APPENDIX 3
Memorandum submitted by the Association
of the British Pharmaceutical Industry
INTRODUCTION
The Association of the British Pharmaceutical
Industry (ABPI) represents in the United Kingdom the research
based manufacturers and suppliers of prescription medicines.
The Association's membership provides directly
about 70000 high value jobs in high technology areas and of this
about one third of the jobs are in manufacturing. Indirectly,
the Association's membership also accounts for employment for
about six times the number of its direct employees in ancillary
industries and services supplying the industry.
The maintenance of a thriving pharmaceutical
manufacturing sector and encouragement of investment in it is
a prime concern of the Association and the subject of ongoing
dialogue with Her Majesty's Government.
The Association therefore welcomes the opportunity
to contribute to the House of Commons Trade & Industry Select
Committee inquiry into the future of manufacturing industry in
the UK. Over the last nine months the ABPI has been undertaking
High Technology Manufacturing Project looking at the factors that
support manufacturing competitiveness and identifying options
for the UK.
While we have addressed the three strands of
the enquiry, we have focused more on the interim findings of the
ABPI High Technology Manufacturing Project. We would be delighted
to brief the Trade & Industry Committee in more detail and
answer any questions that may arise.
KEY POINTS
Pharmaceutical manufacturing is a success story
for the UK—in 2005 the trade surplus was £3.2 billion
in 2005, with total output of £11 billion. Nevertheless,
we cannot become complacent with globalisation driving competition,
with countries such as Ireland, Switzerland, India, Puerto Rico
and Singapore capturing the manufacturing of new products.
The ABPI will be briefing Government in relation
to our project in October—we would be delighted to brief
the Committee in more detail. The project has been in three phases:
The ABPI High Technology Manufacturing Project has being carried
out in three phases:
1. A survey of manufacturing investment
plans across UK sites; to identify where investment for new products
will be made in coming years and loss of existing manufacturing;
develop projections for pharmaceutical and biopharmaceutical industry
output and its impact on the balance of trade (completed).
2. Identification of the key drivers for
investment in pharmaceutical and biopharmaceutical manufacturing
(completed).
3. Identification of potential levers to
attract high technology manufacturing investment, with the advantages
and disadvantages of each (for completion by mid-October).
The key issues arising from the ABPI initiative
are as follows.
— The ABPI believes there will be a
significant decline in pharmaceutical production in the UK and
a failure to capture new investment even in biopharmaceuticals,
driven by:
— Other countries out-competing UK
in attracting investment to produce innovative medicines.
— The loss of the UK's distinct competitive
advantage of skills supply and capability: caused by decline in
supply of technical skills in the UK coupled with up-skilling
of emerging countries.
— Significant incentives for investment
through reduced corporation tax or incentives or cost bases in
certain countries.
We believe that there is a real potential for
the loss of R&D in the longer term: there is an "elastic"
relationship between R&D and manufacturing, through:
— Linkage of development & manufacture
("D&M") which assists process development and scale
up of pharmaceutical and biopharmaceutical production—20%
of all sites in the UK are co-located with R&D facilities.
— A common skills base, especially
technical support.
If the UK is to sustain its position as a high
technology manufacturer of pharmaceuticals and biopharmaceuticals,
thereby capturing the value of R&D and innovation, the UK
must respond by focusing on:
— Complex secondary and tertiary medicines'
manufacture associated with innovative and emerging technology
platforms—drug delivery and formulation are increasingly
critical in the efficacy and safety profiles of a medicine.
— The ability to deliver new products
to market on time with consistent high quality that always satisfies
the regulators
— Networks of high technology manufacturing
excellence and SME clusters
— The blockers to investment and options
on developing potential incentives for new investment.
TRENDS IN
UK PHARMACEUTICAL AND
BIOPHARMACEUTICAL MANUFACTURING
In 2003-04 the ABPI carried out a survey of
pharmaceutical and biopharmaceutical manufacturing in the UK.
Analysis of this survey showed that the trade balance for pharmaceuticals
was expected to go negative in 2007-08 (Figure 1).
In 2006 the survey was repeated to update the
model: the trends predicted for 2005 appeared to bear out—there
was a decline in output and also a decline in the trade balance,
although this was not as great as in the base case scenario.
These data have been updated following the survey
in the first half of 2006 and this, along with the assumptions
made in the model are included in Annex A.
RESPONSES TO
THE TRADE
& INDUSTRY COMMITTEE
The work of UK Trade and Investment in supporting
exporters and encouraging inward investment
"In particular, the Committee will be
examining the new Strategy for UKTI to see whether it will assist
in achieving the Public Service Agreement target of delivering
"a measurable improvement in the business performance of
UK Trade & Investment's international trade customers"
and maintaining the UK "as the prime location in the EU for
foreign direct investment"
Competing solely within Europe is no longer
an option—industry today is truly global and the most significant
competition is from countries outside the EU. Emerging nations
are seeing science, R&D and high technology manufacturing
as mechanisms to accelerate their economy and are developing a
significant skills base, along with real incentives for investment.
For example:
— China is producing very large numbers
of chemistry and other science graduates, but it is not just this
that will make them attractive for investment: anecdotally at
least our members report that the brightest students want to follow
a science career.
— Singapore has invested heavily in
manufacturing and research infrastructure and is providing corporation
tax breaks to companies investing there. The Singapore Economic
Development Board, also funds a scheme whereby graduates are provided
free of charge to companies in other countries for up to two years,
for them to enhance their experience—the only caveat is
that the graduate returns to Singapore for a minimum period of
two years.
