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Paul M. Henchin on why Ireland needs to mobilise its pharmaceutical industry to compete.

Ireland is one of the world's largest producers of life-science products, with many bulk-manufacturing facilities located here. They have received significant investment over the past few decades, contributing heavily to the economy.

Even prior to the global financial hurricane of 2008, the Irish pharmaceutical sector had  shown signs that it was starting to lose its ability to attract investment from leading pharmaceutical giants, while Singapore was seen as a more attractive option. Recently, many of Ireland's pharmaceutical manufacturing facilities have been viewed as uncompetitive by their multinational parents.

This has lead to speculation over the long-term sustainability of this manufacturing sector in Ireland. The main cause as reported in the media is the cost of manufacturing in Ireland, primarily labour and energy costs.

Although somewhat true, other factors contributing to this situation have been identified by the latest World Economic Forum Global Competitiveness Report 2009-2010 and the Business Environment Risk Intelligence (BERI), the Labour Force Evaluation Measure (LFEM) on Ireland. It also casts doubts on the credibility of Ireland's knowledge economy, as a means to steer the country from recession.

Starting with the 2009 BERI Labour Force Evaluation Measure (LFEM), Ireland was  ranked number seven in the world with an overall value of 66 which implies, "superior performance with advanced technology. Labour-unit costs are low, relative to the value of goods and services produced". (A score of 66- 100 implies a consistently productive labour force).

At first glance this is positive, considering the current economic climate but a more in-depth analysis of this BERI measure reveals some worrying observations for Ireland with respect to other countries that have significant pharmaceutical manufacturing and R&D capability, such as Switzerland, Belgium and Singapore.

• Ireland is one point removed from being defined as having "some capacity for producing high-value added goods and services requiring advanced technology; acceptable unit costs but wages and compulsory benefits and taxes are eroding profitability on labour-intensive work; disputes with employees are infrequent".
• Belgium and Switzerland are ranked higher than Ireland by seven and nine points respectively.
• Singapore, which is ranked highest, is 23 points ahead of Ireland

The latest World Economic Forum Global Competitiveness Report 2009-2010 and changes since the 2008-2009, reports that:

• Ireland has dropped three places with an overall ranking to 25.
• Belgium has moved up one place with an overall ranking of 18.
• Singapore stayed the same with an overall ranking of four.
• Switzerland has replaced the US in first place.

Digging deeper into the report, Ireland is also performing poorly with respect to:

• university-industry collaboration in R&D
• company spending on R&D
• production process sophistication
• capacity for innovation

Recent unnecessary strike action by unions, reductions in funding for educational programmes, and a failure to invest in solutions to modernise Irish infrastructure and manufacturing by Government and industry have contributed to the aforementioned rankings and, worse still, raise questions marks over the strength of the Irish knowledge economy as a means for economic recovery. 

With this in mind, the World Economic Forum Global Competitiveness Report 2009-2010 and the BERI Labour Force Evaluation Measure on Ireland, pose serious questions on how the Irish pharmaceutical industry can achieve sustainability.

The cornerstone of the new growth theory is that economic growth is a result of the increasing returns associated with new knowledge. The growth potential of an economy imparted with increasing knowledge rather than with labour or capital investment is thought to be unbounded. The new growth theory has two main points:

i. Technology progression is a product of economic activity.

ii. Unlike other products of economic activity (ie, physical objects), technology is essential to increasing growth.

The reason technology is not only a product of economic activity but also an enabler for increasing economic activity is that technology increases knowledge. As with other methods for increasing knowledge (eg, research and training) the greater the investment in technology, the greater the driving force for economic growth. Not only does technology have to advance, but so do services and policies supporting it as well.

To create sustainability within the Irish pharmaceutical industry, a model for continuous improvement needs to be adopted by policy makers and business leaders, while also focusing on issues such as:

• Establishing grants and tax rebate schemes to create solutions to modernise manufacturing processes
• Asset evaluations and feasibility studies to identify where solutions and new knowledge can be used to reduce costs, increase quality and throughput
• Continued investment in workforce modernisation, through increased funding for training, from Fás to third-level institutes.
• Leasing programmes for latest technologies from suppliers, for case development and student-training programmes
• Ongoing graduate placement programmes with support and feedback from manufacturing companies
• Commitment to ongoing technology modernisation by manufacturers, evaluations every five years to ensure continuous innovation and sustainability
• Commitment from technology suppliers to provide resources and solutions to support continuous market development

By investing in technology, proper knowledge utilisation through education and adopting policies for continuous improvement, the seeds for growth are planted in an environment where they can thrive and flourish.

For sustainable manufacturing, the State, manufacturers, and suppliers have integral roles to play in creating the enablers and environment for sustainable growth. As the saying goes knowledge is power; in today's pharmaceutical industry it is more accurate to say knowledge is growth.

Paul M. Henchin is writing in a personal capacity

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