EF2001_day5

Executive Fellows - Class of 2001

Day 5 March 7th 2000

What happened on day 5

Yesterday we survived the train ride back and forth to Munich! Today, it's off to Basel to meet with Novartis and Basel Canton University Hospital.

The day started for most of us at 6:30 a.m. in the Marriott restaurant for Fruhstuck (breakfast)…and what a great buffet they had. Most of us rated it a bit higher than yesterday’s box breakfast. After breakfast it was time for the 1+ hour bus trip to Basel. Today we visited Novartis (hosted by Executive Fellow and Novartis Employee, Gary Skillet) and then the local state-run hospital (hosted by Executive Fellow, Dr. Karl Becker).

The trip to Basel was very nice with views including foothills, mountains, rivers (specifically the Rhine), small farms, etc. Although we traveled on the Swiss highways, it was not the same as the German Autobahn. During our trip to Basel, we learned more about the small gardens (30x30m) that many Swiss residents rent for approx. $200/year, where they build small tool sheds that cost approximately $3500. In the case of our tour guide, it took her and her husband 7 years on a waiting list to receive their small garden outside of Zurich.

A few other Swiss facts that we learned during our bus trip included: you won’t find a Swiss car with rust or damage since all cars are required to pass a yearly inspection, gas is priced per liter and currently costs over $4 per gallon, approximately 6% of the Swiss population works on farms where the most popular Swiss products include milk and cheese. As we approach the city limits of Basel, it was agreed that the only way to describe the Swiss countryside was very peaceful and BEAUTIFUL.

After some confusion we finally arrived to the correct security gate. With all the security booths, gates and metal fences, the Novartis campus resembled a military base. We were greeted by Frau Mullel of the VIP Service, who led us into the main headquarters building for a short break of orange juice, coffee, water and croissants.

Most of our time at Novartis was spent in what appeared to be the main auditorium. We were presented with four fantastic presentations covering various aspects of Novartis . . . their current state and future strategies. The first presentation by Herr Wolfdietrich Schutz, Head Organization and Planning mainly spoke toward the overall structure, sales and strategies of the company. The main point discussed by Herr Schutz was targeted toward the pending spin-off of the Agribusiness division. This new company which will combine the Novartis Ag Division with Zeneca and Astra will be called Syngenta. Novartis is a relatively new name to the industry, having been created only four years ago through the merger of Ciba Geigy and Sandoz?. Since agricultural sales trailed the industry the past few years, Novartis has decided to specialize in its pharmaceutical and health foods industries. A couple surprising facts about Novartis was its current position in the seed and health foods businesses. After the purchase of Northrupt King Seeds, Novartis is the second largest seed company in the world, and have food products such as Gerber and Aviva in its very profitable health foods product line.

The next speaker, Dr. Karen Huebscher, Investor Relations Manager, gave a more detailed overview of Novartis' goals and objectives for the coming years. Specifically, she focused on the need for new product development due to patent expirations of existing products and competition by generic drugs. Following Dr. Huebscher, we heard from Dr. Ernst Buser, Head of Economic Affairs/International Relations, regarding mergers and acquisitions which have become common place in the 1990's in the pharmaceutical industry. Although he did not specifically mention it, Gary Skillet and others speculate a merger with another company is imminent, especially after the company positions itself on the NYSE later this year. One amazing point was the fact that even with the recent mergers, 76% of the pharmaceutical industry is made up of smaller companies. This is much larger than the auto, oil and other industries that have undergone substantially changes over the past century.

A few Pharmaceutical Facts that you might find interesting about Novartis:

Novartis will be launching a line of baby care products (marketed under the Gerber Name) during the next couple months.
The Avia life food produced by Novartis will reduce cholesterol and improve bone health
Novartis is a Global Company with 40% of their business in North America, 36% in Europe, 17% in Asia and 8% in Latin America
In 1998 46% of the Novartis business was pharmaceuticals, within 5 years pharmaceuticals will represent 77% of their business.
In 1988 the Top 10 Pharmaceutical Companies accounted for 25% of the drug business, today the top 10 still only represent a little over 40% of the drug business. In the auto industry the top 5 represent over 80%.
Mergers and consolidation will continue in the pharmaceutical business

Our last speaker was Dr. Joerg Staeheli (some of us think he has "Trish-Like" qualities), Senior Officer of Corporate Knowledge Management, who presented a very interesting and new communications technology. Being a global company, Novartis has taken e-mail to the next step via what are similar to chat rooms and folders for the exchange of knowledge between all employees. This allows everyone who has an interest in specific topics to keep current on special topics, and to avoid duplication of research and other tasks.

