An Analysis of Developments in the Pharmaceutical Market

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Solvay Pharma B.V.

Keeping the options open…

An Analysis of Developments in the Pharmaceutical Market

Appendices

S.C.A.H. Scheffers

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Appendices

I: List of abbreviations 4

II: List of illustrations 6

III: Original list with trends and developments 7

(Translated version)

IV: New list with trends and developments 9

V: Issues 10

VI: Overview of how trends and developments make up 11 the eight issues

VII: Interview scheme external respondents 13

VIII: Interview scheme internal respondents 23

IX: Participants in the research 30

X: Strategic outline of the Solvay Group 32

XI: Organisation of Solvay Pharmaceuticals 35

XII: Mission statement of Solvay Pharmaceuticals 37

XIII: Organisation of Solvay Pharma B.V. 38

XIV: Results of interviews held with external 39 respondents

XV: Results of interviews held with internal 68

respondents

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Appendix I: List of abbreviations

• B.V. Besloten Vennootschap. (More or less) Private company.

• CBG College ter Beoordeling van Geneesmiddelen. Medicines Evaluation Board.

• CTG College Tarieven Gezondheidszorg. Tariffs Health Care Board.

• CVZ College voor zorgverzekeringen. College for health care insurances.

• EMEA European Medicines Evaluation Agency.

• EVS Elektronisch Voorschrijf Systeem. ‘Computer system supporting prescription of medicines. EVS can contain a preferred list of drugs’

(Van Leeuwen, 2000: xi).

• FTO Farmaco-Therapeutisch Overleg. ‘Regular consultation between one or two public pharmacists, and the g.p.’s in the neighbourhood, aiming at increasing rational prescription (good quality and cost conscious)’

(Van Leeuwen, 2000: xi).

• FTTO Farmaco-Therapeutisch Transmuraal Overleg. ‘Regional consultation like FTO, in which medical specialists and hospital pharmacists are also involved’ (Van Leeuwen, 2000: xi).

• GP General Practitioner.

• GUIDE ‘The Groningen University Institute for Drug Exploration is a national research school in the field of innovative drug research’¹.

• HCIC Health Care Insurance Company.

• HMO Health Maintenance Organisation. ‘An HMO is a group that contracts with medical facilities, physicians, employers and sometimes

individual patients to provide medical care to a group of individuals.’²

• HRT Hormone Replacement Therapies.

• ICT Information and Communication Technology.

• IMS Instituut Medische Statistiek. Institute Medical Statistics.

‘Multinational, collecting market data for the pharmaceutical industry’(Van Leeuwen, 2000: xi).

• KNMP Koninklijke Nederlandse Maatschappij ter bevordering van de Pharmacie. This is the Royal Dutch Professional Association of

Pharmacists.

• Ltd. Limited. Limited (liability) company.

• MDW Marktwerking, deregulering en wetgevingskwaliteit. Open market, Deregulation and Quality of legislation.

• Nefarma The Dutch umbrella organisation of research-oriented pharmaceutical Companies.

• NIVEL Nederlands Instituut voor Onderzoek van de Gezondheidszorg. Dutch Institute for Research of Health Care.

• NMa Nederlandse Mededingings autoriteiten. ‘Dutch equivalent of the US Federal Trade Committee.

• OTC Over-The-Counter. Medicines that can be obtained without a prescription.

• PGB Productgebonden budget (ook: Persoonsgebonden budget). Product- bound budget (also: Personal-bound budget).

1 Http://dhcp2.med.rug.nl/guide/profile.htm, February 13^th 2002.

2 Http://www.hmopage.org/, June 19^th 2002.

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• PR Public Relations.

• RVZ Raad voor de Volksgezondheid & Zorg. Council for the Public Health

& Care, the advisory council that advises the government about policy with regard to public health and sport.

• SCP Sociaal en Cultureel Planbureau. Social and Cultural Bureau of Planning. The SCP is an interdepartmental scientific institute.

• SFK Stichting Farmaceutische Kengetallen. The Foundation for

Pharmaceutical Statistics. The SFK collects and analyses data about the use of pharmaceuticals in the Netherlands.

• STG Stichting Toekomstscenario’s Gezondheidszorg. The Foundation for Future Health Scenario’s.

• VWS Volksgezondheid, Welzijn en Sport. Public Health, Welfare and Sport.

• WTO World Trade Organisation.

• ZN Zorgverzekeraars Nederland. The Dutch umbrella organisation of health care insurance companies.

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Appendix II: List of illustrations

Figure 1.1: Conceptual model 3

Figure 2.1: Basic Elements of the Strategic Management Process 10

Figure 2.2: Organisations as open systems 13

Figure 2.3: A model of macroenvironment 14

Figure 2.4: Linkage to Strategic Management 16 Figure 2.5 The role of external analysis 17

Table 2.1 Integrating table 36

Figure 4.1: Solvay Pharma B.V and her context 52 Table 9.1 Recommendations related to issues 94

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Appendix III: Original list with trends and developments

• Societal developments

• Increasing individualism (Paragraph 2.4.3.10)³

• Demography (Paragraph 2.4.5.1)

• Ageing population

• Ethnic-cultural diversity

• Increasingly emancipated consumer (Paragraph 2.4.5.2)

• New age, alternative modes of treatment (Paragraph 2.4.3.9)

• Global lifestyles and cultural nationalism (Paragraph 2.4.3.4)

• Increasing internationalisation (Paragraph 2.4.2.3, Paragraph 2.4.3.1 and Paragraph 2.4.3.4)

• Cocooning (Paragraph 2.4.4.1)

• Staying alive (Paragraph 2.4.4.7)

• From either/or to multiple option (Paragraph 2.4.2.10)

• The vigilante consumer (Paragraph 2.4.4.8)

• From institutional help to self-help (Paragraph 2.4.2.6)

• S.O.S. (Save Our Society) (Paragraph 2.4.4.10)

