LOS ANGELES — The pharmaceutical industry in Illinois is one of its most valuable economic resources, accounting directly and indirectly for $9 billion a year in Gross State Product (GSP) and more than 100,000 jobs, but the state′s position in the pharmaceutical industry is slipping, a new study from the Milken Institute shows.
The findings show that Illinois — and other states with a large pharmaceutical industry — has a lot at stake, and that policy makers should consider all of the economic ramifications of any changes affecting this industry, such as the impact of drug imports, said Ross DeVol, Director of Regional Economics and the study′s principal author.
"State and local governments need to be aware of how valuable the pharmaceutical industry is to them as they consider whether or not to advocate changes to regulations," DeVol said. "They need to consider all sides — not only how much money they might save, but how much they might lose."
The study comes at a time when the state of Illinois is pushing federal officials to allow it to import drugs from Canada in an effort to reduce state and local government employee health-care costs.
The report shows that, despite its importance to the state′s economy, Illinois' position in the pharmaceutical industry has been slipping recently as other states take a greater share of its valuable dollars — a warning sign that Illinois policy makers should heed if they wish to protect this important resource, the authors say.
"While the pharmaceutical industry has become an increasingly valuable source of state production, conversely, that production has been slipping relative to U.S. pharmaceutical industrial output," the study says. "In light of its contributions to employment and job growth in the state, finding ways to bolster Illinois′ performance in the pharmaceuticals industry deserves attention."
The pharmaceutical industry is a major component of Illinois′ economy. In addition to providing thousands of direct jobs in the state, the industry is an important contributor to state and local government finances, including the corporate taxes it generates, the personal income taxes that its workers contribute, the sales taxes generated by purchases of its products and the taxes collected by the industry′s ripple effects on employment and income in other sectors.
Among the study′s findings:
- In 2002, the pharmaceutical industry in Illinois employed nearly 23,000 workers who produced some $4.3 billion worth of industrial output for the state. This ranks the pharmaceutical industry seventh among major export sectors in the state.
- When the full extent of the industry and its ripple effects on the economy are accounted for, however, it is responsible for 107,000 jobs — comparable to the state′s principal export industry, communications equipment — and $9 billion worth of GSP.
- Since the 1990s, employment in the state′s pharmaceutical industry has represented close to 7 percent of all pharmaceutical employment nationwide.
- Since 1990, pharmaceutical employment in Illinois has risen by more than 40 percent, whereas overall employment in the state has grown around 10 percent.
- Since 1990, the state′s pharmaceutical output has grown by around 90 percent — more than double the rate of the state′s growth of total GSP.
But researchers also found that while the industry has grown in importance in the Illinois economy, it has been slipping in importance to the overall U.S. pharmaceutical industrial output.
The state′s concentration of industry output as part of its overall economy has dropped from 60 percent above the national average to around 25 percent above the national average. This slippage is a sign of increasing competitive challenges for Illinois′ pharmaceutical industry as other leading states manage to capture more of the value of U.S. pharmaceutical output and attract international firms′ R&D headquarters, the study says.
Illinois is home to two major global pharmaceutical companies: Abbott Laboratories and Baxter International. Together in 2002, they earned more than $26 billion in annual sales. They and other pharmaceutical companies in the state are major magnets for highly skilled — and highly paid — workers, spending hundreds of millions of dollars on research and development.
The authors say these numbers are a wake-up call to policy makers, who must consider the impact of their decisions about the pharmaceutical industry on the overall state economy.
"The industry′s economic and scientific contributions propel many key states and regions," DeVol says. "Yet, for many, what comes to mind when the pharmaceutical industry is mentioned, is the growing cost of prescription drugs. It′s much more than that. For example, there is the strong link between profits, research and development, and future drug discoveries. Policy makers should take these things into consideration."