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Cup Russia 2013

Development Strategy Design of SMS for Life Project Alexander Kravchenko

Svetlana Krechetova George Nichkov Anna Gibaeva

Executive summary

Solution

Our team

Goal: sustainably develop SMS for Life system to the benefit of Novartis’s distribution and sales in emerging markets preserving its social value Distribution model • Open up second stream of the project to make it profitable • Target different groups to reach more patients • Cooperate with other pharma companies

Current situation analysis • • •

Health system factors reduce the patient impact of antimalarial drugs by more than 60% Challenge of applying low-cost, simple-to-use technologies and infrastructure to solve More than 2 BN people are threatened by dangerous diseases, and their lives are dependent on essential medicines and basic infrustracture

Partners network • Leverage capabilities of charities • Use large vendors • Establish long-term relationships

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Generic Originator Price per treatment course, USD

2010

2009

2008

2007

2006

2005

-2x

2004

Number of treatment courses, M

The economy of scale enabled Novartis to halve the price per treatment (6x4 regular tablets) 160 120 80 40 0

Economic effect • Save lives • Overall profit is $80 M • 2.4 BN people sheltered from dangerous diseases by spending less than 50 cents per person

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Scope and coverage

0

• Expand in other 20 countries by 2020 with coverage of more than 1.5 BN people • Enter new markets in two waves • Use DALY’s approach

Structure & risks • Use resources timely and coordinate joint efforts • Single out subdividion which monitors the development of projects, emulates best practices and trains IT partners • Make rigorous risk assessments

Source: Swiss TPH, Sublime analysis

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Executive summary

Our team

Solution

Scope and coverage

By 2020, SMS for Life is planned to expand into 20 other countries where infectious diseases cause the most burden for its citizens

Ultimately, resolves the “last mile” problem of critical drugs availability

…enabling it to tackle the most serious diseases…

• This supply chain problem is observed in low-income developing countries • The number of DALYs per 100,000 with a cut-off level of 10,000 DALYs is used to select target countries* Distribution of burden of diseases as % of total DALYs by broader causes (2010) 100.00% 7.84% 11.22% 23.75% 75.00% 53.88% 50.00% 25.00%

68.46% 34.98%

0.00% Injuries

Sub-Saharan Africa Non-communicable diseases

Global Communicable diseases

Better health care system + presumably better communication infrastructure in place

High

Forecast the day when the store would run out of stock

Technological penetration High Low

Little need for SMS for life

Low

Tracks the availability of drugs of certain kinds through SMS

…but not in all of 4 types of emerging markets

Health care spending

Increased functionality makes it powerful tool…

Thailand Malaysia

–

Indonesia Philippines

Ghana Pakistan Nigeria Mali Tanzania …

Some of these countries with extremely low mobile penetration (<10%) don’t suit either*

COUNTRIES IN FOCUS • The SMS for Life system is launched in two waves in other countries, spanning next 7 years** • On the first stage Sub-Saharan region remains the key for the expansion of the system • Later on the focus of program and marketing is shifted to India, Nigeria and Indonesia, covering more than 1.5 M people • Launch in the new market is preceded by 6-month pilot project

Source: Swiss TPH, WHO, IHME, Sublime analysis * For analysis of the countries see Appendix 1 and 2 **For depiction of target countries refer to Appendix 3

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Executive summary

Our team

Solution

Distribution model

The project is divided in two streams: one working as a social enterprise, and another one earning profit by means of segmentation SMS for Life can be partly monetized without jeopardizing its social value

2. Adequate drug supply

Data-processing center (by Novartis only) 3b. Tailored drug supply

Chain of warehouses in Africa

Hospital

Health post Big 3 diseases + 9 NTDs* Of Novartis

Of others

Poor remote areas

Diseases cured Drugs delivered Target group

3a. Confirmation of the delivery

Manufacturer (Novartis)

