed publicly available
video presentations of the managers from Shire, BioMarin,
and Amicus Therapeutics at the 2010 World Orphan Drug
Congress (http://talks.terrapinn.com/life-science) and con-
ducted an analysis of secondary data (e.g., press releases,
industry, and academic publications) on several other
companies in the orphan drug domain such as Eli Lilly,
Bristol Myers, and Merck). Table 2 provides general
information about the firms we interviewed. For the sake of
confidentiality, we keep the names of the firms we inter-
viewed anonymous and refer to them as Firm A, Firm B,
etc., while referring to the companies, we collected pub-
licly available secondary data on by their names. We also
maintain anonymity for the executives we interviewed.
Keeping anonymity is highly important for research in
the pharmaceutical industry. In fact, the general secrecy of
the industry turned out to be one of the main limiting
factors in our ability to schedule interviews with execu-
tives. The secrecy requirements are often reflected in firm
policies that do not allow members of the firm to speak
freely with outsiders. To illustrate, the signing of a consent
form for the university’s Internal Review Board (IRB)
proved to be a hurdle that amplified secrecy concerns and
had firms cancel interviews already scheduled. In other
instances, we were in contact with people that were willing
to talk to us but due to firm policies were not authorized to
do so. Another factor that seemed to limit our ability to
schedule interviews with more companies was the general
time constraint of executives. Even when we were able to
get in touch with a company and an executive was autho-
rized and willing to talk to us, busy time schedule some-
times did not allow him/her to take the time required for
our interview and even some meetings we had arranged
were canceled. Despite being limited by the number of
firms willing to participate, our sample represents a variety
of business models (e.g., small versus large firms, and firms
specialized in orphan drugs versus firms peripherally
involved in orphan drugs through diversification).2 While
2 To get a better idea of the orphan drug market, we also talked to
main stakeholder groups including national and regional patient
organizations [e.g., National Organization for Rare Diseases (US)],
and the following French organizations—Eurordis, Alliance for Rare
Diseases, Vaincre La Mucoviscidose (for cystic fibrosis), Association
de l’osteogenese imparfaite (for osteogensis imperfecta), Association
Le Goeland (for X fragile syndrome), and Association Francaise
contre les myopathies (for muscular dystrophy). We also interviewed
representatives of regulatory authorities including the French Mission
des Medicaments Orphelins (Mission for Orphan Drugs), members of
the French Direction of Hospitalization and Healthcare Organization
(DHOS), and members of the French Health Authority, responsible
for the price of medicines in France. Given limited space, we do not
report the summaries of our interviews with the above-mentioned
stakeholders.
52 O. Bruyaka et al.
123
Page 9
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Strategic CSR and Orphan Drug Development 53
123
Page 10
policies seemed to be more restrictive in larger firms and
thus secrecy demands could have introduced a bias toward
smaller firms, our interviews and the secondary informa-
tion used in our qualitative analysis describe the positions
of both small and large companies reflective of the overall
industry structure. As for the interviews that we did con-
duct, there was no noticeable difference in the candidness
of the respondents between large and small firms. There-
fore, we do not expect these limitations to have introduced
a bias in our analysis.
In most cases, the interviews lasted from one hour up to
two and a half hours. The average duration was 1 h and
30 min. An interview guide (Appendix) with 13 questions
was developed prior to the interviews. The main theme
included the following: (1) personal involvement of the
interviewee(s) in orphan drug development, (2) the com-
pany’s involvement in orphan drug development, and (3)
issues related to the industry, legislation, and international
market for orphan drugs. During the interviews, care was
taken to allow respondents to deepen and clarify their
views. In some cases, interviews were recorded and tran-
scribed. In other cases, several (2–4) researchers partici-
pated in the interviews and took notes. In either event
interviews were analyzed according to Schwartz and Car-
roll’s (2003) model and the criteria of strategic CSR out-
lined above.
Study 2 Methodology: Content Analysis of Company
Websites
To get a better understanding about companies’ strategic
use of CSR, we chose to analyze the websites of companies
actively involved in orphan drug development. Existing
studies underline the importance of the Internet as an
industry communication tool (Berthon et al. 1998; Deeter-
Schmelz and Kennedy 2002). We randomly chose 100
biopharmaceutical firms (53 US and 47 EU-based) from
among 312 companies having at least 1 orphan drug des-
ignation or commercialized orphan drug in 2010–2012
according to the FDA database of orphan drug designations
and approvals (http://www.accessdata.fda.gov/scripts/
opdlisting/oopd/index.cfm) and the Orphanet list of
orphan drugs in Europe (http://www.orphanet.fr). On
average, the companies in our sample had 3 orphan drugs
on the market and 6 pending orphan drug designations. We
provide additional descriptive information on our sample
firms in Table 3.
When analyzing the companies’ websites, we explored
all posted tabs and links as well as documents available for
download (e.g., annual reports, CSR reports, etc.). Broadly
following Maignan and Ralston’s (2002) methodology of
website analysis, for each company we looked up the
answers to the questions that reflect three criteria identifying
strategic attributes of CSR, namely centrality, specificity,
and visibility: Q1: Does the company explicitly discuss
CSR? Q2: Does the company discuss its involvement in
orphan drug development in terms of CSR? If so, where (i.e.,
different sections of the website: About Us, Products/R&D,
Social Responsibility/Corporate)? Q3: What CSR processes
does the company discuss (e.g., philanthropy, sponsorship,
volunteerism, quality programs, environmental impact,
health, and safety)? Q4: What communication channels does
the company use other than its website (e.g., Facebook,
Twitter, Blog, other)? For each company, we recorded
‘‘yes’’ or ‘‘no’’ answers to each of the above questions and
counted their frequency. We used the keyword ‘‘corporate
social responsibility,’’ its variations (e.g., ‘‘social responsi-
bility’’ or ‘‘corporate citizenship’’) and associated terms
(e.g., philanthropy, ethics, etc.) to collect answers to Q1 and
Q3. The keywords ‘‘orphan drugs,’’ ‘‘rare disease,’’
‘‘neglected disease,’’ ‘‘specialty pharmacy’’ as well as their
combinations with the keyword ‘‘CSR’’ and its variations
were used to code answers to Q2. Finally, to collect answers
to Q4, we searched online through search engine Google for
information about whether a firm has a blog, a Facebook
page, Twitter account or any other online communication
channel other than a website.
