Can Ireland continue to provide the right medicine for Pharma?

The meteoric rise of pharma in Ireland is one of the most successful industrial strategies in Europe. However, it is arguably also highly exposed to geopolitical movements.

The growth came as a result of a deliberate foreign direct investment strategy, built around attracting multinational investment. The outcome is that Ireland now hosts circa 100 pharma companies including most of the world’s top players. The clustering effect is critical, enabling companies to co-locate, and for supply chain, talent and expertise access to deepen over time. The Irish Pharmaceutical Healthcare Association cites pharma as being ‘central to Ireland’s FDI-led growth model’.

Ireland also offers long-term, consistent industrial policy across governments and an attractive corporate tax regime. This has resulted in many pharma companies treating Ireland as a core global base rather than as a satellite.

Ireland has one of Europe’s youngest and most educated populations. It has strong industry/university links in areas such as chemistry, biotech, and engineering. This means Ireland has a skills pipeline effectively tailored to industry needs. It also means the industry currently employs a workforce of some 75,000 people.

This has led to Ireland becoming a global biologics hub with easy access to both the EU and US markets, and the added advantage of being an English-speaking EU Member.

Ireland has the highest number of FDA-approved plants per capita in Europe, with a deep infrastructure covering manufacturing, supply chain and shared services. Once established, this creates high switching costs and therefore longevity.

The success of the sector appears almost unassailable, and yet there are challenges on the horizon. 

One such is its dependence on the United States.  

The majority of current exports go to the US where domestic policy is becoming increasingly protectionist and focused on domestic manufacturing. US engagement in armed conflicts and other geopolitical unrest is likely to focus US policy further, increasing the risk to Ireland of tariffs and incentives for US-aligned companies to re-shore pharma production. 

The OECD’s global minimum tax may also reduce Ireland’s historic advantage. The global minimum tax, part of the OECD’s two-pillar solution addressing tax challenges from digitalisation and globalisation of the economy, sets a global minimum effective corporate tax rate of 15% for large multinational enterprises (MNEs), ensuring that profits are taxed at a minimum level regardless of where they are reported. If tax differentials narrow, investment decisions may move elsewhere.

Ireland’s own success is also now creating constraints. Housing shortages, energy and grid challenges, and water and planning issues all act as a direct threat to competitiveness; and while Ireland is strong in manufacturing and process excellence, it is arguably weaker in early-stage R&D and venture-backed biotech which risks value capture moving upstream in areas such as the US and Switzerland. 

Governments across the globe are pressing to reduce pharmaceutical product prices. The United States, for example, is introducing pricing reforms under the Most Favoured Nation banner. Under a US MFN policy, the United States would pay no more for certain drugs than the lowest price paid by comparable territories such as in Europe. This type of initiative places a squeeze on margins across the value chain. 

Another potential risk is that recent pharma growth has been driven heavily by biologics or complex medicines made from living cells, (also at the heart of the Most Favoured Nation debate) and clinically approved weight loss and obesity medications. This could potentially be viewed as an over-reliance on a small number of ‘headline’ categories focusing the industry’s risk profile. 

Whilst some of these potential risks might currently remain as shadows on the horizon, at least in the near future, it would be unwise to ignore them in the face of the high and rapid growth of the pharma industry in Ireland.

It should also invest in increased R&D, clinical development and biotech start-ups, to capture more of the innovation margin and move further up the value chain. 

There are clearly identified infrastructure challenges that need to be attended to, including housing (as it relates to talent attraction in particular), the energy/grid capacity situation, and the planning system. Infrastructure is rapidly becoming arguably the most urgent of constraints on future growth. 

While Ireland must clearly adapt to global tax reforms, it still needs to stay attractive and ensure regulatory predictability. It should also strengthen its EU positioning by advocating for more rapid approvals, stronger life sciences funding, and an integrated EU pharma strategy.  

Critically, in the face of geopolitical upheavals, Ireland will need to build resilience into supply chains and position itself as a ’secure’ manufacturing base within the Western supply infrastructure. 

Tomorrow, the sector’s success in Ireland may be far more dependent on reducing concentration risks relating to both the United States and the sector’s product categories, solving domestic infrastructure constraints, and moving further up the value chain through innovation. Ireland’s pharma future most likely resides in moving away from being a low-friction global manufacturing hub, to becoming a strategic node in a fragmented, politicized global pharma system. Such a movement does not end growth but, critically, it is likely to raise the bar for maintaining it.