This article forms part of Healthcare & Life Sciences Review: Switzerland February 2021, a comprehensive up-to-date country report on the Swiss pharma market, featuring data snapshots, feature articles, exclusive interviews and more. Click here to download.
Long heralded as an innovation powerhouse able to hold its own against the considerably larger neighbouring life science markets of France and Germany, Switzerland has, in some respects, found the going tougher of late.
The country’s domestic drug market has been enduring a sticky patch and could only muster a modest growth rate of 2.8 percent in 2020 as policymakers grappled with issues more familiar to the rest of the continent such as cost-containment.
Nonetheless, Switzerland’s life science companies continue to achieve global acclaim and attract the attention of investors the world over. As one of the elite drug development and biotech hubs of the world, Switzerland is a far more significant player than its 8.5 million population and domestic pharma market would suggest at first glance.
With pharma today contributing a massive 40 percent of Swiss exports, this is a nation that has historically always managed to punch well above its weight on the international stage in medicines and medical technology.
Moreover, the Swiss life sciences sector continues to possess enduring appeal as an FDI destination as demonstrated by the slew of big-ticket investments currently being placed.
German drug maker Merck, for instance, recently disclosed a CHF 270 million investment in a brand-new facility in Corsier-sur-Vevey, which, when fully operational at the end of 2022, will become one of the company’s flagship R&D centres dedicated to biotech development and manufacturing for clinical studies. Meanwhile, Celgene – a Bristol Myers Squibb company – has just inaugurated a new production site in Couvet, creating an additional 100 jobs in the process.
Nor is it just Big Pharma that has been keen to get in on the act. US biopharma outfit Incyte unveiled its new European headquarters in Morges in July 2020, while California-headquartered JSR Life Sciences, for its part, has announced the expansion of the European gene-to-GMP biologics manufacturing facilities of its affiliate companies KBI Biopharma and Selexis in Geneva.
Vaccine specialist Moderna has also been making headlines, having teamed up with Lonza in the wake of the global pandemic to invest CHF 210 million in a new production infrastructure in Visp, which will be capable of producing 100 million doses a year of the company’s much-publicized mRNA vaccine against COVID-19.
Similar trends have also been witnessed in the medtech space. In January 2020, Italian diagnostic device producer Bracco broke ground on a new EUR 60 million facility to support the strong growth of its medical imaging products. This followed fast on the heels of GE Healthcare’s announcement that it will be constructing a 7,360 square meter high-tech bioscience facility in the canton of Vaud, with a view to meeting the increasing global demand for cell and gene therapies.
Highly Prized
What are the main factors underpinning such sustained investor confidence and interest? “Switzerland as a country stands for stability, innovation and quality – all key success factors for the pharmaceutical industry,” explains Urs Vögeli, managing director at Janssen.
“While they cannot lay claim to the market volumes of economies like Germany or France, the Swiss really do have a tremendous amount to offer. For a start, the country is an epicentre of innovative scientific discovery, not just at the academic level, but also embedded within its start-ups and associated industry sectors. Moreover, this is complemented with an excellent infrastructural fabric comprising state-of-the-art clinical study centres and internationally respected key opinion leaders (KOLs),” he adds.
This in turn endows the country with some unique characteristics. “In general, we try to harness the country as a place for early clinical development since the population size is a little small for scaling up to large late-phase clinical trials. The compact ecosystem also lends itself to launching products fairly early, while the multicultural talent pool and excellence of the technical universities render it an obvious location for bringing together many kinds of R&D activities,” confides Vögeli.
Annalise Eggimann, CEO of Innosuisse, the Swiss agency for innovation promotion, very much concurs. “On the one hand, we boast a competitive and high-quality educational landscape with very strong universities such as ETHZ and EPFL which are important sources for the life science workforce of the future, while on the other, our strategic location right at the heart of Europe and open borders tend to foster a rich exchange of human capital and cross-pollination of ideas,” she enthuses.
“We believe Switzerland’s strong focus on R&D is of critical importance to our overall goal of developing next-generation innovative medicines,” reflects Pfizer’s country manager, Sabine Bruckner. “We’re taking about the top-ranking country on this year’s World Intellectual Property Organization (WIPO)’s Global Innovation Index (GII) and a highly successful research nation endowed with top-ranking technical and scientific universities. This means there are unparalleled opportunities to collaborate with the public sector in developing innovative medicines and carrying out clinical research that you would be hard-pressed to find elsewhere.”
[In Switzerland] there are unparalleled opportunities to collaborate with the public sector in developing innovative medicines and carrying out clinical research that you would be hard-pressed to find elsewhere
Amgen’s calculus has been strikingly similar, with over CHF one billion invested in its Swiss manufacturing footprint. “Switzerland constitutes a strategically important country for us within a strategically important region – Europe being a key revenue driver, second only to our home market of the US,” confides the company’s general manager, Henrik Asmussen.
“From a very early stage we established a significant footprint in Switzerland out of recognition of the immense experience and calibre of the scientific community, the potential for sourcing top talent and the fact that this place has matured into a well-rounded life science hub in the true sense where there is an abundance of opportunity to collaborate with companies and institutional partners the full length and breadth of the pharma value chain,” he observes.
Of course, none of this has arisen by chance or coincidence. While Switzerland may enjoy a long, rich heritage in specialty chemicals and precision instruments that has undoubtedly formed a solid foundation for the country’s current prowess in pharma and medtech, its policymakers and planners have been astute in fashioning a balanced, well fleshed-out life science sector spanning active pharmaceutical ingredients (APIs), supply chain logistics, clinical research, drug development, manufacturing, and commercialization.
