INDUSTRY REPORT
PHARMA IRELAND
Developing and Delivering Medicines
CONTENTS
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FOREWORD This year Ireland’s pharmaceutical industry became the world’s biggest net exporter of pharmaceuticals worldwide. The research-based pharmaceutical sector is making an impressive and important contribution to Ireland today – and not just economically. The contribution new medicines make to the nation’s health and well-being by improving longevity, by combating illness and by reducing the length of hospital stays, has an impact on all our lives. The fact that so many of these medicines are being manufactured in Ireland and, as the IDA point out in this booklet, that a growing number will be researched and developed here in the future, should be a source of pride for all of us. This publication brings together some of these achievements, to show how Ireland is building from its base of pharmaceutical manufacturing to provide more value in research and developing medicines, thereby contributing to the health and quality of people’s lives here and worldwide.
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We hope you find this publication a useful reference source and a means of appreciating the contribution research-based medicines are making to the health and wealth of the nation.
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Anne Nolan Chief Executive Irish Pharmaceutical Healthcare Association
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MOVING IRELAND UP THE VALUE CHAIN An overview of recent achievements and the future for the industry
COMPETITIVENESS REMAINS THE KEY The business challenge that determines the sector’s future here
THE VOICE OF BUSINESS The views of Ireland’s medicine providers
NAVIGATING THE ROAD AHEAD Interview with IPHA president, Conn Clissman
THE VALUE OF MEDICINES What the industry’s output contributes to health
BRINGING WORK HOME An interview with the IDA’s Barry O’Leary on pharma’s evolution
BIOTECH TAKES ROOT How Ireland’s indigenous companies are faring in the next big thing
The Irish Pharmaceutical Healthcare Association represents the research based pharmaceutical sector in Ireland. Produced by The IPHA and Business & Finance Client Publishing Division 2005. Editor Brian O’Grady. Published by Business & Finance Client Publishing Division (Moranna Limited), part of the Cloughmore Media Group. For further information on this service contact Ian Hyland, Brenda Mc Padden or Ken Lanigan Tel: +353 1 4167800 Fax: +353 1 4167899 E-mail: brenda.mcpadden@bandf.net BUSINESS & FINANCE HOUSE, 1-4 SWIFT’S ALLEY, DUBLIN 8, IRELAND While every effort has been made to ensure the accuracy of this publication, Moranna Limited accepts no liability for any errors or omissions.
IPHA Review 1
SUBJECT
PHARMA SECTOR
MOVING IRELAND UP THE VALUE CHAIN Ireland’s huge pharmaceutical presence is changing focus for the competitive challenges ahead. The IPHA’s Brian O’Grady provides an industry overview ‘The list of pharmaceutical investments here is an ongoing one, which has been generating 1200 new jobs annually for each of the last five years.’ ‘Groundbreaking’ - The IDA’s July announcement: Sean Dorgan, CEO IDA Ireland; Paul McCambridge, Corporate VicePresident and Managing Director, Xilinx Ireland; Aidan Brady, Country Corporate Officer Citigroup; Minister for Enterprise, Trade & Employment, Micheal Martin TD; Prof. Terry Smith, NUI Galway/Bristol-Myers Squibb Company collaboration; Dr. Paul Duffy, Site Leader Pfizer Ringaskiddy, and Dominic Carolan, General Manager Genzyme.'
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or an industry that is already generating 44% of Ireland’s annual exports, an additional spend of €36 million may not seem of great significance, but according to Minister for Trade and Employment Micheál Martin TD, the news announcement in July 2005 was: "Groundbreaking. The fact that five of the world’s leading multinational corporations have chosen Ireland over global competition for their cutting edge research activities is a major achievement," he said, and one which was: "hugely significant for Ireland’s future competitiveness. " The July announcement included investments from Pfizer, Bristol-Meyers Squibb and Genzyme Corporation, which, together with two IT developments, were heralded as being a major coup for Ireland’s longer term competitive strategy. The IDA had combined the five investments into a single news event to illustrate the sectors it was now targeting in order to speed Ireland’s much heralded move towards a ‘knowledge-led economy’. "The Ireland of the future will be one where education and skills are the defining advantages in an increasingly competitive world", claimed Minister Martin at the press launch. These latest investments however, represented just part of an ongoing momentum in Ireland’s pharmaceutical expansion. Previous
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months had seen Wyeth announce a €4 million plus research venture with DCU and SFI for its €1.8 billion biotech campus investment here, (in addition to €7.7 million investment with UCD the previous year). Johnson & Johnson group, which employs 1400 in Ireland, invested €750 million in its subsidiary, Centocor Biologics, in addition to €100 million in Janssen Pharmaceuticals; GlaxoSmithkline spent €35 million on R&D facilities in its Cork site making it the specialist site for ‘nano milling’ in the worldwide group; Altana announced a €70 million plant in Cork and Fujisawa invested €17 million expanding its finishing plant in Co Kerry. The list of pharmaceutical investments here is an ongoing one, which has been generating 1200 new jobs annually for each of the last five years. Minister Martin’s July announcement focused on investments in research that would see Pfizer spend €20 million to make its Cork plant a worldwide centre for process development; Bristol Myers Squibb invested €9.65 million in a collaborative research programme with DCU and NUI Galway (which would effectively see the formation of a new faculty in bio research), while Genzyme invested €6.1 million to expand its biotech process R&D facility in Waterford.
‘If any sector encapsulates the Irish economy’s ambitions of moving from manufacturing to knowledgeled activities, then the research-based pharmaceutical industry is probably the one.’
FROM MANUFACTURING TO INNOVATION If any sector encapsulates the Irish economy’s ambitions of moving from manufacturing to knowledge-led activities, then the research-based pharmaceutical industry is probably the one. The pharmaceutical sector has been one of the few areas to meet the goals of the Lisbon Agenda, the economic strategy signed by all EU member countries in 2000, with the declared aim of building a ‘knowledge-led’ economy through spending 3% of GDP in R&D activities. According to DTI figures, five of ten Europe’s biggest research spenders and four of the US’s are pharma companies. As a research-driven industry, pharmaceutical companies typically reinvest 15-20% of their sales in R&D, which in 2003 amounted to €21 billion in Europe alone, making it a truly knowledge-led industry that is tying ever-closer links with Ireland’s educational institutions, as demonstrated in the IDA’s July announcement. For thirty years Ireland has maintained ongoing success in attracting pharmaceutical manufacturing that has been little short of spectacular. From a near standing start, the country has created an industry with a capital worth now estimated to exceed €40 billion. Years of ongoing investment and expansion have made the country a major world centre and the biggest net exporter of pharmaceuticals in the world, with 12 of the world’s top 25 selling ‘blockbuster’ drugs now manufactured here.
ON THE WORLD STAGE Ireland’s pharmaceutical sector now hosts 14 of the world’s top 15 pharmaceutical companies. In total this amounts to 83 foreign owned companies, with 24 FDA approved sites (the US Food and Drug Administration is the industry standard for production worldwide), in addition to a growing indigenous biotech industry now coming online (see page 27). This meteoric rise has now made Ireland one of the top global locations for production, alongside, and in competition with, Singapore, Puerto Rico, and Switzerland. Having built such a strong manufacturing base here however, the next challenge is to attract the innovation activities that drive manufacturing activity. The IDA began targeting US pharma companies in the 1960s, with offers of zero export tax and green field sites. Though Danish-owned Leo Laboratories had been here since the 1950s, the arrival of US-owned Bristol-Myers Squibb in 1964, followed by Pfizer, sparked a momentum of new investments that saw Eli Lilly,
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Schering Plough, Merck Sharp & Dohme, Smithkline-Beecham and Jannssen, all establish manufacturing facilities here. Favourable tax, access to European markets and to the country’s third level educational institutions, helped the IDA build a critical mass that has maintained momentum to this day. "There would have been a couple of factors: the early 1970s was the time of EC entry and there was a [business] model that now doesn’t exist anymore, which was the dominance of US corporations coming to Ireland to service the European market. Today every plant is global and that’s the big difference," says Barry O’Leary of the IDA. Sustaining this rate of activity through a growing emphasis on innovation, is now seen as critical in such a truly globalised and competitive industry, where manufacturing sites compete internally with their sister sites for investment and new product.
