OCTOBER WAS a turbulent month for healthcare manufacturing operations in Mayo. Continence care group Hollister announced an expansion programme that will see it create an additional 250 jobs in Ballina. Less than two weeks later, Baxter Healthcare said it would shed 200 jobs over the next 12 months.
Reaction, especially locally, was predictable with Fine Gael TD John O’Mahony declaring: “At a stroke of a pen, the effect of the jobs announcement two weeks ago has been wiped out.”
Of course, that’s not so. Certainly the loss of jobs at what has been Mayo’s largest industrial employer is regrettable, but Baxter still retains more than 800 jobs in Castlebar, where it has had a manufacturing business since 1972.
Further, it is in the middle of a €75 million, six-year investment programme designed to instal new manufacturing technologies and upskill staff.
Plant general manager Pat Gallagher concedes the job losses were difficult, but adds: “The manufacturing sites in Mayo [Baxter also has a plant in Swinford] will continue to remain an important and integral part of the Baxter manufacturing network worldwide and we approach the future with confidence.
“Process and technology investments will continue so that we can provide enhanced high-value therapies to the patients we serve for many years to come.”
Baxter’s problems are a microcosm of the difficulties besetting a sector that has become increasingly important for Ireland Inc. The global economic downturn, and the subsequent impact of European healthcare cost- savings measures, alongside an ongoing need to improve cost competitiveness, was cited as the reason behind the job losses.
It is by no means alone. Since the start of the year, companies of the stature of Pfizer, Schering Plough, Glaxosmithkline and Boston Scientific have announced cutbacks in staff numbers.
Alongside a recession-driven squeeze on costs, big pharma in Ireland is also being impacted by consolidation in the industry. That in itself is attributable to the expiry of patents on some of the world’s biggest-selling drugs, a poor pipeline in some larger companies and a general move from traditional small molecule pharmaceuticals to large molecule biopharmaceuticals.
Ireland has done well out of both pharmaceuticals and medical devices. Eight of the 10 largest pharma companies worldwide have major operations in the State, along with 15 of the top 25 medical device businesses globally.
The life sciences sector accounted for exports of €52 billion last year, according to IDA Ireland chief executive Barry O’Leary, and remains one of the largest industrial employers in the State.
And it’s not simply resting on its laurels. Mr O’Leary points to investment of €5 billion in recent years. This is reflected in relatively bullish figures for foreign direct investment (FDI) into Ireland announced last week.
Despite the global recession and more local concerns about Ireland, including its banking sector collapse, Ireland saw a 22 per cent rise in FDI in 2009 to €169.3 billion.
However, the face of the business is changing. Ironically, one of the successes of Irish FDI policy is now presenting new challenges. Ireland’s older pharmaceutical investments date back to the late 1960s. Baxter’s Castlebar plant was established in 1972 and even Hollister can date its involvement with Ballina back to 1976.
Of course, most pharmaceutical manufacturing capacity has seen significant investment since then, but the economics of the business – and more particularly our rising cost base – means that some of the single product, single platform units that were a feature of early investments are no longer viable.
Not that the IDA’s head of life sciences, Dave Shanahan, is giving up on the prospect of attracting additional business from the more traditional pharma operations already in Ireland or others in that sector.
“We are not waving the white flag on our production operations,” he says. “We need to survive the first round of cuts that is currently ongoing. Thereafter, as automation and investment sees plant capacity increase, they become much more efficient. Sites are fitting themselves out for a tougher future.”
And while the threat from generics is real, opportunities remain. Shanahan notes that patent or no, “some traditional small molecule drugs remain difficult to make and the manufacturing competence that we have built up over the years helps in retaining jobs in these areas”.
The rise of generics is a major theme in modern pharma, but Shanahan is pragmatic about the prospects of Ireland tapping this market. “Companies in this space are generally looking to low costs and huge scale, Teva, for instance. Its model is to build monstrous capacity sites.”
However, the future is much brighter in other areas. While refusing to disclose the IDA’s investment research, development and innovation projects, he said the State agency has had “a very busy year in that sector”.
“It is clear that companies are making very significant investment in process development. It is important that we retain our high level of competence in manufacturing process – you’re talking about better process, increased automation, lean manufacturing and cost control.”
As a result, he says, there is an increase in the number of sites in Ireland that either are global hubs for their parent companies in particular segments of the business or are becoming significant within their global site networks.
Ireland has also been doing well in securing higher value service support operations for big pharma. These businesses have accounted for the biggest investments in the sector here this year.
Science Foundation Ireland and the Department of Enterprise, Trade and Innovating are both working with the industry here to provide relevant academic support.
Shanahan concedes that Ireland is losing between 500 and 1,000 jobs a year in traditional pharma but says new investment can more than offset that.
“We believe we will grow the overall base in pharma over the next five years, driven by growth on the biotech side. We are winning a reasonable amount of investment and have had some good wins this year.”
PHARMACEUTICAL JOBS 2010: GAINS AND LOSSES
GAINS
Feb: Warner Chilcott 200
May:MSD150
June:Biotrin 40
July:Merit Medical100
Eli Lilly100
Covidien200
Oct:Hollister250
LOST
Feb:Boston Scientific175
May:Pfizer785
Covidien199
June:Innothéra27
Sept:Schering Plough160
Oct:GSK121
Baxter Healthcare 200