Analysis and Results
Economic Domain
According to Schwartz and Carroll’s (2003) model of CSR,
the fulfillment of a firm’s economic responsibility will lead
to such favorable financial results as consistent profitabil-
ity, strong earnings per share, excellent competitive posi-
tion, and a high level of operating efficiency. We asked the
biopharmaceutical firms about economic motivations that
Table 3 Descriptive statistics on the sample firms (total of 100
biopharmaceutical firms)
Descriptive statistics US
firms
EU
firms
Total
Number of firms 53 47 100 Firms
Number of SMEs (\500 employees) 39 26 65 Firms
Number of public firms 39 28 67 Firms
Average age 36 50 42 Years
Number of firms founded before
1983
19 21 40 Firms
Average age of firms founded before
1983
72 95 84 Years
Number of firms founded after 1983 34 26 60 Firms
Average age of firms founded after
1983
16 14 15 Years
54 O. Bruyaka et al.
123
Page 11
drive their involvement in orphan drug development. The
companies identified three main economic drivers of their
engagement in developing treatments for rare diseases.
First, the orphan drug market can represent a business
opportunity. As Firm A (large US firm with 10 % profit
margin3) noted ‘‘rare diseases are the industry sector still
generating two digit growth numbers.’’ This sector repre-
sents an opportunity for established pharmaceutical com-
panies to switch from the failing blockbuster business model
to a promising niche-buster business model (Lazonick and
Tulum 2011), although the latter is of a higher risk.
Second, developing orphan drugs in niche markets helps
in avoiding competition. ‘‘Biotechnology firms generally go
toward those pathologies in which big pharmas are not
interested. In other words, they go toward rare pathologies’’
(Firm A, US). According to biopharmaceutical companies in
our sample, there are very few if any competitors in the niche
markets especially for those rare diseases for which there are
no clear endpoints (i.e., ways to measure success/progress).
Even if several companies develop treatments for the same
diseases, they still work on different designations, thus,
dividing an already narrow market into even narrower seg-
ments. Only in rare cases when a firm demonstrates that its
drug has a significant benefit for patients over an existing
rival drug for the same indication (e.g., Gaucher disease,
pulmonary hypertension) is there direct competition.
Third, developing orphan drugs implies working on
breakthrough innovations given that little or no knowledge
exists on the rare disease in question. A breakthrough
innovation in the treatment of a rare disease may be applied
to other more common and widespread diseases, which
may dramatically increase return on investment. For
instance, one of the companies that we interviewed (Firm
B, small US firm with negative profits) initially developed
technology for treatment of a specific lysosomal storage
disease. Later on, the company discovered that this tech-
nology can also be applied for treatment of Parkinson and
Alzheimer diseases.
Thus, the relative absence of direct competition, the
presence of cutting edge innovation often required for
treatment of rare diseases, the existence of unmet medical
needs meaning inelastic demand for the product (with
resulting higher prices), as well as the potential to find
applications for mainstream diseases help partly offset the
inherent disadvantages for biopharmaceutical companies
targeting rare and neglected diseases.
Legal Domain
Schwartz and Carroll’s (2003) model of CSR defines firms’
legal responsibilities as their responsiveness to meet the
expectations of government and law and being a law-
abiding corporate citizen. According to the three-domain
model of CSR, legality may be viewed in terms of three
general categories: compliance, avoidance of civil litiga-
tion, and anticipation of the law. The case of orphan drug
legislation is a type of incentive control in that it does not
prohibit, restrict, or require a specific activity but rather
provides incentives to encourage socially desired activi-
ties—i.e., orphan drug development—as a result of market
failure to do so without government intervention (Rza-
khanov 2008; Moors and Faber 2007). As Firm I (medium-
size EU firm with negative profits) stated: ‘‘…a company is
given an opportunity to run a profitable business [i.e.,
legislation will provide conditions for a pharmaceutical
company to be profitable in developing orphan drugs] and
protect the company during some time in order for it to
develop drugs.’’ Our interviews showed that companies do
not usually engage in orphan drug development for purely
legal motives as defined in Schwartz and Carroll’s (2003)
model. Rather the companies, we interviewed acknowl-
edged that provisions of orphan drug legislation certainly
help improve economic attractiveness of this activity
(although many issues remain unsolved) as well as help
justify ethically motivated initiatives in treating rare dis-
eases. One example of a legally motivated activity is a
biopharmaceutical firm giving its orphan drug to patients
for free as a result of an agreement between the firm and
the government. In the case of Alexion, the company and
the French government reached an agreement that the high
price Alexion charges for Soliris—the most expensive
orphan drug on the market-will be tolerated only until a
certain number of patients is reached. When in the future
the diagnosis reveals a larger population of patients,
Alexion will pay for their treatment (CEPS report, 2008.
Accessed at http://www.sante.gouv.fr/les-activites-du-
ceps.html).
Ethical Domain
Our research shows that many biopharmaceutical firms
justify their involvement with orphan drugs on the grounds
of ethical duty or social responsibility. Firm E (small US
firm with negative profit) noted that being involved in
orphan drug development automatically implies social and
ethical responsibilities. ‘‘Why else would you be working
in this field? …to bring treatment to people [with rare
diseases]…CSR is incumbent to be in this area [orphan
drugs]’’ (Firm D, small US subsidiary of an EU firm).
Similarly, Firm B (small US firm with negative profits) said
that the ‘‘culture of the company recognizes social and
ethical duties.’’ Firm E (US) noted ‘‘this is what we
do…we are a patient-specific company…humane respon-
sibility is a very high motivation for us.’’ European3 We report the firms’ profit margins in 2010.
