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February 22, 2022

ESG – Healthcare: Macroeconomic trends

The pharmaceutical industry has deeply rooted environmental, social, and governance (ESG) issues that challenge sustainability. Overcoming these challenges requires collaborative, proactive steps to achieve sustainability goals and turn the reputation of this industry around.

Listed below are the key macroeconomic trends impacting ESG performance, as identified by GlobalData.

Climate change

Healthcare has not yet come under as much environmental scrutiny as other industries. This is partly because its greenhouse gas (GHG) emissions are relatively low. However, they can still be significantly reduced by carefully redesigning supply chains and operations without affecting health outcomes.

In 2020, Fisher & Paykel Healthcare, a medical devices firm, made a SBTi commitment to reduce GHG emissions by 67% by 2034. Pharmaceutical giant AstraZeneca also plans to make its supply chain carbon-negative by 2030; to reduce its Scope 1 emissions by 20%, Scope 2 emissions by 95%, and Scope 3 emissions by 25% per $1 million of sales by 2025.

Access to medication in developing countries

According to the World Health Organization (WHO), two billion people lack access to essential and basic medicines. Improving access to existing medicines could save ten million lives each year, four million of them in Africa and Southeast Asia. The leading pharmaceutical companies are doing more to improve access to medicine.

In 2010, only eight big pharmaceutical companies had an access strategy for low- and middle-income countries, but today, 17 out of the biggest 20 companies do. For instance, GSK has a business model focused on Africa, a large relevant portfolio, and a large share of its pipeline is dedicated to relevant diseases.

Drug pricing and gouging

The pharmaceutical innovation process is complex and was developed through a system involving lengthy clinical trials and time-limited patents, which encourage research investment and enable competition to reduce prices after patents expire. Aggressive strategies to maximise profits and appease investors result in prices that are unjustifiable and unaffordable by consumers.

Inflated drug prices are a subject of intense scrutiny and debate. However, in 2020, there was significant pushback against skyrocketing drug pricing and gouging with growing pressure on organisations, governments, and legal systems to question whether drug prices represent value for money and are accurately compensating for investment in research and development (R&D).

This is an edited extract from the ESG – Top Trends by Sector – Thematic Research report produced by GlobalData Thematic Research.

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