Pharma production falls are not the disaster the statistics suggest

By Chris Wheal

June 12, 2024

Production output depends on the order book

It’s not been a good week for pharma stats. The sector in Ireland has had a bad quarter and the industry in the UK a bad month. But is it all it seems?

First Ireland’s Central Statistics Office (CSO) reported on 10 June its quarterly production and turnover figures. The numbers showed that to April 2024, production in manufacturing industries decreased by 17.5% when compared with the previous three-month period. Year on year the decline was 12.7%.

Statistics can speak with forked tongues. The numbers for the pharma sector are top secret. They show as asterisks in the tables. Colin Cotter, statistician in the CSO’s Enterprise Statistics Division, explained to PharmaLifeScience why the numbers are withheld. 

“Statistical confidentiality is a fundamental principle of official statistics. As some of the sectors in the Irish economy are dominated by some large companies, disclosing data for certain sectors would identify the performance of individual companies,” he said.

The official announcement said the decline was “driven by differences in performance between the highly globalised Modern sector and the Traditional sector”.

The Modern world

The ‘highly globalised Modern sector’ is code for the chemical and pharmaceutical industries, plus the computer and electronic sectors. Together, the CSO reports, these declined by 16.6% in industrial production between February and April 2024, when compared with the same period in 2023. In contrast, the Traditional sector saw an increase of 13.1%.

Cotter gave some more detail. “The Modern sector is made up of enterprises in [European Community economic activity sectors] NACE 20, 21, 26, 27, 182, 325. Although the pharmaceutical (21) and chemical (20) production are significant components of this there are other sectors such as computer, electronic and optical products (26) that would make up a substantial part of the Modern sector,” he said.

Whichever way you slice it, it does appear that the pharma sector has underperformed the Irish economy as a whole and is dragging down the country’s output overall. But do the stats tell the whole story?

English rose

It’s no better across the Irish Sea. The UK’s Office for National Statistics two days later reported: “Manufacturing output fell by 1.4% in April 2024 and was the largest contributor to the fall in production output in the month. 

“The largest contribution within manufacturing came from the manufacture of basic pharmaceutical products and pharmaceutical preparations, which fell by 6.1% in April 2024, following a growth of 7.6% in March 2024.” 

Statistics can be confusing. Looking at the numbers slightly differently, based on each sector’s contribution to overall production, total UK production output fell by 0.9% in April 2024. It wasn’t so bad for the quarter as it grew by 0.7% in the three months to April 2024. 

Of that, manufacture of basic pharmaceutical products and pharmaceutical preparations contributed an overall fall of 0.56% for the month, but grew by the tiniest of margins – just 0.03% – over the quarter. Because it is a large sector, fluctuations in pharma output make big differences overall.

In a jam?

So should we be worried? The short answer is no. A very helpful chap at the UK ONS flagged up that the pharma sector is a regular headline grabber. Orders drive production and they don’t come in a regular stream. 

Illnesses, disease, seasonal variations and government planning drive big drug orders. When the orders come in, production ramps up. There is rarely a steady output from the sector. It leaps and falls.

Cotter at the Irish CSO, added: "The scale of contract manufacturing and outsourcing in the Irish industrial economy has increased since 2015, meaning that very high levels of short-term – even monthly – volatility may be present in the indices presented in the release. With this in mind, it's recommended that analysts take a longer-term view of the indices."

Economic statistics usually need to be looked at over the long term for trends. Think of it like the price of computer games – when a new blockbuster game is released with a premium price and a captive market, the average price of a game sold goes through the roof. But over the rest of the year they drop back down again.

The statistics don’t lie. But neither to do they tell the whole truth.

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