Estimating Pharmaceutical Companies' Value to the Nation: Case Study of the British Pharma Group

Garau, M. and Sussex, J.

Briefing
February 2007

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Knowing the net value that companies, or whole sectors of the economy, bring is clearly important when considering economic and industrial policy.

In this paper we estimate the economic contribution to the UK made by two British based, research intensive, pharmaceutical companies: AstraZeneca(AZ) and GlaxoSmithKline (GSK). These companies are the two members of the British Pharma Group – BPG. The paper demonstrates the practical application of an economic methodology based on estimating the ‘economic rent’ that the companies earn for the UK. Specifically we estimate the net additional income and wealth brought to the UK by these companies’ activities in excess of the income they would be expected to generate in the next best alternative use(s) to which the labour and capital would be diverted if, hypothetically, AZ or GSK ceased to operate in the UK.