Thomas Bohn, executive director of the Greater Geneva Bern area (GGBa), provides an interesting insight when he describes his organization’s strategy for enticing life science investment flows into his region. “We very much see our role as building up the sort of life science ecosystem that the elite pharma and medtech trailblazers of the world are going to want to gravitate and flock towards. They will only come if we have all the different steps of the pharmaceutical value chain present and within easy reach. Being comprehensive and systematic in this manner can trigger a snowball effect and it swiftly becomes a virtuous circle where more and more companies want to build a footprint.”
In fact, Switzerland’s life science sector can already be said to have reached a level of recognition and status where sectoral promoters such as Bohn can start being more selective. “Today’s strategy revolves around targeting the sort of genuinely top-notch entities that actually add material value: essentially innovative, profitable enterprises operating in high-margin areas and at the vanguard of pioneering science. This requires a business intelligent approach whereby we spend a lot of time analysing data to identify the most promising entities so we can be proactive as ‘company hunters.’ This does not necessarily mean only approaching companies in very advanced Phase III clinical trials, but rather identifying those with the most potential that will ultimately be able to bring game-changing products to market or play a decisive role in assisting someone else to do that,” he confides.
Internationally competitive corporate tax rates around the mark of 13-15 percent also help with a multitude of further deductions available for R&D activities, however the country’s value offering is these days less about tax breaks and more about forging connections and fast-track, efficient development on the back of stellar infrastructure, services and talent.
“The outdated myth that companies come to Switzerland purely for tax reasons alone still persists, but the truth is that nowadays this is merely one piece of a much more elaborate puzzle. The tax rate in a place like Zug is 12 percent with five percent withholding tax on top of that, but the true value offering is the education, workforce, liberal labour laws, working infrastructure, political stability, and quality of life. As in everything, a very good product needs to have a reasonable price, but does not necessarily need to be the cheapest,” muses Martin Naville, CEO of the American Chamber of Commerce (AmCham).
Nor should it be neglected that Switzerland’s thriving biotech scene also renders it strategically relevant as a locus for M&A activity. “From a big pharma perspective, with the sheer amount of innovation going on over here, it’s an excellent place to acquire new assets and refresh the pipeline… in 2015, we acquired Redvax, a spin-off from privately held Swiss biopharmaceutical company Redbiotec AG, and in 2019 we struck a deal for Basel-based biotech Therachon,” recalls Pfizer’s Bruckner.
“Whichever way you look at it, the country today provides concrete and rapid solutions both in terms of establishing strategic partnerships and setting up new facilities. Irrespective of whether you want to buy, build or a blend of both, Switzerland has the answers,” summarises Bohn.
Safeguarding the Innovation Nation
Against this backdrop, and despite some of the highest operating costs of any country in the world, an increasing number of pharma companies have been choosing to base their headquarters out of Switzerland, allowing the landlocked nation of eight million to cement its status as Europe’s brain and nucleus.
Today the country plays host to more than 41 international headquarters and 29 regional headquarters of life science companies as well as acting as home to the World Health Organisation (WHO) and Red Cross. Aside from homegrown champions Novartis, Roche and Lonza, pharma heavyweights including MSD, Novo Nordisk, Takeda, Biogen, and Amgen among others have all seen merit in making the country a strategic centrepiece of their operations.
The case of Bayer is perhaps illustrative of these trends. Despite having its domestic market, Germany, literally next door, the company has been steadily ramping up its footprint in Switzerland by incorporating pan-European and worldwide management structures.
Precisely because we are so innovative, we must ensure that we do not make any mistakes in terms of IP rights and must guarantee that the innovation generated by our companies remains protected and safeguarded at all times
“Right now, I can say we have around 1,600 employees across our entire operations in Switzerland. At the country level, across the standard affiliate functions, we have around 300 people sitting in Zurich. In addition to this, we also have above-country activities, which comprise more than 1000 personnel based in Basel, operating several billions in terms of the overall organization’s business… this showcases the exceptional importance of Switzerland to our global activities,” confirms the company’s local CEO, Axel Steiger.
“The pro-innovation orientation, overall business friendliness, collaborative spirit and international complexion that you encounter here are a pretty exceptional combination of qualities that other places would probably find rather hard to replicate,” he adds.
With so much at stake, it is little wonder therefore, that Switzerland jealously guards its international reputation as an innovation nation and is acutely sensitive to any variation of its annual performance in global competitiveness rankings. When the country slipped to fifth on the global competitiveness index last year and dropped two places in the global IP protection rankings, there was no lack of hand wringing and soul searching.
“We are happy to have retained first place on WIPO’s innovation index, which remains the most important indicator for Swiss pharmaceutical companies and their strong tradition in R&D, however, precisely because we are so innovative, we must ensure that we do not make any mistakes in terms of IP rights and must guarantee that the innovation generated by our companies remains protected and safeguarded at all times,” warns Marcel Plattner, the president of vips, an industry association representing 71 life science companies from small biotechs and pharma midcaps to medical device and healthcare groups such as CSL Behring, Fresenius Kabi and Baxter.
“Retaining our attractiveness as the destination of choice for this industry is of critical importance and you can rest assured that all stakeholders – business, government, policy makers and regulators alike – will be putting a great deal of effort into making up any lost ground,” he predicts.
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“As a country, we have to innovate continuously. We cannot just rely on the successes of the past and rest on our laurels,” insists Janssen’s Urs Vögeli. “There’s certainly no need to panic because Switzerland is still right at the very top when it comes to number of patents per inhabitant, which is deeply impressive, but from an industry standpoint and a political perspective, competitive edge in innovation is something that needs to be constantly nurtured and not neglected or taken for granted,” he elaborates.
