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Pharmaceutical Industry

Volume 542: debated on Wednesday 21 March 2012

Motion made, and Question proposed, That this House do now adjourn.—(Bill Wiggin.)

Last week my constituents received some devastating news. The staff at the Sanofi pharmaceutical manufacturing centre in Fawdon were told that it is proposing to close in 2015, with the loss of up to 450 jobs. The 90-day consultation period with staff and their union, Unite, has now started. Unite wants to work with the company and other stakeholders to mitigate the losses, and is calling on the company to explore all avenues to try to save those valuable jobs. News of the proposed closure was a great blow, because in the north-east we already have the highest unemployment rate of any region in the United Kingdom, at 10.8%. In the last year, the number of jobseeker’s allowance claimants in my constituency has gone up by 15.6%, and the number of people claiming for more than 12 months has nearly doubled.

The UK is a world leader in the pharmaceutical industry. The sector is a net exporter, generating a positive trade surplus, and a key employer, with an estimated 67,000 jobs in the UK depending on it. The pharmaceutical industry is also the leading sector in terms of investment in research and development, at about £4 billion each year. I pay tribute to the work of the previous Government in supporting the sector, and I am pleased to see the shadow Minister for competitiveness and enterprise, my hon. Friend the Member for Hartlepool (Mr Wright), in his place for this debate.

The Sanofi factory has been part of the north-east’s manufacturing base for many years. Andrews Liver Salts, invented by a Newcastle entrepreneur in 1896, was made there, along with other household names, such as Milk of Magnesia and Panadol. In the decade after Sanofi-Aventis acquired the old Sterling-Winthrop plant in 1994, it spent £100 million on modernising its facilities, investing in a new packaging plant for solid-dose oral medications—or pills, to you and me.

Members will recall that, just over a year ago, Pfizer announced the closure of its research and development facility at Sandwich in east Kent. That followed closures and jobs cuts among other leading pharmaceutical companies—for example, research and development job cuts at AstraZeneca’s Alderley Park facility in Macclesfield. The trend reflects long-term changes in the structure of the pharmaceutical industry worldwide. On 7 March last year, the hon. Member for South Thanet (Laura Sandys) raised the matter in an Adjournment debate. The Minister for Universities and Science pointed out to the House that major structural changes were under way in the life sciences industry.

Within days of the announcement that Pfizer would be closing, the Government took swift action to establish a taskforce to lead it to recovery. A package of support was secured for the site and around 650 jobs were eventually saved, enabling the facility to continue its excellent research and development work, although more than 1,000 jobs were sadly lost. In a speech on life sciences in December last year, the Prime Minister set out how the Government were responding to the changing demands placed on the sector—what he said was also confirmed by the Chancellor in his Budget statement today. Those measures included the patent box—a policy initially conceived by the last Government—low, or lower, corporation tax rates, and tax credits for R and D, among other things. However, my concern is that that is simply too little, too late. In the light of the job losses at Pfizer, AstraZeneca, GSK and now Sanofi, it seems that the Government are trying to close the stable door after the horse has bolted.

Surely the withdrawal of manufacturing capability cannot be wise when the national health service is facing shortages of prescription medicines, as has been admitted in the House by the Department of Health. I have support for that view from the highest level. Last month, the Secretary of State for Business, Innovation and Skills kindly shared his thoughts on industry policy with the Prime Minister and the Deputy Prime Minister, and we have all had the chance to study his letter. In it, he bemoaned the lack of a “clear and confident message” about how Britain will earn its living in future, and pressed the need for “strategic pro-growth thinking”. The Business Secretary rightly identified the fact that the manufacturing industry merited close attention and backing.

One of the weaknesses in the Government’s approach that the Business Secretary identified was a need for more strategic and long-term thinking about supply chains and public procurement. My constituents would certainly agree with him. I hope that he has begun to engage with this matter and to take steps to strengthen the supply chain, thereby shoring up the UK manufacturing industry. As he suggested, the Government’s industry policy is not joined up. Much closer working between the Department for Business, Innovation and Skills and the Department of Health could help companies such as Sanofi, but there is no evidence that that is happening. What meetings have BIS Ministers had with Health Ministers and officials to ensure better coherence in respect of the drugs market for the benefit of British-based companies such as Sanofi? If the Secretary of State is looking for a case study to develop his Department’s thinking, together with that of the Department of Health, he could do worse than to look at the role of the Fawdon manufacturing centre. In doing so, he could take the same swift action to aid its recovery as was taken for Pfizer.

