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Pharmageddon continues

This time it’s Glaxo Smith Kline (GSK). You may remember that GSK was in the papers recently because it was one of the only big pharma companies with a potential vaccine for ebola. Well, now they’re cutting their R&D staff. According to the rumors flying over at In the Pipeline, the biggest cuts are going to happen at their research park in North Carolina.

How these things typically happen is the pharma in question just eliminates a whole research division or therapeutic area. Your job is not spared because you made your company a zillion dollars on the patent you sold to it for a dollar 10 years ago. I used to be in favor of this quid pro quo arrangement. You give me the means to do my research, I give you the fruit of my labor. But now, I’m not so sure. Like everything else, there are predators in the executive suites and on Wall Street who have zero appreciation for the amount of work it takes to create a new drug entity and plenty of people who think they own it. In some respects, researchers have only themselves to blame for not protecting their own interests, those being the need to earn a living in order to consume calories to sustain life and have a roof over their heads.

GSK’s cuts come on the heels of cuts at Astra-Zeneca, which decided to get rid of its antibiotics research unit. Yeah, try to figure that one out. And then there was Amgen that recently announced that it would cut up to 4000 jobs globally including at its research facility in Seattle. So, while the flood of layoffs in the US R&D industry has slowed down a bit since the high water mark of 2009-2010, it’s still not finished yet. After all, sooner or later, the industry will run out of people to lay off. But we’re still going to see pulses of carnage here and there, dumping more over-educated, over-qualified, experienced and talented chemists and biologists into the already saturated labor market. Fun, fun.

In other news, the left sometimes *almost* grasps what the problem is with pharmaceutical R&D but as soon as those of us who really know what’s going on turn our backs, we get more clueless BS from people like Dean Baker. Don’t get me wrong, I’d love to have him on my side. But he doesn’t seem to spend any time talking with people who have actually, you know, been there. There is something bizarrely automatic about the left’s misunderstanding of how drugs get invented and developed. Maybe this has something to do with the complexity of the process. Or maybe it’s just laziness.

Here’s the basic outline of the misunderstanding: The NIH, which we all pay for, does basic research. Then it collaborates with a big drug company and that big drug company turns around and sells that basic research for a ginormous profit. All the big company does is scales the sucker up, runs some admittedly expensive clinical trials, and then produces and markets the drug, delivered fresh and complete from the NIH labs, directly to you the consumer at an enormous markup.

There is just enough truth about the greed of the executive and finance movers and shakers to make this look plausible. Unfortunately, it is one of those beautiful theories easily destroyed by ugly facts.

I don’t want to go into this again because it will take at least several posts to unpack but the NIH rarely delivers a pristine drug to industry. No, the whole idea of basic research is that it is basic. That doesn’t mean it isn’t hard or not valuable. It means there is sometimes little more than a nugget of a something to follow up on. The “drugs” are sometimes nothing more than fragments or completely undruggable. (Undruggability is a whole different topic) Sometimes, there is no drug delivered to industry. Sometimes, it’s merely the suggestion that a specific protein target may or may not be involved in some undesirable endpoint.

The role of industry R&D is to take this very basic research and through many years of real, genuine, honest-to-god research, turn it into something resembling a drug. It is a very expensive process. I’m not surprised at the numbers being batted around. That is not to say that we can’t cut back on the amount of marketing that pharma does. At the end of the day, what is more valuable to you? The researchers that invent an ebola vaccine or the marketers that tell you why you need it? But to get real drugs from real research, a lot of money must be spent in order to pay for many trials and errors and reagents and lab equipment and researchers who need to be fed and housed.

That being said, it sure does look like there is a plan to exploit NIH and academic labs. If you get rid of all your R&D units in the name of shareholder value, or at least cripple them with endless, non-productive mergers and acquisitions and layoffs, you may end up without anything to market. And there are a lot of geeky students out there who are willing to work at subsistence wages to get a PhD. Why not use them as your new staff? That certainly looks like what is happening. It’s a bit of a self-fulfilling prophecy.

What is missing in the equation is the experienced R&D staff that will know “when to hold’em and when to fold ’em” when it comes to actually making the potential drugs. In other words, there will be a lot of reinventing of the wheel in academic labs as they sort through how to do it on limited soft money.

It’s a research strategy only a banker could love.

***********

One bright spot for the journal famished: Nature is experimenting with making its journal archive and current issue available as a free “read-only” version. That’s to circumvent the habit of some poor researchers who have to sneak around to satisfy their paper habit, a phenomenon known as “dark sharing”. You have to know someone who has inside access to a license, usually some friend who is still in industry or someone at a university. This is what we are reduced to: sharing illicit copies of nerdy papers like they’re banned versions of Tropic of Cancer. Read-only versions that you can’t save or refer to later is  better than nothing, I guess, though not quite as good as getting a subscription to Nature and Science for Christmas.