ADDING VALUE TO EXPORTS The emphasis since ‘Export Profits Sales Relief’ in the 1970s, has been to attract activities that generate and deliver higher value – by moving ‘up the value chain’ (the stages from concept to manufacturing that enable viable products to be developed). Increasing the number and value of services by improving workforce skills, research capabilities and infrastructure have become increasingly important when competing with countries with vastly reduced labour costs and zero corporate tax rates. Singapore, for example, offers zero per cent tax compared with Ireland’s 12.5% and Puerto Rico’s 3%, while boasting far lower labour costs. Switzerland, as a non-EU member, can waive tax rates on specific industry activities, enabling it to become a Research and Development powerhouse for the industry. For Ireland’s pharma sector, such competitive challenges have meant evolving from bulk manufacturing of active agents, to adding complimentary activities, to ‘finishing’ completed product, and through to R&D. All of which has been made possible by the everexpanding skills set of Irish workers and closer tie-ins with academia. In the early 1970s the pharma sector employed just 2000 and contributed little over €100 million in exports. Now pharmaceutical exports are worth €37.4 billion, making Ireland the largest net exporter of medicines in the world and resulting in a contribution of over $3 billion in taxes.
RESEARCH-DRIVEN EMPLOYMENT The pharmachemical industry now
employs 24,000 here, more than half of them graduates, in some of the best paid manufacturing jobs in the country. For job creation, the pharma sector has been averaging 1200 new jobs annually over the last five years, with each new job requiring close to one million euro capital investment according to the IDA. But the future for the industry now lies in combining this immense manufacturing capability and expertise with the innovation that will drive new product development. This move ‘up the value chain’ is what the Government’s Enterprise Strategy Review Group termed in its 2004 report as ‘High Value Added Manufacturing’, and though it applies to every industrial sector, pharmaceuticals offer some of the greatest potential rewards. "Moving into activities that generate a higher value and which are less easy to replicate elsewhere, will prove critical if Ireland’s pharmaceutical sector is to continue competing successfully with plants overseas, in what is now one of the most globalised industries in the world." according to Matt Moran of IBEC’s Pharmachemical Ireland, "Innovation and R&D capability will become the drivers of this."
Next year the pharmaceutical industry will invest an estimated €45.2bn in R&D, according to The Economist. Research is the engine that drives the pharmaceutical industry worldwide, and there is an ongoing and urgent demand for new medicines as lifespans increase, and with 75% of medical conditions still without an adequate therapy, according to the World Health Organisation. Though overcoming illnesses provides the impetus for developing new product, the short product lifecycle before patents lapse means the industry requires a constant ‘pipeline’ of new medicines, which can only be fulfilled through ongoing research (see page 8).
ADDING INNOVATION Research in pharmaceuticals extends from developing new molecules for medical use, to clinical trials, to discovering how to produce safe and viable products. "In a multinational environment, every site is trying to convince senior management that it should be the site for investment," says John Condon, EMEA Director of Public Affairs at Merck Sharp & Dohme’s Manufacturing Division. "By including research into your
manufacturing activities you’re familiar with the process at a much earlier stage, so if the drug gets market approval later then you’re in a much better position to justify being able to produce it. It’s all about internal competition." The Government’s Enterprise Strategy Group 2004 report in Pharmaceutical/Biotech suggests Ireland’s strong existing manufacturing base could "act as a magnet for future development activity", something that is already proving to be the case. In business terminology, this means growing ‘horizontally’ – by encompassing more business functions, and ‘vertically’ – by including activities further up the ‘stream’ of activities that add value to a medicine’s development, such as R&D. Ireland’s pharmaceutical businesses are currently expanding in both directions, and integrating research activities further up the value chain is seen as being vital to the industry’s future here. The IDA’s strategy focus is now to encourage companies "to start earlier” and "finish later” by adding activities from the pre-clinical stages on to launch. As The Enterprise Strategy Group points out, because so many of the global
IPHA Review 5
players are already in Ireland; "further growth in the FDI sector must come primarily from an expansion in the range of activities in Ireland by the installed base of multinational corporations." Whether innovation and R&D can extend to the development of new medicines here is the subject of debate, but the IDA and many in the industry feel very strongly that this is well within Ireland’s capabilities. Though the Strategy Review Group maintained that early stage development for new medicines is likely "to remain in US head offices", John Condon is among those who strongly disagrees; "I think that was traditional thinking but what’s happening in Ireland now is that a momentum has started where we are beginning to build up economies of scale in R&D and that means we can offer a lot more than we could five years ago. Companies are beginning to realise that not all valuable research comes out of a single research centre, and that's why companies have done collaborations with small biotech companies and they’re prepared to invest in these areas. Large companies are beginning to look externally as much as internally for research opportunities, probably even more so."
Such a fragmented approach to research could suit the scale of the Irish market, and seems a likely scenario for the industry. According to Ian Hunter, industry analyst at Goodbody Stockbrokers, maintaining the entrepreneurial edge of biotech and research companies, by keeping them smaller and independent rather than absorb them in a multinational culture, is now especially attractive to the industry following a period of intense consolidation and acquisitions. The IDA is also aiming at early stage development in its existing and future client companies:" Yes, that’s the eventual game and I know that’s going to be difficult, but we would be encouraged by the flow of companies we’ve had in to date." says the IDA’s Barry O’Reilly.
NURTURING FUTURE GROWTH But what makes such diversification into any new activities possible, still depends on maintaining Ireland’s extraordinary pharmaceutical manufacturing base. Everyone in the industry warns against complacency as the business worldwide becomes ever more conscious of expanding overheads in increasingly crowded and competitive markets. While rising operating costs are a huge concern for the industry, so too is
the environment in which it operates. A recent article in The Financial Times (21/07/05) on the success of Swiss companies, Roche and Novartis (both of which boast considerable presences in Ireland), referred to the decline of the German pharmaceutical industry where German patented medicines "have all but disappeared", despite being a pharmaceutical powerhouse until very recently. "The success of the Swiss companies has lessons for others. One is that not all European countries need to be hostile environments for research-based drug companies. Switzerland is a startling contrast with Germany, where drug companies have been hobbled by price controls and health reforms favouring low price drug and generics." The ESRG recommends that: "the central role of Government strategy should be the development of a knowledge based competitive economy," with an emphasis on innovation, echoing the opinions expressed in The Lisbon Agenda and, seemingly, everyone in the industry. Maintaining a business climate where such innovation can flourish involves many factors, foremost of which must surely be acknowledging the extraordinary asset the country has already built.
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The Growing Footprint of Pharma Manufacturing This ever expanding foot print of the pharma industry in Ireland has led to the expansion of related and complementary activities, with many companies co-locating other business functions here such as customer support, shared services and supply chain management.
Pfizer’s ongoing expansion Wyeth’s growing presence
‘This ever expanding foot print of the pharma industry in Ireland has led to the expansion of related and complementary activities, with many companies co-locating other business functions here such as customer support, shared services and supply chain management.’
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BIG PHARMA’S BIG INVESTMENT Wyeth’s Biopharma Campus at Grange Castle is one of the biggest one-off inward investments in the history of the State. Costing almost $2 billion, and occupying 1.2 million square feet, this is one of the biggest integrated biopharma sites in the world, which will employ over 1000 on a 90 acre site in South County Dublin. The campus model integrates research with manufacturing, bringing together operations, research, finished product and Vaccine and Conjugation facilities onto one site. Comprising three units: a development, substance site and product facility, the site, which opened on September 8, will come into phased production over the next four years, producing the rheumatoid arthritis drug, Enbrel; a new vaccine, Prevenar and a new antiobiotic, Tygacill. Sixty five per cent of those employed on the site are university graduates, with 95% having a third level cert or diploma, according to Peter O'Brien, Director of External Relations and Communications. Having research capability close to manufacturing is critically important in competing at world level, in his view. Like other ‘Big Pharma’ companies in Ireland, Wyeth grew from an early presence, employing 500 in Askeaton in Co Limerick in 1974 to adding an additional animal healthcare investment in Sligo in the 1980s, which was followed by Wyeth Medica’s 1400 strong in Newbridge, the largest of its type (secondary dosage) in Europe. Wyeth’s positive experience in Ireland, the proven capability and availability of staff, and the positive attitude of Government institutions here were crucial to Wyeth’s new investment, according to O’Brien. "Support from Government and local authorities is vital and that support is very important to US companies, it’s no longer money. The availability of the site, the people and our experience here have all contributed."
