It might have been a very different interview. This time last year, pharmaceuticals giant Pfizer was in discussion with rival Allergan in a move that would have seen the US company move its headquarters to Ireland.
The "corporate inversion", the biggest of its kind ever proposed, was designed to deliver a major tax advantage to Pfizer, which has consistently argued it is penalised financially by virtue of its domicile in the US where corporate tax is levied at up to 35 per cent. For Paul Reid, Pfizer's country head in Ireland, it would have inevitably meant major changes in his working life.
In the end, the $150 billion deal fell foul of an Obama administration under increasing pressure over the flight of manufacturing jobs and, in this case more importantly, tax dollars from the US.
“It would have been nice for Ireland, but it didn’t happen,” says Reid of the Allergan deal. But that hasn’t dulled Pfizer’s appetite for acquisition, or for Reid’s efforts to ensure that Ireland, where the company employs some 3,500 people, is positioned to play a part in the new drugs that will come with acquisitions.
Switching focus from saving tax to strengthening its portfolio of drugs , Pfizer almost immediately spent $5.2 billion (€4.9 billion) acquiring the skincare drug business Anacor, which had a new eczema treatment ready for approval. It also acquired cancer biotech company Medivation for $14 billion (€13.1 billion). Medivation promises to immediately add to Pfizer earnings on the back of its new prostate cancer treatment, Xtandi.
Pfizer has already digested the $17 billion purchase of Hospira. "For Pfizer, it was a big acquisition because it was now buying a portfolio of biosimilar medicines," says Reid. The move for a company that was focused predominantly on off-patent biologics "was a real signal from the company that we see a future in that business".
In all three cases, the target companies have short-term commercial prospects rather than simply being promising drug developers – “and that’s great because you don’t have the risk that goes with developing a pipeline and bringing it through the different phases of clinical development,” says Reid.
Aside from the Allergan deal, the major setback last year was the failure of the cholesterol drug, bococizumab. Grange Castle had been chosen as a manufacturing base for the drug when it went commercial and had announced a major expansion of the west Dublin facility to accommodate it.
The decision to pull bococizumab late in the clinical trials process, amid concerns over unexpected side effects and diminishing efficacy, meant the €400 million project was mothballed – for now at least. Phase III trials “are not where you want to fall over,” says Reid.
The industry rule of thumb is that it costs about €1 billion to get a drug through the full clinical trials process. Phase III is the final phase. Only one in every 10,000 molecules initially considered will make it through; the entire process can take seven or eight years.
“If you’re going to fall over,” Reid says, “you’d prefer it was in phase I, and you’d prefer not at all.”
Despite the failure, Reid says Pfizer remains driven by the research and development of new drugs, whether from within its own pipeline or through bolt-on acquisitions. But, as he is aware, pipeline delivery is becoming more difficult. When he first joined the industry more than 20 years ago, he says, you could be launching five or six medicines a year. “Now you’d be lucky if you’re launching one or two.”
Best pipeline
That said, he argues that Pfizer currently has the best pipeline of drugs in a decade. And he is actively eyeing up prospects in the pipeline for suitable production at the state-of-the-art biologics facility.
At the moment, Grange Castle is focused on producing Prevnar 13, the world’s top-selling vaccine and Pfizer’s biggest product, as well as Enbrel, the rheumatoid arthritis drug that remains among the most used drugs in Ireland, despite losing patent protection outside the US.
However, he is conscious that increasing biosimilar competition for Enbrel means that capacity will likely become available – not something to be welcomed given the scale of investment in modern pharma infrastructure.
“There are some mid-stage and late-stage compounds [in the pipeline] that we’re looking at that may be able to come into Grange Castle,” Reid says, citing as a strong selling point the presence of a R&D facility at the site – unusual for a US drug company, he says.
“That helps us once again in terms of building an argument to continue to bring future compounds into Grange Castle, and that is what we’re doing,” he says. “So, I hope all the expansion plans won’t be gone and we’ll be able to confirm more about that in the coming months. But what it could have been [with bococizumab] is not going to happen.”
Thesis options
This is all a long way from the
Trinity College
business school, where Reid first dipped a toe in pharmaceuticals almost by accident.
Studying at the time for a BSc in management, the Dubliner who grew up in Waterford was mulling his options for a thesis when he read about corporate troubleshooter Sir John Harvey-Jones. At the time, the high-profile Harvey-Jones was chairman of ICI. For Reid, the notion of chemicals, or rather pharmaceuticals, sounded interesting.
For his eventual thesis (R&D Based Manufacturers: the Response to the Threat of Branded Generics), Reid talked to figures in both the branded pharma and then nascent generics business in Ireland. A week after meeting the sales and marketing manager of Rowa Pharmaceuticals, the man offered him a job. So Reid found himself in Bantry. Spells with Nutricia and Aventis in sales and marketing followed before he joined Pfizer in 2001.
