Management Report & Annexes | Basic Information About the Group

9. Products, Distribution and Markets

Bayer does not tolerate legal violations in the marketing of its products. Responsible marketing means acting ethically and morally and adhering to sustainability principles. This involves communicating with our target groups in a transparent, consistent and reliable manner. We are also committed to regularly evaluating the properties of our products and acting on our findings where necessary. Our Group ­directive on “Responsible Marketing & Sales” was already adopted by all subgroups in 2012 and has been integrated into the relevant regulations. With distribution activities decentrally organized due to the diversity of Bayer’s business portfolio, the directive’s ongoing implementation and the respective training programs took place in a variety of ways in 2013.

HealthCare

Our Pharmaceuticals segment supplies prescription products. Our range of cardiovascular products ­includes the anticoagulant Xarelto™, Adalat™ to treat hypertension and coronary heart disease, and ­Aspirin™ Cardio for secondary prevention of heart attacks. The product portfolio in women’s healthcare comprises contraceptives such as YAZ™/Yasmin™/Yasminelle™, Mirena™ and the Essure™ procedure. We also offer specialty pharmaceuticals that are mainly prescribed by specialist physicians, including Kogenate™ for people with hemophilia A, Betaferon™/Betaseron™ to treat multiple sclerosis, the cancer drugs Nexavar™, Stivarga™ (regorafenib) and Xofigo™ (radium-223 dichloride), the eye medicine ­Eylea™ (aflibercept), and riociguat (approved in the United States and Japan under the trademark ­Adempas™) to treat two forms of pulmonary hypertension. Our pharmaceutical products are primarily distributed through wholesalers, pharmacies and hospitals. Co-promotion and co-marketing agreements serve to optimize our distribution network. For example, we cooperate with Janssen Pharmaceuticals, Inc. in the United States in the marketing of Xarelto™.

The portfolio of our Consumer Health segment mainly comprises non-prescription products. The ­Consumer Care Division specializes in over-the-counter (OTC) medicines – those available without a prescription – and is among the leading suppliers in the OTC market with a portfolio covering all the major therapeutic ­areas. Our offering includes the pain relievers Aspirin™ and Aleve™ and the OTC medical skincare products ­Bepanthen™/Bepanthol™ and Canesten™. The product range also includes nutritionals such as One A Day™, ­Supradyn™, Berocca™ and Redoxon™, antacids such as Talcid™, and cough-and-cold products such as ­Alka-Seltzer Plus™ and White & Black™. We also offer prescription dermatology products. The division’s sales and distribution channels are generally pharmacies, with supermarket chains and other large retailers also playing a significant role in certain important markets such as the United States.

In the Medical Care Division we offer blood glucose monitoring devices such as the single-strip ­Contour™ system and the multi-strip Breeze™ system. We also market the Contour™ USB meter, which features integrated diabetes management software and direct plug-in to computers. Outside Europe, these products are generally sold to consumers through pharmacies, drugstores, mass merchants, hospitals or wholesalers. In Europe, they are sold mainly through pharmacies. We are among the principal players in the market for blood glucose meters and are also the world’s leading supplier of contrast agent injection systems for diagnostic and therapeutic medical procedures in X-ray, computed tomography and magnetic resonance imaging. We are among the leading companies in the field of mechanical systems for removing thrombi from blood vessels, offering service products for these systems in addition. Examples from our portfolio of contrast agents for diagnostic imaging are Ultravist™, Gadovist™/Gadavist™ and Magnevist™. Our products are marketed to cardiologists, radiologists and vascular surgeons in hospitals and out-patient clinical sites through a global direct sales organization, supplemented in some cases by local distributors.

The Animal Health Division offers an extensive portfolio of pharmaceuticals, nutritionals, grooming products and hygiene products for farm and companion animals. Our innovative Advantage™ family of products to protect dogs and cats from parasite infestation gives our company the number two position in the parasiticides market. The newly developed Seresto™ collar replaces conventional dog and cat collars with a modern system for controlled release of the active ingredient and reinforces our leading market position. Other important products include Baytril™ for the control of infectious diseases, Drontal™ and Drontal™ Plus wormers, and Baycox™ to treat coccidiosis in livestock. The integration of the product portfolio we acquired in 2013 from Teva Animal Health Inc., United States, is progressing with the relaunch of companion and farm animal products in the U.S. market. Depending on local regulatory frameworks, animal health products may be available to end users on a veterinarian’s prescription or prescription-free from veterinarians, pharmacies or retail stores.