Pfizer is one of Ireland’s biggest pharmaceutical multinationals, and was among the first to arrive here, opening its main Ringaskiddy plant in Cork in 1972. The subsequent expansion of the company’s activities here demonstrates the sector’s diversity and potential for expansion into related activities. In addition to its four manufacturing sites in Cork delivering active ingredients and drug production, Pfizer now operates a sterile manufacturing and research operation in Dun Laoghaire (currently undergoing a €240 million expansion), a Treasury Centre and European Shared Services Centre from Dublin’s IFSC, an Operations Support Group in Cork Airport, a corporate head office in City West, plus its new process research centre. In total, Pfizer employs 2,200 in Ireland, generating an annual wage bill of €160 million and capital expenditure in excess of €200 million. The supportive legislative environment has been crucial in attracting such ongoing foreign direct investment, according to Dave Shanahan, MD of Pfizer Healthcare Ireland. "Government policy has strongly encouraged the location and expansion of multinationals here and Ireland’s position as the global leader in pharmaceutical exports is a success story we should all be proud of. At a time when competitiveness is a major concern, the industry is now hoping that the Government continues to demonstrate the foresight it showed in the 60’s and 70’s." Similarly Abbott Ireland began manufacturing operations here in 1974 that now extend across the entire healthcare spectrum, incorporating pharmaceuticals, medical devices, diagnostics and nutritional in six sites. The 2,100 employed make Ireland among the biggest Abbott Laboratories overseas presences.
Bristol-Myers Squibb – ‘the road to higher value’ Bristol-Myers Squibb was one of the industry pioneers in Ireland, setting up operations in 1964. "We have some people celebrating 41 years here," explains John Nason, Vice President and General Manager, Technical Operations BMS Ireland. Describing the firm’s subsequent expansion, he adds, "In Ireland we have been developing products researched abroad on a pilot plant scale here,
Lifecycle new medicine
and then bulk manufacturing them. We’re continuing within the bulk manufacturing activities but going down the road to higher value products focusing on ten disease areas, and we’re going up the value chain with respect to complex products. We’re certainly investing significant money year on year to bring us up to date with the new technologies." BMS’ ongoing investments have been secured through the consistently high performance of its sites here. "Our regulatory record is second to none, and we’ve consistently performed well with FDA, IMB etc. Our technical people are first class, and we have always been able to meet the challenges with any of the new products that come to our site. The danger is cost competitiveness, and we have serious problems with Ireland Inc – on base costs and project costs." BMS’ two sites in Swords and Cruiserath, were recently augmented by its R&D faculty with DCU, and NUIG, and Ireland is now competing with other sites worldwide for some major forthcoming projects. According to Nason however, the ongoing momentum behind Ireland’s foreign direct investment is now facing its toughest challenge yet in the form of rising costs and questions over profitability. "To apply these new technologies means significant investment and to attract these capabilities, and the new products coming out of the pipeline related to them, we need to upgrade our facilities or build new sites. The costs of these are very expensive compared with other sites [abroad]. We certainly have a significant challenge on our plate, and I know this extends to my colleagues in other companies as well. This issue is not going away and we had better address it."
RESEARCH - THE DRIVING FORCE AND COST OF MEDICINES Though at the heart of the pharmaceutical industry, research is both risky and expensive. According to The Economist: "For every 10,000 molecules screened, an average of 250 enter clinical testing, ten make it through to clinical trials and only one makes it to the regulator." Even then it has to compete with other products, and has, in 8 years, to return its R&D investment. The costs of bringing a drug to market is put at $1.5 billion by Steven Paul, head of science and technology at Eli Lilly, and some estimates go higher. The fate of Elan’s share price recently, following questions over Tysabri, offers an unfortunate example of the risks facing the industry through the entire development process.
THE PRODUCT CYCLE (see graph above) Medicines are developed in the most regulated market in the world, demanding a unique business model for the companies involved. The product lifecycle for medicines typically takes products 10-12 years to get to market, of which: • 5 are spent in pre-clinical trials and pharmacological research • 5 years of clinical trials to assess the safety of the compound
• 2 years administrative procedures to obtain market authorisation. Between 5,000 and 10,000 drugs will be screened for every drug that successfully gains market authorisation. The resulting development costs typically in excess of $800m and many companies claim costs of up to $2 billion, with twelve years spent in the development stages, leaving eight years to recoup development costs before patent protection expires.
EUROPE V US Europe is losing its edge to the US when it comes to pharmaceutical R&D, and a reverse in earlier trends has seen a sudden drop in European-developed new product. From 1998 to ‘02, there were 85 new product launches in the US compared with 44 in Europe. From 1993 to ‘98 however, 81 products were launched in Europe and 48 in the US. According to the European Federation of Pharmaceuticals Industries and Associations, 40% of scientists working in the US are European. Europe’s brain drain, especially in research fields, is a big concern and a major impetus for the EU’s Lisbon Agenda, which plans for economic growth based on innovation.
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SUBJECT
SUSTAINING GROWTH
COMPETITIVENESS REMAINS KEY FOR IRELAND’S PHARMACHEM Matt Moran, director PharmaChemical Ireland, the IBEC trade body, offers the industry’s perspective on the competitive challenges ahead
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EXPORTS 1973 1995 1998 1999 2000 2001 2002 2003 2004
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€100.31 million €6.40 billion €18.03 billion €21.08 billion €27.22 billion €32.25 billion €39.4 billion €35.7 billion €37.4 billion*
*44% of total exports for Ireland. Source: CSO
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EXPANSIONS (1999-2005) EXPANSIONS Pfizer Ireland Merck Sharp & Dohme Organon Ireland GlaxoSmithKline Beecham Wyeth Medica Elan Janssen Pharmaceuticals Amersham Healthcare Servier Fujisawa
EURO MILLIONS 432 171.41 25.39 317.43 57.14 35 100 34.15 52 17
EMPLOYMENT 250 50 170 100 170 120 60+ 150 100 n/a
GREENFIELD (NEW INVESTMENTS)(1999-2005) NEW INVESTMENTS EURO MILLIONS Wyeth BioPharma 1269.74 Bristol-Myers Squibb 380.92 Genzyme 317.43 Alza 152.37 Abbot 406.32 Gerard Laboratories 40 Altana Pharma 70 Taro Pharma N/a Recordati 28 Centocor 650 Takeda 80
EMPLOYMENT 1300 250 480 80 200 380 150 300 60 330 60
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ith exports valued at over €37.4 billion in 2004, there is no doubting the role the pharmachemical sector plays in driving the Irish economy forward (see attached table 1). The latest figures published by the Central Statistics Office in August 2005, indicate that the sector is bucking a trend of slowing exports from the country, with pharma exports from JanuaryMay up 7.3% to €17.02 billion, while the overall figure was up by just 1.9% with Office Machinery and Data Processing (dominated by the ICT sector) showing a fall of 5%. Ireland’s pharmaceutical industry has continued to attract new investment over the last decade, while established companies have continued to re-invest in new capacity (see tables 2 & 3). All of this is good news for ‘Ireland inc.’ as the sector continues to contribute significantly to the exchequer through corporation and employment taxes. The pharma sector is a steady and stable employer, providing secure employment options in this country. Despite these investments and pharma’s undoubted success to date, Ireland inc. would do well to nurture the sector, as its future could be a lot less certain should the country take it for granted. As with most industrial sectors in Ireland, pharma is finding the cost of doing business here increasingly high, while Singapore and Puerto Rico continue to present a significant competitive threat to the future development of the sector here. Ireland has always been able to compete successfully with these locations despite their lower rates of corporation tax because of the very high operational standards that are maintained in all Irish operations. The emergence of the new Asian economies, especially those of China and India, is presenting a whole new set of challenges. Most of these are based on their
lower costs, combined with an emerging capacity for innovation. It is incumbent upon the industry, and indeed on the country, to rise to meet these challenges and to overcome them. The days are long gone when the industry could be expected to meet these challenges alone through paying for increasingly costly regulation, while operating inspite of the local infrastructure rather than because of it.