Stephan Mumenthaler, director general of scienceindustries, a business association straddling the chemical, pharmaceutical, and life sciences sectors, very much mirrors this sentiment. “We’ve just commissioned an independent competitiveness study with one of the leading Swiss economic thinktanks, creating, for the first time, a global industry competitiveness index and the results are actually quite remarkable: Switzerland comes in number two, playing second fiddle only to the United States, and well in front of direct competitors like Ireland and the Netherlands so the signs are still pretty good,” he reveals.
“Our country exhibits a particular strength when it comes to fostering breakthrough technology, but we are all aware that while a reputation like this takes a long time to build, it can be lost very swiftly. There is no room for complacency; If you stand still, you fall back. We must therefore keep the hunger!” he notes.
Interestingly, the strong Swiss franc does tend to keep the country’s pharma and medtech firms on their toes. “Any export-oriented enterprises based out of Switzerland are constantly challenged. Both the exchange rate and the high operating costs mean that the quality of the products and services have to be second to none. To remain competitive internationally they must exhibit a demonstrable added-value that customers are willing to pay for and for pharma firms that means breakthrough, latest-generation, best-in class therapies that really make a noticeable difference in terms of end health outcomes,” reflects Innosuisse’s Annalise Eggimann.
The fact that Switzerland has no real tradition in strategic industrial policy may also, ironically, have been beneficial. “The Swiss philosophy is to set the framework right and let the market dynamics unfold in an environment regulated by principles rather than detailed decrees. The Government doesn’t attempt to know the right direction in which to go. When this is combined with a cluster approach that pools together in the same location all ingredients and all the component parts that make up the value chain, then a special form of innovative spirit can take off and flourish,” reasons René Buholzer, the CEO of Interpharma which represents the research-based pharmaceutical industry.
“Our weakness is not so much innovation itself but the commercialization of discoveries and the bringing that innovation to market. Also, there is maybe a slight element of risk aversion and fear of failure amongst our entrepreneurial cadre that you don’t necessarily get in some of the great innovation hubs of the world such as Boston or Silicon Valley,” adds Buholzer.
Land of Discovery
What then are some of the latest life science innovations being cooked up from within the Swiss market? “The fascinating thing about Switzerland is that we are an SME-heavy country so a lot of the novel technologies being invented and rolled out relate to very niche areas and remain quite discreet and understated. We have a considerable volume of so-called hidden champions within the supply chain performing highly specialized tasks with unprecedented levels of competency. They may not attract great media fanfare outside of their specialism, but their work is nonetheless radical and game changing,” observes Eggimann.
Take, for example, ADC Therapeutics, a clinical-stage oncology biotechnology company leading the development and commercialization of next-generation antibody drug conjugates (ADCs) with highly potent and targeted pyrrolobenzodiazepine (PBD) dimer technology.
Incorporated in Switzerland back in 2011 explicitly with a view to leveraging and piggybacking upon the country’s unique innovation ecosystem, the company has managed to file – on average – two INDs per year ever since and has been trailblazing a new front in the war on cancer.
We have a considerable volume of so-called hidden champions within the supply chain performing highly specialized tasks with unprecedented levels of competency
“In a way, antibody drug conjugates are a simple concept. There is the antibody, which binds to a protein that is exclusively or predominantly expressed on surface of tumour cells. To use an analogy, it acts rather like a guided missile. It finds and binds to the tumour cell, where it becomes internalized, and then the enzymes in the cell release the toxin into the cell, so that it can kill the tumour cell. The PBDs, meanwhile, are highly potent toxins designed specifically to be active in tumour cells that are resistant or refractory to many other therapeutic modalities,” explains the outfit’s CEO and co-founder, Chris Martin.
“The tricky part about antibody drug conjugates is that they are relatively complicated to develop and manufacture because they combine such potent drugs with complex biologics and antibodies. That’s why Switzerland with its deep expertise, proximity to world-class oncology-focused pharma players and reputation for high-tech manufacturing constituted an appropriate location for such an endeavour. You see, the ADC platform itself is important, but equally the way in which the platform develops drugs through to clinical point of care is just as critical so we were looking for a comprehensive enabling ecosystem that would get these technologies off the ground in an efficient, fast-track manner.”
Another company that has been raising eyebrows recently has been Idorsia, serial pharma entrepreneur Jean-Paul Clozel’s latest venture having sold his previous biotech, Actelion, to Johnson & Johnson for a record-breaking USD 30 billion back in 2017. Not only has Idorsia seemingly managed to condense a ten-to-15-year story into just three years – burning through CHF 300 million worth of R&D and ready to launch a drug a mere 36 months after conception, a tempo practically unheard of in the industry – but it has controversially chosen to focus on small molecules, an apparently counter intuitive stance at a juncture when large molecules are all the rage in medical science circles.
“I tend to be more drawn towards established technologies like this,” explains Clozel. “I believe small molecules are very much underrated. There are so many things that they can accomplish that other technologies cannot. It is great to use mRNA technology for a vaccine, but it is simply not appropriate to use injectables for sleep drugs, for example. The pitfalls with many large molecules, by contrast, are clear for all to witness. From seeing cell and gene therapy as something of a home run, people are suddenly waking up to the hard reality that the execution is not at all easy. Idorsia is seeking to become none other than the best small molecule company in the world and to deploy them in exciting new ways. That’s not to imply that we are averse to new technology though. On the contrary, we are using CRISPR in our research, are harnessing artificial intelligence to interpret data, and are employing algorithms to model the 3D molecular structure of proteins.”
He regards Switzerland as a logical host location given the “close proximity to universities that compete with the best in the world in training up talented chemists” – a resource base that they have been leaning heavily upon for their scientific research and clinical work.
