Not a member? Sign Up

Reasons for Joining

    Address your challenges through knowledge sharing with peers from our global network of specialists.

    Benchmark your business initiatives with the who's who in the field.

    Hear from industry pioneers how to maximize ROI in today's challenging economy.

    And best of all It's FREE!
Sign in using your existing
Pharma IQ account
Username or Email:

Sign Up  |  Already a member? Sign In  |  Visit IQPC.com  
Pharma IQ


Will Pharma Outsourcing lose out to Obama’s Victory?

Contributor:  Niamh Madigan
Posted:  11/07/2012  12:00:00 AM EST  |  6

Rate this Article: (4.7 Stars | 3 Votes)
Tags:   Pharma outsourcing | Niamh Madigan | Pharma 2020: Which Path will you take | PwC

So Barack Obama has secured another term of office in the US and I’m sure it will be the main topic of conversation around the water cooler today. Even though he is the US president, globally we will all be affected in some way by the decisions he makes and his next four years in the Whitehouse, apart from if you live in Germany!
 
But I like Barack and  we actually have a lot in common. We both claim Irish heritage. Ok, I’m fresh to UK shores, but  Obama’ s  great – great –grandfather was born in a little village called Moneygall in Co.Offally, Ireland, which  is just  'a hen’s race',  as they say back  home,  from where my mum grew up! Sure we’re practically related!
 
Indeed there was much excitement in that village in May last year, when Obama visited his roots and even indulged in a pint of the black stuff  in the local pub. Of course it did much to strengthen the US / Irish ties, which has always been fairly healthy, since like Obama, over 34.7 million Americans claimed to have Irish heritage in 2010.
 
But a month later, 133 jobs were lost in Cashel, Co Tipperary in Ireland, with the closure of the Johnson & Johnson facility there. The US multi-national decided to close its factory and cease operations in the town. The company said it was closing the Cashel plant due to its decision to end development and manufacture of a coronary stent.
 
It could be a coincidence, but we know that Obama has spoken out a lot on his campaign trail about keeping and creating more jobs in the US. He has criticised the outsourcing of jobs to countries like India saying that the US needs to create jobs locally, which if you are from the US makes perfect sense. “Let’s stop giving tax breaks to businesses that ship factories and jobs overseas. Lets reward companies that create jobs an manufacturing right here in the United States of America,” he recently told a crowd at Tampa, Florida.
 
So will his re-election result in fatalities to Pharma relationships outside of the US and send  out shockwaves  to pharma  global outsourcing?
 
Having come from a country which flourished as a result of US outsourcing, I for one know the pity of when those jobs which were created cease to be or go back to the country which outsourced them.  I recall another US presidential visit ,  when Bill Clinton came to Ireland in 2000. Nicknamed the Irish hero, he did as much for the Irish economy as he did for Irish politics, as a result of the number of factories and manufacturing jobs he sent our way – hell he was the first person to drive down the new M1, before the tarmac had time to dry! Of course Irish generous tax allowances encouraged overseas firms to set up shop, which they did in great numbers.
 
And the Pharma industry was one industry that benefitted from Clinton’s tenure - currently 8 out of the world's top 10 pharmaceutical companies operate in Ireland! The sector employs around 25,000 people according to the Irish business lobby group IBEC, and produced 26 billion euros ($32 billion) worth of products last year, representing 28 percent of total goods exported.
 
But other countries  who have also thrived as a result of outsourcing, may also be affected from an outsourcing cull, “As the Indian pharma industry is sustained mainly on outsourcing, especially from the US, the future does not appear very smooth,” explains pharma major,  Promed Group's President Deepak Bahri. The Promed group manufactures and delivers branded as well as generic pharmaceutical formulations to Russia, CIS, south-east Asian countries, the UK and EU.
 
But Patrick Cogny, CEO Europe & Senior VP, Infrastructure, manufacturing & Services of Genpact  foresees continued growth in this area , certainly in a back office perspective, as Pharma companies have long-term plans to squeeze money out of the back office to re-invest in R&D and manufacturing.

And added to that a report by PWC; ‘The Changing Dynamics of pharma outsourcing in Asia’  cites that  China could overtake the US in around 2025 to become the world’s largest economy and will continue to grow to around 130% of the size of the US by 2050. India could also grow to almost 90% of the size of the US by 2050. Such economic growth would create major pharmaceutical markets regardless.
 
by Niamh Madigan
 

Fnd out more about this topic and more through our PWC Webinar,  'Pharma 2020: Which path will you take?' with Steve Arlington, Global Advisory Leader Pharmaceuticals & Life Sciences, PricewaterhouseCoopers on November 22nd at 8am EST, 1pm GMT.
 
