CASE STUDY NORVARTIS

1

NOVARTIS & INDIA IN 2007*

Nathan Jones is VP of New Business Development for Swiss-based Novartis. As costs go up in Europe in the United States, he is responsible for finding new markets of opportunity throughout the world. His focus lies on developing and emerging markets in particular. According to the Economist, only 3% of pharmaceutical research and development is directed toward “tropical diseases,” while 97% targets diseases of “the rich.” As he considers competitive positioning during the next decade, Nathan sees tremendous opportunity in serving the bottom of the pyramid, both by providing drugs for the less fortunate as well as by created drugs tailored to treat local ailments.

OPPORTUNITY IN INDIA

India is one of the new markets that holds tremendous potential. First and foremost, India represents a population of 1.16 billion people, second only to China. These are patients, customers and trial participants. India is a tremendously desirable location for conducting trials because (1) the regulatory environment is lax and far less costly than conducting trials in the United States, and (2) since Indians are technically classified as Caucasian, clinical drug tests in India can use the same racially-based data for Americans.

The healthcare market in India, which includes pharmaceuticals, healthcare and equipment/devices, 4 million people and is currently estimated at US$30 billion. A report co-authored by McKinsey indicates that India will spend US$ 45.76 billion on healthcare in the next 5 years. Also in the next 5 years, the total healthcare market in the country is anticipated to increase to US$ 53-73 billion.

INTELLECTUAL PROPERTY CHALLENGES

The challenge, for many pharmaceutical companies, however, lies in the absence of clear protection for intellectual property. If they are not granted patents to protect their investment in their drugs, they are not able to take advantage of the opportunity to sell to such a large population. In addition, if local firms successfully manufacture viable generic versions of the drugs for export, their positioning in other markets—where their patents are protected—will nevertheless be jeopardized. At the very least, they run the risk of expensive and protracted litigation to enforce their rights.

The government in India is protectionist in terms of recognizing intellectual property rights because of the special needs of people in India. Health insurances covers very little in India; few people

*This case is based on a real situation. Some of the names and events have been disguised or modified for the purpose of illustration for the intended class discussion. Copyright © 2014 by Neu Academic Press. To order copies or request permission to reproduce materials please go to http://www.study.net. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet or transmitted in any form or by any means—electronic, mechanical, photocopying, recording or otherwise—without the permission of Neu Academic Press.

2

have insurance. Private funds account for nearly 80% of healthcare spending. In a poor country, this is a loud statement about access to healthcare, even for life-saving drugs.

There are indications, however, that such protectionism will not necessarily last. Rule of law exists in India, and there are processes through which patents are granted and can be enforced.

CRITICISM

As large pharmaceutical companies strive for patent protection around the world, these companies confront challenges on many fronts. One of the loudest voices is that of Doctors Without Borders, whose members advocate loudly for access to poor for life-saving drugs. Such critics are reframing the debate as being not about enforcement of rights but about discrimination

BRIC

India is one of a group of countries—the BRIC countries (i.e., Brazil, Russia, India and China) that are viewed as representing purchasing power on the rise. With its global diaspora and English speaking culture, India is particularly attractive among these countries. Acquiring a presence in India today could be integral to competitive positioning.

NATHAN

Having been briefed by his research team, Nathan considers carefully the promise of opportunity in India within the context of the many inherent challenges.

ASSIGNMENT

You are Nathan. How do you via India as a new market to enter?