Hi all, I’m busy today hand delivering some documents for Brooke for her trip to Germany and then I’m headed to Philly to Check on some jobs I left running.
In the meantime, it seems to have suddenly hit some of the financial analysts that, hey, maybe it wasn’t such a good idea to fire all of the drug discovery scientists in America and expect them to sink or swim in one small underfunded company after another. We could have told them that a few years ago but no one has been listening to the labrats for at least a decade, so, you know, there’s that. Matthew Herper at Forbes gets a clue:
I write a lot about
an industry (pharmaceuticals) where there have been huge and crashing drug cuts. From 2000 through the beginning of 2011, the drug industry cut almost 300,000 jobs. That is as many people as are employed at Merck, Pfizer, and GlaxoSmithKline, and as many people as the entire drug business employs in the U.S. Part of the reason is that companies are facing dramatically rising research costs and declining peak sales of new drugs. Price increases can only go so far in counteracting these forces. That’s why there’s lots of talk about moving to smaller, more outsourced companies.But the Uniqlo article got me thinking that perhaps part of the problem is a lack of appreciation for the human capital that goes into inventing drugs — or, to avoid management speak, all those scientists. Two big problems in the drug business are that most costs occur at the end of developing a new medicine, in the form of new clinical trials, but that the prospect of these huge costs also crimps on what comes from basic research.
An ideal drug company would follow all sorts of crazy ideas in early research, with the goal of selecting those where there was a high probability of believing they would actually prove effective in clinical development. It would bulk up on scientists, and try to limit the number of large clinical trials it conducted to those where some kind of test — blood levels of some protein, perhaps — led researchers to think they had a high probability of success. (Novartis, the most successful company in terms of getting new drugs to market, has moved in this direction.) But the tendency of the shutdowns has been to shut laboratories, too. Look at Merck’s stance toward the old Organon labs or Pfizer’s decision to shut the Michigan labs where Lipitor was invented. Taking the ax to the scientists is probably a mistake.
Let that sink in. In the past decade, we have essentially fired all of the research staff of the US. Oh sure, some of them are lucky enough to score jobs in Massachusetts but these are at small companies where the pay includes equity and where the company failure rate is 80%. Scientists have to uproot their families, sometimes several times, and layoffs are the rule now, not the exception. You can never plan on having a job for very long.
And remember, this is how we treat the best and brightest in American universities and colleges. It’s not much better in academia where the shrinking pool of grant money means that it’s frequently who you know, not what you know, that gets your grant funded. In the meantime, everyone is living on soft money in the most expensive areas of the country.
300,000 people is a lot of people and not all of them have been salespeople. When you go to a networking meeting and meet nothing but other unemployed people trying to find a job, the situation isn’t funny any more. It’s criminal.
I consider myself lucky because I’m not destitute yet. But I know other scientists who are leaving the profession. Not just their fields of study. They’re leaving science altogether. They’re turning their backs on the whole idea of research. And this trend reminds me of something Rachel Maddow wrote about in her book when she was relating our troubles in maintaining nuclear weapons built in the 60s and 70s. The military has lost generational knowledge. It can no longer maintain these systems because the scientists and engineers who used to do it have retired or died and no one replaced them. That’s what’s going to happen to medicine. And that is a shame for scientists and patients alike. Patients will be stuck using older generation medicines and generics. The pace of new dug discovery is going to slow to a snail’s pace and when we are gone, it will be up to a new generation of scientists, if you can get anyone to go into it, to figure out how the “ancient ones” did it.
I’m bitterly disappointed in the way the left has turned their backs on this problem. Based on recent emails I have gotten on the subject, it seems that the left is more concerned with finding fault in research without looking closely at why it is that so many scientists lack the resources and time to check their work. That’s because there’s no money for multiple experiments and no time before your lack of publications land you on the unemployment line. Even if you can publish and make the next big blockbuster, your employment is not assured. To the suits, it’s always, “what have you done for me lately?”
