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The Environmental Impact of Novartis Along Global Supply Chains

Carbon emissions arising from the global supply chains of the European pharmaceutical industry are about ten times as high as its emissions from direct operations. A similar picture is observed for water consumption (about three times as high) or air pollution (twenty times as high). Besides opportunities to effectively reduce total environmental impact, this poses considerable financial risks: Carbon prices are expected to rise or to be introduced to provide incentives for significant emissions reductions and suppliers may pass on such costs. As the vast majority of emissions occur along the supply chain, it is thus important to go beyond own operations when assessing the full carbon-pricing risk exposure. The same applies to water risk, as water is increasingly becoming a scarce resource. Overconsumption and pollution put many regions at risk, presumably leading to raw material shortages and higher costs.

This case study describes how Novartis analyzed the total environmental impact of its business activities along the upstream global supply chain with respect to environmental indicators. The objective was to obtain a comprehensive picture of the upstream environmental impacts triggered by Novartis in order to effectively monitor environmental risks and opportunities in different geographical and operational areas by comparing impacts and dependencies.

Click here to view or download the case study.

Do you also want to know about other case studies?

  • The Social Impact of Novartis medicines: Two Case Studies from South Africa and Kenya, click here to view or download the case study

The Global Economic Impact of Novartis

Gross value added (GVA) quantifies the value of goods and services produced by a company, by an industry sector, within a certain region of an economy, or by an economy as a whole. The GVA of a company directly quantifies the contribution to the gross domestic product (GDP) of the country of operations. As such it is the measure of economic growth and quantifies a company’s contribution to national economic wealth. Often, policy targets are formulated in terms of GDP, a prominent example being the Europe 2020 strategy target of increasing combined public and private investment in R&D to 3% of GDP. The GVA is thus key to being able to directly compare a company’s performance to such strategy targets.

Novartis has translated its business figures into this macroeconomic rationale and has, besides its direct impact, studied its economic impact along global supply chains. There, GVA and employment effects occur as “ripple effects” through third-party spend (intermediate consumption). Going a substantial step further, induced effects arising through the spending of wages by Novartis staff and the spending of its suppliers’ labor force were also considered.

The impact analysis was performed for different geographical and operational regions, i.e. in regions where the contribution occurred and where it was triggered, respectively. By adhering to the concept of the System of National Accounts, the analysis provides a high level of significance and comparability with official macroeconomic indicators. It thus forms a sound basis for informing different stakeholders and improve decision-making by uncovering the economic relevance of Novartis business activities along its global upstream supply chain.

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Understanding Public and Private Funding for Pharmaceutical R&D: Does Society Really Pay Twice?

Differentiation of Global Pharmaceutical R&D Expenditures by Performing Sector and Research Type & The Research and Development Footprint of the Global Pharmaceutical Industry

This report, commissioned by the International Federation of Pharmaceutical Manufacturers & Associations (IFPMA), examines global pharmaceutical research and development (R&D) activities in detail in an effort to contribute to an ongoing debate concerning the commitment of business performed pharmaceutical R&D. It demonstrates for the first time the economic value that industrial pharmaceutical R&D creates in the global economy. Firstly, R&D activities were analysed from a cost perspective in more detail. After determining overall global gross domestic expenditures on R&D and showing the share of pharmaceutical R&D expenditures, the analysis focused on the structure of pharmaceutical R&D activities. In a two-step differentiation, pharmaceutical R&D expenditures were assigned to performing sectors and afterwards further categorized by types of R&D. Thus, it was possible to compare different sectors’ efforts in performing certain types of R&D, answering questions of who performs which type of R&D and to what extent. The second part of the study employed the new approach in international accounting of regarding R&D activities as contributing a value to the economy as opposed to a cost-factor. The calculation of the R&D Footprint of the global pharmaceutical industry thus for the first time aimed at evaluating these activities and determined their direct, indirect and induced economic effects. This new and innovative approach is a key tool to display the macroeconomic role that industrial pharmaceutical R&D has played for the global economy and labour market.

You may view or download the research report and the key findings.