Strategic CSR and Orphan Drug Development 55
123
Page 12
companies that we interviewed, in particular, stressed that
their involvement in orphan drug development was ‘‘glo-
rious and courageous’’ (Firm I, medium-size EU firm with
negative profits) and ‘‘from outer space’’ (Firm G, small
EU firm with a 15 % profit margin) because when they
started there was no orphan drug legislation in Europe and
‘‘there was no reason to go into orphan drugs; there was no
profit’’ (Firm G, EU). And a manager in Firm G (EU) noted
the following: ‘‘it bothers me that some people with a very
commercial profile arrive in the domain of orphan drugs
thinking—and this is the only thing they see—that they can
grow profits at a two-digit rate…ours is a state of mind
which is not at all commercial…we would not be here
otherwise, because we are not in the company that pays the
best salary, we do not get bonuses.’’ And Dr. Sylvie
Gregoire from Shire (large US firm with 15 % profit
margin) notes ‘‘it’s our responsibility to never give up on a
particular disease no matter what hurdles [there] are.’’
(http://blogs.terrapinn.com/total-biopharma/2012/01/27/
video-sylvie-grgoire-shire-corporate-social-responsibility-
rarediseases/).
Overall, our interviews and analysis of publicly acces-
sible speeches revealed a variety of reasons that drive
biopharmaceutical firms’ involvement in orphan drug
development. Certain companies have started developing
orphan drugs primarily for economic reasons with the
intent to develop and commercialize breakthrough inno-
vations. For example, a manager of Firm C (large US firm
with 30 % profit margin) noted: ‘‘…this is science that
drives us to treat rare diseases…we do not take the reverse
approach…we do not say we will only focus on orphan
drugs, not at all. We say that what is important is that we
want to discover through our scientific work, through our
collaborations, innovate…and starting from there we will
find new products and if they treat a rare disease, then we
will be in rare disease field; if they treat a common disease,
it will be it, whatever.’’ At the same time, other firms have
articulated a more dominant ethical motive—i.e., with ‘‘a
state of mind that is not at all commercial’’ and a general
objective ‘‘to save people’’ (Firm G, small EU firm with a
15 % profit margin). Usually, these are dedicated biotech
firms of a small size often created to realize the founder’s/
manager’s desires to find a cure for a rare disease from
which their own loved ones suffer (e.g., Orexigen Thera-
peutics and Novazyme founded by John Crowley whose
children are battling a rare disorder—Pompe disease). In
the same vein Firm G (EU) noted: ‘‘it was a founder’s will
to always stay in the domain of rare diseases. I think it was
a personal conviction… I think that it’s like a pilot of a
ship, it’s the founder who will make it his own business.’’
Our interviews with small biopharmaceutical companies in
both the US and the EU revealed a wide-spread view that
established pharmaceutical companies diversifying into
orphan drug markets fall in the category of firms that are
driven by primarily economic interest and opportunism
created by the orphan drug legislation but ‘‘not recognizing
the special approach required to be effective [e.g., building
trust with the patient associations]’’ (Firm D, small US
subsidiary of an EU firm).
Overlap Among the Three Domains of CSR
Despite sometimes polarized motives explaining biophar-
maceutical firms’ involvement in orphan drug development,
all of the firms that we interviewed stressed that economic,
legal, and ethical motives are usually intertwined, and none
of them taken separately is typically sufficient alone to
motivate orphan drug development. First, economic attrac-
tiveness of orphan drug market became reality mainly as a
result of orphan drug legislation (legal domain). Such
practices as charging extremely high prices, salami slicing
(re-defining drug indications to increase the population
treated by the same orphan drug) and applying for govern-
ment subsidies even when a drug would have been devel-
oped in the absence of these subsidies (Hemphill 2009;
Newman 1992; Yin 2009) certainly increase profitability of
orphan drugs and fall in the category of economic/legal
domains of Schwartz and Carroll’s (2003) model. Although
orphan drugs may be as profitable as traditional drugs
(Lazonick and Tulum 2011), the numbers of successful
niche-buster drugs are much lower than that of successful
blockbuster drugs, and there are numerous examples of
orphan drugs exhibiting little prospect of commercial
financial return, e.g., zinc acetate for Wilson’s disease (Kak
2008). It is especially true in the case of ultra-rare diseases
with much lower prevalence than is the case for more
common rare diseases (e.g., compare Lupus disease with
prevalence of 50/100,000 and Niemann-Pick type C disease
with prevalence of 0.85/100,000). In addition, the compa-
nies we interviewed pointed out, in line with existing evi-
dence (Hemphill 2009), that the time-to-commercialization
and costs associated with development of an orphan drug has
increased and in certain instances can match the costs of
developing a regular drug, which eliminates the cost
advantage of developing orphan drugs.
Second, biopharmaceutical companies that we inter-
viewed pointed out that legal incentives provided by the
orphan drug legislation are not enough by themselves to
trigger research on and commercialization of treatments for
rare diseases (Firm B and Firm E, US firms with negative
profits). This result corroborates the fact that getting an
orphan drug designation does not provide favorable treat-
ment by the FDA when it comes to drug approval as evinced
by the approval of 403 drugs out of the total of 2,614 that
received orphan drug designation (from 1983 to 2012).
Grant opportunities provided by the ODA are usually too
56 O. Bruyaka et al.
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small to cover the cost for trials so that certain companies
were not even applying for them but rather looking for
funding elsewhere (Firm E, small US firm with negative
profits). Exclusivity is an incentive but it is not what makes
firms go into the orphan drug space; rather it is the good
match for the technology the company holds. The require-
ments on trials for orphan drugs are seen as problematic.
Large clinical pharmaceutical companies and small biotech
research firms for orphan drugs need to go through the same
process. The rigor and costs of clinical trials delay products
going to market (Firm E, small US firm with negative
profits). Furthermore, the US government was the first to
adopt orphan drug legislation, but the ODA was passed
close to 30 years ago and ‘‘certainly could use some twenty-
first century modernization…’’ (Firm D, small US sub-
sidiary of an EU firm). There is also an issue with the
threshold for recognizing a disease as rare: when ODA was
adopted the US population was 200,000 million; today it is
300,000 million, but the threshold for rare diseases remains
the same—200,000. Firm D (US) believes that the threshold
should be re-calculated based on the increase in population.