Though operating in a somewhat unfancied realm of medical science, there is little doubt that Idorsia’s activities can be described as revolutionary. “I can draw an analogy with the car industry. For 100 years, these have been vehicles with four wheels going from A to B. However, the performances and designs have changed dramatically, so much that the final product still has four wheels, but in practically all other respects is now completely unrecognizable,” says Clozel.
“For the last 30 years, there have been no big discoveries in insomnia, but our drug has a new mechanism whereby the patient is not put to sleep but prevented from being awake. To take away the alarm clock is not the same as a sleeping pill. All existing drugs up to the discovery of the orexin receptor antagonist were anaesthetics which decreased the function of the brain, caused memory loss, and did not lead to natural sleep. Our receptor antagonist, on the other hand, takes away the mechanism which wakes a patient up, or which keeps them awake when the system is over-stimulated. That represents a huge leap forward in that, when the patient wakes up, they will be in good shape having enjoyed natural sleep. The problem has always been to identify a drug with the appropriate pharmacokinetics, and we believe we have finally managed it,” he exclaims.
Manufacturing Reimagined
Switzerland has also done spectacularly well carving out a niche for itself in high end pharmaceutical and API manufacturing with CMOs offering visibly differentiated service offerings capable of handling high potency active ingredients at a point when medical science is increasingly resorting to complex chemical entities requiring sophisticated containment technologies.
Meanwhile the country’s iconic contract manufacturer, Lonza, has been upending the conventional drug developer-CMO relationship: moving away from a traditional outsourcing service provider posture to one of a much more intertwined partner whereby their capabilities become almost an extension of the client’s assets, and spreading out along the drug development continuum so as to be able to offer an ever more expansive portfolio of services.
One CDMO that has been enjoying notable success with an especially bold business strategy is CordenPharma. The company has been capitalizing upon the prevailing tendency for Big Pharma to offload assets such as production facilities to amass a fully integrated supply solutions capability encompassing four technology platforms: Highly Potent & Oncology; Peptides, Lipids & Carbohydrates; Injectables; and Small Molecules.
“These past few years, under increasing technological, regulatory, and financial pressures, many of the large-scale drug developers have been looking to consolidate their portfolios and double down on their core strengths and this, in many cases has meant a fire sale of legacy production sites. We therefore set about developing a strategy for discerning the value of those assets with a view to rounding out our own capabilities and offering an entire new layer of service,” recalls Michael Quirmbach, the company’s CEO and president.
“In order to accomplish that goal, we explicitly sought out managing directors who understood their facilities were no longer merely cost centres, but rather profit centres that needed to be run as lean, fast, agile, cost-efficient machines. Whereas cost centres are usually limited to asking for additional resources from their centralized corporate financing, profit centres are much more accountable and play a strategically relevant function. This is why companies nowadays come to us. They realize we can transform a company’s obstacle into a strength, and make it a big business,” he details.
Central to this approach has been CordenPharma’s application of ‘continuous manufacturing.’ Unlike conventional batch production involving the sequential processing and testing of material across multiple discrete stages and potentially facilities, continuous manufacturing combines the full manufacturing stream into a single, fully integrated flow, thus eliminating built-in production gaps that can shorten manufacturing times from months to days.
“Conventionally, when we put chemicals together, we run the reaction in batches, taking into account the requirements to handle hazardous chemistry or temperature-sensitive products that need advanced infrastructure. With continuous manufacturing, we take a much smaller amount of material and run the reaction constantly in a dynamic mode, which greatly increases safety and enhances quality. The advantages of continuous manufacturing for customers are less deviation in production, higher yields, shorter time to market, and more profitable processes with lower costs for operation, equipment, and investment,” expounds Quirmbach.
Because Switzerland has an established chemical industry and extensive CMO network already in place, there’s absolutely no reason why we couldn’t start working with other European countries to provide them with the production of certain APIs and necessary products, thus guaranteeing a minimum of volume every year
Interestingly one of the by-products of the ongoing global pandemic has been a newfound enthusiasm for in-country production as a counterweight to supply chain disruption and Swiss CMOs, bolstered by the formidable reputation of the ‘made in Switzerland’ label have been experiencing an upswing in regional demand. “20 years ago, because prices were reducing dramatically year-on-year, manufacturers were forced to look for new suppliers which they found readily available at bargain basement price tags in places like India and China. Back then, we were all happy to get APIs at a minimum cost and keep our profit margins stable, however, COVID-19 has made us realise that in a crisis, countries will look after their own people first and deal with export markets second. Consequently, rich markets in Europe have been hit badly with supply shortages and that is making many stakeholders reconsider the repatriation of their supply chains as far as possible despite the higher prices that would inevitably ensue,” reflects Axel B Müller, managing director of generics association Intergenerika.
While conceding that “it is not realistic for a small country like Switzerland to try and produce all of the essential medicaments it needs,” he conceives of a situation arising in which Switzerland will start to coordinate with neighbours such as Germany, France, Austria, and the wider European region more generally to fashion more resilient supply chains closer to home. “Frankly we’re already witnessing many movements in that direction and, because Switzerland has an established chemical industry and extensive CMO network already in place, there’s absolutely no reason why we couldn’t start working with other European countries to provide them with the production of certain APIs and necessary products, thus guaranteeing a minimum of volume every year,” he suggests.
Firms like CordenPharma have already been noticing something of a bounce in demand from clients close at hand. “We’ve been detecting a certain shift where clients have been giving priority to products made in their country because of fears of fragilities with their supply chains. Many are now saying that they are willing to pay a premium for guaranteed reliability and peace of mind,” points out Quirmbach.
