Ireland is world famous for castles and cabbage, for the Blarney Stone and Bono. And in recent years, a sizeable biopharma cluster co-anchored by nine of the industry’s 10 largest companies.
Two of those pharma giants are now shrinking their presences in the Emerald Isle. Merck said November 29 it will shut its Swords manufacturing plant, idling all 570 workers over three years as operations shift to Belgium, the Netherlands, and the U.S. Less than a week later on December 4, Pfizer said it will axe 150 of its 670 workers at its Newbridge plant in County Kildare.
In public statements, the companies cited their still-large Irish workforces (3,200 for Pfizer, 2,000 for Merck), while linking their Irish job reductions to overall corporate cost-cutting—like Merck’s plan to eliminate 8,500 jobs by the end of 2015. Pfizer, similarly, said its layoffs were a response to growing generic competition following the patent-cliff expiration of exclusivity on blockbusters.
“Ireland remains a key strategic location for Pfizer with many of our leading and newest medicines manufactured here, and the company continues to make investments in the Irish operations,” a Pfizer vp, Paul Duffy, told the Irish Independent. In July, for example, Pfizer and Ireland’s economic development agency, IDA Ireland, announced company plans to spend $130 million to expand two manufacturing sites, Grange Castle in Dublin, and Ringaskiddy in County Cork.
News of the layoffs comes weeks after Ireland took aim at multinationals by changing its tax code to outlaw Irish-incorporated “ghost” or stateless entities that have no tax residency but collect royalties in offshore tax havens, like Bermuda or the Cayman Islands, from Irish tax-resident subsidiaries that pay royalties for IP. The practice, nicknamed “Double Irish,” has been a perfectly legal way for multinationals to cut their global tax bills, given U.S. tax rates reaching 35% for the highest-income corporations.
The change would not end “Double Irish” since multinationals could still register subsidiaries in Ireland, then shift profits to offshore companies that declare residency in a tax haven. Yet Irish officials hope the change will deflect U.S. and European criticism that the Emerald Isle is too business-friendly.
With a corporate tax rate of just 12.5%, Ireland beckons for CEOs, and biopharma’s no exception. In July when Perrigo said it would acquire Irish-based Elan for $8.6 billion, Perrigo Chairman and CEO Joseph C. Papa told analysts his company would cut its effective tax rate to 17% (from about 30%) in the first 12–18 months after closing, at an annual after-tax savings of more than $150 million annually. Actavis included reduced taxes along with synergies in the overall $400 million in yearly savings it said it generated by acquiring Dublin-based Warner Chilcott, in a deal completed October 1.
Neither IDA Ireland, nor the trade group Irish BioIndustry Association responded at deadline to GEN queries on the job cuts and the effect ending Double Irish may have on biopharma job creation.