About this Author
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: Twitter: Dereklowe

Chemistry and Drug Data: Drugbank
Chempedia Lab
Synthetic Pages
Organic Chemistry Portal
Not Voodoo

Chemistry and Pharma Blogs:
Org Prep Daily
The Haystack
A New Merck, Reviewed
Liberal Arts Chemistry
Electron Pusher
All Things Metathesis
C&E News Blogs
Chemiotics II
Chemical Space
Noel O'Blog
In Vivo Blog
Terra Sigilatta
BBSRC/Douglas Kell
Realizations in Biostatistics
ChemSpider Blog
Organic Chem - Education & Industry
Pharma Strategy Blog
No Name No Slogan
Practical Fragments
The Curious Wavefunction
Natural Product Man
Fragment Literature
Chemistry World Blog
Synthetic Nature
Chemistry Blog
Synthesizing Ideas
Eye on FDA
Chemical Forums
Symyx Blog
Sceptical Chymist
Lamentations on Chemistry
Computational Organic Chemistry
Mining Drugs
Henry Rzepa

Science Blogs and News:
Bad Science
The Loom
Uncertain Principles
Fierce Biotech
Blogs for Industry
Omics! Omics!
Young Female Scientist
Notional Slurry
Nobel Intent
SciTech Daily
Science Blog
Gene Expression (I)
Gene Expression (II)
Adventures in Ethics and Science
Transterrestrial Musings
Slashdot Science
Cosmic Variance
Biology News Net

Medical Blogs
DB's Medical Rants
Science-Based Medicine
Respectful Insolence
Diabetes Mine

Economics and Business
Marginal Revolution
The Volokh Conspiracy
Knowledge Problem

Politics / Current Events
Virginia Postrel
Belmont Club
Mickey Kaus

Belles Lettres
Uncouth Reflections
Arts and Letters Daily
In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

In the Pipeline

« Whistleblowers: Paid Too Much? | Main | Fanapt: Not Paying Out »

February 8, 2011

Too Much Outsourcing: Has the Line Been Crossed?

Email This Entry

Posted by Derek

We've talked a lot about outsourcing on this blog, since it's been one of the biggest features of life in this industry over the last few years.

It's not hard to see why. Costs. We spend too much money finding drugs (which don't always make it back even when they succeed). Anything that cuts costs more than it cuts productivity is going to be tried.

But any idea can be taken too far. Here's Boeing's current CEO, talking about the cost overruns on the 787 Dreamliner project, and how they were made worse by overzealous outsourcing:

. . .the 787's global outsourcing strategy — specifically intended to slash Boeing's costs — backfired completely.

"We spent a lot more money in trying to recover than we ever would have spent if we'd tried to keep the key technologies closer to home," Albaugh told his large audience of students and faculty.

Boeing was forced to compensate, support or buy out the partners it brought in to share the cost of the new jet's development, and now bears the brunt of additional costs due to the delays.

Read the whole article; it's extremely interesting, and especially so for those of us in the drug industry. There was a Boeing employee who specifically criticized this process some years ago, and the whole return-on-net-assets view of the business world, and the company seems (belatedly) to be giving him his due. His line about how the biggest return would come from having someone else build the plane and then slapping a tiny Boeing decal on the nose is funny, but in a painful way.

So here's the question: have companies in our industry reached this point? And if so, which ones? Reports like this one make me think that some organizations have crossed that invisible line, and will regret it. I think that "zero outsourcing" is probably a bad idea. But "way too much outsourcing" could be worse. . .

Comments (48) + TrackBacks (0) | Category: Business and Markets | Drug Industry History


1. anon on February 8, 2011 2:31 PM writes...

Outsource smarter, not harder.

We're outsourcing the wrong things. Internal scientific teams tend to be very productive and competent. Those roles should not be outsourced. We need to focus on the weak areas.

Big pharma should outsource decision-making.

Permalink to Comment

2. David Formerly Known as a Chemist on February 8, 2011 2:56 PM writes...

You're asking a biased audience. Despite that, I'll chime in.

What I've seen work in drug discovery is the teamwork, trust, and spirit of collaboration that holds internal scientific teams together. These teams learn together. They learn what to avoid, they learn what works, they learn how to solve problems together. The chemists and biologists and pharmacologists learn aspects of each other's disciplines and thus a deeper understanding of how a molecule affects an entire living system. That is the essence of drug discovery and development.