Market Access Declines
For all Switzerland’s innovative zeal, its internal CHF 6.1 billion pharma market has been experiencing a troubled period of late as the authorities try to rein in spending and implement a course change on healthcare expenditures involving what they perceive to be long overdue structural reforms. This policy shift has taken many drug makers by surprise after years of smooth market access compared to much of the rest of Europe.
“I think it’s fair to say that the Swiss government’s first and second cost containment packages have posed significant challenges for our sector. Unfortunately, we detect an increasing focus on the costs of medicine rather than on the quality of care, innovations, and outcomes which we believe is frankly the wrong direction to be heading. So far, we have been successful in getting our own treatments approved for reimbursement, but the market situation is definitely taking a turn for the worse and is less predictable than any time I can remember in the past decade,” bemoans Mads Stoustrup, vice president and general manager for Novo Nordisk.
Amgen’s Henrik Asmussen very much agrees. “I was told before I was posted here that Switzerland was a safe haven with easy market access, but what I have experienced is something altogether different. It takes a long time to bring your therapies to market as the operating landscape has completely changed,” he regrets.
Practically overnight [Switzerland] seems to have become one of the more challenging markets in Western Europe and we therefore found ourselves having to implement a number of big changes very quickly
The same story can be heard from those returning to the Swiss market after stints managing other affi liates abroad. “In all honesty, I was pretty surprised to discover just how much tougher the Swiss market access had become on arrival back in the market after period of seven years away,” candidly recalls Janssen’s Urs Vögeli. “Practically overnight it seems to have become one of the more challenging markets in Western Europe and we therefore found ourselves having to implement a number of big changes very quickly. For instance, we enlarged our market access team and brought in fresh talent that helps us better understand and navigate the current dynamics. Clearly, we are going to have to invest a lot more in competences such as data analytics and modelling because pharmacoeconomics is now the name of the game. We will also have to really start looking into drawing up proposals for innovative reimbursement schemes,” he forecasts.
When pressed upon what might have happened during the intervening years, he attributes the change to growing public dissatisfaction with spiralling healthcare costs. “Total healthcare costs have been rising at a rate faster than GDP growth. Swiss people pay out-of-pocket for their healthcare insurance, and they also have to cover a certain amount for medical treatments. In an annual survey of the most pressing problems faced by Swiss people, the issue of healthcare costs has been repeatedly raised and this is what has prompted the authorities to pursue an aggressive agenda of healthcare cost sustainability,” he reasons.
Tytus Litynski, the country manager of Italian outfit Alfasigma, concurs. “The crux of the matter comes down to political price pressure. As in many other developed markets, overall healthcare costs have been getting out of hand, with ordinary citizens having to pick up the tab. To counter this, the Federal government has been rolling out an austerity drive centred upon an overhaul drug pricing and it is this that is having an unfortunate effect on all our go-to-market possibilities,” he summarises.
Indeed, The Federal Council recently adopted a Health 2030 strategy that sets out the priorities for health policy over the ten next years. “While technological and digital change will remain our top priority, this strategy focusses on what we have identified to be three other key challenges: demographic and social trends, preserving high-quality and financially sustainable healthcare coverage and creating opportunities for a healthy life,” explains Anne Lévy, director-general of the Federal Office of Public Health (FOPH).
“The brute reality and inconvenient truth is that demographic changes and technical progress with ever more sophisticated remedies mean that healthcare costs will continue to rise in the future. It is therefore our duty and our responsibility to inject greater financial sustainability into our public health service and that means thoroughly reviewing the price of medicines, coordinated care and system transparency,” she insists.
What irks many within the industry, however, is not so much that the authorities are trying to get a grip on runaway spending, but rather the manner in which they have been going about it. “It’s time we edged away from this mindset fixated on limitation. Healthcare costs are rising, and the kneejerk political response is to reduce the number of doctors, close down the hospitals, and slash prices. This is not a sustainable solution. We need a holistic view and look at the entirety of costs and patient outcomes, rather than only the cheapest price at the beginning. That is the proper pathway to cost containment.” argues vips’ Marcel Plattner.
“The element that we’re badly missing in Switzerland right now is real value-based pricing,” maintains Stephan Mumenthaler. “The FOPH needs to remember that the products most under threat from price reductions of this ilk are often precisely those lifesaving medications in therapeutic areas where we had no cure at all. They often make treatments much more effective and lead not only to a higher quality of life for patients but also to relief of the general public, for example by reducing or even preventing lost work… There is an urgent need for introducing new pricing models that take the full value of innovative therapies into consideration rather than just looking at the upfront sticker-price.”
In many cases, pharma companies bring very viable solutions, but these solutions require the existence of outcome measurement systems. If we cannot have access to the data or we are not allowed to even collect that data, then it becomes very difficult to implement reliable monitoring and risk sharing
Most of the main innovator drug developers would actually be willing to embrace the concept of performance related contracts where pricing would be tied to the end outcomes after a therapy is administered. “Along with the other members of Interpharma, we are advocating that Swiss policymakers seek inspiration from what other advanced markets are doing across Europe and that means settling upon risk-sharing models whereby novel therapies are financed in accordance with the true outcomes that they deliver. This would be a fair and sensible way forward because it would mean the state only reimburses game changing therapies when they produce the intended results,” opines the general manager of Takeda, Pierre Morneau.
However, Abbvie’s Jon Helsdingen spots some clear obstacles to rolling out such a solution. “The root problem is that Switzerland lacks the infrastructure, not necessarily from a technical point of view, but more from a regulatory and legal perspective, because if you ask Apple or Google today, they could probably implement the necessary digital systems in a heartbeat,” he concedes.
