Country Report: Belgium
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Among Belgium's hallmarks is its indulgent frothy beverage, beer, which appears to be limitless in variety and taste ranging from pale lager to Lambic or Flemish red. Simultaneously, Belgium has achieved remarkable success in a loosely related industry that also requires a seemingly magical mixture of ingredients under highly controlled and complex environments to produce a product many also view as indispensable: pharmaceuticals.
With an economy defined by international trade, Belgium exports roughly 60% of both its barley pop and pharmaceutical drugs production. However, the pharmaceutical industry directly employs in excess of 30,000 people and represented 10.4% of Belgium's total exports in 2011. Belgium is in fact still the world's second largest exporter of pharmaceuticals. As such, the pharmaceutical industry is a significant positive contributor to the country's trade balance.
Today, the Belgian pharmaceutical market is valued at approximately €4.5 billion (USD 6.1 billion) and is supported by "a highly commendable healthcare system which provides a high standard of services to patients," declares Laurette Onkelinx, minister of Social Affairs and Public Health. Belgium's life sciences industry has evolved into a world-class contender. The country is regarded as a hub for clinical trials, a leader in the biopharmaceutical industry and a hub for pharmaceutical production and distribution. Belgium has been the driving force behind a number of global giants such as Janssen Pharmaceutica, GSK Biologics, UCB and Solvay Pharmaceuticals.
Nonetheless, Belgium remains an attractive destination for investment by the pharmaceutical industry. This is illustrated by numerous investments made over the recent past, including UCB's new biotech pilot plant, Janssen Pharmaceutica's new distribution center and Pfizer's new production unit, to name a few.
THE GOOD, THE BAD AND THE UNANTICIPATED:
The Good: A Mecca for Biotechs
Belgium's biopharmaceutical sector enjoys a leading position on a global level. The biotechnology industry is an increasingly important player in Europe and has been playing a central role in supporting Belgium's economy.
Today, there are over 140 biotechnology companies operating in Belgium (7% of all such companies in Europe) that accounted for 16% of Europe's turnover and almost 10% of European R&D expenditures. Patrik De Haes, CEO of ThromboGenics, a successful biotech spin-off from the Katholiek Universiteit Van Leuven (KUL), stated that although Belgium is a small country, "in terms of biotechnology we are right on top."
Eduardo Bravo, CEO of TiGenix, the first and only company with an approved cell-based product in Europe and also a spin-off of KUL and Universiteit Gent (UG), agrees that Belgium offers unique opportunities in biotech. "Belgium finds itself in a privileged position for cell therapy due to the concentration of cell therapy companies located in the Benelux region, particularly in Belgium."
Yet Omer Saka, director at Deloitte submits that there is still room for improvement. "With the right policies and incentives in place, Belgium could very easily become the European leader in the biopharmaceutical sector. I consider the biotech sector to be the jewel in the economic and financial crown of the country." More specifically, Saka notes that "Belgium would benefit significantly by setting this as a major objective for her industrial policy. The government therefore has to put the vision out there to be the leading country, not just in R&D, but also in manufacturing biopharmaceuticals."
In part, Belgium's success in biotechnology can be traced to its excellent academic network, abundance of expertise and the trend towards cooperation and clusterization in the industry. Belgium boasts an academic network of 16 universities within a 60 mile radius and a high concentration of university hospitals. A 2008 study by The Scientist found that four out of the top 10 universities in life science research, as measured by citations, are located in Belgium. This is the greatest academic concentration of any country outside of the US.
De Haes notes that "in Belgium, the number of drugs in development per million inhabitants is the highest in the world, ahead of the UK or the United States." Likewise, Bravo goes on to say that Belgium maintains a "favorable position that obviously derives from the quality of its universities, especially with regard to the quality of the spin-offs they produce. With the highest concentration of life science employees in the world, the country has become the birthplace of several world R&D centers for the biopharma industry."
"One of the key drivers of our strong presence in the clinical research sector is the high-quality standard of the universities and research institutions," she says. "Furthermore, Belgium is home to several well-known key opinion leaders in the therapeutic areas that we are focused on. This combination of Belgium's outstanding academics and our dedication to innovation makes the country a highly attractive landscape for investment in clinical trials."
Similarly, Mark Connolly, managing director at Boehringer Ingelheim, highlights that "the main attraction is the number of high quality research centers to work with and the expertise of the investigators. When we work in partnership with these centers we consistently see high standards of management of the studies as well as superior data management. Overall, I would say that it is a mixture of reputation and consistent delivery of results that make the environment so appealing."
