ESG in pharma: Meeting increasing requirements in the Nordic region

The trend of making environmentally conscious decisions is quickly becoming an integral part of the global healthcare sector with increased impetus in the pharmaceutical sector to invest in initiatives that follow environmental, social, and governance (ESG) criteria.

As more consumers base their purchasing decisions on a brand’s ethical and environmental reputation, pharmaceutical businesses must incorporate ESG standards into their R&D, production, consumption, and supply chains. This strategy can also address issues such as lawsuit risks and product safety, as well as improving affordable healthcare access. Yet despite the growing interest, the increasing inclusion of sustainability criteria within European procurement policies is fast becoming one of the most important factors influencing the industry’s ESG evaluations.

The Nordic countries have a longstanding history of balancing market economics with social issues, often used as a global model for socially conscious investments. Finland, Denmark and Sweden were the frontrunners in the global Sustainable Development Report in 2022. The upcoming environmental premiums and procurement standards in Norway and Sweden will encourage green innovation in the pharmaceutical industry in the future.

The Nordic Pharmaceutical Forum (NPF), which represents Finland, Iceland, Norway, Sweden, and Denmark, claims that its joint tender agreement not only ensures lower prices and supply security but also helps the region advance its green plans by integrating environmental requirements, particularly when tendering for older, off-patent pharmaceuticals.

How Sweden is reducing pharma waste

The Swedish Association of the Pharmaceutical Industry (LIF) is laying the groundwork to develop environmental price premiums in the reimbursement system for certain classes of essential medicines.

In an interim report, Medical Products Agency (Läkemedelsverket, LV) proposed three points for environmental criteria in determining eligibility for price premiums – green manufacturing sites, efficient waste management requirements, and restricting the number of active ingredients (APIs) discharged into surface water.

The LV has established a multi-year voluntary project to study price premiums and limit the risk of active substance emissions during production. The Knowledge Centre on Pharmaceuticals in the Environment will begin in 2024 and aims to promote sustainable manufacturing using environmental criteria. The key is to ensure that the environmental price premium should be sufficient to appeal to interested pharmaceutical companies.

Action Norway is taking for ESG in healthcare

Around the same time as Sweden’s action, Norway’s Public Procurement Appeals Board (KOFA) handed down a landmark decision in favour of the hospital procurement agency’s (Sykehusinnkjp HF) efforts to support green standards in the public procurement of hospital drugs. The board concluded the agency did not breach procurement norms or commit a legal error by emphasising environmental elements while awarding tender contracts.

A supplier had challenged the decision, claiming that the priority given to environmental requirements had unfairly impacted market competitiveness. According to Sykehusinnkjøp HF, the tender in question reduced the estimated carbon footprint by a minimum of 21% and the selected supplier was valued at 15% more than the outgoing provider.

Norwegian policymakers are also targeting to reduce 40% of CO2 emissions from healthcare services by 2030. To this end, Sykehusinnkjøp announced that the public hospital system would reduce the use of asthma inhalers and inhalation anaesthetics that do not meet environmental rules by 2025. This decision indicates that the procurement organisation will prioritise proposals for alternative inhaler technologies that reduce greenhouse gas emissions, reinforcing Norway’s strong stance on ESG principles in healthcare.

How Finland is adjusting pharma pricing for ESG

The decision to incentivise greener pharmaceutical production is held widely among Finnish consumers. A consumer survey published by the School of Pharmacy at the University of Eastern Finland showed that the Finnish population is not opposed to paying higher prices and believes that challenging policy decisions on the environmental impact of medical waste are vital.

Researchers have calculated an annual national willingness to pay (WTP) ranging from €37m ($39.5m) to €134m ($143m). This is projected to be 1.2%-4.5% of Finland’s overall pharmaceutical spending which was estimated to reach €2.9bn ($3.1bn) in 2022, according to GlobalData figures.

An environmental classification system for pharmaceuticals is also a vital aspect of the Nordics’ eco-friendly healthcare policies. Sweden implemented this classification model in 2006 while Finland followed suit by the end of 2021.

With a goal to be carbon-neutral by 2035, the Finnish Government is developing a circular economy and efficient waste management. The government-funded EKO-SOTE research project coordinated by Tampere University was initiated in the first quarter of 2022 to study the current scenario of the healthcare sector and suggest ecological solutions to control emissions and waste.

Managing medicinal waste is also a high priority. The Lääkkeetön Itämeri campaign (drug-free Baltic Sea) is an annually recurring project that seeks to build awareness about the correct ways to dispose of medicines among the Finnish population.

Denmark implementing green pharma strategies

Recent policies by the Danish Government reflect its commitment towards sustainability.

In 2021, Denmark, Norway, and Iceland included environmental criteria as part of the Joint Nordic Tendering Procedure. Suppliers who meet criteria such as environmental certification, a statement of environmental rules and strategies, or ecologically friendly transportation are awarded the contract. The procedure entered its second tender in 2022 and was awarded The European Healthcare Procurement Awards 2022.

The country’s Action Plan for Circular Economy for 2020-2032 can be crucial for pharmaceutical companies to minimise the use of resources by avoiding waste and redundancy. With this plan, Denmark aims to decrease the amount of incinerated plastic waste by 80% by 2030.

In March 2022, the Danish Government released the Nordic Criteria for More Sustainable Packaging in collaboration with Norway, Sweden, Iceland, and the Faroe Islands. The document aims to reduce material waste, increase recycling and the usage of recycled or renewable materials in the healthcare sector.

Advantages for ESG in pharma

ESG provides pharmaceutical businesses with a competitive advantage both economically and socially. The ongoing implementation of green legislation and projects in the Nordics reflects the gradual momentum in the pharmaceutical sector. Overall, the Nordic countries are committed to a more sustainable future and have cultivated the market through many years of experience, a high level of responsibility and transparency, and continual innovation activities.

Part of the Abacus Medicine Group, Abacus Medicine Pharma Services (AMPS) is a strategic partner to pharmaceutical companies launching and distributing medicines in Europe. Based in Copenhagen, AMPS combines a strong distribution network across the Nordics and Benelux with expertise in market entry, commercial strategy, medical affairs, supply chain management, and compliance.

The Abacus Medicine Group takes a conscious and strategic approach to sustainability and recognises its contribution and impact on society, both positive and negative. While the company’s purpose of providing better access to medicine holds a positive social impact, it is aware of the environmental impact its business model may have. Therefore, the company works with Focus Programs that focus on measuring the company’s impact on environmental and social topics to identify areas for improvement and the risks and opportunities of the business model related to ESG topics. The Focus Programs cover Diversity & Inclusion, Community Engagement, Waste & Sourcing, Transportation, ESG Reporting and Supplier Code of Conduct. You can read more about the Abacus Medicine Group’s sustainability efforts in its annual Sustainability Reports.

To learn more about how Abacus Medicine Pharma Services can help you launch and distribute specialty medicine in key European markets, please download the whitepaper below.