• Prosperity developments (Paragraph 2.4.5.3)

• Changing values and norms

• Improved education

• Increasing freedom of choice (see also: Paragraph 2.4.2.10)

• Economic developments

• The introduction of an open market in health care and the leading part of healthcare insurance companies with regard to the purchase of medicines (Paragraph 2.4.3.5 and Paragraph 2.4.5.4)

• Networking (Paragraph 2.4.2.8)

• Mergers and take-overs

• Increasing internationalisation (Paragraph 2.4.2.3, Paragraph 2.4.3.1, Paragraph 2.4.3.4 and Paragraph 2.4.5.5)

• The coming of the Euro

• Increasing price transparency

• European tender

• Parallel import and export

• The coming of pan-European health care insurance companies

• The coming of pan-European wholesalers

• From an industrial to an information society (Paragraph 2.4.2.1)

• Prosperity developments (see: societal developments) (Paragraph 2.4.5.3)

3 For every trend and development it is stated which paragraph in the report elaborates on this trend or development.

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• Political developments

• Europeanisation (Paragraph 2.4.3.1 and Paragraph 2.4.5.5)

• Increasing influence of European legislation (Paragraph 2.4.5.5)

• Technological developments

• Biotechnology (Paragraph 2.4.3.8 and Paragraph 2.4.5.6)

• Information technology (Paragraph 2.4.2.1 and Paragraph 2.4.5.7)

• Medical technology (Paragraph 2.4.5.8)

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Appendix IV: New list with trends and developments

• Societal developments

• Demography

• A double ageing population

• Increasingly emancipated consumer

• Prosperity developments

• Changing norms and values

• Increasing freedom of choice

• Global lifestyles and cultural nationalism

• Staying alive

• People are willing to spend more money on health

• From institutional help to self-help

• Economic developments

• The introduction of an open market in health care and the leading part of healthcare insurance companies with regard to the purchase of medicines (privatisation of the health care market)

• Increasing influence of health care insurance company

• Networking

• Increasing internationalisation

• European tender

• From an industrial to an information society

• Political developments

• Europeanisation

• Increasing influence of European legislation

• Decreasing influence local authorities, decreasing national thresholds, one market

• Technological developments

• Biotechnology

• Information technology

• Medical technology

• R&D Æ decrease in discovery blockbusters

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Appendix V: Issues

1. Globalisation and concentration of pharmaceutical industry, pharmaceutical wholesalers and insurers.

2. European integration and her consequences for price transparency, free movement of medicines, European tender and local social insurance systems.

3. The introduction of an open market in health care and the leading part of health care insurance companies.

4. Increasing costs of health care as a consequence of demographics, technology and prosperity developments.

5. Internet and E-commerce and the increasingly emancipated consumer.

6. The role of biotechnology in the development of medicines.

7. The increasing pressure on pharmaceutical companies to provide medicines cheaper to developing countries.

8. The decreasing amount of blockbusters from classical R&D.

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Appendix VI: Overview of how trends and developments make up the eight issues

This appendix renders how the sixteen trends and developments of the new list with trends and developments (see: Appendix IV) make up the eight issues. With these eight issues the semi-structured interviews of phase four of the research (Conducting the interviews, see: Paragraph 1.4) have been held (see: Appendix V). The trends and developments of the new list with trends and developments have for the larger part been pointed out by respondents as being the most important for or of the greatest influence on the pharmaceutical market (in the future). The respondents of the third phase of the research (Preparation of the interview topics, see: Paragraph 1.4) have been asked how they thought the trends and developments were mutually connected to each other. On the basis of the outcomes of these interviews and on the basis of the literature review, eight issues have been found to enclose the trends and developments. In other words, the sixteen trends and developments are the underlying

‘structure’ of these issues or driving these issues.

1. Globalisation and concentration of pharmaceutical industry, pharmaceutical wholesalers and insurers.

• Global lifestyles and cultural nationalism

• Networking

• Increasing internationalisation

• European tender

• Europeanisation

• Increasing influence of European legislation

• Decreasing influence local authorities, decreasing national thresholds, one market

2. European integration and her consequences for price transparency, free movement of medicines, European tender and local social insurance systems.

• See issue 1

3. The introduction of an open market in health care and the leading part of health care insurance companies.

This issue stands on her own:

• Introduction of an open market in health care (privatisation of the health care market)

• Increasing influence of health care insurance company

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12 4. Increasing costs of health care as a consequence of demographics, technology and

prosperity developments.

• Demography

• A double ageing population

• Biotechnology

• Medical technology

5. Internet and E-commerce and the increasingly emancipated consumer.

• Staying alive

• People are willing to spend more money on health

• From institutional help to self-help

• From an industrial to an information society

• Information technology

6. The role of biotechnology in the development of medicines.

• Biotechnology

7. The increasing pressure on pharmaceutical companies to provide medicines cheaper to developing countries.

Included when compiling this list with issues

8. The decreasing amount of blockbusters from classical R&D.

• The decreasing amount of blockbusters from classical R&D.

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Appendix VII: Interview scheme external respondents

(Translated version) Introduction

Currently I am doing a research project in order to graduate in Business Administration at the University of Groningen, the Netherlands. This research project takes place for Solvay Pharma B.V., the Dutch marketing and sales organisation of Solvay Pharmaceuticals. It involves an analysis into market developments and their influences on the pharmaceutical market. Therefore I am interviewing representatives of various market players. In these interviews I discuss the issues that are the outcome of my preparatory study (see: List with issues) in order to get a balanced view of what the future might be concerning these issues, how these developments might influence the pharmaceutical market and what possibilities and dangers might be. In so doing I want to come to recommendations for Solvay Pharma B.V. about how to anticipate and deal with future possibilities and dangers caused by developments taking place within her environment.

In order to concentrate myself on the interview I want to tape record this interview, is that ok with you?

Before we start with the real interview I want to ask you something about yourself (background to include in my report)

• Background, function, other important activities that you are involved in?

