Pharmaceuticals set to remain key factor in Irish economy, Central Bank says

Sales of high-end drugs such as Bristol-Myers Squibb’s cancer treatment Opdivo are boosting Irish exports, underscoring the importance of multinationals to jobs and wealth creation in the Republic.

The Central Bank estimates that exports topped €446.2 billion last year, €50 billion more than in 2018, with goods accounting for €240 billion of the 2019 total and services the balance.

Figures in the bank’s Quarterly Bulletin, published on Wednesday, show that during the first nine months of 2019, pharmaceuticals accounted for 62 per cent of the goods sold abroad by the Republic. The bank notes that they dominated growth in exports over the last 18 months.

Multinational subsidiaries in the Republic produce five of the world’s 15 top-selling pharmaceuticals, led by Opdivo, used to treat some forms of lung cancer, whose worldwide sales approached $7.6 billion in 2018.

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Other treatments made here include Pfizer's Enbrel, used to alleviate rheumatoid arthritis, among other chronic ailments, whose revenues also exceeded $7 billion in 2018, and Bayer and Johnson & Johnson's blood thinner Xarelto, which sold almost $6.6 billion two years ago.

Supply network

Central Bank staff say pharmaceutical factories in the Republic are part of an overall supply network, producing active ingredients and other elements of these drugs.

Its bulletin states that many of the drugs are exported to the United States, but a high proportion also go to Belgium, a centre for pharmaceutical distribution for the rest of the European Union.

Regulators such as the US Food and Drugs Administration continue to approve these drugs to treat different diseases, boosting their sales. At the same time, patents protect many of them. This means their manufacturers face no competition from generic copies, allowing them to charge higher prices for these treatments.

Technology exports, aided by the presence of multinationals such as Apple, Google and Microsoft, also contribute strongly to growth, particularly in services, where they account for 40 per cent of the total.

Mark Cassidy, the Central Bank's director economics and statistics, acknowledged that both industries' performance meant the Republic relied heavily on them for taxes and growth.

Even though the bank said growth in exports from Irish indigenous companies was flat last year, he noted that, between the years 2000 and 2017, homegrown businesses’ productivity was ahead of the European average.

Mr Cassidy argued there were “clear benefits” to having global pharmaceutical and high-tech players based in the Republic. “We have no reason to think that the multinational sector, and these subsectors, will not remain strong into the future,” he said.

Brexit remains a nearer-term threat to the Republic’s economy, which the Central Bank believes will continue growing. It predicts that gross domestic product, a measure of all the wealth generated here, will increase by 4.8 per cent this year, down from 6.1 per cent in 2019.

Even if the EU and UK reach a trade deal, the Central Bank expects this to slow growth to 4.2 per cent. Mr Cassidy said that the type of deal that the pair anticipate doing by the end of the transition period this year would mean that the Republic would create 50,000 fewer jobs than if the UK had remained in the trade bloc.