Top Drug Lobbyist Says U.S. Losing Resarch Jobs Overseas
The U.S. risks losing thousands of research jobs as countries led by Singapore, Ireland and South Africa boost incentives to woo drugmakers, said John Castellani, head of a pharmaceutical industry lobbying group.
Those countries are outpacing the U.S. with tax incentives, increases in government research spending and efforts to train scientists, according to a study released today by the Pharmaceutical Research and Manufacturers of America. That has many U.S. companies considering shifting their investment overseas, according to the lobbying group that represents most of the largest drugmakers.
The pharmaceutical industry spends more on research than any other industry in the U.S. and employs 650,000 people, according to PhRMA. Drugmakers have been under pressure to cut costs as they brace to lose $120 billion in sales to generic competition by 2015 in the U.S. and Europe, according to IMS Health Inc. Drugmakers are looking outside the U.S. for growth and savings.
“It is getting very, very competitive in the world as everyone tries to attract this business,” Castellani said in a telephone interview. “These are the best jobs you can create in an economy. These are the highest-multiplier, best-paid workers, the ones that drive the biggest bang for your investment dollar, and the rest of the world knows that.”
Efforts in Congress
Castellani said PhRMA will lobby Congress to make the research-and-development tax credit permanent and fight any efforts to limit the incentive, which enables tax reductions made on the basis of how much they spend on developing new products. He is also pushing to limit cuts to drug spending in Medicare and Medicaid, the U.S. health programs for the elderly, disabled and poor. A $20 billion drop in revenue for drugmakers could lead to 260,000 job cuts, PhRMA said.
Efforts by the U.S. to keep companies may have little benefit as most of the growth in the pharmaceutical sector will be in emerging markets, said Christopher-Paul Milne, associate director for the Tufts Center for the Study of Drug Development. Spending on drugs in emerging markets, such as China, India and Brazil, is set to double in the next five years to as much as $315 billion -- about the size of the U.S. market, according to IMS, a Danbury, Connecticut-based company that analyzes health trends.
“It is a global industry and has been and it is going to continue to further globalize,” Milne said in a telephone interview. “It has spread out from being U.S.-centric to more U.S., Europe and Japan, to now being worldwide.”
London-based GlaxoSmithKline Plc (GSK) opened a $600 million vaccine plant in Singapore in 2009. Indianapolis-based Eli Lilly & Co. (LLY) plans to invest 330 million euros ($420 million) in a new pharmaceutical plant in Ireland. Johnson & Johnson (JNJ), based in New Brunswick, New Jersey, is looking to buy Chinese companies with treatments for mental illness and cancer, the company’s China unit head said this week.
To lure companies, Singapore’s government has been pushing to recruit and train researchers and has one of the highest rates in the world with about 6,000 researchers for every 1 million citizens, according to the PhRMA study. It also offers a tax deduction of 150 percent for research expenses. As a result, pharmaceutical exports have increased 274 percent since 2000.
Ireland has created programs to fund research, such as $4.6 billion in basic research grants, and offers a 25 percent research tax credit and one of the lowest corporate tax rates of 12.5 percent, according to the report.
Castellani is going to China this week to meet with Chinese companies that are trying to attract foreign investment to build a biotech and pharmaceutical sector there.
“As we go around the world, we are seeing countries develop very aggressive innovation strategies,” Castellani said. “We don’t see the U.S. doing the same thing.”
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