1. Globalisation and concentration of pharmaceutical industry, pharmaceutical wholesalers and insurers

• Pharmaceutical wholesalers are focusing more and more on Europe and mergers and take-overs are rife.

• Why does globalisation and concentration of wholesalers take place?

• How is this going to evolve further in the future?

• The combination wholesaler and pharmacist can be a particularly attractive party for a purchaser of medicines, for example a health care insurance company.

• Is that a motivation to co-operate?

• Why (not)?

• Why do health care insurance companies merge? (like IZA, VGZ and Univé lately, but there are many more examples, the sector is getting ever more concentrated)

• What are the ideas behind this?

• Does it have to do with the future? (purchasing of medicines etceteras.)

• How will this evolve further in the future?

• Is it possible in the future that pan-European health care insurance companies come into being?

• If yes, why?

• If not, why not?

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• Which barriers have to disappear for this to happen?

• What are consequences for:

• pharmacists

• pharmaceutical wholesalers

• physicians

• pharmaceutical industry

• How will these parties react according to you?

• The pharmaceutical industry is global. Mergers and take-overs are rife. On the other hand selling of the pharmaceutical part takes place by chemical companies.

• Why do globalisation and concentration of pharmaceutical industry take place?

• And why at the same time the selling of?

• What do you recommend a company as Solvay, that hardly goes along in this?

• How is this going to evolve further in the future, do you think?

• Another trend is often forward integration.

• Do you think that in the future pharmaceutical companies will buy up wholesalers (or pharmacies, physician practices)?

• Why (not)?

• Do you recommend this?

• Why (not)?

2. European integration and her consequences for price transparency, free movement of medicines, European tender and local social insurance systems

• I would like to start with a thesis: ‘In the future the social insurance systems within the European Union will be harmonised.’

• To what extent do you think this is realisable?

• Why (not)?

• What has to happen, will it succeed?

• Which key barriers have to disappear first?

• When local social insurance systems will be harmonised, what will be the consequences of this for (and how will the following parties react according to you?):

• the crossing of the border of services

• pharmacists

• physicians

• patients

• How do they have to prepare for and adapt to this?

• What do you recommend them?

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• What will the future look like with regard to purchasing care abroad by health care insurance companies?

• What has to happen for this to take place at a large scale?

• How do you think that the increasing European integration (among other things the coming of the Euro) will have her repercussion on price transparency?

• And on price levelling?

• What will happen to the difference between generics and R&D-based medicines?

• What will be the consequences of this for:

• pharmacists

• How will they react according to you?

• European integration also means free movement of goods. With regard to free movement of medicines barriers still exist (package/information leaflets etceteras).

• How do you think this can be met?

• Do you think pan-European wholesalers will come into being in the future?

• Medicines and particularly information leaflets and package have to be adjusted continually to different markets.

• What else?

• Is this going to change all?

• Is it going to be easier in the future?

• Why (not)?

• What has been made easier with regard to this already?

• Which key barriers with regard to free movement of medicines have to disappear first?

• When free movement of medicines will come into being in the future, what will be the consequences of this for:

• pharmacies

• pharmaceutical industry?

• How do you think will they react?

• To what extent does this mean the end of parallel import/export?

• Why?

• What will be the future of this?

• Consequences?

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• A thesis: ‘In the future the purchase of medicines will be put out to tender (on a European level).’

• What do you think about this?

• Advantages/disadvantages with regard to this?

• What will be the consequences for parties involved (patients, pharmacists, pharmaceutical wholesalers, the pharmaceutical industry)?

• What would be their reaction?

• How does the pharmaceutical industry have to prepare for and adapt to this?

• Do you have examples of European policy that penetrates as far as the Dutch policy?

3. The introduction of an open market in health care and the leading part of health care insurance companies

• What is meant by an open market in health care?

• Why does an open market have to come?

• What has to happen for that?

• How will the new division of tasks and responsibilities of market parties look like then?

• What is your opinion with regard to an open market in health care?

• Why?

• What does the deregulation program of the government involve?

• Which instruments are given to health care insurance companies in order for them to be able to execute their part in the future?

• What legislation is taken away/relaxed or has been taken away/relaxed with regard to this?

• Reports (Wijers, MDW and de Vries) are ‘old’. What has happened since then with regard to this?

• Do you think that a more open market makes the problems within the healthcare disappear (waiting-lists, shortage of personnel, financial problems)?

• Why (not)?

• Do you think it is wise to assign the leading part to health care insurance companies?

• Why (not)?

• Which barriers have to be taken away will health care insurance companies be able to apt to call the tune (qua purchase of medicines)?

• If not health care insurance companies will be assigned this part, who do you think will then be able to take on the leading part with regard to the purchase of medicines or will be able to get it?

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• Why?

• Why is there a need for a new structure with regard to medicines provision?

• Do health care insurance companies already call the tune?

• Are there health care companies already pursuing an active policy?

• Which?

• How?

• With regard to what?

• Do health care insurance companies also have to compete with each other in the future?

• Why?

• How?

• Which barriers have to disappear in order for health care insurance companies to be able to compete with each other?

• What we see, however, is what we talked about before, that health care insurance companies are merging and unite forces.

• How will this evolve in the future? The government wants on the contrary more competition.

• Which barriers have to be taken away for this initiative to succeed, as well with regard to health care insurance companies as with regard to other parties, like physicians, pharmacists etceteras.

• How is one able to let GP’s prescribe efficiently?

• How does one put out to tender purchase and distribution? (we will come back to this later on)

• What is your opinion with regard to this?

• How does one establish a fixed formulary per health care insurance company?

• Why?

• What will be included? (What is the case with prescribing and delivering of preferential remedies, make more agreements with regard to that? Is this being done more and more by health care insurance companies with health care suppliers?)

• What are consequences for physicians, pharmacists and the pharmaceutical industry?

