Social Business at Novartis: Arogya Parivar

Section A

Group 2

Submitted to- Dr Nilanjan Sengupta

21010-Madhu Sudhan

21011-Bharath Kumar

21012-Bhavna S

21015-D R Sravya Reddy

21016-G Alpha Rani

21017-G Sai Teja

21018-Gresshma Sharath

21019-Hiranmayi N M

21020-Jack Cherian
 1. Discuss the various issues related to Social business as far as Novartis is
concerned? Use theoretical explanation for your answer.
Issues
The main issues they faced were related to:
Affordability
1. Roughly half of India’s middle class were farmers who lived in villages and could afford
generic drugs.
2. Rural villagers spend 10% of monthly income on cigarettes and alcohol but less than 6%
on their health.
Pilot – A portfolio of 24 generic products which are under price control to make sure they are
affordable to customers.
Access
1. People don’t go to community health clinic because they are too far away. 2. Traditional
notion of authority and gender posed additional challenges.
Pilot – Arogya’s initial 3 cells with 35Km radius each contains 10 market town and dozens of
villages. A cell supervisor (CS) manages 4 Health Educators who visited 3 villages per day,
six days per week to present talks.
Expansion – Each Cell had 1 HE and 1 Sales supervisor HE was responsible for all social
marketing effort SS for all the commercial effort. Both reported to Area business manager
Awareness
People were unaware about some of the disease and do not visit doctors due to social
consequences which could be cured by simple antibiotic. Later they pay a huge price for
ignorance. Pilot – Short talks by local social workers to increase awareness about healthcare
and hygiene and disease treatment. Expansion – Organizing hour long health camps that
brought doctors to villages where HE’s were present Health camps frequencies were
increased from 1 per day In 2010 to 257 per month in 2012.
Internal Issues faced in managing Arogya
1. Conflict of interest between Arogya and local sales team over sale in same territory
2. Initial portfolio of 24 product which were based on National disease burden data were
irrelevant to local needs
3. Need to package drugs in smaller packets to make them cheaper. Novartis had to register
every variant and package size with national regulatory authority. A process that took months
4. Partnering with government and NGO were not feasible. Government were time
consuming and NGO were very specific to location population and disease
5. To cover all the costs including administrative Arogya’s sales need to exceed 3.5 times
field cost.
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1.Infrastructure issues would impede growth.

2. the unreliability of the supply chain had a negative impact on patients trust in the system
and willingness to continue with the treatment
3.A struggle to educate patients and even the doctors.
4.Findings a way to recruit more females'
5.changing local beliefs and habits associated with healthcare services was an uphill task

Pharmaceutical Industry is R&D intensive and the companies heavily on R&D. A large proportion of
the P&L of these companies is R&D. To cover these cost, Government across the world allow these
companies to sell its product exclusively in the market at a higher price for a limited period through
patent. A patent in the Pharmaceutical industry is valid for 20 years post which any company is
allowed to replicate the composition and develop the generic for the same. Companies book huge
losses due to the loss of patent protection loss. For example, Novartis anticipated a loss of $7.7bn
on product sale because of Patent protection loss.
Most of the time, people are not aware of the product, and they hesitate to visit a doctor because
of lack of health awareness.

The Government, especially in the emerging economy, work for the welfare of society. Both, in
turn, find ways not to honour the patent so that to make the medicines available at a low cost. For
example, India in 1970, eliminated the process patents and reduced the composition patent to 5 to
7 years. As a result, these companies find it tough to compete with local generic manufacturers
who do not have to incur any R&D cost and just replicate the formulae.
By charging a high price to cover the R&D costs, pharma companies make an impression as the
companies making higher profit margins. That's why most of the time, businesses have clashed
with the Government, and as a result, CSRs are mandated.
A Business must be responsive to the economic and non-economic environment. Business must
recognise that operating not within the market but within the society is critical. Hence a business
model is required that would not only be very responsive for the society but also make a profit for
the company. Novartis Group has been facing challenges by media and individuals across different
platforms to do something for the society, and the Arogya was the response of Novartis towards
that direction. Arogya would not only bring health awareness at the bottom of the period, but the
cost incurred in the process would be covered by the sell of the medicine in these rural areas. This
Program would help Novartis penetrate its products to the bottom of the pyramid. This would also
increase the social capital of the company which is very critical for an organisation

