US drug giant Pfizer's decision this week to invest €240 million in expanding its Dublin plant was a coup for the management of the company's Irish operation, writes Dominic Coyle

Not only did it have to fight off competition from other plants in Pfizer's global network, but it had to prove itself against offers from governments seeking lucrative inward investment from a pharmaceutical sector leader.

The company's announcement that it would double the size of its sterile manufacturing and freeze-drying operations in Dún Laoghaire was important not so much for the size of the investment or the jobs and money it will bring into the local economy. Its major significance was the vote of confidence granted by Pfizer's executives in the Irish plant's ability to meet the challenge of producing key drugs that have yet to emerge from the pipeline - a statement that it sees Ireland as having a key role to play in the company's future.

At a time when the pharmaceutical industry is facing challenges in Europe and the US, the investment is a fillip for the sector here and for IDA Ireland, which has done much to secure such investments over the last four decades.

Ireland remains well-placed for such investments, according to Mr Dave Shanahan, managing director of Pfizer Healthcare (Ireland) for two key reasons - experience and a supportive political environment.

"I think experience has a lot to do with it," he said. "John Mitchell has run our global manufacturing operations for a decade and his experience of Ireland is just so positive. He didn't fall in love with it because of Guinness and the 40 shades of green but because he recognised the talent and the people and the capacity to deliver.

"Every time we have done an expansion or brought new medicines to production in this country, we have achieved our goals and hit our objectives and that performance ultimately is the sword we live or die by.

"As long as we continue to perform, these guys will continue to enable us to perform better."

The ability of Ireland to capitalise on its opportunity is also something that IDA Ireland's manager of pharmaceuticals and biopharmaceuticals, Mr Barry O'Leary, believes is a strong persuader for further inward investment.

"There is no doubt that the historical track record we can point to is hugely important," he says. "Nine of the top 10 pharmaceutical companies in the world have plants here and that usually means we will be on a company's shortlist at least when investment decisions are made.

"It is a feature of the companies that have come here that they tend to have multiple plants. Pfizer has nine pharmaceutical plants, as does Abbot. Johnson & Johnson has five following the recent announcement about the arrival of biopharmaceutical subsidiary Centocor, Wyeth has four and Schering-Plough three. Once they come, these groups tend to add operations."

Mr Shanahan also points to the supportive influence of successive governments. "The relationship between Pfizer and the Irish government has been excellent, irrespective of which major party has been in power.

"We have had a very businesslike, open and trusting relationship. It's been win-win to date and we are optimistic that it is going to continue."

While the Irish use of medicines - at around 11 per cent of health spending - is lower than the European average due to our younger population profile, the Government is seen by the drugs industry as forward-looking in introducing policies that promote access to new medicines rather than inhibiting it.

The industry argues strongly that using effective medication makes financial sense when compared with the cost of hospital stays.

"The major strategic issue for the industry is the healthcare environment both in the US and Europe," says Mr Shanahan. "Governments are being extremely short-term in how they resource health care."

He says the focus on non-staff costs, including the cost of medicines, is storing up trouble for the future, citing Germany and France as two particular offenders.

"European countries need to realise that you cannot have a vibrant pharmaceuticals industry if you do not have a vibrant pharmaceuticals market. It doesn't mean that medicine costs have to go through the roof but it does mean you have to recognise the value of medicines.

"This terrible focus we have on the costs of medicines all the time and not on the cost of disease and illness, is really impacting negatively on Europe," he says.

Europe has lost around 200,000 jobs in pharmaceuticals in the past three or four years, he notes, especially research posts which are relocating to what is seen as a more receptive environment in the United States.

"Governments need to understand that capital is mobile and just because we are in one place today, that does not mean we will be there in the future," he says.

Ireland is seen as more supportive than some of its European peers. "One of the things that has really helped us with this investment decision is that, when we look at who we should reward for future expansion, we are clearly not going to go to governments who tell us on one side that they want our economic contribution and on the other side are trying to kill our business."

For Ireland, the key issues remain the existence of a skilled workforce, a friendly tax regime and, increasingly, a comprehensive waste management infrastructure.

While few companies in the sector are currently experiencing recruitment difficulties, all foresee problems in the future which might influence investment decisions.

Similarly, Ireland's current package of financial incentives and low corporate tax rate are seen as critical to its success in attracting inward investment. "People should not lose sight of the fact that the reason we have the highest level of foreign direct investment in Europe is precisely because we have a government that supports business," says Mr Shanahan. "If that were to change, that would change the game."

The IDA is frustrated by the efforts of fellow EU member-states to chip away at the tax structure. "What seems not to be recognised by people in Brussels is the nature of global competition," says Mr Barry O'Leary. "The majority of projects we win, if they did not come to Ireland, they certainly were not going elsewhere in the European Union. They would have ended up in Singapore, Switzerland or Puerto Rico."

Waste management is seen as the more immediate concern and Mr O'Leary acknowledges that it features prominently on the agenda of the industry. "It is clear Ireland has not made the progress it should have," he says.

"Waste management infrastructure is a prerequisite for the industry and it is an area where we should be doing better but there are some steps being taken to address it."

The industry is even more blunt. While technological advances mean that emissions and waste are just a fraction of what they were, says Mr Shanahan, the lack of an incineration option is a growing concern.

Ireland currently exports such waste but this is not seen as a sustainable option.

"People have to take responsibility for the waste we create and people have to stand up and accept that we cannot go on hoping that everyone else will go on cleaning up after us," says Mr Shanahan.

"The fact is that other countries have it, including the Nordics, who are a lot cleaner than we are and have a far better environment. They seem to be able to manage it, so there is no reason we cannot."