Responsible business practices at HealthCare

In marketing its medicines, HealthCare applies strict standards and observes the relevant international industry codes. This includes all codes of the International Federation of Pharmaceutical Manufacturers & Associations (IFPMA) and of regional associations such as the European Federation of Pharmaceutical Industries and Associations (EFPIA) concerning relations with health care professionals and patient organizations. These codes include rules governing the distribution of advertising materials and product samples, cooperation with health care and pharmacy professionals under speaker and consultancy agreements, and scientific studies. HealthCare has also undertaken to implement the EFPIA transparency code. The codes apply to prescription medicines. There are also local laws and codes applicable to all medicines.

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Online annex: 3-9-BHC-1

The IFPMA code applies not only to prescription medicines but also to over-the-counter products that are directly advertised to health care professionals. Since 2012 the IFPMA code has also included basic principles for cooperation with patient groups. HealthCare views the IFPMA code as a global minimum standard. The EFPIA Code of Conduct for cooperation with patient organizations mandates universal transparency and requires that these organizations’ independence not be compromised by the provision of support to patient organizations. Under the code, donations to health care professionals or organizations must be disclosed on a publicly accessible website. This information must be published for the first time by June 30, 2016, and must include the relevant donations made in the 2015 calendar year.

These local codes generally serve to bring the provisions of the global or regional codes mentioned above into line with local laws. In the event of discrepancies among the rules we have committed to respect, HealthCare always observes the more stringent requirement.

We regard the WHO’s Ethical Criteria for Medicinal Drug Promotion as the minimum standard for the ­advertising of pharmaceutical products. We also observe national ethical standards, which usually are also enshrined in industry codes at the local level, an example being that of the association “Voluntary Self-regulation for the Pharmaceutical Industry” (FSA). The provisions of our Group-wide Corporate Compliance Policy, the Responsible Marketing & Sales Policy, and the Directive on Integrity & Responsibility in Communications and Marketing also apply.

HealthCare has summarized the key requirements for compliant and ethical conduct in globally valid HealthCare Compliance Manuals that set minimum standards for all activities.

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Online annex: 3-9-BHC-2

Specifically, the minimum global standard for responsible marketing and ethically acceptable dealings with important stakeholders such as officials, health care professionals and patient organizations is established by the Manual for Human Pharmaceuticals and Consumer Care Businesses, the Manual for Medical Devices Business and the Manual for Animal Health.

The global training program for the compliance manuals launched in 2012 was continued in 2013. The training materials are now available in eight languages. There are also web-based and personalized compliance training courses for which employees can enroll via the intranet. These web-based programs were honored with the Brandon Hall Excellence in Learning Award 2013, receiving the silver medal in the “Best in Compliance Training” category. Additional support and information are available for employees in conjunction with all training courses.

As part of our compliance management system, we register and investigate any suspected violation of our responsible marketing principles. This includes complaints received from either inside or outside the company.

CropScience

CropScience offers a comprehensive range of products and services for agriculture in the areas of seed breeding, crop protection and plant traits. It also supplies products for non-agricultural pest and weed control. These are commercialized according to local market conditions. Our business is subject to the growing seasons for the relevant crops and the resulting sales cycles.

CropScience markets its products in more than 120 countries. In the coming years we intend to continue expanding our business, particularly in the Emerging Markets, by deploying innovative, leading-edge technologies in order to meet the increasing global demand for high-quality food and feed.

The marketing and distribution activities of the Crop Protection/Seeds operating segment are aligned to our product range.