INDUSTRY CHALLENGES In May last year, the membership of PharmaChemical Ireland published a second five year business plan listing a number of key challenges that will have to be met in the very near future:
• Education: The availability of qualified employees is under threat as student numbers studying science have fallen off. The recommendations in the Taskforce Report on Physical Sciences to improve science promotion in the school system must be acted upon to ensure sufficient science graduates emerge. PharmaChemical Ireland recognises the need to actively encourage interest in science at all school levels, and is actively addressing the issue. An educational officer has been appointed to work with companies and career guidance councillors in schools. Additionally, the membership is working at local level with creative school programs.
measures. This cannot continue however, and the time has come for Government to take a long hard look at how it regulates and manages the cost drivers within the economy that are permitting this level of inexorable increases to persist.
• Tax: Perhaps one of the greatest challenges to the Irish pharmaceutical and chemical industry is to retain a low competitive rate of corporation tax. There are three worldwide locations of particular interest to pharmaceutical companies – they are called ‘The three islands’: Singapore, Puerto Rico and Ireland.
COUNTRY SINGAPORE PUERTO RICO IRELAND
CORPORATION TAX RATE % 0% 3% TO 4% 10% TO 12.5%
• Costs: Ireland is becoming a very expensive place to do business, placing the country at a huge competitive disadvantage (see table below). Despite the IDA’s excellent efforts, Ireland is losing projects to lower tax rate countries. The potential harmonisation of corporation tax rates within the European Union (EU) would inevitably lead to further investment leaving not only Ireland, but the EU as a whole.
• Infrastructure: The lack of an integrated waste infrastructure is another major challenge as it deters new investment in Ireland, and is a major threat to the future of the industry. Local government must convince their communities about the benefits of waste management. There is a general lack of environmental awareness by the public in Ireland that hinders the development of a practical, realistic approach to the waste problem. It is vital that the reliance on waste exportation is reduced and Ireland develops a comprehensive, internal solution.
• Energy Costs: Energy costs in Ireland remain a severe challenge to companies trying to control their cost base. This, combined with the lack of consistent supply, is a cause of grave concern to the industry. To date companies have absorbed these exorbitant increases (still at over 17% last year, according to CSO figures) and attempted to mitigate them by a range of energy management
• R&D Investments: It is critical that companies manufacturing in Ireland are encouraged to invest in R&D in order to embed existing manufacturing investment in the economy. If Government is to be successful in this task, it will need to assure the industry of an evenhanded policy right across the supply chain. Currently the Government receives around €3 in taxes from the sector for every €1 that it spends on medicines.
CONCLUSIONS: The Role of Government Against this backdrop of increasing challenges, the Government needs to change the investment model that it has employed so successfully to date. Not only is it more important than ever that Ireland retains the attractive package of incentives that encourages major multinational pharmachem companies to locate their manufacturing operations here, but the State also needs to persuade companies to leverage this by investing in R&D. This will be a far more difficult task as the country is now asking major companies to shift key investment from other locations, sometimes from their home country, into Ireland, with no guarantee of early return on investment. To be fair, the IDA has recognised this fact and is working hard to encourage companies already manufacturing in this country, to invest in process development to support manufacturing. Recent investments by Wyeth, Genzyme, GSK, Pfizer, Bristol-Myers Squibb and Fournier bode well for the future. But have the other organs of Government got the message; how will the industry fare in the up and coming price negotiations? Will the industry be regulated out of existence? (Recent developments in Cork for example, where it would appear that the Environmental Protection Agency is publicising minor events, with no environmental impact and reported to them by companies in a spirit of cooperation, is a worrying development). Will the recommendations outlined in Task Force on Physical Sciences ever find their way off the Minister’s shelf? Much remains to be done if this success story is to continue. In time honoured manner, it is worth considering the oft quoted catchphrase of a certain well known political leader: "Much done- much more to do."
PHARMACHEMICAL SECTOR – COST INCREASES 2000 – 2003 % INCREASE IN COST COST FACTOR 2001 2002 Electricity 7.08 21.41 Natural Gas 20.48 0.13 Rates 23.38 9.75 Water Charges 6.02 4.80 Other Local Authority Charges 13.31 41.75 Insurance Premia 22.69 15.66
2003 13.91 23.57 11.25 9.15 12.72 22.89
* Based on survey of membership of PharmaChemical Ireland
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OPINIONS
WHAT IN YOUR VIEW ARE THE MAJOR CHALLENGES CURRENTLY FACING IRELAND’S RESEARCH-BASED PHARMA SECTOR? WE ASKED THE SECTOR’S SENIOR MANAGERS FOR THEIR VIEWS
JOHN MCLAUGHLIN
BRENDAN MCATAMNEY
DR GERALD FARRELL
MARK RODGERS
"The Pharmaceutical Industry is one that is both complicated and challenging. In Ireland, we have become an important player in the global market but unless we continue to invest, we could lose out to smaller, more economically advantageous markets. For this reason, improved education programmes are key to our continued success and growth and this investment needs to be consistent in all areas R&D, manufacturing and sales & marketing programmes".
“The challenges facing Ireland’s research-based pharma sector are many and varied. The most basic threat is the ongoing rise in the cost of operating in Ireland, together with the desire to move employment along the value chain to more knowledge-based employment. This represents a challenge, not just to the pharma sector, but also to the Government. To attract and retain employment within the pharma sector that is sustainable in the longer term requires innovation in the partnership between the two sectors. This, in turn, requires recognition that the European model of pharma price erosion will not facilitate such partnership initiatives to flourish."
"The great challenge for Ireland in the 21st century as a mature society which has economically come of age, is to develop a healthcare system that meets the needs of an increasingly diverse nation. The Irish pharmaceutical industry has played an important part in the generation of new medicines for human diseases such as heart disease, cancer and mental illness. We must continue to foster a climate of innovation and enterprise so that every patient can share in the benefits of the healthcare technology revolution."
"Innovation in healthcare is about courage, risk and reward. It is also very much about patients and their right of access to new treatments and technologies. In the field of cancer therapy the new buzzwords are ‘survival’ and ‘progression free disease.’ Roche is a world leading company in the supply of innovative diagnostics and medicines for the early detection, prevention, diagnosis and treatment of cancer. I am quite clear in my view of the future. We have some of the world’s great physicians and support staff. We have a health service that cares about this emotive disease area. We have exciting and promising new treatments. We all have an obligation to ensure that everyone, especially patients and their carers, are in a position to benefit from these opportunities."
John McLaughlin, Managing Director, Sanofi Aventis
Brendan McAtamney, Managing Director, Abbott Laboratories Ireland Limited
Dr Gerald Farrell, Managing Director, Eli Lilly & Company (Ireland) Ltd
Mark Rodgers, Managing Director, Roche.
IPHA Review 13
OPINIONS
THE MAJOR CHALLENGES CURRENTLY FACING IRELAND’S RESEARCH-BASED PHARMA SECTOR
MAI HANLON
SOREN TULSTRUP
STEVE A ROSS
MICHAEL DEMPSEY
"Medicines are based on trust, and on the practitioner’s belief that what he or she is prescribing is the best solution for their patient. It’s important that everyone can have faith in this process, so transparency is vital. How products are marketed, therefore, is very important for the industry, and it is of critical importance that the relationship between the industry and prescribers is absolutely above reproach. Maintaining a clear code on what is acceptable serves everyone’s interests, and helps maintain the confidence of patients and practitioners alike."
"The declining competitiveness of the European pharmaceutical industry, and the growing innovation divide between the EU and the U.S., are of increasing concern. Over-regulation in Europe (e.g. restricting pharmaceutical companies from helping patients become better informed about their health and relevant treatment options) and the absence of a competition-based, innovation-friendly and demand-driven single market, constitute serious barriers that need to be dealt with to achieve the goals of the Lisbon Agenda. Ireland - through example and by directly influencing the EU agenda - can play a leading role in this respect."
