Puerto Rico Leads in Pharmaceutical Exports

As Puerto Rico defaults on a large debt payment and Congress works toward coming up with a plan for Puerto Rico, there are calls for austerity on the Island. Some have suggested revising Section 936, the tax break that encouraged manufacturing in Puerto Rico that Congress ended in 2006 after the General Accounting Office found it to be an unwise use of taxpayer funds.

There are claims that the loss of Section 936 led to a decline in manufacturing in the U.S. territory.  Yet there is evidence that manufacturing in Puerto Rico has been healthy since the phase out of Section 936. This is true even as manufacturing throughout the U.S. in places like Detroit never restored its former manufacturing strength.

A new organization, YoNoMeQuito, is attempting to encourage people to stay in Puerto Rico. Their Facebook page offers general optimism:

The possibilities are endless, the first step is to have purpose, believe without giving in to the challenges and obstacles that will tempt us on the road. Excuses or explanations drain us of the energy and focus that we must always maintain. Then surround yourself with people who believe in you, in the purpose and goal. People who will help you be better and not settle. The power of a group which is purposeful, focused and passionate can move mountains and change the course of history. The time is now, now!

Optimism may seem like all that’s available for Puerto Rico, and keeping people’s spirits up may seem like the best way to work toward halting the population loss — a must for future economic growth. But there is some actual good news in the most recent report from the U.S. Bureau of Labor Statistics.

In 2015, Puerto Rico accounted for 24% of all pharmaceutical and medicine exports from the United States, with $14 billion in exports. California and Indiana were next in line, but each of these states had just about half as many dollars’ worth of medical exports as Puerto Rico.

The Puerto Rico Industrial Development Company, a government agency, describes Puerto Rico as “one of the most important biopharmaceutical manufacturing centers in the world, with more than 50 years of experience in pharmaceutical manufacturing and 30-plus years of experience in sterile pharmaceutical manufacturing.” They point to the 49 FDA-approved pharmaceutical companies on the Island, and the lower cost of labor in Puerto Rico even for college-educated workers in the life sciences.

CSafe Global agrees. The international logistics company, which specializes in the cold-chain shipping needed to keep medications safe during export, is opening a new center in San Juan. Their press release announcing the new facility is also full of optimism:

Home to one of the world’s most advanced pharmaceutical production and development centers and with a large and growing biotech presence, the Caribbean island of Puerto Rico is a globally significant player in the life sciences sector. With its established infrastructure, highly skilled labor force, ready access to the US market and a favorable fiscal climate, the island is a manufacturing or outsourcing base for the majority of the world’s biggest pharma companies. Around 60% of Puerto Rico’s export value is pharma-related and over 25% of the country’s GDP comes from the pharma industry.

A 2014 JJL report mentions the tax incentives play a role in the location of the pharmaceutical companies to Puerto Rico in the first place, but also points out that, “As a United States’ territory, the island offers the same intellectual property protection laws and is eligible for funding opportunities from government programs, like the National Institutes of Health.” These advantages are sustainable and do not depend on the tax incentives that can make manufacturing look good for Puerto Rico on paper even when they don’t create wealth for the Island. JLL’s update on Puerto Rico’s involvement in the life sciences industry for 2015 acknowledges the impact of Puerto Rico’s financial issues on the industry and mentions the continuing high cost of energy and of transportation, but there is plenty of optimism in this report, as well. “Industrial development in Puerto Rico’s pharmaceutical sector is organic and driven by the private sector,” they point out, “with minimal state intervention aside from policies drafted to generate incentives for the private sector.” Puerto Rico continues to be among the top ten internationally in production volume for biotech and pharmaceuticals. While some of the largest companies have relocated, JJL expects mid-sized companies to take advantage of the existing infrastructure and the experienced workforce by maintaining or increasing current investments.

Assuming that Puerto Rico weathers the current debt crisis, which will require austerity, and ultimately resolves its territorial political status that has contributed to the crisis, the life sciences industry may be a source of realistic optimism for the future.

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