Big Pharma’s Big Burden in the Climate Fight: Managing Supply Chain in the Midst of Uncertain Disease Proliferation
Zika. Malaria. Dengue. West Nile. The common denominator? Vector-based transmission. Discussions on the manifestation and regulation of climate change typically center on reductions in greenhouse gas emissions and firm-level abatement costs. Rarely does the debate highlight the implication of rising temperatures on vector-borne disease burden and, importantly, the pharmaceutical industry’s operating and business models.
About Novartis
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.[1]
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.[2] 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.[3] 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.[4] 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.[5] 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.[6]
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.[7]
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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[1] “Corporate Responsibility Performance Report 2015 – Novartis.” N.p., n.d. Web. 4 Nov. 2016.
[2] Thissen, Elvira. “Climate Change and Global Health The Role for Business.” N.p., Jan. 2011. Web. 4 Nov. 2016.
[3] The Novartis Malaria Initiative: Committed to Malaria Control and Elimination. N.p., 2016. Web. 4 Nov. 2016.
[4] Moriarty-Siler, Erin. “Zika Vaccine? Why Big Pharma’s in No Hurry.” N.p., 10 Aug. 2016. Web. 4 Nov. 2016.
[5] “Corporate Responsibility Performance Report 2015 – Novartis.” N.p., 2015. Web. 4 Nov. 2016.
[6] Ibid.
[7] “Novartis Malaria Initiative: Innovation.” Novartis Malaria Initiative: Innovation. N.p., n.d. Web. 04 Nov. 2016.
Thanks for the great post. In addition to anti-malarial vaccines and anti-malarial drugs, there’s been extensive research on long-term solutions to the proliferation of vector-borne disease in the face of global warming. One of the most interesting proposed solutions for malaria is the genetic modification of mosquitoes. Technology of gene drive enables a mutant gene to pass on a trait to almost all its offspring (instead of 50%). Mutant mosquitoes engineered to resist the parasite are introduced into the mosquito population causing the whole local mosquito populace to become resistant to malarial parasite transmission.
In the case of pharmaceutical companies, there’s an interesting debate to be had around profit-incentive versus social consciousness. It may seem counter intuitive for pharmaceutical firms with profit-maximizing incentives to reduce disease burden when they stand to gain directly from it. When it comes to reducing their impact on the environment, big pharma like Pfizer, Astra and Novartis, have begun to take steps in the right direction. However, governments may need to intervene to better align incentives through subsidies or grants.
Fantastic article! Though I used to work for a biotechnology company that was focused on sustainability initiatives, I had never really considered the impact of the supply chain. In today’s globalized world it is a significant challenge to get medications from a factory certified to produce drugs that are safe for human use–so called GMP (good manufacturing practices) facilities, often located in developed nations–to patients who need them on the front lines of pandemics. I wonder if there are different schemes that Novartis should consider. For instance, instead of shipping boxes of vaccines filled in vials, would it be more economical from an emissions perspective to ship larger loads of unformulated bulk material to regional GMP filling facilities? Is there any consideration of finding improved formulation recipes to reduce the need for refrigeration during transport? Could Novartis, and other similar pharma companies somehow be incentivized to establish GMP production facilities in emerging markets, thus reducing the need for costly shipments of finished goods?
Thank you so much for the interesting read!
Jacqueline, thanks for a thought-provoking post. Given the complexity of pharma supply chains, I wonder what financial incentives Novartis would have to establish a complex supply chain, and what the financial impacts would be the make end-to-end operational changes. Moreover, can they, in practice, navigate the regulatory environment across different countries to actually implement this?
I think the suggestion to develop temperature-stable formulations is brilliant, and can have huge impacts on costs for the pharma company as well as their carbon footprint, since biotech drugs and vaccines today have to be transported by air to ensure they remain stable.
Mike, while I really like your suggestion of manufacturing in bulk and filling in vials at the country of use, do you know if they can do that with sterile products like vaccines that, in my understanding, have to be in final packaging in the sterile facility that they are manufactured in?
To mitigate some of the financial impacts of making such changes, Novartis could consider long-term contracts with governments with minimum offtake agreements for vaccines in emerging markets. This would ensure them a minimum volume, since vaccines in developing countries will be a high volume, low margin game.
The idea of cold supply chain management sustainability is not only a question in the biotech/pharma industry but throughout the food manufacturing industry as well. Efficient cold supply chain is very difficult to achieve. Making equipment and systems robust for travel via ships, trucks, planes, etc…is difficult to design for, and each design has its own constraints. Other times, in the cold supply chain, the drugs require sub zero temperatures which can only be achieved with dry ice or liquid nitrogen. There have been some innovations with products around the requirement of a cold supply chain. Companies have recently been investing heavily to develop drugs that are stable at room temperature. These drugs, although difficult to develop, have been critical to delivering care to underdeveloped regions of the world. Its key to recognize here with this industry and others that while we can make the supply chain more efficient, the same end result can be achieved through product innovation.
Thank you for the interesting article and great insight. You mentioned Novartis’ need to respond quickly in order to provide vaccines; this certainly would have been the case, however Novartis actually sold their Vaccines business to GSK in 2015 in an asset-swap deal in which Novartis acquired GSK’s oncology assets, and therefore is no longer in the vaccines business (http://www.gsk.com/en-gb/media/gsknovartis-transaction/). One key aspect of Novartis’ operating model related to climate change which it should consider is how it might go about rapidly providing urgent medications during climate change-induced natural disasters.