“In many cases, pharma companies bring very viable solutions, but these solutions require the existence of outcome measurement systems. If we cannot have access to the data or we are not allowed to even collect that data, then it becomes very difficult to implement reliable monitoring and risk sharing. Some countries are far more advanced in terms of digitalization of patient records and so on, which enables data analysis at a higher level and system innovation… Currently, the Swiss authorities see these contracts as additional workload because they feel like the burden of proof is on them to define and assess the outcomes. More often than not, they lack the resources and infrastructure to measure the data needed, so it prevents them from accepting such proposals,” he laments.
“This is actually symptomatic of a wider problem where the paradigm shift in medical science and advent of new classes of therapies has not been matched by administrative procedures to approve, price and reimburse them,” observes Morneau. “There is a supreme paradox between Switzerland’s high level of medical innovation and the fact that these innovations are taking so long to reach Swiss patients. It was a Swiss company that has been at the forefront of pioneering CAR-T and yet it took as late 2019 for the first therapy of that kind to reach the Swiss market!” exclaims Helsdingen.
A Lopsided Path to Market
One particular pain point being reported by many industry stakeholders is the current length of time being taken to receive decisions on reimbursement and labelling when endeavouring to bring new products to market.
“Unfortunately, regulatory processes and timelines are not matched by reimbursement processes. To get your therapy to market in Switzerland is a two-step sequential process. The first step is regulatory approval which can be fairly swift, but then a considerable amount of energy is expended on the second step as you enter into pricing discussions and try to secure reimbursement,” reveals Amgen’s Henrik Asmussen. “In theory it should take 60 days to get reimbursement on a new product, but in our own experience for oncology products we find it taking more than 200 days on average!” he complains.
Unfortunately, regulatory processes and timelines are not matched by reimbursement processes
Henrik Asmussen, Amgen
“In 2019 only 24 percent of new products were given a price within 60 days as stipulated in the regulation, meaning that originator drug developers had a large backlog of products not being reimbursed,” points out Interpharma’s René Buholzer. “11 of the 46 applications were admitted within the official timeframe, over half took longer than 120 days and there is a backlog of 136 new active substances not yet listed on the specialty list. The technical and medical progress that has been made in drug development is really exciting, but the reimbursement procedures simply have not yet caught up and this is having very detrimental consequences for patients who deserve to be accessing latest generation treatments,” he continues. “From a patient perspective, it is not sufficient if the regulatory agency is relatively quick, but then the reimbursement process is not properly handled.”
Some therapeutic areas seem to have borne the brunt especially harshly. “Today, vaccines are taking more than two years to reach patients after being approved by Swiss regulators. It is imperative that we speed this up. Just imagine a scenario whereby we get a COVID-19 vaccine and treatment into Switzerland but then need to spend 200 days negotiating its reimbursement. People would be furious,” contemplates Pfizer’s Sabine Bruckner.
The national drug regulator, Swissmedic, for its part tends to come in for a certain amount of praise. “I would say that, in term of drug approvals, Swissmedic is relatively swift and adaptive to new technology when factoring in the limited resources at their disposal. At the end of the day, it tends to be the second fastest regulatory agency globally in giving scientific assessment, though there are question marks over the labelling stage where some entitles have experienced lengthy delays. It is certainly not worth losing 200 days or more just because of labelling,” reflects Interpharma’s René Buholzer.
“There is definitely a strong and amicable relationship between the regulator and the industry,” emphasizes Mumenthaler. “Scienceindustries has extensive dialogue with Swissmedic and feel they have made a lot of progress. While there is still some room for improvement on terms of positioning Swissmedic as a first-wave agency, we are confident in seeing further progress here. The more virulent problem is getting an adequate price for the therapies from the Federal Office of Public Health (FOPH) within a reasonable timeframe. These dialogues take much longer than they previously did and nowadays represent a significant headache for many of our members.”
“We are actually very proud of the rate at which we have been managing to process authorizations compared to other regulatory authorities,” admits Swissmedic Agency Council Chair Lukas Bruhin, while strenuously pointing out that it is not within the remit of his organization to set prices. He is upfront, however, about the strictures of a mid-size agency that has to work on its own and does not have the commensurate guidance and support structures of the European Medicines Agency (EMA) that the national regulators of EU member states can enjoy and rely upon.
“I think it’s time to be frank in accepting that Swissmedic needn’t necessarily do everything alone. It’s always going to be difficult to square the circle of retaining our modest size and keeping abreast of technological developments in medical science while still carrying out our legal mandate in all areas – properly, speedily and effectively. For that reason, it makes sense for us to intensify coordination and consultation at the international level, taking seriously the information and principles of equivalent foreign authorities,” he muses.
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What then, is the best solution going forward for the industry? To date, many companies have been trying to mitigate reimbursement delays by engaging with the authorities earlier. “We’ve started up a dialogue with the authorities for our rare disease therapy CARNK right away, despite this product potentially not reaching the market for many years,” discloses Takeda’s Pierre Morneau. “In this way, we can start to adjust and predict what questions might be asked as early as possible while simultaneously laying the groundwork for us to co-build new forms of risk-sharing pricing solutions.”
“For CAR-T, we’ve actually put in motion a similar plan and are beginning the prelaunch preparations earlier than we have ever done before,” acknowledges Janssen’s Urs Vögeli. “This means engaging with multiple stakeholders, not just the Ministry of Health and Swissmedic but also with payers, politicians and hospital representatives, so that we can understand how to expedite the related processes in order to ensure a smooth launch. It’s about mobilizing a real coalition to get these breakthrough treatments over the line and to the patients who so badly need them.”
