GSK on America First: US will not be able to own every part of supply chain

By Dan Stanton

- Last updated on GMT

Image: iStock/TheaDesign
Image: iStock/TheaDesign

Related tags Glaxosmithkline

GSK has warned that Donald Trump’s plan to encourage US drug production through import tax hikes must take the global nature of pharma supply chains into account.

Last month​ President Donald Trump criticised the drug industry, arguing outsourced manufacturing had cost the country jobs and vowing to encourage US pharmaceutical production through higher import taxes.

Although Trump did not present data to support his jobs argument - or back his claim that pharmaceutical firms “supply our drugs but don’t make them here, to a large extent​” – his comments have put US production capacity in the spotlight.

Evidence for this was seen during GlaxoSmithKline Q4 call, when the UK-based drug firm was quizzed about its US manufacturing presence.

“We have nine factories in the US [and] one of our two global R&D centres,”​ CEO Andrew Witty responded. “From a factual point of view of network, I think we're in a pretty good position.”

He added the firm is “in the process as we speak of continuing to expand our physical footprint in America” ​– something spokeswoman Frannie De Franco confirmed to this publication, without divulging any details.

Global Supply Chain

GSK also questioned whether Trump’s plan to increase import taxes would have the desired effect, citing the complexity of pharma’s global supply chains.

“The reality is it's going to be very difficult for the US to own every single piece of input that goes into its system,”​ said Witty. “I don't think anybody realistically believes that.”

CFO Simon Dingemans added “the devil is going to be in the detail of what the proposals finally turn out to be, particularly in relation to any border adjustment and which products it covers and how it covers cross-border flows.”

However, he noted GSK is far from alone in having its supply chains stretch across borders, and US policy changes will be either a challenge – or perhaps opportunity – for the industry as a whole.

“We’re participating in the debate, and we’ll see what proposals appear.”

UK investment

GSK has announced a string of investments in its UK production network – the latest being a post-Brexit vote £275m ($345m) injection​ – and has actively relocated IP to take advantage of the country’s Patent Box tax incentives​.

Witty also told investors GSK has a policy that whenever a new product is launched, “we as quickly as possible transfer production to our US factories, so things like Tivicay, things like Breo are already now being manufactured in the US.”

Tivicay (dolutegravir) is an HIV-1 infection drug, while Breo (fluticasone furoate and vilanterol inhalation powder) treats chronic obstructive pulmonary disease (COPD). Both were approved by the US FDA in 2013.

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