Will Pharma Outsourcing lose out to Obama’s Victory?

Niamh Madigan
Posted: 11/06/2012
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.
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Niamh Madigan
Posted: 11/06/2012

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