The business of researching, manufacturing and distributing medical products is worth £2.7bn to Scotland’s industrial output, according to the Association of British Pharmaceutical Industry (ABPI), making it a major contributor to the country’s economy. So much so that the Scottish Government regards it is an industry where Scotland has a competitive advantage.

In a statement regarding a 2017 report commissioned by the ABPI and written by the Fraser of Allander Institute (FAI) of the University of Strathclyde, ABPI Scotland director Alison Culpan said: “We are a sector that Scotland should be proud of — contributing far higher levels of productivity than the national average, employing people in highly skilled jobs across the length and breadth of the country, often in disadvantaged or rural areas.”

Despite these positive figures, successive ABPI-commissioned FAI reports have cited data showing that a significant portion of the industry, research and development (R&D), had experienced a decline in spending and employment since 2012.

However, the negative impact of these figures should not be over-exaggerated since this downward trend was not unique to Scotland; in fact it affected the whole UK. To add to this figures released by the Scottish Government at the end of 2018 show that the country’s pharmaceutical industry’s R&D expenditure is returning to pre-2011 levels.

Explaining the success of the Scottish pharma industry

In addition to contributing over £2bn a year to the Scottish economy, the most recent 2018 FAI report found that the country’s pharmaceutical sector directly supports approximately 5,130 full time jobs, as well as indirectly maintaining 17,450 jobs. The ABPI states the industry has delivered the biggest job growth of any sector on the Scottish Government’s key growth sectors list in recent years.

Chief scientist of the Royal Pharmaceutical Society Gino Martini attributes the success of the Scottish pharma industry to: “the combination of academia, the NHS and the private sector working closely together,” which he describes as: “similar to the so-called ‘golden triangle’ in the South with London, Oxford and Cambridge”.

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He also notes that attractiveness of Scotland’s unique Scottish Health Research Register (SHARE), which is: “a recruitment method for volunteers who are willing to help medical research.”

Notable examples of effective public-private partnerships include Pfizer designating Scotland inspire status in 2016, making it part of the pharmaceutical company’s international network of preferred locations for clinical research. The partnership involves knowledge and data sharing between Pfizer and NHS Scotland and makes Scotland the first entire country in the world to be given this status.

Moreover, AstraZeneca signed a genomics partnership with the Glasgow-based Stratified Medicine Scotland Innovation Centre in 2016. Stratified Medicine Scotland links the country’s personalised medicine expertise across the NHS, universities and industry partners.

The collaboration is part of AstraZeneca’s global genomics initiative, which aims to leverage data from two million genome sequences by working with influential organisations; other collaborators include the UK-based Wellcome Trust Sanger Institute and the Finish Institute for Molecular Medicine.

This combination of universities, the NHS and private sector working collaboratively: “is further strengthened by government support, such as from Scottish Enterprise, the Scottish Investment Bank, and the Edinburgh Bioquarter. And, of course, there is the Life Sciences Strategy for Scotland,” says Martini.

Martini picks out BioCity as an exemplar of Scotland’s commitment to invest into good facilities, like laboratories and campuses, which are important for continued, future success.

Over the past few years, Scottish Enterprise has invested significantly in BioCity Glasgow, a biotech incubator built on a former-Merck research facility created through a collaboration of BioCity, a Nottingham-based company linked with both of the city’s universities, and Scotland’s Roslin BioCentre.

In 2016, alongside the UK Department of Business Innovation and Skills and North Lanarkshire Council, it invested £1m in building a medical incubator called MediCity on the BioCity site. Then in 2018 it provided funding for BioCity scientists to provide specialist support and mentorship to life science start-ups across Scotland.

Challenges facing the industry: R&D decline

The past three FAI reports have logged a drop in key Scottish R&D indicators. The 2016 report reported that business R&D fell by £32m to £122m between 2001 and 2012 and employment in pharma R&D fell 28% between 2007 and 2013.

Mairi Spowage, lead economics analyst and visiting researcher at the Fraser of Allander Institute, sees this as a key issue for Scotland with its focus on innovation because: “[R&D] leads to more innovative collaborations with industry partners and academia.” The 2018 FAI report sees this as a significant challenge for the industry: “if it is to retain its position internationally and in the UK.”

However, pessimistic conclusions about the future of the industry derived from these statistics need to be tempered. Although pharma R&D makes up a 23% smaller proportion of business R&D in Scotland than it did 15 years ago, according to the 2017 FAI report it remains the industry with the second highest R&D spent at £115m; the biggest spender is consumer electronics and communication equipment with £125m.

Additionally, NHS Research Scotland data has shown that the volume and value of trials and research in Scotland funded my major pharmaceutical companies has grown between 2014 and 2017.

This is supported by Business Enterprise R&D data published in late 2018 by the Scottish Government that showed pharma R&D expenditure increased from £118.2m in 2016 to £163.7m in 2017, and represents 13.1% of the 2017 R&D total, the highest proportion of the Scottish manufacturing sectors.

Although experts are not entirely sure of the precise explanation for the drop in R&D recorded by Scottish pharma, it seems that the decline is consistent across the UK pharmaceutical industry.

Analysis by the Office for National Statistics found that in 2014 pharma R&D across the UK totalled £3.9bn, down by £200m from 2013.

Spowage notes: “there has been a drop in terms of employer and spending across R&D overall; there has been a shift towards the services sector across the whole of the UK”.

Martini agrees: “Perhaps it was tied in with major issues in the industry anyway; between 2012 and 2015, many of the major drugs went off patent so the British pharma industry had to invest there. So the drop probably coincided with a general issue within the industry with lots of downsizing and patent expiration.”

Martini emphasises that other challenges facing the Scottish pharma industry, such as high failure rates, are also an issue beyond the country’s borders.

Positive outlook for Scottish pharma

In addition to the predominance of the pharmaceutical sector in Scotland’s business R&D market and the beginnings of recent growth, there are other reasons to be optimistic about the the future of the Scottish pharma industry.

Spowage centres her optimism about the future on the fact that “Scotland’s share of the total UK pharmaceutical industry continues to increase; it has gone from 4% in 2008 to 7% in 2015.” The 2018 FAI report concludes Scottish pharma manufacturing occupies its largest share of the UK industry in almost 20 years.

She argues this shows: “the Scottish industry is specialising”, which Martini also sees as a very encouraging sign. He argues that one of the concerns he has had about the sector is its focus on oncology, however, he notes that this is beginning to change as: “innovative things are happening in diverse disease areas”.

Enterobiotix is one example mentioned by Martini. Headquartered in Aberdeen, Enterbotix focuses on the microbiome and improving a common procedure for certain gastrointestinal diseases, fecal transplants. Another example is TauRx that develops therapies for neurodegenerative disorders that target tau protein instead of amyloid-beta protein.

However, the Royal pharmaceutical chief sees continued governmental support as another crucial factor in the sector’s continued success. There is no evidence of this slowing down, as proved by investment in BioCity and other similar initiatives, as well as the clear prioritisation of communication and cooperation with the private sector in the Scottish Government’s 2017 strategy achieving excellent in pharmaceutical care.