Why Switzerland is the right place to invest in healthcare innovation?

By guest blogger Nico Bacharidis. Before founding www.growpal.ch, Nico has worked for Pfizer for over 13 years in various local, regional and global positions. He is an angel investor and board member of several start-ups. Nico is currently working with Roche and KICKSTART on a global project to find startups and partners that can help patients with SMA, Huntington’s disease and Neuromyelitis Optica.

Have you ever asked yourself how you can win a Nobel prize? You should invent something that is of great benefit to humanity and changes the current paradigm. Eating heaps of Swiss chocolate will help you achieve this. At least according to this very convincing and highly scientific table below.

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Joking aside. We can probably all agree that in order to win a Nobel prize many factors must come into play. Starting with a strong know-how and innovation capacity, an environment that encourages the effort and the investment, as well as a strong support system that enables and facilitates it. All the above help to create something that is new, innovative and of value.

Creating something new, innovative and valuable is the holy grail for almost every big healthcare company. I am focusing on healthcare here as this is my area of expertise, but it also seems that big pharma is one of the industries that is struggling the most with the topics of digitalization and innovation. In BCG’s innovation report, there is only one pharma-company to be found in the Top 20 in 2019, despite the second highest spend in R&D per industry coming from the healthcare/pharma sector. There are many hints pointing into the direction that it is not R&D investment that primarily drives innovation, but culture and organization. In the current corporate environment, it has become more and more difficult to experiment, fail & learn, and innovate due to corporate policies, rules, and regulations as well as internal politics. In addition, the hierarchical organizational structures of big corporations prevent them from moving fast and flexibly. Plus, there can be a trade-off between what is right for the customer or the patient and what is right for the corporate P&L and the shareholders.

Many corporates are therefore looking into creating innovation hubs, autonomous satellite organizations with less restrictions, and a stronger focus to work on customer and patient needs as well as more freedom to collaborate and co-create with the ecosystem.

If you are thinking about your ideal spot for building your regional or global innovation hub — look no further. Switzerland might just be the right place for you!

I know. It is easy to claim that. So, let’s go through some of the key criteria for such an important corporate decision:

  • Access to the right talent and minds
  • Environment and culture where they can experiment and thrive
  • Access to high quality, inclusive education and know-how
  • Efficient and stable system and diversity of workforce
  • Thriving ecosystem of high quality start-ups, entrepreneurs, universities, hospitals, HCP’s, and other healthcare stakeholder.
  • Financial stability, efficient and trustworthy governmental institutions and a favorable corporate tax situation

Entrepreneurship

The Global Entrepreneurship Monitor (GEM) report from 2019/2020 validates my above assumption that Switzerland is a favorable environment for entrepreneurship. In fact, it ranks Switzerland as number one world-wide in their NECI-score. NECI stands for National Entrepreneurship Context Index and measures the ease of starting and developing a business in a country. To do so, it weighs and averages a range of critical factors such as commercial and professional infrastructure, research and development transfers, physical infrastructure, access to finances, taxes and bureaucracy (or the lack thereof).

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As you can see in the Switzerland country profile from the GEM report, Switzerland significantly outperforms the GEM average in all areas, except the one of internal market dynamics.

Talent

According to the renowned IMD (Institute for Management Development) in their World Talent Ranking Report 2019, Switzerland ranks first place out of 63 countries. Amongst other things it measures the extent to which a country attracts local and foreign talent, as well as the quality of the skills and competencies that are already available in a country. There is reason to believe that Switzerland will continue to occupy some of the top spots also in the future as it ranks second in total public expenditure in education (per student) and first in effectiveness of its education systems, universities and management education. An important note to international companies is that it also had the highest score regarding ‘foreign highly skilled personnel are attracted to your countries business environment’. This is certainly due to the high quality of life as well as the high-income level.

Legislation

In addition, and compared to many other countries, the labor market in Switzerland is quite flexible for example, in regard to hiring or dismissal processes or setting of salaries. This enables a more direct discussion between employees and employer and a much higher flexibility and adaptability to changes in the environment or organizational changes. Peter Kuhn, Partner with MME Legal | Tax | Compliance, explains that the Swiss labor market is characterized by liberal legislation and light-touch regulation. As a general rule, either party to the employment contract is free to give notice — with or without reason and irrespective of the employee’s age, subject to applicable contractual or statutory notice periods and subject to certain restrictions imposed on the employer (no termination during certain time periods, e.g. during employee’s pregnancy and 16 weeks following the birth or during employee’s performance of compulsory military or civil defense service). Furthermore, Swiss law provides that employees may elect works councils in enterprises with at least 50 employees. However, employee representation committees under Swiss law have far less powers than works councils in the EU. The main difference is that Swiss employee representative committees are not able to decide, force or prevent a decision and are limited to being informed, having their arguments heard and providing input.