"For Belgium, building such a reputation and level of expertise certainly takes a great deal of hard work and dedication. For that reason, we have continued to invest in Belgium for over 50 years now and we have consistently expanded our clinical development activities in the country."
Nevertheless, the European Commission has been making progress towards adopting a new proposal from the European Parliament and the Council on clinical trials that will replace the existing Clinical Trials Directive (2001/20/EC). On a European level, the proposal is expected to arrest the general decline in European clinical activities by offering centralized application procedures and harmonize approval times across member states, thereby increasing cost competitiveness. However, in relation to Belgium's rapid clinical approval processes, Garot warns that "the new regulation will unfortunately make Belgium's fast track differentiating factor obsolete."
Despite the directive's potential impact, many believe Belgium's clinical trials industry is still in a favorable position owing to its expertise and long track record of rapid approvals. Jan De Backer, founder and CEO of FluidDA, a cutting edge clinical research organization (CRO), accentuates this point. "Generally speaking, I think that Belgium has somewhat of a head start in this respect owing to its familiarity with rapid approval procedures for clinical trials. On the other hand, if certain countries are currently accustomed to a three month time frame for instance, then it will be very difficult for them to quickly adapt to the new time frames. Illustratively, we carry out a number of multi-center clinical trials in Europe as a whole and the differences between Belgium and the Netherlands for instance is huge where these procedures require extended time periods. That is, there is an underlying dissimilarity in mentalities towards these activities. Therefore, even with the introduction of the new policies, I do not believe that the respective people's attitudes will change as easily."
Although Mark Connolly, managing director of Boehringer Ingelheim, believes that the new regulation will influence their clinical operations to a certain degree, he maintains an equal level of confidence in Belgium's clinical expertise. "The new European regulation could very well have an impact on our clinical research activities. Nonetheless, whatever the regulations, what really matters is the ability to deliver good quality data, good quality management of studies according to the plan as well as recruitment rates. Of course, together these elements are critical to maintaining a healthy clinical trials environment and I believe that Belgium's reputation in doing that will undoubtedly last."
A push towards openness and collaboration
Considering the increasing costs and complexities associated with drug discovery and development and the urgency to address unmet medical needs, the need for collaboration has never been greater. AstraZeneca has recognized the fact, asserts Tarja Stenvall, country president of AstraZenaca Belux. She emphasizes that, "innovation is very much at the heart of what AstraZeneca is and does. Despite the associated increased risks and long-term investments, we realize that science and a commitment to discovering new treatments can help to drive innovation. As such, we aim to profile the Belgian affiliate as a key contributor to AstraZeneca's global innovativeness. One way in which we do this is through various partnerships with academic and commercial research institutions that provide us with a solid platform on which we can nurture future innovations."
Stenvall is certainly not the only one to identify the importance and potential for collaborations. Jean-Pierre Delwart, CEO of EuroGenTec, a Belgian biotech that has grown to become a leading international biotechnology supplier, notes that "as a spin-off of the Liège University, EuroGenTec has an inherent propensity for academic collaborations. Since academics are often our customers or regular contacts, we maintain a large base of contacts in Europe as well as the United States with them. For instance, when a researcher is willing to develop a certain type of product, we lend our support to them in whatever way possible, so long as there is the potential for a mutually beneficial outcome, of course. Simultaneously, we also try to develop various partnerships with other academics or researchers to explore new scientific or technological avenues. This is an ideal approach to staying at the forefront of technological breakthroughs and scientific advancements."
At least in terms of sales representatives, the outsourcing industry in Belgium shares a past similar to that of academic collaborations in that they both made a late entry in Belgium. Vandiest explains that "Belgium is perhaps among the last markets in the European Union to develop a pharmaceutical outsourcing industry, which was practically non-existent about 20 years ago. Since Belgium is a fairly dynamic market boasting very accessible people with many competencies in a small geographical area, outsourcing was never a necessity at the time. If you compare this to the French market for example, outsourcing was essential because 40 years ago if you wanted to launch a product in the market, the communication rules were not the same as they are today prompting the need to have some correspondence across all departments in France in order to provide information about the product. This marked the start of pharmaceutical outsourcing in France, and the rest of the EU for that matter with the exception of smaller countries like Belgium."
Outsourced pharmaceutical representatives in Belgium now represent 17% of of all representatives in the country. A PriceWaterhouseCooper's report forecasts that this figure will climb to 40% by 2015."
