HI5015: Legal Aspects of International Business for Novo Nordisk

This essay provides a comprehensive overview of the legal and regulatory frameworks applicable to Novo Nordisk's international business operations, focusing on its Australian subsidiary. It discusses key legislations like the Therapeutic Goods Act 1989, Corporations Act 2001, and data protecti...Read More

Running Head: Legal Aspect of International Businesses
Legal Frameworks Applicable to Novo Nordisk

Legal Aspect of International Businesses 1
Introduction:
Novo Nordisk is the global healthcare corporation that operates its business in the
pharmaceutical industry. The company has its headquarter based in Denmark. For over 95
years, the company has achieved leadership in diabetic care. As per the recent data, it has
employed almost 43100 people in 79 nations. It markets its pharmaceutical products in
approximately 170 countries. Around 40% of the total staff of the company is hired for
Denmark office and rest 60% of the staff hired in the rest of the world (IBIS World, 2017).
The main products and services that the company is dealing in are: Diabetes Care medication
as well as devices, Haemophilia & Bleeding Disorders, Obesity and Weight Management,
Hormone Replacement Therapy and Growth Hormone Therapy. The company researches and
develops a wide range of healthcare products that are unique designed to assist a broad gamut
of health issues. The company was formed with the merger of two small sized Danish
corporations called Novo and Nordisk (Novo Nordisk, 2018).
Novo Nordisk Australia
The company operates its business in Australia through its wholly owned subsidiary
corporation Novo Nordisk Pharmaceuticals Pty. Limited. The subsidiary company’s
headquarter is located in Sydney (Bloomberg, 2018). It was established in the year 1985 and
is currently engaged in the business of marketing as well as distribution of the healthcare
products and services that are designed and developed by its holding company Novo Nordisk
A/S. Also, the company has a clinical trial development centre for the purpose of conducting
trials for the new products. Currently, the company employees around 100 staff members in
Australia (Pharma Boardroom, 2018).
Legal and Regulatory Frameworks applicable to Australian Subsidiary of Novo
Nordisk

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There are various acts and regulatory frameworks that are applicable on the companies that
are operating their business in the pharmaceutical industry in Australia. The major piece of
legislation that governs the pharmaceutical companies in Australia is named as Therapeutic
Goods Act 1989. This act is in force to maintain the quality, safety, efficiency as well as
timely provision of medical drugs and devices in the country. The framework is set up as the
national control system for the medication products. The act is further supported by
Therapeutic Goods Regulations as well as other state or territory legislation. Furthermore,
there are two primary codes that govern the production and advertisement of medication
products and services in Australia. Therapeutic Goods Advertising Code (TGAC) and the
Australian Code of Manufacturing Practice for Therapeutic Goods (Australian Government,
2018). All the entities that are engaged in the business of medicine preparations in Australia
are required to hold a certified license relevant to this particular field. Before any type of
medication drug is marketed in Australia, it has to undergo an evaluation test by Therapeutic
Goods Administration (TGA). The evaluation program of TGA covers both pre-market
regulation processes as well as post market regulation processes (Wong, 2001).
Further, the company has to adhere to the framework of corporate governance as per the
requirements of Corporations Act, 2001. As the company has its headquarter based in
Sydney, it has to comply with all the relevant rules and legislations that are applicable to the
Australian entities (Novo Nordisk, 2018). As a part of corporate governance practices the
company has to undertake various initiatives such as corporate social responsibility,
sustainable reporting etc. (Schwartz, 2017) The company is committed to follow the triple
bottom line principles in order to ensure that its business is conducted such a way that it is
able to maintain the balance between its financial, social as well as environmental
considerations. To adhere to these principles in the strict sense, the company has incorporated
these principles in its Articles of Associations. Further, the company has to fulfil its

Legal Aspect of International Businesses 3
commitments towards the Guiding Principles on Business and the Human rights as developed
by United Nationals. These principles are given in the Protect, Respect and Remedy
Framework of the country. Furthermore, the company along with its holding company is duly
complying with the principles of UN global compact which is an initiative towards aligning
business goals, policies and strategies with the main social and environmental principles such
as human rights, labour protection, environmental safety, anti-corruption etc. Moreover, the
company has to comply with the regulatory framework of integrated reporting. The said
framework is developed by International Integrated Reporting Council (IIRC). It is intended
to improve the quality of information provided by the company in addition to the financial
information to the external parties who are concerned or associated with the company in
direct or indirect capacity. Also, as a part of regulatory compliance, Novo Nordisk is fully
committed to comply with the requirements of EFPIA Disclosure Code, 2018 (Novo Nordisk,
2018).
Further in the areas of data protection and security, the company is enforced by various
binding laws. One of the major laws that is applicable to Novo Nordisk is the Data Protection
Law. As Novo Nordisk operates as a pharmaceutical corporation which is indulged in the
development, production and selling of healthcare products in the global market, it collects a
wide range of personal data of its employees, contractors and other business parties which is
subjected to the protection (Faunce, Bai & Nguyen, 2010). The binding corporate laws and
rules form the basis of its compliance program in relation to data protection. The company is
firmly committed to comply with all the applicable legislative rules and laws in order to
maintain the high of degree and integrity of personal data. The said law does not permit the
company to transfer any kind of personal data related to the parties associated with it, in any
capacity, from outside Europe (Novo Nordisk, 2018).

