Building for the Big Picture
Emerging markets also serve as a test of Jimenez' vision to reposition Novartis from a pure-play pharmaceutical company to
a broadly based health solutions enterprise. The transition is well under way; with the recent acquisition of the Alcon eye
care business, the share of pharmaceuticals in overall sales is down to about 56 percent, from 80 percent a few years ago.
What emerging markets offer here is a relatively blank slate. Basic health infrastructure is either being created from scratch
or repurposed to address the fact that, with rising disposable incomes, health is becoming a consumer priority as well as
an essential public good. This gives Novartis the opportunity to grow its business by offering investments that promote good
health practices while expanding access to treatment. These investments are focused outward, with an emphasis on institution-building
rather than one-off sales; many local stakeholders benefit from the company's engagement and there is a reputational enhancement
for Novartis by reinforcing the perception that it is going to be there for the long term. "We call it a social business model
because it blends corporate citizenship with entrepreneurship," Jimenez says.
An example is a comprehensive health education program, "Arogya Parivar" (Healthy Family), that Novartis launched in India
in 2007. The initiative recruits and trains citizens in predominantly rural areas to teach preventive healthcare and disease
management practices and to direct those deemed most vulnerable to chronic conditions to a network of mobile clinics—health
camps—for screening, diagnosis, and treatment. Novartis funds the camps and makes available a range of prescription and OTC
medications to treat major chronic ailments at low cost.
Since its launch, Arogya Parivar has provided this basic service to more than 42 million people in 33,000 villages in 10 Indian
states. The company is rolling out similar programs in several other Asian and sub-Saharan African countries—Novartis has
a related "Health Express" initiative in China geared to health professionals in rural Xinjiang province to improve public
health awareness—with the aim of reaching 100 million people. Each of these programs provides a commercial boost by giving
management more insight into local customs and the relationships that motivate patterns of medical practice, including patient
compliance with dispensed medications. One consequence is that Novartis has tailored its distribution strategies to give precedence
to OTCs and generics issued in smaller packs that require the patient to return to clinics more frequently for refills. This
conforms to patient preferences for lowering the out-of-pocket costs of each transaction while providing the means to better
measure rates of compliance—a key driver of public health outcomes.
Another attribute of these initiatives is it gives Novartis the opportunity to showcase the synergies between Sandoz and its
prescription pharmaceuticals business. "Our message to even the poorest consumer is that our generic products form part of
a global portfolio characterized by a consistent overall commitment to delivering the highest possible standard of quality,"
said Catalino. "When we sell a generic in an emerging market, we are selling the best you can get."
Management is emphatic that the social business model is not to be confused with charity. Instead, the intent is to help Novartis
structure its commercial operations to allow for maximum penetration of the customer base. In other words, what good is a
great product if it is unaffordable and can't be accessed by the audience most likely to benefit from it? Jimenez also takes
the view that programs with a social objective can be profitable too. "Our Arogya Parivar initiative turned profit-positive
this year, after four years of losses. This is critical for sustainability," he notes.
So, in looking ahead, Novartis sees its commercial progress in emerging markets as dependent on how well it does in facilitating
market reform. This represents a departure from Big Pharma's traditional reluctance to engage in issues beyond the narrow
circle of what is required to obtain the authorization to sell medicines. Yet because the rules of the road are either different
from mature markets or are still subject to the mystery detour, Novartis feels it has no choice but to engage, in the widest
And the big question the company must answer is: What is our value proposition? That answer, according to Novartis, must be
tailored to each market. But it begins with an assessment of the diverse mix of products a big company like Novartis can bring
to the customer. Beyond that is the post-pill service orientation, which Novartis feels is a much underestimated driver of
value. This includes leading the competition with "reverse innovations" in process applications, ranging from diagnostic tests
to supply chain improvements, all based on local precedents; developing evidence directly from local sources to document the
clinical and cost effectiveness of Novartis products, including customized clinical trials and relevant pharmacoeconomic data;
and promoting patient access through novel P&R strategies, patient assistance, and adherence programs, each appropriate to
the way healthcare is delivered and paid for. Information, in particular, is a prized asset in demand in these markets, and
a data analytics center the company has built in the Indian city of Hyderabad is one way Novartis is responding.