Q2 What lesson can be learnt from this model regarding social aspects of business?
More than a decade ago, management theorist C. K. Prahalad urged Novartis to do more to
reach vast numbers of people living at the bottom of the pyramid in developing countries -
those earning less than USD 2 per day. This resulted in our first social enterprise, Arogya
Parivar (Healthy Family in Hindi), in India. This programme swiftly established the viability
of our methodology, breaking even 30 months after launch and boosting sales by
approximately 300 times in ten years.
Building on this success, Novartis established Healthy Family initiatives in Vietnam (2012),
Kenya (2013), and Uganda (2014). (2019). The coexistence of two distinct yet mutually
reinforcing arms is a major feature of these programmes. Social initiatives, such as healthcare
education and health camps, are separate from commercial operations but are funded by
product sales.
Key learnings
1.The poor in spite of their financial crisis will be ready to pay for good quality health and
treatment that cures at a fast pace.
2.The doctors once they started prescribing tablets of Novartis it started getting the trust of
chemists
3. Doctors were also satisfied as the patients were cured and at a stretch and they had a good
impression
4.Doctors were happy as their income increased therefore they were willing to take an active
part in the program.
One of the initiatives worked upon that made Arogya Parivar a success was educating the
low-income people. Awareness and access were the biggest challenges for Novartis since
travelling to town meant forgoing a day's wages and the notions of authority and gender
roles was a challenge as well. There was a feeling of intimidation among poor illiterates
who feared the worst in case they went to the doctor. Hence, a Cell Supervisor was
appointed to build relationships with village chiefs, opinion leaders and health care workers
to gather villagers for Health Education Meetings. They worked on awareness with the help
of Health Educators who would visit villages to talk about significant health care themes
with the aim to create awareness of hygiene. In this way, Jarry laid the foundations. But it
was Anuj who brought about the breakeven of the project and its profitability by 2010,
much before Jarry's target of 2012. He had prior experience in rural markets which he
exploited to succeed at this. He quickly noticed problems in the project and got down to the
root of them. For example, he encountered tension between Arogya's sales focus and the
mission to raise awareness of rural health care. He also realized that Arogya needed to scale
up quickly. It was his collaboration with Jimenez, the head of Novartis' Pharma division that
helped the project succeed faster as well.
Jimenez agreed to cover Arogya's internal and even invited them to be a part of the Group of
Emerging Markets, replacing the steering committee that oversaw Arogya's operations.
Joining the GEM eliminated the need to deal with multiple divisional bureaucracies, thus
enabling faster decision making. He also altered the field force structure to enable a
smoother flow of operations. Novartis did not compromise on the cost: They sold products
in rural areas at prices used all over India. However, they sold their products at small
packages affordable enough for the target group.

 Defining the Global Health & Corporate Responsibility priorities Novartis recognizes
society's increasing expectations of our industry and our company.
 In recent years, many aspects of our business model have been debated and
questioned in public settings, including how we price our medicines, engage with
physicians, and leverage intellectual property to protect our innovations.
 These are industry issues, but our own behaviour has sometimes contributed to these
perceptions, as we have lacked transparency and faced allegations of inappropriate
behaviour.
 We are committed to living up to stakeholder expectations as we endeavour to
increase the positive social impact we have on patients, stakeholders, the communities
in which we operate, and society at large.
 Our purpose is to improve and extend people's lives.
 We aim to develop breakthrough therapies and deliver them to as many people as
possible.
 Building trust with our stakeholders is critical to our ability to develop.
  Unleash the power of our people We are transforming our culture to ensure people
can fully apply their talent and energy. We’re creating an organization where people
are inspired, curious and unbossed.
 Embrace operational excellence We are rethinking how we work, embracing agile
teams and building better productivity into our company to free resources that we can
invest in innovation and help boost returns. Go big on data and digital We aim to
spark a digital revolution at Novartis, embracing digital technologies, advanced
analytics, and artificial intelligence to help drive innovation and improve efficiency.
 Build trust with society We strive to build trust with society through our efforts to
operate with high values and integrity, and to find new ways to expand patients’
access to our treatments.
 Deliver transformative innovation in our pursuit of transformative treatments, where
they challenge medical paradigms and explore possibilities to cure disease, intervene
earlier in chronic illnesses, and find ways to dramatically improve quality of life.
The activities of initiative has been adapted to local market conditions and disease prevalence
in each country. Cung Song Khoe in Vietnam, launched in 2012, is a private-public
partnership with the Services of Health at the province level, working with doctors at
community health centres to raise health awareness among rural communities, and expand
access to health screening and treatment. Was a very helpful act to the community and it was
that part of their social activity.
These type of social activities are very important as it is the obligation of the company to give
back to the society
In 2018, we strengthened our efforts to further integrate access to healthcare across our
portfolio.
To better reflect this increased breadth and scope, the company changed the name of the
function responsible for leading this work to Global Health & Corporate Responsibility.
The Governance, Nomination and Corporate Responsibilities Committee (GNCRC) of the
Board of Directors continues to oversee the company's strategy and governance on GH&CR
topics.
They simplified the other CR governance bodies from three to one.
The new GH&CR leadership team includes representatives from the business divisions and
relevant functions.
The Group Head of Global Health & Corporate Responsibility continues to report to the CEO
of Novartis.
We believe this new leadership structure will helpensure alignment behind a comprehensive
GH&CR strategy, enabling its smooth rollout and integration into the business and
streamlining objectives and monitoring of impact.