• Are these the three initiatives, that form together the leading part of health care insurance companies? Or what more in the future?

• When health care insurance companies are going to arrange purchase, to what extent do pharmacists and wholesalers still have a right to exist in the future?

• Are health care insurance companies going to co-operate with wholesalers and pharmacists with regard to purchase and distribution?

• What will be con sequences of this for the pharmaceutical industry?

• How will she react?

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• Doesn’t the package of reimbursed medicines in the future include all medicines anymore:

• Is this going to happen?

• How do you think that parties are going to react on this?

• How will the putting out to tender of the purchase of medicines take place?

(see above)

• Why aren’t health care insurance companies going to do it themselves or by hiring again?

• Which parties are allowed to take part in this?

• Putting out to tender on a European level?

• How do you imagine that?

• Which barriers have to disappear for this or on the contrary what has to happen will it be possible?

• What are consequences for:

• pharmacists

• physicians (contract, protocol, formulary, incentives?)

• patients

• How will these parties react according to you?

• Policy of contracting of health care insurance companies: what is going to change with regard to this in the future? (Europe?)

• When health care insurance companies get the leading part one of the consequences is that pharmacists will have to distribute more efficient.

• How do you imagine this in the future?

• Purchase profits have to find their way back to the care, health care insurance company and patient according to the government etceteras.

• How does this have to happen?

• How will this evolve in the future, when health care insurance companies call the tune?

• What are consequences for pharmacists?

• Separate care and commerce.

• Another image of the future is also that pharmacists have to compete with each other and with new entrants for the favour of the health care insurance company which will put out to tender the purchase and distribution of medicines.

• How do you think that pharmacists will react on this?

• Which barriers have to be taken away in order to be talk of more competition?

• Do you see this happening?

• Why (not)?

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• Which other forms of distribution do you see in the future? (why did other initiatives fail?)

• What are consequences for pharmacists?

• However, how is this going to be able with regard to the supply, since the number of first-year pharmacy students is historically low? And next to this there is taking place a streaming out of pharmacists?

• How will they react according to you?

• What are consequences for the pharmaceutical industry?

• How does she have to prepare for and adapt to this?

• How is she going to react the coming years according to you?

• What are consequences for health care insurance companies?

• How are they going to react the coming years according to you?

• According to the report ‘Geneesmiddel verzekerd’ the government has to abolish the obligation that in every pharmacy one pharmacists has been registered, since there are too few pharmacists, in order to facilitate the entry of new distributors.

• Which impediments have to be removed further more?

• What is your opinion with regard to all these plans?

• What do you think the consequences will be for the following parties of the intention of the government to let health care insurance companies take on the purchase and how are they going to react the coming years according to you?

• pharmacists

• physicians

• patients

• Summarising: do you think that assigning health care insurance companies the leading part is going to be a success in the future?

• Why (not)?

• What is going to happen when assigning the leading part to health care insurance companies fails?

• One hears more and more that making profit within care must be able (among other the advice of the RVZ of February 14^th 2002)

• Do you think that the prohibition of making profit within health care must be abolished?

• Why (not)?

• What will be consequences of this in the future?

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and prosperity developments

• Why do costs of health care increase?

• What is the relationship between improved medical technological knowledge and the use of medicines?

• One hears also about that medicines are capable of decreasing other costs of health care, like admissions into hospitals.

• Changing of population; what is the influence of this on the use of medicines?

Or on health care: interculturalisation of health care. What are differences in consumption of health care between immigrants and autochthons?

• How will this evolve in the future?

• How do physicians have to prepare for and adapt to this according to you?

• How do pharmacist have to prepare for and adapt to this according to you?

• How does the pharmaceutical industry have to prepare for and adapt to this according to you?

5. Internet and E-commerce and the increasingly emancipated consumer

• Patient is becoming more critical, knows more, (improved education), is able to get information from the Internet and as a consequence is standing stronger with regard to physician.

• To what extent does this view tally according to you?

• What are consequences of increasing emancipation of consumers for:

• physicians

• pharmacists

• How do they have to deal with and react on this in the future?

• What is the relationship with self-medication?

• People are willing to spend more money on their health. Prosperity developments, changing norms and values.

• Why?

• Why? (and why not regular health care? What are advantages of self- health care compared to regular health care?)

• From institutional help to self-help: we trust less on institutions then on ourselves. People want to do more and more themselves.

• How do you think this will evolve?

• More medicines from prescription-only to over-the-counter; what does the future look like with regard to this?

• What are consequences of this for:

• physicians

• pharmacists

• How will they react the coming years according to you?

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• How do they have to prepare for and adapt to this according to you?

• E-commerce: how do you think that E-commerce will develop in the future: will patients buy medicines via Internet?

• What else could be consequences of Internet and E-commerce?

• What would be consequences for the pharmaceutical industry?

• The role of E-commerce in the future, what will be consequences for the pharmaceutical chain (wholesalers, sale via Internet, etceteras).

• A thesis: ‘Pharmaceutical wholesaler will disappear and pharmacists, or a central purchaser, like a health care insurance company, are going to negotiate directly with the pharmaceutical industry.’ (Decrease in number wholesalers or pharmacists or worst-case scenario for wholesalers, etceteras, no wholesalers and pharmacists anymore?)

• Is this realistic?

• Why (not)?

6. The role of biotechnology in the development of medicines

• What is the role of biotechnology in the designing of new medicines?

• What is the difference between biotechnology medicines and ‘normal’

medicines?

• Which consequences may biotechnology have in the future within health care?

• How will one react on this react on this according to you (Ethically, financially….)?

• What will be the influence of biotechnology on traditional pharmaceutical companies in the future?

• What are consequences for the pharmaceutical industry?

• How will she react according to you?

• What do you recommend her?

• (Europe is lagging behind on the US, because of what?)

• What is the future of biotechnology according to you?

