The Maltese healthcare manufacturing sector, which consists primarily of the production of pharmaceuticals, pharmaceutical ingredients and medical devices, is an important part of the country’s industrial set-up which generates significant economic activity and employment.
There are over 30 of these companies, most of which are established international brand names, including Amino Chemicals, Combino Pharm, Watson, Pharmacare, Actavis, Starpharma, Siegfried, Solea Pharma, Sterling Pharmaceutical Services, Medichem, Baxter and CardinalHealth.
The sector employs 2,118 full-timers (1,464 employees directly in pharmaceutical production) and has an annual global export turnover of over €295 million per year.
The companies are certified to good manufacturing practices according to European Union requirements and most companies are also accredited by the United States Food and Drug Administration.
Malta’s accession to the European Union in 2004 and the eurozone in 2008 without doubt made the country more attractive for the manufacturing sector primarily due to the single market’s fundamental pillars of free movement of goods, services, capital and people. The EU’s regulatory framework ensures practices and products are not only effective and efficient in producing the desired results, but the operation of companies is also safe and reputable.
Malta’s tax system is very attractive to the entrepreneur wishing to carry out activities in the pharmaceutical sector. Income tax paid on trading income and income generated by licensing and sub-licensing of patents and trademark are eligible for refunds of up to six-sevenths of income tax paid.
The sector employs 2,118 full-timers and has an annual global export turnover of over €295 million per year
The government offers various further incentives in the form of investment allowances, investment aid incentives, research and development incentives and access to other potential funding opportunities under the relevant and applicable funding programmes within the EU’s multi-annual financial framework.
Malta is also one of the few EU member states that in 2003 fully recognised the Roche-Bolar Provision, where generic companies are allowed to undertake development work prior to patent expiry – held by originators – but excluding any product commercialisation.
The wide manner in which the Maltese Patent and Designs Act has been adopted allows generic companies to carry out testing and trials for the purposes of earning the required regulatory approvals prior to the expiration of the patent in question.
Therefore, a generic pharmaceutical company in Malta may manufacture a drug, complete all the mandatory testing requirements, obtain the necessary approvals and, upon expiration of the competitor’s patent, release their product onto the market without undue delay. All obligations arising from the Patent Cooperation Treaty and European Patent Convention are also incorporated into Maltese legislation, ensuring that property rights registered in Malta are automatically extended to the territories of all other signatories.
The six main advantages Malta offers the pharmaceutical manufacturing industry are: a strategic geographic location; EU and eurozone membership; an attractive tax system; the authorisation of registered products is mutually recognised in EU; a highly skilled, qualified, dedicated and multilingual workforce; and the recognition of the ‘Roche-Bolar’ provision.
Chris Cardona, Minister for the Economy, stresses that the healthcare industry is high on the government’s agenda.
“There is room for further growth in specific areas within the industry sub-sectors, especially with regards to research and development, medical devices and life sciences projects.
“With particular reference to the latter, the government’s strategic objective is to complete the Life Sciences Park which was intentionally located next to the University of Malta, Mater Dei Hospital and the new Oncology Centre. With an investment of over €24 million (co-funded under ERDF), Malta’s Life Sciences Park will provide many more growth opportunities within the healthcare manufacturing industry, promoting a research and velopment cluster,” Dr Cardona says.
Dr Cardona says Malta provides an ideal environment for enterprises engaged in healthcare activities, coupled with attractive and generous incentives.
“A most important element is the English language, apart from the local skills and aptitudes of the Maltese workers. Indeed, our educational system including the vocational courses organised by the Malta College for Arts, Science and Technology (MCAST), in addition to the University of Malta and other specialised training, cater for the various skills requirements. Besides, the government’s policy is aimed at encouraging more students to take on science subjects.”
Dr Cardona highlights that over the past three decades, Malta succeeded in attracting renowned industry players particularly in medical device manufacturing (Baxter, Cardinal Health), pharmaceuticals (Actavis-Watsons) and related ancillary services including the production of active pharmaceutical ingredients (Amino Chemicals, Sterling), product development and technologies, formulations and improvements, laboratory testing, batch release for EU market, repackaging activities, specialised packaging and printing (including blister lines) and logistics.
He explains that the industry is supported by an attractive incentives package which includes investment aid primarily in the form of tax credits, access to finance by way of soft loans, interest subsidies or loan guarantees, access to custom made dedicated facilities (production areas and laboratories) through property development agreements, business development grants and training assistance.
“Another local characteristic that has contributed towards the attraction of companies engaged in the healthcare manufacturing industry is the Malta Medicines Authority which acts as the regulator for the industry,” he points out.
