Dáil Éireann Debate, Thursday - 7 November 2019
62. Deputy Michael McGrath asked the Minister for Finance if an analysis has been undertaken by his Department on the pharmaceutical industry; if patent expiration in the industry has been profiled; the potential impact of same on employment in particular regions; the potential of same to impact corporation tax receipts; and if he will make a statement on the matter. [45986/19]
Amharc ar fhreagraIn 2013, due to the weight of the pharmaceutical sector in Irish GDP at the time, my Department produced a report seeking to assess the impact of a ‘patent cliff’ in the pharmaceutical sector on the Irish economy, arising from a clustering of patented drugs going off patent in quick succession.
The report, titled “The Impact of the Patent Cliff on Pharma-Chem Output in Ireland” is available here:
https://assets.gov.ie/5560/140119123817-b71a249b4ad24fc78ce5eb401e85a236.pdf
The research concluded that the ‘patent cliff’ led to a drop in both output and exports, from the mid-2012 peak, by late 2013, when the report was published. However, the impact on employment was expected to be less significant. This was expected to be the case as the pharma-chem sector was a relatively small contributor to total employment at the time, at less than 2 per cent, and those employed were highly skilled workers who, in the event of a demand shock, would be less likely to face skills mismatches compared to other sectors.
Tax receipts by sector are published by Revenue, and are available at: https://www.revenue.ie/en/corporate/documents/statistics/receipts/net-receipts-by-sector.pdf.
This includes information on employment taxes and Corporation Tax receipts. The pharmaceutical industry is included in the figures shown for ‘Manufacturing’ at the above link and accounts for the bulk of tax payments in this sector (over 75% in most years).
I am advised by Revenue that tax returns do not include information in respect of patents, therefore there is no information available to Revenue with which to estimate the effect of any potential future patent expirations.
I would note however that the figures indicate a substantial rise in corporation tax receipts received from the manufacturing sector, which increased by 54% from 2017 (€2.09 billion) to 2018 (€3.22 billion).
As the patent cliff research paper referred to above related to the expiry of specific patents in a certain time period, this particular piece of research has not been updated. That said, my Department monitors and analyses trends in the pharma-chem sector on an ongoing basis.
Pharma-chem exports have grown substantially over the last 18 months or so, increasing by 26 per cent to €86 billion in 2018. In the second quarter of this year, pharma exports grew a further 9 per cent year-on-year, with the sector now comprising 62 per cent of goods exports.
I am conscious of recent job losses in the broad pharma-chem sector, as well as in some other sectors of our economy. It is imperative that we continue to remain competitive, including by shifting resources into higher value added production.
Finally, the IDA will continue to work to secure new investment in key growth sectors of the economy, including the pharma-chem sector.