"We still need to work at promoting the benefits our products bring to their ultimate consumers - patients. Our products cost huge sums to develop and offer improved quality of life to people with debilitating diseases like diabetes, asthma, and cancer. Yet somehow, these products are sometimes perceived as overly expensive, even in a world of €20 CDs and €40 haircuts. We need to help society understand the value of our products, and not just to know the cost."
"The pharmaceutical industry estimates that it takes about €900m to develop a new medicine and bring it to the market. Remember, the development process can take 15 years and in the end only three out of 10 medicines recover their costs when brought to market. Ireland is attractive for many reasons including commitment to a low tax model, excellent education and infrastructure, and access to a skilled workforce. We must however, be cognisant of a rapidly rising cost base and the need to engage politicians and the public in understanding the huge contribution that pharma makes to eradicating major health challenges. It is essential to recognise and reward innovation in medicine discovery. If cost containment measures are such, so as to discourage investment in Ireland, then there will be a social and economic impact. A recent EU commission report on biomedical innovation found that 70% of world biomedical research now originates in the US, with only 25% coming from Europe. We will not succeed in tackling healthcare if we constantly view it as a burden. I pray that today’s politicians have the courage to make the right decisions to invest wisely for our future generations. Moving forward, we need to reward innovation, research and value for patients.”
Mai Hanlon, General Manager, Tillots Pharma Ltd
Soren Tulstrup Managing Director Merck Sharp & Dohme Ireland (Human Health) Ltd
Steve A Ross, General Manager Pharmaceuticals GSK
Michael Dempsey, General Manager, Bristol-Myers Squibb Pharmaceuticals, Ireland.
14 IPHA Review
SUBJECT
IPHA INTERVIEW
NAVIGATING THE ROAD AHEAD Colin Leopold talks to Conn Clissmann, president of the Irish Pharmaceutical Healthcare Association (IPHA), about the European race for competitiveness and the worldwide reputation of the pharmaceutical industry
In spite of overseas competition Ireland is continuing to attract investment.
‘I passionately believe that the industry has a positive story to tell, both on a worldwide basis as the developer of new treatments that enable people to live longer, healthier lives and on a local, national basis, as a key contributer to the success of the Irish economy.’ 16 IPHA Review
HOW IMPORTANT IS THE PHARMACEUTICAL SECTOR TO THE IRISH ECONOMY AND HOW HAS ITS ROLE CHANGED OVER THE LAST FIVE YEARS? The pharmaceutical sector has become a very important part of the Irish economy and its continued development has contributed significantly to our recent economic prosperity. The sector has grown from a small constituent of the economy in the early 1970s to the point today where over 120 pharmaceutical companies operate in Ireland, and 13 of the top 15 companies worldwide have substantial operations here. The figures give an indication of how important the sector has become; the pharmaceutical sector employs 24,000, and generates annual exports of €15 billion (€37.5 billion using the broader pharmachem measure). Further to this, the industry makes annual tax payments to the Irish Exchequer of over €3 billion and has attracted total investment of over €13 billion, €4.3 billion of which has been in the last five years The role of the industry in Ireland is now becoming even more important as turbulent global conditions make attracting additional foreign direct investment here more difficult. Whilst competition from centres such as Singapore and Puerto Rico is now quite intense, Ireland is continuing to attract new investment in pharmaceuticals. One of the key elements that has facilitated the development of the industry here has been the partnership between the Irish Government and the pharmaceutical sector, for instance in relation to the supply of medicines to the Irish health services. We have seen in other countries, such as Germany, Spain and Australia, that an antagonistic relationship between the State and the sector has lead to a fall off in investment as the industry has chosen to locate new investments in countries that are more open to rewarding research and innovation.
DO YOU SEE RESEARCH & DEVELOPMENT EVENTUALLY TAKING THE PLACE OF DRUG MANUFACTURING IN THE IRISH SECTOR? The pharmaceutical sector is a dynamic one, and to remain a significant player, Ireland must seek to attract additional elements of the business' value chain such as clinical trials, process development and optimisation and activities like shared services centres. There have been a number of positive developments in recent years that will help in the achievement of this objective. €2.5 billion Government support has been earmarked for research and development, for example, through the National Development Plan, to help Ireland become a world centre of excellence for research. Also, the establishment of Science Foundation Ireland has resulted in significantly increased support for basic scientific and technological research. Finally, the recent Enterprise Strategy Group's emphasis on developing a strategy to deliver the goal of a knowledge based competitive economy, clarifies the important long term role the sector has to play Overall the State's policy shift towards research and innovation, and the ongoing support of the Government and its agencies, plays a key role in increasing Ireland's attractiveness as an investment location for the international research-based pharmaceutical industry.
IN TERMS OF EMPLOYMENT AND SKILLS, HOW IS IRELAND COPING WITH A FAST GROWING SECTOR? The pharmaceutical sector is constantly developing and Ireland has been highly successful in attracting new investment, resulting in job growth of more than 1,200 for each of the last five years. Looking to the future however, there are concerns about the decline in take-up of science among second-level students, which
is feeding through to third level where recruitment of students to science, engineering and technology (SET) courses, is in many instances, below capacity. If Ireland is to realise its ambitions as a knowledge-based society, then the level of student demand for science, engineering and technology courses in higher education must be addressed. The six point action strategy outlined in the Report of the Task Force on the Physical Sciences needs to be implemented urgently if Ireland is not to be at a serious disadvantage as it seeks to move up the value chain by attracting new pharmaceutical investments in the years ahead.
DO YOU THINK THE STAGGERING GROWTH OF THE IRISH PHARMACEUTICAL INDUSTRY WOULD HAVE BEEN POSSIBLE WITHOUT THE STRONG EXPORT MARKET SUPPORTING IT? Ireland is a key location for the pharmaceutical industry. The country is the biggest net exporter of pharmaceuticals in the world. Exports from the sector totalled over €15 billion in 2004, nearly €1 in €5 of all Irish exports. Using the broader pharmachem measure, and including organic chemical exports, the contribution of the sector amounted to over €37.5 billion in 2004. The industry here has a strong reputation for quality and reliability with 29 Irish pharmaceutical plants approved by the Food and Drugs Administration (FDA) in the United States. The pharmaceutical sector looks to Ireland as a model of what can happen when a constructive relationship between the State, State agencies and the industry is allowed to develop. The country's emphasis on supporting innovation is warmly welcomed, in contrast with the position in a number of other European markets where shortterm State policies are leading to a situation where the industry is reassessing its future engagement with those locations.
PHARMACEUTICAL MULTINATIONALS ARE GENERALLY VIEWED QUITE SCEPTICALLY IN THE PUBLIC DOMAIN. WHY IS THIS AND HOW COULD IT HARM THE SECTOR?
We have seen in some quarters a reaction against the globalisation of the world economy in recent years. It is not surprising that the pharmaceutical sector, as a prominent player in that global economy, has been a target. Also, in the past the industry has made some mistakes in terms of unwillingness to engage with the media and over the access to the medicines issue in the third world. I passionately believe that the industry has a positive story to tell, both on a worldwide basis as the developer of new treatments that enable people to live longer, healthier lives and on a local, national basis, as a key contributor to the success of the Irish economy. The industry internationally and locally is actively seeking to counter the negative perceptions by presenting the facts in an open way. For example, the international industry recently launched a new internet search portal to provide patients and physicians with full information about ongoing and completed clinical trials. The industry has volunteered to publicly disclose summary results of all industrysponsored clinical trials of medicines that have been approved for marketing via free, publicly accessible databases, regardless of trial outcome. In addition, the industry will now publicly register new clinical trials being performed to determine a medicine's therapeutic benefit, including information on how patients and clinicians can enrol in such studies. The portal will ensure that those in need and the medical community, can easily find the data that can help facilitate medical decisions about therapies and future potential treatments. An example of this approach is the work the industry is doing with Governments and NGOs to help tackle the crippling health crisis in the developing world.
PATENT PROTECTION LAWS HAVE BEEN CRITICISED FOR RESTRICTING DEVELOPING COUNTRIES' ACCESS TO NEW MEDICINES. DO YOU THINK THAT THE INDUSTRY SHOULD HAVE MORE RESPONSIBILITY ON THE GLOBAL STAGE?