A non-scientific manager looks at this team and sees only chemists, biologists, pharmacologists, etc. The chemists can be replaced with cheaper chemists in Asia, right? The biology can be set up at a CRO because it's a standardized process, right? Pharmacology is pharmacology, there are plenty of animal CROs that have pharmacologists on staff, why not unload the fixed costs? And there you have it, all the components you started with, just in different places, and at a fraction of the cost. With the internet and cell phones, communication is no barrier, so things should work just as well. Right?

Pharma has certainly gone too far, way too far, in breaking up the cohesiveness that leads to effective drug discovery. It is learned experience and insight that leads to breakthrough products, not just more hands at the bench. Internal teams have a sense of ownership in their projects. Having worked at a CRO and having used CROs, I can tell you that isn't necessarily true at your outsourcing partner, especially when team members are continually redeployed from project to project depending on the need to hit revenue numbers, etc.

What should be outsourced? Straightforward, measurable tasks. Synthesis of reagents, scaffolds, simple parallel libraries. Scale up, as long as it's carefully managed. Manufacturing, once you have a mature, validated process. But discovery science? I say no.

I told you this audience was biased.

Permalink to Comment

3. Lacerta Bio on February 8, 2011 3:03 PM writes...

This is a fascinating question. I think you may be right. It's very tempting to think that the closer you get to 100% outsourcing, the faster and cheaper you'll get to product commercialization. But is this really true? Just because it's a CRO/CDMO is doesn't mean that it's necessarily better/faster/cheaper than in internal effort. This is especially true with the high employee turnover rates some of these CROs possess. What this implies is a much more fluid structure (recognizing the oxymoron) where some activities are out sourced some of the times, but not all the time.

Let's face it. Drug development is hard. Delays/budget over runs, mistakes...these things can happen internally or externally.

One area that I think should not be outsourced (generally speaking) are core drug discovery activities. Many of these activities are built on a foundation of internal knowledge and expertise. This makes the recent closing of Pfizer's Sandwich facility all the worse. Who knows how many good products those folks could have developed.

Permalink to Comment

4. anchor on February 8, 2011 3:09 PM writes...

Those who have been watching these “outsourcing” activities with dismay knew all along that nothing lasts forever, but still moved on. The flip side to cost savings are poor quality control, time delay have been all overlooked or when pointed out “they” looked other way (MBA's from elite school). As for the pharmaceutical companies, they went all out for outsourcing with vengeance as if they have no time to lose and need to make and rake all those $$$. Belatedly, they will reach conclusion that it too made a big mistake. Unfortunately, for some it is too little and too late.

Permalink to Comment

5. SK on February 8, 2011 3:12 PM writes...

Excessive outsourcing (in this case, of fighting forces, and the use of too many mercernaries) led to the decline, and fall of the Roman Empire. And I'm Indian, btw.

Permalink to Comment

6. silicon scientist on February 8, 2011 3:14 PM writes...

Andy Grove, of Intel fame, came to a similar conclusion. Google his Business Week commentary. His main point is that manufacturing is the cradle of new ideas--and jobs--as opposed to start-ups and "knowledge work," which produce very little without scaling up to mass production. There's a high opportunity cost to letting someone else do the hard work.

It seems that Boeing learned that lesson the hard way.

Permalink to Comment

7. JasonP on February 8, 2011 3:37 PM writes...

SK: I pretty much agree with you! I would say though that the real core reason for the fall of the Roman empire was a failure to create a dependable line of imperial succession. This failure led to constant civil war, which depleted the resources of the empire, which led to barbarian mercenaries.

So too, today's CEO is like a cheap Roman emperor; totally self interested and not at all concerned about the longevity of the Empire. Will use all the imperial/company resources to achieve all his personal wishes, few to none of which have anything to do about long term growth.

Permalink to Comment

8. Kay on February 8, 2011 4:04 PM writes...

Another thing that's overlooked when considering outsourcing is employee development. Team leaders don't appear out of nowhere. Scientists start out as inexperienced bench chemists and they gain experience and knowledge as they work on different projects. If you plan to outsource lower level positions and keep team leaders in the U.S., that only works for so long. Eventually the higher level folks leave or retire, and you won't have anyone in the pipeline to fill their roles. But most companies don't think any further ahead than next quarter.

Permalink to Comment

9. tedthechemist on February 8, 2011 4:06 PM writes...

a prime example of the above is az - brennan and his jock strap

Permalink to Comment

10. Anonymous on February 8, 2011 4:21 PM writes...

Rule 1: Don't outsource you core business.

It seems that basic R&D doesn't make that list.

