Deloitte Belgium today announces the results of its analysis about “Belgian BioPharma Industry: a major player in the Belgian economy”, which was set up in cooperation with the Health, Science and Technology Group (HST Group), represented by UCB, GlaxoSmithKline, Janssen Pharmaceutica and Pfizer. The biopharmaceutical industry is a major contributor to the Belgian economy. It has a strong positive trade balance and exported almost € 36bn worth of products in 2011. The biopharmaceutical industry covers c.40% of private R&D in Belgium and employs c.32,000 full-time equivalents of which 2/3 have received higher education. Belgium has the opportunity to become the European leader in life sciences and particularly in the biopharmaceutical sector. In order to achieve this goal, the strong partnership that exists between the government and the industry needs to be maintained. In this spirit, the government has proposed to set up five working groups (1) the business environment for entrepreneurs in the pharmaceutical sector (2) protection of intellectual property and market access (3) support to the Belgian innovative pharmaceutical industry abroad (4) cooperation with the national Medicines Agency (5) “Stimulus Plan” (employment and education).
Deloitte – the largest Life Sciences global advisory firm – has worked with the HST Group on an analysis of the current status of the biopharmaceutical industry in Belgium and to evaluate the way forward to meet the vision outlined above. Deloitte believes that the vision is achievable within a foreseeable future if the government and the industry work together in partnership.
Belgian biopharmaceutical industry: a bright future ahead, if certain conditions are met
Belgium is a competitive market for the biopharmaceutical industry and has attracted sizable investments, largely because of the favourable tax regime. However, the Deloitte analysis published today shows that this attractiveness is under pressure. Eric Nys, Partner at Deloitte Belgium Life Sciences and Health Care Industry leader explains: “Belgium, already a major player in the European biopharmaceutical market, could become the leading country in Europe in this sector. However, there are some vital conditions which must be met: the government attention currently paid to the sector, combined with private commitments, will need to be maintained and further improved”.
Belgian biopharmaceutical sector: crucial for the Belgian economy
Overall production of the biopharmaceutical industry in Belgium is over €7.7 billion and has grown with an annual rate of 8.1% from 2005 until 2011. This has generated significant revenues for the Belgian Treasury. For example the HST Group is a net contributor, with a contribution of €241 million in 2011.
Belgian biopharmaceutical sector as an important contributor to the Belgian knowledge economy
The biopharmaceutical industry has a strong positive effect on the employment in Belgium: the sector employed over 32,000 highly skilled full time equivalents (67% have higher education) in 2011, and generated an additional 80,000 indirect jobs.
Belgian biopharmaceutical sector as an important contributor to Belgian R&D Investments
The biopharmaceutical industry has consistently provided around 40% of the total private R&D investments in Belgium. Compared to the other countries in Europe, Belgian tax incentives have stimulated growth in R&D. To be specific, Belgium recently attracted a large number of new pharmaceutical investments and ranks 3rd with regard to R&D per capita expenditure in Europe. However, the gap with the best performer, Switzerland (on R&D per capita) is high – Switzerland invested € 4.6bn in the biopharmaceutical industry R&D as compared to € 1.8bn in Belgium in 2010. Moreover, Belgium is a key country for clinical trials in Europe. However, the total number of clinical trials in Belgium is in decline.
R&D tax incentives: tax competition is on in Europe – can Belgium keep up?
Europe is currently experiencing unique financial and economic difficulties. Many Member States are raising taxes to cut deficits (e.g. increase in the VAT rates; increase in the top rates in individual income tax). At the same time, Member States seek to attract investment and tax competition remains alive, especially in the field of corporate taxation. Wim Eynatten, International Tax Partner at Deloitte, adds: “Investment in R&D is widely regarded as a creator of (high-quality) employment, it encourages export and stimulates economic growth. The governments of the EU Member States are increasingly using tax incentives to (re)attract R&D investments and innovation. These tax incentives may relate to both the development phase (i.e. performing R&D activities – also referred to as Input incentives) and/or the commercialisation phase (i.e. exploitation of IP rights – also referred to as Output incentives)”. Wim Eynatten concludes: “To avoid Belgium lagging behind, the government will need to maintain and improve the current tax incentives.”
Looking at the road ahead: an important role for the Belgian government
Looking at the future, the report concludes that it will be important to maintain and further improve the competitive advantage for the biopharmaceutical industry in Belgium. In this spirit, the government has proposed to set up five working groups (1) the business environment for entrepreneurs in the pharmaceutical sector (2) protection of intellectual property and market access (3) support to the Belgian innovative pharmaceutical industry abroad (4) cooperation with the national Medicines Agency (5) “Stimulus Plan” (employment and education).