2. Request of drugs

Data-processing center

Commercial current

1. Registration info

1. Stock levels

Not-for-profit current

ADVANTAGES For patient: • No queues, exact timing • Protection from counterfeit For physicians: • Commissions for every drug sold using their prescription For Novartis: • Wider brand recognition • Larger sales

Chronic diseases SMS communication Galvus, Xolair, Onbrez** Wealthy urban districts

Delivery of physical good

DISTRIBUTION STRUCTURE • Alongside the non-profit model, SMS for Life will be launched in cities in the same countries of presence as profit generating project • Middle and upper-class city dwellers will be able to register in the system with their doctor to buy Novartis patented products. Orders will be confirmed by the SMS, which would specify the date and time of collection at the patient's hospital. After 5 successful order customers will receive cash-back, covering their SMS costs. Physicians will be incentivized by 3% margin from each sale • On the non-profit side, the range of monitored drugs will be enlarged; other firms could add their drug in the system if they paid for the incremental costs associated with this addition in form of periodic fee Source: case data, Sublime analysis * For analysis of the diseases refer to Appendix 4 **For analysis of the drugs see Appendix 5

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Executive summary

Solution

Our team Partners network

Work with partners on a continuous basis enables project team to cut costs and reach more people with a help of charities

Funding partners

Charities*

Contracts & money transfers

Development partners

SMS services

Ongoing support

COLLABORATION WITH PARTNERS • • • • • •

Assuming SMS cost being $0.1, SMS account for 5% of average operating expenses NGOs and international charity organizations working in Africa can be of great help to SMS for Life project and bear little or no cost It’s preferable to use large vendor as it’s able to develop, test and supply new functionality to existing platform on an ad hoc basis Before entering new market it’s necessary to place a bid for services to achieve best price for the upcoming year Credit incentive for doctors is viable for the first year only Usage of free number can solve the hassle with credit top-ups

Source: case data, Sublime analysis * For comparison of the charities refer to Appendix 6

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Executive summary

Our team

Solution

All divisions of the company gain from the SMS for Life project with the risks being at manageable level NIBR – Novartis Institute for Biomedical Research

Actions •

Company overall Pharmaceuticals Alcon, Sandoz, Consumer Health, Vaccines and Diagnostics NIBR

•

Help secure contracts with governments and large partners

Organize supply of pharmaceuticals to the site of the project

Increased brand recognition in the emerging markets 200 millions potential new middle- and upper class clients

•

Increase in sales by $... in developing countries

•

Improve communication between division heads

•

Easier entry to market in other countries, better purchasing power

•

Create a supply of new solutions to develop into life-saving drugs.

Follow WHO guidelines

•

Treatments for malaria and dengue fever reach the population of the troubled regions

Disseminates best practice; Help introduce IT-partners to the system Establishes his own division

•

Fully operating central database, covering over 1.5 BN people by 2020

• •

Jim and his IT team • Risk description

Benefits

• •

Structure & risks

Exposure

Mitigating measures

Counterfeit and pilfering

Effective monitoring, thorough investigation into logistics partners

Partners abandonment

More frequent contract renewal

Political instability / regime change

Limiting interaction with government to the required minimum

Patent breach

Check local laws for expiry dates

Source: case data, Sublime analysis

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Executive summary

Our team

Solution

Economic effect

Project shows the strong incentive to spread SMS for Life on the greater scale 13’ 1

14’ 2

1

15’ 2

1

16’ 2

1

17’ 2

1

18’ 2

1

19’ 2

1

20’ 2

1

2

Not-for-profit current New subdivision under Jim created

Leprosy defeated by 2020 1 BN people covered*

1st wave

2nd wave Commercial current First commercial project in Nigeria

Number of partners

10-15

13-18

First working system in Asia

18-25

25-27

$373 M Profit per year in 2020**

Source: case data, Sublime analysis * For details of the model refer to Appendix 7 **For the detailed model see Excel file

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Executive summary

Solution

Our team

Our team’s all necessary skills and experience for case problem solving

Svetlana Krechetova

George Nichkov

Alexander Kravchenko

Anna Gibaeva

Education: MESI’13, Economics and Finance / Statistics

Education: Financial University‘13 / UCL’13 / Finance and Credit

Education: LSE’14 / BSc Politics and Philosophy

Education: UCL’13/ BSc Information Management foe Business (ITMB)