Legal Aspect of International Businesses 4
Last but not the least, the company has also entered into an advance price agreement with
different nations and is in process of entering into APAs with more countries to which it
deals as a part of its pharmaceutical business. Novo Nordisk’s Tax policy is aimed at meeting
its tax obligations in the responsible way. It has set out all the well-established subsidiaries
shall comply with their tax obligations as per the tax laws of the countries in which they are
operating. As a result of this, the company is under the obligation of paying income taxes at
the rate of 30% for all the incomes generated by the Australian subsidiary of the company
(Annual Report, 2017).
How compliance with these regulatory frameworks affects the company?
The compliance with all the above regulatory frameworks is mandatory for Novo Nordisk to
sustain in the industry. These frameworks cover the provisions of non-compliance or breach
of any rules and regulations. Therefore, in order to avoid the legal or regulatory interventions,
the company is stringently committed to the due compliance with all the relevant laws and
regulations applicable on it. Apart from legal consequences, another reason that encourages
the company to work in accordance with all such rules as are applicable on it, is that these
provisions are allowing the company to maintain the leading position in the entire industry as
well as in the global market. The sustainability position of the company is also improved with
the compliance with the corporate social responsibilities under corporation acts, 2001. Along
with that, the compliance with all the laws and regulations enables Novo Nordisk to maintain
a sound public image of its business in the market.
Treaties, conventions or agreements that have impacted on the products or services of
company

Legal Aspect of International Businesses 5
In order to protect the health of the consumers of products of Novo Nordisk and to safeguard
the ecosystem from harmful chemicals, the company has started producing only those
products or drugs that are environmental friendly in nature after the severe criticism from its
stakeholders. The environmental regulators alleged that the enzymes that were developed by
the company could cause severe skin allergies. It was alleged that the production and
development processes of Novo Nordisk generates heavy dust that affects the health of
different constituents of ecosystem. In response to all the allegations, the company started
taking initiatives to improve the quality of its products as well as its production processes. As
a result of this, the employees along with the managerial persons of Novo Nordisk
participated to United Nations Conference on Environment and Development (UNCED)
Earth Summit which was held in Rio de Janeiro. After attending the summit, it was realised
by the company that environmental protection is quite important. Consequently, the company
reinforced its commitment towards sustainable development. The company started to get its
environmental report published which contained the necessary information regarding the
resources consumed, quantum of emissions made in environment due its production
processes. The environmental reports were followed by the integrated reports publishing by
the company which contained sustainability report of the business along with the annual
financial report (Novo Nordisk, 2017). The sustainability reporting has now become the most
significant part of company’s corporate culture. To achieve sound sustainability reporting, the
company has also accepted the Triple Bottom Line Philosophy so as to maximise the
stakeholder’s value. Novo Nordisk has also supported the United Nations Convention on
Biological Diversity in order to enhance its focus on sustainability. Also on the social front,
company has agreed to value the socially integrated factors like human rights, environmental
protection, labour protection etc. It had initiated the patient assistance program under which it
provided medical assistance to the ones who did not have any medical insurance or medical

Legal Aspect of International Businesses 6
assistance facility available from government. Novo Nordisk was the member of consortium
formed for the purpose of allowance for the production of copies of the patented medicines in
the situations of national emergencies. This agreement is recognised with the name of Trade
Related Aspects of Intellectual Property Rights (TRIPS). However, the activists imposed
heavy criticism for such production against patented rights. The company, thereafter, adopted
a new pricing policy which was named as sustainable pricing. Under this policy the insulin
was supplied at the price which was 20% of the original average price, to the poorest nations.
This allowed the cross subsidizing of company’s product. Further, the company became the
signatory of UN Global Impact which was the platform created with the motive of promotion
of sound corporate principles and learning (Harvey et. al., 2008). The aim of this initiative
was to combat diabetes pandemic. In 2004, company’s management practices were certified
to ISO standards. In year 2005, Novo made an initiative to launch its ‘Changing Diabetes’
platform for its brands. After huge preparation and assessment processes, Novo Nordisk
entered into one more agreement in year 2006 with the World Wildlife Fund for Nature
(WWF). This agreement allowed the company to become the 10th member of Program of
Climate Savers. The participating corporations of the said program were supposed to cutback
the emission of carbon dioxide gases in open environment through their operations. As a
result of which, Novo had set the aim of reducing the emission of CO2 by absolute 10% by
the end of 2014. It has shifted to the renewable sources of production. Moreover, the
company had also made an investment of $ 20 million to initiate a campaign called global
energy efficiency campaign. The agreement that was entered by Novo with WWF required it
to not put reliance on the carbon offsets or buying of power from the current renewable
resources. In order to achieve the set benchmark in regards to CO2 emission the company had
to join hands with the giant most energy company of Denmark viz. DONG Energy. Novo
pledged to deploy the money savings that were achieved through the energy saving measures,

