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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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In the Pipeline

« Drug Patents in India | Main | Biology By the Numbers »

February 17, 2010

Merck Announces Cuts

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Posted by Derek

Merck reported earnings this week, and dropped the other shoe: they're going to make the Schering-Plough merger work by trimming the head count at the company by 15%. Where are the cuts coming from?

As of Dec. 31, 2009, Merck had approximately 100,000 employees. As part of the first phase of its Merger Restructuring Program, by the end of 2012, Merck expects to reduce its total workforce by approximately 15 percent across all areas of the combined company worldwide. The company also plans to eliminate approximately 2,500 vacant positions as part of the first phase of the program. The reductions will primarily come from the elimination of duplicative positions in sales, administrative and headquarters organizations, as well as from the consolidation of certain manufacturing facilities and research and development operations.

Merck said that certain actions, such as the ongoing reevaluation of manufacturing and research and development facilities worldwide, have not yet been completed, but will be included later this year in other phases of the Merger Restructuring Program. Merck also said it will continue to hire new employees in strategic growth areas of the business throughout this period.

Well, OK, the cuts are coming from. . .everywhere. Looks like sales and administration will be first, since those are the easiest to figure out, with R&D coming along later. It doesn't appear that there's any hard information to be had, which doesn't give anyone much to work with. Basically, everyone in research at Merck can, I suppose, just hang out for the rest of the year waiting to hear something. That'll crank up the productivity, as the scientists at Pfizer, GSK, AstraZeneca et al. can tell you.

Comments (114) + TrackBacks (0) | Category: Business and Markets


COMMENTS

1. hell to the chief on February 17, 2010 12:11 PM writes...

With over 10% unemployment, how is it possible to have 2500 vacant positions?

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2. milkshake on February 17, 2010 12:33 PM writes...

Merck bottom line won't be affected by the morale-busting research reorganizations for the next decade... and their efficiency experts will move up and away in the meantime - to do more nuking elsewhere.

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3. PharmaHeretic on February 17, 2010 12:49 PM writes...

They could cut everyone except the board members and a few PR shysters and sell that as a new paradigm. It would boost their stock prices to the heavens for a short time.

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4. Anonymous on February 17, 2010 1:30 PM writes...

The by reductions by Merck and Pfizer were a primary rationale from GSK Sr. management when discussing their recent cuts. It seems big pharma Cos. are trying to outdo each other to appease share holders.

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5. E on February 17, 2010 1:37 PM writes...

With over 10% unemployment, how is it possible to have 2500 vacant positions?

Hiring freeze coupled with natural attrition.

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6. David P on February 17, 2010 1:42 PM writes...

Just the term Merger Restructuring Program gives me the shivers.

Good luck to all the folks at Merck.

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7. milkshake on February 17, 2010 2:17 PM writes...

these reorganizations and cuts come as a belated realization that mergers do not work and big pharma management method tend to ruin the research productivity. So the logical next step is to keep the management because there is where the real value is, keep on doing mergers and dispose off with the research. India and China and US academic labs are supposed to do a better job at drug discovery and the pharma management will then have the option to license in the goodies without risks or upfront commitments... At least that's the shape of the house of cards pitched to the shareholders.

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8. Pharma Conduct Guy on February 17, 2010 2:50 PM writes...

Holding on to big pharma stock in the hopes that that the industry is going to unveil a truly innovative plan for future growth is akin to holding stock in White Star Line just after the Titanic set sail.

Those nice dividends being paid to widows and orphans will be long gone in 3 years. Although the executives will be out of jobs too, what does someone who gets millions in severance care if they're uneligible for unemployment?

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9. SRC on February 17, 2010 3:10 PM writes...

Cue the MSM: "where will get the scientists and engineers of tomorrow? How can we encourage more American kids to go into science and engineering?"

Not treating the existing scientists and engineers like used Pampers would be a good start.

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10. DonB. on February 17, 2010 3:18 PM writes...

Of course "scientists" fudging data to show global warming & get huge grants has really helped the reputation of honest scientists.

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11. Barak Obamma on February 17, 2010 4:11 PM writes...

