Austria has long been merely a cog in the wheel of global R&D, lying in the shadows of neighboring research giants, Germany and Switzerland. Now, however, this perception is changing as Austria capitalizes on its ideal central European location and impressively educated workforce.

“From a biotech perspective, [Austria] has a diverse and abundant product portfolio in phase I, II and III.”

Erich Lehner, EY

This change was first catalyzed in 1991 when Austria became home to the world-renowned Vienna Biocenter (VBC) which encompasses “four academic research institutions: the Research Institute of Molecular Pathology (IMP), the Institute of Molecular Biotechnology (IMBA), the Gregor Mendel Institute of Molecular Plant Biology (GMI) and the Max F. Perutz Laboratories (MFPL), which host in total 86 research groups,” explains VBC chairman, Harald Isemann.

The Austrian government equally “has backed the entire Austrian R&D industry through research grants. These initially started at a rate of ten percent,” explains Phillip von Latorff, country managing director of Boehringer Ingelheim’s Regional Centre Vienna (RCV), and “have been increased even more today, first to 12 percent, and on January 1st, 2018 this will kick up to an impressive 14 percent.” This comes as welcome news for Boehringer Ingelheim who plan to complete construction of a state-of-the-art EUR 700 million biopharmaceutical production plant in the heart of Vienna by 2021, the largest single investment for the German powerhouse globally and for the Vienna life science industry.

Furthermore, these changes have spurred on a number of small to mid-size domestic biotech companies that have strengthened Austria’s positioning on the global life sciences map. Erich Lehner, head of the life science sector at EY Austria admits that, demographically, Austria is very small “but from a biotech perspective has a diverse and abundant product portfolio in phase I, II and III.” Many of these companies collaborate closely with Austria’s world-class medical universities. Nevertheless, Mr. Lehner believes the industry can do more “to create a more comfortable environment, including tax incentives for example, to ensure these businesses can focus on R&D rather than financial concerns.”


Government vs Industry: A Game of Chess

Any flourishing R&D hub is supported by a stable economic environment, a situation Austrians have become accustomed to; therefore, what underlying issue inhibits further large-scale investments? Manuel Reiberg, president of the Austrian forum of the Research-Based Pharmaceutical Industry (FOPI) feels that Austria “must incentivize companies to invest in R&D,” facilitating the inevitable link between the stimulation of R&D and a country’s ability to “be an attractive research into retail environment where drug development is adequately valued.”

The ability for products to gain market access is directly associated to the perennial wrestling match between rising innovative drug prices and healthcare budgets, a common dynamic in most developed markets. Reiberg believes the “problem is that there are two separate financing streams, intramural (hospital) and retail, leading to decreased transparency in understanding the allocation of funds.” This leads to the Austrian healthcare ecosystem having “no idea where we can make savings because we do not know where money is being spent.”

There are always two side to any story and Herwig Ostermann, executive director of the Austrian Public Health Institute, a neutral voice between the government and retail sector, shares a more holistic view, indicating “When devising the budget cap, [the launch of innovative drugs] was taken into account, and technological progress was incorporated in the original model.” Despite Austrian budget healthcare caps being readjusted every four years, Ostermann believes “highly expensive therapies, as observed in recent years, pose challenges to the fiscal sustainability of the whole system.”

This finance conundrum occurred at the same time as the global phenomenon of Gilead’s launch of the revolutionary HCV drug, Sovaldi®, resulting in the Austrian retail sector, collectively paying a EUR 125 million solidarity payment back to the Austrian government in 2015. Jan Oliver Huber, secretary general of the Association of the Austrian Pharmaceutical Industry (PHARMIG) acknowledges that “In 2014 and 2015 we saw higher growth of spending at 5.4 and 5.2 percent respectively,” though at the same time he is not shy in voicing that “the sick funds (the reimbursement authority) and many politicians, were foolhardy enough to start the fight against the industry in terms of pricing.”

Austrian product prices are based on the European average of 28 nations spread across the entire continent.  This is effective at first as more prosperous members are part of the first launch wave, although these prices are reviewed, “18 months after the drug is placed on the reimbursement list, 24 months after that, and then every subsequent 18 months,” explains Huber; therefore, less affluent nations are incorporated into the European average price each time and “these constant price reviews will drive the price down further. This will make it difficult for the Austrian healthcare system to maintain its first wave status for drug launches,” even reaching a point that “there is the possibility that companies turn to other nations for drug launches, especially if Austria continues to become less attractive due to market access laws.

To compliment the 2015 retail sector solidarity payment, reimbursement authorities implemented a hotly discussed reimbursement box-system; drugs are classified in “boxes” and their innovation value evaluated based on a comparison to drugs on the market. Robert Sauermann, head of the Department of Pharmaceutical Affairs of the Main Association of Austrian Social Security Institutions, is open to discussing sustainable pricing “as long as [the retail sector] can provide sufficient evidence to back up their therapeutic and financial claims…. real innovation must result in a significant added therapeutic benefit.” He further stresses that “the appropriate price is evaluated, taking into account several aspects, such as the medical classification and the EU average price. For example, if a drug provides drastic improvements for patients in need, it may be reimbursed at a higher price than the comparator drug.”

This system requires companies to attack the market using differing methods. Théa’s country manager, Gunther Aschenbrenner, posits that “If the government does not offer us a sufficient price; we do not enter the market.” Peter-Karl Schwarz of LEO Pharma, however, is on-board with the system: “Our interactions with the reimbursement authority have been very constructive.” This has enabled his team to gain first wave status in LEO Pharma’s global launches as he is able to “provide real scientific evidence [to the reimbursement authority] on how, aside from improved clinical efficiency, we benefit our patients through increased adherence and compliance for long term treatment


Next Move?

Now, the obvious question is, what needs to be done to find the happy medium between regulation and innovation? Sauermann believes “increased collaboration between the outpatient and hospital sector” will greatly benefit the healthcare ecosystem, as well as “joint procurement and tendering of treatments to create a more efficient, streamlined system.”

Prof. Robin Rumler of Pfizer has a different perspective, believing that Austria “should remove departments in hospitals that are not needed and create specialist centers; for example, oncology, cardiovascular diseases, pain and surgery. This would make not only the system cheaper to run, but give patients better care. The money saved can then be distributed throughout the retail sector to improve innovative therapies entering the market or to strengthen medical care.”

Despite these challenges, Austria is still one of the top-ranked countries in terms of patient health according to the European Federation of Pharmaceutical Industries and Associations (EFPIA). Now is the time for healthy discussion between all the stakeholders. As Prof. Rumler stresses, “We must all strive to have the same overarching goal in thinking long-term, so in the end Austrian patients can receive world-class innovative care well into the future.”

Writer: Matthew Fsadni