Biogen managing director, Katharina Gasser, who also happens to be the incumbent chairwoman of the Executive Committee at Interpharma, points out that there are certain work-around solutions, though questions their overall desirability given the way that they could distort the marketplace.
“There is a mechanism where, on a case-by-case basis, pharma companies can negotiate a treatment for individual patients with their health insurance provider. This provides a possibility for earlier access, but this is not always fair to patients as it depends on the openness of individual health insurance providers to such a scheme. The real danger with this is such a model has the potential to flip the entire Swiss healthcare system to something akin to that of the US – where companies are forced to be part of a payment system to alleviate patients’ pockets and ensure their products reach the patients…. That is not really what anyone wants and goes against the spirit of solidarity on which our health system is premised,” she astutely observes.
Generics: The Moment is Ripe
For many, one relatively fast, simple, and effective way to take costs out of the system and render Swiss healthcare more financially sustainable would be to increase the share of the generics market which remains noticeably smaller than in many peer countries such as Germany, the UK, France, and the Netherlands. According to the latest figures from Intergenerika, the local generics market grew by 3.2 percent in 2019, faster than the overall reimbursed market and the category now accounts for some 20 percent of the market by value and 37 percent by volume, based on defi ned daily dosage, all of which suggests a certain amount of traction is being attained.
The local market’s biggest player, Sandoz, with seven different approved drugs, believes however that there is still considerable untapped potential and scope for improvement. “The current growth rate far underestimates the potential for incremental savings that generics could leverage in Switzerland,” affirms Jan Tangermann, the company’s country head. “After all, 20 percent of the market is taken up by off-patent originator products with no generic competition, and there are currently only 299 generic APIs currently approved in Switzerland, far fewer than in neighbouring countries.”
He blames a negative incentive system for pharmacists and physicians for holding back what he thinks would ordinarily be a flourishing market segment. “As the current margin system is based on a percentage of the list price, pharmacists earn more dispensing an originator drug than the comparable generic drug, which meets the same quality, efficacy, and safety standards. By removing the negative margin incentive, generic penetration could grow by between 10 and 20 percent and could fully enable incremental savings of CHF 200 million, to the benefit of the healthcare system, patients and society. These savings could not only support the stabilization of healthcare insurance payments but would also offer more budget opportunities for life-altering innovations, be they in pharmaceuticals or new treatment standard,” he argues.
“There are also issues in terms of packaging,” points out Intergenerika’s managing director, Axel Müller. “The originators are playing hardball on this and arguing to Swissmedic that generics need to match all the pack types offered on the original product. If the originator sells 10- and 30-tablet packs, then our firms find themselves having to manufacture medicines in package formulations that are simply not profitable.”
By removing the negative margin incentive, generic penetration could grow by between 10 and 20 percent and could fully enable incremental savings of CHF 200 million, to the benefit of the healthcare system, patients and society
Not everyone agrees that that is the primary cause, however. “While it is true that generics penetration in Switzerland is lower than in many other countries, I see that original products which are generified or could be generified are making a huge effort on their pricing. Consequently, as there is less of a price differential between originals and generics, and thus the pressure to convert to generics is smaller compared to other countries,” reasons Alfasigma’s Tytus Litynski.
“Sometimes products are so small in terms of market volume and the price of the originator has already come down so far that it is simply not worth a firm’s while launching generic equivalents.” Of major concern to the generics industry, however, is the Federal Office of Public Health’s proposal to install a reference price system.
“Despite the not yet exploited potential of generics in Switzerland, the government has signalled it wants to initiate a reference price mechanism. That type of flawed system would destroy existing market dynamics in a liberal and competitive environment. It would also reduce competition in the Swiss market, limit choice and treatment options for patients and thus ultimately reduce the attractiveness of supply allocation and portfolio extensions for generic players. A fair price level is a prerequisite to compensate the country-specific downsides of small volumes, low economies of scale and high regulatory and quality standards,” contends Tangermann.
“Contrary to what some might think, we, as the generics industry, are not opposed to lowering prices. In fact, we want to support the overall healthcare system by reducing costs. The purpose of our industry is to bring affordable medicine to the people,” reassures Müller, but he likewise is adamant that reference pricing is not an acceptable way to achieve such objectives. “In countries like Germany, where a reference pricing and rebate system was introduced, over 50 percent of generic companies have now disappeared from the market. Countries with this system have also consequently experienced severe drug shortages. It beggars belief that Switzerland should contemplate trying to import a system that has patently been shown to be wrong-headed elsewhere,” he warns.
“The idea to have a price level no higher than the European average and to strive for some sort of concept of a symmetry of sacrifice is ill thought-out and quite frankly absurd,” agrees vips’ Marcel Plattner. “Let’s not forget that, in the last six to seven years alone, there has been a price cut of CHF 1 billion (EUR 0.93 billion) in pharmaceutical products on the Swiss market, which represents roughly 20 percent of market value! Switzerland is a comparatively expensive country where people earn high salaries and pay high prices for goods and services so the issue of striving for parity is not viable. It would just lead to supply-shortages as companies pull their products from the market.”
In response, Intergenerika has come up with a counter proposal on behalf of the generics industry. “Currently, doctors and self-dispensing pharmacists earn more if they give the patients originator or more expensive products and this is clearly counterintuitive,” suggests Müller. “Our proposal is that they should receive the same margin calculated on the generic price regardless of which product is prescribed. Such a system would trigger a greater handover of generic products and pharmacists would stock more generics because the margins would be the same. Generic penetration could grow by between 10 and 20 percent and save hundred of millions of Swiss francs. With the same margins, we would save another CHF 40 million and, if we promote biosimilar penetration, we could bring in another CHF 30 million. Moreover, there is a price gap between originators and generics of 70 percent when a generic is launched. Why not increase that price gap to 75 percent voluntarily which would create another CHF 50 million in savings?” he proposes.
