Novartis India

Dear Shareholder
 
 Indias rural population of over 700 million represents one of the
 biggest healthcare challenges in the world. The complexity created by
 inadequate infrastructure, poverty and illiteracy is compounded by the
 fact that most pharmaceutical companies in India have tended to
 concentrate on areas with a developed healthcare infrastructure - the
 urban market. The rural masses, as a result, are primarily served by
 the public health system, which is overstretched and significantly
 inadequate, with many local and national NGOs attempting to provide a
 buffer.
 
 Yet the fact is that, as Prof C K Prahalad so eloquently pointed out in
 his book, The Fortune at the Bottom of the Pyramid, this large
 population also represents an under-served market. But to benefit from
 this opportunity, companies need to be innovative, creative and
 inclusive; for what works at the top of the pyramid does not, and will
 not, work at the bottom. Couple this opportunity with the corporate
 philosophy of the Novartis Group of providing medical care to those who
 have the most need for it and yet the least access, and it forms a
 compelling reason to embark on an innovative social-marketing
 initiative - Arogya Parivar - a first-of-its-kind in the Novartis
 world.
 
 Launched after the running of a successful pilot program in 2007,
 Arogya Parivar today covers seven states and a population of roughly 25
 million people in 18,000+ villages. It is a holistic program covering
 everything from health awareness at the grassroots level through
 meetings with villagers using audio-visual aids to educating healthcare
 professionals and organising health camps.  The differentiating factor
 for Arogya Parivar is that it aims to achieve social good in a For
 Profit business model. The goal now is to double the reach by the end
 of the year.
 
 Along the way, your Company has had to unlearn several traditional
 aspects of doing business and learn others. For example, traditional
 pharma marketing primarily consists of detailing product benefits to
 doctors. But this assumes a certain level of patient awareness and that
 he or she will ask for medical help when things go wrong. This is just
 not the case in a rural milieu. In a situation where ignorance and
 blind faith leads to people believing that a disease like TB is a
 curse, creating grassroots level awareness is critical. Even more
 important is to target women and child health, as they typically suffer
 from several completely preventable diseases because of lack of
 awareness and understanding. This awareness is only possible if the
 organization takes a holistic approach, involving all stakeholders -
 the people, the pharmacies, the doctors, the government and the NGOs.
 
 Arogya Parivars inherent success lies in its replicability. Once you
 understand the basic DNA of how it works, it can be replicated across
 cultures and geographies. There is no single template that can be
 followed and each intervention has to be customized to the local
 environment, but the broad learnings are applicable in any
 bottom-of-the-pyramid market. No doubt efforts such as these by private
 companies can only attempt to bridge the gap that exists in our public
 health infrastructure. What is really needed is much stronger
 government intervention - both at a policy and execution level.
 
 Greater government investments in building healthcare infrastructure
 and monitoring will all go to improving healthcare access. Government
 measures are key to widening the scope of inclusive healthcare through
 partnerships with industry and through measures such as reduction in
 transaction costs of medicines, imposing zero import duties on
 life-saving drugs and greater incentivising of R&D, especially for
 solutions aimed at the rural sector.
 
 We now have a new government at the Centre, one that is committed to
 greater social and financial inclusion, and I hope that the issues
 related to infrastructure, education, and healthcare are addressed
 urgently. I take this opportunity to thank you, our shareholders, for
 supporting us whole-heartedly in all our access to medicines
 initiatives.
 
                                                  With best wishes
 
                                                    Ranjit Shahani