Instead of looking to the scientists to blame, and we tend to be very critical of ourselves or we would have gone into finance which requires a lot less self-reflection, both sides of the aisle should spend some time asking themselves what they might have done differently to keep the scientific infrastructure robust and vibrant. Because right now, there is a lot of blame to go around and we’re pretty disgusted by the reaction of all sides.
I’d like to say I helped cure cancer in my lifetime and for all I know, I may have already done that. But it’s only one of many cancers and the list of diseases is very, very long. For those of you who may be worried that the next antibiotic isn’t there or that your cancer won’t be curable, all I can suggest is that you try very hard to not get sick.
Filed under: General | Tagged: cutting scientists probably a mistake, Forbes, matthew Herper, pharmaceuticals |
The Confluence 
It won’t be just the pharmacutical industry but technological manufacturing a well. When I worked in the QC department of a now defunct manufacturer back in the 1970’s much of the more sophisticated testing equipment was imported as was the measuring equipment. Soon the only industries left will be agriculture related, assembly of parts designed and made overseas into a final product, or the transporting and warehousing of the imported goods we buy on credit.
Good point about the left blaming the scientists for the failures of science. I’ve thought for a long time that it’s not science that is failing in such spectacular ways, but the business of science that’s screwing science. That’s not how science works best.
Read this yesterday, seems to coincide with your ideas:
naked capitalism
The problem of “making share holder value” rather than making good products.
But I know other scientists who are leaving the profession. Not just their fields of study. They’re leaving science altogether. They’re turning their backs on the whole idea of research.
So what are all these ex-scientists going into?
Margaritaville partly. Those are the ones leaving NJ. They don’t want to move to MA where they’ll be in one little company after another and they don’t want to start over making crap wages and having no vacation or benefits. They’re looking for work in other areas. Some are trying their hand at teaching.
Teaching, especially in public high schools, is going to be a difficult transition. If they’re going to teach science, the students need to be kept busy with hands-on work in every class, but public school budgets often don’t allow for that. High school students are not like college students. If you don’t keep them busy, it’s very easy to lose control of the class.
It doesn’t surprise me that a lot of scientists are leaving for warmer and much lower COL places. But if they’re not going to have anything to do with science, what kinds of work are they looking for? Or are they all going full bore with the Margaritaville spirit and starting/working for tourist-related businesses (bars, nightclubs, tour guides, etc)?
There is a growing foodie-yuppie movement in and around every city and town with enough money to support one. There is an emerging “local agriculture” movement rising to supply these paying customers . . . including Big Budget gourmet restaurants.
Some of these ex-scientists may well look into this growing “boutique agriculture” sector. Anyone smart enough to be a scientist is smart enough to be a boutique gourmet foodgrower. How many of them are prepared to endure the unending brute physical labor? At least some of them.
I assume the “don’t get sick” advice was meant as a warning to us all.
But of course if anti-biotic and chemo discovery is not revived in a meaningful and comprehensive way, it will be the advice that you and all the other disemployed scientists will have to live by also. It may well become our default Plan B.
So how would we lower the chances of our contracting drugimmune bugs or not-yet-curable cancers? After all, the drugimmune bug or cancer not contracted to begin with is the drugimmune infection or case of cancer for which a cure need not be sought.
The lifespan of antibiotics we now have can be extended by firm controls against antibiotic abuse in hospitals and by patients and families, if such controls can in fact be applied. But also, firm controls will have to be exerted against the mass sale and abuse of many kilotons of antibiotics per year by the corporate CAFO operators. Believe me now or believe me later.
And cancer prevention will have to be pursued far more comprehensively than now. Some is surely lifestyling. If you don’t smoke, don’t start. If you smoke, quit. That would pre-eliminate a lot of new cancers from even forming right there. If you live in the “radon zone”, make sure your household air – including basement air- is thourououghly aired out and turned over. Carcinogenic pollution control and prevention will have to be savagely instituted and savagely enforced. (Well, no . . . it won’t “have” to be. We can fail to do so and harvest the attendant crop of exo-carcinogen-caused cancers instead. That is always a “choice” too).
good luck with that. if you don’t do it, no one will do it for you.
unfortunately, none of us who have been laid off have the money to finance drug discovery.