American kida that go into science and engineers will have a great opportunity for jobs...as long as they are in areas that I agree with: building wind turbines, better batteries for electric cars, and high-speed rail. Great stuff.

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12. Skeptic on February 17, 2010 5:56 PM writes...

Scientists should put blame on the middlemen, the general practicioners and pharmacists.

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13. Hap on February 17, 2010 6:19 PM writes...

I think we get more deference than used diapers - I don't get any money when I take out my daughter's diapers.

I think we get something of the deference chicken farms give to their chickens, if that helps any.

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14. me on February 17, 2010 6:46 PM writes...

I saw on CBS news yesterday about 134/month for chinese worker as compared to 2784/month for american worker. Can we do any thing to stop outsourcing????

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15. yossarian on February 17, 2010 8:01 PM writes...

When you count all the money spent vs. productivity of offshore CRO’s you will quickly arrive at a conclusion that the cost to do effective research offshore is quite similar to the cost of doing research in USA. The industry has a herd mentality – since the current trend is to outsource research, everyone is doing it. It does not matter that it makes no sense.

The herd mentality also manifests itself in obliterating in-house research in all large pharma companies in hope of in-licensing lucrative projects in the future from small companies. However, if all big pharma powerhouses follow this path, there will not be enough projects on the market to in-license to satisfy their needs.

It seems that pharma companies will do absolutely anything possible to actually avoid hard work and innovation.

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16. Skeptic on February 18, 2010 4:51 AM writes...

"It seems that pharma companies will do absolutely anything possible to actually avoid hard work and innovation."

The financiers aren't interested in innovation. They are demanding competentcy. There is simply too much monetary rot and time has run out.

Medicinal chemists influence is on the wane in favour of mathematicians. Because of the new technologies, a more rigorous language of measurement is necessary to properly frame and evaluate experiments.

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17. bboooooya on February 18, 2010 8:19 AM writes...

"When you count all the money spent vs. productivity of offshore CRO’s you will quickly arrive at a conclusion that the cost to do effective research offshore is quite similar to the cost of doing research in USA."

Really? Can you provide some actual data to suppport this conjecture, as I do not believe that this is true. I find these "but everybody knows" arguments troubling and likely wrong.

Quick fact is making molecules is about mixing ingredients (cooking): it ain't rocket science. One smart gal directing things in the US can achieve many more different cpds/$ in the PRC or India than in NJ. it may be little comfort after spending years in grad school (which I also did, but jumped to banking, much more fun), but chemistry is going the way of cotton mills in the south, or leather manufacturers in New England.

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18. wierdo on February 18, 2010 8:25 AM writes...

#9,
Your absolutely right. I hope current and future students are paying attention to these layoffs and the employment situation. I know alot of us scientists would redo things if we could. If your good at science, you should go into fields that cannot be outsourced, like medicine, dentistry, pharmacy, etc. You can have lifetime employment, good pay, good prestige, and you don't have to relocate your family every few years.

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19. anchor on February 18, 2010 8:50 AM writes...

Like other companies before them, Merck is doing more of the same. What I am also hearing is that Merck has a "rolling" layoff's in place (20-30 people a day in various department) so that the bad news would not be sensationlized. We have not heard from Dr. Peter Kim in along time and what is he up to? When he is silent it is unbecoming of him.

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20. get real on February 18, 2010 9:25 AM writes...

What? How many of you really felt that there would be no efficiency exercise with loss of jobs after Merck acquired SP? It's the way it's done, part of the reason for mergers and aquisitions in all industries, including big Pharma. Further, there is no other proven sustainable way for big Pharma to continue to stay big or get bigger in the early 21st century except through consolidations. Unfortunately, this means a continual bleeding of many jobs in this industry, independent of the other econmic problems across the world.

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21. processchemist on February 18, 2010 9:56 AM writes...

@17

"Quick fact is making molecules is about mixing ingredients (cooking): it ain't rocket science. "

Maybe you're talking about the chemistry you know and practice. In *my* line of work, almost nothing works this way.

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22. Thomas McEntee on February 18, 2010 10:11 AM writes...

