Petra Laux is the Head of Global Public and Government Affairs at Novartis, a position she assumed in 2006. In this role, she creates strategy and overseas implementation of all public and government affairs activities for the Novartis Group of companies, including the divisions Pharmaceuticals, Alcon, and Sandoz.
GlobeScan co-CEO Christophe Guibeleguiet recently interviewed Petra to gain insight on the value Novartis puts on stakeholder intelligence to help build recognized leadership in an uncertain world.
You have been with Novartis for more than ten years. Which non-financial challenges for a business like Novartis have you seen emerging and growing over these years?
I’ve seen three challenges: the first one is the tremendous change to our business model and the increasing need for transparency in all that we do — clinical trials data, benefits we give to doctors, and the codes of practice. Stakeholders want to know if the way we act is “correct.” The second challenge is the increasing questioning of the value of innovation and intellectual property, and whether intellectual property is really supporting innovation.
Finally, over the last three to four years we see the impact of austerity on healthcare (HC) systems; looking at price in isolation from benefit while at the same time we observe the inability of the HC systems to make available the ever more sophisticated products and processes we offer as an industry. We are producing high-tech solutions that are targeted at specific patient populations but the HC systems find it difficult to incorporate them systematically into care processes. Variation in care and health outcomes in turn hampers proper tracking of the benefits of new products.
In all of this, innovation is key but the HC systems are slow to leverage the benefits innovation can bring. We have a growing world population; there will be 500 million more people on the planet by 2020, more than half of them will be above 50 and many will suffer from chronic disease. There is a tremendous need to beef up today’s care systems. At times of austerity we need to find out how to do this in an efficient way. The journey is very much open ended right now.
How has Novartis responded to a challenge like transparency? And what is the cost of it?
Firstly, as an industry, we have upgraded our codes of business practice. This started about ten years ago and is being strengthened in some way every year. Secondly, the disclosure of clinical trial data has evolved and while we have always published result summaries, we are now publishing clinical study reports for all our medicines. This is a new move which has industry-wide support.
Transparency comes with a cost to us operationally and necessitates increased headcount globally. Then there is a non-financial cost in terms of reputation and business risk. Today, the pharmaceutical industry has ownership of its clinical data. With the availability of big data systems, there will be times when anybody can interpret data in various ways, independent of scientific backing. The question is how to get qualified views on data and avoid challenges by those lacking in scientific merit.
Within this context, how much have stakeholders’ expectations changed over recent years?
Policy makers are thinking more short-term. Policy making is becoming a question of getting the lowest common denominator whereby you offend as few people as possible and your mainstream is acceptable to the public. That means that trust is more important than ever. If the policy maker cannot defend a policy because they don’t have the trust of their constituency, then it cannot get through even if it is the right thing to do.
The declining trust in government is increasing the burden on industry to come forward with solutions that are acceptable to the majority of people.
Social media of course also have a major impact on our business with a plurality of voices and views on what people consider good and bad medicine.
As a multinational corporation, we are also seeing a fast-growing trend in nationalism which impacts how we position our brands. In many markets, stakeholders want to deal with local companies; people favor local production and local products. This again impacts our reputation and how we run our business locally and globally.
What does it take for a company like Novartis to keep that trust high with stakeholders?
We have to be out there and engage more frequently with our stakeholders, explaining how we conduct our business.
In a normal consumer relationship you need the trust of the consumer to buy your products. The challenge for pharmaceutical groups like ours is that, unlike other sectors, there are many occasions when we cannot leverage our responsible behaviors to commercial advantage. One example is tender processes whereby procurement decisions are determined by price alone. Or indeed pricing decisions by health authorities that do not consider a company’s environmental footprint.
What value does stakeholder engagement bring to Novartis’ corporate strategy?
We need to hear directly what the outside world thinks of us. Within a corporate hierarchy, feedback is often watered down. Understanding what the expectations are directly from the stakeholders is very valuable at all levels in Novartis. At the same time, the more transparent we are in explaining our issues and respective dilemmas the more easily we are understood and supported by our stakeholders.
What will it take for a business like Novartis to be even more successful in their relationship with stakeholders over the coming years?
To be as transparent as possible. For example, one of the key concerns from consumers has always been the pricing of medicine. Why does medicine A cost so much and medicine B cost something different? While I think it is wrong to commit to opening our books — no other sector does this — I think we need to be able to explain the mechanisms we apply and the thinking behind.
We also need to have clear and simple messages. There is a tendency to be overly scientific and we should aim for a lot more simplicity in the way we explain how things work.