This is done automatically in the EU because the threshold
is designated in terms of a percentage of the population. In
addition, European companies that we interviewed raised
several issues pertaining to the legal context of the EU. For
instance, Firm G (small EU firm with 15 % profit margin)
stressed the necessity to distinguish between rare and ultra-
rare orphan designations as it puts significant constraints on
budgets of biopharmaceutical companies focused on ultra-
rare diseases: ‘‘…if there is no distinction between rare and
ultra-rare, one day we’ll see the legislation that will
asphyxiate us [biopharmaceutical companies].’’ Another
issue mentioned by the EU-based companies that we
interviewed was the absence of a common procedure in the
EU that allows a biopharmaceutical company to avoid
having to go through market exclusivity approval in each
EU member country. This significantly limits accessibility
of patients to the treatments for rare diseases in many EU
countries.
Third, the companies we interviewed stressed that eth-
ical and philanthropic motives alone will not help to
accomplish the firms’ mission to satisfy unmet medical
needs of the patients with rare diseases. As Firm G (small
EU firm with 15 % profit margin) said: ‘‘we want to stay in
this profession and in this state of mind [non commercial],
and to do this we must be profitable…because if we do not
stay [in business] we won’t be able to help. That’s why we
certainly have this Damocles sword upon our heads…’’ In
addition, many startup firms are still developing their
orphan drugs and burning their investors’ money. There-
fore, the extent of their philanthropic activities is very
limited, otherwise they will go out of business (e.g., Firm B
and Firm E, US firms with negative profits).
Figure 1 summarizes examples of biopharmaceutical
firms’ actions in orphan drug development that can be
tentatively grouped in seven categories identified by Sch-
wartz and Carroll (2003) and presented in a Venn model
framework.
Thus, the overlap among economic, legal, and ethical
domains of CSR is very important as supported by the
following quotes from our interviews. A manager of Firm I
(medium-size EU firm with negative profits) stated: ‘‘…For
me it means that if a pharmaceutical company works in this
area [orphan drugs] it has a certain number of ethical
responsibilities vis-a-vis the society. It means that the
company has to make sure that its drugs are used appro-
priately, to offer support in treatment services and establish
reasonable prices…For me an orphan drug beyond certain
threshold of profitability is no longer an orphan drug.’’
Firm B (small US firm with negative profits) noted:
‘‘Balancing the two—medical need and commercial via-
bility—is very important.’’ Dr. Sylvie Gregoire from Shire
(large US firm with 15 % profit margin) stated: ‘‘our policy
makers have allowed companies like us to be able to do
R&D and commercialization of products for rare dis-
eases… However, it’s our job in the industry not to abuse
this legislation’’4 (http://blogs.terrapinn.com/total-biopharma/
2012/01/27/video-sylvie-grgoire-shire-corporate-social-
responsibility-rarediseases/).
Strategic CSR: Interviews and Website Analysis
In this section, we analyze the overlap among the three
domains of CSR from the perspective of strategic use of
CSR by applying three criteria—centrality, specificity, and
visibility. Our interviews with pharmaceutical companies,
our analysis of secondary data as well as the quantitative
study of the firms’ websites provide the empirical data for
our analysis.
Centrality refers to the idea that benefits of CSR activities
and associated reputational benefits are related to the stra-
tegic mission of the firm. While developing orphan drugs is a
core strategy for many of the small biotech companies
involved in this activity, large established pharmaceutical
companies such as Pfizer, Eli Lilly, etc. have been focused
on common diseases and diversified into rare diseases rel-
atively recently. Thus, orphan drugs are not a core business
for many large pharmaceutical companies and their mission/
vision is broader as compared to small biotech firms. For
4 Abuse of legislation in this context refers to a technique known as
‘‘salami slicing’’ wherein a biopharmaceutical firm narrowly defines
treatment groups for its orphan drugs and later adds new orphan
designations for different indications of the drug. Thus, the same drug
can be approved by the FDA to treat large populations of patients
([200,000), but still retain its orphan drug status and associated
benefits, if each subsequent application receives its own designation.
Strategic CSR and Orphan Drug Development 57
123
Page 14
example, a small biotech company, Orphanbiotec AG
(Zurich, Switzerland), formulated the following mission/
vision statement: ‘‘Our goal is to help people with rare dis-
eases. For them, we develop new intelligent drugs to
increase their quality of life’’ (www.orphanbiotec.
com/en/home). In contrast, Eli Lilly’s strategic mission is
‘‘to make medicines that help people live longer, healthier,
more active lives’’ (www.lilly.com/responsibility/
workplace). In the case of Orphanbiotec, the mission state-
ment is very specific and related to orphan drug develop-
ment, whereas in the case of Eli Lilly, the mission is much
broader. Overall, one of the companies that we interviewed
summarized the differences between small biotech compa-
nies and big pharma in the orphan drug industry:‘‘…but after
all I really think it’s in the culture: we know that such things
as taking care of patients with rare diseases, relationships
with reference centers [matters], all this is scary [for big
pharmas] because they do not know [these things]. They are
identified as a big pharma that will swallow everyone
etc.…taking care of patients, accompanying them, their
specificity, how to respond to their expectations, how to be
present with nursing services, there are so many things that
are better carried out by a small specialized company’’ (Firm
G, small EU firm with 15% profit margin). Thus, it is clear
that any philanthropic activity relative to rare diseases
undertaken by a dedicated orphan drug biotech firm will
have higher degree of centrality than when it is undertaken
by a big diversified biopharmaceutical firm.
The results of our analysis of biopharmaceutical com-
panies’ websites (see Tables 4, 5) showed that more than
50 % of companies in our sample (in both the US and the
EU) mention orphan drugs they market and orphan drug
designations granted to them in the description of their
pipeline of products, 30 % of companies mention orphan
drugs in their vision and mission statements, and only 23 %
of companies in our sample are explicit about their
involvement in orphan drug development as a part of their
CSR. Thus, less than one-third of all companies in our
sample can be said to use their CSR strategically according
to the centrality criterion.
