PM Live Interview with Novo Nordisk CEO and President, Lars Rebien

Well, yes, I think that is a big issue, but I also think the funding of the healthcare system itself, healthcare capacity, is a big issue, education of the general public. What we aim to do in Kenya is try to develop a new distribution model which will benefit people as we call the bottom of the pyramid, the poorest in low-income countries like Kenya, who today unfortunately do not have access to very essential affordable medicine due to distribution systems. So, for instance, off-patent insulin, which are life-saving drugs for people with diabetes, are prohibitively expensive due to the way it's distributed today.

Yes, but I do believe that it's upon the Western economies, in the United States and in Europe and also in Japan, the wealthy nations to pay for the innovation such that other countries, emerging markets and lower-income countries, can benefit from this when the drugs become off-patent and can be made available. Let me mention just the fact that generic human insulins, which was first introduced about 25 years ago in the West, is now available in Kenya at the cost of less than a can of Coke. So it is not prohibitively expensive if we make sure that it's distributed and available at the doorstep close to where the patients need it, so they don't need to disrupt their daily life, take a day off and go to the dispensary, but rather that it's available close by every day, all the time.

Well, our distribution systems for medicines are slightly different and need to be slightly more controlled than general foods and soft drinks, so to speak. So there are actually quite good distribution systems which currently exist for essential medicines, which is set up by faith-based organizations but also with the government, and we aim to demonstrate that it is possible to reach through setting up local distributors that on a profit basis with a small margin can handle inventories and distribute these drugs closer to the patients, and once this has been established, I think this can be scaled up to all of this country but also many other emerging economies.

Yeah, I think my assessment of how we can deal with this is that we need to have international funding agencies that identify together with the recipient countries what are the most important illnesses to deal with, and then set up funds for research programs so that the commercially based innovative companies can compete with each other as if there was a real market, and those that come first to market will of course benefit and thereby being able to repay their investment and make the drugs available. Otherwise, as you rightly point out, these diseases will not be dealt with if there's no market, because you need to have a market to run the risk of making investment in R&D.

We have patients in Kenya that procure and use the most modern products that we make. They are the same products which are being made available in the United States and in Europe. Obviously, since they're on patent, they're slightly more expensive, but the big broad market for the general public is a generic market, but there are still deficiencies there in terms of reach and availability physically and also financially. And this is why we're here to reach the broad public. Our hope is then in longer term that as the economies grow and Kenya becomes more wealthy, more people can afford the more advanced product, and that will then be the business case for us in 10 years time, in 15 years time, in 20 years time.

We have always been a generic manufacturer. Our company was founded based on the discovery that insulin was lacking in people that had diabetes, and so we started manufacturing insulin. We've always been a generic manufacturer until we could innovate the insulin, make it a better and better therapy, and 80% of our activities are in the area of diabetes. And so it's very important for us to also have product that we can make available for people with low incomes because the community of people with diabetes is our constituency, and we will only thrive as a company if people with diabetes are taken care of. And so therefore, it has been a good strategy for us to have a full portfolio with low-cost product, and we can manufacture insulin cheaper than anybody else in the world. We have factories in Brazil and we have factories in China. We have dominating market shares in both India and China. We, as I mentioned, we manufacture more insulin than anybody in the world, and that benefits countries like this because we can make insulin available and still make a little profit so that it makes sense and it's sustainable. Yet we can also then invest in R&D to improve the products for the future and for the benefit of this country as well.

Unfortunately, the issue is that the larger the plant you build, the more economies of scale you get, the cheaper the products become. And so I would say that from a purely financial economics, it doesn't make sense to make a local factory in this country; the products would simply be too expensive. Then there could be other reasons why... but what about manufacturing for the global market in the sense of set up a factory here and say we're manufacturing this particular drug for the global market? So the issue of market: we have, we already today have strategic plants in Denmark, in the United States, in Brazil, and in China. Those plants can supply for the whole global market. We need not build any more plants. If we were to build more plants, the products will become more expensive, so it doesn't make sense from that perspective. Then there are countries, of course, which for political reasons erect duty barriers, want to make or demand technology transfer for political reasons. The flip side of this is unfortunately that the products produced will become more expensive for the local population. So that's a weighing off of two benefits politically, whether you want to attract technology, high workplaces and investment, but yet the cost of doing so is levied on your population. And I think most economies in the world benefit from free trade, that we do things where we can do it cheapest so that everybody can benefit from producing the products as cheaply as possible.

Well, that actually supports my business case in that we need to be involved. Let's say that we also need to be in research because ultimately we would like to cure diabetes, we would like to get rid of diabetes, and for that we need research, and we can still improve therapy. But it's not the poor countries that are going to pay for these new therapies; that'll have to be the west, it'll have to be Japan, it'll have to be United States and Europe. And so, and you're right, what's happening today in this part of the world and in fact all over the world is urbanization. So people are moving from a hard life in the countryside where they have a lot of physical labor, which is good for their metabolism and good for chronic disease, but it's a very hard life. So people move into the cities, they become more sedentary, they start to change their food habits to more refined foods, more sugar, become heavy, get diabetes, become heavy. And so unfortunate as you rightly point out, these diseases used to be seen as a disease of affluence. Now it hits the poor classes as well, and it hits the poor classes in a younger and younger age. It used to be such that we called it adult-onset diabetes, which where our grandparents got the disease, but now it's hitting people in this country in the age of 40 to 50, and that means that they are still breadwinners in the family, so from an economic perspective, it's even harder when you get diseased that early, whereas we used to see it in the 60s and 70s with our grandparents.

My assessment is that we have seen now for at least, I've witnessed at least for the last 20 years, Indian pharmaceutical companies trying to move up the value chain, going from raw materials manufacturing to do innovative medicine. We in fact have had several research projects together with Indian-based research organizations, and so far it has proven to be difficult. So I say the hurdles today of developing new innovative drugs are so huge that you have to have almost global presence to be able to afford this. The price of developing a new drug today is more than a billion dollars, and so it's an effort which requires skills from all the way from biology to toxicology to animal testing to human testing to administration. So it's a very complex process, and so far we've not seen that many companies in the emerging markets being successful. So I still see the role for Indian, Chinese companies largely as generic manufacturers and essential raw materials manufacturers for years to come.

Yeah, I think the general pharmaceutical industry is struggling with replacing very high-volume patented medicines that are blockbusters that are going off patent. And so lack of innovation leads then to diversification into enriched food stuffs, into generics, into other kinds of health products. And so this is probably a trend which will continue. Ourselves, we have been very successful in developing new diabetes drugs, and so we are kind of the other category, a more traditional full process innovative company focusing on a very few therapeutic areas where we think we can still be successful. So we're not going to diversify into auxiliary products, health products, provision of care. I think it's problematic if pharmaceutical companies get too heavily involved in provision of care because then we start to meddle with the political priorities and cannot really be seen as an independent provider. So I'd rather stay out of provision of care and stay focused on doing what we're good at, which is innovating new diabetes drugs, educating the public about their usage, and then hopefully be successful long-term in that.