Major achievements: Finalist of Technical Cup 2012; Semi-finalist of MedXpoint (2013) Case and SVAO Cup Case (2012); Chairman of MESI Student Scientific Society

Major achievements: Finalist of business case game BNP Paribas Ace Manager 4, 2012; Holder of the President of the Russian Federation scholarship

Major achievements: President of the Russian Society at the LSE Has lively interest in medicine, due to the sheer number of ancestors in this profession.

Major achievements: I’m graduating the 4th most prestigious university in the world. I self -taught myself 6 languages and now I am fluent in English, Spanish, Russian, German, Catalan and French.

Nearly won the backgammon championship at home university (2nd place) :D

My verbal intelligence surpasses my IQ :D

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Cup Russia 2013

Appendix

Alexander Kravchenko

Svetlana Krechetova George Nichkov Anna Gibaeva

Appendix 1. Analysis of the countries based on the DALYs

2015-2020 2013-2015

• DALY indicates that there are several major regions which are the most desperate in terms of the harm from the infectious diseases: – Sub-Saharan Africa (Western, Central, Easter and Southern) – South Asia – Oceania – Certain countries from other regions (Bolivia etc.)

• The years show the start of the expansion of the project in particular region

The number of DALYs per 100,000 attributable to infectious diseases on the level of countries

Source: Global Burden of Diseases (GBD), IHME, Sublime analysis

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Appendix 2. Analysis of suitability of the countries for the project Assumptions • Low median availability of selected generic medicines in public sector is an indicator of the presence of the “last mile” problem • The uptake of mobile phones shows how easy it would be to use mobile technology for SMS for Life system • The size of the bubble is determined by the level of government spending on health. Larger expenses facilitate the negotiations with national government over the supply of drugs and project implementation Malaysia

Cellular subscribers (per 100 population)

140

Countries where the level of technology allows them to use more effective reporting systems

Thailand 120 Indonesia Philippines

100

Bolivia Ghana

80 Pakistan 60

India Nigeria Tanzania

Sao Tome and Principe

Target zone

Uganda 40

Cameroon Sudan

African countries Non-African countries

Mali Burkina Faso

Chad Ethiopia

20

Too low mobile penetration 0 0.00%

10.00%

20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% Median availability of selected generic medicines in public sector, %

90.00%

100.00%

The supply chain problem is less severe Source: WHO Health Statistics 2012, Sublime analysis

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Appendix 3. Expansion to the other emerging markets until 2020

Countries of presence as of the end of 2012 1st wave of expansion (2013-2015) 2nd wave of expansion (2016-2020)

Source: Sublime analysis

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Appendix 4. Choice of infectious diseases targeted Leading causes of burden of diseases as % of total DALYs, 2010 0.00%

5.00%

10.00%

15.00%

20.00%

Communicable diseases Non-communicable diseases

25.00%

Diarrhea, LRI and other common infectious diseases Malaria and NTDs

Included in list of monitored diseases

HIV and TB Neonatal disorders

N

Diseases that Novartis produce medication for

Potential to grow By 2030 non-communicable diseases are projected to account for more than 50% of disease burden in Africa due to improved economic conditions

Cardiovascular and circulatory diseases Mental and behavioral disorders Diabetes, urogenital, blood and endocrine disorders

Big 3 diseases

Unintentional injuries

Attract the majority (around 80%) of world R&D expenditures for diseases of poverty: • HIV/AIDS • Malaria N • TB N

NTDs

List of monitored diseases

Nutricional deficiency

TOTAL

Injuries

17 diseases, 9 of which represent more than 90% of the global NTD burden: • Sleeping sickness • Chagas disease • Lymphatic filariasis • Soil-transmitted helminthiases • River blindness • Schistosomiasis • Leprosy N • Fascioliasis N • Dengue N

