Leonardo da Vinci, Gianni Versace, Massimo Bottura — these names come to mind immediately when someone mentions Italy. Famed for its culinary delights, high-end fashion, and rich history in arts and culture, it should come as no surprise that Italy is one of the most visited countries in the world.
Tourists likely aren’t flocking to Italy to see its pharma manufacturing facilities, but nonetheless, the drug industry is carrying its weight in the Italian economy. Known for its reliability and robustness, the Italian pharma industry has been a stable driver of economic rejuvenation.
According to Farmindustria, pharma’s largest trade association in Italy, the industry has been, and still is, the leading sector in terms of job growth, production and exports — representing a “force for the entire economy.”
All of this comes in spite of significant obstacles — cultural barriers and a lack of government backing chief among them — that the industry will need to overcome if it wants to remain competitive on a global scale.
Battling it out
Based on 2019 data, Italy is the biggest pharmaceutical producer in the European Union, both in terms of total manufacturing capacity, as well as in manufacturing capacity per capita, according to Lorenzo Positano, managing director and partner, Boston Consulting Group.
“It’s a bit of a race between us and Germany each year,” says Positano, who leads BCG’s health care practice in Italy, Greece and Turkey.
According to annual reports compiled by the European Federation of Pharma Industries and Associations (efpia), Italy claimed the crown in 2017, Germany grabbed it in 2018 and now Italy has wrangled it back.
Italy’s pharma production value reached €34 billion (USD $41.2 billion) in 2019. Much of the sector’s success can be attributed to its exports — over 80 percent of the drugs made in Italy leave the country. Italian drug exports, which Farmindustria refers to as the “engine of pharma companies” were up 57 percent in 2019.
Quantity has not come at the expense of quality, either.
“Italy has a 60-year history of successful pharma manufacturing,” says Positano. “The industry is very mature in terms of manufacturing quality. Our workers have strong skills. Essentially, pharma production in Italy is cheaper than in Germany, but the same quality.”
The quality of workmanship is affirmed by the numerous multinational drugmakers, such as Novartis, GlaxoSmithKline and Pfizer, who choose to manufacture in Italy. Italy is also the EU leader in contract development and manufacturing organizations; the sector has seen steady growth in production for the last decade and Italian CDMOs now rank first in manufacturing value. Capitalizing on access to the European market, leading global CDMOs, including Patheon (Thermo Fisher Scientific), Recipharm and Catalent, have commercial manufacturing facilities in Italy.
Recognizing that the quality of human resources is key to producing quality products, pharma companies based in Italy seek to maintain a top-notch workforce by offering modern corporate welfare programs with an emphasis on work-life balance.
Lack of federal focus
During the past decade, federal governments around the world have set lofty goals and pushed initiatives targeting life science industries in their respective countries.
In 2011, the Russian government launched Pharma 2020, with the goal of reducing the amount of pharma imports from 90 to 50 percent. In 2016, the United Arab Emirates unveiled the 2030 Dubai Industrial Strategy, targeting pharma as a vital manufacturing sub-sector and laying the groundwork for it to contribute 25 percent of the country’s GDP by 2025. In 2018, the Canadian government introduced the Health and Biosciences Economic Strategy, with the goal of doubling the size of the health and biosciences sector and becoming a top-three global hub by 2025.
Notably, this type of long-term national strategy is absent in Italy.
“There is no central strategy or agency that pushes pharma innovation in the country,” says Positano. “No organization has been done at the federal level to put together champions and focus on scaling up specific technologies across the country.”
According to Positano, the heart of the issue may be cultural. “The scientific culture is not a part of our heritage,” says Positano. “Our primary schools don’t teach the scientific mentality — they are more focused on the arts, literature, history,” he says.
Italy’s investment in education in general is well below the EU average, particularly when it comes to higher education. Several federal school reform initiatives over the years have attempted to correct the problem. The high cost of university education coupled with low returns once graduates enter the job market has led to a lower number of graduates. Many of those who do graduate with science degrees leave the country seeking better positions abroad; for years the country has been trying to slow the trend of a large fraction of its top researchers leaving Italy.
What is on the horizon for the pharma industry as it fights to stay on top? One area where Italy is fine-tuning its skills is orphan drugs — the development of drugs for rare diseases.
About 30 million people living in Europe and around 2.5 million Italians suffer from a rare disease. The development and authorization of treatments for rare diseases is both expensive and complex, and due to the small number of patients affected, the return for drugmakers is small — making it an area fraught with unmet needs.
“A lot of Italian pharmaceutical companies are pursuing orphan drugs. It is an area where pharma companies really have a competitive advantage and a lot to be proud of,” says Positano.
This dedication isn’t a new trend. Decades ago, Italy established itself as a pioneering country for rare disease expertise in Europe. One of the first orphan drugs to be approved by the U.S. Food and Drug Administration after the enactment of the 1983 Orphan Drug Act was developed by an Italian biotech, Sigma-Tau Pharmaceuticals, for the treatment of genetic carnitine deficiency. The Italian academic research sector has the highest number of scientific publications in the global field of rare diseases. In 2001, Italy became the first country in Europe to implement a population-based public health registry dedicated to rare diseases.
Recently, Italian pharma company Chiesi Farmaceutici launched a U.S.-based subsidiary in Boston with a focus on advancing research and new product development for rare and ultra-rare diseases.
A newer push cited by Positano is in the area of digitalization.
Because of pharma’s importance to the manufacturing sector, the industry has not been left out of the federal initiatives related to digital transformation. With the aim of helping Italian companies seize opportunities brought by the fourth industrial revolution, the National Industry 4.0 Plan 2017-2020 provides incentives and direct funding for companies investing in related R&D and smart machinery.
The most notable transformation will likely be seen in the pharma workforce.
“Historically, the Italian pharma industry was based on a strong physical commercial workforce,” says Positano. “And now you see them accelerating the transition towards digitalization.”
According to Farmindustria, the pharma workforce is poised to transform. Of the 20,000 employees that have been recruited into the pharma sector since 2014, 81 percent are aged under 35, and over 90 percent have either a university degree or a high school diploma.
Pharma companies are making in-house preparations by setting up advanced analytics teams comprised of engineers, scientists and data analysts. Farmindustria predicts that the effects of digitalization on pharmaceutical production will be the creation of new opportunities, not the loss of jobs.
The pharma industry’s flexible and dependable workforce will continue to position the industry for success and enable pharma to continue to play a strategic role in the country’s economy.