ARE WE FACING COLD TURKEY?
EVERY since Pfizer opened its citric acid plant in Ringaskiddy in 1969, the story of Ireland and the pharmaceutical sector has been one of unprecedented success.
Forty-one years on, we are home to eight of the top 10 pharmaceutical companies in the world. Six of the top 10 blockbuster drugs — that is drugs that sell over €1 billion each year — are made here. Pharmaceutical exports account for 50% of our total exports, the sector employs 24,000 people directly and another 48,000 indirectly. By any reckoning, that’s a pretty serious drug habit.
It’s inevitable therefore, that if the international sector starts to suffer, Ireland cannot escape the pain. Right now, the global pharmaceutical industry is facing a €100bn hit as a range of marquee drugs come off patent. To make matters worse, the pipeline is dry and there’s nothing out there to replace them.
Regulation is getting tighter and the length of time it takes to get a profitable drug to market makes funding harder to find. In Ireland, those issues are further compounded by local ones. Will the EU again go after our corporation tax rate? Are our labour costs just too high to sustain what are essentially manufacturing operations? Are we facing massive cold turkey as the pharmaceutical industry moves bag and baggage to cheaper locations overseas, or can we stop the rot and hold onto our drugs for another 40 years?
But even before that question arises, there’s a more basic question to be addressed. Do we want it? Critics have suggested that the importance of the pharma sector is overstated in Ireland.
Yes, it gives us 50% of our exports, but total employment, direct and indirect, comes to just 72,000 jobs. Against a backdrop of 450,000 unemployed, would government agencies be better employed supporting labour-intensive SMEs rather than capital-intensive multinational corporations?
Matt Moran is director of PharmaChemical Ireland, the sector’s representative body in Ireland. He points out 50% of those employed in the sector have a third-level qualification.
Moreover, having been here for 40 years, the pharmaceutical industry represents a long term, stable proposition for the economy.
“The other interesting thing to note about the economic impact of the sector is it tends to produce high-value jobs. They tend to be well paid, and it also supports quite a lot of high-end services like engineering and the supply of specialist materials. No, it’s never going to be a massive employer because it’s a capital intensive industry, but it certainly will produce value in terms of taxation receipts.”
Dave Shanahan, global head of Life Sciences with the IDA believes the sector not alone provides tremendous value now, it is likely to prove even more important in the future.
“Every other foreign direct investment agency in the world is chasing pharmaceutical development, production and the services that come from it because it’s an industry from which you can generate new sub-supply sectors and new industry.”
He believes the way in which the healthcare industry is developing is key to Ireland’s ability not alone to retain what it has, but to deepen and widen the country’s dependence on pharmaceuticals.
“I would argue that the pharma sector actually doesn’t sell tablets,” he says. “In reality they’re selling a healthcare outcome based on an intervention.”
Shanahan points out that in the US, healthcare provision is approaching this model, where ICT is being harnessed for everything from remote care monitoring to advanced diagnostics. Telehealth, which is defined as the delivery of health-related services and information via telecommunications technologies is a growing area. Market research firm Datamonitor expects the tele-health market will grow to $6bn in 2012 from $900m in 2007.
“My view,” says Shanahan, “is that Ireland has a unique opportunity to link our very strong software writing abilities here and our tremendous medical technology abilities; we’re second only to Germany in our medical device exports per capita and we’re globally the largest exporters of stents. We need to link our very smart ICT industry, our medical device industry and our pharmaceutical industry to really start looking at how we’re impacting global health outcomes.”
The trajectory of the international healthcare sector suggests there’s a substantial economic dividend coming to someone. PharmaChemical Ireland wants it to be us. To that end, the group launched its strategic plan for the sector in New York last March.
This document sets out everything the stakeholders must do to lock down what we have, and to align itself with the future of the industry. It sets out a range of recommendations; for government, for the education sector and for the industry itself. Arguably, it is in getting its own house in order that presents the sector in Ireland with its greatest challenge.
Paul Duffy is Pfizer’s head man in Ireland. “Maybe the industry’s been lucky in that we’ve lived through a lot of good times,” he says.
“As a result, the pace of change in our industry has not been as significant as in other industries. You look at textiles, you look at computer manufacture. Those industries have changed radically. Now look at pharma. Just doing basic manufacturing here in Ireland is probably not a good proposition for the future,” he says.
To address this deficiency, the sector has been working hard to change that proposition. In addition to the bulk pharmaceutical industry, which makes the active chemical ingredients that go into drugs, and the tableting plants themselves, we’ve been steadily growing our presence in the biopharmaceutical industry. Alongside these high level manufacturing operations, we’ve also been pushing deeper into R&D,” says Duffy.
“There is the manufacturing end, which is really the core around which you build the development side. Being excellent at manufacturing, using lean manufacturing principles, state of the art technology and good people — you can be pretty successful at that, even though we’re a higher cost location.
