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Ireland’s Brexit Trump Card

Ireland’s pharma story began just over 60 years ago, with Leo Laboratories making small molecule drugs out of Dublin. Today, Ireland hosts each of the world’s top 10 biopharma companies, with biopharmaceuticals making up 55 percent of Irish goods exports – €67.8 billion in 2017. Sitting on the edge of Europe, Ireland has served as a springboard for European markets. But with the Trump administration’s tax cuts coming into force and the UK’s departure from the European Union on the horizon, some have questioned whether Ireland’s biopharmaceutical sector can remain strong. I believe it can.

Major US companies are global corporations and will always require an international presence; and for companies looking to invest in the European market, Ireland will continue to be an attractive proposition. A series of investments made by US companies in Ireland since the legislation was announced – particularly on the biologics side – is evidence of this fact. In 2017, Merck Sharp & Dohme (MSD) invested in two sites (Cork & Carlow), Regeneron (Limerick) announced further expansion of their site, and Janssen (Cork), likewise, announced a major investment.

The first half of 2018 has noted some significant client investments including Chinese Biologics manufacturer Wuxi Biologics, which announced that it will locate its first manufacturing plant outside of China, in Dundalk (40 minutes north of Dublin Airport). Wuxi’s plant will be the largest facility in the world using single-use bioreactors and will employ 400 people when fully operational. Edwards Lifesciences is to build a new plant to manufacture delivery components for its transcatheter heart valve therapies, investing €80 million and creating 600 jobs in the mid-west region, while MSD will invest in a major new drug substance facility in Dublin creating 350 jobs. 

On the face of it, the Trump administration’s recent reduction in the rate of corporate tax appears to pose a challenge to Ireland’s favorable tax environment, with large US companies stating they intend to spend any spare money they have in the US. But these same companies are also pledging to invest in their international operations so I believe that the Trump Administration’s tax reforms will also bring positive developments to the global life sciences market outside the US.

The truth is, the tax environment in Ireland is just the icing on the cake. A more significant pull-factor is the available skills base in Ireland. We’ve made sure we have people with the right skills for the biopharma sector; the National Institute for Bioprocessing Research and Training (NIBRT) has done a tremendous job in this regard.

The second key ingredient to Ireland’s success is its strong regulatory and compliance culture. The Health Products Regulatory Authority (HPRA) is one of the leading regulatory agencies in Europe, and works to make sure plants in Ireland remain in an acceptable state of GMP compliance. Though post-inspection GMP certification of Irish sites by the HPRA covers manufacture of medicines and active substances for all markets supplied, an important by-product of our strong regulatory environment is that, over the years, Irish sites have not received FDA warning letters. In short, all pharmaceutical quality systems have been thoroughly evaluated, and so companies can be confident that their innovative new product will be manufactured to globally acceptable standards of GMP. Without this vital infrastructure, it really doesn’t matter how low your corporate tax rates are – companies will not invest.

Moreover, the mutual recognition agreement (MRA) on GMP inspection between the US and EU – an important step in regulatory convergence – means that the FDA will, following full implementation, be reliant on GMP certification provided by national regulators, such as the HPRA, for medicines and active substances supplied from the EU to the US. At that point, Ireland’s strong regulatory and compliance culture will be even more attractive.

The UK’s departure from the EU arguably throws up much greater challenges to the Irish economy, but for the biopharma sector, Brexit may bring new opportunities. At the time of writing, we still do not know what Ireland – and the EU’s – relationship with the UK will look like. Will it be hard, soft, or somewhere in between? Time is ticking; and when companies have products in their pipelines destined for the European market they need answers soon.

Following the establishment of the single market in 1993, industry has developed supply chains on the assumption of frictionless trade between the UK and the rest of the EU. What often happens is that the drug substance and drug product is manufactured in Ireland, then shipped to the UK for packaging and qualified person certification, before launch into the European market. A harder Brexit would see Britain become a third country without the potential to carry out batch certification directly for the EU market – and that may force companies to validate new supply routes. For companies looking to relocate their supply chains, Ireland, as an established biopharma manufacturing base, makes sense from a logistical point of view. The HPRA is happy to talk to companies looking to relocate or to seek pragmatic solutions to issues that may result from Brexit.

We are already aware of some companies relocating their batch release activities for Europe to Ireland, and we are also seeing some sub-supply services companies and packagers putting jobs into Ireland. Pre-Brexit, IDA Ireland (responsible for attracting foreign investment in Ireland) had not been engaged with packagers to the same degree for a number of years.

Though Brexit is an unwelcome development that is not in Ireland’s interest, it does represent an opportunity for the Irish economy and its biopharma industry in particular, which is well equipped to weather any storm and to capitalize on new opportunities.

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About the Author
Tommy Fanning

Tommy Fanning is Head of Biopharmaceuticals and Food at IDA Ireland.

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