“We want to make it clear that we are part of the solution and not part of the problem and we agree that we also need to tighten our belts and help to find new approaches and we believe that this sort of compromise would leave everyone a winner,” reaffirms Tangermann.
Biosimilars: Coming of Age
Switzerland’s local biosimilars market is also growing rapidly – shooting up by 80 percent in value and 60 percent in volume over the last year alone – albeit from a very low starting base. There are currently 12 APIs for which a biosimilars are possible, but, in value terms the biosimilar market remains a minnow accounting for mere CHF 48 million out of a possible CHF 1.6 billion (the current total market value).
Nonetheless many stakeholders have high expectations for the future prospects of this category of therapies. “We believe biosimilars are a fantastic means to ease healthcare budgets and unlock funds for innovative treatments. It is a win-win-win for patients, innovators, and payers alike,” affirms Biogen’s Katharina Gasser.
Sandoz’s Jan Tangermann is equally positive, noting that “despite the still rather meagre market share, biosimilars are already generating in excess of CHF 100million cost-savings per annum.” A rule change in 2019 which permitted biosimilar developers operational in Switzerland for the first time to make applications on the basis of an existing registration from another country rather than having to submit a completely new dossier from scratch seems to have given the segment a fresh shot of impetus.
The speed with which Katharina Gasser has managed to place Biogen’s therapies on the market is perhaps indicative of this. “Introducing biosimilars to Switzerland was one of my first remits,” she recalls. “When I assumed my position two years ago, we had zero biosimilars locally, so I had to put together an acceleration plan and, with the assistance of Samsung Bioepis, managed to gain a couple approvals within a very short space of time: The first, in 2019 was Benepali, the first biosimilar of Enbrel, and the second, in July 2020, was Imraldi, our biosimilar referencing Humira.”
Amgen, for its part, has managed to launch three biosimilars locally since 2019. “We spied an opportunity to increase competition in the off-patent market, which could lead to savings that could then be invested in innovations coming into Switzerland,” says Asmussen. He still detects scope for even swifter uptake, however.
Switzerland represents an excellent clinical research hub with an unmatched talent pool. The fact that biosimilars are biologic drugs means that we have to conduct Phase III studies, spending anywhere between USD 40 to 60 million. We thought it was important to secure the very best enabling environment for what is such as critical part of our value chain
“Compared to many other markets, the uptake of biosimilars is still lags behind in Switzerland, mainly due to an underdevelopment of the off-patent market. There is not entirely free competition and there are incentives to prescribe the higher cost originator. We believe in free competition in the off-patent market, which means the physician’s freedom to prescribe with equal incentives. If these incentives are made there would be even more rapid uptake,” he counsels.
Interestingly, Switzerland is also now starting to attract biosimilars companies hoping to leverage the country’s rich R&D infrastructure. Icelandic entity Alvotech is a case in point. “We position ourselves as a pure play, differentiated, fully vertically integrated biosimilars development and manufacturing company that goes global with partners that are regional champions. While several biosimilar companies prioritise the US market, we, by contrast, go global in collaboration with regional champions such as Teva for North America and STADA for Europe, which is something which has never been done before at scale,” explains Anil Okay, general manager of Adalvo and chief commercial officer of Alvotech.
Alvotech’s relationship with Switzerland is all about the country’s pedigree in clinical research. “Alongside our two R&D sites in Germany for pre-clinical development, we base our clinical operations and medical affairs functions all out of Switzerland, where we have over 40 personnel,” reveals Okay. “The rationale behind that was the fact that Switzerland represents an excellent clinical research hub with an unmatched talent pool. The fact that biosimilars are biologic drugs means that we have to conduct Phase III studies, spending anywhere between USD 40 to 60 million. We thought it was important to secure the very best enabling environment for what is such as critical part of our value chain,” he declares.
“In the future, we will be exploring the possibilities of moving commercial operations to Switzerland as well,” adds Okay. “The country’s dense network of global trade agreements would surely be a huge advantage as we bolster our global footprint and begin generating revenues from product sales,” he reflects.
Holding Firm?
Despite continuing to occupy top spot of the Global Innovation Index and attract a relentless flow of big-ticket investment, it is hard to escape the notion that Switzerland’s life science industry is finally beginning to lose some of its shine. While the country remains home to best-in-class companies operating at the pinnacle of advanced medical science and the pioneers of the healthcare of tomorrow, many market insiders fret that this proud nation risks tarnishing its well-honed reputation if innovative new medicines continue to face significant delays and roadblocks in their introduction to the domestic marketplace.
AmCham’s Martin Naville describes the situation thusly: “15 years ago Switzerland was a clear leader in location attractiveness for life science entities the world over. Today the country remains on a solid footing and continues to be endowed with many positive attributes, but the overall picture is maybe not quite as great as many people still think. Slowly, but surely the hubris is starting to diverge from the reality.”
The question that remains is how Switzerland’s policy makers, payers, captains of industry and practitioners will react as the country navigates the big common issues of the day from global pandemic and public healthcare sustainability to population demographics and the rise of chronic disease. Will the country manage to stay the course?
“When the sun comes up in Africa, the gazelle knows it has to run to not be eaten. The lion has to start running to catch the gazelle. Regardless of whether Switzerland is the gazelle or the lion, it has to start running,” muses Naville. “A lot of people in Switzerland have not yet realised that the sun is already up. The country needs to become nimbler, not assume that it is still the best, but instead strive hard to become the best again. There is not a moment to lose,” he urges.
