Documente Academic
Documente Profesional
Documente Cultură
Comparing
the business models of Cuban
and US pharma.
Authors
Dr Denise Baden
Associate Professor, Southampton Business School, University of Southampton, UK
Dr Courtney Davis
Senior Lecturer, Department of Social Science, Health and Medicine, Kings College
London, UK
Dr Stephen Wilkinson
International Institute for the Study of Cuba, Hertfordshire, UK
Outline of paper
Argument that as long as the purpose of business is accepted (particularly in US and
UK) to be profit maximisation we have little chance of reconciling the tensions
between sustainability, ethical challenges, and profitability.
Historical of justification for profit maximisation Adam Smith
Values to what end are we exerting our efforts? We argue that the prevailing wisdom
of profit maximization as the ultimate goal of economic endeavour - a view typified
by the famous statement by Milton Friedman that the social responsibility of business
is to make a profit (Friedman, 1970) - has confounded the means with the end. Indeed,
the raison dtre for this view, dating back from Adam Smiths Wealth of Nations
(1776/1976) was that profit maximization was for the benefit of all society. Therefore
the goal of profit maximization is historically subordinate to the goal of societal
welfare. Thus, the moment that profit maximization comes into conflict with social
good (e.g. due to externalities of business) then the means have become mistaken with
the ends.
There is a sense in which the wider institutions governing society, setting its
norms and standards, and entrusted with the goals of pursuing the common good,
have also fallen into the trap of mistaking the means for the ends, accepting too
uncritically the idea that business self-interest maximization serves the interest of all
society. This mind-set or perceived wisdom that profit is the ultimate end goal is
apparent even in articles and phrases that come from the proponents of CSR (Baden &
Harwood, 2013). Kreps and Monin(2011) for example highlight the popularity of the
phrase doing well by doing good which by its use of the preposition by indicates
that the goal of doing good is subordinate to the goal of doing well. Similarly, in
therecent Rio Declaration, it is claimed that: For more than 100 years, management
education has sought to support organisational leaders with the insight and know-how
to create wealth through helping people improve their quality of life (Rio+20, 2012).
Again even here the ends and means have become confounded. Rather than the end
goal being improved quality of life with the means being wealth creation, the priority
is on creating wealth through improving quality of life. This subjugation of societal
welfare to individual business profits then allows social and environmental
considerations to be jettisoned when they conflict with the financial interest of
business organisations (Brooks, 2010).
Rokeach(1973) distinguished between terminal values end states or goals
that are desirable in their own right, and instrumental values which refer to the
means employed to reach these end-states. Money acquisition is clearly an
instrumental value, as money is important only insofar as it can purchase other goods.
In turn the goods which money can buy will also be means to further ends, such as
happiness, good health or a feeling of security. Once this distinction between means
and ends, or instrumental and terminal values, has been made clear, it is easier to
appreciate how they may become conflated, leading to foolish and irrational choices.
Furthermore, such conflation moves away from the intended view of wisdom as being
...tacit knowledge infused with values (Sternberg 2001:23). Within this definition, it
is evident that Sternberg is not referring to instrumental values. It is illogical
therefore to set up a system whereby the prioritisation of shareholder maximisation
imposes costs upon society such as global warming and pollution that will be felt by
all society. The same shareholder that benefits financially from manufacturers cutting
corners on safety, factories polluting the rivers and oceans, and banks making large
profits with high risk investments, is also likely to want safe products, clean
waterways and a stable economy.
Cross-cultural comparisons can offer insights into alternative mind-sets. The
intense political polarisation caused by the historical conflicts between Cuba and the
US has inhibited appreciation of the valuable insights that can be gained by study of a
country that has developed along an alternative value system. Since 2007 the Cuban
Government has been implementing a strategy of economic reform designed to reduce
the role of the State in the allocation of resources, and to allow the controlled
development of private enterprise and a market economy. In interviews with Cuban
management academics and educators, and business owners it was clear that profit
was seen simply as a means to the end of other social goals and never as an end in
itself (Baden & Wilkinson, 2014). The metrics used to judge success are based on
quality-of-life type indices such as full employment, food security, health, literacy,
social equity etc. Indeed the researchers found that when asked about tensions
between profit maximisation and other social/environmental goals, the question did
not appear to make sense to the respondents as the notion of profit as a priority was
alien, bearing in mind the Governments stated aim in allowing private enterprise was
to reach their social goals mentioned above.
