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‘Time for UK to wake up before it’s too late’ says former Novartis Horsham site director

Novartis aerial shot

Novartis aerial shot

Until retirement, Michael Carroll was site director at Novartis Horsham - at a time when it was arguably the most important employer in the town.

Since his departure the company has announced the closure of the Horsham site. In this special article for the County Times he looks at the challenges and changes facing the pharmaceutical industry.

I asked the taxi driver how business was? Full invective flowed!

The pharmaceutical company had just closed its manufacturing and related development activity with hundreds of job cuts and his annual takings were a staggering 50 per cent down from the previous year.

More gloom and doom was to follow when that same company prosecuted the scheduled closure of its nearby drug research operation in the near future.

Restaurants, hotels, shops and an array of small business service providers were all suffering and it was only going to get worse!

This rather dismal outlook was not helped by the rains sheeting down on Macclesfield, a Cheshire town and the home to several thousands of jobs initially created by the pharmaceutical arm of ICI and latterly sustained by its successor company, Astra-Zeneca, a town which has become almost totally dependant for its local economy on this one global company.

In my current work for the Technology Strategy Board, a body charged with encouraging innovation in the advanced science and engineering sectors for UKplc, I had not too many months earlier, visited Sandwich in Kent and there had the identical story recounted.

Until its closure in 2011, this location employed close to 6,000 jobs for Pfizer, the world’s largest pharma company, where Viagra and other global best selling medicines had been discovered and produced.

Whilst we may think of Kent as the ‘the garden of England’, there exists pockets of extreme poverty in that same county, and Sandwich and its environs is one of them; the local population’s dependency upon Pfizer was thus fundamental to living standards and to civilisation.

Thus, although having retired from my role as site director at Novartis in 2009, I was sad but not entirely surprised by the announcement that its manufacturing arm was to close; this, despite it being one of the best performing operations of its kind in the global Novartis manufacturing network with a very progressive culture and a proud record of achievement.

Slightly more surprising, but only slightly, was the later news that it’s research activity was also to close with the loss of a further 500 high value added jobs.

And so the closure news afflicting Novartis is not a phenomenon specific to Horsham alone ; rather it is a national dynamic which has been at work for over 25 years. I know the industry well, and by my reckoning, since 1995, over 50 pharmaceutical manufacturing sites have closed in the UK with the loss of close to 25000 direct high valued added jobs and adversely impacting a further 125,000 jobs which closely depended on this sphere of activity. Aside from the significant social consequences of these closures, think of the loss of income tax revenue to the treasury alone and the loss of pharmaceutical exports impacting our Balance of Trade.

Having attracted much our manufacturing base due to its lower corporate tax rate, The Irish Republic is now a net exporter of medicines to UKplc! At a time when no sane person can now doubt that the rebalancing of the economy is a national imperative, this picture is a decidedly unwelcome one!

Why has this state of affairs been allowed to happen and what are the key factors at work? In his famous book, The Age of Unreason, the celebrated business commentator, Charles Handy, cited the following:

“If you put a frog in water and gradually raise the temperature over a period, the frog adapts and survives, until boiling point approaches whence the frog dies!”

In other words, incremental creep in environmental conditions passes almost in-perceptively, few people noticing the deterioration or even caring, until it is all too late. This is what has happened to the UK pharma industry, exacerbated by, short term thinking on both sides of the political divide, a lack of a coherent growth strategy for an industry politicians are quick to publicly acclaim as a ‘jewel in the national crown’, and bolstered by an innate ignorance on the part of government departments of the fact that research development and manufacturing are linked activities is a value chain, and once you lose once element, other elements follow over time.

And whilst pharma activity in the UK has declined in relative terms, it remains strong in the likes of France, Switzerland and Germany, nations which have a clear understanding of which industries are vital to the national interest, and which accordingly are zealously protected.

Meanwhile the likes of Eire and Singapore have made rapid progress over the last 25 years, progressively capturing important footholds in manufacturing and thereafter development and now research.

Why do multi national companies seemingly have a tendency close its UK operations in preference to their overseas assets?

Firstly, like all industries, the pharma companies are now under great pressure to reduce the cost of our medicines whilst maintaining product quality and sustaining a steady stream of new treatments in areas of unmet need such as dementia, motor-neurone disease, Alzheimer’s, COPD, and Parkinson’s.

Secondly, the discovery and development costs of innovating a new medicine now exceeds 1 billion dollars whilst the success rate is just 1 in 10,000 new drugs invented.

Lastly, they need to satisfy their immediate shareholders and provide an acceptable return on their investments.

Very few readers of this section will not have pension schemes which do not invest in the likes of GSK, Roche, and Novartis!

And so if you are sitting in Basle, and you need to make some important strategic decisions as to where and where not to have expensive operations, why would you want to invest in the UK when, undertaking clinical trials is increasingly expensive and bureaucratic.

The UK is the slowest to adopt new drug treatments in the whole of Western Europe.

There is no incentive to manufacture the latest generation of complex drugs in the UK, thus improving our balance of trade.

Following the drug pricing negotiation with industry, every Health Minister celebrates a reduction in the drugs bill as a victory when in essence we should be spending more of our wealth on preventive and life saving treatment interventions, which the end will actually save the NHS money!

These are aspects which are not universally replicated elsewhere and which thus put the UK in an uncompetitive light when objectively viewed from afar.

So don’t blame the pharma companies for closing assets and certainly not their UK employees who in my experience are as skilled as any in the world. Rather, the politicians need to demonstrate an understanding of what drives a successful economy in a competitive global environment and to display imaginative leadership and sound long term execution of policies which attract an retain the best.

One of my bosses used to remark: “There are three types of country. Those which make things happen, those that think about making things happen, and those that wake up one morning and wonder what the hell did happen!”

Time to wake up UK before its too late!

FOOTNOTE: Until retirement, Michael Carroll was site director at Novartis Horsham. He now undertakes work for the Technology Strategy Board, and sits on the board which regulates the dental profession, the General Dental Council

 

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