Switzerland is an important power in Europe's pharmaceutical industry. As well as being one of the EU's major trade partners,
Switzerland represents an important source of new pharmaceutical innovation and is home to two of the world's largest pharma
companies.
Nathan Jessop
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When it comes to Europe, most attention focuses on the EU pharmaceutical market and the R&D activity of companies in the 27
member states. Switzerland is not an EU member state, but remains one of Europe's most important pharmaceutical markets, as
well as a major centre for medical research and new products. In 2010, the Swiss pharmaceutical market was valued at SF4.9
billion (€4 billion), which represented a 3.4% increase compared with the previous year (1). The country's healthcare spending
represents 10.7% of gross domestic spending, which is one of the highest levels in the world. Per capita, pharmaceutical expenditure
is around the average for Organisation for Economic Co-operation and Development (OECD) countries (2), but the country holds
a particular interest for the pharma industry because there tends to be a high share of out-of-pocket payment (around 30%)
both for total healthcare expenditure and pharmaceutical spending (2).
R&D and exports
Switzerland is ranked by the European Federation of Pharmaceutical Industry Associations as the fourth highest for R&D expenditure
in Europe, behind the UK, France and Germany (3). The country's pharmaceutical industry has been active since the 19th century
and is a great source of national pride. Traditionally, the country's lack of natural resources forced it to turn to innovative
industries and build up an export network. Furthermore, it has been keen to attract foreign workers, whose presence is often
viewed as having helped drive its R&D-based sectors (4, 5). Since 2007, work and residency conditions for EU citizens have
been substantially relaxed (5).
Although there has been a steady drift of R&D investment from Europe to the US since 2000, Switzerland's pharma industry has
remained an important contributor to the country's economy. In 2011, its annual pharmaceutical exports were estimated to exceed
$40 billion (€27.3 billion) (6), while the balance of pharmaceutical trade is positive and has continued to increase since
2000. The Swiss pharmaceutical industry is also a major source of employment, comprising approximately 35000 workers and supporting
nearly 120000 other employees in related and downstream sectors (3, 7). For every new job created in the Swiss pharmaceutical
industry, it has been estimated that a further two are generated elsewhere in the Swiss economy (8).
For most Swiss companies, exports are a vital source of revenue, particularly as the growth of the domestic pharmaceutical
market has been affected by government pressure to control prices. Another trend that is limiting the market for branded products
is the steady growth of the country's genericdrug sector. In the past, there was little interest in generic products—possibly
because of Switzerland's leading role in developing new medicines, which created brand loyalty among domestic consumers. In
2008, generics represented only about 9% of the Swiss national market, but estimates for 2011 suggest that generics now account
for 12% of the market (2, 3).
Novartis and Roche
Switzerland is the home country of pharma giants Novartis and Roche, as well as a host of small and medium-size enterprises
(SMEs). All the major multinational pharmaceutical companies are represented in the national market, but the leading forces,
by far, are Novartis and Roche. Although active in 140 countries worldwide, Novartis maintains a strong link to its home country
and employs approximately 12500 staff in Switzerland. Since 2008, Novartis has also been named in an annual survey of Swiss
science university students as the most desired company to work for (7). Out of Novartis' estimated €5.1 billion annual R&D
budget, approximately 56% is spent in Switzerland (7, 9). Meanwhile, Roche employs around 10000 people in Switzerland, which
represents 12% of its global workforce (7). On a global basis, the company spends around €1.9 billion on R&D annually (9).
In 2009, Roche strengthened its worldwide position through a US$47 billion takeover of Genentech. The merged group became
the seventh largest drug company in the US market.
From time to time, there has been speculation regarding a merger between Novartis and Roche. In 2003, Novartis announced that
it had accumulated enough stock in Roche to control 32.7% of the company's voting rights; however, members of Roche's founding
family spoke strongly against any merger, while Novartis' CEO stated that the company was not looking to launch a hostile
takeover (10). Since then, rumours have periodically resurfaced, but Novartis has not made any overt move for Roche. In March
2011, one of the members of Roche's founding family left the Roche family voting group, reducing its stake in the company
from 50.01% to 45.01%. Some analysts have predicted that, in the long term, a merger with Novartis would be attractive based
on the companies' shared interest in oncology. However, Roche has issued a number of media statements to dismiss this possibility
and claimed that the suitability of such a merger is even less logical than it was in 2003 (11). Roche's spokesman argued
that while Roche has focused on personalised medicine and diagnostics, Novartis has diverged into generic drugs and eye care.
