ESG challenges in the healthcare sector

Providing access to high quality medicines is one of the biopharmaceutical industry’s main priorities. These companies have the capability to bring modern medicine to everyone, playing a major role in providing life-saving products for the two billion people that still lack access to them. Due to their expertise in the sector, they are able to strengthen supply chains, support development of healthcare infrastructures, and ensure widespread distribution of their products.

In the recent years drug spending in emerging markets has grown at a faster pace than in North America, Europe and Japan. Therefore, it has become business critical to build a reputation as a positive contributor to the development of emerging markets. The underlying purposes are not only ensuring that their products reach as wide a base of people as possible, but also that they do so efficiently with an eye toward long term value creation for shareholders.

To analyze how the industry evolved in this matter, it is used the information gathered in the Access to Medicine Index (ATMI) reports published in November 2014 and November 2016. It provides a comprehensive overview of the top 20 research-based pharmaceutical companies’ efforts to make medicines, vaccines and diagnostics more accessible in low- and middle-income countries.

Overall, a larger amount of companies have implemented strategies for increasing access to medicine, many of them approaching it as a way of developing business in emerging markets. More than 100 products for high-burden diseases entered the pipeline since 2014, being R&D one of the areas where there is evidence that the industry responds to externally identified needs.

The proportion of collaborative research models for high-priority, low-incentive products increased in the last two years. R&D conducted in partnership includes access plans more often and earlier than in-house R&D, highlighting that collaborative models are an effective mechanism for engaging the biopharmaceutical sector in R&D oriented to the needs of populations in low- and middle-income countries.

Modest improvements were achieved in terms of product deployment. Voluntary licensing have been expanding the last two years, more compounds have been covered by voluntary license agreements, and for the first time moving beyond HIV/AIDS and extending them to hepatitis C. Even though steps are promising, large middle-income countries (MICs) are often excluded from licenses despite the fact that they are home to the majority of the world’s poor. Efforts for moving the product from the pipeline to the patient differ across companies, but a persistent trend of limited registration of new products in countries where they are particularly needed dominates the industry.

Most of the companies analyzed by the ATMI have now engaged in equitable pricing strategies, tailoring prices to different population segments. Although companies are considering affordability for more products than they did in 2014, the proportion of the industry portfolio covered by such pricing strategies remains static at one-third.

The biopharmaceutical industry is very diverse and this is reflected in the way companies approach access to medicine, which access challenges they choose to address and how, and which products they prioritize. Evidence shows the industry is continuing to step up its efforts to improve access to medicine in developing countries. It is analyzed below the performance of biopharmaceutical companies in four key industry-levels:

• Research & Development. Johnson & Johnson presents one of the largest relevant pipeline, with a significant share of development targeting high-priority product gaps with low commercial incentives. Together with GSK, Novartis, Sanofi, Merck KGaA and AbbVie, these companies account for over half (55%) the total industry pipeline. On top of that, they lead in the field of developing products for the poor, developing almost three quarters (72%) of products targeting high-priority, low-incentive product gaps. In 2014, tropical diseases and maternal and neonatal health were identified by the ATMI as disease areas with least attention. GSK and Novartis reported new projects for both maternal and neonatal health, thus addressing this area of need.
• Product Deployment. AstraZeneca has done a considerable improvement in terms of product deployment through the implementation of a new affordability-based pricing strategy and expanded it to more products than in 2014. Currently it conducts an in-depth ability-to-pay analysis in certain countries, and it also extensively updates and expands its access strategy. Even though Novo Nordisk have filed to register most of their newest products where they are needed, it has equitable pricing strategies only for a small proportion of its portfolio as well as a small pipeline of products addressed for people in low and middle-income countries.
• Governance and Compliance. In general all companies have comprehensive compliance systems, yet misconduct continues to some extent. Novartis Access business model shows a preparedness to take calculated risks in reaching more people, while its access management approach is more closely aligned with stakeholder expectations than that of any other company. Roche has strong enforcement processes for ensuring compliance, yet its approach to intellectual property (IP-management) remains static lacking back in product deployment.
• Capacity Building. AstraZeneca, GSK, Johnson & Johnson, Merck & Co., Inc. and Novartis are key leaders in addressing local needs when engaging in capacity building. For instance, Merck& Co., Inc. has a system for continually improving quality standards in manufacturing, including at 53 third-party manufacturing sites on four continents. Novartis took a comprehensive approach to partnering with in-country research organizations to identify local skills gaps and design partnerships to target identified need, while continuing its innovative, research-based capacity building strategy in two disease-specific areas.