Economists warn us about the “dangers” of having all our tax eggs in one basket – even though, in truth, such abundance is more a welcome challenge than a problem. However, just like Ireland’s tech sector tax bonanza, Denmark faces an analogous “problem”. Last year, two-thirds of its economic growth could be attributed to the pharmaceutical industry, specifically the roaring international success of two drugs, manufactured by Novo Nordisk, that are essentially the same product. The first, branded as Ozempic, is intended to treat diabetes. The second, Wegovy (which is not yet available in Ireland), is branded as an anti-obesity treatment. But both are highly effective for weight loss and have proved wildly popular for this reason.
The company’s market capitalisation is now larger than Denmark’s annual GDP. Its profits surged 45 per cent to about €5.2 billion in the first half of the year, and economists are now debating whether the country needs to publish another set of economic statistics that strips out Novo Nordisk. Sound familiar?
The challenge for the Danes is to avoid the sort of damaging overdependence on Novo Nordisk that Finland faced when Nokia’s phones lost their world-dominating allure to Apple’s iPhone. At one stage Nokia represented a quarter of all Finnish tax revenues and 4 per cent of GDP. Its domination of the economy meant an eclipse of manufacturing and, effectively, a lost decade economically when it declined.
Denmark’s economy has a somewhat more diversified industrial structure and so is less exposed, although the central bank has been forced to keep interest rates lower than it otherwise would. Ozempic’s success, however, has had other consequences, notably prolonged shortages for users in Ireland and elsewhere where demand has outpaced the company’s ability to produce the drug. Some chemists, if they have been able to maintain supplies, have found it necessary to ration them, favouring diabetes sufferers over the “merely” obese. Hopefully, restored supplies will make such distinctions redundant.
