Pfizer's CSR projects, truly responsible?

Kieran Alexander Ross-Stubbs

02/04/2021
Abstract
This paper aims at finding out what Pfizer's CSR projects are and who they benefit the most.
Whether CSR projects are more beneficial to the firm initiating these projects or to society. It
looks into the pharmaceutical industry and more specifically Pfizer’s CSR projects. The two
main benefits will be discussed for initiating CSR projects from a firm's perspective and the
results these specific projects have on society. The possible disadvantages towards NGOs and the
public receiving this aid will be discussed and analysed. We conclude whether these projects
make the world a better place or solely benefit the firm.

Introduction
Pfizer is a pharmaceutical company based in the US with an annual revenue of 41.9 billion USD,
(Yahoo Finance.2020) they operate worldwide and are currently a producer of Covid-19
vaccines. Pfizer has a separate legal entity called the Pfizer foundation that solely focuses on
CSR projects. These projects include donations of medical supplies to NGOs for further
redistribution in regions in need of humanitarian relief. Pfizer foundation employees can also be
sent out to these regions for further aid. Pfizer employees that volunteer for this foundation are
rewarded for their time spent abroad, these rewards include pfizer donating funds to the
volunteers chosen foundation and tax exemptions as a result from volunteering.

This paper aims at finding out what Pfizer's CSR projects and who they benefit the most.
Whether these CSR projects are more beneficial to the firm initiating these projects or to society
as a whole. The pfizer foundation on the surface brings a lot of good to the world. Milton
Friedman said however that the only purpose of a business is to make profit while remaining
within the law, so why is Pfzer voluntarily donating both its products and employees in the name
of philanthropy? This paper will look at the macroeconomic effects these CSR projects have on
both the company Pfizer and society as a whole. The employees/ volunteers of the foundation
will be excluded from this analysis. Two main advantages of conducting CSR projects, tax
avoidance and greenwashing, will be discussed and analysed to see if they are applicable to
Pfizer.
Body
Tax avoidance is where a firm tries to minimise its required taxes and maximise their after tax
income. This can be done by tax write-offs from donations, rapidly depreciating the company's
assets and moving operations overseas to tax havens. These tax havens are usually well governed
countries with a population under one million. ( Dharmapala.2009) This tax avoidance can bring
forth both consequences of the firm's stakeholders such as the government (scholes et al.2009)
and non cash related costs such as political and reputational costs. Some of these stakeholders
such as the firm can have a higher incentive for tax avoidance. (Guenther et al.2012)

Before tax avoidance can be discussed the pricing of drugs must first be explained. The United
States pays more than 256% for prescription drugs in comparison to 32 other countries.
(Mulcahy.2021) Brand name drugs have an even greater cost of 344%, they make up about 10%
of the prescriptions in the US but end up costing between 72-75% of the overall spending on
prescription drugs. (U.S. Drug Prices.2018). Pfizer's prescription drugs fall under these brand
name drugs. The price of these types of drugs cannot be negotiated by government programs that
aid citizens in lower socioeconomic statuses. This results in Pfizer setting their own prices
without any possibility for price negotiation from public programs, the only group that can
negotiate these prices are private insurance firms.

The high prices associated with these brand name drugs allows for huge profits to be reaped by
Pfizer and its competitors. These high profits can be observed in their profit margins, Pfizer's
profit margin is 79.5%, for reference Tesla’s highest profit margin ever recorded was 27.7%.
With 41.9 billion USD in profit in 2020 and only paying 6.4% in income tax instead of the 21%
income tax fully US based companies pay Pfizer has somehow avoided paying 70% of its taxes.
It is quite common for big companies to undergo tax avoidance as was shown in an 2017 ITEP
report. (ITEP.2017)