A number of issues come to mind. There is increasing global demand for pharmaceuticals, so the Fawdon centre’s capacity is not being withdrawn permanently from the world’s drug manufacturing base, as it will almost certainly be reproduced somewhere else. However, the skills built up over generations to serve the industry in the north-east will go to waste, and the machinery that has been so expensively installed at Fawdon will be scrapped, or removed and taken abroad, which I find worrying.

Where will the new production take place? What are the advantages that another location offers? Is it simply that it is much easier and cheaper for a French company to make people redundant in the UK than elsewhere in Europe, or will the tablets and capsules that currently come off the production lines at Fawdon be made in Brazil or India in future? How content are we to have no indigenous pharmaceutical manufacturing capability left in the UK, given that our ageing population is increasingly dependent on medication in one form or another?

I grew up in Newcastle just 100 yards from the Fawdon plant, and I congratulate my hon. Friend on bringing this important subject to the House tonight. Does she agree that a city such as Newcastle, whose university has real strengths in health care and medicine, needs more active Government intervention to ensure that that research and development is translated into manufacturing capability in the region?

I thank my hon. Friend for that question. This is a subject that I feel strongly about. We have heard some positive noises from the Chancellor today in his Budget, but I am already hearing concerns being expressed in the science community in Newcastle over how those proposals will be translated into action. People are concerned as to whether the full weight of support will be provided, rather than just small tax breaks. Serious efforts need to be made to encourage research and development in science, particularly in the light of what we can see, if we look closely, is a real-terms cut in the science budget. The science community is still concerned that it does not have the full backing of the Government.

I, too, congratulate the hon. Lady on bringing this important matter to the House. At present, 10% of the people in Northern Ireland visit their chemist daily, which is a large proportion of the population. That illustrates the importance of our pharmacies. Pricing premiums, generic rivals and falling returns are the key issues for the pharmaceutical industry. Does she think that it is time for the NHS to consider buying British first, and buying from elsewhere second?

Absolutely, and that is one of the key issues on which I hope the Minister will respond. It should be a key consideration in the way the Government take forward their active industrial strategy.

I am grateful to the hon. Lady for giving way, as I appreciate that time is precious. She has referred to the systemic and structural changes in the industry. Does she accept, though, that at the heart of that is a profound problem of the productivity of the traditional model of pharmaceutical drug discovery and development? That means that, although this country can have a bright future in the new models of discovery in translational and experimental medicine, bringing industry, hospitals and universities back together—her city of Newcastle has a lot to offer there—the industry is struggling with the traditional models of discovery and development, which might well mean the closure of yesterday’s plant and the recycling of talent and expertise within the location into new centres of drug discovery.

I appreciate the hon. Gentleman’s point, but I cannot refer to Sanofi as yesterday’s plans, when it is open currently and there are 90 days of consultation in which to turn the situation around. That is an important point for my debate today. I nevertheless thank him for his intervention.

Retaining our world-class status in pharmaceuticals means ensuring that the Government work actively and intelligently with businesses such as Sanofi to retain research and development and manufacturing capability. There is huge global potential here: as the world’s prosperity increases, with a growing and ageing population, Sanofi’s products made in Newcastle will be in demand. The biggest questions of all are, of course, those raised by the Secretary of State for Business, Innovation and Skills. Where is the clear and confident message about the way Britain will earn its living? When will the Government start to act decisively on their call for an industrial strategy?

In the meantime, there are many practical issues for my constituents, which I urge the Minister to address by way of a Government-backed taskforce. Pfizer staff received a package of support, including counselling, careers advice, CV writing and retraining. What support will Sanofi be able to offer its loyal employees in acquiring new skills? What are the intentions for the site? The Discovery park in Sandwich is being heavily promoted and marketed to attract investment. In the longer term, how can we get into the north-east the sort of jobs and small and medium-sized enterprises that the Minister talked about last year?