That’s why, to the extent that drug discovery will continue, it will be the People’s Republic of China, the Republic of India, and Japan who will be the taking the baton passed to it by the U.S. and W. Europe. The Far East is where the new medicines will be coming from.
I would trust medicines coming out of Japan. I would not trust medicines coming out of China. What kind of medicines could I expect from a Red Fascist economy which has given us poison pet food, lead paint toys, melamine milk, sulfur-offgasing gypsum sheetrock, dirty honey laundering, etc.?
Well . . . that is what politics would be about and be for, ideally.
A pollution-suppression party which would also be a carcinogen-suppression party of course. And systematic suppression and repression of antibiotic-abuse everywhere it occurs.
And working-science infrastructure-restoration would also have to be attacked and solved politically.
An epidemiologist/ecologist named Sandra Steingrabe has done long and extensive work on the issue of carcinogenic pollution in the environment, including the internal environment (personal physical bodies) of women of childbearing age.http://en.wikipedia.org/wiki/Sandra_Steingraber
For cancer prevention, continuing the aggressive push to reduce tobacco use, and perhaps requiring anyone with a family history of cancer to get a complete physical exam every year is about all the government(s) can do.
For antibiotics, changing how they’re prescribed would help control resistance. Instead of giving someone a two-week supply and admonishing them to take all of it, give the patient a four day supply and require them to return to the pharmacy two more times to obtain the remainder. Doctors should also be more aggressive to obtain a bacterial culture from the patient to aid in prescribing the right antibiotic (or no antibiotic if the infection is viral).
Savage repression of carcinogenic pollution would also be an effective step to take.
Study could also be made of the body’s own internal cancer-suppression mechanisms to find out why everybody doesn’t get cancer all the time and what internal countercancer physiological mechanisms are at play, and how to augment those.
I think that would like prove to be too expensive in a post-peak oil world.
John Michael Greer has the best take on the ramifications of peak oil. You should check him out sometime, r u reddy.
http://thearchdruidreport.blogspot.com/
Thanks. Believe it or not, I barely already have, from time to time,though not as much as I should. If I understand the little I have read of what he writes, he is a lot more optimistic than Dmitri Orlov or some of the other doomers. He thinks we will decline and fall slowly and episodicly enough that we will have time to adjust to a smaller slower civilization if we have the spiritual depth-resources to accept making the adjustment. John(?) Tainter has said a version of the same thing. Richard Heinberg (Powerdown) has said the same thing.
The downward adjustment/retrenchment can be made if the people prepared to make it can force the rest of society to accept it.
If they can’t, well . . . that’s what John Robb and Dmitri Orlov and Kurt Saxon and Backwoods Home Magazine are for.
The Forbes comments to Matthew Herper’s article are quite enlightening, particularly this one from rickwo:
Perhaps I’m taking you too literally, but the key difference, as I have had it explained to me with great forbearance over the years, is that marketing and sales are profit centers, whereas R&D is sunk cost, a pure liability. That’s why, as discussed in your post last year (http://www.forbes.com/sites/matthewherper/2011/04/13/a-decade-in-drug-industry-layoffs/) the cuts over that time period disproportionately affected research. What seems to make a lot of people shake their heads is that it is sound, conventional strategic planning to cut research because of this negative valuation, even though we throw out some adorable babies with the bathwater. We need a better way to value research, but I’m skeptical that treating research like sales is the way to go.
And then, in response to Matthew Herper’s retort that Development, rather than Research, is the sunk cost, rickwo said:
As much sense as it might make to view D as the sunk cost and R as something else (a really, really, really long-term investment???), that’s not the result that the analytical tools (NPV, IRR, balanced scorecards, etc.) spit out. Longer time-to-market and vastly higher probability of failure always give R a far worse (generally negative) NPV, for example, than D. Maybe things have changed, but in my experience that’s the hurdle supporters of research in industry inevitably stumble on, and when profits decline, that analysis works even harder against R. It may not be flashy, but it seems to me that until we find business analysis tools that better reflect what we seem to intuit about drug research, i.e. research is more valuable than we credit it, we can not exit this trap.
