Is now a great time or an awful time to be running a global pharmaceutical giant? The bad news is that the U.S. Affordable Care Act aims to achieve much of its promised savings by squeezing payments to suppliers, and strapped European governments are trying to reduce their health care and drug payments. The good news is that medical science keeps gaining ground on the most dreaded conditions just as baby boomers are reaching ages when they need help the most. The job of Joe Jimenez, 53, is to navigate that world for Novartis (NVS), the Swiss maker of drugs such as the breakthrough leukemia treatment Gleevec and consumer brands including Excedrin and Theraflu. He talked recently with Fortune's Geoff Colvin about beating cancer, getting the most from R&D, why a shrinking Russia is a growing market, and much else. Edited excerpts:
Q: Novartis is a major player in pharmaceutical research. What are the areas of greatest promise?
Oncology is going to be an area of great medical breakthroughs in pharmaceutical development in the next five to 10 years. You're seeing technology explode. The deep sequencing of the human genome and how inexpensive that has become have created a wealth of data that will allow new areas of discovery that have never been possible before.
I also think regenerative medicine will be a growth area over the next 10 years. As people age, muscle loss becomes very common, as do sight and hearing loss. And the explosion of technology is allowing us to discover and develop innovative new medicines in those areas.
It sounds as if the nature of medical research is changing. If it's analyzing vast quantities of data that never used to be available, then doesn't that call for new areas of expertise?
It does. If you think about the amounts of data that are now available, bioinformatics capability is becoming very important, as is the ability to mine that data and really understand, for example, the specific mutations that are leading to certain types of cancers. For us, what it's meant is that IT has become a very important part of drug discovery. In the future, you're going to have to meld medical, scientific, and information technologies to create medical advancements.
In the U.S. the growth of health care spending cannot continue at the current rate. The rate of growth has to come down. Is that fundamentally a good thing or a bad thing for a big pharmaceutical company?
First of all, it's a necessary thing because we can't continue to see these increases in spending, particularly in the U.S. We have to get on a very solid financial footing. At the same time, pharmaceuticals are generally 15% or less of total health care spending. The big areas of spending in health care are hospitalization, physicians, nursing care. So I don't think it's necessarily good or bad for a pharmaceutical company.
Our mission is to discover and develop new and innovative medicines, and if we are developing these new medicines that can change the practice of medicine in certain disease areas, then those drugs will be reimbursed. What will go away most likely is the incrementally better new drug that comes out. But for the big medical breakthroughs, I think there will be reimbursement.
Novartis has a way of pursuing those medical breakthroughs, getting to blockbuster drugs, that seems to be different from what some other companies are doing. Can you describe that approach?