 

11 Responses

  1. Didn’t Dean Baker leave a comment on this blog about a year or more ago? And wasn’t he dismissed as a jagoff? It seems to me I remember that, though I don’t have the patience to go back looking through every thread to see if it really happened.

    Still, I feel strongly that I remember it happening. And I remember thinking . . . what if that was “the” Dean Baker and not some other Dean Baker who came here?

    • Jagoff is a Pittsburghism. It’s meant to be only slightly offensive.
      Look, if dean baker wants to be considered serious about big pharma and genuinely wants to do something about it, why does he keep identifying the wrong problem?? What good does it do him or us to harp on the NIH funding of basic research as if it were the holy grail of drug discovery while also saying that the costs of research are exaggerated? I’ve been there. Research is astronomically expensive. NIH grants do not result in fully formed drugs like Athena springing from the head of Zeus.
      Either he is intellectually lazy or willfully ignorant. In either case, he’s not helping the consumer or the researcher. Therefore, he is a jagoff.

      • If it was “the” Dean Baker rather than some other Dean Baker, it might have been a good opportunity to explain these things to him right here on the blog. If he had proven uneducable in the teeth of polite personable efforts, he could always have been dismissed at that point.
        It may have been a missed opportunity. Or it might not have been in any case. Economists are very proud of their knowledge and can be hard to educate.

        • I’ve found the left to be as intractable as the right on some issues. Drug discovery and costs are complex issues. Dean Baker has to be willing to listen to something other than his own internal monologue or what’s the point?
          In actuality, I don’t think he or many on the left are receptive. It may be a missed opportunity but I’ve been out here for years trying to get it out there and they know where I am and how I can be reached. And yet they still continue to spout silly, unhelpful BS. So, you know, there’s that.

          • Riverdaughter, I’d encourage you to read some of Dr. Dean Baker’s writings, such as this free pdf ebook
            http://deanbaker.net/books/the-conservative-nanny-state.htm .
            It has been years since I read this book, but is very insightful. It refutes the false DC/Media Conventional Wisdom premise that Team D is for Big Government, & Team R is for small Governement. The reality is that Rs love Big Government, but only for Corp Welfare & Rich Person Welfare for the richest 0.1, to at most 10%, of the population.

            Part of this Corp Welfare is the patent system, abused by Big Pharma, which he covers in the book. As I recall, Dr. Baker does not say the Applied Research that Pharma industry does is “easy” as you describe, only that it less important than the Basic Research the Fed Gov already funds anyways, with NIH, funding university research, etc. Dr. Baker’s policy prescription is to also fund the Applied Research part, including the FDA Clinical Trials; and for this effort to be legally open-source. This approach would allow MORE funding of research than is currently done, with net overall reductions to the Fed Gov budget from reductions in what Medicare/Medicaid alone pay annually to the Pharma industry. Private pharma companies would be free to compete on manufacturing & selling these open-source pharmaceuticals. AFAIK this was the approach that funded Dr. Jonas Salk to discover the polio vaccine. In software, there are several example where open source software is of equivalent or better quality than closed-source products, such as Linux/Unix for Operating System, R or Python for Data Analysis (which happens to be used in biology-related research BTW), LibreOffice for Office Software Suite, etc. So Dr. Baker is not proposing something that is not currently existing, like a nuclear fusion power plant; Baker is advocating a proven funding method towards a broken status quo US pharma industry, which is seemingly not working for any USians, including patients, the actual pharma R&D pros; besides the CXO execs, & their associated whore-ly owned subsidiaries like lobbyists & campaign-grubbing DC poli-trick-ians.

            BTW US pharma spends mulitples (3X iirc?) on marketing than on R&D. Also, RD you report US pharma has heavily downsized the R&D staff. These 2 points would indicate that the crying US pharma PR hacks claim about the high prices being necessary to fund R&D being just another Big Lie.

            RD, I’d encourage you to be open-minded & consider Dr. Baker’s proposal. It would be great if you have constructive criticism, as you say perhaps an industry veteran may have a unique insight. Knee-jerk castigation any approach that differs from the broken status-quo is not helpful.


            PS, Dr. Baker notes how he used simple arithmetic formulas, like Shiller 10-yr Price-to-Earnings ratio for stocks, & housing median multiple for his home, to “put his money where his mouth is” & sell his stocks in 1999 & sell his DC house (as a middle aged family guy) in 2004 & rent an apartment, due to extreme asset overvaluation. Baker notes that he was not special for doing so, that any economist should’ve known this asset overvaluation, and criticizes the incompetent economists like Fed Chair Greenspan, Larry Summers, as well as others who are self-claimed economic geniuses like JP Morgan’s Jamie Dimon, & US Presidents from Reagan to Obama. So Dr. Baker has a track record of being competent/correct, and courageous (somewhat like a whistleblower) in pointing out the corruption/incompetence of powerful US economists.