7. The increasing pressure on pharmaceutical companies to provide medicines cheaper to developing countries

• How will this evolve in the future? In Africa it is allowed for some AIDS medicines to be produced already by pharmaceutical companies, while the patent has not yet expired.

• Is this going to happen ever more?

• Why (not)?

• What are consequences for the pharmaceutical industry with regard to this?

• What does she have to do to prepare for this?

• Is developing still ‘meaningful’ in view of the earn back period?

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• How does the pharmaceutical industry have to prepare for and adapt to this according to you?

• What do you recommend her?

8. The decreasing amount of blockbusters from classical R&D

• It is said that there is or will be in the future a decrease in the amount of classical blockbusters by traditional pharmaceutical companies.

• How can this be?

• What can be done about this?

• Can this be circumvented by biotechnology in the future?

• If yes, how?

• If not, why not?

• What do you recommend the pharmaceutical industry with regard to this development of ever fewer real break-throughs?

• Biotechnology, board out, co-operation with other companies, buy-up?

Rounding off

• Thank you

• Tips and ideas for the remainder of this research?

• Other persons to get in contact with?

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Appendix VIII: Interview scheme internal respondents

Introduction

Currently I am doing a research project in order to graduate in Business Administration at the University of Groningen, the Netherlands. This research project takes place for Solvay Pharma B.V., the Dutch marketing and sales organisation of Solvay Pharmaceuticals. It involves an analysis into market developments and their influences on the pharmaceutical market. Therefore I am interviewing representatives of various market players. In these interviews I discuss the issues that are the outcome of my preparatory study (see: List with issues) in order to get a balanced view of what the future might be concerning these issues, how these developments might influence the pharmaceutical market and what possibilities and dangers might be. In so doing I want to come to recommendations for Solvay Pharma B.V. about how to anticipate and deal with future possibilities and dangers caused by developments taking place within her environment.

I hold interviews with people from Solvay as well. The purpose of these interviews is to get to know what Solvay has done or is doing with regard to certain subjects (some of which have been mentioned during interviews held with people that don’t work for Solvay), what you think about these subjects and what Solvay’s strategy is with regard to these subjects.

In order to concentrate myself on the interview I want to tape record this interview, is that ok with you?

Before we start with the real interview I want to ask you something about yourself (background to include in my report)

• Background, function at Solvay, other important activities that you are involved in?

1.Globalisation and concentration of pharmaceutical industry, pharmaceutical wholesalers and insurers

• Pharmaceutical industry is global. Mergers and take-overs take place all the time. On the other hand also selling of the pharmaceutical part of chemical companies takes place.

• Why both these actions at the same time?

• What do you think the future will be concerning this?

• What does Solvay do in this?

• What is Solvay’s strategy concerning this?

• What do you recommend Solvay in this?

• How will this evolve in the future, do you think?

• Sometimes it is said that mergers will not work out for R&D, that the larger the R&D department, the less it produces.

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• It is said that Solvay’s research department is just as large that it is able to find and develop enough, and that Solvay is able to make nice deals with other parties. Is that a reason not to merge? What is Solvay’s strategy for the future in this?

• Another trend is forward integration.

• Do you think that in the future pharmaceutical companies will buy wholesalers, pharmacists or physicians? HMO’s?

• Do you recommend this?

• What is Solvay’s strategy?

• What do you think about the other way around, that insurers or wholesalers start their own generic pharmaceutical business?

• Is it in the future possible that we will have pan-European insurers?

• Why (not)?

• Which barriers have to disappear for this to happen?

• What will be the consequences?

2. European integration and her consequences for price transparency, free movement of medicines, European tender and local social insurance systems

• I want to start with a thesis: ‘In the future the social insurance systems will be harmonised across Europe’.

• What do you think?

• Why?

• What will be the consequences?

• How will pharmaceutical companies react?

• What will Solvay do?

• How, do you think, will increasing Europeanisation (e.g. Euro) have her consequences on price transparency of medicines and on price levelling?

• What will happen to the difference between generic-R&D based medicine?

• Price-strategy of pharmaceutical companies will become more visible.

What will be consequences in the future?

• How will Solvay react?

• What will be the consequences for pharmaceutical companies?

• What would Solvay do?

• What would her strategy be?

• European integration does also mean free movement of goods and in casu of medicines. For the last, barriers still exist.

• What has to happen in order to have free movement of medicines?

• What will be the consequences of free movement of medicines for pharmaceutical companies? (It is said that the industry wants free movement of medicines, since this will be cheaper, is this true?)

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25

• What will Solvay do?

• What is its strategy?

• End of parallel import/export?

• What will be consequences?

• A thesis: ‘In the future the purchase of medicines will be put out to tender (on a European level)’.

• What does Solvay think about this?

• Decrease in possibilities of choice for patient, since some companies will withdraw themselves from the market.

• What would Solvay do?

• How will Solvay react on this in the future?

• What does she do?

3. The introduction of an open market in health care and the leading part of health care insurance companies

In the Netherlands the government wants the health care sector to work more like an open market. Furthermore she wants to assign to insurers the leading part in health care. One of the consequences of this will be that insurers have to take care of the purchase of medicines in the future. Competition between insurers and between pharmacists will belong to the consequences. A consequence for the pharmaceutical industry is that they have larger purchasers in front of them, representing many clients, with a lot of power to say, no we won’t compensate that medicine.

• How will Solvay react on this?

• What does Solvay do in this? (it is said that Solvay should change its marketing activities, direct its attention to other places where decisions are made, account manager insurer, does Solvay have this, what do you think that Solvay needs to do, what does Solvay do in this, what will Solvay do in this in the future, what kind of other activities to employ?) How to negotiate with insurers (in the future)? What about?

• Another input from the interviews is that when insurers are going to work with a formulary, it is luck when you have been put on this formulary, otherwise it is very bad, since no patient will ‘buy’ your medicines.

• A picture of the future is that pharmaceutical companies will be much more competitive towards each other in order to get the contract.

• What do you think that Solvay needs to do in this in the future?