#17 has hit the nail on the head. Industrial cotton milling began in England in the 1770s and began in the US in the early 1800s in New England. The cotton mill workers in New England watched their jobs increasingly move to the South after the Civil War. By 1929, the US cotton milling had surpassed that in what is now the UK. Mill workers in the South saw their jobs begin to leave after WWII. By 1972, India had overtaken the US and by 1977, China surpassed India. I'm certain the same arguments were being made by workers and management where jobs were being lost that are being made by chemists today in the US. Good luck.

We need to start thinking seriously about sustainability, first here in the US and next on Planet Earth. The world population was 3 billion when I graduated from high school, and 4 billion when I started working in pharma after grad school. It's now approaching 7 billion. We all need food, clothing, shelter, healthcare, and energy and none of this is "guaranteed." Beyond trades such as medicine, dentistry, pharmacy that Wierdo names (#18), what can we as a nation _produce_ that others in the world want and are willing to spend their income to buy? Unless we revert to a pre-industrial mode of living in an agrarian society, we're going to have to figure this out. The US is blessed with land that could support this type of existence but we're unlikely to go back to everyone living off the family farm.

7 billion people live on home cooking every day. Cooking (chemistry), as #17 says, ain't rocket science. For anyone starting out in pharma, other areas of chemistry, or for goodness sake, grad school, think long and hard about the path you're on, especially if you have a family or are thinking about being a provider for any future dependents.

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23. molecular architect on February 18, 2010 11:10 AM writes...

"Quick fact is making molecules is about mixing ingredients (cooking): it ain't rocket science. "

This comment, while based on seriously flawed logic, aptly summarizes the mindset of financial/legal/management types.

First off: Making molecules may be about mixing ingredients but drug discovery/development is much more complicated and difficult. Besides the huge uncertainties of the basic science (e.g. will inhibition of this target effect the desired modulation of the biological process underlying the disease and lead to a clinical improvement?), it requires effective cooperation of scientists and clinicians from disparate fields. These fields often do not share a common terminology (language) or approach to science (painfully obvious to anyone who has ever lead a drug discovery group) Getting chemists, biologists, pharmacologists, etc. to effectively communicate is no easy task. Adding in the business development folks and the lawyers exponentially increases the difficulty. Drug discovery/development is risky and difficult even when everyone can meet face-to-face. Outsourcing medicinal chemistry here, biology there, PK somewhere else, process chemistry ...., etc. just makes the whole process less efficient. By dismantling in-house research and outsourcing, Big Pharma is building their new competition. Once their Chinese and Indian "partners" learn how to develop drugs, they will no longer need the Pfizers and Mercks of the West.

Secondly: Rocket science AIN'T science. It's ENGINEERING. We already know how to build and fly rockets. Attempting to build an effective medicine fails more often than it succeeds, that's why it's call RESEARCH.

Sadly though, these truths will fall on deaf ears in the boardrooms of Big Pharma and the trading floors of Wall Street. As long as today's executives and investors earn $$$, they will pursue the long-term destruction of the industry in the West.

I'm currently in the process of interviewing candidates for summer internships in our labs. Can't tell you how often I feel the urge to advise them: "don't even consider science as a career, run, run, run to a stabler and more lucrative field".

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24. Thomas McEntee on February 18, 2010 11:40 AM writes...

#23: No argument about the differences between running modifications of Organic Synthesis preps and drug discovery. Apologies for suggesting a literal interpretation of the figure of speech "rocket science." But given your very likely accurate views on the deaf ears in the boardrooms of Big Pharma and the trading floors of Wall Street, what _do_ you tell the candidates coming in for interviews? Do our own needs for survival prompt us to put others' survival at risk?

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25. bbooooooya on February 18, 2010 12:14 PM writes...

"Making molecules may be about mixing ingredients but drug discovery/development is much more complicated and difficult"

And I would never suggest otherwise. Designing a drug discovery program is a value-add function (yes, I picked that term up in MBA school. I think it was after "pie chart" class) that doesn't require thousands of worker bees. Reality is that any idea, correct or not, takes many molecules to prove/disprove. My suggestion is that generating molecules is low value work (which I consider rote organic synthesis to be) is more effectively sent to low wage countries. Look around labs at most US universities: the Chinese graduate students who we teach can do the job just as well here as in China: if they're willing to go back there (and many are), why pay them 5X what we'd pay them in the US? Further, once in China they can manage others who are paid even less.