Before heading to lunch, we split into three groups to visit various production areas of the campus. One group witnessed the filling of ampoules, another visited the animal pharmacokinetics research area, and the third group saw a laboratory where sampling of medications is sampled by a robot to detect side effects and carcinogens.

The visit was capped by a fantastic lunch in the visitor's restaurant, where we tasted sautéed veal, beef with hollandaise sauce and several delicious desserts of ice cream and Swiss cookies.

BASEL KANTON UNIVERSITY HOSPITAL

After our visit to Novartis, we took a quick drive over to one of the five state-owned hospitals in Switzerland, where a contact of our own Dr. Karl Becker regaled us with an outstanding overview of his country’s health care system, sociopolitical arena, and beyond. Professor (and Doctor) D. Scheidegger, was able to provide meaningful comparative insight to our culture and healthcare system, since he practiced medicine in Boston for three years. We enjoyed approximately one hour of an interactive presentation where we bombarded him with questions that he responded in the most casual and relaxed way.

Salient points of his presentation were as follows:

Switzerland is a wealthy country where health care is the right of every citizen. The State plays a strong role in subsidizing health care to those who cannot afford it. Every Swiss citizen is required to have health insurance." You cannot live here without it" Swiss cantons (States) used to be different in the health care coverage, but have unified during the past six years. Swiss citizens don’t realize how much it costs to stay in a hospital. Everything is included in the services with no upper limit – from simple outpatient surgery to cardiac transplants. Private insurance on top of government insurance is a 2^nd tier (choose room, choose hospital, choose physician, etc.) option. An "in-between" insurance lets you choose doctor without choosing a private room. "Middle insurance" for a family of 4 is an additional $1000 Swiss francs (CHF) per year. The doctor gets 360 CHF per resident and the hospital system is experiencing deficits.

Why is the system like this? Because it started 300 years ago and it’s difficult to change. This insurance is significantly more expensive and in Dr. Scheidegger’s words, "private insurance is really not worth the additional cost because you won’t get any better treatment at the hospital."

Home is where the heart is….!

In addition, he indicated that Switzerland has the same problems as every other nation in the world. Even here there isn’t enough money to pay for everything needed for health care. Hospitals are state owned. As such, doctors are paid by the state – everyone knows what doctors make. Dr. Scheidegger as chief of the anesthesiology department gets paid the same as chief of surgery, chief of medicine. If any doctor working for the State hospital wants to have an outside practice, he must declare the percentage of his participation in the outside clinic so his salary can be adjusted accordingly.

The malpractice system does not exist as established in the USA.

All insurance companies know that the Government will pay for all health care services that they don’t cover. All hospital employees are paid a salary and ALL doctors are paid the same salary regardless of their specialty. When asked to compare health care between Switzerland and the United States, Dr. Scheidegger indicated that the largest difference between Switzerland and the United States was the number of employees that work at the hospital. In Switzerland, the doctors work more hours and will average over 80 hours per week.

The duration of the residency period for graduating doctors is 8 years. After that, they must move on to work in the private sector. When you graduate from Med. school, you apply to one of the five hospitals, where you can stay only eight years. Only department heads and other senior management/doctors can stay past eight years. Abortion is allowed only if 2 psychiatrists recommend that it’s the right thing to do. Also they realize that if they don’t allow it, they’ll be treating the results of butchers. Income tax and corporate tax are used to cover university education and hospitals.

State schools are very good – as good as private schools (and there aren’t any in Switzerland). Insurance companies have to take an applicant (regardless of pre-existing conditions). Dr. Scheidegger was asked why Switzerland is not part of European Union (EU)? He thinks part of the influence of the rich in other European countries is to keep Switzerland separate because they have most of their money here. For the most part, the bilateral contracts have otherwise made this country part of EU.

Preventive medicine is not widely practiced in Switzerland. They have to rationalize their medical system – they can’t afford everything. When asked if he liked Swiss or US system better, he only would comment that he liked not having to know if a patient can pay for treatment. All patients here can pay for it. He consulted for the government but expressed frustration with the resistance to changes needed in the health care system.

With some hesitation, Dr. Scheidegger acquiesced to the possibility of privatizing the health care system. As we pondered that thought, we began a walking tour of the hospital. It was a veritable history lesson as we reviewed wings built in various centuries. As we traversed over the cobblestone we noted the daffodil and crocus blooming in ecstasy. We completed our tour at the front gate and boarded our bus with a deeper appreciation for the Alpine approach to this ever increasing global concern.

We left Basel with a better understanding of how this country values knowledge as it related to health care, and some sense of how they value society’s responsibility to its people.

A Swiss "Paradox"

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