Novartis is a global healthcare company based in Switzerland with core competencies in pharmaceuticals, eye care (Alcon), and generics (Sandoz). In 2015, Novartis realized $49.4BN in net sales, with 18% of net sales ($8.9BN) in operating expenses for R&D.
Improving Novartis’ Response to Growing Disease Burden Requires R&D Investment and Review of Cold Chain and Manufacturing Processes
Central to the global health climate challenge faced by Novartis is its need for flexibility. Novartis must quickly respond to provide vaccines and pharmaceutical agents when demand fluctuates in the face of disease pandemics. Research, development, and manufacturing budgets for pandemics prove challenging to forecast because global disease burden resulting from climate change is, itself, difficult to ascertain. Fluctuating weather patterns are not expected to lead to occurrences of new disease, but they are very likely to lead to disease proliferation in new geographical areas. Unfortunately, alterations in disease patterns will contribute to the extension of existing health burdens in poor regions and communities hit hardest by communicable disease. To respond adequately, Novartis’ manufacturing processes require flexible capacity to accommodate new product development; for example, for drug-resistant malaria. Moreover, as the geographic regions affected grow, Novartis must ensure its vaccine distribution cold chain remains effectively and sustainably operated. Sustainable cold chain operation could mean, for example, use of energy efficient refrigeration units.
Novartis currently has partnerships with the World Health Organization and other NGOs to support distribution of products like its anti-malarial Coartem. However, a large R&D challenge persists. The pharmaceutical industry’s response to the Ebola, Zika, and H1N1 outbreaks of the past decade depleted firms’ global health R&D budgets. In particular, when cases of H1N1 and Ebola turned out to be less widespread than anticipated, firms like Novartis realized little or no return on R&D investment. Increased climate and global health uncertainty do little to incentivize Novartis to invest in pandemic drug discovery and development.
Sustainable Business Practices Have Been Central to Novartis’ Operations for Years, but More Needs to Be Done to Address Global Health Challenges
Novartis is a leader in the pharmaceutical industry for its approach to sustainable development. While Novartis’ revenues more than doubled between 2000 and 2015, Novartis’ emissions declined over the period. Most of this success is attributable to four factors: (1) reductions in greenhouse gas emissions, (2) responsible water management, (3) use of sustainable packaging, and (4) assessment of the supply chain environmental footprint. Novartis is also one of a handful of pharmaceutical companies that uses a carbon price to assess investment decisions.
Beyond sustainability goals, Novartis consistently demonstrates broader corporate social responsibility goals. Novartis’ Malaria Initiative is one of the industry’s largest access-to-medicine programs, having provided more than 750 million treatments to-date to reduce malaria deaths.
Making Health Part of the Climate Debate: Aligning Incentives
Novartis and other players in the pharmaceutical industry have made commendable progress in supporting sustainable development. However, more needs to be done to prepare for the increased communicable disease burden that accompanies climate change. To this end, Novartis should consider:
Improving collaborations with national and international organizations to understand pandemic models and systems risks. Significant gaps exist in our understanding of the timing, geographic range, and severity of global pandemics. More study and collaboration with NGOs and public health organizations will be required to help Novartis understand and predict disease burden, and to support manufacturing and cold chain operational enhancements.
Partnering with other pharmaceutical and public health entities to share costs. Individual pharmaceutical companies should not be expected to take on the infectious disease response burden alone. Partnerships with biotechnology firms, other pharmaceutical companies, and governments should focus on payment and/or cost sharing agreements that support continued drug discovery and innovation.
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