Skip to main content

Advertisement

SpringerLink
Log in

Extraordinary Pricing of Orphan Drugs: Is it a Socially Responsible Strategy for the U.S. Pharmaceutical Industry?

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

The PRIME Institute of the College of Pharmacy, University of Minnesota, recently released preliminary research findings indicating a trend of extraordinary pharmaceutical industry pricing of drug products in the United States (U.S.). According to researchers at the PRIME Institute, such extraordinary price increases are defined as any price increase that is equal to, or greater than, 100% at a single point in time. In some instances, PRIME Institute researchers found that drugs exhibiting extraordinary price increases are categorized as “orphan drugs” (or blood-related biologic treatments) and often life-saving or life-sustaining for treating the cause or symptoms of diseases affecting fewer than 200,000 people in the U.S., or where there is prevalence of less than 5 per 10,000 people afflicted with a disease or symptoms in the community. Because of extraordinary price increases for orphan drugs – some exceeding 1000% at a single point in time – this article addresses two interrelated questions: Are extraordinary orphan drug price increases socially responsible behavior? If so, are the pharmaceutical industry's policies providing orphan drug access to American consumers in dire need of available life-sustaining and life-enhancing pharmaceuticals considered “socially responsible” behavior? The author concludes, after an interdisciplinary analysis of the legal, economic, sociopolitical, and ethical dimensions of orphan drug pricing, that they are not socially responsible – unless justified by cost and availability of health care marketplace/patient options. Furthermore, the author recommends a socially responsible industry strategic approach to insure that patients ultimately receive – regardless of cost – timely access to life-saving and life-sustaining orphan drugs.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Appleby, J.: 2008, ‘Drug Prices up 100% – or Higher’, USA Today, August 8–10.

  • Ashburn, T. T. and K. B. Thor: 2004, ‘Drug Repositioning: Identifying and Developing New Uses for Existing Drugs’, Nature Reviews Drug Discovery, 3, 673–683.

    Article  Google Scholar 

  • Baron, D.P.: 1995a, ‘The Non-Market Strategy System’, Sloan Management Review, 37, 73-85.

    Google Scholar 

  • Baron, D.P.: 1995b. ‘Integrated Strategy: Market and Nonmarket Components’, California Management Review, 37, 47-65.

    Google Scholar 

  • Bayles, M.: 1990, Procedural Justice: Allocating to Individuals. (Kluwer: Dordrecht).

    Google Scholar 

  • Bentham, J 1948 An Introduction to the Principles of Morals and Legislation. Hafner: New York NY

    Google Scholar 

  • Carey, J.: 2001, ‘What’s a Fair Price for Drugs?’, Business Week, April 30. http://www.businessweek.com/print/magazine/content/01_18/b3730093.htm?chan=mz. Accessed 23 Nov 2008.

  • Carpinelli, M. M. and S. W. Schondelmeyer: 2008, Extraordinary Price Increases in the Pharmaceutical Market. Statement Presented Before the Joint Economic Committee, United States Congress, Special Hearing: Small Market Drugs, Big Price Tags: Are Drug Companies Exploiting People with Rare Diseases?, July 24, Washington, DC.

  • Carroll, A.B.: 1979. ‘A Threee-Dimensional Conceptual Model of Corporate Performance’, Academy of Management Review, 4(4), 497-505.

    Article  Google Scholar 

  • Carroll, A.B.: 1999, ‘Corporate Social Responsibility: Evolution of a Definitional Construct.’. Business & Society, 38(3), 268-295.

    Article  Google Scholar 

  • Cavanagh, G. F. 2006 American Business Values: A Global Perspective Fifth Edition. Pearson Prentice Hall: Upper Saddle River NJ.

    Google Scholar 

  • Chong, C. R. and D. J. Sullivan: 2007, ‘New Uses for Old Drugs’, Nature, 448, 645–646.

