Joseph Jimenez, the CEO of Novartis, believes that big pharma needs a new business model if it is going to keep up with a changing world. Jimenez notes that the global middle class is growing, and that swelling population expects premium healthcare. However, with current healthcare systems lacking public funding across the globe, and with new diseases becoming prominent as humans live longer, many could find that the healthcare system of today no longer fits their needs.
Jimenez notes demographic changes that will present real problems for the industry. By 2050, there will be more individuals aged 60 or above than there are people aged 15 or below. Those older people will require care for the kinds of expensive diseases that typically afflict the elderly—cancer, diabetes, and heart disease. He notes, “What is required are new business models that spread risks, take a broader view of health, and address the needs of the world’s poorest people.”
Novartis has tried out several different business models that they believe can be successful in a world of changing economics and demographics. The first business model involves risk-sharing. It operates by having a patient with an illness or disease use a drug, but only pay for it if the drug is successful at treating the problem. This model has been tested in Germany to mixed results. Some patients have found it difficult to define a successful outcome and others have found it difficult to obtain a refund. Nevertheless, it is an interesting prospect for companies, especially if patients with successful treatments pay greater than market value for the price of the drugs.
The second business model operates by providing patients with a comprehensive treatment program to help alleviate illnesses. Novartis runs this program in Brazil with COPD patients, providing vaccines, therapy, and other health programs.