The Economic Footprint of Selected Pharmaceutical Companies in Europe

The research study, commissioned by the European Federation of Pharmaceutical Industries and Associations (EFPIA), investigates the direct economic impact of seven selected companies of the pharmaceutical industry in Europe as well as their contribution to the entire European economy from 2010 to 2014. In addition to direct gross value added (GVA) and employment effects, this “Economic Footprint” also accounts for indirect and induced economic effects (so-called spillover effects) along the companies’ supply chains. Thus, for every direct employee the companies support almost five additional jobs within the European economy are created. The seven investigated companies – Abbvie, AstraZeneca, Boehringer Ingelheim, Ipsen, Janssen (J&J), Novartis and Sanofi – together account for €34.6 billion of direct GVA and generate additional €43.3 billion as spillover effects along their supply chains in Europe. In addition, they have already surpassed the European Union’s 2020 strategy’s target R&D intensity rate of 3% by a factor of almost six, demonstrating their importance for innovation in Europe.

The Economic Footprint of the Cluster Life Science Nord

How is the Life Science Nord Cluster positioned? How much economic strength does the industry have in Hamburg and Schleswig-Holstein? Life Science Nord commissioned this study to obtain the indicators concerning these and further questions. The health industry is analyzed as the cluster’s core. The health industry covers companies that produce and sell (including wholesale) human pharmaceuticals, medical technology, personal care and dental hygiene products, sports and fitness equipment, health-relevant information and communication technology, and data processing devices. The economic research institute WifOR, applies the established “economic footprint” approach across both Hamburg and Schleswig-Holstein. And for the first time, WifOR describes the close economic ties between the two states in an analysis of the health industry. Besides determining the key economic indicators for the entire industry, WifOR also carries out an analysis that focuses exclusively on the Life Science Nord Cluster.

National Health Account for Germany

Within the scope of this research project commissioned by the Federal Ministry for Economic Affairs and Energy, the health industries in Germany are identified as an economic sector with its contribution to value added and, the labour force, as well as to foreign trade. By linking together all previously created compilations for the German health economy, commissioned by the Federal Ministry for Economic Affairs a comprehensive tool of National Health Accounts (NHA) has been developed. The tool is increasingly used to answer health and economic policy issues. Furthermore, data structures of NHA now use the new classification of economic activities (NACE Rev. 2) and are adjusted to the updated compilation methods of the System of National Accounts (SNA).

The Economic Footprint of the Pharmaceutical Industry

With the present research project the pharmaceutical industry’s direct economic effects are enhanced by a regional breakdown and a differentiation between economic effects by innovations and generics. For this purpose, the global economic effects are divided into the continental effects for Africa, Latin and North America, Asia, Europe and Oceania according to the geographical regions of the UN. Therefore, the global economic effects have been updated in a first step as well. Additionally to the regional quantification, an initial assessment of the economic effects differentiated by innovations and generics in the pharmaceutical industry is given. The update of the pharmaceutical industry’s economic effects and the regional breakdown are based on the statistics of official organizations such as UNSD, OECD and Eurostat. The available data was the limiting factor for the differentiation between innovations and generics: available data displays primarily figures like the production volume and sales for generics and innovations. Since the assessment of the economic effects is based on macroeconomic indicators, assumptions had to be made in order to use the available information for a first estimation of the economic effects differentiated by innovations and generics.

The Social Impact of medical innovations

With the study ‘The Social Impact of medical innovations’ WifOR identifies - using the example of the pharmaceutical Entresto® - the social and economic outcomes that result from the life-prolonging effect of this medicine. The impact study shows exist important dimensions of medical progress that go beyond the early benefit assessment (as in the AMNOG process). The study was commissioned by Novartis Pharma GmbH.

Click here to view and download the Management Summary.

Workshop „Education, Health and Labor Market Outcomes"

This WifOR workshop took place in Darmstadt from October 8-9. Keynote Lectures were given by Hans-Martin von Gaudecker (Bonn) and Patrick Puhani (Hannover). About 30 interdisciplinary researchers from the fields of education, health and labor economics as well as (economic) sociology and psychology discussed on the interactions of education, health and labor market outcome. Further members of the academic committee were Thomas Rigotti (Mainz), Christiane Gross (Hannover) and Andrea Mühlenweg (WifOR).

Click here to view and download the Workshop Program.