Please note, I also get that economics dictates that this will force equilibration of wages in this country with those in places like the PRC. This can be avoided, but only through protectionist measures that are unlikely to occur (especially given the amount of US debt China holds). Waging against the immutable econimic force of globaliztion (which has been on-going since humans started living in clans) is about as useful as trying to get the sun to set in the east.

This economic reality is already being noted. have a look at NSF statistics on % of US students engaged in graduate degress in chemistry. The number is getting shockingly close to 50%. That is, Americans are already realizing that chemistry is not a growth field, and are voting with their feet in terms of course of study. Chemistry is hard. Why spend 4-5 years in grad school (and a couple years as a PDF for those who don't go to top 20 schools) to enter a field that is bound to shrink?

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26. Timbo on February 18, 2010 12:19 PM writes...

The next generation of scientists have to be diverse in there direction and be able to adapt easily. Also, I think graduates in the top 10% of their class won't have a problem but the other 90% or so will have to be more competitive in ways other than their grades.

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27. David Formerly Known as a Chemist on February 18, 2010 12:30 PM writes...

Every time one of these big layoff threads hits this blog, everyone starts howling about the ineptness and ingrained evil of management, and how this is leading to the decline of the noble profession of chemistry. Come on! It's not an evil plot. Labor that can be performed more cheaply somewhere else will go somewhere else. It's economic reality, not an evil plot. If a good chemist in Chindia can make 20 quality compounds per month for $1,000, and a good chemist in the US or Europe can make 20 quality compounds per month for $5,000, it's a no-brainer where you get those compounds made. It's easy to argue that the quality in Chindia is low, but good management can correct that, and is correcting it. The landscape for this industry is changing dramatically, and it will only keep changing. People need to adapt. No jobs doing chemistry available? You need to do something else. What choice do you have? Reinvent yourself. You don't have any other skills? Better develop some quickly. Think of the skills your career in chemistry gave you (attention to detail, organization, critical analysis, data management, etc) and find ways to apply those skills in other industries. It may be satisfying to ooze sarcasm and whine on blogs and message boards, but the fundamental fact is that chemistry jobs are going away, and I doubt many will come back to this country. This is happening to just about every industry, globalization is painful. Adapt.

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28. Hap on February 18, 2010 1:06 PM writes...

That's fine, just so long as you don't expect a torrent of people willing to spend ten years in school for the next big/important thing so they can spend the remainder of their lives trying to reinvent themselves. People in fields requiring large fixed inputs of time or money are resistant to moves that decrease the value of those inputs, and if the inevitable economic trend is to make it impossible to repay those fixed costs, then lots of people aren't likely to be following them to the unemployment lines. If you discard people like used toilet paper while expecting knowledge and loyalty from them, you shouldn't be surprised when not so many people are willing to follow in their footsteps.

It should also be noted that if there's nothing to create (or no one to create it), there's nothing to manage, either, and no expansive profits to be made hyping and selling it. The layoffs don't really go well with the "we need scientists" line gov't and business keep repeating. They also ask the question that, given that we're laying off the information and manufacturing economies, what kind of economy are we planning to be, exactly (other than an imaginary one or a large Ponzi scheme)?

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29. bbooooooya on February 18, 2010 1:09 PM writes...

Just a comment on "Rocket science AIN'T science. It's ENGINEERING. We already know how to build and fly rockets".

I just don't buy that. We also know how to build and test molecules. The big contribution of guys like KCN and Dale is simply to prove that (almost) anything you can draw you can collect in a flask. There may be more artisitc ways to do things, but to simply get a molecule to test, who cares: we'll worry about it when (and this happens rarely) we need a kilo.

There's a reason one rarely sees articles on organic synthesis in JACS, and it's been ages since I've seen a synthesis paper in Science or Nature: it's just not cutting edge anymore.

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30. PH.D.#6785 formerly known as a biologist on February 18, 2010 1:10 PM writes...

David (#27) spot on.........

