Tuesday: More on Pharmageddon

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Mac had an attack.  All back to normal now.

Yesterday, Derek Lowe of In the Pipeline, linked to an article in Science titled “A Pharma Industry in Crisis”.  This kind of article is rare because the writer actually interviewed the people who are in the midst of the chaos, the researchers.  Typical finance rags writing about Pharmageddon tend to absolve management of any responsibility and blame the whole disaster on the scientists.  Derek contributed his two cents on what has happened to the industry:

Expert observers believe that big pharma is stuck, largely due to a broken drug discovery process. “Everyone’s frantically trying to come up with something because of course the rewards of finding a good drug that meets an unmet medical need … are tremendous still,” Lowe says. But, right now, “no one really knows how to increase the number of clinical successes.” All we really know how to do is to “cut costs on the other end,” he says.

Over the last several years, big pharma companies have been restructuring their organizations to make their operations leaner, through large-scale mergers, acquisitions, and risk-sharing partnerships. Global companies have announced the closure of entire therapeutic lines, R&D sites, and production plants, refocusing their resources on more promising areas. They have outsourced R&D activities to contract research organizations (CROs) and off-shored others to emerging countries such as India and China; on Tuesday, Merck announced its intention to set up a new R&D headquarters, with plans to invest a $1.5 billion in R&D and hire 600 scientists — in Beijing

The result is that, in the West, big pharma employs fewer scientists than before.

Chemists have been hit especially hard as the industry has moved away from small, chemically designed molecules toward large biologic molecules. “A lot of research in the United States, it’s been redirected in the biotech, biomolecule area,” says Josh Bloom, director of chemical and pharmaceutical sciences at the American Council on Science and Health in New York City. “There have been tens of thousands of layoffs of chemists within a 3-4 year period from all the big companies.”

[…]

Whether big pharma will ever come back is another open question. “Have companies cut more than they should? I suspect many of them have,” Lowe says. “I think some people are waiting for some of the companies to slap their foreheads and go, ‘Oh my gosh, we messed up. We actually need to hire back a few thousand researchers.’ ” But, he says, that’s not likely to happen. “They may do a little hiring back, or they may do a little less outsourcing, but I don’t think it’s ever going to get back to the state it was 15 or 20 years ago.”

Chemjobber adds, “The era of people working for a large company for 20 to 30 years is over.” He sees the R&D employees of the future working for a series of smaller companies. “I expect that unfortunately some of the large American companies or the large multinational companies … will ultimately collapse,” with newer, smaller companies taking their place.

Bloom is less optimistic. “All of these companies are saving tons of money, or at least they think so, by shipping off their research and their clinical trials to Asia and then everybody else is following them, much like it has been done with other industries in this country which don’t exist anymore,” Bloom says. “I think we’re just on our way to becoming one of those.” He adds that he would discourage anyone from pursuing a career in the industry.

As the pharma industry we once knew struggles to survive, the demand for new drugs remains, with many important unanswered scientific questions. “The amount of our ignorance about important questions of disease and physiology is just staggering, so you would have to think that the opportunities to do something about these things are also staggering,” Lowe says. “It’s not like we’ve run out of diseases to treat. It’s not like we’ve run out of things to try. It’s just that the amount of money and time it takes to try them right now is getting unsupportable.” Given the human need and the financial incentives, Lowe believes that “we’re eventually going to find some different way to do this,” he adds. “It’s just the details and the path for getting from here to there; it’s going to be very wild and rocky.”

Derek makes a good point that I think gets overlooked when we talk about the nature of biomedical research.  There is plenty of work to go around and then some.  Every biologist and chemist could have more work than they know what to do with because there are so many unanswered questions and puzzles and conundrums and obstacles that lead to new discoveries.  The last 20 years has seen an explosion in the field of biology.  I’d call it a Biological Enlightenment.  It’s going to take decades to sort it all out and make sense of it all.  The problem is that the money isn’t available to do the research.  When you consider that the pharmaceutical industry generates almost a trillion dollars a year, you have to wonder why companies would rather slit their own throats in research rather than be proactive and taking advantage of all this new information.  Unfortunately, the market is set up to reward short term profits, not long term goals.  So, we do need a new and different entity to step up and invest in the long term outcome of research so that everyone can get back to work.  I think it is inevitable that the government will have to get involved in some capacity.

That bit about a couple big multinational pharma companies collapsing has me worried.  I have a pension, maybe all I’ll get to live on in my old age, at one of those big multinationals that bought the company I used to work for.  It’s very frightening to think that if it goes under, it’s going to take my retirement with it.

The Science article reflects the way it looks from here in New Jersey.  Today, I attended another career fair sponsored by BioNJ, a group that works with the NJ Department of Labor.  One of the seminars was about the future of the industry in the United States and NJ in particular.  The speaker says that there  are smaller companies that are finally starting to get big enough to hire and suggested that in the future, the biotech industry will be more like Silicon Valley where people move more frequently between companies.  Sometimes, I wonder if the clueless chip makers have anything to do with this model.  But integrated circuits are not biological systems and cells.  We know a lot more than we did a decade ago but the difficult part is that we see a mountain of new things we don’t know.

The speaker also says we are reaching some kind of job equilibrium that makes him cautiously optimistic.  Last year at this time, the number of biotech jobs lost in NJ was in freefall.  He didn’t know when we would hit bottom.  Now, he says there are about as many positions available in companies hiring as there are positions lost from companies laying off.  The problem is the backlog of laid off scientists.  It’s going to take awhile for everyone to find a spot.  Academia is also pulling its weight and branching out in ways it hasn’t before.  But there’s no doubt that the reduced salaries and opportunities to work are going to be a real drag on New Jersey’s economy for a long, long time.

We were in our prime earning years.  Our salaries were pretty good if not spectacular. Now they’re just gone.  That’s going to hurt.