The strategic significance of CSR activities is maxi-
mized when the firm is able to capture some of the benefits
of the program for itself rather than having these accrue to
society at large (specificity criterion). By choosing CSR
activities carefully, a firm may be able to capitalize on the
greater legitimacy or stronger reputation it derives from
producing these social benefits. An example of reputational
benefits is recognition by patients and patient associations
of the firms’ efforts in commercializing new treatments for
rare diseases—e.g., Alexion, Amgen, Pfizer, Biogen Idec,
(iv) Economic/ Ethical
(vi) Legal/ Ethical
(v) Economic / Legal
(vii) Economic/ Legal/ Ethical
Companies launching an open innovation platform to simultaneously expand their drug pipeline and find a cure for the patients (e.g., Eli Lilly).
Companies using orphan drug designation status to charge unreasonably high prices for their drugs (e.g., a 1,310% increase in price of Acthar, manufactured by Questcor Pharmaceutical, Inc., that treats infantile spasms) (Hemphill, 2009). Companies using salami slicing technique currently allowed by orphan drug legislation. For example, the FDA granted Bristol-Myers orphan status for Taxol as an ovarian cancer treatment. If the drug is later approved for other "orphan" diseases, Bristol-Myers will remain Taxol's exclusive marketer, even if the total patient population for Taxol is over the 200,000 patient limit (Newman, 1992).Companies applying for the FDA orphan drug subsidies to develop drugs that would have been developed in the absence of these subsidies (Yin, 2009).
Companies using legislative incentives to develop orphan drugs that create value for their shareholders and satisfy previously unmet needs of patients with rare diseases at a reasonable cost for them (e.g., Firm G and Firm I in our sample).
Companies founded by entrepreneurs motivated to find a cure for their loved ones and
other patients battling a rare disorder (e.g., Orexigen Therapeutics and Novazyme, Firm B)
Companies providing orphan drugs for free to the uninsured patients (e.g., Firm A)
(i) Predominantly EconomicCompanies that started developing orphan drugs because their technology happened to be applicable to treat rare diseases (Firms A & B in our sample).
(ii) Predominantly Ethical:
Companies keeping in their product portfolio drugs at the end of their life cycle (low or no profit) because they are the only available treatment for a rare disease. These
drugs do not necessarily have orphan drug status.
Companies providing patients with orphan drugs for free as a result of legal agreement between them and the government. For example, French government and Alexion reached an agreement that when the diagnosis reveals a larger population of patients taking the company’s orphan drug Soliris, Alexion will pay for treatment of these extra patients.
(iii) Predominantly Legal
LEGEND:This figure illustrates examples of actions and strategies undertaken by biopharmaceutical firms developing orphan drugs that can be tentatively categorized within CSR domains identified by Schwartz and Carroll (2003). Because of the difficulty in identifying purely economic, purely ethical and purely legal motivations of the firms’ actions, we chose to label CSR domains (i), (ii) and (iii) as predominantly economic, predominantly ethical and predominantly legal respectively.
Companies using legislative incentives to develop much needed treatment for rare and neglected diseases without prospects of high profitability.
For example, Merck developed a drug to treat "river blindness"that only afflicted people in third world countries who could not afford the drug. Merck extensively explored available incentives, subsidies and partnerships that could help underwrite the costs associated with the development and distribution of this drug (Sturchio and Colatrella, 2002).
Established firms acquiring small biotechs specialized in orphan drugs
(switching from blockbuster business model to nichebusterbusiness model) (e.g., Sanofi Aventis acquiring Genzyme)
..
..
..
.
.
.
.
.
Fig. 1 The three-domain CSR model applied to orphan drug development in the biopharmaceutical industry
58 O. Bruyaka et al.
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Genentech, and Rare Disease Therapeutics have been
recently (2012) awarded Power of Partnership corporate
awards by the National Organization for Rare Disorders
(NORD). Another example of CSR benefits captured by a
company is the launching of a new open innovation plat-
form designed to help build Eli Lilly’s pipeline of tomor-
row to identify molecules that may have applications for
treating multi-drug resistant tuberculosis. In this case,
although the larger society will benefit from the success of
the open innovation initiative, it will be Eli Lilly who will
be at the center of scientific development and own key
intellectual rights to benefit from commercializing the new
drugs.
The visibility criterion of strategic use of CSR by a
company refers to the CSR initiatives having high visibility
and that are widely known about by stakeholders both within
and outside of the firm (Burke and Logsdon 1996). We
studied how firms communicate about their involvement in
orphan drug development through their websites, blogs, and
other online channels. We found that while many companies
discuss CSR on their websites only a few explicitly recog-
nize their involvement in orphan drug development as part
of their CSR. Our analysis also showed a difference in CSR
communication between small and medium-sized enter-
prises (SMEs) and large biopharmaceutical firms (see
Table 5). In particular, smaller companies are clearly less
active in publicizing their involvement in CSR activities:
only 26 % of SMEs explicitly discuss CSR on their websites
versus 79 % of large biopharmaceutical companies. At the
same time all company representatives we spoke with
acknowledged the CSR implications of their work on
developing treatments for rare diseases—even those from
companies whose websites did not make this connection.
Thus, while biopharmaceutical companies clearly perceive
their involvement in orphan drug development as a
responsible business activity the majority of these compa-
nies do not take credit for activities in this arena as reflected
in discussions of CSR on their corporate websites. This may
be due to lack of experience and knowledge about the ben-
efits of using CSR strategically.