“That then allows you to build in activities around clinical trials, around research, around development, even around financial services activities. Concentrating on basic manufacturing alone really is a spiral that’s difficult to come out of.” Does this mean that we are bound to lose are manufacturing base? Are all of these chemical and tableting plants destined for Poland, for China or India sooner rather than later. Not at all, says Matt Moran at PharmaChemical Ireland. Cost is an issue, he says, but it’s not the only issue.
“It’s much more difficult to move this manufacturing because it’s high level and it’s highly regulated. These are medicines that are being given to people who are sick or dying,” he says.
Moreover, security of supply has emerged as an issue in parts of the far east. “You could say, we’ll outsource our raw material, which could be an active pharmaceutical ingredient plant into China, but unless you know exactly what they’re doing, there’s a chance that what it says on the label is not what happens inside in the container. One of Ireland’s great strengths is that our level of compliance is high and we’ve a really, really strong reputation with the regulators.”
Dave Shanahan of the IDA says the agency is targeting a net increase in pharma sector jobs over the coming four to five years.
“We have a very active programme of working with our existing sites, but we also chase new names through our overseas offices. Yes, we have a number of sites that are indicated to be either sold or closed, but we’re actively marketing those sites to new name companies.”
He cites the Loughbeg facility in Cork, closed down by Pfizer two years ago, but reopened by Portuguese pharmaceutical manufacturer Hovione.
“We don’t discriminate. We’re looking for quality manufacturers to come to Ireland and in addition we’re working with all the sites to develop services. We’re very keen to see sites become global hubs within their network or at the very least, to become centres of excellence.”
- Eight of the leading global 10 companies have operations in Ireland
- Companies indicated a planned spend of about €350 million during 2009 on various capital projects
- Ten of the world’s top selling drugs are manufactured in Ireland
- The sector exported products to the value of €47.2 billion in 2009, representing 51.2% of the national total
- The sector contributes more than €1bn in corporation tax annually
- Employment in the sector has grown from 5,200 in 1988 to 24,000 in 2009
- Upwards of a further 24,500 jobs are based on the provision of services to the sector
- Over half of the employees are third level graduates
AS the pharmaceutical sector in Ireland repositions itself as research rather than manufacturing-led, the colleges need to step up to provide the people who will make this happen.
Professor Anita McGuire is head of the School of Pharmacy in UCC. She also leads the area of organic and pharmaceutical chemistry in the college, in which there are currently 40 PhD students engaged in research. She says the pharmaceutical sector attracts more PhD activity than any other.
“It’s the nature of the industry. You’re working in a highly regulated industry. You need people who have the research skills to drive change. And because there’s this move to a research and development agenda, the skills needs are very high.”
McGuire has been well placed to view the changes that have taken place in the sector in the last two decades, and the knock-on impact that that has had on education.
“Traditionally it was just a manufacturing industry. Most of the development and research work was done overseas in the global HQ. What’s happened over the last decade is companies here have become more involved in the research and development aspects of the industry, particularly in the area of process development.”
As a result, the skills needs of graduates are radically different to what they were 15 years ago. The good news is that the symbiosis between the colleges and the industry are now well established.
“The links between UCC and the pharmaceutical sector in the region span from undergraduate education, postgraduate education, research links and provision of technical services.
“They span right across the spectrum. We continue to develop our curriculum, develop the kind of training that we provide to people to make sure that they meet, and even anticipate, the needs of the industry as they move into more of a research and development agenda.”
The wide range of traditional science courses are offered at undergraduate level, while more targeted programmes address the specific skills sets required by the pharmaceutical sector.
Research links were strengthened massively by the opening of the €22.3m Cavanagh Pharmacy Building four years ago.
This resource is home to the Analytical and Biological Chemistry Research Facility, and also houses a dedicated industry suite to facilitate collaboration between UCC and the industry.
AN ambitious plan to create the world’s largest dedicated pharmaceutical research facility in Co Kerry promises more than 4,500 jobs in three years.
Rory Doyle of Cork-based pharmaceutical company Pharmadel is chief executive designate of the Global Pharmaceutical Centre of Excellence. He acknowledges his plan is ambitious but believes such a centre is viable, and has already garnered extensive local, national and international support.
The idea itself is relatively simple. Pharmaceutical companies outsource an increasing amount of their research and development to contract research organisations. This is a highly fragmented industry, with more than 1,000 firms, each specialising in a particular research area.
Doyle believes by bringing the broadest range of research activities together under one roof, the centre can offer huge economies of scale. “If we don’t do it now, China or India will do it very shortly,” he says.
Preparatory work for the centre is already advanced, with phase one due to begin in the spring. This will bring together international universities, pharmaceutical companies and research institutions in a number of research collaborations.
Phase two will involve the construction of a 1.2 million square foot facility in Kerry Technology Park in Tralee, which will, it is envisaged, house the 30 interconnected research departments. The planning application for the facility will shortly go before Kerry County Council. Under the current timeline, building will begin in October of next year, with research activity due to begin in the facility two years later in October of 2013.
