Novo Nordisk is a pharmaceutical development and manufacturing company. The company specializes in the treatment of diabetes, rare bleeding disorders, and growth disorders.
Impacts and Opportunities for Pharmaceutical Companies
According to the World Health Organization, nearly a third of the world’s population lacks access to the most basic essential medicines; in the poorest parts of Africa and Asia this figure rises to over 50% ((World Health Organization. 2004. Equitable access to essential medicines: a framework for collective action. http://whqlibdoc.who.int/hq/2004/WHO_EDM_2004.4.pdf. Accessed July 18, 2014.)). In addition, the failure of the public sector in low-income countries to provide affordable medicine exacerbates the problem by creating high out-of-pocket expenses ((Leach, B.; Paluzzi, J.; Munderi, P. 2005. Prescription for healthy development: increasing access to medicines. http://www.unmillenniumproject.org/documents/TF5-medicines-Complete.pdf)) . Pharmaceutical companies can improve access to medicine through strategic partnerships, outreach, education and training, and differential pricing schemes.
In 2013, Novo Nordisk provided diabetes treatment to 24.3 million and has a target of providing quality diabetes care products to 40 million people by 2020. Novo Nordisk is working to achieve this target by building strategic relationships with local partners, providing differential pricing policies, and numerous other programs. The Novo Nordisk-owned Steno Diabetes Center program REACH is establishing education centers in various Asian countries and is expected to train more than 9,200 healthcare professionals each year. The company provides differential pricing in 35 of the 49 Least Developed Countries. In 2013 it is estimated that 5.2 million patients worldwide were treated with insulin for less than $0.22 per day.
Pharmaceuticals in the Environment
Pharmaceuticals enter the environment in a variety of ways, including emissions from manufacturing sites, disposal of unused medicines, and patient excretion. A 2013 study published in the Journal of Environmental Pollution analyzed effluent samples from 50 large wastewater plants in the United States. The samples contained 56 active pharmaceutical ingredients, with hydrochlorothiazide found in every sample and three other ingredients found in over 90% of the samples ((Kostich, M.S.; Batt, A.L.; Lazorchak, J.M. 2013. Concentrations of prioritized pharmaceuticals in effluents from 50 large wastewater treatment plants in the US and implications for risk estimation. Environmental Pollution. 2013, Oct; 184C: 354-359. DOI: 10.1016/j.envpol.2013.09.013)). Pharmaceutical companies can decrease the impact of pharmaceuticals in the environment by conducting full life-cycle analyses of pharmaceuticals and encouraging take-back programs.
Novo Nordisk recognizes that waste streams are a large contributor to pharmaceuticals in the environment and therefore focuses its waste reduction programs on reducing environmental impact from waste, rather than quantity of waste. This allows the company to focus its attention on specific projects. For example, since 2011 the company has treated wastewater from its insulin production site in Kalundborg in a biogas reactor. The reactor produces 47,000 megawatt hours of electricity annually.
Direct Environmental Impact
Pharmaceutical manufacturing is highly energy and water intensive. In 2005 the U.S. pharmaceutical industry consumed $1 billion in energy ((http://www.energystar.gov/ia/business/industry/LBNL-57260.pdf)). During the same year, pharmaceuticals consumed 36.68 million tons of oil equivalents in the European Union ((Ecorys Research and Consulting. 2009. Study on European Energy- Intensive Industries – The Usefulness of Estimating Sectoral Price Elasticities. http://ec.europa.eu/enterprise/policies/sustainable-business/climate-change/energy-intensive-industries/carbon-leakage/files/cl_literature_review_en.pdf. Accessed July 18, 2014.)). According to the World Health Organization, “water is the most widely used substance, raw material or starting material in the production, processing and formulation of pharmaceutical products.” Pharmaceutical companies must find ways to increase production to meet rising demand while decreasing energy related emissions and water requirements.
Novo Nordisk strives to decouple environmental impacts from business growth. In 2013 the company set new targets to a maximum 50% increase in energy and water consumption compared to business growth. Novo Nordisk has entered into an agreement with Denmark’s largest energy company, DONG Energy. DONG will assist Novo Nordisk in identifying energy-saving initiatives, and in return, Novo Nordisk will purchase corresponding quantities of energy from offshore wind farms.
Areas for Improvement
Pharmaceuticals in the Environment
Although Novo Nordisk is working to decrease wastewater production in high impact areas, Portfolio 21 would like to see the company invest in green chemistry research and encourage pharmaceutical take-back programs across its markets.
Engagement with Suppliers
Novo Nordisk’s Environmental Profit and Loss report concluded that 87% of the company’s total environmental impact is derived from outside the company’s own operations. Specifically the report found that product distribution, extraction of raw materials and cultivation of farm crops are the largest contributors to environmental degradation. Portfolio 21 believes Novo Nordisk should engage with suppliers and take additional steps to decrease indirect environmental costs.
Industry: Health Care
To the best of our knowledge the above information is accurate and was obtained from sources we believe to be reliable. Neither the information presented above nor any opinion expressed shall be construed as an offer to sell or a solicitation to buy the security. The views expressed are those of portfolio management as of 7/31/14 and may not reflect current opinions or subsequent events.