Table 4 Corporate communication about CSR and orphan drugs: comparison between US and EU biopharmaceutical firms
Questions coded Total (100
firms)
Group 1—US (53 firms) Group 2—EU (47 firms) Comparison of
differences
Percentage of
positive
response
Frequency of
positive
response
Percentage of
positive
response
Frequency of
positive
response
Percentage of
positive
response
Z score Significance
Q1 Discusses CSR 52 27 50.94 25 52.08 -0.0822 ns
Discusses orphan drugs as part of CSR in:
Q2a Vision/mission
(about us tab)
30 14 26.42 16 33.33 -0.4116 ns
Q2b Products/pipeline
(products or R&D
tab)
50 28 52.83 22 45.84 0.4907 ns
Q2c Social responsibility
(Corporate tab)
23 12 22.64 11 22.93 -0.0166 ns
Discusses CSR processes
Q3a Philanthropy 36 24 45.28 12 25.00 1.1787 p \ 0.10
Q3b Sponsorship 37 21 39.62 16 33.33 0.3928 ns
Q3c Volunteerism 25 17 32.08 8 16.67 0.8082 ns
Q3d Code of ethics 44 26 49.06 18 37.50 0.7589 ns
Q3e Quality program 19 10 18.87 9 18.75 0.0067 ns
Q3f Environmental
impact
40 16 30.19 24 50.00 -1.2433 ns
Q3g Health and safety 36 18 33.96 18 37.50 -0.2216 ns
Communicates through:
Q4a Facebook 27 15 28.30 12 25.00 0.1923 ns
Q4b Twitter 19 11 20.75 8 16.67 0.2237 ns
Q4c Blog 5 2 3.77 3 6.25 -0.1392 ns
Q4d Other 19 5 9.43 14 29.17 -0.8875 ns
We calculate Z score to establish the significance of the differences between two independent proportions (US and European firms). We use a
two-tailed test with 95 % confidence intervals
Strategic CSR and Orphan Drug Development 59
123
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Finally, our analysis revealed significant differences
(p \ 0.05) in the discussion of philanthropy, sponsorship,
code of ethics, environmental impact, and health and safety
issues between SMEs and large companies. The large
companies discussed these issues to a greater extent.
Interestingly, no significant differences were found in how
smaller and larger firms interpret their involvement in
orphan drug development and in their choice of commu-
nication channels (e.g., Facebook, Twitter, etc.).
Discussion
Key Findings
In this article, we have explored whether biopharmaceuti-
cal companies consider their involvement in orphan drug
development as a CSR activity and the extent to which they
engage in this activity strategically. Our exploration of
these research questions was guided by reference to Sch-
wartz and Carroll’s (2003) three-dimensional (economic,
legal, and ethical) notion of CSR as well as the emerging
perspective of strategic CSR (Burke and Logsdon 1996;
Porter and Kramer 2006; McWilliams and Siegel 2001),
which is particularly relevant to biopharmaceutical firms’
activities in the orphan drug arena.
In terms of Schwartz and Carroll’s (2003) model, our
findings show that economic motivations for involvement
in the orphan drug space are clearly important for both US-
and EU-based companies, but they are not the only reasons
firms get involved with orphan drugs. All companies that
we interviewed stressed the critical role of technology and
business opportunity that orphan drugs represented as their
primary motivation for deciding to enter the orphan drug
field. Firms readily admitted that the incentives provided
by orphan drug legislation have created important induce-
ments for their involvement in orphan drug development.
This is also apparent from the dramatic increases in orphan
drug development and marketing in the countries that have
passed orphan drug legislation (Yin 2008).
Besides economic responsibility, the majority of bio-
pharmaceutical companies that we interviewed made it
clear that to successfully do business in rare diseases a
company needs to address ethical responsibilities. Because
Table 5 Corporate communication about CSR and orphan drugs: comparison between SMEs and large biopharmaceutical firms (the US and the
EU firms combined)
Questions coded Group 3—SMEs (65 firms) Group 4—large firms (35 firms) Comparison of
differences
Frequency of
positive response
Percentage of
positive response
Frequency of
positive response
Percentage of
positive response
Z score Significance
Q1 Discusses CSR 14 26.42 38 79.17 -3.5367 p \ 0.001
Discusses orphan drugs in:
Q2a Vision/mission (about us
tab)
21 39.62 9 18.75 1.111 ns
Q2b Products/pipeline
(products or R&D tab)
27 50.94 23 47.92 0.2129 ns
Q2c Social responsibility
(corporate tab)
10 18.87 13 27.08 -0.4603 ns
Discusses CSR processes
Q3a Philanthropy 7 13.21 29 60.42 -2.2428 p \ 0.05
Q3b Sponsorship 7 13.21 30 62.50 -2.3533 p \ 0.01
Q3c Volunteerism 5 9.43 19 39.58 -1.2729 ns
Q3d Code of ethics 14 26.42 31 64.58 -2.3736 p \ 0.01
Q3e Quality program 4 7.55 15 31.25 -0.9571 ns
Q3f Environmental impact 9 16.98 31 64.58 -2.5218 p \ 0.01
Q3g Health and safety 7 13.21 29 60.42 -2.2428 p \ 0.05
Communicates through:
Q4a Facebook 5 9.43 22 45.83 -1.5057 ns
Q4b Twitter 3 5.66 16 33.33 -0.9696 ns
Q4c Blog 1 1.89 4 8.33 -0.2251 ns
Q4d Other 10 18.87 10 20.83 -0.1099 ns
We calculate Z score to establish the significance of the differences between two independent proportions (US and European firms). We use a
two-tailed test with 95 % confidence intervals
60 O. Bruyaka et al.
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of the specific economics of orphan drugs (e.g., small
market size, few and geographically distant physicians and
patients, etc.), companies have to interact directly with
pharmacists, doctors, and patients. Because of this personal
interaction they express a greater sense of moral respon-
sibility. Especially smaller companies reflect this by
explicitly stating their involvement in orphan drug devel-
opment in their mission and vision statements, and claim it
to be an integral part of their organizational culture. This is
very much in line with the concept of strategic CSR
developed in the literature. At the same time, many com-
panies underlined that larger pharmaceutical firms who
diversify into the rare disease market through acquisitions
often lack an appropriate organizational culture and spe-
cific capabilities in the field of orphan drug development,
which may undermine their business success. Interestingly,
some of the EU-based companies that we interviewed
described their involvement in orphan drug development as
‘‘glorious’’ and ‘‘from outer space’’ in contrast to the US-
based companies who received economic incentives pro-
vided by the ODA much earlier.
