Novartis Looks to World's Rich to Meet Need in Chronic Ailments

  • Swiss drugmaker explores formation of new financing vehicle
  • Novartis seeks to fill funding gap for chronic diseases

One of the world’s biggest drugmakers has a new plan to get more medicines to more people: tapping funds from wealthy investors to build up health-care systems in low-income countries.

Swiss pharmaceutical giant Novartis AG is in talks with banks to create a fund for investors interested in opportunities that have a social impact, Harald Nusser, the company’s head of social business, said in an interview in London. A $1 billion fund started by the Abraaj Group, the Dubai-based private equity firm, is a potential model, he said.

The effort is aimed at improving treatment of chronic ailments such as heart disease and diabetes, which Novartis estimates attract less than 2 percent of donor funding for diseases. Last year, UBS Group AG’s wealth-management unit took advantage of growing interest in impact investing, raising $471 million for an oncology fund that will give up some of the profits for cancer research and health care in emerging markets.

“We have spotted two or three interesting candidates for collaboration to move this forward,” Nusser said, declining to name any of the banks. “There will be something coming.”

Abraaj’s health-care fund plans investments in hospitals and clinics among poorer neighborhoods in Nairobi, Lagos and Addis Ababa. It has attracted money from foundations, institutional investors, health technology companies and others, the firm wrote in an email Monday. Companies including Medtronic Plc, the medical-devices maker, have backed the fund.

Joining with a bank would make Novartis one of the first pharmaceutical companies to clinch such a partnership to invest in countries with scarce government resources -- and is also likely to draw skepticism.

Suspicion, Always

“There’s always a suspicion that the pharma company is doing that to facilitate access to key products rather than really improving the system,” said Jayasree Iyer, executive director of the Access to Medicine Foundation, a nonprofit based in the Netherlands.

Iyer’s organization last year ranked GlaxoSmithKline Plc, Johnson & Johnson and Novartis as having the top three strategies for improving access to medicines in low- and middle-income regions. Novartis plans to expand a program that offers a basket of 15 medicines in lower-income nations at a price of $1 per treatment per month, targeting conditions such as cardiovascular and respiratory diseases, diabetes, and breast cancer.

Partly Successful

Working with banks would widen a partnership push by Novartis, which is already collaborating with faith-based and nongovernmental organizations as well as universities.

Rival Glaxo set up a partnership with Barclays Plc four years ago to get affordable health care to more people in Zambia. While parts of the program have succeeded, others, including a micro-health insurance concept, weren’t viable, according to a report by Accenture Plc.

Africa is a particular focus as private-equity groups move to take advantage of increasing demand for health-care products.

Drugmakers can’t simply show up and roll out their medicines, Iyer said. Along with banks, they “need to be part of the conversation on solving these financing issues.”

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