Build trust with society
We are taking steps to continue to build trust with key stakeholders and society. We aim to hold ourselves to the highest ethical standards, be part of the solution on pricing and access to medicines, help tackle global health challenges, and be a responsible citizen wherever we operate.
Holding ourselves to the highest ethical standards
We continue to embed a principles-based approach to compliance through the new Professional Practices Policy (P3), which in 2018 replaced separate divisional compliance policies. We believe this approach will help ensure that employees act in the best interest of patients, physicians and Novartis.
Since 2016, we have adjusted the ratio of fixed to variable total compensation for our sales force to help ensure that the target variable component is a maximum of 35% of total compensation, on a country average basis. To receive any form of variable compensation, each employee, including the sales force, must perform to a minimum standard with regard to our Values and Behaviors, which include acting with integrity. For our sales force, in particular, 20% of target variable pay is based on demonstration of our Values and Behaviors. We are in the process of implementing these standards in every country in which Novartis operates. Ultimately, no sales representative will receive the variable compensation unless he or she meets expectations with respect to Values and Behaviors. In 2018, we assessed the rollout of the new incentive system with positive results. Across divisions, there was a 54% reduction in the number of reported complaints of fraud or professional practices in the sales force in 2018 compared to 2017.
Despite this progress, we are still facing questions about our business practices. Following the issue with Essential Consultants, when our political consultancy practices came into question, we took steps to improve oversight and help prevent similar matters in the future. We have strengthened the relevant contracting and due diligence processes to help ensure more ownership and transparency at a senior management level. For example, before Novartis engages political consultants, we will secure an independent due diligence report from an external partner.
In addition, we continue to strengthen our Integrity & Compliance (I&C) function. In 2018, we combined our risk management and compliance functions in a single organization to help enable more effective risk management and mitigation efforts. We created the role of Chief Ethics, Risk and Compliance Officer to head the combined organization, and we elevated this role to the Executive Committee of Novartis (ECN).
To help monitor and enforce our integrity standards, we added more than 100 people to the I&C function in recent years. The expanded team has increased the number of country visits to share learnings from across the organization, reaching about 220 in 2018. We also harmonized our I&C risk assessment and monitoring process and control activities into a single, continuous process supported by an online tool.
Across divisions, there was a 54% reduction in the number of reported complaints of fraud or professional practices in the sales force in 2018 versus 2017
We continue to evolve our reporting and data analytics to provide centralized and aggregated data across the risk functions to identify trends and help improve risk mitigation. For instance, in the last two years, we’ve seen a positive trend in generally effective internal compliance audits. At the same time, our whistleblower hotline continues to receive reports of suspected cases where employees may have failed to follow our ethical guidelines. However, the proportion of substantiated allegations related to ethics and compliance matters remains stable. We believe these are indications that our efforts are starting to pay off. We also started to employ data analytics for better monitoring and risk prevention. For example, in the US and China, the team leverages big data to monitor various aspects of engagement with healthcare professionals.
Being part of the solution on pricing and access
Our medications reach more than 800 million people worldwide every year, but billions more still lack access to essential medicines and healthcare. We are making a fundamental shift in the way we do business and are reimagining how to expand access to critical healthcare innovations.
We launched the Novartis Access Principles, embarking on a journey to systematically integrate access strategies into how we research, develop and deliver our new medicines globally. These strategies include adopting innovative pricing and access models, refocusing research and development based on society’s healthcare needs, and supporting approaches to strengthen healthcare systems. We made significant progress in setting up our internal systems and training our internal teams on our new business standards. The ECN reviewed plans for key brands in launch phase to assess access strategies targeting underserved populations. For example, Aimovig, our innovative medicine for the treatment of migraine, is supported by programs designed to help accelerate access both before and after reimbursement, as well as to speed up introduction and access in low- and middle-income countries (LMICs). We are also co-creating employer-based access schemes in selected markets, including Russia and Mexico.
We are making a fundamental shift in the way we do business and are reimagining how to expand access to critical healthcare innovations
We aim to price our medicines responsibly, based on the value they deliver to patients, healthcare systems and society. In the US, we recently implemented guidelines for limiting average net price increases across our portfolio to the healthcare inflation rate, and we publish average price increases annually in the Novartis in Society US report.
In addition, we take local affordability into account when pricing our medicines. In LMICs, for instance, we introduced more affordable local brands of many innovative therapies, such as our heart failure treatment Entresto, to help speed up and improve access where there is inadequate healthcare coverage or reimbursement. Through our continued efforts and an impactful access strategy, the number of patients reached with Entresto in LMICs grew two-and-a-half-fold in the last 12 months. Overall, we have launched more than 60 local brands across more than 30 developing markets, reaching more than 200 000 additional patients to date. In addition, we are now able to reduce the time lag between availability of medicines in higher- and lower-income countries. For example, the first Entresto local brand was launched within 12 months of the launch in the European Union. We plan to further expand these strategies.