          • I don’t have time to review your entire post, and btw, I have no idea how it ended up in moderation but I have freed it! So, you know, I’m not trying to muffle you.
            But the issue I have with Baker et al, is that they never bother to come talk to the people who have been in the trenches. They are relying on numbers that may or may not bear any reality to the actual work of research. They don’t see the NIH research that gets delivered to us and they don’t know what we do with it, how much time we spend on it, whether or not it can be validated or a zillion other things. In short, they are looking at the problem from a very abstract distance.
            I’m sure that those of us who have been laid off could provide Baker with more constructive information that will actually help him craft policy recommendations that will help consumer and R&D’s causes but for some reason, he doesn’t bother to ask us. When was the last time he talked to Derek Lowe or me or a zillion other experienced R&D professionals? I have no idea. Plus, if he is only talking to academics, he is missing an entire cohort of industry professionals who have a completely different perspective. Now, why is that?? It’s much like the whole deal with Serial and why Adnan Syed is locked up for life. The cops only wanted to look at evidence that supported their case and the rest was of no interest to them.
            I’ve been blogging about the industry for about 6 years now. I’ve documented the atrocities based on over 20 years of experience there. You’d think that baker would want to know what’s going on in the labs but so far, he’s been more than content to just make it up as he goes along.
            I have a problem with that.

          • One other point. You write:
            BTW US pharma spends mulitples (3X iirc?) on marketing than on R&D. Also, RD you report US pharma has heavily downsized the R&D staff. These 2 points would indicate that the crying US pharma PR hacks claim about the high prices being necessary to fund R&D being just another Big Lie.

            THIS is why you need to come talk to us. Like I said I can’t unpack it all right now but the problem is that it does take an enormous amount of money to fund R&D. More than you can wrap your head around. Now, couple that with shareholder value. Shareholders must get a return and they want more of it. The MBAs have decided that the best way to satisfy shareholders is to cut R&D because it is a money sink. That’s a problem because without R&D, there is no product to sell. So, they’re trying to feed on the carrion of start up biotechs that are deep in the red and will sell their patents tot he highest bidder and academic (NIH funded) research. But this does not eliminate the gobs and gobs of money that it takes to do research. It simply makes it harder and harder to do research. So, don’t expect any miracle cures. Yes, the finance industry is trying to exploit the price of drugs. But no, this can not go on forever. That is why I said many years ago that the price of generics will have to rise. They will rise in an enron type fashion with rolling blackouts and shortages, etc.
            The problem is that Baker is misidentifying the cause of the problem.

  2. It’s all about “excellence” without money, as Historiann puts it so well. You’ve seen it operating in schools, and not coincidentally depriving bright students of opportunities. (Deficiencies their parents have to fill at their own expense.) Using bright young postdocs for pennies on the dollar to do industrial R&D will work about as well as using bright young underpaid subs instead of experienced teachers.

    The bright young workers are good and smart. Don’t get me wrong. They just don’t fill the same slot as experienced ones.

    This business of not paying people enough is making everything devolve into that old Russian joke. “They pretend to pay us, and we pretend to work.”

    When the result of the work is essential, such as the ability to think or the invention of lifesaving drugs, then the pretense isn’t so funny any more.

    • The reference to the old Russian joke reminds me of an observation whose source I have forgotten–I may even have thought of it independently:

      The concentration of the wealth and power of a society in a few hands is bad for everyone in that society–ultimately even for that fortunate minority–and it does not matter whether that fortunate minority be called the “Communist Party” or the “Fortune 500”.

  3. RD, to be clear, it would be great if you &/or other Pharma private industry R&D pros carefully read Dr. Baker’s policy proposal & provided constructive criticism of it.

    I have an open mind on the issue, that there is some pharmaceutical R&D-specific aspect that Baker is not accounting for or aware of. However, the track record seems to indicate that the Fed Gov CAN fund high-complexity STEM-type projects if it chooses to do so, given the examples (off the top of my head): the Salk’s polio vaccine, Human Genome project, cloning Dolly The Sheep, the internet (DARPAnet iirc), NASA’s interstellar spacecraft probes, UNIX/Linux computer OS, the Hoover Dam, etc.

    • I have long been an advocate of the government stepping in to fill in the gap where private industry has abandoned research, such as the very important search for antibiotics.
      However, that is going to take a shift in thinking because it is not basic research in the way NIH has been doing it. It’s applied research and it takes money. Massive loads of money. You won’t believe just how ginormously expensive it is.
      Then you have to factor in ADME/Tox. I never hear anyone on the left looking into that. And it would help if research could have continuity and stability.
      But the bottom line is no one ever asks us. Baker is no different. He writes something up without asking us about it and we’re supposed to critique it, then accept or reject it. That’s not the way to go about writing policy on the drug industry.
      He starts with the premise that the NIH just hands stuff over fully formed and it’s all down hill from there.
      I can’t take it seriously.

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