Funding has been hampered by the country’s fiscal and banking crisis. The board of the GPCE has been in talks with three sovereign funds with a view to securing the total investment externally. However, they are not now willing to advance the funds without prior financial commitment from the state.
“The overall cost of the project from January 2011 to August 2023 is €4.7 billion. We’re asking the Government to start off the investment with €45 million to €48m to give confidence to outside investors that the state is behind this project.”
While the Taoiseach has given verbal backing to the project, no financial commitment has yet been made.
Doyle acknowledges that making this project happen will prove particularly challenging against the current economic backdrop.
“It’s a very difficult journey,” he says. “It’s a project that mightn’t happen. We’ve never said it will definitely happen, but we’ve come up with something, we’ve proof of concept, we’ve gathered an international board, that has given us huge credibility.”
THOUGH Paul Dempsey lost his job last March, he still gets up early each weekday morning and goes through the usual routine. He gets dressed, eats breakfast with his wife and children — a 10-year-old year old boy and a 12-year-old girl. He kisses them goodbye and heads out, returning to the house when the children have left for school. He doesn’t want them to know that he’s lost his job.
“I’ve some mates that are in the same boat,” he says. “They’ve told the children and they’re there going ‘dad, did you get another job yet?’ That’s a pressure that you really don’t need. So we try and keep some continuity in the household. Children growing up have enough pressure on them with school and everything else. The last thing they need is to be worrying about me.”
He says his redundancy from a pharmaceutical sales job came out of a clear blue sky.
“I suppose when you start looking with hindsight there were subtle changes that you could have added together, but every company was going through it.
“We were always being pulled in about expenses. But then one day, the four of us sales people were called in and we were given a presentation. We were told the way the company was going, they didn’t see a future for us. It was jaw dropping.”
It’s cold comfort, but he’s not alone. Since the start of the year, Ireland has been haemorrhaging pharma jobs. Three years ago, Glaxo SmithKline employed 650 in Cork. When the latest job losses take effect, that number will be down to 340. At the height of the boom, Schering Plough employed 1,000 at its Brinny, west Cork plant. That’s now down to 519 and will fall further following the September announcement that a further 160 jobs are to go. Pfizer meanwhile, announced in May it is shutting down three plants in Ireland, with the loss of 785 jobs.
“Traditionally,” says Paul Flanagan of pharma recruitment company Pharma Solutions, “it’s a very conservative industry. If there’s any crisis looming, the first thing that’s hit is recruitment.”
“While the economic situation may be the underlying cause, the slew of mergers in the sector hasn’t helped.
“The four companies that came together, first of all, Pfizer and Wyeth — there was no recruitment last year from either of those, and similarly with Merck Sharpe and Dohme and Schering Plough. There’s a bit more clarity this year but now there are fewer companies,” he says.
In this environment, it’s a buyer’s market. “Companies are now much more specific on what they want and they can wait to get exactly that. In the recruitment market they call the shots.”
Which is not to say that employment opportunities don’t exist. As the IDA is keen to point out, Ireland has secured over €6.5 billion worth of pharma investment over the last number of years, from Pfizer, Allergan, Genzyme, Gilead, Merck, Lilly and Centocor.
The life sciences sector was responsible for $52bn worth of exports in 2009 and recent investments in the pharmaceutical sector include PPD’s $37m investment in bioanalytical and chemistry services in Co Westmeath; Centocor’s investment in a Biopharmaceutical Manufacturing Centre of Excellence in Cork; Merck’s investment of $245m in a new vaccine facility in Carlow and Eli Lilly’s investment of a $490m in biologics facility in Co. Cork.
Joe O’Keefe graduated from UCC in 2004 with an arts degree. He went on to do two postgraduate courses, including an MA in health economics, then secured a sales job with a contract services provider in the pharma sector.
From there, he moved to an indigenous pharmaceutical company before going on to take up a position with a multinational. He attributes his success in a difficult market to the fact that he has kept working on his skills and picked up further postgraduate qualifications at night.
“I appreciate everything I learned in university and when the time came, I combined my commercial experience with my academic experience and get what for me is very much a dream job.” He believes that the high quality, highly relevant education he got has been instrumental in his success.
“What they’re doing in the universities is related to what’s happening in the real world and it is essential that we maintain those ties. There are jobs out there and there are growth areas. Look at exports. Pharma will be a big driver in the recovery of the country,” he says.
Despite his unemployment Paul Dempsey is also upbeat. “When you’re selling, you do get ups and downs and you have to pick yourself up and dust yourself off after each call.”
Emigration, he says, is not an option. He has no third level qualification, and even if he did, he would baulk at the upheaval of relocating his family.
“We got married in 1996, we had a house two years before that. We’re probably outside the area where people got stung when they brought at the height of the boom, so in that sense we’re lucky.
“Ten years on, if we’d started out in 2004, we’d probably be a lot worse off now. It’s those people I feel sorry for.”
CONNECT WITH US TODAY
Be the first to know the latest news and updates
