AstraZeneca's David Brennan is probably right to insist that last night's surprise decision by the European Patent Office to revoke the patent on the company's top selling anti-asthma treatment, Symbicort, won't have any near-term implications for the product's growth potential.
Rules governing "data exclusivity" make it virtually impossible for generic rivals to launch any immediate challenge to the product's position. First, they must go through their own process of clinical trials and development. They are not allowed to use the work already undertaken by Astra. They must also develop to required standards their own respiratory delivery device.
So although yesterday's ruling lowers the bar for generic competition, it doesn't entirely remove it. None the less, it is yet another headache for Mr Brennan as he struggles to develop a credible pipeline of new treatments to replace the old ones as they fall off patent. AstraZeneca is not alone. GlaxoSmithKline faces a similar patent challenge from generics on its read-across asthma treatment, Seretide. This is currently the company's best selling product.
The wider point is that all the big pharmaceutical companies are increasingly under siege from generic rivals, who are pushing at an open door with governments and health insurers in their campaign to strip Big Pharma of lucrative patent protections. Once upon a time, it was just antibiotics, blood pressure pills and other assorted mass-market treatments that the generics went for. Now they are trying to climb ever further up the value chain. The Big Pharma business model is under attack as never before. It's not yet clear how it will emerge from the battle.
Zero sum game of taxing enterprise
The wisest comment so far made on the Chancellor's capital gains and inheritance tax reforms comes from a previous Treasury incumbent and now, among other things, a director of The Independent's parent company, Indep-endent News & Media.
In a recent interview, Ken Clarke said that when he was Chancellor he gave up on tax reform after it was pointed out to him by Treasury officials that whatever he did, there would be winners and losers, and that he would always get a lot more complaints from the losers than he got thanks from the winners. So it is proving with capital gains tax reform.
Yet I'm suspicious of the growing volume of commentary to the effect that Gordon Brown's reign as Prime Minister is as good as over before it's properly even begun because he bottled the election date, compounded the error by stealing Tory proposals on inheritance and non-dom taxes, and then further undermined Labour's pro-business credentials by abolishing taper relief on capital gains.
The tax proposals may have been poorly thought out, and certainly with the benefit of hindsight, it would have been better for Labour if, as Ken Clarke suggests, the Government had left well alone. It is hard to believe the reforms would have been announced at all but for the fact that they were intended as part of a pre-election vote booster which overnight became redundant when a poor showing in the polls caused the Prime Minister to pull out of holding a snap election.
Yet they are only directly relevant to Labour's long-term electoral prospects to the extent that the musings of the right-leaning press have an all-pervading, trickle-down influence on the population as a whole.
In fact, the capital gains tax reforms only directly affect a tiny, albeit powerful, minority of voters. The vast bulk of the population is totally untouched by them, and that goes too for the estimated 1.7 million in save-as-you-earn employee share ownership schemes. Few of these people are in practice going to be realising gains of more than the tax-free allowance of £9,200 a year. Only 250,000 pay capital gains tax in any shape or form each year at the moment. Those able to utilise taper relief are a much smaller cohort.
The entrepreneurs and private equity partners most affected by the abolition of the 10 per cent taper relief rate are important to Britain's economic health, so it doesn't do to upset them. Once a tax break is given, it is extraordinarily difficult to take it away without a row.
Yet the consequences for competitiveness of taxing entrepreneurs a little bit more on the sale of their companies are open to question. One of the few countries in Europe which has no capital gains tax or inheritance tax at all is Italy. On the evidence, this has not notably improved Italian competitiveness, though it has certainly greatly increased the number of holiday lets in Tuscany.
Tax may be part of the equation, but it is plainly not the most important one.
The new, flat-rate capital gains tax of 18 per cent is a little bit worse than the 15 per cent taper relief rate in America, but even in the US the rate is set to rise to 20 per cent by 2011.
Still, I don't want to defend what Alistair Darling, the Chancellor, has done. The capital gains tax reforms were presented as a piece of tax simplification that would also address the widely criticised tax perks enjoyed by private equity partners. In fact, their real purpose was to help pay the costs of matching the Tories' promise to cut inheritance tax.
The wider criticism that can be levelled at Labour is that, as its spending commitments have grown, it has steadily raised the burden of taxation, which now stands at 38 per cent of GDP, its highest level since the 1980s.
The great bulk of this extra load has fallen on business. It is a constant source of amazement to me that Labour hasn't already run into the law of diminishing returns by taxing business so heavily. The British economy has to date kept growing at a reasonably robust rate despite an ever-rising tax burden on wealth creation. Eventually something will give.
All the same, though ministers will listen intently and sympathetically to the concerns of Richard Lambert and other business lobbyists, they won't back off. How else are they going to fund the black hole of public expenditure? The same question might be asked of the Tories. Where is the money for all the promised tax cuts going to come from? But they are not the Government, or not yet, anyway.
ITV's good day to bury the bad news
With staff at the BBC threatening to go to the barricades over job cuts – welcome to the real world, guys – it was a good day to bury the bad news at ITV. But surely not? ITV could have published the damning findings of the Deloitte review into premium-line telephone scams on prime-time shows almost any time. The £18m provision could presumably have been announced some time back too. The fact that Michael Grade, the chairman, chose to bare all on the day the BBC announced a dramatic cull is, of course, pure coincidence. Quite handy, even so.
B of A's lack of fun in investment banking
Ken Lewis, chairman of Bank of America, makes a strong bid for stand-up comic of the year with his comment yesterday that "I've had all the fun I can stand in the investment banking business at the moment. To get bigger in it is not something I want to do". This at least had the merit of introducing some jollity into an otherwise truly shocking set of third-quarter results.
Yet it is also instructive. Bank of America is not a name you would immediately associate with investment banking. Despite years of throwing money at the problem, B of A is, at best, a second or third-tier operator on Wall Street.
And there's the rub, for the best investment bankers – stand up Goldman Sachs – made record profits out of the credit crunch. In investment banking, there are the professionals, and then there are amateurs. No wonder Mr Lewis wants to get out. He was never any good at it in the first place.Reuse content