The Value of the Pharmaceutical Industry; key to Europe’s economy
The pharmaceutical industry continues to be a key driver of growth in the European economy. This is just one of the principle conclusions drawn by a new analysis of “The Economic Footprint of selected pharmaceutical companies in Europe”, carried out by the independent economic research institute, WifOR.
Specifically, the report looks at the economic impact of seven pharmaceutical companies – Abbvie, AstraZeneca, Boehringer Ingelheim, Ipsen, J&J, Novartis and Sanofi – and their contribution to the entire European economy from 2010 to 2014. While the report was funded by EFPIA and six of its member companies, these parties had no influence over the study questions, methods, analysis or the drafting.
The selected companies contributed a total of €77.9 bn to Europe’s Gross Domestic Product (GDP) in 2014, with €34.6 bn generated in direct gross value added effects and a further €43.3 bn in indirect and induced effects . This translates effectively to 1.3 additional euros generated for the European economy for every euro of direct gross value added by the seven participating companies.
Meanwhile, the report also underscores the pharmaceutical sector’s continued contribution to employment in Europe, with the business activities of the seven selected companies alone supporting nearly 865,000 jobs – equivalent more or less to the size of the population of Amsterdam. Of these, 153,027 people are employed directly by the industry, while 711,661 jobs are generated indirectly through business activities with suppliers of goods and services and are induced through company employees spending their earnings. As a multiplier, this means that some 5 additional jobs are supported for each job created by the pharmaceutical industry – making it the largest multiplier of any industry sector.
The report emphasises the value of the pharmaceutical sector for European innovation, with its focus on research and development seen as a key asset to the EU economy. While the European Commission has set a target for R&D expenditure to account for 3% of GDP in 2020, the selected pharmaceutical companies have already eclipsed this figure by a factor of 6, reinvesting 17.4% of their revenue on research and development.
Commenting on the report, EFPIA Interim Director General Eric Cornut said: “The WIFOR report underlines the importance of the pharmaceutical sector to the European economy. In a globally competitive market, it is critical Europe’s policy makers foster an environment that supports pharmaceutical research, development and investment.”
 Gross value added is a measure of the value of goods and services produced by the seven companies. This can be split into direct, indirect and induced effects. (1) Direct effects describe the selected companies immediate economic impact, (2) indirect effects are generated by the businesses that supply goods and services to the selected companies, (3) induced effects are generated by the spending of income by employees working for the selected companies and their suppliers.