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Novartis A Transformative Deal Case Solution

Solution Id Length Case Author Case Publisher
2304 653 Words (3 Pages) David J. Collis, Ashley Hartman Harvard Business School : 717453
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The pharmaceutical industry is impacted by many factors. This includes government spending on healthcare and the drugs they chose to cover and those that they did not because of budget issues. While in many countries, the government-controlled the pricing in the pharma sector, in countries like the US, where insurance companies negotiated with the pharmaceutical companies rather than the government, the pricing was high. This showed that the power of the sector that focused on controlling the prices was the main driver of change in the industry. 

Following questions are answered in this case study solution

  1. What are the main drivers for change (according to the case) in the Pharma context? 

  2. What is the value of the digital transformation project? (think on markets, architecture and new capabilities for Novartis)

Case Analysis for Novartis A Transformative Deal

Furthermore, government policies on drug pricing also impact the strategy changes in the pharma industry. For example, Germany has developed a value-based pricing model in which the drug is priced on the basis of its efficacy. The reason behind this policy was that high-margin drugs would reduce the motivation of pharma companies to innovate and attain patents to charge a premium price. This resulted in companies beginning to focus on specialty drugs. The demand for specialty drugs such as oncology and immunology was also the driver of change. Also, the pharma companies cashed on patented drugs because once the patent expired, the prices were lowered by 80%. However, because of this competition on generic drugs, companies had begun focusing on biotech drugs, which was challenging to replicate. Therefore, the competition had emerged on the basis of biotech firms rather than the traditional way of developing drugs from chemical combinations. 

Another driver of change was the patents and the slowdown of new drug development. In a world in which drug development expenditures were increasing, and governments were pressuring companies to reduce prices of drugs, the pharmaceutical companies focused on developing strategies that changed the architecture of the sector. It meant companies combining their efforts to spend on R&D to reduce costs and thus, achieving more in collaboration.

2. What is the value of the digital transformation project? (think on markets, architecture and new capabilities for Novartis)

The digital transformation project at Novartis did not only bring about a change in the way of conducting routine tasks but changed the way that things were planned and executed. This is because a static planning process was replaced by an engagement tool that made decision-making easier for global and local markets.

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