He says that Malta appeals in particular to the generic pharmaceutical sector in view of the fact that relatively few patents were registered in the territory prior to Malta’s accession in the EU. This, coupled with an established practice for many years of the Roche-Bolar Provision (where generic companies are allowed to undertake development work prior to patent expiry – held by originators – but excluding any product commercialisation), continues to generate interest from the industry.
Other attractions for this sector include a very high standard of specialists who have studied, trained and qualified in the UK and the US, high medical standards that meet and exceed European requirements, with Malta ranking highly amongst nations in terms of health levels and overall health system performance (World Health Report 2007), a vast range of services and treatments, a variety of private clinics and hospitals providing five star ambiences, multilingual doctors and nurses, competitive pricing, excellent flight connections from all over Europe and beyond and short distances from the airport to the healthcare centres and accommodation facilities.
Dr Cardona says the government is “constantly” looking at improving the general environment for enterprises to set up new activities and/or expand their existing operations locally.
“The government, through Malta Enterprise is enhancing measures and the level of assistance to promote research and development projects, particularly those engaged in life sciences activities.
Many new opportunities are expected to arise from synergies with other sectors such as ICT and healthcare research.
Incentives offered, he points out, include investment tax credits and cash grants for projects undertaken in industrial or experimental research. There are also incentives for feasibility studies, as well as collaborative research projects under European Union programmes – Eureka and Eurostars.
These new projects are expected to generate an investment of more than €21million and should generate more than 250 new jobs
Asked about the feedback the government receives from people in this industry about the challenges they experience on a daily basis, Dr Cardona says that operators in this sector “face constant challenges which are common to all industrial concerns operating from Malta”.
These, challenges, he says, are typical of island economies and include logistics (sea and air), human resource skills’ availability and managing operating costs.
“Nevertheless, Malta still appeals for many as evidenced by the constant expansion projects undertaken by local operators within the healthcare manufacturing sector. Malta is also attracting new investments in this area from various localities, particularly Europe and Asia,” he says.
Indeed Malta Enterprise has already approved a number of new and expansion projects in the health manufacturing sector. The majority of these involve the setting up of new pharmaceutical entities, research and development projects, medical devices manufacturing, laboratory testing and batch release. Altogether, these projects are expected to generate an investment of more than €21million and should generate more than 250 new job opportunities by their third year of operation.
Claude Farrugia, chairman of the pharmaceutical manufacturing section of the Chamber of Commerce and Industry, says it is important to be constantly aware of the fact that this industry is highly global in nature.
“The patent cliff that was seen as an opportunity for the expansion of the generic pharmaceutical manufacturing sector in Malta at the turn of the century reached its peak a couple of years ago, so although there are still opportunities for new products, these are experiencing a decline as we see the effects of the pharma innovation gap, when fewer new medicines came to market, in the same period,” Prof. Farrugia says.
He says Malta was not the only country to notice this window of opportunity; other countries with lower operating costs and more resources have also been active and their exports have increased – it is difficult to remain competitive purely on financial grounds and Malta has to discover and exploit its strengths in other areas, such as its geographical location and the quality of its human resources.
“We are only now starting to see signs of recovery from the global recession a few years ago, which means that many countries are very sensitive to the cost of medicinal products to their national healthcare systems and are continually seeking to reduce prices, even for generic products.”
However, he points out, although generic medicinal products can be placed on the market at a lower price compared to the originator product, maintaining global good practice standards in this highly regulated industry to guarantee the quality and safety of products has a cost, and there is a limit to how much market prices can be decreased without becoming financially unsustainable, even for generic manufacturing companies.
Prof. Farrugia says pharmaceutical manufacturing generates a significant amount of waste that has specific requirements for its disposal. This has to be sent abroad, and the process is demanding financially and logistically to ensure that the waste is properly handled.
“The pharmaceutical manufacturing industry is not the only industry generating such waste, and therefore it would be beneficial to the industry in general if the government had to invest in a national strategic plan to coordinate the handling of hazardous waste.”
Prof. Farrugia also says the industry would like to see educational initiatives to maintain the level of science and linguistic skills of the country’s human resources “that are a key component of the ability of this industry to function effectively”.
He believes the health manufacturing industry in Malta does have a future; however he points out that there are many challenges and these will increase as biological medicinal products and their biosimilars (biopharmaceutical drugs designed to have active properties similar to one that has previously been licensed) play a more important role in healthcare.
“This may mean that the pharmaceutical manufacturing industry may have to diversify its portfolio, but I think we have already shown in the past that we can rise to a challenge when the opportunity for growth of the pharmaceutical manufacturing industry in Malta presented itself, and I believe that we can do so again with the collaboration of all sectors involved.”