'Big pharma' is well named. For an industry that is highly research intensive and where it takes an average of 12 to 13 years to bring a medicinal product to market, it requires a significant effort, and size matters for success.
The pharmaceutical industry is a cornerstone of Europe’s knowledge-based economic development. It employs 800,000 people and produces an output worth €220bn. It is a major contributor to Europe’s trade, with the EU being the world’s number one trader in medical and pharmaceutical products. Total trading is worth €157bn, with exports at €107bn.
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Global trade is important to its continuing success, with the US its prime destination, though emerging and developing countries are becoming increasingly important. Europe accounts for half of the pharmaceutical imports to these fast-growing markets. Free trade is therefore essential, and Europe has been active in reducing trade barriers and encouraging regulatory, intellectual property and pricing convergence with a host of trading partners around the globe.
In particular, the Transatlantic Trade and Investment Partnership (TTIP) free-trade agreement currently being negotiated between the EU and the US is a key platform for future growth. With Europe and the US accounting for 80% of global sales and 75% of global R&D, the TTIP could open up markets and help bring efficiencies, reduce costs, increase transparency in pricing and reimbursement systems, and improve the environment for developing new medicines.
Critical mass is also being formed in the pharma and biotech hotspots of Europe. A leading example is the UK’s Med City initiative launched in 2014 that brings together the R&D, manufacturing and commercialisation strengths of the London-Oxford-Cambridge life sciences sector. Established by the Mayor of London and King’s Health Partners, Imperial College Academic Health Science Centre, UCL Partners and the universities of Cambridge and Oxford, it creates a life sciences cluster on a scale equivalent to the big US hubs of Greater Boston, San Francisco Bay Area and San Diego. In pharma, big (and connected) is beautiful.
Douglas Clark is director of Location Connections, an FDI consultancy for smart companies and winning locations. E-mail: douglas@locationconnections.com