I welcome this debate, and I feel for the hon. Lady’s community, as mine in Sandwich was impacted by the Pfizer closure. I would also like to give some constancy and hope to the community in Newcastle. What came out of the difficulties and major challenges we faced was a reinvigorated environment—in many ways a community similar to what my hon. Friend the Member for Mid Norfolk (George Freeman) described, given his vision of how a pharmaceutical community can work in the new model. After one year, we now have 900 committed jobs on the site, and more spin-out companies on the verge of creating themselves, which is exciting.

I thank the hon. Lady for her words of comfort, but I do not think that what she said will be entirely comforting to those in Newcastle, given that we face a very different situation. We are talking about a production plant, not a research and development plant, while the north-east faces higher levels of unemployment than any other part of the country. That adds to the deep anxiety in my region, but I thank her for her words.

In his oral evidence to the Science and Technology Committee after the Pfizer closure, the Minister said that he recognised that there was a London-Oxford-Cambridge cluster for research and hence for the SMEs that are the future of pharmaceuticals. In business questions last week, the Business Secretary admitted that there was a financing gap, with venture capitalists unwilling to provide much needed finance to SMEs outside that cluster. My colleague who asked the question referred to it as the “golden triangle”. The Business Secretary said that the business growth fund—a private sector initiative—was already beginning to fill that gap. The Government surely need to oversee that, however, to ensure that my region gets the investment it so badly needs. Newcastle is a long way from that triangle, and I hope that we will not be abandoned.

We have an outstanding tradition of manufacturing and production in the north-east, and a population of adults who are ready, able and willing to work. Newcastle is a great science city with world-class universities that provide excellent research. I want the Government to make use of the north-east’s potential, and to start by keeping the Fawdon manufacturing centre open. I would like the Government to assist in the recovery of the Sanofi Fawdon manufacturing centre, just as it did in the case of Pfizer. That would have been an excellent project for our regional development agency, One North East. Previously, if a major employer had announced job losses, a taskforce would have emerged from One North East to provide help and support for the business and its employees.

Our local community has already established a very determined taskforce comprised of Unite, local councillors, local MPs and other stakeholders. Our aims are to keep the skills of Sanofi staff, make a future for the centre, and secure the investment needed to keep it open. I urge the Minister to give his support to our taskforce without delay to help to save Sanofi and the 500 or so jobs at stake in Fawdon.

I congratulate the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) on securing this debate on an incredibly important subject. I fully appreciate the concerns she raises.

I shall begin by addressing the specific issue that prompted this evening’s debate. We in the Government are extremely disappointed by the news of the planned closure of Sanofi’s Fawdon site. I should like to express my sympathy to the work force and their families, who are, obviously, going through a very anxious time. She did absolutely the right thing in raising their concerns with us.

I recognise the challenges in regions such as the north-east, where unemployment is high, but in a sense that is exactly why the Government are seeking to rebalance the economy and rebuild manufacturing and exporting, while taking advantage of the north-east’s incredible assets—it has a skilled work force and is a wonderful place to locate. We absolutely agree on the need to do that.

I want to be clear that Sanofi’s decision was not in any sense based on a judgment of the UK as a location for life science investment. It was no reflection at all on the radical measures that the Government have taken to support the industry. I shall come on to those measures shortly, but we understand from Sanofi that the decision was made entirely for its own commercial reasons. The hon. Lady talked about the major restructuring that many such companies are undertaking globally. We have to recognise that that is a force in play.

Of course, that does not in any way lessen the impact on Fawdon’s employees and the local community. BIS Local has spoken to Sanofi’s local management, as well as to Newcastle city council and the North Eastern local enterprise partnership. We will examine how we can ensure the most effective local support for those directly affected by the proposed closure, as well as plans to support sustainable economic growth in the affected area—plans that recognise the skills of the work force. Naturally, the first priority will be to ensure that those affected by the proposed closure have access to the very best support available for redeployment and, if necessary, retraining, but I absolutely recognise that a consultation is under way; we must let that take place before determining the future course. We will work closely with the company to secure its support at this very difficult time for the employees affected.