New products are the life-blood of the pharmaceutical industry. Researching and developing new medicines is an expensive, complex, risky, and lengthy business. The average cost of bringing a new medicine to the market is over €900 million and the process takes 10-15 years. A great deal of work remains to be done to treat those suffering from disease - the World Health Organisation, for example, estimates that there are still no treatments for 75% of known conditions. The pharmaceutical industry is the engine for such R&D work; it has been responsible for the development of over 90% of medicines used today. The limited period of market exclusivity provided by patent protection allows companies to sustain the vast R&D investment necessary to invent new medicines and therapies. The industry is very willing to play its part in helping to address the staggering health crisis in developing countries. The success of the negotiations on the implementation of the Doha Declaration and the TRIPS Agreement, as well as the recent G8 decisions, show that with goodwill on all sides practical solutions can be found. The UN recently estimated that nearly 50 million people may die of AIDS alone in developing countries by 2010. Undoubtedly, all of us governments, industry and taxpayers - can do more. There has been an unfortunate tendency by some commentators to simply blame pharmaceutical company patents for this health crisis. The reality is that the reasons for the crisis are many and varied. 95% of the medicines on the WHO essential medicines list are off patent. TB, malaria, polio and measles are killing millions in developing countries, yet the medicines to cure them are mostly off patent and cheap. The real barriers to access include poverty, inadequate health infrastructure, insufficient resources devoted to healthcare, lack of political will and discrimination.
IPHA Review 17
SUBJECT
MEDICINES
THE VALUE OF MEDICINES Unlike other business sectors, the output of the pharmaceutical industry is very literally a matter of life or death, writes Brian Murphy, Commercial Affairs Manager, IPHA.
‘Prescription medicines provide some of the best value in healthcare. Medicines save lives, relieve pain, cure and prevent disease.’
T
oday people in Ireland live longer, healthier and more productive lives than ever before which is, in part, due to medical progress and pharmaceutical innovation. But how do we calculate the value of a medicine? How do you calculate the value of the smile of a child who doesn’t have to feel the pain of cancer? What is the value of giving a grandfather with congestive heart failure the energy to go fishing with his grandson? We can however, in some ways, quantify the value of medicines to patients, to society and to the healthcare system. We can count the number of years it adds to a person’s life, we can look at whether the medicine enables the person to work or live independently, or simply enjoy life more, we can calculate the money saved when a medicine helps a patient avoid surgery, hospitalisation or admission to a nursing home. The fact is that spending on medicines translates into overall cost savings for healthcare systems, keeping employees healthy and productive in society. They help patients avoid disability and surgery, and they benefit healthcare systems by reducing costly hospital care. The ‘cost of treatment’ needs to be balanced against the long-term benefits of innovative medicines that decrease the ‘burden of disease’ for society, in both financial and quality of life costs.
HEALTH SAVINGS In the past 40 years, the use of medicines has helped diminish the number of hospital admissions for 12 major diseases by half, including ulcers, mental illness, and infectious disease. New treatments for Parkinson's, Alzheimer's and diabetes have helped thousands of patients to lead better and more normal lives, easing the burden on care-givers and
delaying or avoiding costly long-term nursing care, while cholesterol-lowering medicines, at a cost of less than €3 a day, can help avoid coronary by-pass surgery at a cost of around €75,000. In the space of a lifetime, vaccines have virtually wiped out diseases such as diphtheria, whooping cough, measles and polio. By any of these measures, prescription medicines provide some of the best value in healthcare. Medicines save lives, relieve pain, cure and prevent disease. Medicines help keep families together longer and improve the quality of life for patients and care-givers.
The timely use of modern medicines in Ireland has: • Helped to improve life expectancy by over a third in the last eighty years from 57 in 1925 to 79 today. • Enabled hospitals to treat many more patients on a day care basis, up from 85,000 cases in 1987 to an expected 500,000 in 2005. • Assisted in the reduction of the average length of hospital stays from 9.6 days in 1981 to 6.3 days today. The last few years have seen an unprecedented focus in Ireland on the Health Service with expenditure being trebled in the period 1997 to 2005, and administrative structures being overhauled with the introduction of the Health Service Executive. Despite the increased expenditure, public concern about the state of the Health Services remains high and there are increasing demands for further improvements to ensure an efficient and effective service. As part of this drive to find further efficiencies, some have pointed to the medicines bill as an area requiring attention. It has become fashionable in some quarters to question the value of medicines and to view the medicines bill as part of the problem
IPHA Review 19
rather than appreciating medicines as an essential element in a strategy to improve healthcare. In some countries policies have been introduced which have discouraged the use of innovative so called "high price" medicines. Such policies are shortsighted, overlooking the fact that the alternative to using new medicines is often longer hospital stays; longer, less effective treatments, invalidity and a poorer quality of life. In this time of economic prosperity, we have the opportunity to develop a healthcare system which would deliver more efficient and effective care to the patient. A system designed to intervene at the earlier, more cost effective primary care level rather than waiting until the expensive hospital care level makes sense, both economically and from the point of view of patient welfare. Of course there are things that can be done to help improve the health of the nation – individuals taking greater care of their own health, eating properly, taking regular exercise, going for health checks and complying with their treatment regimes. The Irish Pharmaceutical Healthcare Association has partnered with the Department of Health and Children in various initiatives to enhance patient education through publications such as "Tips for Taking Medicines." The increasing State bill for medicines is not the result of inefficiencies in the system. It is due to demographic factors, the availability of new treatments, the increasing incidence of chronic and non-communicable
20 IPHA Review
diseases such as asthma, diabetes and obesity; and Government decisions to enhance patient eligibility to medicines through initiatives such as the provision of medical cards to everyone over 70.
THE COSTLY, RISKY BUSINESS OF PHARMACEUTICAL R&D Another aspect that needs to be factored in to any discussion weighing the value and cost of medicines is that the discovery, development, testing and gaining of regulatory approval for new medicines is a highly complex, lengthy, risky and expensive process. Even after a medicine is developed, teams of engineers, biologists, chemists and physicists spend many thousands of man hours trying to mass-produce the results achieved by an individual scientist in their lab. The odds are formidable – between 40 to 50% of potential medicine candidates that enter the third and final phase of clinical trials fail to make it to market. Often, promising experiments are not replicable on a large scale. Research may fail because it is not possible to manufacture the medicine safely or to the proper specifications. The risks involved in developing any new medicine are substantial and very expensive, with the estimated costs of bringing new products to market being anywhere near €900 million. On average, only one of every 10,000 promising substances will successfully pass testing in the R&D phase to be eventually approved as a marketable product. It takes an average of 10-12 years to turn a promising new compound into a marketable medicinal
product that is safe and effective enough to bring to patients. Once on the market, the average medicine has only about 8 to 10 years of effective patent protection left before the patent for the medicine runs out, and other companies start manufacturing the medicine using the same formula. Even making it to market is still no guarantee of commercial success – historically, only 3 out of 10 marketed medicines produce revenues that match or exceed the costs of R&D before they lose patent protection. Committing resources into researching new medicines has therefore really become an act of faith, which requires massive expenditure with no guarantee of return. The cost of developing a medicine is offset by the enormous value it brings to patients, to society, to the healthcare system, and to the savings it generates.
CONCLUSION In conclusion, do medicines really cost that much? Do we not want to see every ill child cured and every grandfather have the opportunity to take his grandson fishing? If the answer is yes, then we must face facts. The pharmaceutical industry is playing its part towards building healthier societies as they continue to add years to life and life to years. The cost of medicines must be set against the great value of medicine if the debate is to be balanced and help achieve the outcome every person wants - to improve the health of a nation and create a cost effective healthcare system.
SUBJECT
IDA
BRINGING WORK HOME Ireland’s Industrial Development Authority has played a pivotal role in building up its pharma industry. Here, Barry O’Leary, the IDA’s divisional manager for the sector, talks to The IPHA about achievements to date and the challenges ahead
‘Today every plant is global and that’s the big difference’
WHY DID THE RESEARCH BASED PHARMACEUTICAL SECTOR BECOME AN IDA PRIORITY ORIGINALLY? The first major pharmaceutical multinational to come here was Bristol Myers Squibb. Last year Peter Dolan, their CEO, was over at the celebrations for forty years of the Swords plant in the morning, and at lunchtime he went to open their new half a billion plant in Cruiserath. I suppose that brings you from A to Z very quickly: it’s a good demonstration of the longevity of the industry here. The main push in the 1970s to getting companies into Ireland was because it was a high value, global and a very well paying industry. Because it was health-based, there also was seen to be a longer-term perspective, as there would be a need to treat disease in a growing population around the world, so it was seen as a long term growth industry.