• What strategy?

• Be distinct also as a pharmaceutical company.

• How do you see that concerning Solvay?

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26

• How distinct is Solvay?

• In what?

• What is Solvay’s strategy?

• Another thing that came out of the interviews is that pharmaceutical companies have the possibility to withdraw themselves from certain markets when insurers become too powerful as a purchaser. That pharmaceutical companies, organised in a kind of umbrella organisation, say we won’t supply that country with our medicines.

• Do you think that is a possibility to be considered?

• Why (not)?

• Purchase of medicines put out to tender on a European level?

• What are consequences for Solvay?

• Closing of local marketing and sales offices and work out of the head- office?

• What will be consequences?

• On the other hand, it is said that marketing is local.

• What does Solvay think about this?

• What is Solvay’s strategy in this (for the future)?

• Another thing: An idea of the Dutch government is to have more different points to buy your medicines next to the traditional pharmacists and competition between them in the future.

• Boots did not work out in the Netherlands

• Why do you think?

• In England it does, why?

• What kind of other distribution ways do you think we will get in the future? Internet? Medicines at the local supermarket? Etceteras. Why?

• What does Solvay need to do in this?

• Disease management programs: what does Solvay do in this (in the future)?

• Do you think this is the future?

• What does Solvay do in this in the future?

• Does it fit with her strategy?

• Will the pharmaceutical industry in the future go into other fields of health care?

• During an interview it has been mentioned that pharmaceutical companies could in the future make contracts with health care organisations and that co- operation with commercial organisations like pharmaceutical companies could increase.

• What is Solvay’s strategy in this (in the future)?

• Of what do I have to think about?

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27 4. Increasing costs of health care as a consequence of demographics, technology

and prosperity developments

• Why do costs of health care increase?

• But costs of medicines are capable of reducing costs since it will reduce the days that a patient is taken into hospital, or not?

• How will evolve this in the future?

• Which changing norms and values have an influence on this?

• How do pharmaceutical companies have to react on this?

• Strategy?

5. Internet and E-commerce and the increasingly emancipated consumer

• Patient has become more critical, knows more, better education, is able of getting information on the Internet.

• What are consequences of this for pharmaceutical companies?

• What does Solvay in this?

• What can it do?

• It is said to do more with Internet (website).

• What will it do in the future?

• Strategy?

• It is said to get more in contact with patient associations, sponsoring, exchange of information, also about patients and the working of medicines.

• What does Solvay do?

• What is strategy?

• How does Solvay think about marketing towards patients?

• What is her strategy?

• It is said to get directly to the patients so that they will ask for your products.

• What does Solvay (intend to) do in this?

• What do you want to ‘tell’ patients in this?

• Information telephone number, does Solvay have this? In the future?

• It is said that the pharmaceutical industry should do something about her image (towards patients).

• What do you think about that?

• To make clear that pharmaceutical companies also only want medicines to be taken in a correct way. Convincing professionals, organisations, insurers and patients. Bad image, pushing in order to get the medicines in the pen.

• What is Solvay’s strategy in this (in the future)?

• Self health care is also a consequence.

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28

• More products from UR to OTC.

• What are consequences for Solvay?

• What does pharmaceutical industry have to do in this?

• Vemedia is in the Netherlands the marketing and sales organisation of OTC products.

• Selling the OTC-part of pharmaceutical companies?

• What do you think, will Solvay do this?

• Why (not)?

• E-commerce: how do you think that E-commerce will evolve in the future?

• Will patients buy their medicines etceteras on the Internet?

• What will be other consequences of Internet and E-commerce in the future?

• What will be consequences for pharmaceutical companies?

• How will they react?

• Role of E-commerce in the future, what will be consequences for pharmaceutical chain? (wholesalers, sale via Internet, etceteras).

• A thesis: ‘Pharmaceutical wholesaler will disappear and pharmacists or a central purchaser like an insurer, will negotiate directly with pharmaceutical industry’ (Decrease in number wholesalers or pharmacists or worst case scenario for wholesalers etceteras, no wholesalers and pharmacists anymore?)

• Is this realistic?

• Why (not?)

6.The role of biotechnology in the development of medicines

• What is the future of biotechnology? (outstripping of traditional by biotechnology?)

• What do you recommend traditional pharmaceutical companies in this?

• Biotechnology or not, or in co-operation, board out, what does Solvay do?

• What will she do in the future?

• What is Solvay’s strategy for the future in this?

• What do you suggest?

7.The increasing pressure on pharmaceutical companies to provide medicines cheaper to developing countries

• It was said that this could not be in the future because of an infrastructure problem in those countries.

• What do you think the future of this will be?

• How will this evolve in the future?

• It is said that this will increase parallel import, and that it will thus not favour the pharmaceutical industry.

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• What is Solvay’s strategy concerning this?/What does Solvay think about this?

• What do pharmaceutical companies need to do in order to ‘survive’?

• How can they prepare themselves?

• Does developing have use, since the earn back period is becoming smaller?

• It is said to enlarge this period, what do you think about this?

• What happens to your corporate image, when you, as a pharmaceutical company, are able to develop and produce a certain medicine, but you won’t?

8.The decreasing amount of blockbusters from classical R&D

• It is said that there is or will be in the future a decrease in the amount of traditional R&D blockbusters?

• How can this be?

• What can be done about this?

• Can this be circumvented by biotechnology?

• What do you recommend the pharmaceutical industry concerning this?

• Biotechnology, board out, co-operation with other companies, buy-up?

• What is Solvay’s strategy in this?

• What does she intend to do in this in the future?

Rounding off

• Tips and ideas for the remainder of this research?

• Thank you

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30

Appendix IX: Participants in the research

This appendix gives a division of respondents in different categories. In part A the people are mentioned, that provided information during the third phase of the research (see: Paragraph 1.4). Part B gives the people that co-operated in the fourth phase of the research (see:

Paragraph 1.4). On the next page Figure 4.1 is included to show how many respondents of what external parties are included in this research. For questions relating to participating respondents, one can contact the author of this report or her first university supervisor.

