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West's future 'has to include manufacturing' Add to ...

British-based drug and health care company GlaxoSmithKline PLC is one of the largest pharmaceutical producers in the world, but it has also gained praise for its attempts to ease the burden of high drug costs in the Third World.

Chief executive officer Andrew Witty was in Canada recently to launch an expansion of GSK's plant just west of Toronto - an investment supported by $3.6-million from the Ontario government. The company also has a manufacturing facility in Quebec City, where it makes most of Canada's flu vaccine.

How important is government support when you are deciding where to build or expand research and production facilities?

The No. 1 reason to invest is the skill of the work force and [its]productivity and efficiency. The involvement of government is important, though, because it is a signal of a commitment to the partnership. There is no question we are always going to invest preferentially in jurisdictions where the government wants us to be there, and is encouraging of what we do.

Frankly, every government in the world is screaming out for job creation, [so]having the Ontario government step forward - not just with warm words, but with a concrete commitment to the partnership - is important. It makes us feel good to be here.

What are the skills in Canada that make it competitive in pharmaceutical R&D?

[Canada has]a tremendous academic base. It has great output from universities, with a high degree of talent. It is obviously in the top echelon of medical research [and]clinician quality. So the foundations for a vibrant research environment are very good. The reform of intellectual property rights 20 years ago [also]really stimulated the growth of innovation and research.

When you combine all that with a work force that is very comfortable operating complex processes, [and has a]bedrock of innovative medical talent, [that creates]a very potent environment where you can expect to discover, develop and manufacture new products.

How much of GSK's R&D is performed in Canada?

We don't have a big standalone research centre. In Quebec, we have a flu [vaccine]manufacturing operation which does a very significant amount of development in the field. But most important, we have a lot of partnerships with Canadian research organizations and universities.

Globally, at GSK, about 50 per cent of the research we do is in-house, and 50 per cent is in partnerships. Canada is big on the partnership side.

Is it important to have a critical mass of biopharmaceutical research in a country or community?

I don't think it is by accident that the U.K. has such a significant proportion of the world's pharmaceutical market for innovative drugs and manufacturing, when it only represents 2-to-3 per cent of the world market. [It is the]same for Switzerland, North Carolina, Philadelphia, New Jersey, and San Francisco. These are clusters that have grown up around universities initially, [and have]a history of working collaboratively with hospitals, allowing that so-called bench-to-bedside and bedside-to-bench dynamic, which is so critical.

It is really critical to have a financial environment that funds these things, either from government or venture capital or large multinationals.

How important are labour costs in deciding where to locate pharmaceutical facilities?

It is a factor. We want to be able to manufacture at the lowest cost with the highest quality. Twenty years ago some commentators in the West said labour rates were so high that we'll never be able to compete with rates elsewhere in the world, so we shouldn't be in manufacturing. I think that is completely wrong. The reality is that if you can run lean, efficient processes, and if you can run your plant to a high capacity, then you can tolerate relatively high labour costs.

So developed countries shouldn't write off manufacturing?

The West needs to realize that the future has to include manufacturing, and we ought to be challenging ourselves to demonstrate that Western sites can be absolutely the most efficient and innovative.

If you get process efficiency and capacity utilization right, then the most developed economies like Canada and the U.K. can compete with anybody in the world.

GSK's Quebec plant was the main manufacturer of Canada's flu vaccine during the H1N1 scare, and got some criticism for delays. What happened?

That facility was extremely successful in manufacturing very high volumes of vaccine in short order. As always when you are doing something like this there are situations where you might have a batch that has a question mark, and you want to check the quality. In a situation like pandemic flu, where you are making hundreds of millions of doses, it is not unusual to have issues like that to resolve. But those issues were addressed very straightforwardly.

How are you making drugs more accessible to patients in the Third World?

First, and most important, we have a tiered-pricing approach. That means countries with higher per-capita incomes make a greater contribution to the R&D of our business than those with middle or poorer levels.

In Africa we provide royalty-free licences to any generic manufacturer who wants to make any of the HIV drugs we've discovered. We don't ask for any payment, we just expect them to be a high-quality manufacturer. We have eight generic companies who have licences from us, and that has led to tremendous expansion of supply. In the poorest 50 countries in the world, most of which are in Africa, we have reduced the prices of patented products by 75 per cent.

We were the first company to make available all of our intellectual property free of charge, to any researcher in the world who has an interest in developing neglected tropical disease drugs.

Six months ago, we organized our business [unit that operates]in the 50 poorest countries in the world so its [goal]is to provide increased access, not to generate profits. It does generate profit, and 20 per cent will be reinvested back into health care infrastructure in those countries.

Are you doing specific research that will benefit developing countries?

In the next six months we'll get the final [test]results on the world's first potential vaccine for malaria. If it succeeds, we will sell it to aid agencies at cost, plus a 5-per-cent profit margin, and we promise to reinvest all of that back into future malaria research.

This interview has been edited and condensed.

Biography: Andrew Witty

Title: Chief executive officer, GlaxoSmithKline PLC

Personal: Born in Yorkshire, England; 46 years old

Education: BA in economics, University of Nottingham

Career highlights:

Joined Glaxo in 1985 after graduation

In 1993, appointed managing director of Glaxo South Africa; then worked in the United States and Singapore.

Became president of GSK Europe in 2003.

Appointed CEO in May, 2008

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