Swiss pharma reckons with its past, present and futureJessica Davis Plüss (Text), Helen James (layout/photo editor), Veronica DeVore (editor)
From the Rhine to the world
originsFrom the Rhine to the world
By the late 19th century, Gesellschaft für Chemische Industrie in Basel (later known as Ciba), Geigy (J.R. Geigy), and Kern & Sandoz (eventually Sandoz) were household names in Basel. Today, only the Sandoz name remains in the pharmaceutical world, but they all shaped what is today known as Novartis.
Shortly after, in 1896, F. Hoffmann-La Roche & Co (known today as Roche) applied some of the chemistry know-how to the medicine business, becoming the first company in Basel to focus exclusively on pharmaceutical products.
Photo: The Geigy plant, Grenzach, Germany in 1924. (Novartis AG)
In addition, Switzerland didn’t have any patent protection on chemical processes until 1907, which allowed Basel companies to produce foreign products without any problems.
Photo: Sandoz Basel. The first Kern & Sandoz factory at St. Johann, around 1890. (Novartis AG)
originsThe chemistry of three giants
Ciba, Geigy and Sandoz were part of the golden age of chromolithography in Europe. Up until the 1930s, dye packets with colourful labels from Basel flooded markets in Asia.
Photo: Prints of aniline blue from a manufacturing inspection register. (Novartis AG)
The Basel companies “created works of art that reflected the tastes and culture of an international clientele”.Novartis corporate history
originsFrom dyes to medicine
The chemical companies entered the pharmaceuticals business, albeit hesitantly. But these products proved profitable early on.
In 1914, only 10% of Sandoz’s turnover was from pharmaceuticals. By 1952 the pharmaceutical sector was the strongest part of the company’s sales.
Photo: Sandoz in the 1930s (Novartis AG)
origins New arts, new skills
In 1996, when Sandoz merged with Ciba-Geigy to create Novartis, it was the biggest corporate merger ever in the Basel commercial registry. To this day, it is considered one of the largest-ever corporate mergers in Switzerland. The name Novartis was inspired by the Latin words “novae artes”, meaning “new arts or skills”.
Many other Swiss multinationals such as Syngenta and Clariant can also trace their roots back to the Basel chemical industry.
1873 Gesellschaft für Chemische Industrie (Ciba in 1945)
1886 Kern & Sandoz (Sandoz in 1939)
1970 Ciba & Geigy Merger
“By joining forces, they catapulted themselves not only into the top ranks in the chemical industry but the new Novartis will be one of the biggest companies ever.”Neue Zürcher Zeitung (Day after the merger announced that would create Novartis, March 8, 1996)
originsKeeping it in the Roche family
It was founded on October 1, 1896 by Fritz Hoffmann-La Roche when he was just 28. He died in 1920 at a time of uncertainty about the firm's future. The year before, the firm's poor financial outlook led him to transform the company into a public limited company.
The founding family eventually acquired controlling interest in the company. Some 125 years later, the majority of voting shares are still held by descendants of the founder.
In 2001, Novartis bought shares in Roche after some talks of a merger between the companies that never materialised. Novartis has held one-third of the shares, making it the second largest shareholder in terms of voting rights after the Roche family.
Photo: Fritz and Adèle Hoffmann (F. Hoffmann-La Roche Ltd, Basel)
originsRise of a pharma hub
In 1980, the pharmaceutical industry’s share of the Swiss economy's gross value added was around 1%. Today it is around 5%. In 2020, nearly 45% of all Swiss exports were pharmaceuticals.
The European Union is the most important market for Swiss pharmaceuticals (50%) but the United States is the most important single country. In the last 20 years, exports to the US doubled from 11% to 24%.
“The chemical and pharmaceutical industry is the only Swiss industry that could really establish itself successfully in the US.”Tobias Straumann, economic historian
originsBecoming a global player
As early as 1912, Roche established a so-called "scientific office" in Yokohama and liaised closely with the leading professors in Japan. Ciba followed suit with a scientific office and sales group in Osaka.
In the first half of the 20th century, Swiss companies set up foreign subsidiaries or branches as far away as China, Japan, Russia, Argentina and Brazil to lower production and transport costs, and to circumvent import restrictions.
