Corporate Responsibility

Aim: Students are to demonstrate a sound understanding of the three viewpoints on corporate responsibility: the classical economic view (exemplified by Milton Friedman), the socio-economic view (the duty to prevent harm within the Kew Garden Principles) and the broad social view (the duty to contribute to society within the KGP). Students should also demonstrate knowledge of the literature on corporate responsibility (including the required readings for this topic shown in the Companion) and its application to business practice.

Question Notes :Read the case study, Drug Company Monopolies and Profits (see below).
Firstly, what do the three viewpoints of corporate responsibility (CR) imply with respect to the ethical obligations of the pharmaceutical companies and the extent to which they met these obligations?

Secondly, review the website of the pharmaceutical company, Pfizer, (http://www.pfizer.com/home/) or Johnson & Johnson http://www.jnj.com/responsibility/esg and comment on Pfizer’s or Johnson & Johnson’s initiatives regarding corporate responsibility. Your comments should be of an analytical nature, not descriptive. There are no marks for simply re-tying passages from the website. Your analysis should consider how well Pfizer or Johnson & Johnson meet the responsibilities advocated by the three viewpoints (and literature) on CR through their corporate ethics programs as advocated in their corporate responsibility reports and websites.

Finally, given your review of the literature and analysis of the case, what do you think is the social responsibility of business?

Notes:
Your application of theory to business practice must demonstrate strong skills in analysis. Application requires more than simply describing an example.
you must use references in your essay and you must cite those references both in the text and in an end reference list. Please use the author-date method. Be sure to express the ideas you read about in your own words, but acknowledge their source by citing the reference.
Your essay should have a brief introduction (an introduction should be more than a summary in the future tense) and a solid conclusion (note a conclusion is not a summary in the past tense). The conclusion can relate back to the introduction.
Be sure to read the required readings for the topic of CSR/CR and to make use of the recommended reading as well as the numerous articles as well as the numerous journal articles

Case study:
Drug Company Monopolies and Profits
Sources:
Velasquez, M.G. 2012. Business Ethics: Concepts & Cases (7th ed.). Pearson Education Inc., Upper Saddle River, N.J. (p212).
http://www.guardian.co.uk/society/2006/nov/14/internationalaidanddevelopment.medicineandhealth (accessed January 17, 2013).
Drug companies in the United States are granted a patent on any new pharmaceutical drug they develop, which gives them a monopoly on that drug for 20 years. Not surprisingly, high monopoly profits (i.e., profits well beyond the average rate of profits in other industries) are characteristic of the pharmaceutical industry. In a 2003 study entitled The Other Drug War II, Public Citizen’s Congress Watch noted that during the 1970s and 1980s, drug companies in the Fortune 500 had average profit rates (as a percent of revenues) that were double the average for all other industries in the Fortune 500. During the 1990s, drug company profit rates averaged 4 times the average profit rates of all other industries, and during the first years of the twenty-first century, drug company profit rates were about 3 times the rates of other industries.
According to the U.S. Census Bureau’s Quarterly Financial Reports, in the first quarter of 2007 and 2008, average drug company profit rates were about 3 times the average for all other manufacturing companies. In the first quarter of 2009, average drug company profit rates were close to 7 times the average for all other manufacturing companies, and in the first quarter of 2010, they averaged close to 3 times the average of other manufacturing companies. In 2010, Johnson & Johnson made a profit of $13.3 billion, the highest in the U.s. pharmaceutical industry.
Drug companies say they need these profits to cover the costs of research for new drugs. But while drug companies put only 14 percent of their revenues into research, they siphon off 17 percent of their revenues into dividends they hand out to shareholders and plow 31 percent into advertising and administration.
A study of drug manufacturing costs (see www.rense.com/general54/preco.htm) found that prescription drugs have mark-ups of 5,000 percent, 30,000 percent and 500,000 percent over the cost of their ingredients. The ingredients in 100 tablets of Norvasc, which sold for $220, cost 14 cents; of Prozac, which sold for $247. 11 cents; of Tenormin, which sold for $104, 13 cents; of Xanax, which sold for $136, 3 cents and so on.
The UK Guardian newspaper reported that people in developing countries are needlessly dying because drug companies and the governments of rich countries are blocking the developing world from obtaining affordable medicines. The reports states that Indian generics firms make most of the cheap drug cocktails that are now being rolled out to people with HIV in Africa and are keeping more than a million people alive. They brought the price of a basic three-drug cocktail down from $10,000 (£5,250) a year to less than $150 (£79). However, new Aids drugs will soon be needed because the virus will become resistant to the basic ones now in use – as has happened in the EU and the US. Those newer Aids drugs, together with drugs for cancer and diabetes, are under patent.
The US has pursued its own free trade agreements with developing countries, tying them into tight observance of patent rights. A report by Oxfam says that, “the US has also pressured countries for greater patent protection through threats of trade sanctions” and that drug firms are fighting to have patents observed. For example, Pfizer is challenging the Philippines government in a bid to extend its monopoly on Norvasc, a drug pressure drug. Novartis is engaged in litigation in India to enforce a patent for Glivec, a cancer drug, which could save many lives if it were available at generic prices and three-quarters of HIV drugs are still under monopoly and unaffordable in poor countries. Oxfam also reported that more than 75% of those who need HIV treatment urgently in developing countries, are still not getting it. Only 8% of children with HIV are on drugs, which cost four times more than those for adults.
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