The AVR in dialogue with the Roche CEO
In 2020, the Committee of the Roche Employees’ Association (AVR) once again received a new-year update of the previous year's business results from top Roche management in person – and this significantly exceeded expectations. “How could we have got our forecasting so wrong?” Dr Severin Schwan, Roche CEO, asked the audience at the meeting on Wednesday 29 January. He then immediately answered his own question. Growth of new products, particularly Ocrevus, Hemlibra, Tecentriq and Perjeta, turned out to be much higher than expected. In contrast, the estimated drop in sales as a result of the market launch of biosimilars was spot on. On a particularly welcome note, Schwan is expecting sales growth in the low to mid-single digit range again this year.
After the briefing, the AVR had a chance to ask questions. First of all, AVR President Adnan Tanglay mentioned the many changes within the business. For example, the AVR was involved in over 20 reorganisations in 2019 alone. “For employees, this means not only opportunities but also anxiety,” declared Tanglay. Schwan explained that these changes were necessary because the portfolio is changing rapidly and the landscape is undergoing a fundamental transformation due to digitalisation, increasing pressure on costs in the healthcare system, and demographic trends. “We therefore need to continue investing in innovation,” stated the CEO. But he also sees an opportunity for Roche to offer more tightly integrated solutions for healthcare systems in the future. Based on a broad portfolio of diagnostics, medicines and increasingly digital products, he said Roche is in the unique position of working together with external partners such as hospitals far more extensively than in the past. So it is no longer simply a question of selling cancer medicines, for example, but of jointly ensuring that patients receive optimum care, starting with the correct diagnosis and electronic decision-making aids for doctors right through to treatment and ongoing monitoring of the disease outcome. “Health ecosystems” will evolve, where gathering and analysing healthcare data and also working together with third-party companies become increasingly important. However, Schwan stressed that these were much more complex tasks. So we need to create more flexible structures and give employees more freedom to make decisions. “Otherwise we’ll be too slow and the opportunities will pass us by,” he explained. This is not always easy for the employees concerned. “We are currently undergoing a period of change – lots of things are happening at the same time, but we’ve got to work our way through it,” said Schwan.
Following on from this, Tanglay asked about success stories. As a positive example, the CEO mentioned the Late Stage Committee in Research and Development that decides which products will be pursued. “90 percent of the decisions are now delegated downwards. Many of them currently take place within the project teams,” reported Schwan. This means medicines reach the market faster, which represents real progress. “Once a doctor has decided which cancer medicine to use, he usually sticks with it. So it’s important to be first on the market,” declared the CEO.
Reto Buholzer, President of the AVR Central Switzerland Section, then wanted to know how things were going with regard to reorganisations in Diagnostics. Schwan explained that Pharma had been the forerunner, and Diagnostics was now following suit. With “TransformD”, the new Head of Diagnostics Dr Thomas Schinecker has introduced a process whereby over 2,000 employees worldwide are working together on new solutions. “It's already clear that there must firstly be sufficient investment in Research and Development. So efficiency needs to be increased in all the other functions to free up money. Moreover, the silos within the organisation must become more permeable in order to develop better end-to-end solutions for customers,” stated Schwan.
Another question from the AVR concerned Roche's pricing policy. On this subject, the CEO said that today, a fixed “price per tablet” was generally paid, irrespective of whether a medicine was effective or not. “However, in future the price should reflect the actual benefit within the healthcare system,” he continued. This would lead to risk-sharing between manufacturers and health insurers. Having said that, this requires patient data to be comprehensively recorded, something in which countries like Switzerland are seriously lagging behind. Another focus is to bring prices in line with the purchasing power of the country in question. For example, for a long time only rich people, military personnel and politicians had access to medicines in China. But this is now changing. “If medicines are to become accessible to poorer social classes too, costs will need to be reimbursed by the public authorities. In turn, with lower prices we are offering a route to more sustainable financing,” said the CEO. However, such pricing models that are differentiated in line with the purchasing power of the country in question are difficult to implement in Europe due to parallel imports.
And speaking of China, Tanglay asked about a modified Tamiflu to treat the coronavirus. Schwan replied that there was no Roche medicine for the coronavirus, but there was a test to diagnose the virus. “Roche is working on getting the diagnostics into Wuhan,” said the CEO. But it was difficult because the city is sealed off.
AVR treasurer Andreas Winkler had a question on a completely different subject. He wanted to know what Roche’s plans were for its 125th anniversary next year. A quick reminder: on its 100th anniversary, the company gave each employee around CHF 3,500. Schwan explained that there will be various events, particularly for employees. But there are no plans for any special financial bonuses.
Finally, matters turned political. Beat Hess, AVR pensioners’ representative, confronted the CEO with a statement by the Deputy Chairman of the Roche Board of Directors, André Hoffmann, who stated in the Basler Zeitung that businesses should be measured not merely in terms of profitability, but also by their contribution to society. “These two aspects are not mutually exclusive – quite the opposite,” said Schwan. The medicines that Roche develops result in huge social benefits and are made available to humankind in perpetuity at very low costs once their patent protection expires. “We do not need to apologise for earning money from medical progress. It is the only way we can continue to drive forward innovation and tackle the associated risks,” concluded the CEO at the end of the meeting, which lasted almost 90 minutes.