In terms of legal frameworks Switzerland consistently ranks in the top positions, according to the Global Competitiveness Report from the WEF, including in the areas of property rights (2) and intellectual property protection (3) which is critical for an innovation organization.

Diversity

Diversity within the workforce has become a priority for almost every global organization and a part of the global strategy as companies have realized that a diverse workforce can lead to a better understanding of customer needs, spark innovation and lead to new business opportunities. A critical observation and the insights made by a diverse workforce can become a competitive advantage and help develop more customer-centric solutions. As the search for talent has become more and more global as well, having a diverse talent pool and a culture that supports diversity is highly valued. Oxford Economics has compiled a Global Diversity Report in order to benchmark countries and industries including multiple factors such as gender, age, ethnicity, skills and education, disability, language etc. The report shows Switzerland overall ranking at number 6 globally and healthcare as one of the top sectors.

As the chart below shows, Switzerland as well as Norway, New Zealand and Iceland rank amongst the highest in competitiveness as well as in diversity. The graph also seems to underline that there is a strong correlation between diversity and competitiveness.

Infrastructure

Talents need an environment where they can live up to the full extent of their potential, work efficiently and it is easy to get things done. That type of environment starts with the ‘basics’, which in fact very often are not that basic at all. I am referring to a good infrastructure, a stable political and economic environment as well as efficient bureaucracy. According to the Global Competitiveness Report from the WEF, Switzerland ranks at a very good fifth place in the global competition. The report takes into considerations factors such as infrastructure, macroeconomic stability, financial system, skills, health, and business dynamism. The report also ranks Switzerland in the top 3 in terms of innovation capability. The output or productivity for innovation, specifically for the pharmaceutical sector, can be measured in the numbers of pharmaceutical patents at the European Patent Office. As you can see in the table below from the European Patent office, Switzerland had almost twice as many patent applications per million inhabitants over the last year than Denmark, which comes in second on that list.

Information and Communications Technology

The Information and Communications Technology (ICT) infrastructure is critical for a fast and efficient way of doing business as the backbone for many new technologies or innovations such as Artificial Intelligence (AI), Internet of Things (IoT), 3D printing, digital currencies or robotics just to name a few. According to the global connectivity Index Switzerland ranks 2nd worldwide behind the US and before Sweden. The GCI was created to analyze a broad spectrum of indicators for ICT Infrastructure and digital transformation to provide a comprehensive map of the global digital economy. It looks at 40 indicators such as ICT investment, legislations and patents as well as software developers or AI investment or data creation.

Culture & Support

Besides the very tangible criteria such as physical infrastructure, legal framework or education, there are also the more intangible but at least equally important factors such as attitude and culture of entrepreneurship.

According to the GEM report, Switzerland is amongst the highest countries of informal investments into startups and entrepreneurship and the 2nd highest in median amount invested. The most common relationships are either to invest in a close relative, or a friend or neighbor. This can be interpreted as having a high trust and appreciation for entrepreneurship and startups and a willingness to support them. Looking at the below graph from the Swiss Venture Capital Report 2020 the investments in Swiss startups have almost doubled from 2018 to 2019, especially in the areas of ICT and Biotech, which again shows the trust into entrepreneurship.

Taxes

According to Stefan Widmer, CEO of PrimeTax: In a pan-European comparison, Switzerland still has very attractive tax rates. They generally range between 12% and 20% with some locations being even below that. In addition, special tax rates for patent-related income as well as super-deductions for R&D spending can drive down the corporate tax rates below 5% for certain types of income. But it is not only the tax rates but also the general tax climate which is very favorable in Switzerland. In most cantons, companies will find an open door at the local tax authorities to discuss their particular tax issues. Private letter rulings that are usually obtained from the tax authorities in a matter of a few weeks, can give companies certainty about their tax treatment and avoid lengthy discussions at the time of a tax audit or even costly tax litigation.

To sum it up: There are a lot of positive factors and aspects that support collaboration, innovation, productivity, and co-creation in Switzerland and to set up tent for an innovation hot spot. In all important areas such as entrepreneurship, talent, legislation, diversity, infrastructure, ICT, culture & support as well as taxes it ranks among the top spots in the global benchmark. Plus, you will benefit from the best chocolate in the world.By guest blogger Nico Bacharidis. Before founding www.growpal.ch, Nico has worked for Pfizer for over 13 years in various local, regional and global positions. He is an angel investor and board member of several start-ups. Nico is currently working with Roche and KICKSTART on a global project to find startups and partners that can help patients with SMA, Huntington’s disease and Neuromyelitis Optica.