The hon. Lady reflected on the closure of AstraZeneca’s Charnwood site in 2010 and the scaling back of Pfizer’s Sandwich site last year, which involved some 1,200 and 2,400 direct jobs respectively. Decisions on how best to respond have to be based to some extent on the economic impact, time scales and most suitable response for the local work force and the local area. The decisions were hugely disappointing to Government, but they were based on the companies’ global restructuring strategies, and were not a judgment on the UK as a location for life science investment or as a location for research. Indeed, both companies have gone on to make substantial investments in the UK.

The hon. Lady highlighted the positive impact of the taskforces we put in place following these decisions. She referred to the taskforce established in Newcastle, and I applaud that local work; it was absolutely the right thing to do in the circumstances. The taskforces have been exemplary and have largely mitigated the impacts.

Let us first consider Pfizer’s Sandwich site. Some 800 jobs were retained or created on the site. The Discovery park has been designated an enterprise zone, offering a package of business rate discounts and planning flexibilities, thus supporting its attractiveness as an investment location. That has encouraged 20 new life science businesses to locate at Discovery park. Some £35 million was secured through the Government’s regional growth fund to provide grant and loan finance to business through the Expansion East Kent programme, with the aim of creating, or safeguarding, 5,000 jobs. I acknowledge the points made in this regard by my hon. Friend the Member for South Thanet (Laura Sandys).

AstraZeneca employees were similarly supported in securing new roles and opportunities, with about 90% of leavers securing their future. My hon. Friend the Member for Loughborough (Nicky Morgan) is also present this evening. She was very active in working to support staff and in finding new uses for the site.

The hon. Member for Newcastle upon Tyne North has rightly expressed the genuine concern that is felt about the potential closure. However, even if the site closes, given the skills of the work force there is some hope that there will be a brighter future than some can see at present. I have every confidence that Sanofi, Newcastle city council and the local enterprise partnership will be able to work well together.

I want to turn now to the broader concerns raised this evening about the status of this key industry in the UK. I am, of course, alive to the challenges we face. The UK has seen a reduction in the number of large pharmaceutical manufacturing sites, as have many other developed markets. However, I wholeheartedly disagree with any claim that this is a weakening industry or that the Government are not providing enough support. The UK continues to have one of the strongest and most productive life sciences sectors in the world, contributing to patient well-being as well as supporting growth.

In the last decade, the UK life sciences industry—pharmaceutical, medical technology and medical biotechnology companies—has not only continued to be strong, but has shown continued growth. It has grown faster than any sector of the economy apart from finance and insurance. It employs more than 166,000 people, many in high-tech, high-skilled jobs, and it has an annual turnover of more £50 billion. It is therefore a very important sector for the British economy.

Data clearly show that we continue to be a leading destination for research and development investment, attracting £4.6 billion of pharma R and D spend in 2010 alone. Indeed, only yesterday Eisai, one of the world’s leading research-based pharmaceutical companies, announced it is expanding its British base to support the company’s growing European, middle eastern and African business, creating new job opportunities for the UK. Gary Hendler, Eisai EMEA president and chief executive officer, specifically cited

“the country’s importance as a global hub for the pharmaceutical industry”

as the reason for choosing the UK, noting:

“Initiatives to support the life sciences sector championed by The Department of Business, Innovation and Skills (BIS) have added to”

the company’s

“ability to cure and care for the health and wellbeing of more people across the EMEA region.”

That is a very recent decision to invest in the UK.

That is not to say that everything is perfect, however. At a time when we are working hard to rebalance the UK economy, we need to ensure that we keep, and grow, our key industries.

I thank the Minister for the points he is making about the strength of the UK pharmaceutical industry’s research and development. The key is to translate that research and development into manufacturing capability, so that we have jobs for technicians—ordinary working manufacturing jobs. What policies are there to ensure that small biotech companies have the help to translate into manufacturing in this country?

Let me go on to talk about the steps that the Government are taking, because in large part this will address the points the hon. Lady is making.