A possible explanation for this avoidance of taxes is the amount of medication Pfizer donates.
These donations are not priced at the cost of production but at their market value. Meaning that
prescription drugs with a profit margin over 70% only pay 30% of the price to produce the drug
and get an added 70% towards their tax write off. Pfizer makes abundant use of this strategy as
they have donated around 3.2 billion USD worth of medication and medical devices resulting in
a 3.2 billion USD tax write-off for a 960 million USD investment. (Strauss.2016)

Donations in theory are very attractive to both the firm and the NGO receiving them as both are
improving their situation. In practice however NGOs are worse off when accepting donations
from big pharmaceutical companies as there are usually conditions associated with these
donations. These conditions can impede on the NGOs work as they might only be allowed to
administer the medicine to certain parts of the affected region. As a result this can greatly slow
down the implementation of certain medical programs as was noted by Jason Cone the executive
director of Doctors without Borders responding to why they did not accept Pfizer's offer for free
pneumonia vaccines. He noted that there was no such thing as free vaccines due to the conditions
that come with them. (MSF Access Campaign .2018) Accepting these donations makes it less
likely that competitors will enter this industry, making it easier for both Pfzer and
GlaxoSmithKline (GSK) who are the only two companies producing this vaccine to keep the
price at 36 USD per vaccine. The donor is always in control and can choose at any moment to
stop the donation of a certain type of medication, resulting in the halt of treatments and making it
impossible to treat their patients. WHO therefore does not recommend accepting donations of
medicine. These disadvantages are also explained in a WHO report written by Reich, M. (Ed.).
(1999).

A second strategy Pfizer employs to reduce their taxes is lobbying, where funds are used to
influence decisions in a certain industry or sector. Pfizer spent about 10.87 million USD in
lobbying by the end of 2020. (OpenSecrets.2020) Making use of lobbying can increase the time
it takes to make changes that can disadvantage the frim in the future. The cigar industry for
example lobbied to not be associated with the health drawbacks of cigarettes even though it is
apparent that they share the same health risks. The same thing is happening in the pharmaceutical
industry as outside competition is held at a minimum and drugs importation from outside the US
is highly regulated.

Corporate Social Responsibility (CRS) is where a company conveys the message to the public
that they are an ecologically and or socially responsible firm. The firm tries to do things for the
greater good rather than for the sole intention of making a profit. The Pfizer foundation is a CSR
project set up by Pfizer, they are not the only big pharma company that has CSR projects. These
projects are set up to better the perception of these companies as socially responsible firms.

CSR projects are especially necessary in the pharmaceutical industry, where 42% of US
respondents' opinion towards the pharmaceutical industry was somewhat too strongly distrusting.
(Olsen. 2009) This poor public opinion is especially prevalent in one of the only countries in the
world where 767 thousand citizens went bankrupt in 2018 due to medical expenses. It can be
argued that Pfizer currently is making use of greenwashing, perceiving the public that they are
socially responsible while in actuality behaving in a non collective manner. (Dhaliwal.2011)

Pfizer does make use of sincere CSR projects even while behaving in a socially irresponsible
manner at the same time. These sincere projects towards humanitarian relief, send a message to
the public and tend to better Pfizer's image. (Yoon.2006) As explained some of these projects
might only benefit Pizer and not society as a whole as there are usually conditions that come
with the projects.

Conclusion
This paper discussed the duality of the pharmaceutical companies that conduct CSR projects
while also behaving in a non socially responsible manner. These companies profit off of high
fees attached to their drugs while also donating 10% of their total profit towards humanitarian
relief. As Milton Friedman puts it companies will use their resource for the sole purpose of
making a profit. The humanitarian donations come with conditions and uncertainties that only
benefit the firm and not the NGO, the donated medication is written off at market price and not at
the price of production. Further these projects try to sway the public's opinion away from their
lawsuits and high prices and towards the good they are bringing to the world. By not allowing
government aid programs to negotiate the prices of drugs to further aid their fellow citizens in
need by aggressively lobbying to slow down the process of much needed change to this system. I
can say with much regret that these CSR projects are only beneficial to the companies financial
statements and public opinion.
Word count:1459
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