Novartis Mexico Gets “Aggressive”; Country President Foresees Outcome-Based Contracts

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During a year where the Mexican economy shrank 8.5 percent, Novartis Mexico experienced a modest one percent growth which Country President Fernando Cruz, qualified as “reasonably good” considering the impacts of COVID-19, down from 4.5 percent growth in 2019.

 

“In summary, our strategy for 2021 is to be aggressive with our value offering and deploy data science and digital transformation more widely,” he said during the +Salud 2021 forum hosted recently by Forbes, adding that Novartis will double down in Mexico and expects seven percent growth this year.

 

The Mexican general manager outlined the affiliate’s strategy which will be centered around accelerating their digitalization push. “Novartis is not only a medicines company anymore but also a data science organization. We are incorporating disruptive technology such as artificial intelligence and internet of things to accelerate the discovery of new therapies,” Cruz explained.

 

In the Swiss giant’s quest to accommodate Mexico’s financial reality into its business ambitions, the company is advocating for a new approach. “We are shifting from a transactional business model where health authorities simply pay for a medicine to a results-based approach where they pay if medicines accomplish the desired objectives. This new model will ensure the sustainability of the system in the long term,” the general manager told a Forbes reporter.

 

His comments during the Forbes forum coincide with the ones given to PharmaBoardroom last year. “Novartis has been more than happy to sit down with the authorities to discuss ways to deliver innovation in a way that is affordable to the system, but we also want to emphasize that financial sustainability also has to do with other factors like outcome-based business models, in which the system pays for patient outcomes, not units of medicine. What we are trying to promote now within the Mexican healthcare ecosystem is the evolution of the existing transaction-based business model into a value-based business model,” Cruz told us.

 

At that time, he was critical of the Mexican government’s effort to centralize the procurement of all medicines and medical supplies for the public healthcare system through the Ministry of Finance. Part of the intention was to change the distribution system, asking pharma companies to supply their products directly to the government across over 3,000 distribution centers.

 

“This is something that the pharma industry simply lacks the capabilities to do,” Fernando said, adding that the company opened a dialogue with the authorities to help them understand that despite their good intentions, “we needed to find a compromise and make sure that the right drug gets to the right patient at the right time and conditions. While the conversation was long and difficult, ultimately, we are happy that both sides found common ground regarding the situation.”

 

The Novartis executive also explained that, as a whole, Mexico is “underinvesting in health,” with only around six percent of our GDP going to healthcare of which half is out-of-pocket, meaning that the total public investment in health is only at three percent of GDP compared to the OECD average of nine percent.

 

During the Forbes forum, Cruz explained that Mexico has ideal conditions to attract more clinical research investment because it “has the largest health institute in Latin America and probably the world,” he said referring to the Mexican Institute of Social Security (IMSS) which covers nearly 70 million people.

 

“Novartis has been generating disruptive medicine by investing over USD 9 billion per year in R&D. With 26 regulatory approvals in the last few years, we are in a favourable position, but, at the same time, it carries the challenge of getting that innovation to patients. In Mexico, we have to continue working with the authorities.”

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