Permalink to Comment

11. Hap on February 8, 2011 4:25 PM writes...

Outsourcing is supposed to allow people who you're paying a lot to do high-value work. What it can't cover for is if you don't know what that is, as well as if you can't tell who is doing high-value work and who isn't, or if your projects are dying for reasons you don't understand, or if you insist on spending your resources to achieve goals that don't lead to useful drugs but make the financial people warm and fuzzy. If outsourcing groups can manage your resources better than you can, eventually they will.

Outsourcing is a tool. At this point it might be the "Swiss Army chainsaw" of management tools. Normally, people's willingness to keep their limbs prevents such tools from being misused, or used when something better and safer would suffice. When people using it don't risk their own limbs but only those of others, then there's likely to be a lot of blood, a dead company, and lots of richer people with minimal consciences.

Permalink to Comment

12. baychemist on February 8, 2011 5:10 PM writes...

Today's American likes working little, earning big.

Permalink to Comment

13. CMCguy on February 8, 2011 5:21 PM writes...

#2 David FKaaC while I do generally agree with your assessment you may be (unintentionally) selling development and manufacturing short. Those activities involve a greater number of diverse functions so the importance of building and operating as cohesive teams is critical. There are indeed some limited activities that are amenable to outsourcing, with proper selection and oversight, but still can not easily delink and isolate the expertises. Most people in R&D would benefit from exposure to manufacturing so that they can better direct some aspects of the work they do and until something has been in commercial production many years not sure consider mature (and even sometimes reflects various compromises more that an optimum process)

Permalink to Comment

14. pete on February 8, 2011 5:26 PM writes...

This is taken from that Forbes interview with Pfizer's Ian Read that was the subject of many comments here just recently:

" Mikael Dolsten, the head of Pfizer's research labs, added, via a speaker phone: "I have never seen such a comprehensive approach re [sic] really want to put all the pieces together to create an engine for sustainable innovation."
Read said the aim was not quite to make researchers feel they're working at a small biotechnology company like Exelixis or Dendreon - but it's close. He wants to create "that sense of feeling of 120 scientists working together close to the business." "

So that's the picture:
1) Up-end internal R&D
2) Outsource heavily
3) And now create magical biotech-like clusters of internal discovery (..haven't they tried that already?)

Really creative biotechs of yore were so productive because they possessed a cohesive R&D chain that extended from early discovery all the way to, say, drug formulation. This bastardized approach (a la Boeing outsourcing) seems like a recipe for more headaches and unmarked graves.

Permalink to Comment

15. Shake on February 8, 2011 5:37 PM writes...

The underlying assumption by the author of this article is that markets are rational and that the pharma executive acts in the interest of the shareholders and company.

As we all know executives operate on a short term time frame and make decisions intended to bolster the stock price at all costs.

You'll find the salaries of most executives (in all types of companies) spiking across the board in the last decade, regardless of performance.

Why? Because these people are involved in the systematic looting of America. They win and you lose. Just look at the mega bonuses in 2010 at financial companies which laid of hundreds of thousands and ran their core business into the ground.

It is well established that you become an executive to extract as much wealth out of a company for your own benefit as quickly as possible.

You are all witnessing the sacking of America.

Permalink to Comment

16. milkshake on February 8, 2011 6:11 PM writes...

I wonder if anyone tried to outsource the management - I mean the top business talent can be found in East Asia too and maybe the execs could teleconference from Shanghai or Hyderabad for a fraction of the US cost...

Permalink to Comment

17. BioBrit on February 8, 2011 6:23 PM writes...

Don't assume that having learned it's lesson, Boeing can't unlearn it again. I've heard too many of these statements.

I heard management of IBM mea culpa that suspending their graduate recruitment program for a few years in the 80's was the biggest mistake they ever made. Didn't stop them from doing it again in the 90's, and probably the last few years too.

I heard (I think it was) Novartis and other biopharmaceutical companies bemoan that they slashed chemists in the 90's in the height of the combichem hype. Don't need so many chemists, when a couple can create millions of compounds each, right? Worst mistake they ever made, they said. Didn't stop the slashing the last few years either.

Chemists are always risks as they are perceived as just tools, no creativity there right, just crank out compounds. We probably don't do ourselves any favors in the way we portray our work to other departments. But nothing could have stopped this tide.

Hopefully the outsource fad is just that, and it will swing back somewhat. But things won't change until the underlying issues the industry has are resolved - much harder to develop drugs, less time to make money off them etc. Don't think there will ever be political will to resolve that.