    Article  Google Scholar 

  • Cool, K. and I. Dierickx: 1993, ‘Rivalry, Strategic Groups, and Firm Profitability’, Strategic Management Journal, 14, 47-59.

    Article  Google Scholar 

  • Davidoff, F.: 2001, ‘The Heartbreak of Drug Pricing’, Annals of Internal Medicine, 134(11), 1068-71.

    Google Scholar 

  • DiMasi, J.A. and H.G. Grabowski: 2007, ‘The Cost of Biopharmaceutical R&D: Is Biotech Different?’, Managerial and Decision Economics 28, 469-79.

    Article  Google Scholar 

  • Donaldson, T. and T.W. Dunfee: 1994, ‘Toward a Unified Conception of Business Ethics: Integrative Social Contracts Theory’, Academy of Management Review, 19(2), 252-284.

    Article  Google Scholar 

  • Donaldson, T. and T.W. Dunfee 1999 Ties that Bind. Harvard Business school: Boston MA.

    Google Scholar 

  • Dunkle, M. and M. Hardin: 2009, Telephone Conversation with Mary Dunkle, Vice-President of Communications, National Organization for Rare Disorders, Inc., and Maria Hardin, Vice-President of Patient Services, National Organization for Rare Disorders, Inc., on ‘Orphan Drug Access by Patients Afflicted with Rare Diseases’, January 23, Danbury, CT.

  • Elkington, J.: 1994, ‘Towards the Sustainable Corporation: Win-Win-Win Business Strategies for Sustainable Development’, California Management Review, 36(2), 90-100.

    Google Scholar 

  • Federal Trade Commission: 2008, ‘FTC Sues Ovation Pharmaceuticals for Illegally Acquiring Drug Used to Treat Premature Babies with Life Threatening Heart Conditions’, Press Release, December 16. Washington, DC.

  • Fombrun, C. 1996 Reputation: Realizing Value from the Corporate Image. Harvard University Press: Boston MA.

    Google Scholar 

  • Gebhart, F.: 2004, ‘How do Manufacturers Set Drug Prices? Here’s a look’, Drug Topics, July 12, http://drugtopics.modernmedicine.com/drugtopics/content/printContentPopup.jsp?id=107970. Accessed 23 Nov 2008.

  • Gericke, C.A., A. Riesberg, and R. Busse: 2005, ‘Ethical Issues in Funding Orphan Drug Research and Development’, Journal of Medical Ethics 31,164-68.

    Article  Google Scholar 

  • Global Alliance for TB Drug Development: 2002, The Economics of TB Drug Development (Global Alliance for TB Drug Development, New York, NY).

  • Grabowski, H. G., J. A. Vernon and J. G. Grabowski: 2002, ‘Returns on Research and Development for 1990s New Drug Introduction’, Pharmacoeconomics 20, 11–29.

    Article  Google Scholar 

  • Haffner, M, A., J. Torrent-Farnell, and P. D. Maher: 2008, ‘Does Orphan Drug Legislation Really Answer the Needs of Patients?’, Lancet 371, 2041-44.

    Article  Google Scholar 

  • Kaiser Daily Health Policy Report: 2008, ‘Lawmakers Criticize Pharmaceutical Companies for Large Price Increases for Brand-Name Medications for Rare Diseases’, Kaisernetwork.org, July 25, http://www.kaisernetwork.org/daily_reports/print_report.cfm?DR_ID=53507&dr_cat=3. Accessed 1 Jan 2009.

  • Kaiser Family Foundation: 2008, ‘Prescription Drug Trends’, The Henry J. Kaiser Family Foundation, Menlo Park, CA, September.

  • Kaiser Public Opinion Spotlight: 2008, ‘Views on Prescription Drugs and the Pharmaceutical Industry’, April, http://www.kff.org/spotlight. Accessed 25 Jan 2009.

  • Kak, A.: 2008, ‘The Eternal Orphan’, Express Pharma, August 31, http://www.expresspharmaonline.com/20080831/research01.shtml. Accessed 5 Dec 2008.

