Aug. 19--The drug industry's impact on the New Jersey economy grew by $1 billion, or 4 percent, in 2007 even as industry employment fell by 600, a pharmaceutical trade group said Monday.

The increase in the impact, from $26 million in 2006 to $27 million in 2007, was reported in the annual state of the industry survey conducted for the Health Care Institute of New Jersey, a Bridgewater-based trade group.

The report defines impact as the sum of drug company spending on payroll, benefits, vendors, capital investment, research and charitable donations, and the economic stimulus as that money trickles into the economy.

Despite the employment decline, from 61,971 in 2006 to 61,347 last year, the institute said the industry "demonstrated stable growth" in 2007, with significant increases in capital investment and research spending.

The relatively upbeat assessment runs counter to recent reports of widespread drug company layoffs and fears that industry has too few drugs in the pipeline and is reducing its presence in New Jersey.

Yet institute President Bob Franks, and Rutgers University economist James Hughes, said the report reaffirms the importance of the pharmaceutical industry to the New Jersey economy.

"Generally, I think it's a positive report, particularly recognizing that the nation is in an economic slowdown," said Franks. "It gives reason to believe that New Jersey can tout its own in a high-technology economy."

Even Governor Corzine seized the moment to promote the industry, touring the Nutley-campus of Hoffmann-La Roche Inc., which plans to build more research labs on the site.

"Reports of the state's pharma industry withering on the vine couldn't be further from the truth," Corzine said in a written statement. "New Jersey remains the 'Medicine Chest of the World.'"

The Hoffmann-La Roche expansion is part of plans by its parent company, Switzerland-based Roche Holding AG, to acquire San Francisco-based Genentech and move the La Roche headquarters to California.

The institute reported that drug industry capital construction investments fell from $1.87 billion to $1.73 billion. Drug research and development expenditures increased by $400 million to $7.9 billion in 2007, about 5 percent over 2006, according to the report.

It was based on a survey of 24 companies that research new drugs or make medical equipment, including most of the world's biggest drug companies. Franks said his association represents the overwhelming majority of new drug companies in New Jersey.

The report follows the announcement by several major New Jersey-based drug companies of layoffs totaling about 20,000 jobs worldwide. They include cuts by Madison-based Wyeth, New Brunswick-based Johnson & Johnson and Novartis AG, which has sites in Parsippany, Princeton and East Hanover.

In June, Kenilworth-based Schering-Plough Corp. said it planned to lay off 500 employees in New Jersey. And Teva Pharmaceuticals announced plans in February to cut 155 jobs in Northvale.

A 2006 report by Rutgers University's Edward J. Bloustein School of Planning and Public Policy found that employment fell by 5 percent from 1990 to 2005 in New Jersey's drug industry, which got smaller and leaner as the nation's industry grew by 40 percent.

The state had 20.2 percent of the nation's drug manufacturing jobs in 1990, but it had 13.7 percent in 2005, the report found.

Franks said that because the institute's report only covers 2007, it does not reflect the impact of the layoffs announced this year. He said he could not say how they would impact New Jersey.

Franks said he was encouraged that the companies surveyed submitted a total of 50 new drug applications in 2007. But he acknowledged that new drug approvals by the Food and Drug Administration are down, with 17 approvals in 2007 compared with 53 a decade earlier -- mainly, he said, because the approval process is now more difficult and the science needed to find new drugs is more complicated.

Hughes said the institute's report showed that the drug industry is "still one of the crown jewels of New Jersey's high-tech economic base."

He said pharmaceutical companies are particularly important to the state economy because they bring revenue into the state from around the world, instead of merely generating sales from state residents.

"The potency of the report is in demonstrating how big of an economic impact it has," Hughes said. "And [it's] setting the stage that we better pay attention because there's a lot at stake."

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