The companies navigated delicate geopolitical dynamics with the help of Switzerland's policy of neutrality. This was tested during the Second World War when Basel firms signed deals with the Nazi regime. Roche also used the labour resources of prisoners-of-war. However, it also relocated numerous Jewish scientists from its Berlin offices, saving them from persecution.
Photo: Premises of CIBA Shanghai. Around 1938. (Novartis AG)
originsMaking it big in America
On the other hand, “America is the land of the future,” wrote one board member. “When we don’t seize the moment to set up production now, we will be totally shut out in a few years”. A year later, the Basel firms bought an old dye factory in Cincinnati, Ohio.
Roche also set up a plant in Nutley, New Jersey early on that proved fortuitous during the World Wars. By 1943, its Nutley office represented half of the group's turnover.
Photo: Factory of Ault & Wiborg Co. Cincinnati, Ohio jointly bought by the Basel chemical firms. (Novartis AG)
As German companies struggled, British and American companies filled the gap, driven forward by the discovery of penicillin and other antibiotics.
But the so-called "Therapeutic Revolution" in the mid-20th century benefited the industry everywhere as investment in research for new medicines soared.
Sales boomed in the two decades following the Second World War and the Basel companies cemented their place as major global players.
Competing for the best minds
TalentCompeting for the best minds
In 1937, there were about 4,300 workers in the chemical and pharma industry in Basel. In 2018, about 32,000 people worked in the Life Sciences industry.
Photo: Parasitology laboratory at the Sandoz Research Institute in Austria. (Novartis AG)
The work in chemical and dye factories was considered “too dirty and dangerous to be done by women's hands”. Nicholas Schaffner, cultural historian
TalentBringing in women
Of 101 professional titles at Ciba in 1954, ranging from archivists to zoologists, four were classified as “explicitly female” positions (using the feminine form in German). These were billing clerks, welfare clerks, secretaries, and cleaners, according to a survey conducted that year.
The workforce was 89.6% male and 10.4% female, the survey found. Today, 45% of Novartis employees are women.
Photo: The roof of the Sandoz packaging factory in Basel,1959. (Novartis AG)
When she returned to Switzerland in 1939, Keller rose to become Roche’s first female senior executive. She retired in 1952. Although women are less of a rarity in labs and in the higher ranks of Swiss pharma companies, there has never been a female CEO or board president at Roche or Novartis.
Video of pharmaceuticals
Top scientists were treated like royalty - a practice that reinforced rigid hierarchies inside the companies.
Many executives were part of Basel's social and economic elite known as the “Daig”, and took great pride in the number of Nobel prizes they collected.
“You could even see the person’s status on the name shields on the front of the door, which were either gold or silver.”Tobias Ehrenbold, historian
TalentAttracting top talent
The profile of a typical pharma worker changed with globalisation and the shift away from producing packets of pills. Instead of factory workers and Basel elite, the corridors are filled with “expats”, sometimes perceived as removed from Swiss society. English is more widely spoken in the companies and in some parts of Basel than the local Swiss German dialect.
Photo: The Roche tower is the tallest building in Switzerland. It is set to be joined by another even taller tower in 2022. (Keystone)
“Switzerland has a relatively limited talent pool. It has always understood that it needs to embrace talented scientists from abroad.” Thomas Cueni, Director General of the International Federation of Pharmaceutical Manufacturers & Associations and former head of the Swiss pharma industry association Interpharma
An industry reckoning
ScandalAn industry reckoning
There was public outrage at such accidents, with companies criticised for reacting too slowly and shirking their responsibilities.
As other disasters and scandals such as Nestlé’s baby milk boycott, the Bhopal gas tragedy and the Chernobyl nuclear disaster unfolded, the public began questioning the power and practices of big multinational companies.
Photo: On July 10, 1976, a chemical reactor exploded at the Seveso plant near Milan operated by a subsidiary of Roche. (Keystone)
The warehouse destroyed by the fire contained over 1,000 tons of insecticides and pesticides. The accident turned the Rhine red, killed thousands of fish and sent acrid smoke over the city.