  • Klobuchar, A.: 2008a, ‘Klobuchar Calls for Action to Stop Price-Gouging in Specialized Prescription Drugs’, Office of U.S. Senator Amy Klobuchar, Transcript of Speech, July 25. http://klobuchar.senate.gov/multimediagallery_detail.cfm?id=301410&. Accessed 30 Dec 2008.

  • Klobuchar, A.: 2008b, ‘Klobuchar’s Concerns about Price-Gouging Lead to Federal Action against Pharmaceutical Company’, Office of U.S. Senator Amy Klobuchar, Press Release, December 16. http://klobuchar.senate.gov/newsreleases_detail.cfm?id=305999&. Accessed 1 Jan 2009.

  • Kolchinsky, P.: n.d., ‘Drug Pricing Principles’, BioProcess International, http://www.pharmalicensing.com/public/articles/view/1066849957_3f96d6a52730a. Accessed 31 Dec 2008.

  • Lofing, N.: 2009, ‘UCD Leads Effort to Find New Uses for Old Drugs’, The Sacramento Bee, February 12, http://www.sacbee.com/latest/story/1619847.htm. Accessed 22 May 2009.

  • Lyons, D.: 1979, ‘Rights, Claimants, and Beneficiaries’, in D. Lyons (ed.), Rights (Wadsworth Publishing, Belmont, CA), pp. 58-77.

    Google Scholar 

  • Maeder, T.: 2003, ‘The Orphan Drug Backlash’, Scientific American, 288, 80-87.

    Article  Google Scholar 

  • Maitland, I.: 2002, ‘Priceless Goods: How Should Life-Saving Drugs be Priced?’, Business Ethics Quarterly, 12(4): 451-80.

    Article  Google Scholar 

  • Mettner, J.: 2008, ‘Captive Markets’, Minnesota Medi- cine, November, http://www.minnesotamedicine.com/CurrentIssue/PulseCaptiveNovember2008/tabid/2707/Default.aspx. Accessed 16 Nov 2009.

  • Mill, J. S 1957 Utilitarianism. Bobbs-Merrill: Indianapolis IN.

    Google Scholar 

  • National Organization for Rare Disorders, Inc.: 2009a. ‘Patient Assistance Programs’, http://www.rarediseases.org/programs/medication. Accessed 22 Jan 2009.

  • National Organization for Rare Disorders, Inc.: 2009b. Healthcare Access Issues for the Rare Disease Community. Power Point Presentation Sent via E-Mail to Author by Maria Hardin, Vice-President of Patient Services, National Organization for Rare Disorders, Inc., on January 30, 2009.

  • NeedyMeds.org: 2009, ‘Program List’, http://www.needymeds.org/index.shtml. Accessed 23 Jan 2009.

  • Oregon Health & Science University: 2007, ‘Old Drugs Need ‘Repurposing’ for New Uses, Physician Says’, Press Release, October 31, http://www.ohsu.edu/ohsuedu/newspub/releases/103107drugs.cfm. Accessed 22 May 2009.

  • Ostas, D.T.: 1997, ‘Ethics of Pricing’, in P.H. Werhane and R.E. Freeman (eds.), Encyclopedic Dictionary of Business Ethics (Blackwell Publishers, Inc., Malden, MA), pp. 266-268.

    Google Scholar 

  • Pabst, J.R.: 2001, ‘Medicaments Orphelins: Quelques Aspects Juridiques, Ethiques et Economiques’, Rev Epideminol Sante Publique 49, 387-96.

    Google Scholar 

  • Pharmaceutical Business Review Online: 2008, April, ‘Pharma R&D Stimulates Global Economy’, http://www.pharmaceutical-business-review.com/article_news_print?aspguid=A9D1530B-604A-4DF3-89FE-819EBD6277AD&title=Pharma%20R%26D%20. Accessed 23 Nov 2008.

  • Pharmaceutical Research and Manufacturers of America: 2008a, Pharmaceutical Industry Profile 2008, March, Washington, DC.

