New Jersey is home to more pharmaceutical companies than any other state in the country. In fact, New Jersey has more pharmaceutical companies than any country in the world. The pharmaceutical and medical technology industry is a major factor in the state’s economy. The Healthcare Institute of New Jersey has commissioned a study to take a detailed look at the economic impact that the industry has on the state.

Bob Franks, former U.S. Representative and Senate candidate and current president of the Healthcare Institute of New Jersey, discusses the results of the report at the Princeton Regional Chamber of Commerce luncheon on Thursday, August 10, at 11:30 a.m. at the Marriott at Princeton Forrestal Center. Cost: $40. Call 609-924-1776.

The Healthcare Institute of New Jersey is a trade association of 24 pharmaceutical and medical technology companies with a “significant presence in the state,” says Franks, “including all of the larger companies such as Johnson & Johnson and Pfizer, including 11 companies with global or North American headquarters here in New Jersey.”

The study only details members of the Healthcare Institute. It does not include any bio-tech companies, which have their own trade association, or pharmaceutical and medical technology companies in the state which do not belong to the Healthcare Institute. This means the impact of the industry is actually greater than this study shows, says Franks.

This is the 10th year for the report, which was compiled by Deloitte. Some of the most significant numbers are:

Employees. The companies surveyed had 60,5056 employees in 2005, a “marginal” increase of about 300 employees over 2004. But Franks is “delighted” with the number, he says, because it is the first increase in employee roles since 2002, when there were approximately 69,000 full-time employees in large New Jersey pharmaceutical companies.

“I’m happy to see that the hemorrhage has ended. I anticipate that this is a beginning of a recovery for the industry,” he says.

Payroll. The aggregate employee payroll exceeded $7 billion last year. The average salary paid was $93,948. “No other industry in New Jersey has an average salary as high as this industry,” says Franks. In fact, even though the number of jobs is smaller than in 2002, the aggregate payroll is larger.

Research. In 2006 the industry spent $7.5 billion in New Jersey in research and development of new products. This is another new record for spending, says Franks.

Third party vendors. Contracts for third party vendors were $4.16 billion last year. This includes spending for all types of support areas, including legal, accounting, labeling and packaging, food service, maintenance, and landscaping work.

Spin-off jobs. The pharmaceutical industry was responsible for creating 101,500 additional jobs created throughout the state.

Capital expenditures. The industry put $2.2 billion into capital expenditures last year, double the amount spent in 2004, says Franks. This includes “rehabilitating old buildings and building new ones. This is an industry that needs to attract the best and the brightest, and in order to do that the facilities must be the best.”

Philanthropy. The companies in the association spent $4.6 billion on philanthropy throughout the world in 2005. The amount includes both product donations and direct financial assistance, says Franks, and again, this number is higher than the amount spent in 2004. “Much of that was spent on relief for the tsunami victims in Asia and for the hurricane victims on the Gulf Coast,” says Franks. Out of that amount, $152 million was spent on philanthropy in the state of New Jersey.

In all, he says, the total economic impact of the top 20 pharmaceutical and medical technology companies to the state of New Jersey was $27 billion in 2005, up from $22 billion in 2004.

But the numbers only tell part of the story, he says. “For nearly a century New Jersey has had the moniker of the ‘medicine chest of the world.’ Half of the medicines in the world are made by New Jersey based companies. That has led to a concentration of more scientists per square mile in New Jersey than in any other state, or any other country in the world.”

Employing so many highly skilled people has had an impact on the wage structure of New Jersey, which has one of the highest per capita incomes in the country.

“This is an industry where there is enormous competition, where innovation is the life blood. To be successful a company must have an aggressive research program and a solid pipeline of products,” says Franks. This need has become ever more challenging, he adds, and a variety of concerns need to be addressed if New Jersey is to continue as the leader in the industry.

“I am very concerned about the tax climate in this state,” says Franks. “A trifecta of taxes” is making it ever more difficult for corporations to work in New Jersey. “The personal income tax of over eight percent is one of the highest in the nation,” he says, “and it’s not just homeowners who pay property taxes. Corporations pay them, too.” In addition, corporate business taxes in New Jersey are also some of the highest in the nation.

The tax situation “sends a chilling signal to investors and entrepreneurs,” says Franks, and if it continues he predicts that the state will lose stature as a location for new business. Bristol-Myers Squibb has announced that it is opening a new facility out of state, and Novartis recently chose Cambridge, Massachusetts, not New Jersey, for its new World Genomics Center, he points out.

The choice of Cambridge came as no surprise to Franks. That area, along with San Diego and Research Triangle in North Carolina, “has a wonderful synergy of elements that New Jersey doesn’t have,” he says. And although tax rates are also high in both California and Massachusetts, the “cooperative, non-competitive” atmosphere fostered by higher education, life science, and other medical resources in those areas make them attractive to the pharmaceutical and medical technologies industries.

“New Jersey has historically had a weaker higher education system,” which has often had “no desire to collaborate,” he says. On the bright side, Franks adds, “I see that starting to change in New Jersey.”

That is good news. With the high-paying jobs it generates, the business it gives to its myriad sub-contractors, and the contributions it makes to scores of charities of all kinds, the pharmaceutical industry is a sector that the Garden State would do well to cultivate.

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