 
Have Your Say
Rate this feature and give us your feedback in the comments section below


Niamh Madigan Contributor:   Niamh Madigan


* = required.

Not a member yet? Sign up
User Name:
Password:
You Should Check Out:


6
 Comments
Sign in or Sign up to post a comment
View Profile
  Report Abuse  
Robert.Woodman 11/08/2012 1:57:12 PM EST

In my opinion, Romney would not have actively discouraged outsourcing -- he was opposed to eliminating tax breaks for companies that off-shore business -- but neither would he have encouraged it due to the political risk that would involve in this slow-growth recovery. President Obama has stated that he intends to eliminate tax breaks for off-shoring and create tax breaks for on-shoring business in the U.S. That's a different proposition. Whether the President's position is the correct one remains to be seen; I think it is correct, but results, not prognostications, are what really matter. Pharma will continue to outsource operations to other countries. There are many reasons to do so, cost being one, but not the only, important driver of such decisions. The growing market in Asia will pretty much compel outsourcing to Asia. If Europe can't find its way out of its current economic mess, we may see Pharma pull back from European outsourcing in the near term, and perhaps for a longer period of time
Replies (0)
View Profile
  Report Abuse  
Niamh Madigan 11/08/2012 11:01:29 AM EST

Thanks for all your comments, great that its got you engaged. From my point, Barack made his point clear when canvassing that he believes US jobs should stay in the US, so it's a policy issue rather than a personal one. I mention in the piece of my experience of coming from a country whose economy grew because of outsourcing and the effects can be devastating when those jobs are cut. But the East will still thrive whatever decisions are made.
Replies (1)
View Profile
  Report Abuse  
nambler 11/08/2012 10:37:42 AM EST

Hi Clare, not sure that this article can be compared to Donald Trump's somewhat sweeping commentary on the election and its outcome - all I read is a thought provoking headline (standard practice for media, I believe) and the presentation of both perspectives, US and rest of the world. Really interesting discussion point though adn if US companies don't outsource to these emerging markets, there will be others that do. Interested to see how this impacts the pharma industry in the coming years, if at all...
Replies (2)
View Profile
  Report Abuse  
pftaylor 11/08/2012 10:26:43 AM EST

Personally, I think its a bit extreme to insinuate someone is a "national laughing stock" based on a blog/opinion-piece, which - let's face it - could only really be accused of "several counts of mild postulation" at worst. The only lesson anyone should learn from Donald Trump is that business success, bad hair and gold-plated hotel suites doesn't make someone a political prophet.
Replies (0)
View Profile
  Report Abuse  
davidgrhodes 11/08/2012 10:13:15 AM EST

With all due respect, I think that the impact on outsourcing (and everything else) would have been much more severe if Romney had been allowed to take office and impose Bush-era policies that nearly sunk the US and global economies. As for blaming Obama for a J&J business decision, that's a stretch. Companies open and close offshore operations pretty frequently and in response to a variety of factors and experiences. Consider, for example the surge and waning of pharma outsources to Puerto Rico. Finally, your closing remark that growth in India and China "would create major pharmaceutical markets" is clear. However, as we have seen in the electronics industry, it is essential to guard our IP - difficult if the production is outsourced to the big market itself.
Replies (0)
View Profile
  Report Abuse  
clare.matti@duke.edu 11/08/2012 10:01:50 AM EST

Okay, so you should learn a lesson from Donald Trump: you make yourself a national laughingstock when you imply that the re-election of the President of the United States is a cause for alarm. Secondly, you should spell Mr. Obama's name correctly.
Replies (0)

Post a Comment
Sign in or Sign up to post a comment

Advertisement

Events of Interest
Download Brochure

Please complete the information below to complete your download.

Please note: That all fields marked with an asterisk (*) are required.

First Name *
Last Name *
Job Title *
Company Name *
Email Address *
Telephone *
Country *
Where did you hear about us? *

I would like to receive information about sponsorship and exhibition opportunities

Yes, sign me up for the FREE Pharma IQ e-newsletter, including information on FREE Podcasts, Webinars, event discounts and online learning opportunities.

Advertisement

Recent Activity