A cross-cultural example of how different end-goals have led to different
strategies, and implications for societal outcomes is presented by the pharmaceutical
sector. It has been of increasing concern in the West that profit maximisation goals are
failing to coincide with health needs. Focusing on R&D into drugs needed to treat the
most serious diseases as opposed to making minor variations of existing drugs to treat
less serious diseases is now considered a form of voluntary CSR as opposed to
intrinsic to the purpose of the industry (Lee & Kohler, 2010). This has led to an
innovation crisis in the sector (Pammolli, Magazzini, & Riccaboni, 2011), and it is the
pharmaceutical sector in countries such as Cuba, where metrics of success are based
on health needs rather than profit, where the current medical advances are now
occurring (Reid-Henry, 2010; Senz, Thorsteinsdttir, & de Souza, 2010).
sector, with particular attention to the impact of changing national and international
contexts. We will also appraiseselected outcomes for the sector againstkey objectives,
and consider what might count as success in the Cuban context. More specifically,
the paper aims to:
Identify the key strategic goals, priorities and values underpinning Cubas
research and development (R&D), science and business models, the factors
shaping these goals and priorities, their translation at the meso-level and
associated outcomes.
Provide a comprehensive overview of the state of Cuban medical product
R&D, governance, commercialisation and utilisationaccording to a range of
relevant measures, including the extent to which key objectives have been
realised.
Consider what implications recent economic changes and Cubas evolving
international relationships may have for Cubas R&D and business models,
and the capacity of these models to meet, and balance, public health and
economic needs.
Consider the extent to which Cubas pharmaceutical sector may provide a
model, for (a) the pharmaceutical R&D and governance policies of highincome countries (b) the pharmaceutical R&D and governance policies of lowand middle-income countries, and (c) the R&D and business models of
national and transnational pharmaceutical companies.
Background
Cubas biotech boom
Following the birth of the US biotech industry around the late 1970s, the then
President of Cuba, Fidel Castro, established a scientific consultative body, the
Biological Front, in 1981 to explore the potential of this new science to meet the
health, social and environmental needs of the Cuban population. Thus, Cuba invested
in, and began to develop a biotechnology sector several years in advance of most
industrialized countries outside of the US, including those in Western Europe. The
Cuban biotech sector is characterised by full-cycle research-production-marketing
institutions, organised into networks or scientific poles the most important of
which is the West Havana Scientific Pole, a cluster of around 50 research, education
and production institutions and hospitals (Giles, 2005; Lage, 2006; Mola et al., 2006;
NezJover et al. 2011). Until 1990, Cuban biotech was mainly focused on building
expertise in manufacturing generic versions of existing biologics, and one of its first
successes was the manufacture of Leuferon, a version of human interferon. However,
from around 1990 onwards, there was a strategic shift towards the development and
production of innovative biotech products (Mola et al., 2007). Through sustained
State support the sector flourished and now boasts a pool of highly skilled scientists,
cutting edge R&D programmes, and manufacturing facilities that meet the regulatory
standards of the US and EU authorities and the World Health Organisation (Brookings
Institution, undated; NezJover et al. 2011).
Whilst a key motivation for Cubas investment in the sector was the production of
medical products to meet the health needs of the Cuban population, the States
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commitment to health technology R&D has also been tied to broader economic and
sociopoliticalimperatives. In the first instance, the development of biotechnological
expertise and productive capacity was seen as a path to development and
modernization and, crucially for Cuba, one with relatively low start-up costs (Lage
2009, p.8; Reid-Henry, 2010, pp. 27-30;NezJover et al. 2011).Production of
medicinal products for the national market was expected to meet the health needs of
the Cuban people, whilst it was proposed that the export market would meet the
economic needs of the Cuban state for foreign currency (Brookings Institution,
undated; Tancer, 1995; Lage, 2006; NezJover et al. 2011). Thus Cuban biotech has
had, from its inception, an export orientation that existed in parallel with its national
public health orientation, and management of its R&D portfolio has had to balance
economic with ethical and health priorities (Lage, 2006).
