Congratulations are in order. The pair have known each other for some time. But the relationship has now been formalised. Living as we do in modern times, both may have other relationships, but it’s still a significant commitment and we can only but wish them well with the hope of many healthy, and rich, children in the coming years, who do good across the world.
The happy couple are AstraZeneca, one of the biggest pharmaceutical companies in the world, and the Medical Research Council (MRC) who are creating a Centre for Lead Discovery together in Cambridge, UK.
The move can be seen as part of a process by which the big pharma firms are increasingly using university research expertise, rather than keeping that expertise in house. Astrazeneca will open the doors to its vast library of more than two million compounds and state-of-the-art screening facilities to MRC-selected academic researchers who will run up to 15 screening projects a year. In return the company will have the first option to enter licensing negotiations over any resulting drug discoveries relevant to its areas of interest. If this option is not used, the academics responsible can negotiate with other parties.
Those at the reception appeared overjoyed. David Willetts, the UK science minister, said this type of partnership would reinforce the UK’s reputation as a global leader in medical research. And as one pharma insider said, while Astrazeneca get the licensing rights, academics get access to libraries they wouldn’t otherwise access (or afford) as well as the kudos – a good deal all around. The ultimate hope, for both parties and their well-wishers is that the relationship will fast-track research that might not otherwise have been carried out, and will ultimately mean better treatments for patients.
Amid all these glad tidings, it seems churlish to point out a few problems with the relationship, but that’s the role of an economist. The company claims its products make up around 2.3% of the total UK export of goods – a total of almost £7 billion. But according to their website, AstraZeneca is a worldwide multinational with 35% of its employees based in Europe and just 13% in the UK. This poses the question of how the UK will benefit in terms of jobs and export revenues? How many of any new products will be made in the UK for example? Or will the UK taxpayer be subsidising a multinational to create wealth in other countries for the benefit, in large part, of non-UK shareholders?
The MRC stresses the scientific merits of the research proposals, not the impact on the UK as a basis for funding projects. That is fair enough perhaps, if the UK is getting a fair return for being, again in the words of David Willetts, “a global leader in medical research”. But too often the UK sells research expertise too cheaply, and make no mistake the quality of research in UK universities, right across the board, is exceptional.
One further point may be worth making. The groom’s background includes some problems with their tax payments. Nothing unusual in that, and not illegal of course. Many multinationals, worldwide, devote a large amount of resources to minimising their tax payments through exotic schemes such as the “Double Irish Dutch Sandwich” – where multinationals lower their corporate tax by shifting income from a higher-tax country to a lower-tax one.
There is no suggestion that AstraZeneca was involved in this particular scheme. According to the Guardian, its tax affairs revolved around activities in a number of countries, including the US and the UK. It made a settlement of up to US$100m with UK and US authorities in 2004. According to the Daily Mail, this was followed in 2010 by AstraZeneca agreeing to pay more than £500m to the UK Exchequer following a dispute over “transfer pricing”. This is a device which allows multi-national companies to lower their overall tax bill by making bigger profits in countries with lower taxation rates than they do in high-tax countries. A further agreement followed in 2011.
It must be emphasised that many multinationals do this, and if you do hook up with any multinational there is a strong possibility that they have had a spot of tax avoidance in their past. It must also be emphasised that AstraZeneca [is one of the biggest payers](http://www.theguardian.com/business/2011/mar/28/astrazeneca-tax-refund-hmrc-irs](http://www.theguardian.com/business/2011/mar/28/astrazeneca-tax-refund-hmrc-irs) of UK business taxes in the FTSE 100. And it is particularly important that this remains the case.
But our main point is that government departments and research councils could put a greater emphasis on the benefits to UK PLC in any funding decisions they make. This is not to say it must be the only consideration or even always the primary one. But given the UK’s debt situation and the relatively weak state of the economy, we need to exploit any competitive advantage we have and that includes our research base.
AstraZeneca does have some roots and manufacturing presence in the UK – the company is a result of a 1999 merger between Astra AB of Sweden and Zeneca Group PLC of the UK. This isn’t the case for most other multinationals.
In cases when the product of research is sold to non-UK firms, it is particularly important the UK gets a fair return for it. Universities worldwide have a poor record in this respect, but that is no excuse and still less a justification. “Kudos” is nice, but not quite enough. Many marriages go through rocky spells, with money at the heart of these problems. Its important to get the details spelt out explicitly right at the beginning.
None of this is to deny that it is better that this research centre is in the UK, rather than somewhere else. Nor is to deny the academic success of UK research – much of it due to research council finding. In many respects they do, and have done, an excellent job. It is simply a plea to use this more than as has previously been done as a base on which to help build a successful economy, with manufacturing at its heart.