Challenging philanthropy

Searching for sustainability

Changing principles

Illustration men on bicycle in Kenia's nature.

Science

Breaking the mold

Novartis has come a long way in its access to healthcare efforts. Starting out with philanthropic projects more than half a century ago, the company has steadily broadened its access activities and recently integrated them into its traditional business model. This was not least thanks to dedicated associates such as Lutz Hegemann who have pushed the limits to reimagine how to meet the rising healthcare demands in developing countries.

Text by Goran Mijuk, illustrations by Haley Tippmann

More than 50 years ago, Novartis predecessor J. R. Geigy set up a healthcare training center in Tanzania, creating the company’s first philanthropic venture. The center has become a key educational hub for Eastern Africa.

Philanthropic beginnings.

Table of contents

Challenging philanthropy

Searching for sustainability

Changing principles

Published on 07/07/2020

When Lutz Hegemann took over the Novartis Established Medicines unit in 2011, which consisted of mature prescription drugs targeted for markets such as Europe and the USA, the experienced researcher was ready to break the mold and try something completely new.

"When I got the job, I sort of had a choice to say, well, shall we keep the status quo or shall we try to bring this very valuable set of drugs into geographies that currently don’t benefit from it?” Hegemann recalls. “The idea was to bring innovation to countries that still see those mature products as highly innovative and highly valuable for their health systems.”

A trained medical doctor with a Ph.D. in molecular pharmacology, who during his career has focused among other things on infectious diseases such as leprosy, Hegemann was acutely aware of the high medical need in regions such as Africa and Asia. Drugs, including treatments for heart disease, diabetes and cancer, which he oversaw in his new role, would in his view prove a boon to the health systems in underserved regions.

Straightforward as the idea sounds, making it a reality was far from easy. Besides technical challenges, such as regulatory and pricing questions, one of the biggest hurdles was cultural: Hegemann’s idea ran counter to the company’s traditional way of differentiating between business and access to healthcare efforts. Yet, times were changing – in his favor.

For a long time, economists saw philanthropy as the only way out to help people stuck at the bottom of the income pyramid. This changed with economist C. K. Prahalad. His ideas gave rise to Arogya Parivar.

Arogya Parivar.

Challenging philanthropy

When Hegemann was thinking about broadening the scope of his unit, philanthropy was still the most dominant form of financing access to healthcare projects in the industry, despite the growing realization that donations alone were too limited to meet the huge healthcare demand faced in many regions of Africa, Asia and Latin America.

Novartis, whose activity in the field goes back to the 1960s, when predecessor company J. R. Geigy launched a healthcare training center in Tanzania, was also aware of this problem. The company had run a gamut of donation-based projects in the past 50 years, including a drug donation program to help eliminate leprosy, which still continues today. But it had also started testing new avenues in the access arena, as the company realized that programs needed to be scaled up.

In 2001, together with the World Health Organization (WHO), Novartis started the Malaria Initiative to provide its newly developed treatment Coartem® without profit to patients in need. Rather than just relying on donations, the company charged the manufacturing price of the drug in order to ramp up production and reach as many patients as possible. The concept worked. By 2020, the company had delivered nearly 900 million packs of its medicine to patients in need, helping the United Nations (UN) in its efforts to reduce malaria.

The success of the Malaria Initiative emboldened the company to think of other financing forms. Inspired by the late C. K. Prahalad, an influential Indian economist who looked into the possibilities for catering to the economic needs of the poor, the company started to work on a social business project in India around 2007.

Called Arogya Parivar, meaning “healthy family” in Hindi, the social business venture not only consists of a dual approach, i.e., providing the rural population in India with essential medicines at affordable prices and conducting health education and screening camps, the team running the project also aspired to make the venture financially sustainable – an idea that had rarely been tested before in the area of healthcare.

Back in the late 1990s, malaria killed nearly 1 million people every year. Novartis’ Malaria Initiative was designed to support the World Health Organization (WHO) in helping end this human tragedy.