WAS IRELAND’S RELATIVE GREEN FIELD STATUS AS AN INDUSTRIAL LOCATION AN ADVANTAGE? There would have been a couple of factors: the early 1970s was the time of EC entry and there was a [business] model that now doesn’t exist anymore, which was the dominance of US corporations coming to Ireland to service the European market. Today every plant is global and that’s probably the big difference. So the EU market; zero per cent tax on exports at the time and a good availability of sites, were all contributing factors.
WAS ACCESS TO UNIVERSITIES A PRIORITY AT THAT TIME? Probably not in the very early stages but certainly over the last 10 to 15 years that’s accelerated. There would have been very, very good collaboration in areas such as chemical engineering going way back, but now the sophistication of the relationship required with universities is certainly growing and getting far more profile.
DOES THE IDA NOW CONSIDER THE PHARMA SECTOR AS ONE OF ITS GREATER SUCCESSES? It’s one of the key areas we go after. We have four key areas: ICT (Information Computer Technology), Life Sciences, Financial Services, and International Services. The pharma side is extremely important in its sheer economic impact. Currently it’s approximately 50:50 between bulk and finished pharmaceuticals; its exports are worth almost €40 billion, it’s a big employer and it is a strong contributor of corporate tax. And apart from the direct employment, there are huge spin off benefits such as the construction industry, the engineering companies, project management, etc. So it isn’t just about the people employed directly in the industry.
PHARMA COMPANIES HAVE EXPANDED THEIR ACTIVITIES A GREAT DEAL HERE, PROBABLY MORE THAN OTHER SECTORS. IS THAT THE CASE?
IPHA Review 21
‘We are finding that companies are having very, very good recruitment experiences here.’
Well the difference with pharma would be the sheer capital intensity of the investments – it’s an expensive industry to build. You wouldn’t be far off a million euro per employee in investment levels.
who have hired about 150 people; Fournier, another new arrival from France, have hired over 100, and there have been many expansions as well of course, all around the country.
AND YET THAT IS NO GUARANTEE THAT THE INVESTMENT WILL STAY HERE?
BIOTECH IS PROBABLY AN INTERESTING EXAMPLE AS IT’S SO NEW. ARE THE SKILLS IRELAND CAN PROVIDE HERE COMPARABLE WITH OTHER EUROPEAN COUNTRIES?
No, because you have no shortage of opposition particularly Singapore, Puerto Rico, Switzerland and other locations.
IN AN INVESTMENT ANNOUNCEMENT IN JULY, THE IDA REFERRED TO ‘REALLY GOOD QUALITY JOBS BEING CREATED IN THE SECTOR. COULD YOU DEFINE THAT TERM? There are a number of criteria we’d use average salary per employee, the percentage of graduate, third and fourth level qualifications and that’s anything between 40 and 60% and increasing all the time, because you have a greater regulatory environment, and because of the skills requirement associated with a pharma facility.
HAS IT NOT BEEN A CHALLENGE TO PROVIDE SUFFICIENTLY QUALIFIED WORKERS TO DATE? Well look at the hiring record, and at some of the newer investments: Wyeth at their biopharma facility, for instance, have recruited over a 1000 people in the last three years; look at Genzyme down in Waterford,
We would be better than many in terms of the percentage availability – in a pro rata basis we certainly have far more [of the appropriate skills]. Look at science and engineering graduates per thousand; we’re way ahead there. We are finding that companies are having very, very good recruitment experiences here.
THE IDA’s PRIORITY IN ATTRACTING INWARD INVESTMENT TO DATE HAS BEEN IN MANUFACTURING. CAN YOU SUSTAIN THAT? That’s changing. The traditional scope was around manufacturing, and if people were doing process development it was at maybe phase three of it, [EDITOR’S NOTE: the industry has three development phases in developing a medicine] and we were talking to the industry about the need to start much earlier but also finish much later at each phase. So there’s a whole range of activities now… there’s the whole area of shared services: Pfizer for instance do all their European accounting now in Dublin, or
IPHA Review 23
‘The fact that, of the top ten companies here, nine of the CEOs are Irish - that’s a very strong selling point, our track record in execution is a big attraction.’
Novartis have 400 in their manufacturing centre in Cork and have a global supply chain management centre with over 100 people nearby. There’s a number of people managing their IP (Intellectual Property) here; plus a number on the process development side, like BMS, who would have 100 in that area. There are also European headquarters: Nabi Biopharmaceuticals for instance, from Florida, recently set theirs up in Bray - and they’re not manufacturing at all, it’s just their European HQ and regulatory affairs. Or take Merck for example; apart from their manufacturing plant in Tipperary - there’s a new centre we backed last year involving the initiation and management of clinical trials across Europe; plus regulatory affairs and technical market support. So there’s a whole series of activities we are trying to attract to Ireland, not just in manufacturing, though manufacturing has dominated to date. But the key now is very much the backward integration, and getting involved much more on the development side.
DO YOU STILL SEE MUCH SCOPE IN ATTRACTING MANUFACTURING HERE? Definitely. But an important point here is that manufacturing - or the expansion of manufacturing facilities - will be closely allied to the technical competence of the facility, and unless they have process development centres going back very early in the development cycles they will lose out. Whoever has that technical capability will be working with the discovery people and the R&D people a lot earlier. We see that as being a core strategic imperative for the industry in Ireland.
IT’S INTERESTING THAT YOU STILL SEE MANUFACTURING MONEY AROUND IN SPITE OF OUR RISING COSTS HERE If you look at investment over the last few years, say since 2002: Takeda have expanded their formulation facility in Bray dramatically and are validating a brand new facility in Grangecastle at the moment. Servier have just doubled their facility; Fournier have built a brand new development and formulation facility in Cork; Janssen and Lilly are spending €100 million and €200 million on sterile bulk facilities; Pfizer have a series of investments going on; Altanta, a German company, is building a new formulation facility –worth €80 or €90 million for the first phase in Cork; Centocor have spent half a billion in phase one development … so there’s still a very strong flow in manufacturing coming in.
24 IPHA Review
THIS IS MUCH MORE THAN JUST USOWNED ‘BIG PHARMA’ THEN? Well 26 out of the top 50 companies are here, but a lot of the projects in recent years have also come from second and third level players. So there’s a steady flow of projects.
DO YOU SEE MOST FUTURE INVESTMENTS AS REMAINING MOSTLY MANUFACTURING LED OR WOULD YOU HOPE TO GET IN AT EARLIER DEVELOPMENT PHASES? It’s both sides really, it’s a dual strategy. In the process development side we would be in dialogue and support a number of pharma companies in setting up process development facilities [e.g. the July announcement involving Pfizer, BMS and Genzyme] so we’ll be doing more and more Science Foundation Ireland projects, such as BMS’ setting up in a new facility in DCU. We’ve had a number of visits from companies looking at the more basic research but this is a more medium and longer-term development plan.
IS IRISH RESEARCH NOW MAKING AN IMPACT INTERNATIONALLY? There’s no doubt about it, the Government is putting serious funding into it now, and there’s no doubt we’re becoming much more visible on the international circuit. This year we’ve probably had five to six large size companies looking at the initial stages and at basic research. We wouldn’t have had those visits before now.
ULTIMATELY DO YOU SEE US GOING RIGHT BACK TO THE STAGES OF EARLY DEVELOPMENT AND FIRST PHASES OF RESEARCH? Well, yes – that’s the eventual game and I know that’s going to be difficult, but we would be encouraged by the flow of companies we’ve had in to date, giving this a serious look. It’s a dual approach: you have to come from both sides… moving back in the pilot plant to phase one etc – that’s a must for the industry. Manufacturing sites need to have that technical capability to compete when new drugs are coming down the pipeline, and corporations look to decide on where they will locate these facilities around the globe. So you must have more and more capabilities on site, it’s not enough just to have Ireland’s lower tax rate, because other jurisdictions have lower tax rates. The technical capability and the people become a far more critical piece of the whole thing.
