Continuing with the themes of job creation together with creative financing & where Britain has a competitive edge (see Categories/Chairman?s Blog/Fairness/ Job Creation & Creative Financing in the right hand column index), there are major players in the pharmaceutical industry with important Research & Development (R & D) facilities in the UK, such as GlaxoSmithKline (GSK), its biggest drugs company and the Swedish-British merger of AstraZeneca. However, job redundancies result when local research budget funds are diverted to other lower cost parts of the world e.g. GSK has now opened a research facility in Shanghai, China where there is then the additional prospect of major higher-value sales. The industry is also under financial pressure when governments worldwide are expecting to pay less for medicines to cut their health budgets and lucrative drug patents are expiring allowing competition to sell cheaper, so-called generic copies. Pfizer,the largest pharmaceutical company in the world, will now work with Biocon, the largest biotech company in India, to market « biosimilar » (i.e. genetic impersonations but not identical generic copies) insulin treatments designed and manufactured by Biocon. Here in France, Sanofi-Aventis announced the closure of four research facilities last year. The problem is global for the industry with the financial hurdles to successful medical drug innovation becoming ever higher and then the regulators to convince before final launch.
The UK is said to be one of the most conservative countries in Europe when regulating clinical drug trials and, with a separate body NICE – the National Institute for Health & Clinical Excellence ? responsible for advising the NHS on drug supplies, considered one of the slowest adopters of new medicines. There is also not the final prospect of major sales in the local market. Indeed, GSK spent 39% of its R & D budget in the UK last year but the country only represents 5% of its worldwide sales. However, in an effort to become more efficient the industry is looking to focus internally on fewer areas and to also buy in other work from an increasing number of smaller Biotech companies, often backed by the big drugs companies themselves e.g. GSK with its 18% participation in Convergence Pharmaceuticals, a Cambridge Science Park start-up. This offers a potential source of financial backing for R & D scientists looking to launch new businesses in the field of biotechnology.
There is seemingly room for improvement in Britain which to date has been nowhere near as successful as e.g. the US in producing successful biotech companies. However, there is a market there in the major pharmaceutical companies for such products and the opportunity to exploit the innovative benefits of spreading such creative work over a much larger number of smaller laboratories, when the likelihood of coming up with something new could be enhanced. This is why it is important that the government is considering a so-called patent box to foster R & D in the UK. If introduced the system would provide tax breaks for revenues from ideas patented in Britain and, together with the right regulatory and economic environment, provide a boost for the development of more innovative companies and their associated jobs.
Thanks , I have just been looking for info about this topic for ages and yours is the best I » »ve discovered so far. But, what about the bottom line? Are you sure about the source?
Thank you for your constructive comment. The bottom line is key to such business decisions and why Biotech companies are relocating their expensive R & D operations to lower cost countries such as China which also offer major sales prospects for their products. However, as you also point out, a major source of their profits is of course in these costlier western (developed) markets where the higher prices paid for medical drugs by consumers essentially subsidise the lower prices these same companies have to charge in less developed (poorer) markets.