UKTI is not the only factor or organisation
out there trying to attract inward investment. Many others are
involved, especially RDAs. On a number of occasions we have had
significant comment from our colleagues overseas that the RDAs
in the UK appear to be competing with each other at major investment
or trade conferences, creating confusion, deterring investment
and wasting tax payers' money.
UKTI has been effective in attracting investment
within the constraints by which the UK Government ties their hands—in
truth countries need to compete for investment and without the
ability to incentivise such investment, UKTI's success rate is
likely to be low.
Consequently to enhance the ability of the UK
to attract investment we would recommend the following:
— The role of the RDAs in promoting
their region at overseas conferences and trade events should solely
be channelled through UKTI—thereby a coordinated and consistent
approach to trade conferences should be developed.
— The clarity of incentive packages
and support needs to be greatly enhanced, so that UKTI and the
RDAs can compete globally for inward investment—such packages
should not only include fiscal incentives where possible, but
also support for training and accelerated planning approvals.
The current piecemeal approach to incentives does not convey what
is available in the UK in a readily digestible form.
Finally, consideration should not only be given
to new investment in to the UK. Companies with existing sites
must also be supported. In one recent example a significant investment
at a site was lost, because it took two years to get approval
for a road closure (let alone actually close it!). The road split
a site and was only used, with very few exceptions, by employees
to access offices and other company facilities.
Public Procurement
"The scope for government support for
UK industry. The Committee would welcome any information about
the role of public procurement in supporting local manufacturers
in other EU Member States"
Within the UK the pricing of in-patent, branded
and licensed medicines is regulated by the Pharmaceutical Price
Regulation Scheme (PPRS). This mechanism has provided a stable
environment of benefit to industry, the NHS and ultimately patients.
The PPRS instigated in 1957, is negotiated between Government
and the pharmaceutical industry every five years and seeks to
balance the price of new medicines whilst supporting a successful
and profitable industry. It is designed to encourage the development
of innovative medicines.
Compared to other EU Member States, this has
supported long-term investment in R&D by the industry, although
it does not provide clear incentives for manufacturing. Currently
there is an Office of Fair Trading market study in to the Scheme,
looking not only at the mechanism per se, but also in terms of
its ability to attract investment. Further information can be
seen in the ABPI brief Encouraging innovation in medicines[15].
Any proposals for change arising out of the OFT study, should
be able to demonstrate greater effectiveness than the current
scheme in supporting innovation and investment, and should also
be considered against the standards of regulatory impact assessment.
Skills Shortages
"The extent to which such shortages
are hindering the development of manufacturing industry; what
skills are needed—for both management and other workers;
the effectiveness of the dialogue between industry and education/training
providers, including the role of the Sector Skills Councils; and
co-ordination of provision within Government."
In November 2005 the ABPI published a report—Sustaining
the Skills Pipeline in the Pharmaceutical and Biopharmaceutical
Industry[16].
This reported and built upon the results of a major survey of
ABPI member companies which sought to identify the current situation
with regard to the availability of key skills in the UK labour
market, from an end-user perspective.
Some of the key issue that this highlighted
are as follows:
— A decline in the availability of
practical skills, both in vivo skills and other technical
skills. This is an area in which the UK has traditionally been
strong but this is no longer the case. The problem is compounded
by an increasing lack of teachers of these skills essential to
high technology industries.
— A decline in the levels of basic
skills such as literacy and numeracy at all levels. A high level
of these basic skills is essential to high technology industries.
There has been a noticeable decline in these standards. This can
generally be traced back to the school curriculum and the report
makes recommendations for developing the school curriculum to
encourage and develop a higher level of these skills competitive
with that of the nations that UK industry competes with in the
global marketplace.
— The need to stimulate an interest
and demand for science, including manufacturing. While Government
has generally supported science and technology well, the number
of graduates in basic sciences such as chemistry and physics has
declined. Recruitment of suitably trained scientists is an increasing
problem for UK companies The reasons behind this decline are complex
and include such factors as reduction in funding of laboratory-based
courses, perception of high student debt coupled with perceived
poor salary and career expectations, and students being "turned-off'
science for a variety of reasons including restricted practical
experience.
The report makes a number of recommendations.
These include:
— Development of a 14-19 Diploma in
Science with appropriate support from industry, to support science
skills and careers
— The setting by Government of targets
for higher education funding councils to expand physics and chemistry
courses in line with UK strategy on science and innovation
— Provision of better information at
the schools level to encourage the uptake of scientific careers
in industry
— DfES and Government to consider
establishing Technical and Vocational University Funding streams
through the Regional Development Agencies and LSCs, with appropriate
engagement with the Funding Councils.
The ABPI has been working with SEMTA—the
Sector Skills Council for Science, Engineering and Manufacturing—and
has recently signed up to a "Sector Skills Agreement".
However the discussions with SEMTA have been difficult and protracted
and it will be critical that SEMTA delivers tangible and measurable
outcomes both activity and impact based.
In addition ABPI has just started exploring
engagement with the new National Manufacturing Skills Academy.
However unlike other sectors, the industry requires scientific
technical skills and we will need to be sure that it provides
and supports the needs of pharmaceutical manufacturing facilites.
15 Encouraging innovation in medicines, ABPI
September 2006. See www.abpi.org.uk>>Publications>>Encouraging
innovation in medicines. Back
16
See: Sustaining the Skills Pipeline in the Pharmaceutical
and Biopharmaceutical Industry, ABPI, November 2005, this
can be accessed via www.abpi.org.uk>>publications>>ABPI
and the industry. Back
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