Switzerland, home to industry giants like Novartis and Roche, boasts a thriving pharma industry that generates some seven percent of the country’s GDP, as well as a flourishing biotech scene. However, all is not so well in Switzerland’s domestic healthcare landscape, where surging insurance premiums and drug costs mean that the mixed public-private Swiss health system is in desperate need of reform.

 

Pharma and Biotech Going Strong

While it may be a well-known fact that the pharma industry is one of Switzerland’s key sectors, generating approximately seven percent of its GDP, employing over 75,000 people in Switzerland, and investing over CHF 6 billion in R&D in 2021, the country’s biotech scene is also booming.

Focusing on new cancer treatments and immunotherapies, as well as cell and gene therapy development, Switzerland’s biotech ecosystem abounds with promising companies that are taking advantage of the country’s solid talent pool, well-established academic institutions and avid investors.

Having weathered the funding challenges that hit the sector post-COVID-19, in 2022, Swiss biotech companies recorded revenues of CHF 6.8 billion compared to CHF 6.7 billion in 2021 while the industry was able to raise more than CHF 1.3 billion and R&D investments again increased to a new record of CHF 2.7 billion.

Much of the sector’s growth over the past year was driven by collaboration and licensing deals between Swiss biotech companies and Big Pharma, and the boost in product sales for companies such as Idorsia, ObsEva, EffRx Pharmaceuticals, Relief Therapeutics, NLS Pharmaceuticals, Basilea and ADC Therapeutics.

The industry was able to raise more than CHF 1.3 billion in 2022, with CHF 0.78 billion collected by public companies, and the remaining CHF 0.55 billion raised by private companies. And despite the difficult economic environment, two companies were newly listed on SIX Swiss Exchange in 2022: Kinarus Therapeutics and Xlife Sciences.

 

Swiss M&A Reactivated

Swiss pharma is also defying the downward trend in global M&A activity and in 2023 saw both a higher number of deals and a higher total value of these deals than in the previous year. To fill in the gaps from patent cliffs and update their portfolios, Swiss pharma companies looked to dealmaking with Novartis purchasing Chinook Therapeutics and DTx Pharma while Roche took over Carmot Therapeutics and Telavant. Novartis also readjusted its focus by completing the spin-off of its generics arm, Sandoz.

 

Rising Costs, Difficult Reform

In addition to its strong pharma sector, Switzerland boasts a high standard of healthcare with a healthcare model that sits somewhere between public and private systems. While health insurance is mandatory, there are no state-provided services, doctors work in private practices on a fee-for-service basis, and Swiss citizens are responsible for more than a quarter of their healthcare costs. Competing private institutions called sickness funds manage Swiss healthcare insurance, charging premiums based not on income, but on the average risk level of people within the country’s 26 cantons, or administrative regions. Health insurers, who provide basic coverage, can also make profits by selling voluntary complementary coverage.

In a system that hadn’t been reformed for nearly 80 years, the 1996 Federal Health Insurance Act (KVG), aimed at strengthening solidarity between insured people, controlling costs, and increasing competition between health insurers, introduced some significant changes. Specifically, the KVG transferred some responsibilities from the cantons to the federal state, introducing a uniform benefit basket at a national level; created subsidies for low-income people, and the right to change insurers every year.

Insurance premiums have nonetheless surged and between 1996 and 2016 the average national annual premium for adults rose by 147 percent. For many, the burden of these costs has become unsustainable despite the subsidies provided for households with modest incomes. Premiums again rose by 6.6 percent in 2023, a further 8.7 percent in 2024, and are expected to go up an additional 6 percent next year.

The complaint about rising costs is a long-standing one, yet within a country that practices direct democracy through referendum and popular initiatives, reform is a complicated and slow process. In addition, the Swiss federal system creates a large variation of healthcare organizational and spending models across its 26 cantons. A recurrent reform proposal has been to improve equity by more broad financing through taxation, or by basing health insurance premiums on income, but these approaches, as well as other proposals submitted to popular vote, have been repeatedly rejected.

The most recent federal referendum on June 9 brought citizens out to vote for two initiatives, one from the Social Democratic party, proposing to limit premiums to 10 percent of a household’s income, and one from the Centre party to introduce a cost brake obliging the government to intervene if healthcare costs rise by more than 20 percent. These policies were both rejected by voters with the possibility of tax hikes to finance extra subsidies turning them against one initiative the vagueness of the second one failing to win them over.

 

Drug Pricing Debacle

Swiss drug prices have also exploded with originator medicines costing an average 8.9 percent more than in other European countries, up from last year’s 5.4 percent difference. To address rising drug costs and reduce broader healthcare expenditure, last year the Swiss Federal Council approved amendments to the Health Insurance Ordinance (KVV), the Health Insurance Benefits Ordinance (KLV), two of the regulatory frameworks that govern the Swiss system as well as drug pricing and reimbursement.

Namely, the Federal Office of Public Health (BAG) has transitioned from the public price to the ex-factory price (FAP), removing VAT from the FAP and appending it to the Public Price (PP), and compulsory rebates of between 10–50 percent for the reimbursement of medications have been introduced. “The discounts are so high that in some cases, companies will no longer be able to supply medicines and cover their costs, thus potentially depriving patients in the future,” Interpharma, the organization representing the Swiss research-based pharma industry argued in its annual report.

The reform also aims to encourage the use of generics and biosimilars. Under the new rules, patient contributions for purchasing medicines will increase to 40 percent over the previous 30 percent when opting for branded drugs that could have been substituted with generics. Another area the amendments addressed was rare disease therapies with those that fall outside the government’s positive reimbursement list now being individually reimbursed when there is no other equivalent.

“The existing, already significant issues surrounding patient access in Switzerland would only be further exacerbated and it is clear even now that the measures adopted by the Federal Council in the revision of HIO and HIBO will not be sufficient to combat them,” Interpharma claimed.

The organization pinpointed the slow access to innovation cycle in Switzerland. “Access to new innovative medicines is only available after a median time of over 300 days,” it said, arguing for a reimbursed access to innovation (RAI) model. “The core element of the model is that at the same time as Swissmedic grants approval, the Federal Office of Public Health (FOPH) sets a provisional price for new medicines which fulfil a high medical need and adds them to the list of pharmaceutical specialties. The FOPH will then have one year to set a final price.”