A number of studies and commentaries have discussed Cubas significant
achievements in the discovery and development of medicines and diagnostic products
despite a sustained US economic blockade creating impediments to the flow of
scientific knowledge as well as material resources. For example, the industrys early
vaccine development programme led to the eradication of polio, neonatal tetanus,
diphtheria, measles, rabies, mumps, whooping cough and congenital rubella
(Brookings Institution, undated; Lage, 2008). And the sectors record in scientific and
technological innovation is claimed by observers to rival that of first world nations
(Brooking Institutions, undated; Cardenas, 2009). Successes include the discovery and
production of: the worlds first effective vaccine against meningitis B (VAMENGOCBC); the worlds first human vaccine with a synthetic antigen for Haemophilus
influenzae type B (Quimi-Hib); HEBERPROT-P10 for the treatment of diabetic foot
ulcers, which in March 2011 won the World Intellectual Property Organization Gold
Medal; a number of neuroimaging (EEG and MRI) technologies marketed under the
Neuronic trademark; and CIMAVAX-EGF, a therapeutic vaccine for the treatment of
advanced non-small cell lung cancer (Thornsteindottir et al., 2004; Mola et al. 2006;
Reed and Torres, 2008; Cochetti, 2012).
Moreover and in contrast to the transnational pharmaceutical sector as a whole,
which has been suffering a productivity crisis (Munos, 2009; IMAP, 2010; Pammolli
et al., 2011; Hay et al, 2014) Cubas R&D programmes have led to a steady stream
of new products and the sector currently boasts a healthy pipeline, described by some
commentators as Cubas biotech boom (Brookings Institution, undated; Mola et al,
2006; Lage 2009; Nature, 2009; Cochetti, 2012). In April 2012, Cuba was producing
33 different vaccines, 33 anti-cancer drugs, 18 products to treat cardiovascular disease
and 7 to treat a range of additional diseases (Brookings Institution, undated). And as
of January 2013, more than 90 new products were being investigated in over 60
clinical trials, with the industry currently holding around 1200 international patents
(WHO, 2013).
From an economic perspective, and relative to the global industry, the Cuban
biotechnology sector appears to be performing rather better than most of its European
and US competitors. In contrast to the majority of US and EU biotech companies,
which have never earned an operating profit or marketed a drug(Pollack 2007;
Mirowski, 2011), insiders claim that the Cuban biotech industry has operated with a
positive cash-flow for several years (Lage, 2006). The business companies of the
Scientific Pole currently export to more than 60 countries worldwide, and by 2009 the
biotech sector represented the second largest material export category in the Cuban
economy with a sales turnover in the region of USD $400 million (Lage, 2009;
NezJover et al. 2011, p.88). Nevertheless, a continuing challenge has been the
ongoing US economic blockade, which severely restricts Cubas access to the markets
of high-income countries and its ability to maximise export earnings (Domingo,
2013). For example, according to a recent report by the Brookings Institution
(undated) the sales and value of Cubas biotechnology industry are between onefiftieth and one-hundredth that of a company with an equivalent product portfolio
because of obstacles to the sale of its products abroad.
Changing national and international contexts, and new challenges
Considerable changes are taking place with respect to the organisation and operation
of Cubas biopharmaceuticals and medical products sector as a consequence of (1)
recent shifts in State economic policy and (2) the Cuban industrys emergent role on
the international stage. In late 2012, as part of far-reaching economic changes
undertaken under the presidency of Ral Castro, thevarious State-run institutions that
constituted Cubas biopharmaceutical sector were grouped together into a new
company called BioCubaFarma, which was to be governed by business principles
according to a national news report (Anon, 2012).BioCubaFarmais run independently
from the State, although the State continues to be the sole shareholder receiving a
dividend each year from the profits and regulating the company through periodic
inspections and audits. It is hoped that the restructuring will help boost generation of
exportable goods and services (Anon, 2012).
Cuban exports (and its presence on the international stage) are also likely to receive a
boost following the creation of ALBAmed in 2009. This project arose out of the
ALBA trade agreement between the governments of Cuba, Venezuela, Ecuador,
Bolivia and Nicaragua. ALBAmed is a multinational pharmaceutical body created to
organise, on behalf of participating member states, the production and registration of
medical products within a harmonised regulatory framework (Cochetti, 2013). As
Cochetti points out, with the implementation of common equivalence and
bioequivalence requirements, the hurdles for registering Cuban biopharmaceutical and
pharmaceutical products in other Latin American states is expected to decrease,
expanding Cubas overseas market. In addition, and as the country with the greatest
experience in pharmaceutical production, Cuba will play a central role in
implementing ALBAmedsprogrammes. For example, the Cuban Health Ministry and
its medicines registration body, CECMED, are likely to control most of the regulatory
process. Although the ALBA trading bloc accounts for only a small fraction of the
Latin American and Caribbean region, the significance of ALBAmed lies rather in the
model it offers for other developing nations wishing to reduce dependence on costly
drugs manufactured by large transnational pharmaceutical companies.