Through our Novartis Social Business (NSB) group, we continue to pursue unique social business models, such as the Novartis Access and Healthy Family programs, to help expand access to healthcare in lower-income countries. Novartis Access, which offers a portfolio of 15 medicines to governments, nongovernmental organizations and other institutional customers for USD 1 per treatment, per month, delivered almost 2.3 million monthly treatments to five countries in 2018, and Healthy Family reached 7.8 million people with health education initiatives. Since January, NSB has adapted its product and price offering in six African and Asian countries, expanding reach to patients across all income levels.
Novartis does not file or enforce patents in least developed countries or low-income countries. In late 2018, we reviewed our approach to patent filing in LMICs in an effort to better align it with the local socio-economic circumstances that exist in many of these countries. As a result, effective 2019, we decided to stop filing patent applications in nine LMICs, where Novartis had previously filed. In addition, in the remaining LMICs, we will aim to restrict patent filings to those patent applications covering new molecules or new chemical entities.
Novartis is also a founding member of the Patent Information Initiative for Medicines (Pat-INFORMED), a unique public online resource launched in September 2018 that provides basic patent information for medicines of participating companies, and that aims to help procurement agencies around the world better understand patent status to help inform procurement decisions. As of December, Novartis has listed patent information for all of our small-molecule medicines, which goes significantly beyond Pat-INFORMED’s near-term goal of capturing information for medicines in a more limited number of disease areas.
Patent information for all of our small-molecule medicines has been listed online as part of the Pat-INFORMED initiative, of which we are a founding member
We regularly review our early- and late-stage development programs to identify further opportunities for adapting our existing medicines to address unmet patient needs in countries with a high disease burden. In 2018, 14 project proposals were endorsed to move forward. They include the development of a child-friendly formulation of hydroxyurea for treatment of sickle cell disease in Africa; the use of Entresto in heart failure related to Chagas disease; a project to identify potential differences in the pharmacokinetics of drugs in African patients, where such data is lacking; and the creation of a new Coartem formulation to treat infants below 5 kilograms of body weight.
Tackling global health challenges
Novartis has a long history of helping tackle some of the biggest global health challenges, particularly leprosy and malaria.
The Novartis Foundation helped found the Global Partnership for Zero Leprosy in 2018. It brings together international organizations and national leprosy programs, with support from the World Health Organization, to accelerate progress toward eliminating the disease. The Novartis Foundation and Microsoft are partnering to develop a proof-of-concept digital health tool, enabled by artificial intelligence, and a Leprosy Intelligent Image Atlas – in collaboration with local investigators from the Oswaldo Cruz Foundation in Brazil – to aid in the early detection of leprosy. The launch of the first public version of the atlas is planned for 2019.
In April, we renewed our commitment to malaria elimination, pledging USD 100 million to research and develop next-generation antimalarials over the next five years. In addition, we will help expand access to antimalarials formulated for children, and we plan to implement programs to strengthen healthcare systems in four sub-Saharan countries.
We also launched efforts in other areas where we believe we can have significant impact. In October, in Latin America, we kicked off our partnership with the World Heart Federation to develop a roadmap for addressing Chagas disease, the second most common cause of chronic heart failure in Latin America.
In Ghana, we kicked off a collaboration with the government and local partners to establish our commitment to sickle cell disease (SCD) in Africa. This collaboration aims to support the development of treatment guidelines; strengthen the healthcare system by establishing centers of excellence to advance newborn screening and train scientists; accelerate registration and launch of hydroxyurea for the treatment of SCD; and integrate the needs of patients into our drug development strategy. We plan to launch our commitment in 2019 and to also expand our efforts to other countries in sub-Saharan Africa.
Being a responsible citizen
Building trust with society requires doing business responsibly wherever we operate. This includes minimizing our environmental impact, managing risk in our supply chain, respecting human rights and being transparent.
We have adopted a more ambitious 2030 environmental sustainability strategy, aiming for carbon neutrality, plastic neutrality and water sustainability. We have already taken steps to mitigate our exposure to environmental risk, completing a series of comprehensive supplier audits and taking relevant actions. For example, in the Hyderabad area of India, we are severing ties with six suppliers that failed to comply with our Supplier Code, and we are working with nine suppliers to improve their performance in critical areas such as operational efficiency, waste management, and use of natural resources. These suppliers share our values for environmental stewardship and employee health and safety.
In October, our Third-Party Risk Management program went live in Mexico. The program is to be rolled out globally in 2019 in a phased regional approach, beginning in the Americas (including the US) and followed by Asia-Pacific and Europe later in the year.
After completing human rights impact assessments in our own operations in Egypt, Turkey, China and Malaysia, we have established that we have strong policies and solid processes to identify and manage potential human rights risks. We have also identified common risk areas that require additional follow-up action in 2019. For example, we need more regular and broader engagement and consultation with external stakeholders at a local level – including representatives from patient groups, local communities, health authorities and third-party partners – to gain a better understanding of issues; to help ensure that formal grievance mechanisms and processes are in place for communities living close to our manufacturing operations; and, in some markets, to address risks associated with our outsourced workforce.
New environmental targets
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