Angry locals demanded action. No members of Sandoz management were held accountable for the accident. Years later, Novartis agreed to pay around CHF43 million ($49 million at the time) in damages to Switzerland and other countries affected.
“This type of dangerous production has been outsourced to India and China – and that’s where today’s ‘Schweizerhalles’ take place.” Martin Forter, Geographer and contamination expert to Swiss public television SRF in 2016
In a move to cut costs, much of the supply chain has moved abroad. Most active pharmaceutical ingredients are produced in China, and finished products in India, where wastewater discharge from pharmaceutical factories is a major problem.
Photo: Emissions from factories producing antibiotics and other drugs have polluted major waterways in Hyderabad, India, 2008. (Keystone)
scandal Selling lives by the pill
scandal Selling lives by the pill
In 1999, Roche pleaded guilty and paid a $500 million criminal fine in the US for leading what was called the “vitamin cartel” – a worldwide conspiracy to raise and fix prices on vitamins to eliminate the competition. Two years later, the European Commission imposed a similar fine on the company.
In 2020, Novartis paid $729 million (CHF688 million) to US authorities in one of the largest industry settlements for allegedly bribing doctors to use its drugs.
One of the most well-known cases is that of psychiatrist Roland Kuhn, who was involved in the development of Imipramine, which was marketed by Geigy as Tofranil to treat depression.
Between 1946 and 1980, 3,000 people served as "guinea pigs" at the Münsterlingen Psychiatric Clinic in northeast Switzerland where Kuhn was the clinic director. Patients rarely volunteered for the experiments and were rarely informed about the drugs they received.
Testing of treatments even through formal clinical trials continues to raise serious ethical questions including the consent of patients, discriminatory practices, and secrecy.
ScandalMounting calls for access
This came to a head in the HIV/AIDS crisis, when a group of 39 companies including Roche and Novartis sued the South African government in 1998 for enacting a law that would allow access to cheaper generics of antiretroviral treatment. Roche was a key producer of HIV diagnostics and treatments at the time.
During the three-year legal battle, the industry closed factories and cut investment in the country. Meanwhile, South Africa had the highest rate of HIV infections in the world. In the face of a public outcry, pressure from the World Health Organisation, the EU and the US government, companies dropped the lawsuit.
This paved the way for generic manufacturers to produce patented medicines on a large scale. But Swiss pharma companies have remained staunchly opposed to loosening patent protection to allow the production of more affordable versions of their therapies.
Photo: Demonstrators march through the streets of Pretoria in protest against pharmaceutical firms profiting from sale of AIDS drugs in 2001. (Reuters)
“People are dying because they can't afford treatments or because they are simply not available. This is because of high prices and patents. Because companies want to keep total control and raise profits, people die.” Patrick Durisch, health policy expert at NGO Public Eye
Search for a cure
ProductsSearch for a cure
But where and how companies invest in research has raised questions about whether shareholders or public health needs are driving their priorities.
Photo: In 1955, Roche chemist Leo Sternbach identified the drug benzodiazepine, marketed as Librium. (Courtesy F. Hoffmann-LaRoche Ltd, Basel)
“The ‘Swiss-like’ style of Geigy is in reality neither Swiss nor a style… It is more properly described as a more functional approach to design.”Fred Troller, Former Geigy designer
video of medicine production
As sales for former bestsellers waned, the companies had to pivot quickly into strategic new products or business areas. The Basel companies diversified into different segments from agriculture and nutrition to diagnostics. Some units were sold off quickly, while others became integral to success.
Major changes came with the scientific breakthroughs in molecular biology and genetic engineering in the 1970s.
productsInfectious diseases lose interest
This also affected areas like vaccines and antibiotics. In 2007, Novartis was the fifth-largest vaccine maker in the world. It invested in new vaccine manufacturing to meet demand during the Swine Flu outbreak in 2009, but then the pandemic waned and sales plummeted. In 2014, the company decided to sell off its vaccine division.
Low prices and concerns about overuse have also plagued the antibiotics market but there is an urgent need for new antibiotics as antimicrobial resistance rises. Both Swiss pharma giants abandoned research into new antibiotics starting in the late 1990s. Roche returned to it a few years ago.
