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News : Irish Last Updated: Mar 4, 2013 - 10:23 AM


Monday Newspaper Revie - Irish Business News - - March 04, 2013
By Finfacts Team
Mar 4, 2013 - 10:17 AM

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The Irish Independent reports that a European Union loophole is costing Irish taxpayers millions of euro in additional fees for medicines.

The Irish Independent has learnt that five drug companies have been allowed to extend the patent of branded medicines for an extra six months here, reaping a top price for the medicines.

Once the patent of a branded drug runs out, the financial returns to the manufacturer dramatically drop because it has lost exclusive rights to its sale and other companies can make cheaper versions.

The six-month extension was granted to encourage companies to spend more on researching paediatric medicines because treatments for children are suffering from serious under-investment.

However, it means the taxpayer, through the Health Service Executive (HSE), is paying over the odds for these medicines for another six months and cannot purchase cheaper generic versions during that time.

The concession has cost at least €54m in 2011, according to the most up-to-date figures.

The figures are based on the costs of the drugs to the HSE under various state schemes including the medical card, drug payment and long-term illness schemes.

Several of the drug companies contacted by the Irish Independent could provide no examples of progress they had made in developing more medicines for children in return for the rise in their profits due to the EU perk.

They also refused to divulge how much income was generated, saying it was commercially sensitive information.

The companies which were allowed the six-month extension are Bristol Myers Squibb, AstraZeneca, Pfizer, Merck Sharp & Dohme and Novartis.

The drugs granted the extension included the anti-cholesterol drug Lipitor; Singulair, which is used to prevent asthma attacks; and Diovan which treats high blood pressure.

Others include Xalatan, which treats the eye disease glaucoma, and Arimidex, which is given to women with breast cancer after surgery.

The so-called Paediatric Regulation came into force in the EU in 2007.

The purpose is to facilitate the "development of medicines to treat infants and children in order to ensure that new medicines are researched and authorised for children under 17 years of age".

A spokesman for the Department of Health was unable to quantify the benefit of the extension but pointed to a report carried out over a year ago by the European Medicines Agency.

It found there is evidence of increased and better research on paediatric medicines and importantly "increased availability of paediatric medicines and age-appropriate information regarding these medicines".

The extension has been particularly lucrative for companies supplying Ireland because of our traditionally higher drugs prices.

The Irish Independent also reports that the value of Ireland's fund industry will pass the $2.3 trillion (€1.8tn) mark for the first time in 2013 despite a challenging regulatory and economic backdrop, according to BNY Mellon.

The bank's head of offshore, Rachel Turner, has also predicted that Ireland will retain its position as a global leader in fund administration.

"We are still seeing a huge appetite from investors to place money in Ireland," said Ms Turner. She added that large chunks of UCTIS asset flows last year came through Irish vehicles.

"This is down to the fact that Ireland is still seen as a good place to do business from a funds perspective, despite the financial crisis," she said.

BNY Mellon is the largest funds administrator in Ireland, according to Monterey Insight, based on total net assets of $401bn for fund administration services across domiciled and non-domiciled funds.

State Street is second with $356bn and JP Morgan third with almost $240bn.

Ms Turner added increasing regulation posed significant challenges to the sector, but Ireland could use its EU presidency to help shape legislation and position the Irish funds industry for future growth.

"One of the greatest challenges facing the Irish funds industry in 2013 is increased regulation at both a global and local level," she said.

"How quickly the industry in Ireland adapts to these changes will be critical to maintaining the upward growth trajectory the industry has enjoyed."

She added that Ireland needed to start targeting funds from further afield.

"Ireland needs to begin to target emerging distribution markets such as South America and the Middle East," she said.

The Irish Times reports that executive life in Switzerland will soon be less lucrative after more than two-thirds of Swiss voted yesterday in favour of capping pay at listed companies.

Some 68 per cent backed the so-called “rip-off initiative” in a referendum, giving shareholders a veto over salaries of managers and board members. New provisions, to be anchored in the Swiss constitution, will outlaw golden handshakes for arriving and departing managers, plus bonus payments for executives involved in mergers and acquisitions.

At general meetings, pension funds and other institutional investors will be obliged to act in the interests of their investors and publish their votes.

Managers and board members will, in future, be re-elected at company agms to obviate the need for payouts for prematurely ending multiannual contracts.

Breaches of the new law will result in fines of up to six years’ pay or a prison term of up to three years.

Grassroots initiative 

The grassroots initiative, launched seven years ago by a manager-turned-politician Thomas Minder, collected donations via an online platform. Yesterday, he said it would end an era of large bonus payments to managers regardless of their – or their company’s – performance.