He was involved in the 2002 assimilation of Pharmacia Ireland into Pfizer and then led the Irish integration of Wyeth Pharmaceuticals in 2009 – Pfizer's first major investment in biopharmaceuticals – before being named managing director of Pfizer Healthcare Ireland in 2013.
Over much of that time, the thorny issue of drug costs has played out in the background, especially with the arrival of biologics from the likes of the former Wyeth plant at Grange Castle. Now, amid egregious examples of price gouging for older drugs, and as one of the very few issues in common across party lines in the recent US presidential election, drug prices are back in the spotlight.
Closer to home, the failure to find a price at which the HSE can afford to pay for the new cystic fibrosis drug Orkambi has become a political issue, despite earlier protestations by Minister for Health Simon Harris that decisions on access to drugs should be kept away from politicians. According to Reid, the market generally is now generic. "People focus on high-price medicines, and fine, it makes sense to have a discussion about that. But 90 per cent of the market now in terms of volume is prescription of generic medicines."
Unmet medical needs
What really worries Reid is how medicines of the future will be paid for.
“I know what the pipelines look like going forward. We need to find a way to ensure that we can afford to pay for more innovative medicines that frankly are going to cost more in the future because now we’re seeing medicines being developed for more complex conditions, for more rare diseases and for more unmet medical needs.
“You’re probably looking at smaller patient populations, but the cost of developing the medicine remains the same. So you’re ultimately going to be seeing probably higher prices for these medicines that really government should be looking to afford and pay for, because you should be getting the head room from the savings made by growing generics use.”
He cites the savings being delivered since last August under the Framework Agreement on Supply and Pricing of Medicines, reported as running at €12 million a month. “When you total up all the savings that we’ve actually provided to the State as part of that negotiation,” Reid says, “it totals €785 million over four years. Now, in return for that, the industry needs to see new medicines being made available to patients who actually need them. At the moment there is a backlog.”
At the end of 2016, he says, there were 20 drugs in the queue. “A lot of the discussion is about one medicine when, frankly, there are an awful lot of other medicines that are awaiting decision on reimbursement that will treat conditions where patients don’t have another alternative.”
Reid cites two Pfizer products – one for metastatic breast cancer and the other for rheumatoid arthritis – that are due to be manufactured in Ireland. “It’s very difficult to think that they wouldn’t be made available to Irish patients when they are going to be manufactured here.”
Over time, he says, delay on access “does send a message to company headquarters that maybe Ireland is a little bit more difficult or is maybe less attractive for making innovative medicines available to Irish patients.”
Watching Trump
No less than any other industry, pharma has a watchful eye on the new US president. While the focus of Donald Trump’s energy in his first weeks has been on migration, trade and the supreme court, no one has forgotten the comments he made ahead of his inauguration: that pharma was “getting away with murder” on pricing and in moving investment abroad.
As Pfizer’s Ireland head, Reid is unlikely to be first in the firing line when the company and others start engaging with the new administration. Still, he is keen to stress that Ireland cannot rest on its laurels, despite its strong track record of enticing foreign business here.
“I think, for Ireland, what’s really important is that the Government . . . continue to make sure that Ireland is seen as a positive investment destination for companies like Pfizer, [which] are investing a lot of FDI into Ireland,” he says. “And to do that, they’re going to have to be very cognisant of the need to ensure that we remain attractive for investment, that IP protection is solid, and that we continue to ensure that we communicate the value of our educated workforce here in Ireland.
“And as long as the Government does that, along with obviously an attractive tax regime, then Ireland should remain a really good strategic investment location for companies like Pfizer.”
Reid says the recent tax judgment in the Apple case, where the company is being billed €13 billion plus interest retrospectively, will cause wider damage to Ireland’s reputation. He acknowledges that Government reassurance that no change is likely on corporate tax is comforting for major multinationals, but adds that tax will never become the be-all and end-all when deciding on location.
“Tax is certainly a factor,” he says, “ but there are other factors that are determining whether you locate here or not. Because, let’s face it, we don’t have the most attractive corporation tax rate anyway. I mean, countries like Singapore have had a very attractive one for a long time. Yet companies still choose Ireland.”
What will make a difference for Ireland, Reid says, especially in the era of Brexit fallout, is that it can deliver the infrastructure necessary to attract business. In particular, that means availability of housing, schools and so on.
This is especially so in efforts by the Minister for Health to lure the European Medicines Agency – the industry regulator in the EU – to Dublin from London. Reid strongly supports the move. “I think it’s a very attractive proposition that we, post-Brexit, could attract over a regulatory medicines agency of such stature, and it would bring a lot of positives for Ireland.”
The Government, he says, “needs to send a positive message that we have the infrastructure in Dublin to host such businesses. It needs to be much bigger than just targeting the actual business. Because I think a lot of businesses may want to locate here but they may not be able to.”