The Crop Protection business is based on a broad portfolio of highly effective herbicides, fungicides, ­insecticides and seed treatment products with chemical or biological modes of action. Our innovation capability and long years of experience with crop protection products have placed us among the global leaders in this market. The activities of the Seeds unit are focused on cotton, oilseed rape/canola, rice, soybeans and vegetables. We market high-value seeds based on our own research and breeding expertise. In our core crops, we have achieved strong market positions and are internationally represented.

Our Crop Protection products are marketed through a two- or three-step distribution system, either via wholesalers or directly to retailers. We also sell products directly to customers in selected markets where farmers and market conditions require this mode of distribution.

Our seeds are sold to growers, plant raisers, specialist retailers and the processing industry. Plant traits developed using modern breeding methods are either incorporated into our own seed varieties or licensed to other seed companies.

The products of our Environmental Science operating segment are based on both proprietary and inlicensed active ingredients and designed for non-agricultural uses. We market pest control and plant care products both to private customers in the home and garden sector and to professional users in the green industry (including for public parks and golf courses), forestry, infrastructure (such as railroad tracks and roads), professional pest control and public health (vector control to combat malaria and dengue fever). CropScience is among the world’s leading suppliers of products and solutions for such non-agricultural uses. The Environmental Science products are mainly sold through wholesalers and specialist retailers. Much of our business in the area of vector control is transacted in response to tendering by government agencies and non-governmental organizations.

CropScience follows the International Code of Conduct on the Distribution and Use of Pesticides issued by the Food and Agriculture Organization of the United Nations (FAO). This forms the basis for CropScience’s expanded Product Stewardship Policy, which satisfies the requirements of the Group’s position on responsible marketing and sales. Training materials to explain this Group position have been distributed throughout the global organization and are posted on the Bayer intranet.

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Online annex: 3-9-BCS-1

In Germany, responsible marketing had already been a focus of all training programs by the end of 2012, with other countries following suit in 2013. In parallel with the training courses on compliance, the topic of responsible marketing and sales has formed an integral part of the Marketing & Sales Excellence training programs at CropScience since the fall of 2012.

MaterialScience

One of the world’s largest polymer companies, MaterialScience is a manufacturer and supplier of precursors for rigid and flexible foams, plastic granules, and raw materials for coatings and adhesives. The subgroup holds leading competitive positions in these product groups. We also manufacture and market plastic sheets, functional films and selected inorganic basic chemicals. Some of these chemicals serve as raw materials for the manufacture of our products. Others are generated as by-products of our production and sold to external customers.

Our products are used mainly in the automotive, construction, electrical/electronics, furniture, wood, textile, sports and leisure goods, medical equipment and chemical industries.

Rigid or flexible polyurethane foams based on our diphenylmethane diisocyanate (MDI), toluene diiso­cyanate (TDI) or polyether (PET) raw materials have found a broad range of applications in a variety of industries. Automotive uses include the manufacture of car seats and components. These foams are used in the construction industry and the refrigeration chain as insulating materials, and in the furniture ­industry for cushioning and mattresses.

Our polycarbonates are marketed as granules (Makrolon™), sheet, films and blends (APEC™, Bayblend™). Their uses include electrical appliance housings, CDs/DVDs, roof structures and automotive headlamps.

The Coatings, Adhesives, Specialties business unit manufactures raw materials for car and commercial vehicle coatings and for footwear and textile adhesives, for example. Specialties include films used in ID and credit cards, along with raw materials for cosmetic and medical products.

We market our products mostly through regional and local distribution channels, making increasing use of e-commerce platforms for order processing. We also work with trading houses and local distributors who are responsible for business with small customers. Major customers with global operations are ­serviced directly by our key account managers.

In the marketing of our products, we also take into account all the requirements of the Group’s position on responsible marketing and sales. The importance of observing antitrust law and preventing corruption is regularly emphasized in training programs, internal communications and discussions with management.

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Online annex: 3-9-BMS-1

The third major training focus at MaterialScience in 2013 regarding responsible marketing and sales was product liability. A total of 77 training courses were held worldwide to inform some 1,700 employees working in the areas of sales and marketing, quality management, development and production.

Last updated: February 28, 2014  Copyright © Bayer AG
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