10.1 Balancing profit motives with public health needs

Healthcare companies face a tough balancing act between making money and helping people. They need to turn a profit to stay afloat, but also have a duty to improve public health. It's not always easy to do both at the same time.

This section looks at ways companies try to be ethical while still making money. We'll check out different strategies they use to develop new treatments, make drugs more affordable, and work with others to solve big health problems.

Ethical Frameworks

Corporate Social Responsibility and Stakeholder Theory

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• Corporate social responsibility (CSR) requires companies to balance profit-seeking with societal obligations
  • Encompasses economic, legal, ethical, and philanthropic responsibilities
  • Encourages firms to consider long-term impacts on communities and environment
• Stakeholder theory expands focus beyond shareholders to all groups affected by company actions
  • Includes employees, customers, suppliers, local communities, and environment
  • Promotes considering diverse interests in decision-making processes
• Both frameworks emphasize ethical business conduct and sustainable practices
  • Can lead to improved company reputation and customer loyalty
  • May result in short-term profit sacrifices for long-term stability and growth

Health Economics and Resource Allocation

• Health economics analyzes efficiency, effectiveness, and value in healthcare
  • Studies production, distribution, and consumption of health and healthcare
  • Aims to optimize resource allocation for maximum societal benefit
• Key concepts in health economics include:
  • Opportunity cost: value of next-best alternative foregone
  • Cost-effectiveness analysis: compares relative costs and outcomes of different interventions
  • Quality-adjusted life year (QALY): measure combining quantity and quality of life
• Challenges in applying health economics to pharmaceutical industry:
  • Balancing drug development costs with affordable pricing
  • Addressing market failures in areas with low profit potential
  • Incorporating societal value of treatments into pricing decisions

Addressing Unmet Needs

Orphan Drugs and Rare Disease Research

• Orphan drugs target rare diseases affecting small patient populations
  • Defined in US as conditions affecting fewer than 200,000 people
  • European Union defines rare diseases as affecting less than 1 in 2,000 people
• Challenges in orphan drug development:
  • Limited market size makes traditional profit models difficult
  • High research and development costs relative to potential revenue
  • Difficulty in recruiting patients for clinical trials
• Incentives for orphan drug development:
  • Tax credits for clinical research expenses
  • Extended market exclusivity periods
  • Fast-track regulatory review processes
• Success stories in orphan drug development:
  • Imatinib for chronic myeloid leukemia
  • Enzyme replacement therapies for lysosomal storage disorders

Neglected Diseases and Global Health Initiatives

• Neglected diseases primarily affect developing countries and low-income populations
  • Includes tropical diseases (malaria, dengue fever) and poverty-related conditions
  • Often lack sufficient research funding due to limited profit potential
• Strategies to address neglected diseases:
  • Product Development Partnerships (PDPs) combining public and private resources
  • Push mechanisms: grants and subsidies for research and development
  • Pull mechanisms: advanced market commitments and prize funds
• Global health initiatives targeting neglected diseases:
  • WHO Neglected Tropical Diseases program
  • Gates Foundation's Grand Challenges in Global Health
  • Drugs for Neglected Diseases Initiative (DNDi)

Access Programs and Medication Affordability

• Access programs aim to improve availability and affordability of essential medicines
  • Patient assistance programs provide free or discounted medications
  • Copay assistance helps cover out-of-pocket costs for insured patients
• Strategies to enhance medication access in developing countries:
  • Voluntary licensing agreements with generic manufacturers
  • Technology transfer to build local production capacity
  • Differential pricing based on country income levels
• Challenges in implementing access programs:
  • Balancing program costs with company profitability
  • Ensuring sustainable long-term access beyond initial programs
  • Preventing product diversion to higher-income markets

Pricing and Partnerships

Tiered Pricing Strategies and Market Segmentation

• Tiered pricing involves offering different prices for the same product in different markets
  • Based on factors such as country income level, healthcare system, and ability to pay
  • Aims to maximize access while maintaining profitability
• Implementing tiered pricing strategies:
  • Intra-country tiering: different prices for public and private sectors
  • Inter-country tiering: prices vary across countries based on economic indicators
  • Indication-based pricing: different prices for different uses of the same drug
• Challenges in tiered pricing:
  • Preventing parallel trade between markets with different price levels
  • Managing perceptions of price discrimination
  • Accurately assessing ability to pay in diverse markets

Public-Private Partnerships and Collaborative Innovation

• Public-private partnerships (PPPs) combine resources and expertise from multiple sectors
  • Can involve government agencies, pharmaceutical companies, non-profits, and academia
  • Aim to address complex health challenges that cannot be solved by one sector alone
• Types of public-private partnerships in healthcare:
  • Research collaborations to accelerate drug discovery (Innovative Medicines Initiative)
  • Product development partnerships for neglected diseases (Medicines for Malaria Venture)
  • Health system strengthening initiatives (Global Fund to Fight AIDS, Tuberculosis and Malaria)
• Benefits of public-private partnerships:
  • Shared risks and resources in high-cost, high-risk projects
  • Combining complementary skills and knowledge
  • Potential for greater impact and scalability of solutions
• Challenges in managing public-private partnerships:
  • Aligning diverse stakeholder interests and expectations
  • Ensuring transparency and accountability in collaborative efforts
  • Navigating intellectual property rights and benefit-sharing agreements