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Webinar: Changing Pharmaceutical Industry R&D Models

The pharmaceutical industry appears to be in the process of switching over to a different R&D model involving more outsourcing and less internal R&D than in the past. Perhaps a decade ago, pharmaceutical companies were outsourcing drug manufacturing

The pharmaceutical industry appears to be in the process of switching over to a different R&D model involving more outsourcing and less internal R&D than in the past. Perhaps a decade ago, pharmaceutical companies were outsourcing drug manufacturing stating that their core strength was new drug development. The current trend towards more outsourcing and less internal R&D is seen as a response to a major industry problem: big pharmaceutical companies have commercialized relatively few new drugs in the past decade.

Some blame this problem on extremely large research staffs formed as a result of the drug industry mega-mergers of the past ten to fifteen years. They suggest that large staffs have resulted in innovation-stifling bureaucracy. Another contributing factor may be changes in U.S. Food and Drug Administration regulations for permitting of new drugs. Whatever the cause, the result has been what Chris Viehbacher, CEO of Sanofi-Aventis SA, has called a "lost decade" in terms of new drug development.

The big pharmaceutical companies, so-called "big pharma," have been reacting to the problem by reducing R&D staffing levels. According to Russell Reynolds healthcare recruited Jacques Bouwens, the ten largest drug companies have eliminated approximately 27,000 R&D jobs since the beginning of 2009. R&D staffing levels may continue to decline due in part to work force reductions and in part due to reduced hiring of young researchers. At one point in the 1990s, the pharmaceutical industry hired more than half of new Ph.D. chemistry graduates according to American Chemical Society surveys of new graduates.

Restructuring

R&D restructuring has includes more than just laboratory staff downsizing. Some companies have ended development of some types of drugs and dissolved entire research groups.

Entire large laboratories (chemical industry labs as well as drug industry labs) have been closed and sold or converted to other uses. An article scheduled for publication in the September issue of "Laboratory Management Magazine" will discuss some of these once shuttered large laboratories and the uses to which they are now being put.

GlaxoSmithKine provides a representative example. Since 2006, the firm has cut its global R&D staff by 20%. At the same time it has substantially increased funding of outside projects performed by small biotech firms and academic research groups About 30% of its drug discovery research is now contracted out to other firms (http://pubs.acs.org/cen/news/88/i06/8806notw4.html).

As a result of extensive outsourcing, overall drug industry R&D spending has declined relatively little. New laboratory management and staff jobs are increasingly in contract research organizations and in biotechnology firms and small pharmaceutical companies rather than the major pharmaceutical firms.

Another approach being evaluated by some big pharmaceutical companies was discussed at length in a recent "Wall Street Journal" article (http://online.wsj.com/article/SB10001424052748704569204575328580921136768.html?mod=WSJ_hps_MIDDLEFifthNews). Basically it involves carrying out new drug development in small teams of about a dozen people with support functions such as clinical testing, formulation development and manufacturing development being outsourced.

However, entrenched corporate cultures often are hard to change. For example, according to some reports, despite a change in 2006 – 2007 to a more safety oriented culture, many BP managers and staff members are still taking safety-related risks in order to minimize spending and meet deadlines. Even if excessive lab bureaucracy and its time-consuming requirements are eliminated or greatly reduced, some lab managers and staff members behave as if it is still there.


John K. Borchardt

Dr. Borchardt is a consultant and technical writer. The author of the book “Career Management for Scientists and Engineers,” he writes often on career-related subjects.