After losing my job as a PH.D. research/drug discovery biologist twice in a couple of years during my middle age, I reinvented myself and now work in Regulatory affairs and really enjoy my work/get paid well for my expertise and skills. I'm never looking back....................

I have told my kids NEVER get a Ph.D. in science unless you have the interest in truely academic work and can compete at that level. Otherwise get a med, law, pharm professional degree........

At least I can translate that to my kids. It was too late for me so I have to transition/reinvent myself but if you don't you will become a dinosaur.

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31. Chemjobber on February 18, 2010 1:14 PM writes...

it's been ages since I've seen a synthesis paper in Science or Nature: it's just not cutting edge anymore.

Unless you're referring to pure total synthesis, you're just wrong on this.

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32. milkshake on February 18, 2010 1:35 PM writes...

I think what keep medchem research in US is not the quality of chemists but the discovery biology. Medchem projects work best when the chemistry is within walking distance from biology, the labs are filled with motivated people who chow in cafeteria at the same table etc.

Sure you can find decent chemists in Shanghai who will work for half of the pay of a chemist in US but the biology isn't there yet. It will change - Singapore is investing quite heavily into biotech, for example.

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33. J-bone on February 18, 2010 1:41 PM writes...

it's been ages since I've seen a synthesis paper in Science or Nature: it's just not cutting edge anymore.

What are you talking about? Some group synthesized a reactome array and did like 1600 organic syntheses. That's enough synthesis for a whole year!

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34. retread on February 18, 2010 1:54 PM writes...

If pharma were producing blockbuster drug after blockbuster drug radically altering the course of vascular disease, CNS degenerations, psychiatric diseases, etc. etc., there would be no downsizing of chemists.

The problem does not lie with the chemists, but our understanding of fundamental biology.

For an elaboration of this go to the last two posts on Chemiotics II (it's much long to put in a comment here). Start with the post before the current one.

See if you can come up with reasons why the known genetic defects and one exogenous drug causing the disease actually cause it. No one would have predicted them as drug targets (except perhaps one). If you don't know the targets, how can you come up with drugs?

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35. zane on February 18, 2010 2:54 PM writes...

"Merck also said it will continue to hire new employees in strategic growth areas of the business throughout this period." translation - more and more executives

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36. bbooooooya on February 18, 2010 3:04 PM writes...

"it's been ages since I've seen a synthesis paper in Science or Nature: it's just not cutting edge anymore.

Unless you're referring to pure total synthesis, you're just wrong on this."

For example....

if there are more than 3 synthesis papers in the past 6 months in Sci or Nat I'd be amazed.

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37. RandDChemist on February 18, 2010 3:33 PM writes...

Strategic incompetence will be rampant.

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38. David Formerly Known as a Chemist on February 18, 2010 4:06 PM writes...

Hap (#28)...

I have no expectations whatsoever of people spending 10 years training for jobs that aren't there. Fortunately, here in the US people are freely able to choose what they want to do, from education to employment. If one spends 10 years training for a career path that evaporates while you're in training, or evaporates soon after you complete training, that's a risk everyone takes. Plenty of people in finance, real estate, journalism, law, etc have faced the same thing. Hell, I faced it (12 years between BS, PhD, and postdoc). I was a damn good chemist, but now I'm a former chemist. It hurts, it's an identity crisis of sorts, but it was either reinvent myself or move around the country from job to job like some nomad. Too disruptive for my family, so I changed direction. My choice, but I'm happy with it, even though I still miss the drug discovery and development work I used to do. If the job prospects for chemists are dim, fewer and fewer people will choose that path. If they ever become more attractive, people will flow back in that direction. The market has an uncanny way of balancing supply and demand over time.

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39. molecular architect on February 18, 2010 5:14 PM writes...

#29 "We also know how to build and test molecules."

You missed my point. Drug discovery/development is much more than synthesis of new molecules. It's an interactive process that benefits greatly from personal interactions among the chemists, biologists, pharmacologists, clinicians, etc. (as Milkshake reiterated).

If it was just a matter of synthesis and HTS, every second rate academic lab in the country would be inventing drugs at a fraction of the cost of outsourcing to Chinidia! If the leaders of Pharma and Wall Street understood this, they would understand how mismanagement has undermined pharma R&D over the past 20 years.