It handed shareholders greater ability to intervene in bonus awards, he said, and would discourage short-term thinking damaging to a company’s long-term interests.

“I’m just happy the long campaign is over. It’s a huge signal with over 60 per cent,” said Mr Minder of the vote, backed by all 26 Swiss regions or cantons.

At least five of Europe’s top-20 highest paid executives work for Swiss firms, including Nestlé, Credit Suisse and drug firm Novartis.

Criticism 

Critics of the campaign, who proposed a milder reform, said the vote would make Switzerland less attractive to international companies.

Economiesuisse, the industry federation that spearheaded a €6.5 million campaign against the initiative, admitted its campaign had been damaged by public outrage over corporate pay-offs at the loss-making UBS bank and Novartis.

Last month, Novartis scrapped plans to pay departing chairman Daniel Vasella up to €60 million in a non-compete bonus.

The Irish Times also reports that the head of the European Stability Mechanism, Klaus Regling, has warned of the difficulties in reaching political agreement on using the ESM to directly recapitalise banks, a key strand of Ireland’s bid for debt relief.

In an interview with German weekly Wirtschaftswoche ahead of today’s meeting of the euro zone’s finance ministers in Brussels, Mr Regling said there was significant political resistance from some states towards using the fund to directly recapitalise banks.

“In order to have direct bank recapitalisation by the ESM, a unanimous decision by the 17 euro members is required. Additionally in Germany and in other countries the agreement of parliament is necessary,” he said.

Pointing out that each country has a veto on the issue, he said that a “compromise” needs to be found that is “acceptable to all and that can be explained politically”.

“Each country, even a small country like Estonia, has a right of veto. And there are several countries where enthusiasm for direct bank recapitalisation by the ESM is rather limited.”

Mr Regling’s comments come as euro zone finance ministers gather in Brussels, amid divisions between member states about the scope and remit of the ESM fund’s capacity to directly recapitalise banks. Ireland’s bid to lengthen the maturities of some of its bailout loans also received a setback, with euro zone finance ministers delaying a decision on Ireland and Portugal’s request for an extension of the maturities of some of its bailout loans.

Mr Regling said there was also an argument for capping the sum that could be used to directly recapitalise banks. He pointed out that direct bank recapitalisation would negatively affect the ESM’s rating, as recapitalising banks is perceived as riskier than granting loans to countries.

While the 17 European states that share the single currency agreed last year that the ESM fund should be used to directly recapitalise banks, there is mounting disagreement between states about how this process should operate. Germany has indicated that it wants an €80 billion cap on bank recapitalisations.

Ireland is hoping the euro zone’s rescue fund can be used to directly recapitalise AIB and Bank of Ireland.

The possibility of the ESM setting up subsidiaries to directly recapitalise banks credit rating is also being considered, according to sources.

The Irish Examiner reports that British exploration company Europa Oil & Gas intends to expand its Irish asset portfolio beyond its two existing prospects off the south-west coast, which have a mean total resource potential of around 2bn barrels of oil.

The London-headquartered firm, which has exploration assets in Britain, Ireland, mainland Europe, and northern Africa, is unlikely to drill at its Irish prospects until 2015, but is likely to apply for a frontier licence this summer, ahead of its licensing options expiring in November.

It has already held exploratory talks regarding potential farm-out agreements for its Irish interests, with a number of high-profile international players understood to have shown interest.

The AIM-listed firm’s two offshore Ireland options — the Kiernan and Mullen prospects — are both located in the southern Porcupine Basin, off the south-west coast.

Previous testing has shown a 90% probability of 66m barrels of oil and a 10% probability of 1bn barrels existing at the Mullen prospect, with those numbers potentially being bigger at the Kiernan prospect.

The two assets combined have a mean resource potential of 2bn barrels.

Europa chief executive Hugh MacKay suggested that, whatever the true final figure, it is likely to be in the hundreds of millions of barrels bracket.

He added that Europa’s estimates to date have not been notional, but are based on 2D seismic work done last year, after the company was awarded options in the Government’s Atlantic Margin licensing round in late 2011.

“The attractiveness to the larger players should be that the Porcupine Basin is potentially not just a one prospect wonder, but a new play extending into open acreage,” said Mr MacKay.

He added that the company is definitely interested in expanding its Irish portfolio and fully intends to be involved in the Government’s next offshore licensing round, though a decision on the timing or location of this round has not yet been made.

Europa’s need for a development partner is obvious. The cost of undertaking 3D seismic work is being estimated at $27m (€20m), with actual drilling work costing another $50m-$100m.

The company is not concerned with waiting to see what Providence Resources and Exxon find at the nearby Dunquin field, with Mr MacKay proclaiming: “We’re happy to farm out now.”

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