  • Pharmaceutical Research and Manufacturers of America: 2008b, What Goes into the Cost of Prescription Drugs? … and Other Questions About Your Medicines, April, Washington, DC.

  • Pharmaceutical Research and Manufacturers of America: 2009, ‘Partnership for Prescription Assistance’, https://www.pparx.org/Intro.php. Accessed 18 Jan 2009.

  • PhRMA: 2008, ‘America’s Pharmaceutical Research and Biotechnology Companies are Helping Patients Conquer Rare Diseases’, Fact Sheets, http://www.phrma.org/publications/fact_sheets/rare_diseases_backgrounder/. Accessed 23 Nov 2008.

  • Porter, M.E. and M.R. Kramer: 2006, ‘Strategy and Society: The Link Between Competitive Advantage and Social Responsibility’, Harvard Business Review, 84(12), 78-92.

    Google Scholar 

  • Rawls, J.: 1971, A Theory of Justice. (The Belknap Press of Harvard University, Cambridge, MA).

    Google Scholar 

  • Rosin, L. J.: n.d., ‘Are Pharmaceutical Prices Just? A Discussion of Business, Values, and Ethics’, BioProcess International. http://www.pharmalicensing.com/public/articles/view/1080562872_406814b87105d. Accessed 23 Nov 2008.

  • Samson, K.: 2008, ‘Orphan Economics: The Downside of Supply-Side Pharmacology’, Annals of Neurology, September 18, http://annalsofneurology.wordpress.com/2008/09/18/orphan-economics-the-downside-of-supply-side-pharmacology. Accessed 6 Dec 2008.

  • Staton, T.: 2008, ‘Congress Decries Drug Price-Gouging’, FiercePharma, July 28, http://fiercepharma.com/node/9406/print. Accessed 31 Dec 2008.

  • The Associated Press: 2008, ‘Drug Price Hikes Draw Scrutiny from Lawmakers’, MSNBC.com, August 8, http://www.msnbc.msn.com/id/26097240/. Accessed 16 Nov 2008.

  • The Economist: 2008, ‘Just Good Business’, January 19, pp. 3–6.

  • U.S. Department of Health and Human Services: 2005, ‘Prescription Drug Plan Resources’, Centers for Medicare & Medicaid Services, December 20, http://www.cms.hhs.gov/PrescriptionDrugCovGenIn/03_Resources.asp. Accessed 25 Jan 2009.

  • U.S. Department of Health and Human Services: 2009, ‘Medicaid Eligibility’, Centers for Medicare & Medicaid Services, January 7, http://www.cms.hhs.gov/MedicaidEligibility/. Accessed 25 Jan 2009.

  • U.S. Food and Drug Administration: 2008a, ‘OOPD Program Overview’, http://www.fda.gov/orphan/progovw.htm. Accessed 6 Dec 2008.

  • U.S. Food and Drug Administration: 2008b, `Celebrating the Successes of the Orphan Drug Act’, February 8, http://www.fda.gov/consumer/updates/oda020808.html. Accessed 4 Dec 2008.

  • Verschoor, C. C.: 2007, ‘Ethics Issues Still Dog Pharmaceutical Industry’. Strategic Finance, May, 17, 18 & 22.

    Google Scholar 

  • Werner, W.B. and D.B. Chandler 2005 Strategic Corporate Social Responsibility: Stakeholders in a Global Environment. Sage: London UK.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. University of Michigan-Flint, Flint, U.S.A.

    Thomas A. Hemphill

Authors
  1. Thomas A. Hemphill
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Thomas A. Hemphill.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Hemphill, T.A. Extraordinary Pricing of Orphan Drugs: Is it a Socially Responsible Strategy for the U.S. Pharmaceutical Industry?. J Bus Ethics 94, 225–242 (2010). https://doi.org/10.1007/s10551-009-0259-x

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-009-0259-x

Keywords

Search

Navigation