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40. Me on February 18, 2010 5:33 PM writes...

China has more than 1.3 billion citizen, and India has more than 1.2 billion mouth to feed. Face it! it will be tough. Supply and demand.

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41. PhD formerly known as chemist on February 18, 2010 5:53 PM writes...

#27 - David, I couldn't agree more (and certainly couldn't have written it so eloquently).

A lot of people suggest that they wouldn't do a PhD if they could wind back the clock. This is something I don't really get. To me a PhD isn't just training in a specific scientific field, but training in how to write, orate, collaborate etc etc. All of these traits are useful out of science, and are precisely what folks should be highlighting on their resumes right now.

The jobs are going - as painful as it is accept it and move on. But do what you can when you are still there - just before I made the leap I supervised a student. I sat him down one day and explained, in some detail, what was happening in the industry in general and exactly why I was leaving. I hope he read between the lines, and never looks back.

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42. bbooooooya on February 18, 2010 6:00 PM writes...

"Drug discovery/development is much more than synthesis of new molecules. It's an interactive process that benefits greatly from personal interactions among the chemists, biologists, pharmacologists, clinicians, etc. (as Milkshake reiterated)."

Bollocks.

Making is drugs is about finding the receptor you want to modulate, and figuring out a way to do it (insert admet and scale up here). This requires some sparks of ingenuity, and then a ton of mindless grunt work to actually make it happen. I agree the biological assays are tougher to outsource, but that's OK. Nothing wrong with making stuff overseas and shipping it back on a plane the next day. I get this will require some additional QC/QA, but those are now automated steps.

These grandiose notions of how "special" drug discovery is (and, ya, the creative aspect is fun, but the drudgery of 90% is not) will be one of the reasons Wuxi et al will soon be doing most of the world's chemistry.

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43. SanjayK on February 18, 2010 6:05 PM writes...

It is not technical prowess that we are talking about. It is all about cost. IF one person in US is getting more in productivity than 3 researchers abroad. How does it stack up?

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44. Hap on February 18, 2010 6:09 PM writes...

I understand lots of people have faced career change with differing levels of investment in their old careers, and survived. To hope that things won't change for one's sake is foolish. However, the career choices of students seem to be shifting away from highly technical jobs because of the significant risks of employment loss (relative to the input costs) and low pay (again, relative to the time, education, and intelligence necessary to do them) and it's hard for me to see how we will create other jobs without people to perform those jobs. People go where the money is, and if the money is not present to make useful things, people will learn to make useless ones. But that probably can't go on forever.

As we switch from a manufacturing economy to an information economy to an innovation economy, we still need people who can make new things, requiring investments in manufacturing and technology, because the development of new things requires lots of in-depth knowledge of how the old things work and of the factors that affect how something new might work. If those people don't exist, or are outsourced to oblivion, there won't be jobs to switch to. Ultimately, we have to produce something if there's going to be any jobs for people to learn again, and making it unlikely that people will want to learn the knowledge necessary to produce things seems less like creative destruction and more like the uncreative kind. It's hard to separate self-interest and one's own perspective from reality, and I don't know if I'm doing it right though.

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45. Hap on February 18, 2010 6:23 PM writes...

#42: There's this pesky problem of biology and chemistry being real, rather than theoretical (or, rather, either not having a good enough theory to explain it all or not being able to have one) - things have to be found by lots of hard work rather than being thought out. The combination of deep thought and lots of work is what makes drug discovery (and lots of other things) hard. Outsourcing the drudge work out to increase efficiency isn't necessarily going to work, because then the leaps of imagination that discovery requires won't happen either. (You have to outsource the right stuff, which takes a level of thought that doesn't appear to be present in the job cuts - if you cut stuff that's inefficient, and doesn't make you more able to discover drugs, then you can save money and still discover drugs. this doesn't appear to be the case, however, since that would have required deep analysis rather than "let me bump my stock options now".)

If no one here does the down-and-dirty work, then no one here will be finding new stuff, since the only ones who might be able to discover stuff by thought alone (the geniuses) will be doing something else that's more secure and makes more money. Most of your discovery won't exist anymore.