Hereby all participants are thanked for their contribution to this research and the time they have made available.

A. Third phase: Preparation of the interviews External

• 3 lecturers in the University of Groningen Internal

• 4 representatives of Solvay Pharma B.V.

B. Fourth phase: Conducting the interviews External

• 5 pharmacists (of which one is also a representative of a pharmaceutical wholesaler and one is a hospital pharmacist)

• 3 representatives of pharmaceutical wholesalers (of which one is a pharmacist)

• 1 representative of a parallel importing pharmaceutical wholesaler

• 3 representatives of (health care) insurance companies

• 1 physician

• 1 medical specialist

• 5 (former) university lecturers (of which three professors)

• 4 representatives of the Ministry of VWS

• 2 representatives of a consultancy firm

• 2 representatives of Trendbox

• 1 representative of Guide

• 1 representative of NIVEL

• 1 representative of the RVZ

• 1 representative of the STG

• 1 representative of the CVZ

• 1 representative of a patient organisation

• 1 former employee of a pharmaceutical company

• 1 representative of an OTC-company

• 1 representative of the KNMP

• 1 representative of the Nefarma

• 1 representative of ZN Internal

• 4 representatives of Solvay Healthcare Ltd.

• 2 representatives of Solvay Pharma B.V.

• 2 representatives of Solvay Pharmaceuticals

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31

Solvay Pharma B.V. and her context

= information transfer, imposing legally binding directives

= information transfer, imposing national rules (of behaviour)

= scientific information transfer

= supply of pharmaceuticals

= medical information transfer

= medical information transfer, prescribing of pharmaceuticals

= money transfer, imposing rules

= money transfer, information transfer

= imposing rules of education

= providing employees

= part of

Higher education Five resp.

EU

Ministry of Justice

Pharmaceutical industry Ministry of

VWS Four resp.

Ministry of Economic

Affairs Government

Solvay Pharmaceuticals

Two resp.

Ministry of Education

HCIC’s Three resp.

Physicians One resp.

Patients One resp.

Pharmacies Five resp.

Wholesalers Four resp.

Hospitals One resp.

Competitors One resp.

Solvay Pharma B.V.

Two resp

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32

Appendix X: Strategic outline of the Solvay Group

The Solvay Group has formulated a strategy, which is driven by a vision statement, that shows where the Group wants to go. This vision is a picture of the future Solvay seeks to create.⁴ The distinctive character and purposes of company’s vision statement differs from a mission statement and a company’s philosophy. The three are complementary, but differ in their efforts to define a company’s past, present and future (Wilson, 1992). Therefore, first of all the mission statement of the Solvay Group is given. Hereafter the values making up the Group’s philosophy are presented.

Next Solvay’s vision is given. The last part of this appendix is devoted to the strategy of the Solvay Group.

Mission of the Solvay Group

According to Wilson (1992) a mission pursues three ends. First of all a mission sets the basic purpose of a business. Furthermore, a mission states the company’s relationship to other organisations. Third, a mission gives general objectives. The Solvay Group has formulated a mission statement, which identifies what she stands for and what she is beyond just being profitable:⁵

‘Building on our scientific, technical and commercial expertise, we responsibly provide innovative products and services related to chemistry and human health to create ever-increasing value to our customers, shareholders and employees’.

Values of the Solvay Group

Wilson (1992) describes how a company’s philosophy articulates corporate values, which are guiding principles for corporate actions and ethical behaviour. Furthermore a philosophy sets the character of relations with stakeholders, the management style and the corporate culture. The Solvay Group has stated her five values firmly in the values statement:⁶

• ‘Customer care; constant enhancement of quality and added value of products and services through ongoing and cost effective innovation.

• Ethical behaviour; a long-standing tradition of ethical behaviour based on principles of Honesty, Integrity and Trustworthiness.

• Respect for people; encouragement to exercise creativity and leadership, while giving every individual opportunities for developing his/her full potential.

• Empowerment; fostering a culture that encourages delegation, risk taking, speed of response, accountability and partnership in order to adapt effectively to an uncertain and rapidly changing world.

• Teamwork; developing a learning organisation by building teamwork with open communications across the organisation, sharing knowledge, technologies and best practices.’

Values are the guiding principles that bring the Solvay Group to their destination, her Vision.

4Http://www.bxl.be.solvay.com/services/sg-cc/groupe/en/mission_strategy/MVV-Vision.htm, November 1^st 2001.

5Http://www.bxl.be.solvay.com/services/sg-cc/groupe/en/mission_strategy/MVV-Mission.htm, November 1^st 2001.

6Http://www.bxl.be.solvay.com/services/sg-cc/groupe/en/mission_strategy/MVV-Values.htm, November 1^st 2001.

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33 Vision of the Solvay Group

A vision describes the ‘shape’ of the future business. Furthermore it sets particular goals and drives a company’s strategy (Wilson, 1992). A mission and philosophy are, in a way, timeless (or only infrequently subject to change). The vision of a company expresses the mission, strategy and values of a company at a given time (Wilson, 1992). In corporate terms Wilson (1992:18) defines a strategic vision as follows: ‘A coherent and powerful statement of what the business can and should be (ten) years hence (the time horizon varies, of course, with the nature of the business)’.

Vision is needed since we are living in uncertain times. In a more stable time, a company’s direction is likely to be more continuous. It is precisely the uncertainty of the current business environment that make for discontinuity in corporate direction. A company’s vision can establish a direction and a destination (Wilson, 1992).