~80%

STRATEGY FOR NOVARTIS • In compliance with WHO commitment to eliminate NTDs Novartis should allow other companies specializing in treatment of particular NTD participate in SMS for Life project if they reimburse project budget for additional costs • Anticipating future trends it’s advisable for Novartis to start selling their protected drugs for non-communicable disease in Africa using SMS for Life capabilities

LRI = lower respiratory infection, TB = tuberculosis, NTD = neglected tropical diseases, DALY = The disability-adjusted life-year Source: IFPMA, WHO, IHME, Sublime analysis

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Appendix 5. Analysis of Novartis’ pharmaceutical products Primary, critical care and established medicine

Ophthalmics and neuroscience

Oncology

     

      

Integrated Hospital Care

Additional products

 

   

 

Business franchise

Most prospective drugs for sale in Africa

Cured diseases

 

Percentage of total DALYs in Sub-Saharan Africa

Active patent Patent expired

Hypertension, diabetes, asthma, COPD, osteoporosis

Leukemia, cancer, other chronic diseases

Sclerosis, eyerelated diseases, dementia, Parkinson

Organ transplantation

Acute pain, attention deficit disorder

7%

2%

3%

<1%

10%

All of the leading Novartis’ pharmaceutical drugs are against non-communicable diseases Source: Novartis statistics, IHME, Sublime analysis

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Appendix 6. International charity organizations with focus on Africa Help for Humanity - A 501 (C) (3) public charity organization incorporated in the state of New York. Its purposes are to provide food, clothing, transportation, educational, health and medical supplies to children and youths in developing countries. HELP FOR HUMANITY IS A 501 (C) (3) public charity organization incorporated in the state of New York.

(USA) Empower Tanzania, Inc. Works in partnership with Tanzanians to develop models that sustainably improve the quality of life and resilience of rural areas through health improvements, education and economic development. (USA, Tanzania) African Society for Quality in Healthcare ASQH works in Africa training on Six Sigma TQM and CME All information about Health in Africa countries you need all services are totally free. Non Profit Organization working in Africa to improve quality in health care (Egypt) The Ufosa Foundation Uniting aid in Education, Family Wellbeing and Health across South Africa. (UK, USA, South Africa). It has many big invest partners (such as DHL, British Airways, Flamingo Casino and others).

Helps International (HINT) a community development NGO situated in Buea, Cameroon whose mission is to improve the social and economic well-being and health of the poor and under privileged in our society through education, skill development and job creation. Works with collaboration with huge international organizations from UK, Italy, USA and the Netherlands Health & Education 4 All International is a United States 501(c)(3) public charity working primary in the United States and the Republic of Cameroon whose mission is to enrich the lives of unprivileged children, youths and women through Education and Healthcare. (USA, Cameroon)

Sublime Source: companies web-sites, Sublime analysis

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Appendix 7. Research in areas of NTDs Company

R&D Center

Location

Disease

Since

AstraZeneca

Bangalore Research Institute

Bangalore, India

• Tuberculosis • Malaria

2003 2009

GlaxoSmithKline

Tres Cantos Medicines Development Campus

Tres Cantos, Spain

• Malaria • TB • Kinetoplastids

2002

MSD/Merck & Co.

MSD Wellcome Trust Hilleman Laboratories

New Delhi, India

• Rotavirus

2009

Novartis

Novartis Institute for Tropical Diseases (NITD)

Singapore

• Denge fever • Malaria • TB

2002

Novartis

Novartis Vaccines Institute for Global Health (NVGH)

Siena, Italy

• Diarrheal diseases • Salmonella

2008

Novartis

Genomics Institute of the Novartis Research Foundation (GNF)

• Chagas disease • Leishmaniasis • Malaria

2010

Novartis

Novartis Institutes for Biomedical Research (NIBR)

• Infectious diarrhea

2009

Horsham, UK

Novartis is a leader in research devoted solely to diseases that disproportionately affect people in low- and middleincome countries

Source: IFPMA, Sublime analysis

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