WOULD THAT GIVE US AN ADVANTAGE OVER LOCATIONS SUCH AS SINGAPORE AND PUERTO RICO?
To be at the table you have to have that. It’s not a guarantee but you have to have that. The more of a lead you have, the greater the advantage. And because they have lower tax environments, we have to have greater capability.
SO THE FORMULA OF ATTRACTING MANUFACTURING AND ADDING RELATED ACTIVITIES STIILL HOLDS? Yes, but we would very much encourage and incentivise new arrivals to set up development centres from day one.
WHAT IS THE IDA’S BIGGEST CONCERN NOW? Increasing competition: countries like Singapore and Puerto Rico are becoming more active in looking for business. We need to have differentiation over those sites.
AS EVERYONE IS COMPETING AND BENCHMARKING INTERNALLY NOW? Yes.
WHAT’S THE IDA’S VISION FOR THE REST OF THE DECADE? We have so many of the big companies here already, that constant reinvestment and adding new facilities is a key area. And because we’ve had so much success
with the traditional pharma we want to ensure we repeat that as well on the Biotech side. The IDA has ambitious targets in attracting world bio players over the next few years, but you have to remember we have a number of them already, so we’re on our way to it.
IN EUROPEAN TERMS, HAS THE RISE OF SWITZERLAND AND DECLINE OF GERMAN PHARMACEUTICALS OVER THE LAST TEN YEARS HELD LESSONS FOR IRELAND? Well Germany’s pricing environment for pharmaceuticals in particular, I think, would have annoyed a number in the industry, though the US environment is now a hot spot for research. But one can only assume that the German government did not support the industry to the degree that other areas have.
DO YOU THINK MEDICINE PRICING AND PROMOTING GENERICS WAS A CONTRIBUTARY FACTOR TO THAT? I would have thought that the pricing partly contributed. Certainly you read things such as certain companies wouldn’t put activities in there because of the unfriendly environment towards the industry, but the German economy overall has
suffered from cost competitiveness and lack of reform. At one stage they were certainly very strong players. Like anything there’s no one particular item – it’s a combination of items. Most companies, when looking at investing around the world, will typically look at ten or twenty areas and will have a scoring system – so the availability of skilled workforce, because of the regulatory environment, is extremely important; lower corporate tax; and having competitors there is often a plus. A track record in FDA compliance is important. The last warning letter from the FDA in Ireland for pharma was 1998 so that’s extremely favourable. Financial incentives play a role. A temperate climate can be important – for example; ‘are you in a hurricane zone?’. The humidity levels and cost of air conditioning need to be taken into account; also big bio plants, for instance, will need a million gallons of water a day. The fact that professionals can live anywhere and not just in expatriate sites, is an attraction here, as is the growing importance of the industry’s academic collaboration. The fact that of the top ten companies here, nine of the CEOs are Irish. That’s a very strong selling point, our track record in execution is a big attraction. IPHA Review 25
SUBJECT
BIOTECH
BIOTECH TAKES ROOT Biotech represents an important pipeline for new medicines and an important strategic asset, writes Matt Moran
“With some commentators forecasting that up to 50% of all pharmaceutical products will incorporate some aspect of biotechnology by 2020, it is imperative that Ireland has a seat at the biotech table.”
M
ost commentators agree that the Irish Biotech Sector remains broadly on track for growth in the coming decade. Ireland came relatively late to the biotech table and has had to concentrate much of its effort in putting the necessary infrastructure in place to support the development of the sector. Given the dependence of the Irish economy on so-called life science based industries such as pharmaceuticals, healthcare, chemicals, agriculture and food processing, it is of strategic importance to the economy as a whole to have such a sector in place to ensure that these sectors keep pace with global developments. However, by its nature biotechnology is a slow business. The relative complexity of the science involved, stringent regulations underpinned by the significant amounts of finance required, all conspire to make the development cycle for any biotech product lengthy. Nevertheless the rewards available are significant, while the potential threat to Ireland of not enhancing its existing pharmaceutical, healthcare and food sectors by applying biotech is also significant. With some commentators forecasting that up to 50% of all pharmaceutical products will incorporate some aspect of biotechnology by 2020, it is imperative that Ireland has a seat at the biotech table. Ireland is not the only country or region in the world to arrive at this conclusion, however. A quick tour of the globe will yield myriads of biotech strategies – from Singapore to California, from Boston to Helsinki. The competition is tight and the stakes are high. So how far has Ireland come since the Technology Foresight document, which identified biotechnology and ICT, as being the two primary areas that the country should invest in?
THE ROLE OF SFI The establishment of Science Foundation Ireland, with its emphasis on The Life Sciences, has provided a major boost to the research base in this country. In November of 2004, the Irish BioIndustry Association (IBIA), in collaboration with SFI, co-hosted a networking event where SFI funded researchers were given the opportunity to present their work to the industry. A wide array of activity was on show which was followed up with a return event in May 2005 where the industry presented to the research community. There has been a major increase in research activity; the establishment of a network of PRTLI funded research institutes has complimented this. The SFI funded Centres for Science Engineering and Technology have served to attract some serious investment by the private sector. The key challenge that remains will be the effective commercialisation of this research activity - an increase in patent filings followed by a boost to start-up activity needs to take place if the biotech sector is to take root in this country. Industrial development agencies, Enterprise Ireland and IDA Ireland, have both incorporated biotechnology into their own strategies for industrial development. The IDA has had some significant successes in this regard with Wyeth, Genzyme, Genemedix and Centacor all investing in biomanufacturing facilities in Ireland. The National Institute for Biotechnology Research and Training (NIBRT) being proposed by Government will serve to
IPHA Review 27
“Biotechnology certainly is taking root in Ireland - for these young, often delicate roots to grow into something more robust and long term, a number of things need to happen.”
28 IPHA Review
further embed the burgeoning biopharma sector by supporting process development activities. On the indigenous side there have been a number of successes in the medical diagnostics sector: Trinity Biotech, Biotrin and Tridelta, being notable examples. Founder and CEO of Biotrin, Dr. Cormac Kilty led a management buy-out of that company, and it continues to be profitable. Newer to the scene are Luxcel Biosciences which has spun out of UCC. Headed by Richard Fernandes, it is developing a range of fluorescence–based oxygen sensitive tests. In Galway, nEUtek Bio is developing a range of diagnostic tests for measuring low levels of interferon. Trinity based company, Identigen, have commercialised a DNA labelling technology which can be used to prove source of food based products. Known as Traceback, it has been adopted by the retail sector who use the product to guarantee BSE free meat products. Meanwhile Archport, a contract manufacturing company has been spun out of Dublin City University. A number of funding announcements in 2004 have given a further boost to the fledgling indigenous sector including Merrion Biopharma, Opsona, Genable, Eirx, AGI and Neurocure. A number of high-tech start-ups are coming to the fore and one could be optimistic that first round funding is being achieved. It is now important that these companies grow to the scale that they will be able to attract significant second round funding - it is likely that they will need to look overseas as well as to local finance.
CONCLUSION So what can one conclude from all this? Biotechnology certainly is taking root in Ireland - for these young, often delicate roots to grow into something more robust and long term, a number of things need to happen: 1. Government must be patient and retain its commitment to biotech 2. SFI should continue funding the research infrastructure, applying rigorous standards - facilitating private sector involvement where possible 3. Multi-national companies need to be supported in their efforts to diversify into process development 4. Commercialisation of R&D needs to be facilitated and encouraged 5. Strong alliances must be built with other biotech centres such as parts of the US and Scandinavia 6. Start-ups need to be nurtured and supported, Government needs to incentivise the provision of risk capital If the items on this shopping list are ticked off over the coming months and years, biotech will re-pay the country for showing faith in it. If Ireland is to retain its pharma sector in the long term, it is vital that biotechnology is nurtured in this country well into the future.
Matt Moran is director of Irish BioIndustry Association (IBIA) and PharmaChemical Ireland