Patrick Leyseele, founder and CEO of pi, a Belgian based global regulatory and technical service provider, proclaims, "our ultimate goal is to become a truly global strategic partner for our customers. We envision the most potential where customers have specialized partners who think with them and not for them. That is why I always remind our customers that they should remain in the driver's seat, while we are just the navigators. The advantage of this is that they are reminded that they are still in control and have a good feel for what is happening while we take care of the rest for them. In other words, we do not intend to have our clients rely on us, nor do we want to create monopolies. Instead, we simply aspire to be their partners."
This strategy has proven to be widely successful for pi since they have already managed to form "a special relationship with one of the top five Fortune 500 pharma companies," Leyseele continues. "pi has been selected as their preferred partner for outsourcing all of their work related to a platform for Europe and the US and have ongoing discussions to expand the service globally."
In the same way that Belgium is the leading European destination for clinical trials, the country is also a European leader for logistics and distribution. Its geostrategic location has played a central role in enticing multinational giants such as Janssen, MSD and GSK Biologics to establish international distribution centers in Belgium.
Not only is the pharmaceutical logistics market in Belgium well established and highly attractive, it presents transportation service providers with ample growth opportunities. In response to client requests, World Courier recently expanded their services to address the need for specialized temperature controlled ground transportation services.
Pricing & Market Access
These views are shared by Patricia Lanssiers, managing director of Eli Lilly and vice president of the board at pharma.be, the general association of the pharmaceutical industry. "As innovators in the pharmaceutical industry, we would like to see a system that is more predictable and sustainable. We would like to serve the patients and help to increase the quality of public health through the innovative drugs we develop. Clearly, doing so requires significant and long term investments. However, given the current environment's unpredictability, and the fact that drug development takes on average ten years of research and development, we are facing some risks and uncertainties.
"In my capacity as the vice chairman of pharma.be, we are working on a long-term agreement with the health authorities to agree on certain principles that are essential for the sustainability of the Belgian system. Likewise, we are jointly working with the government authorities on finding the solutions to keep the healthcare budget in control. After all, innovative pharmaceutical companies help to support the economy by providing high employment levels and investments while allowing patients to gain access to the latest drugs."
In anticipation of the far-reaching ripple effects of such measures, Hogenhuis clarifies that "access to innovation is critical to sustain the investments stemming from the pharmaceutical industry in any given country. With the increasing trends of globalization, there are a number of competing countries, such as India and China, which are becoming increasingly attractive destinations of investment. Once these investments are channeled there, I believe that it will be near impossible for Belgium or other EU countries to reverse the trend and bring them back."
Looking further into the future, Bencteux refers to having to manage the current price levels and difficult cost containment measures. "These measures are sometimes highly disproportional and simply unfair," he says. "At one end of the spectrum, the pharmaceutical industry faces higher taxes and, at the other, gradually eroding patent protections. All these measures together can pose a serious threat to the sustainability of the industry. The authorities must understand that the development of new products is a long-term investment and that return on investment is a principle driver of our business. We have the innovative products, we know where we intend to go but we have to manage this unpredictability. A constructive dialogue with the authorities is therefore a prerequisite for success."
In terms of market access, "Belgium has always been a challenging destination for market access, and this is a trend we are seeing across many European countries," says Chris Juliam, managing director of Takeda.
Jan Hendrickx, general manager of Sanofi Benelux, agrees that "unfortunately, it is no secret that Belgium is among the slowest countries in the EU to provide innovative drugs with market access. Although we recognize that the budget must be kept in balance and that everyone must contribute in one way or another, we are convinced that this should not be done on behalf of new innovative drugs or solutions. They must realize that such innovations will ultimately contribute towards mending the economy and improving people's well-being. There is much room for improvement with regards to overregulating procedures to improve market access for new innovative drugs in Belgium."
In addition to irregular market access processes, Omer Saka of Deloitte explains how this is a two-sided issue. "The biggest challenge at this point is the lack of standardized approaches both by the payers and the life sciences companies." To help overcome this issue, Saka proposes that "pharmaceutical companies in Europe must focus on conveying the value of their products clearly to payer agencies. In addition to this, they must also think and act like a partner to the authorities – not as an industrial partner that creates jobs – but rather a partner that actually provides healthcare solutions."
This view is echoed by Tom Heyman, managing director and chairman of the management board at Janssen Pharmaceutica. "Whether of not at we like it or not, it is not just about the patients anymore. We have to be able to demonstrate through studies, as well as through solid relationships with authorities, that we can help authorities manage their budgets together with providing better solutions for patients."
