How Belgium can remain the market leader in biotech
The OECD is never shy about making new recommendations to Belgium on occasion, but when it comes to biotechnology, Belgium is the recommendation. We are praised for the quality of our higher education and for our close collaboration with industry. The Flanders Institute for Biotechnology brings together 1,300 scientists and is the absolute world leader in fundamental research. ThromboGenics, which started life in 1985 as a spin-off from KULeuven, is now valued at more than 1.4 billion euro. Thanks to the right fiscal stimuli, we have also succeeded in attracting the capital and investments that have made it possible for Belgium to grow so specta- cularly as a biotech country. In 1990 there were two ‘life sciences’ businesses in Belgium; now there are more than 120. A recent study carried out by KBC Bank calculated that the sector as a whole is valued at more than 11 billion euro, with a 30% market share in Europe and more than 30,000 highly skilled jobs.
There can be no lifetime guarantee, however, that things will always continue to go as well as this. First of all there is increased competition from dynamic and growing economies like India and Russia. Secondly, the introduction of Basel III will hamper bank lending to companies. Thirdly, grim economic forecasts are continuing to put pressure on government budgets. In a nutshell, easier environments are imaginable for a biotech company to submit a reimbursement application for a new drug – even if it does offer promising health benefits.
Despite the difficult budgetary context, this government has decided to increase the advance corporation tax exemption for researchers from 75% to 80%. Although there is no doubt that this represents a whiff of oxygen for the sector, it does nothing to deal with the second challenge: how should Belgian biotech companies finance their future growth?
Developing a biotech drug takes a long time
and involves high costs and substantial risks. Thrombogenics will probably not report its first profits until 28 years after its original formation. Only one in four biotech discoveries actually reach the market in the end. Testing the effectiveness of a new drug in clinical settings and ascertaining the medical added value that it offers (phase III) can easily require a budget of between 50 and 100 million euro. Our SMEs cannot simply turn to their house bankers for funding on this scale. If this means that the company has no other option than to sell to a foreign pharmaceuticals giant to allow it to pay for subsequent development phases, Belgium will miss out on huge added value in the future.
The government, in its role of providing flanking support, is therefore aiming to move beyond the existing advance corporation tax exemption and the existing patent deduction. It needs to intervene to address the heart of this issue: the systems of drug reimbursement. The essential question here is: how can we reform these so that they offer greater financial opportunities for
businesses that are working hard to innovate and developing drugs that are relevant in our society? We could, for example, work through provisional decisions that would make it possible to bring drugs to the market more quickly without sacrificing quality for patients. The level of reimbursement for the drug could also evolve in line with the observed medical benefits.
These are not empty ideas. There are some very practical reasons for considering these approaches: from 2015 onwards, biological drugs valued at more than 500 million euros will be coming off patent in the Belgian market. We must take this opportunity to consult with the sector to look at the best possible ways of reinvesting this budgetary margin in the sector. It can also be invested in innovative strength for our biotech businesses and in ensuring appropriate prices for our patients and health insurers.
Here is one idea: when a biological drug comes off patent and a biosimilar equivalent is available, it will be placed in a new group of ‘cheap biologicals’ and made subject to an automatic price reduction of 25%. In this way we would release up to € 125 million, at least half of which can be earmarked to flow back into the sector. This also means that in accordance with the recent report from the Belgian Health Care Knowledge Centre, we must ensure that biosi- milars continue to be developed and marketed in Belgium on a sustainable basis through specific guideline figures, since if there is no biosimilar equivalent there will be no cheap cluster and no price reduction.
To safeguard our position as the market leader, we will all have to pull in the same direction: drug developers, the generics industry, universities and the government. It is our responsibility to work together to ensure the continuation of our success story in this superb sector.
Published in The European Files, January 2014