A drug which is protected by a patent may not be copied for a certain period of time (usually 20 years). After this period of time, the market is opened to cheaper generics and the former patent holder inevitably faces a dramatic reduction (possibly up to 80%) in sales revenue. Jobs can be lost and the local community and wider economy can also suffer.
The active ingredient in Lipitor, the best selling prescription drug in history, is produced here by Pfizer. Lipitor came off patent protection in the US in November 2011 and Irish patent protection is due to expire in May of this year. Sanofi’s blood thinning drug Plavix is also to lose its protection this year, while Eli Lilly’s anti-psychotic drug Zyprexa came off patent in April 2011.
The pharmaceutical sector is hugely important to the Irish economy. It employs over 24,500 people directly and almost the same number indirectly. It accounted for €56.8 billion of exports in 2010, representing 63.55% of our total merchandise exports. Furthermore, it has invested over €7 billion in the State in the last ten years and pays the Exchequer almost €3 billion in taxes on an annual basis.
Given the importance of the sector to our economy, it is no surprise that concerns have been raised about the potential impact of what is known in the industry as the “patent cliff”. Many fear that drug companies may close their manufacturing bases here as generic producers in India and China take over production. Even if drug companies continue to manufacture in Ireland, the export value of the drugs produced will be significantly reduced. While it is true that the “man on the street” will have access to cheaper medicines, this may come at a significant cost to the broader economy.
The more optimistic amongst us, however, take the view that drug companies will rise to the challenge and seek alternative sources of revenue through the development of new markets and specialised products. In the US, for instance, when Lipitor lost its patent protection, Pfizer responded by setting up a direct mail service and implementing discounts and incentives for patients, insurers and companies that process prescriptions. Such incentives were designed to ensure that Lipitor would be as cheap, if not cheaper, than the generics. Pfizer is itself manufacturing a generic version of the drug, Atorvastatin, and distributing it through another company, Watson Pharmaceuticals.
While manufacturing facilities located in Ireland may be closed in the coming years and jobs may be lost, the Irish Pharmaceutical and Healthcare Association expects that new jobs may be created by an increase in the number of clinical trials conducted in Ireland. Undoubtedly, our 12.5% corporation tax rate, dubbed Ireland’s “oil” by our Minister for Finance, coupled with decreasing labour costs, an educated workforce and a Commercial Court renowned for its speedy resolution of patent disputes, will continue to draw the large drug companies to our shores.
Contributed by Mary Drennan and Carol Plunkett.
