Lobbying to Benefit Novartis - Essay Example

Novartis is a pharmaceutical company (operating in 140 countries) headquartered in Basel, Switzerland, and does most of its research and development (R&D) activity in the US. According to the annual report of Novartis for 2010, some key points to note are:

1. Sales from recently launched products (after 2007) account for 21% of the total revenue – one of the highest for pharmaceutical companies.
2. Novartis has 5 different operating segments: Pharmaceuticals, Vaccines and diagnostics, Sandoz (generics sales), Consumer Health (OTC sales, and animal health), and Alcon (eye care). Pharmaceuticals account for 60% of the sales and are highly profitable but the Vaccines and diagnostics segment is the most profitable.
3. Sales in the US account for 33% of sales, Europe 39%, Asia and Africa 20%, and the rest of America 9%.
4. Tax on profit for Novartis was nearly 15% for both 2009 and 2010.

Other than this, the important facts to keep in mind about Novartis’ business are that it is largely driven by government spending on healthcare and that in 2010 Novartis invested 16% of its revenues (net sales) into R&D for new products – one of the highest in the pharmaceutical industry. Novartis has 27,466 employees in the US compared to 119,418 worldwide (as of the end of 2010).
As a lobbyist in the US for Novartis, I would focus on government spending policy (in the healthcare sector), on changes in taxation policy for healthcare products and for pharmaceutical R&D, and on special treatment in terms of duty or taxes of certain medicines that Novartis imports into and/or exports from the US.

Novartis’ business is largely driven by the government’s policy on public healthcare spending. As the government is facing higher pressure on the healthcare cost, they are forcing Novartis and other pharmaceutical companies to reduce their prices resulting in reduced margins for the companies. To get a favorable position for Novartis, I would lobby for exclusions for certain high-value and high-profit drugs (patented drugs mainly) for Novartis from price reduction while having compensatory price reductions on other large volume drugs which are anyways competitive and would affect the competition equally in terms of price.

For taxation policy, I would lobby for the government to change its taxation policy for pharmaceutical products, especially for patented drugs. Novartis has most of its profitable business from patent drugs and once the patent expires, generics enter the market with low-priced products. So, I would lobby for the government to reduce taxes on patented drugs and to increase taxes on generic drugs so that the patented drugs can become less costly and more affordable for the people while making the generics less competitive by having to pay higher taxes. Also, I would lobby for a reduction of taxes on OTC and animal health products as this segment is the most profitable for Novartis. Lower taxes would attract higher sales, and as the government does not need to compensate OTC sales either, it would be a win-win proposition.

Further, as Novartis is heavy on making R&D investments, I would lobby for the government to further reduce the corporate tax policy for Novartis in the US with a promise from Novartis to increase its workforce in exchange for this lower tax rate. Going by the trend, Novartis is expected to increase employment in the US due to increasing investment in R&D and the fact that most research is done in the US, Novartis would benefit from lower taxes against the promise of hiring more employees, which it would naturally do in any case.
As Novartis is a global organization, it certainly imports certain drugs into the US and exports some others out of the US; I would thus lobby for the reduction of government tariffs on the import of certain drug types so that the landed cost for Novartis these products can be reduced. At the same time, better export incentives for good value-added pharmaceutical drugs would reduce the cost of Novartis products in other countries. Read More