Searching for sustainability

Although it met with initial skepticism and ran into a series of challenges, Arogya Parivar turned out to be a success. It even won praise from shared-value pioneer Michael M. Porter, one of the world’s leading economists, who described the project as a prime example of a business model that creates “economic value in a way that also creates value for society by addressing its needs and challenges.”

Arogya Parivar not only managed to get off the ground, but became profitable within a few years of its inception and inspired Novartis colleagues in Kenya, Vietnam and Indonesia to pursue similar projects – with equal success.

A few years later, Novartis also looked into the possibility of launching a larger program covering non-communicable diseases. Called Novartis Access, the venture focused on addressing the rise of chronic diseases in low- and middle-income countries by offering a portfolio of 15 patented and off-patent drugs at a price of 1 US dollar per treatment per month, providing patients with access to medicines for cancer and diabetes, among other disorders.

All these new programs, which usually also include health education aspects, have since helped millions of patients get access to healthcare and thus also support the UN goal to attain universal healthcare as part of its Sustainable Development Goals, which Novartis fully supports.

Making local brands

Yet, even as these new programs gained traction and proved that access ventures can be put on a sustainable financial footing without the need for donations, Lutz Hegemann’s idea remained something of an outlier because he tried to tackle the access issue from the business side.

But things changed when colleagues in India, where patients usually pay for medicines out of their own pockets, came up with the idea to adapt an innovative eye-care drug to meet local market needs. “This is when the idea of local brands became a reality, which was a huge step towards creating a holistic global access strategy,” Hegemann remembers.

By reducing the price and simplifying the administration of the eye-care drug, the team was able to increase prescriptions and adherence, thus providing access to an innovative treatment and at the same time supporting the healthcare system to manage the rise in age-related eye conditions.

“This really moved the needle, as the team was able to show that by adapting an innovative product to market needs, it can follow both a business rationale and help strengthen healthcare systems,” Hegemann said.

Novartis Access was one of the first global programs to tackle the rising challenge of non-communicable diseases in the developing world. Since 2015, Novartis has provided medicines to more than 3 million patients.

Changing principles

Within months of the project’s launch in 2013, Novartis started to introduce local brands of innovative drugs in countries such as Bangladesh, Indonesia, Pakistan and Vietnam, providing access to treatments for diseases such as cancer, heart conditions and asthma.

This helped broaden access to new drugs which, in the past, would have either remained out of reach for most patients either as a result of the cost or because the drug was not registered in these markets at all.

While Hegemann’s idea gained traction over the years, it received another boost in 2018 when Vas Narasimhan took over the CEO position at Novartis.

Instead of running a series of dispersed access programs, Narasimhan devised a set of principles to guide the entire company to work in a holistic way to improve access to healthcare, starting from research and development and including tackling challenges such as affordability and strengthening healthcare systems in developing regions.

“With this principled approach, we were really able to integrate all our diverse efforts,” said Hegemann, who started to lead the company’s entire access efforts as Chief Operating Officer of the company’s new Global Health unit in 2018. “It gave us the chance to continue developing our efforts in a clear direction and put access at the heart of the company rather than allowing it to remain an afterthought to the traditional drug development and commercialization process.”

While Hegemann concedes that implementation is far from easy, especially in research and development where drugs need to undergo a series of new tests in order to make them viable in tropical regions, for example, Novartis has made great strides in its efforts to broaden access.

Not only has the company been able to launch dozens of local brands in the past few years, it has also cut the drug approval process in developing countries to a few months compared with the years it required in the past.

“This is a huge leap forward,” Hegemann said. “It is the result of a cultural shift in which we don’t differentiate between business and patient populations anymore but have an integrated view that takes into account the healthcare and economic realities along the entire income pyramid. There is still a lot to do, especially in areas such as strengthening healthcare systems. But with our new approach we are on the right track.”

Breaking the mold

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