Solvay’s vision shows where she wants to go and what it will be like, when she gets there. It is a picture of the future Solvay wants to create.⁷ Her vision is a description of on the one hand the end destination and on the other hand the way that will lead to it (Solpharia, 2001). The Solvay Group has formulated her vision statement as follows:⁸

‘Solvay is an independent and ethical global industrial group with a balanced portfolio of sustainable profitable and growing businesses under careful environmental management:

• Amongst the world leaders in selected markets and products either alone or with sound complementary business partners

• Valued by its customers as a highly competent, reliable and competitive solution provider

• With a clear, motivating organisation, developing and empowering people and teams through rewarding and challenging jobs

• Acting as good corporate citizens, carting for the health, safety and environment of their employees and of the community at large’

Strategy of the Solvay Group

As a result from the above mentioned mission and values and driven by the vision the Solvay Group’s strategy is as following:⁹

• ‘To be first choice supplier for customers in a wide range of major industries

• To concentrate on four sectors of activity: Chemicals, Plastics, Processing and Pharmaceuticals, and to be a world leader in selected areas where we have competitive advantage.

• To improve the quality and added value of our products and services through continuous and cost-effective innovation.

• To have a higher growth rate in the Americas and the Asia-Pacific region than in the whole of Europe to achieve better geographical balance.

7 Http://www.bxl.be.solvay.com/services/sg-cc/groupe/en/mission_strategy/MVV-Vision.htm, November 1^st 2001.

8 Http://www.bxl.be.solvay.com/services/sg-cc/groupe/en/mission_strategy/MVV-Vision.htm, November 1^st 2001.

9 Http://www.solvay.com/business/bustmis.htm, October 26^th 2001.

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• To recruit top-quality employees and with their participation create an organisation that motivates and encourages them to realise their potential while rewarding them competitively.

• To delegate authority and responsibility as far as possible in order to create a lean, participative, and entrepreneurial organisation that is highly responsive to the market.

• To continuously improve our health, safety and environmental performance world-wide.

• To conduct business ethically and legally at all times and to be a responsible neighbor in the communities in which we operate.

• To earn profits that will ensure regular growth of dividends and stock value and provide the cash flow needed to implement our business strategies.’

In 2000 Solvay has reaffirmed her strategy for change (Solvay annual report, 2000:

1). This involves three aspects. First of all Solvay wants a faster growth in the Pharmaceuticals Sector (see: Paragraph 3.2 and Paragraph 3.3.2). Furthermore, rapid growth in a carefully selected range of focused activities is desired, with increasing presence in specialties and advanced materials. As a last component of this reaffirmed strategy, the Group wants to reinforce leadership and global position in each activity through innovation and competitiveness. This strategy will promote increased growth and is suited for a rapidly changing world.

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35

Appendix XI: Organisation of Solvay Pharmaceuticals

Sources: Internal documents¹⁰

10 Http://www.we.nl.solvay.com/Home/, November 1^st 2001

Http://www.solvaypharmaceuticals.com/html/company/orgatext.html, October 26^th 2001.

Solvay Pharmaceuticals

Manufacturing

Research

&

Development

International Marketing Business

Develop- ment Financial Planning

Strategic Planning

Operations

Psychiatry and Cardiology

Int.

Marketing

&Licensing

USA Europe and

Inter- national

Japan Formula-

tion and packaging Manufac-

turing

Gastroen- terology and HRT

Local, clinical development sites Product

development centers Research

into Psychiatry Research

into Cardiology

and Gastroen-

terology

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36 Organisation of Solvay Pharmaceuticals

Solvay Pharmaceuticals consists of four different divisions; International Marketing, Operations, Manufacturing and Research and Development. Below these four different parts are explained.¹¹

International Marketing

International Marketing is the division that develops and implements global product strategies and that defines product objectives. These are tailored to local culture and standards by country management, in line with the principle ‘Think globally, act locally’. International Marketing consists of two Strategic Marketing Units. One of these units acts upon the product areas Psychiatry and Cardiology. The other one markets the Gastroenterology and Hormone Replacement Therapies products. Solvay Pharmaceuticals International Marketing and Licensing is located in Basel, Switzerland.

Operations

The operations division is sub-divided in three parts; USA, Europe and International and Japan. These three organisations manage their region. Europe and International is divided into six regions, each managed by a Regional Manager.

Manufacturing

Solvay Pharmaceuticals Manufacturing supplies Solvay subsidiaries, distributors or license-holders all over the world. It provides finished products, products for package and distribution and active ingredients for formulation, package and distribution.

Manufacturing sites are co-ordinated centrally in order to optimise cross-utilisation of resources and expertise.

Research and Development

Solvay Pharmaceuticals as a whole has one global Research and Development division. In Germany the global research centres for cardiology and gastroenterology are concentrated. In the Netherlands the global research centre for psychiatry is located. Product development centres are founded in Germany, the Netherlands, the USA and Japan. Furthermore, in order to ensure that the dossiers are adapted to local regulatory requirements and patient needs, there are additional local, clinical developments sites. These local sites, however, follow one and the same global approach.

11 Http://www.solvaypharmaceuticals.com/html/company/orgatext.html, October 26^th 2001.

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37

Appendix XII: Mission statement of Solvay Pharmaceuticals

The mission of the Solvay Group also applies to Solvay Pharmaceuticals, since she is a division of the Solvay Group. However, Solvay Pharmaceuticals has also formulated her own mission in the following way:¹²

‘Solvay Pharmaceuticals is a division of Solvay S.A. dedicated to optimal patient health management.

Our commitment is to contribute to an increasing portion of corporate growth, revenues and profit.

Within our defined therapeutic areas Solvay Pharmaceuticals intends to be among the leading global pharmaceutical companies in providing health management.

We will strengthen our position through a global market presence and by marketing a portfolio of comprehensive medical treatments. We will support this by manufacturing the active pharmaceutical ingredients and finished pharmaceutical products.

We will build our product portfolio through discovery, development and acquisition of pharmaceuticals.

Our success will be based on attracting, developing and retaining talented and motivated employees with the ability and commitment to excel.’

12 Http://www.we.nl.solvay.com/home/mission.htm, November 1^st 2001.