Regarding the results of our analysis of biopharmaceutical
firms’ communication patterns via the Internet, we found that
while many companies discuss CSR on their websites only a
few explicitly recognize their involvement in orphan drug
development as part of their CSR. Nevertheless, when ques-
tioned about this in our interviews all of the company repre-
sentatives we spoke with agreed that there were CSR
implications of their work, even if their websites did not make
this point. Thus, even though managers of biopharmaceutical
companies plainly view their company’s involvement with
orphan drugs as an element of CSR, the majority of these
firms do not highlight this involvement as a CSR activity on
their corporate websites. Thus, it seems that there are potential
strategic CSR benefits particularly in terms of public relations
and goodwill that these firms are not fully exploiting in their
communication patterns. We have several lines of speculation
about this. For SMEs our findings seem to confirm existing
evidence that (1) SMEs are not active in CSR because it is a
luxury good which only the larger corporations can afford
(Spence et al. 2003) and/or because benefits from engaging in
CSR activities are not clear to the firms (Gelbmann 2010), (2)
SMEs view CSR as doing their commercial activities in a
responsible manner rather than viewing it as undertaking
additional activities that may be regarded as charitable in
nature (Fuller and Tian 2006), and (3) SMEs usually do not
explicitly communicate about their CSR and those that do are
not good at it (Gelbmann 2010). To our question why their
company does not explicitly communicate about orphan
drugs on its website, managers of Firm E (small US firm with
negative profits) replied that there was no specific reason for
this omission except that they had never thought of potential
benefits of doing so.
In addition, the infrequent discussion of CSR implica-
tions of orphan drug development on the websites of
companies involved in orphan drug development applies to
large pharmaceutical firms as well. It may be that these
drugs are not very profitable for the firms and they do not
want to do anything to draw attention to their activities in
this arena for fear that this would only encourage patient
groups to put more pressure on them to develop additional
orphan drugs. Another explanation is that big pharmas are
generalists and orphan drug development constitutes only a
small proportion of their product portfolio. That’s why
even though CSR activities of big pharmas may be aligned
with their business activities in general; they are not nec-
essarily focused on orphan drugs.
When comparing our findings on the differences between
US- and EU-based biopharmaceutical companies in the way
they communicate about CSR on their websites, we did not
find many differences to be statistically significant
(p \ 0.10). This is contrary to the findings reported by Mai-
gnan and Ralston (2002) who found that companies in dif-
ferent countries portray different affinity toward the
importance of CSR and how to convey it. Although our
findings in the specific case of orphan drugs confirm that the
US biopharmaceutical companies communicate about their
philanthropic and sponsorship activities more than their EU-
based counterparts do, no significant difference was found in
how the US and the EU companies portray their involvement
in orphan drug development relative to CSR and in the
communication channels (e.g., Facebook, Twitter, Blogs,
etc.) they use. We recognize that these results should be
interpreted with caution because of the limited sample of
firms we analyzed. However, another explanation of our
findings could be that the biopharmaceutical industry is a
global industry. Many companies in our sample are multi-
nationals marketing orphan and conventional drugs both in
the US and Europe. Due to the global nature of their business,
communication differences will tend to disappear. At the
same time, differences between firms small specialized bio-
tech companies and large diversified pharmaceutical com-
panies may persist. This question will require further inquiry.
Contributions and Limitations of the Study
In terms of the contributions to the CSR literature, this
study has reinforced the notion that CSR is a multidi-
mensional construct with economic, legal, and ethical
dimensions existing simultaneously. It also shed light upon
the theoretical linkages between Schwartz and Carroll’s
(2003) model and the concept of strategic CSR (Burke and
Logsdon 1996; Porter and Kramer 2006). In addition, it
demonstrated the usefulness of these theoretical frame-
works in helping understand and critique the activities of
biopharmaceutical firms with respect to orphan drug
Strategic CSR and Orphan Drug Development 61
123
Page 18
development. We showed that despite potential benefits
which, according to the literature on strategic CSR, com-
panies can derive when they tie their CSR activities to their
other business activities, biopharmaceutical firms involved
in orphan drug development do not follow theoretically
developed prescriptive models. Thus, our results reveal a
gap between what firms actually do in terms of CSR as
opposed to what firms should do according to the pre-
scriptions of CSR models (O’Riordan and Fairbrass 2008).
We started to explore this ‘‘puzzle’’ by analyzing the dif-
ferences between US and EU firms. Our results present
new evidence that suggest that regulatory differences may
not account for important differences in companies’ CSR
activities and communication in an industry that is global,
which is the case of the biopharmaceutical industry and the
orphan drug market. The implication for research is that
while we need to control for regulatory context [a missing
variable in many existing studies on CSR according to
Murray and Vogel (1997) and Guthrie and Durand (2008)],
the significance of regulatory differences may vary from
industry to industry. Future research should explore this
finding further. Our study has also brought additional evi-
dence on the differences with respect to CSR activities and
communications of SMEs and large firms.
Furthermore, our findings revealed a potential avenue
for biopharmaceutical firms to leverage their socially
responsible orphan drug development strategically with
specific benefits that this can bring in the domain of rare
diseases. Finally, our findings on the reasons why firms
commit to projects in the area of orphan drugs can inform
both policy making as well as the activities of patient
movements. We discuss the lessons for biopharmaceutical
companies and for policy makers in the following section.
The main limitation of our study pertains to the gener-
alizability of our findings as they are most notably con-
strained by the limited sample of pharmaceutical firms
whose representatives we have been able to interview. It
would be interesting to explore the issues discussed in this
article in other countries with orphan drug legislation such as
Japan and Australia. Further exploration of pharmaceutical
companies’ relations with a key stakeholder group—asso-
ciations of patients with rare diseases (and their advocates)
would also be instructive. In addition, because our research
is mainly based on the companies’ self-representation,
future research could complement our research through the
use of objective data reflecting how biopharmaceutical
companies perform along the CSR dimensions discussed.