Finally, the epidemiological profile of the Cuban population has changed significantly
since the 1950s, and now mirrors that of much richer, developed nations. Despite
ongoing resource constraints and shortages in basic medicines and other health
technologies (Diogene et al. 2003, p. 40), universal access to quality care and
treatment, an equitable social context and a preventative approach to public health
have driven Cubas epidemiological transition. But the countrys ageing population
brings other public health challenges, specifically a rising incidence of chronic and
and meeting public health needs (including, for example, the need for cheaper or more
context-appropriate medicines).
As discussed above, Cubas medical products sector has had to balance both
economic and public health imperatives in prioritising its R&D and production
activities. Whilst this is often noted in articles and commentaries on the sector, the
implications of these potentially competing priorities for business and public policy
decision-making have not been explored in depth. In other national and international
contexts, analyses have shown how the economic interests of the pharmaceutical
industry have often taken priority over health needs certainly within business
strategizing, but also within government and regulatory policy (Trouiller et al.
2002;Hill et al., 2008; Krumholz et al. 2011; Goldacre, B. 2012; Vedula et al. 2012;
Davis and Abraham, 2013; Pedrique, B. et al, 2013). To date, economic and business
considerations do not appear to have eclipsed health needs in determining the
character of Cubas product pipeline,as recent research and reviews of the sectors
current portfolio confirm (Mola et al., 2006; Thornsteindottir, 2007; Lage, 2007;
Lage, 2008; Domingo, 2013). This may be due to the incorporation within the Cuban
business model of a unique socialist-humanist ethics, which has resulted in a
fundamentally needs driven, as opposed to market-driven approach to medicines
development (Lage, 2006; Evenson, 2007). This ethics is manifest not only in the
sectors focus on improving national health outcomes, but also in the character of
Cubas historical and current international collaborations (Evenson, 2007; ReidHenry, 2010; Cochetti, 2013). A key question for the proposed research is whether the
distinctive ethics underlying Cubas R&D and business modelscan besustained in the
context of broader socio-political and economic changes, and whether Cubas
pharmaceutical and diagnostics sector can preserve its primary commitment to social
justice and advancing public health.
Whilst the organisational features of Cubas biotech sector have been well-described
by previous research, less attention has been paid to understanding the processes and
outcomes of decision-making and priority-setting within individual institutions and
networks, and how these relate to broader policy objectives, cultural values and
changing economic and socio-political contexts. This observation leads to two related
considerations. First, (and as outlined above) the question of how one might specify
appropriate indicators for the Cuban medical products sector that can be justified by
reference to a set of meaningful objectives or goals. These indicators should be based,
at least in part, on the fundamental objectives that Cuba sets for the sector and reflect
on the ethical, political and cultural values that inform these goals. For example, and
as discussed above, whilst the Brookings Institution note that Cuba has been unable to
maximise its export earnings in high-income markets, profit maximisation may not, in
the Cuban context, be viewed as the overriding goal (Baden and Wilkinson, 2014)
Instead targets for export earnings may be related to more concrete plans and
capacities such as financing of particular research programmes. Second, whilst
much of the literature has focused on Cubas biotechnology sector, a serious
consideration of the public health orientation that has informed Cubas
biopharmaceuticals policy would involve an associated investigation of the role of the
sector within Cubas broader pharmaceutical regime, and the capacity of that regime
to address public health needs. Previous studies have investigated the relationship
between Cubas biotech sector and the national health system (Thornsteinsdottir,
2007) and between the biotech sector and universities (NezJover et al, 2011).
However, less attention has been paid to Cubas diagnostics and pharmaceuticals
industries, or to the relationship between these three industries and the role,
functioning and strategic objectives of key downstream, regulatory institutions and
systems, such as Cubas medicines registration body, CECMED, or its Centre for the
Development of Pharmacoepidemiology.
Discussion/implications
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Mola R.L., Silva R., Acevedo B., Buxado J.A., Aguilera A., and Herrera L.
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London: University of Chicago Press.
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