BMI View: With structurally higher prices than many regional markets and quickly rising pharmaceutical consumption, Belgium will continue to present a high level of potential reward to drugmaker . Notably, a distinct lack of price transparency within the pharmaceutical value chain will combine with patient and prescriber bias towards patented drugs to hamper initiatives that seek to reduce public sector pharmaceutical reimbursement spending. However, an increasingly credible threat of domestic terrorism and the destabilising potential of Flemish separatism will weigh on the country's risk profile, increasing the costs and administrative burden borne by investors.
Headline Expenditure Projections
Pharmaceuticals: From EUR5.78bn (USD7.75bn) in 2014 to EUR5.80bn (USD6.38bn) in 2015; 0.24% in local currency terms and -17.7% in US dollar terms. Forecast revised upwards from previous quarter.
Healthcare: From EUR43.87bn (USD58.77bn) in 2014 to EUR44.96bn (USD49.46bn) 2015; +2.5% in local currency terms and -15.8% in US dollar terms. Forecast revised upwards from previous quarter.
In BMI's Q315 Western European Risk/Reward Index, Belgium declines significantly in favour of more lucrative regional markets with a score of 68.0 out of 100, down from a Q215 score of 69.2. Weighed down by a deteriorating risks score, Belgium is ranked as the 9th most attractive pharmaceutical and healthcare market out of 15 in the region, relinquishing 6th place to Norway. Despite sustaining slightly above average reward scores, Belgium is markedly outperformed by the value growth potential and relative political stability characteristic of pharmaceutical markets such as Switzerland, the UK and France.,
Key Trends and Developments
In April 2015, the Belgian health ministry announced a programme that, in cooperation with the Netherlands, will organise for the joint purchase of treatments for 'rare' conditions - those affecting fewer than five in 100,000 people. The scheme will see arms of both countries' health services combine purchasing power in negotiations with drugmakers, in order to secure better pricing for a group of pharmaceuticals that due to the very limited market to which they distributed, are particularly expensive for patients.
In April 2015, Belgium's Health Minister announced a campaign to encourage general practitioners to prescribe cheaper medicines in the VRT's 'De Zevende Dag' show. The move marks tightening of the government previously issued guideline of prescribing 50% cheap medicines. Doctors and dentists are asked to prescribe the cheapest option of drugs on all occasions in order to help both the patients and the state. The move was expected to generate annual savings for patients of EUR15mn (USD15.89mn), while health insurance services will save EUR30mn (USD31.79mn) in spending.
In February 2015, Belgium became the target of a widening European Commission-investigation into the corporate tax regimes of the 28 member states. Led by Competition commissioner Margrethe Vestager, the probe sought to determine whether Belgium's 'Excess Profits' scheme, wherein major corporations were able to claim deductions on their tax bills for 'excess profits' that accrue to businesses operating within multinational structures. In a statement released to the press the commission said 'the Belgian 'excess profit' tax system appears to grant substantial tax reductions only to certain multinational companies that would not be available to standalone companies.' The investigation is part of a wider probe of all 28 member states that aims to halt the use of anticompetitive tax-breaks to attract multinational investment.
BMI Economic View
Tight fiscal policy will weigh on growth over the coming years offsetting many of the benefits of improved purchasing power and a favourable export climate due to a prolonged period of euro weakness. Meanwhile, improving business confidence and low borrowing costs will remain conducive to investment in the near term. We maintain our 1.0% real growth forecast for the Belgian economy during 2015. However, in light of shifting external forces the composition of this growth has altered slightly with a reduced contribution from government spending offsetting a slightly more positive net exports outlook.
BMI Political View
Implementation of somewhat unpopular economic reforms, such as further public sector wage freezes, by the Belgian government will likely trigger further industrial action over the coming quarters. High youth unemployment combined with regional and ethnic employment disparities will persist as a source of social tension. The Belgian political establishment will continue to struggle with reforming a highly inefficient labour market and dealing with the social implications that stem from regional and cultural inequalities within the nation's unemployed population. We see addressing cultural integration and tackling labour market problems the key political challenges for the government. Without the successful implementation of reforms by the government this will continue to result in an underutilisation of labour, and social friction.