Legal Aspect of International Businesses 7
in acquisition of green energy which was produced by DONG Energy. With all these
initiatives, the company evolved as the leading insulin producer across the globe with around
50% of the market share. The company was also recognised as the world’s most sustainable
country by one of the famous business magazines viz. corporate knights (Rao & Purkayastha,
2017).
Impact of such agreements on the products and services of Novo Nordisk:
The agreements have allowed the company to improve the quality of its products and services
by adoption of such production processes that promotes the pollution free environment. The
medical products of the company were therefore recognised as safe and harmless to the health
of the consumers. These factors ultimately enhanced the overall demand of Novo’s products
and services in market and therefore it achieved the competitive advantage over its rival
firms.

Legal Aspect of International Businesses 8
References:
Australian Government, 2018. How therapeutic goods are regulated in Australia. Available
from: https://www.tga.gov.au/how-therapeutic-goods-are-regulated-australia Accessed on
30.08.2018.
Bloomberg, 2018. Company Overview of Novo Nordisk Pharmaceuticals Pty. Limited.
Available at: https://www.bloomberg.com/research/stocks/private/snapshot.asp?
privcapid=23020377 Accessed on 30.08.2018.
Faunce, T., Bai, J. and Nguyen, D., 2010. Impact of the Australia—US free trade agreement
on Australian medicines regulation and prices. Journal of Generic Medicines, 7(1), pp.18-29.
Harvey, K.J., Korczak, V.S., Marron, L.J. and Newgreen, D.B., 2008. Commercialism,
choice and consumer protection: regulation of complementary medicines in
Australia. Medical Journal of Australia, 188(1), p.21.
IBIS World, 2017. Novo Nordisk Pharmaceuticals Pty Limited - Profile Company Report
Australia. Available from: https://www.ibisworld.com.au/australian-company-research-
reports/wholesale-trade/novo-nordisk-pharmaceuticals-pty-limited-company.html Accessed
on 30.08.2018.
Novo Nordisk, 2017. Annual Report. Available from:
https://www.novonordisk.com/annualreport Accessed on 30.08.2018.
Novo Nordisk, 2018. Corporate Governance. Available from:
https://www.novonordisk.com/sustainable-business/performance-on-tbl/finance-and-
corporate-governance.html Accessed on 30.08.2018.

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Novo Nordisk, 2018. Personal Data Protection. Available from:
https://www.novonordisk.com/about-novo-nordisk/corporate-governance/personal-data-
protection.html Accessed on 30.08.2018.
Novo Nordisk, 2018. Tax Approach. Available from:
https://www.novonordisk.com/content/dam/Denmark/HQ/investors/irmaterial/
20160110_Novo%20Nordisk%20Tax%20approach.pdf Accessed on 30.08.2018.
Novo Nordisk, 2018. Transparency Disclosures. Available from:
https://www.novonordisk.com/sustainable-business/performance-on-tbl/more-about-how-we-
work-and-report/transparency-disclosures.html Accessed on 30.08.2018.
Novo Nordisk, 2018. Who we are? Available from: https://www.novonordisk.com/ Accessed
on 30.08.2018.
Pharma Boardroom, 2018. Novo Nordisk – Australia. Available at:
http://pharmaboardroom.com/pharmadirectory/novo-nordisk-australia/ Accessed on
30.08.2018.
Rao, A.S. and Purkayastha, D., 2017. Embedding sustainability at Novo Nordisk: the
compassion vs. competitiveness dilemma. In Case Studies in Sustainability Management (pp.
22-45). Routledge.
Schwartz, M.S., 2017. Corporate social responsibility. Routledge: Germany.
Wong, E., 2001. Regulation of Medicines in Australia. Available from:
https://www.legco.gov.hk/yr00-01/english/library/0001rp15.pdf Accessed on 30.08.2018.