X5RL Pharmaceutical IP Dilemma: Profit vs. Equitable Access, CSR, GSK and Insulin Producers (Discussion Example)
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Discussion: Profit versus ethics in pharmaceutical intellectual property
The context of this Discussion is the apparent clash of profit versus ethics relating to critical types of intellectual property (IP). The dilemma is to what extent should businesses prioritize profit and the promotion of innovation through IP protection over advancing the greater good for social welfare and sustainability (people and planet).
Scenario: Imagine X5RL, a pharmaceutical company, develops a groundbreaking, patented treatment for a widespread chronic disease. X5RL sets a high price on the treatment to recover its R&D costs, fund future innovations, and reap profits. However, many patients, especially in low-income regions, cannot afford the treatment due to lack of, or insufficient, insurance coverage. As a result, a significant measure of the population is foreclosed from the lifesaving treatment.
Post a cohesive, substantive paragraph that incorporates the following (do NOT list as a “Q & A”):
- Is the public’s financial issue X5RL’s problem? Should it be?
- How can this company integrate CSR principles into its strategy to profit from its IP and also provide equitable access, and what ethical considerations should guide this approach?
- (HINT: Compare GSK and insulin producers in developing your thoughts.)
Tiered pricing, LDC price cap at 25% of developed-world price, patent pool, 20% of LDC profits reinvested locally
A century-old drug, rising list prices, rationing by patients, then 70–78% price cuts in 2023 under public and political pressure
Model discussion post
Original example for study purposes (one cohesive paragraph, about 480 words).
The public’s inability to pay is not legally X5RL’s problem, but it is ethically and strategically its problem, and it should be. A patent is not a natural right; it is a time-limited monopoly granted by society to reward innovation for the public good, so a company that uses that monopoly to place a lifesaving treatment beyond the reach of most patients undermines the social bargain that justifies its IP. Friedman’s (1970) view that a firm’s only social responsibility is to increase profits within the rules of the game ignores the fact that pharmaceutical firms operate in a market where demand is a matter of life and death and where governments can, and do, change the rules through price controls and compulsory licensing permitted under the WTO’s Doha Declaration. The contrasting experiences of GSK and the major insulin producers show why access is in a company’s own interest. In 2009, GSK CEO Andrew Witty pledged to cap prices of patented medicines in the least developed countries at no more than 25% of developed-world prices, to reinvest 20% of profits earned there in local health infrastructure and to place patents for neglected tropical diseases into a pool for others to use (PharmaTimes, 2009). GSK typically ranked first in the Access to Medicine Index, only recently being overtaken by Novartis (Access to Medicine Foundation, 2024), and earned reputational capital without abandoning profitability in wealthy markets. By contrast, Eli Lilly, Novo Nordisk and Sanofi, which dominate the global insulin market, raised U.S. list prices for a century-old drug whose discoverers sold the patent for a token $1, leading patients to ration insulin, triggering congressional investigations and producing a reputational crisis; only in March 2023, under public and political pressure, did they cut list prices by up to 70–78% and cap monthly out-of-pocket costs at $35 (ABC7 News, 2023). For X5RL, integrating CSR means embedding access into its business model rather than treating it as philanthropy. Using Carroll’s (1991) pyramid, the company can meet its economic responsibility by charging higher prices in wealthy markets while fulfilling ethical and philanthropic responsibilities through tiered or income-based pricing, voluntary licenses to generic manufacturers through the Medicines Patent Pool, patient assistance programs, partnerships with governments and NGOs and transparent reporting of R&D costs. This approach reflects Porter and Kramer’s (2011) concept of creating shared value: expanding access opens new markets, builds trust with regulators and strengthens the company’s license to operate. Several ethical considerations should guide these decisions: justice, ensuring that ability to pay does not determine who lives; utilitarian concern for maximizing health outcomes while preserving incentives for future cures; stakeholder obligations to patients, employees, investors and society (Freeman, 1984); and transparency, so pricing decisions are explained rather than hidden. Ultimately, X5RL can protect its IP and earn a fair return, but if it ignores equitable access, it risks the backlash the insulin makers faced; if it follows GSK’s example, it can show that profit and the greater good are not mutually exclusive.
References
ABC7 News. (2023, March 17). Sanofi to cut U.S. insulin prices by up to 78%, capping cost at $35. https://abc7news.com/sanofi-insulin-price-cut-lantus/12968448/
Access to Medicine Foundation. (2024, November 21). Novartis dethrones GSK to top Access to Medicine Index 2024. https://accesstomedicinefoundation.org/in-the-media/novartis-dethrones-gsk-to-top-access-to-medicine-index-2024
Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), 39–48. https://doi.org/10.1016/0007-6813(91)90005-G
Freeman, R. E. (1984). Strategic management: A stakeholder approach. Pitman.
Friedman, M. (1970, September 13). The social responsibility of business is to increase its profits. The New York Times Magazine.
PharmaTimes. (2009, February 16). GSK lays out plans to seriously tackle disease in developing world. https://pharmatimes.com/?p=48451
Porter, M. E., & Kramer, M. R. (2011). Creating shared value. Harvard Business Review, 89(1/2), 62–77.
GSK vs. insulin producers at a glance
| Dimension | GSK (access strategy announced 2009) | Insulin producers (Lilly, Novo Nordisk, Sanofi) |
|---|---|---|
| Pricing | Tiered by country income; LDC price cap at 25% of developed-world price | High U.S. list prices for decades; cuts of 70–78% in 2023 |
| Use of IP | Patent pool for neglected tropical diseases; open research at Tres Cantos | Incremental product changes and market concentration limited competition |
| Community investment | 20% of LDC profits reinvested in local health infrastructure | Patient assistance and $35 cap programs, mostly after public pressure |
| Driver | Proactive strategy and leadership choice | Reactive response to rationing deaths, media, Congress and the Inflation Reduction Act |
| Reputation | Typically first in the Access to Medicine Index | Became a symbol of drug-pricing injustice in the U.S. |
Tips for your post
- Write one flowing paragraph, as instructed; use transitions (“By contrast,” “For X5RL,” “Ultimately”) instead of answering questions one by one.
- Take a clear position on whether access is X5RL’s problem, then support it with the GSK and insulin comparison.
- Name a CSR framework (Carroll’s pyramid, shared value or stakeholder theory) and at least one ethical principle.
- Add your course readings as citations if your instructor requires them.
Related reading: AI transparency and corporate responsibility, health promotion and social determinants and the connection between health and wealth.