The life sciences industry has seen significant changes in the commercial environment, and we have recognised that if we are to remain competitive, the UK must up its game. So I emphatically reject any suggestion that the Government are not doing enough to support life sciences in the UK. I alluded a few minutes ago to the fact that we have taken radical steps to support this important industry and its innovations, and to make the UK the location of choice for investment.

We published “The Plan for Growth” in March 2011 and followed it in December with our “Strategy for UK Life Sciences”. I understand from my hon. Friend the Member for Mid Norfolk (George Freeman) that Lord Mandelson specifically supported that strategy in his Davos speech as an exemplar of this work. We worked in collaboration with businesses, clinicians and researchers from across the sector to listen to what they had to say about the UK environment and to deliver against their needs.

The result was a package of measures that has been unanimously supported across the industry. We are delivering fiscal incentives and removing barriers to ensure that the life sciences industry is primed to operate effectively and efficiently, drawing in intellectual property and investment, nurturing small and medium-sized enterprises, and making it easier for products to reach the market. The approach includes: the patent box, which will be effective from April 2013 and will reduce the corporation tax on profits from patents and similar intellectual property to 10%—that is important in attracting inward investment; research and development tax credits offering 200% super- deduction relief for SMEs; and a £310 million investment to support the discovery, development and commercialisation of research, £180 million of which is for a biomedical catalyst to provide support to both academically and commercially led research and development, to deliver innovative life sciences products and services quicker and more effectively into health care. Ultimately, that is what we want to see.

We are creating a true life sciences ecosystem that fosters collaboration and partnerships to enable the UK to compete globally in attracting investment in research and product development. One of the measures to achieve that is the establishment of a number of academic health science networks across the country, aligning clinical research, informatics innovation, training and education, and, crucially, health care delivery. They will provide industry with clear points of access to the NHS to facilitate NHS-industry collaborations, in order to develop health care solutions. We are also addressing the regulatory barriers, to enable innovative technologies, diagnostics and therapeutics to be identified and taken up across the NHS. That will include a Medicines and Healthcare products Regulatory Agency consultation for an early access scheme for treatments that have not yet been licensed but where there is a high unmet clinical need.

Furthermore, in the most radical move in this area of any Government, we are unlocking the power of the NHS and its unique patient data to ensure that, subject to the necessary safeguards, data from research and clinical practice are available for the benefit of improving clinical outcomes and enhancing the UK’s position as the leading country to undertake research and development.

However, we have also recognised that to provide a truly attractive UK environment, we need to address the adoption and uptake of innovation in the NHS and firmly embed innovation within the NHS. So the NHS chief executive is taking action through the implementation of his review, “Innovation, Health and Wealth: accelerating adoption and diffusion in the NHS”. That will, for example: reduce variation in the NHS; drive greater compliance with National Institute for Health and Clinical Excellence guidance; facilitate work with industry to develop and publish better innovation uptake metrics; improve arrangements for procurement in the NHS to drive up quality and value, and to make the NHS a better place to do business; bring about a major shift in culture within the NHS, developing its people by hard-wiring innovation into training and education for managers and clinicians; and identify and mandate the adoption of high-impact innovations in the NHS.

Saying and doing are, of course, entirely different things, but rest assured this Government are committed to early delivery. We have appointed two independent life science champions, Chris Brinsmead and Sir John Bell, who will work closely with my hon. Friend the Member for Mid Norfolk to drive implementation against the “Strategy for UK Life Sciences”. They will report on progress direct to the Prime Minister every six months.

I conclude by reiterating that although announcements such as Sanofi’s are immensely disappointing—I understand that—the future for UK life sciences looks bright. Not only are the Government proactively delivering for the industry at a time when the environment across many other European countries is becoming increasingly hostile, but we have fantastic organisations such as the Wellcome Trust offering additional support, not least with yesterday’s very welcome news that it is to launch a £200 million fund to invest in biotechnology start-up companies in the UK and Europe. I thank the hon. Member for Newcastle upon Tyne North for raising this really important subject, and I am happy to work with her.

Question put and agreed to.

House adjourned.