These two comments by rickwo provide real insight into the thinking of the managerial class wrt research.
Isn’t it odd how they fail to connect the fact that they have jobs and are paid real money for them to the real value of research. I guess that is what he is referring to when he says “what we seem to intuit about drug research, i.e. research is more valuable than we credit it”.
And these are the smartest people in America?
So, where’s the functional dividing line between “research” and “development” in pharma? Intuitively, “research” generates lead compounds, while “development” turns those leads into marketable drugs. But where’s that dividing line, and what tasks/functions go into each?
I consider the hand off to development to occur after the lead optimization stage. Once the lead series has been optimized and as many liabilities as possible addressed and the target verified and SAR clearly established, then it’s passed to the scale up and formulations people and trials. Research phase is complete, development phase begins. So, from a very simplistic standpoint,the commenter is right. Development gets the most robust candidates and if they’ve gotten that far, their chances of success is amplified. However, development wouldn’t have anything to work with if people like me hadn’t been searching, modifying, optimizing, eliminating, selecting and verifying for years and years. Does rickwo think drug candidates spontaneously generate at the development stage? That some scale up person finds one accidentally dropped in the parking lot on the way into the production lab one day? I think the problem with this analysis is that commenters like rickwo have never seen drug discovery in the early phase. This is hard, hard work of a very problem solving nature, like a big puzzle where most of the pieces are missing when you first start and over the years, each person on the team generates pieces that others have to fit into a coherent picture. Sometimes, it had to be abandoned for a period of time while technology catches up or a different puzzle is solves elsewhere. It is sometimes slow, methodical, and maddening. Unlike what analysts and bankers do on wall street, doing more routine work and doing it perfectly sometimes does not help. That’s because there are so many parameters to consider and tweak that it can’t be done on Wall Street time segments. But these MBAs don’t get that. According to Karen Ho’s book, most new analysts hired from Princeton and Harvard are undergraduates who didn’t even specialize in finance. After two years, they go into business school and then become associates on wall street. It is unlikely that any of them have spent more than 6 hours/ week per semester in a lab for a few science related courses. More if they were science majors. Make it 10 hours/week as undergrads. That’s just learning how to make stock solutions, cracking some hydrocarbons, running some grignards and culturing some gram negative colonies. They don’t know what it is to do that all day for weeks on end unless they go to graduate school and most wall street analysts don’t. So. The commenter has no idea how real drugs that pay his salary are found. He almost sounds like he thinks that development is something completely unhitched from research when it actuall follows research.
Maybe this is why so many finance companies are advising pharma to in-license and buy up small research companies. Leave all of the money sucking activities to losers. Focus on development. But this too is stupid. Because when you get to big clinical trials, all of the cost advantages are gone. What Herper is saying is that early research isn’t as bad as everyone thinks. It’s clinical and regulatory that kills shareholder value.
I consider the hand off to development to occur after the lead optimization stage.
This makes sense. So, the pharma managerial class, when they run their cost-benefit analysis software, must be factoring in the cost of all the potential leads that fail to pan out during optimization. Obtaining a handful of optimized lead compounds might require sifting through 100,000 failures. That’s why the research side always ends up being a cost sink, at least by standard accounting methods.
Maybe this is why so many finance companies are advising pharma to in-license and buy up small research companies. Leave all of the money sucking activities to losers. Focus on development.
I believe the correct term is “suckers” rather than “losers”. But, I think you’ve basically got the scenario right. If lead optimization is done by small research companies, and the optimized leads then acquired by Big Pharma, the benefits of research are accrued, while most of the costs are externalized (with failed leads = bankrupt small research companies).
The question is, are there synergies–ones that can (eventually) be at least semi-quantitated–that naturally occur within the in-house research department of a Big Pharma Company that never occur in any number of small research companies, synergies that result in optimized lead compounds, and even novel therapeutic approaches for a particular disease or disease class, that would otherwise never occur?
