Pharmaceutical Industry

Catherine McKinnell Excerpts

Wednesday 21st March 2012 Commons Chamber

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

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?

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

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?

[Catherine McKinnell]

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.

[Jim Shannon (Strangford) (DUP)]

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?

[Catherine McKinnell]

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.

[George Freeman (Mid Norfolk) (Con)]

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.

[Catherine McKinnell]

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?

[Laura Sandys (South Thanet) (Con)]

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.

[Catherine McKinnell]

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.