“The pharmaceutical industry does not necessarily set its priorities according to what the global public health priorities are.” Ellen ‘t Hoen, lawyer and public advocate at Medicines Law and policy
products Engineering the next medical revolution
products Engineering the next medical revolution
But at home in Switzerland, there was deep suspicion of the use of genetic material in therapies, leading to the so-called “biotech referendum” in 1998. Swiss voters rejected the proposed ban on transgenic animals (one integrated with DNA sequence into a cell), ushering in the biotech industry in Switzerland. The vote was seen as a clear sign that the country wanted a strong biotech sector.
productsMulti-million dollar treatments
The quest for health data and the technology to analyse it, means that Roche and Novartis are no longer just competing with other pharma giants but also big tech companies like Google and Amazon who have entered the healthcare business.
This has led to a mad dash to buy up small, innovative firms with promising technology, some of which received government funding. Since 2000, Novartis and Roche have each acquired more than 40 companies from Artificial Intelligence start-ups to small gene therapy specialist firms.
In 2018, Novartis acquired a small US biotech start-up called AveXis, specialising in gene therapies. In 2019, the companies received FDA approval for Zolgensma, a one-time injection priced at $2.1 million to address the genetic root cause of spinal muscular atrophy.
productsReframing pharma's societal role
Suspicion and distrust of the industry has been hard to shake off. As more drugs are launched with huge price tags, governments are scrambling to figure out how to pay for them, prompting more questions about how much companies make and who holds the cards when negotiating the price.
Photo: In June 2019, the Roche tower projected the logo of the nationwide women's strike as a show of solidarity with the movement for gender equality. (Keystone)
The pandemic moment
futureThe pandemic moment
The story was different when it came to vaccines. Swiss manufacturing partner Lonza signed a deal to produce the active ingredients in Moderna’s mRNA vaccine early on. Later on, Novartis also offered manufacturing capacity for the Pfizer/BioNtech vaccine. But no Swiss company led the development of an effective vaccine.
In early 2021, when people were anxiously waiting for vaccine orders to arrive in Switzerland, the public struggled to understand how such an innovative and dominant industry hadn't developed one of the vaccines.
Photo: Harald Borrmann from Roche Diagnostics, left, shows Swiss Interior Minister Alain Berset a rapid Covid-19 test in a Roche Diagnostics laboratory. (Keystone)
“The current health crisis has once again reminded us of the central importance of the research-based pharmaceutical industry for both the health of the population and the national economy of Switzerland.”René Buholzer, head of Interpharma
The social and economic consequences of the pandemic, along with digital technology, also accelerated some culture changes. In 2020, Novartis became the first pharmaceutical company in the world and first Swiss company to allow workers to work from anywhere after the pandemic. The company says this is part of its overall shift towards a less top-down management approach.
In 2021, the company also announced it would slowly open it up its campus, which was only accessible with a badge, to the public. (Visual: Novartis AG)
futureA turning point?
While Basel remains a hub for the pharmaceutical industry, companies and service providers are spread out across Switzerland and around the world. The companies aren’t just looking for the brightest scientists, they are looking for people who specialise in computer science, Artificial Intelligence and data analysis.
There are signs that the companies will not look the same as they did before the pandemic. In autumn 2021, Novartis announced that it was planning to sell its shares in Roche, worth $21 billion, back to Roche in order to invest in new medicines. It is also conducting a review of its generics divisions Sandoz. All options are on the table including selling off Sandoz – the last name that remains of the pre-Novartis era.
Whether the pandemic will mark a turning point for the industry in Switzerland depends on the answer to many questions. How will the industry meet the needs of society and the demands of shareholders? How will it make its medicines available to everyone who needs them? Will it continue to invest in the innovation we need?
Illustrative photo: Keystone
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Tobias Ehrenbold. Samuel Koechlin und die Ciba-Geigy. 2017
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Novartis: How a pharmaceutical world leader was created out of Ciba, Geigy and Sandoz. 2014
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EY. The largest pharmaceutical companies worldwide. 2020
Interpharma Health Panorama, 2020.
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US Department of Justice. Swiss Executive Agrees to Plead Guilty and Serve U.S. Jail Time. May 20, 1999.
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