Hurdles include inadequate worker skills, high costs, and global overcapacity.

Ireland’s pharma industry, which generates half of the Emerald Isle’s total exports, faces challenges to future growth, John Perry, Ireland’s minister of state for small business, told a meeting of the Irish Pharmaceutical Healthcare Association. Hurdles include a gap between worker skills and jobs, high costs, and global overcapacity, members of an industry group were told earlier today.

Ireland is the world’s largest net exporter of pharmaceuticals, with total exports of €55 billion ($73 billion), according to Minister Perry. “Ireland has shown that it has the competence to develop, manufacture, distribute, and service patient-centric solutions from devices to drugs, from managing information and controlling process quality to managing global supply chains,” Minister Perry told association members, according to Business & Leadership.

That’s good news for Ireland’s government, which according to Inside Ireland has continually promoted increasing exports as a huge factor overcoming the economic recession. Ireland’s Central Bank said earlier this month that the nation would remain in recession through this year, with weaker growth expected compared with a year ago.

BBC reported recently that gross domestic product in 2012 is now projected to inch up by 0.5% compared with an earlier prediction of 1.8%, when activity by multinationals is accounted for, a category that includes most of the biopharma giants that generated all those exports. Excluding multinationals, GDP growth this year will only reach 0.7%, which shows just how much economic activity can be linked to corporate giants based outside Ireland.

The bank blames weaker-than-first-projected international demand for revising its numbers downward. The Central Bank sought to balance that with some optimism by adding that exports will continue to contribute to overall GDP growth, offsetting the continued weakness of domestic demand, with a 2013 uptick in export growth possible if the projected recovery in world demand materializes.

That’s a pretty big if. Just last July, Moody’s cut Ireland’s debt rating one notch, to junk status—from Baa3 to Ba1—based on what it called a “growing possibility” that the nation would need a second bailout once its current support plan from the EU and International Monetary Fund run out late next year. Under terms of that bailout, Ireland must reduce its deficit from an estimated 10.1% of GDP in 2011 to 8.6% of GDP.

According to Minister Perry, pharma contributed €3 billion ($3.987 billion) to Ireland’s total tax receipts. The industry accounts for about 10% of Ireland’s total tax receipts, which finished 2011 by falling €873 million ($1.16 billion) short of the budgeted €34.9 billion ($46.4 billion).

Ireland’s pharma sector, Minister Perry said, includes a significant presence by nine of the world’s top 10 pharmaceuticals including Abbott, Amgen, Bristol-Myers-Squibb, Eli Lilly, GlaxoSmithKline, Johnson & Johnson, and Pfizer as well as 15 of the top 25 medical technology companies. Pharma employment has grown at an annual average of 13% over the past four years, though the 2011 increase was just 7%.

However, the twin realities of shrinking job growth and export demand that continues to lag behind forecasts appears to explain the small business minister’s apparent worry about challenges to the comparatively strong pharma sector.

Those challenges, he said, include the patent cliff faced by most biopharma giants, the limited number of new pipeline drugs ready to make up for the loss of blockbusters, global drug manufacturing overcapacity, a gap between worker skills and industry needs, and rising costs for labor, energy, and R&D. Those costs come as Ireland and other European governments have contained costs by limiting industry plans to raise drug prices.

Another challenge, Minister Perry said, was the “fragmentation” of Ireland’s supporting institutions and infrastructure for clinical R&D and innovation. Ireland hopes to address that in part through €65 million recently set aside for science, technology, and innovation. He said a facility specializing in “drug production technologies” will be one of several tech centers to be developed in coming years.

Another option for addressing that fragmentation, he said, was closer engagement between the state healthcare system and industry, especially in carrying out research and clinical trials. As incentives for industry, he added, Ireland is committed to maintaining its 12.5% corporate tax rate and 25% R&D tax credit.

Additional solutions are expected to emerge in a report to be released later this year. Richard Bruton, Ireland’s minister for jobs, enterprise, and innovation, recently received the final Research Prioritisation Report, slated for release by government reportedly in the very near future. “This report will set out a future pathway for our spending in research, development, and innovation in Ireland,” Minister Perry told the association.

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