Conclusion
We conclude the article by briefly discussing the main
lessons that we hope biopharmaceutical companies and
policy makers can draw from the results of our exploratory
inquiry.
Lessons for Biopharmaceutical Companies
Coming from a strategic CSR perspective, companies can
analyze and adjust their current CSR representation in
regards to their involvement in orphan drug development.
This includes a better alignment of their mission and
engagement as evidenced in their informal discourse with
the formal communications content offered on their web-
sites. As we have shown, about half of the companies in
this market are explicitly involved in some sort of CSR
while less than a third of the firms mention orphan drugs in
this context. This suggests room for improvement in terms
of strategically aligning business activities with CSR (or at
least with the communication of CSR). This would allow
firms to more fully reap the strategic CSR benefits of the
orphan drug development activities in which they are
already engaged. Incremental costs for actually communi-
cating what is ingrained in their culture are low and could
lead to substantial benefits in terms of goodwill.
Lessons for Policy Makers
After the original passage of the ODA in the US the eco-
nomic dimension of orphan drug development has become
somewhat more heavily emphasized. The same is true for
the EU legislation. However, despite being more recently
the enacted, the EU laws have been updated to reflect
recent changes in regards to orphan drug development. US
policy makers should consider a similar update in regards
to the economic incentives and testing guidelines pertain-
ing to rare disease treatments. This notion was a common
theme mentioned by managers with several of the US-
based companies that we have interviewed.
More importantly though, our research based on the
Schwartz and Carroll’s (2003) three dimensions suggests
that policy makers should not stop at giving merely financial
incentives that are legally regulated by rather complex laws.
In fact, sometimes the regulatory burden is so high that firms
decide that it is not worth the effort (as was the case of one
firm foregoing applying for research grants as the work
involved does not merit the payback). Instead, we suggest
that in addition to current practices, policy making needs to
put emphasis on stimulating the moral dimensions and
helping firms achieve the strategic benefits of their CSR
activities in this area (intersection among economic, legal,
and ethical domains of CSR). This means that further support
for increasing awareness of the importance of orphan drug
development is necessary. Not only should emphasis be put
on the direct effects of orphan drug development on the
individual patient groups but also the long-term benefits for
62 O. Bruyaka et al.
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society in terms of technology developments should be
explicated. The development of new technologies seems to
be an important aspect of why firms enter this market.
Highlighting this as a benefit to society from a policy
standpoint, in turn allows firms to capitalize on it in their
CSR profile, enhancing their strategic potential. Thus, to the
extent that government can help firms derive strategic CSR
benefits from their orphan drug development activities these
activities will be encouraged resulting in benefits both to the
firm and to society. One way to do this is by acknowledging
the accomplishments of firms that make significant contri-
butions in the development of orphan drugs and the treatment
of rare diseases. This could take the form of separate gov-
ernmental awards such as those given by NORD for out-
standing corporate achievements in the area of orphan drug
development. Alternatively, government agencies could
jointly sponsor awards with NORD and similar organiza-
tions. Likewise, government could provide further benefits
for involvement in the orphan drug space by extending the
exclusivity period for marketing of rare disease drugs or
treatments especially for those addressing ultra-rare condi-
tions. It further seems just a matter of common sense to
update the rare disease threshold numbers in the United
States as is done automatically in the European Union.
We hope that our research will stimulate and guide policy
making in the public sector as well as the development,
implementation, and communication of strategic CSR
activities in biopharmaceutical firms with respect to orphan
drugs. We view this as a win–win proposition for society and
biopharmaceutical firms as well as their various other
stakeholders, leading in a more socially beneficial direc-
tion—without an increase in regulatory burden on firms or
tax burden on citizens and at the same time providing
increased availability and access to orphan drugs for patients.
Appendix
Interview Guide
Part 1: Personal Involvement in Orphan Drug
Development
1. Please, describe your position/occupation at your
organization. What is your involvement with orphan
drug development? How long have you been with the
company?
2. Why are you involved in orphan drug development?
Part 2: Company
3. What explains your company’s involvement in orphan
drugs development?
a. Expectations of superior profits?
b. Moral and/or charitable motives?
c. How important is the Orphan Drug Act in your
considerations to pursue orphan drug development?
4. How is orphan drug development organized in your
company?
a. How is it different from R&D of traditional drugs?
b. Who do you collaborate with in your orphan drug
research?
c. What is the nature of your interaction with patient
associations?
d. What is the nature of your interactions (if any)
with other pharmaceutical companies regarding
orphan drugs?
e. What is the nature of your interactions with the
FDA?
f. How do you choose projects to pursue?
g. Where do you get ideas about what projects to
look at?
h. How and where do you conduct clinical trials on
orphan drugs? How different are clinical trials for
orphan drugs versus traditional drugs?
5. What would you say is the biggest administrative/
bureaucratic hurdle in orphan drug development?
6. Has your company ever undertaken the development of a
drug that qualified for orphan drug designation? Would
this drug have been developed without the Orphan Drug
Act? Was this drug ultimately profitable to the company?
7. Are there benefits other than economic associated with
orphan drug development? Which ones? Does your
company get these benefits?
Part 3: Industry & Legislation & International
8. How would you evaluate economic potential of orphan
drug development? Is it a lucrative activity?
9. Are there many competitors/pharmaceutical compa-
nies involved in orphan drug development?
10. How would you evaluate orphan drug development
relative to a firm’s corporate social responsibility? Do
you think pharmaceutical companies in general, and
your company in particular, have moral responsibility
to develop drugs for rare diseases even if their
economic potential is uncertain?
11. In your opinion, what are current and emerging trends
in orphan drug development in the US?
12. If you could change some policy, what regulation
would you alter? OR If some components of the
Orphan Drug Law could be changed to better
promote orphan drug development what would you
recommend?
Strategic CSR and Orphan Drug Development 63
123
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13. How are they different from the conditions of orphan
drug development in Europe?
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