The answer is yes. In a corporate lab environment, the cost of negotiating contracts for obtaining services and expertise are minimized. You don’t need to spend your time negotiating contracts. All you need to do is bop down the hallway and ask someone to do it for you or slip it into their queue. By forcing everyone to start their own companies, their overhead is enormous at the outset and the only way to recoup this investment is to sell to a vulture capitalist, which may come in the form of a big pharma rep. If you have a good target and drug design support, you still have to negotiate for HTS, analytical, structural biology, chemistry, some registration system, pharmacology, other biological teams, in vivo, buying commercial compounds etc, etc. You can be a virtual company and contract all of that out but they’ve got their own overhead and it’s going to be expensive. And there is no getting around the multiple iterations of things that need to get done. The ACS says that 80% of small biotechs fail. It’s just too expensive. And you have to keep finding funding for the few people you hire.
Now, could corporations save even more money in research? Yes. They could develop their employees to become their “just in time” staff. I did structural biology in my last year and greatly benefitted from it. It made me a better modeler and if I had had one more year in the lab, I think I would have been a valuable asset to the company as a structural biologist. Even my one year made me useful in terms of protein production, purification and crystallization. I was extremely busy. If you train people to do multiple things, you can redeploy when they’re needed elsewhere. And scientists are easy to teach new things. Give them some papers and have them follow someone else for a couple of weeks and they’re able to do the bulk of the day to day stuff with little supervision.
But I am reading that book by Karen Ho called Liquidation right now and it is becoming clear to me that this kind of flexibility and economy of scale in the corporate environment is not what the masters of the universe on wall street want when they harness corporations to their wills. It is becoming increasingly obvious that they just don’t give a f^&*. Productivity is not the goal. Extracting wealth for shareholders is and nothing beyond that.
OK, so it’s in the much better economies of scale of Big Pharma research departments make the synergies happen. Because small research companies lack that, their scientist-managers spend the bulk of their time negotiating for all these different services and trying to find funding to pay for them, that very little actual science gets done, and what is done is prone to error (the wrong target gets chosen, the wrong lead compounds get “optimized”, etc.) due to the stress everyone’s under. There’s no time to think deeply about anything, so novel therapeutic approaches are never explored, never even considered.
Intuitively this makes sense, but it’s not easy to quantitate what never happens due to lack of synergy. Still, in principle it might be possible.
But a MUCH bigger hurdle to Big Pharma management even considering your argument is that their fundamental perspective on the purpose of a pharmaceutical company has changed. The company’s purpose is no longer something like “to develop and market medicinal therapies for improving the health and well-being of people with diseases _____________”. Instead, its purpose now is nothing more than “to generate revenue in any field of business legally allowed in the U.S.” When the reason for being in business changes in this way, closing down in-house research in favor of outsourcing makes perfect sense. And it’s precisely why someone like Viehbacher makes the kinds of decisions that he does.
Big Pharma scientists and managers have completely different perspectives on the purpose of a pharmaceutical company, on its “reason to exist”, as it were. That’s the real source of the conflict, I think.
You’re preaching to the choir. Go read Karen Ho’s book. Yes, it is viehbacher’s mission in life to return money to the shareholders. That’s what he’s paid to do. It doesn’t matter what happens to the company or the people who work there or the patients who need drugs. All that matters is that viehbacher meets his quarterly earnings. Now, we know this intuitively because we’ve seen it happen. But we are dead wrong to expect that viehbacher or any one in the finance industry are interested in looking into what makes labs tick. They may already know or not know. It makes no difference. They aren’t thinking about the labs. They are thinking only about the spreadsheet they have to put together for the analysts. If the company eventually goes under, the pieces will get sold for whatever they’re worth and shareholders will move on.
The thing about viehbacher’s statements that are so maddening is that he feels he has to justify his disinterest in research by claiming that good scientists don’t want to work for a big company. This is just insulting to all of the scientists who poured their hearts into viehbacher’s research unit whose research was disrupted when they were laid off. There were projects that were in progress where scientists were doing productive work and he just insulted all of them so that he and his pals could feel good about what they are doing for wall street. It would have been much better if he’d just been honest and were more sensitive to the staff whose careers he ruined.
Ah, but you see, the managers of pharmaceutical companies native to the Far East do not think in such a way. For the most part, they still adhere to the older purpose.