Despite these challenges, Patricia Lanssiers asserts that "there is a healthy level of dialogue and understanding with the authorities and we are making progress on reaching solutions that are mutually beneficial for both parties."
The collective efforts of the pharmaceutical association and its members seem to have paid off. In October 2012 the industry was given a breath of fresh air when pharma.be announced that it had finally reached a long-term framework, or "stability pact" with the Ministry of Health and Social Affairs. that "this agreement recognizes the role of the innovative industry in Belgium and clearly outlines that during any future budgetary discussions, the industry will act as the preferred partner in the discussion process, allowing us to contribute in evaluating any proposed policies." "What we have on paper today is translated into reality in the near future," he adds.
Tarja Stenvall maintains that the agreement "demonstrates the government's appetite to support and safeguard the industry as well as to boost its capacity to innovate. I believe the pact also exhibits the authorities' acknowledgment of the fact that they cannot tackle the industry's challenges on their own and are therefore becoming increasingly open to new suggestions and ideas. Although overcoming these challenges will be no easy feat, it is certainly an encouraging sign from the authorities. Nonetheless, only time will tell what influence the pact will have on the healthcare and pharma industry as a whole."
"It is evident that the pharma industry does have a voice in the decision making process today." However, she maintains that the industry's capacity to innovate "will help to determine exactly how strong this voice is and whether we could do more."
"In a country of about 11 million inhabitants, Belgium has more ministers than Germany or France," jests Albert Maudens, general manager of Biocodex. "This highly fragmented structure makes it difficult to speak of opportunities as it inflates our business expenses, among others. Every important decision that needs to be made, requires that all the various governments and authorities come together to discuss the matter at hand which makes for a very time-consuming and counterproductive process. For instance, drug costs and hospital expenses are decided on a federal level while costs related to elderly care centers are decided at a regional level. All this makes new developments in Belgium lengthy and difficult."
Despite these challenges, Maudens suggests that implementing a flexible and adaptive business model can help to overcome this issue and still remain profitable. "We were able to grow our revenues from €2 to €10 million (USD 2.7 to 13.4 million) over the last decade and we continue to see strong results."
...AND THE UNANTICIPATED
Considering the Belgian government's determination to balance its healthcare budgets and the capacity of generics to create savings for healthcare systems, one might assume that generics enjoy a strong position in the market. Belgium, however, has among the smallest generic drug market shares in Europe by both volume and value.
Joris Van Assche, managing director at FeBelGen, Belgium's generic drug association, puts the situation into perspective. "In 2011 we launched 20 new generic molecules on the Belgian market, representing savings of €66 million (USD 88.3 million) per year for the Belgian State, but only obtained an average of 5% market share for these generic molecules in 2012 (FeBelGen estimate as of June 2012). Cheap prescriptions have stagnated 50% in Belgium since 2010. In the meantime, no less than 40 new generic molecules have been launched!"
In terms of savings, Pascale Engelen, managing director of Mylan which boasts a 20% generic drug market share in Belgium, elaborates on the potential savings that generics can provide. "Since 2001, generic drugs have been able to create savings of €3.2 billion (USD 4.3 billion) for the healthcare budget." Along with these gigantic savings, Van Assche highlights that generic companies also offer valuable contributions to the economy in that about 50% of generics sold in Belgium are produced locally.
Van Assche explains that the root cause for the low penetration of generics relates to the fact that there is no real policy or long-term vision to incentivize the use of generics.
According to Carlo Ciapparelli, general manager of IMS Health, one way the government can realize further cost savings is to allow generics to realize their fullest potential in order to ease the burden on healthcare budgets. "This has to be compensated via an efficient reimbursement system that recognizes innovation and assigns the right prices to drugs," he says. "In this respect, Belgium has been standing still, not addressing one issue or the other. The real solution here cannot be found in placing further pressure on the R&D-based industry or in delaying reimbursement decisions. These are all very shortsighted 'solutions' to a very real problem. The focus should be in stimulating the right generic business."
Belgium's authorities seem to be responding to these concerns according to Annabelle Bruyndonckx, counsel at Baker & McKenzie. "The authorities have recently introduced a number of new measures designed to promote the increased use of generics throughout the healthcare system." Earlier in 2012, she explains, "the authorities introduced a new law that further encourages the prescription of generic drugs. With this new measure physicians are still endowed with the freedom to prescribe what they feel is most appropriate but at the same time pharmacists have the right to substitute prescribed antibiotics and antimycotics with other cheaper medicinal products."
Supply Chain Strategy: Managing risk and opportunity in a changing global landscape