Permalink to Comment

18. William B Swift on February 8, 2011 6:43 PM writes...

I read a paper on problems with IT outsourcing 2 or 3 years ago (I can't find it again, sorry), that said much of the problems results from differences in training and management of engineers and programmers in India and China (the paper specifically addressed these two countries). Their claim was that for routine work, the outsourcing generally worked reasonably well, but the engineers were not able to take any initiative, they had to be told specifically what to do, which made them next to useless for development work.

Permalink to Comment

19. Jackass on February 8, 2011 7:15 PM writes...

I am biased, since my job was terminated due to outsourcing. However, one has to consider other factors this has on our country. Sending our high paying, good jobs, and technology to another country I think is just wrong. With our sky high unemployment, we should penalize any company sending jobs offshore.

What should also be mentioned is how this will effect the field of chemistry and science. Most students go where the jobs and money are. You have to wonder how many past students considering getting a PhD in chemistry, and after reading these blogs for the last few years, ran the other way into more lucrative, secure professions. This country will lose its scientific edge quickly. We should be building up our scientific base, not allowing it to fade away. Do we really want a country where all we have is low paying service jobs?

Permalink to Comment

20. Wampeter on February 8, 2011 8:31 PM writes...

Seems to me like we're talking 2 different problems with similar symptoms here

Standard Operations Strategy:
Processes are integral (very connected) or discrete (easily disconnectable). For success you must outsource only discrete processes to low labor cost or low raw material cost domains. In the real world processes are not truly discrete. In such a case, to ensure continuing integrality of process, a prereq for success, you ensure at least 3 similarities across the outsourced and outsourcing domains for success:
1. cultural
2. language (both parties speak the
3. geographical (closeness in timezones)
4. electronic (both domains are comfortable using similar communication mechanisms)

Drug Discovery: is a very integrated process of knowledge discovery. Tight information cycles are a must for efficiency. The way most outsourcing is done today, synthesis is done in low labor regions where often raws (reagents. high quality labor) are still not as easily available. Often biology is often done elsewhere, implying longer information cycles (thereby trading longer time for lower cost) Breaking up an integral process suboptimally and outsourcing without consideration for success can often lead to failure. Furthermore when I look at serendipity's role it isn't even clear to me if Drug Discovery can be a clearly definable process, as opposed to a science.

Conversely a plane: while possible to design and manufacture by discrete processes, is still a very integrated product, as opposed to a non-luxury car or a PC laptop. In this case, Boeing has run into some tough problems integrating the parts (done disparately for different parts at different sites) into the final piece. Furthermore the 787 does use new materials (composites) and technologies to enable its feats (fuel consumption, speed etc.).

With planes its integrated architecture of the final product whereas with drugs its integrated process architecture of discovery, that's the issue.

Permalink to Comment

21. AnotherView on February 8, 2011 9:00 PM writes...

Another tip for Boeing -- Why not just move lock stock and barrel to a low-labor cost country?

Permalink to Comment

22. AR on February 8, 2011 9:10 PM writes...

In a couple years Pharma decide the out-source game was just sleight of hand by corporation officers to look business savvy. By then med chemists and biologists will have moved on to something else. You can hear it now. In 2016, Pharma decides to strengthen internal R&D only to bemoan the deplorable lack of qualified Americans. They will be forced to import the next generation of pharma scientists from Chinindia.

Permalink to Comment

23. lynn on February 8, 2011 9:32 PM writes...

Yes, we're a biased audience. All excellent comments above. Now I'd like to hear from some MBA types who can argue for outsourcing in the face of the generally acknowledged (here) concept that drug discovery requires close physical and temporal integration.

Permalink to Comment

24. Hap on February 8, 2011 10:51 PM writes...

Another tip for Boeing -- Why not just move lock stock and barrel to a low-labor cost country?

Because it's hard to argue for tax and other incentives from the US if their jobs are all elsewhere? Also, if they don't have any jobs here, they're no more American than Airbus, and airlines and big customers might decide to chose airplanes more on price than on nationality. Since Airbus is gov't-owned, a competition on price is probably a fight that Boeing can't win. In addition, they may not be able to get (or to trust) the people they would have to hire for core operations overseas.

One of the arguments for outsourcing (at least until they actually start selling drugs in China and India) for drug companies is the size of those markets and the potential for sales, which is less likely (also the necessary patent and copyright protections) if the drug companies are totally foreign as opposed to having some domestic (Chinese/Indian presence). I don't know if it will really matter when push comes to shove, but if they become more open, it will matter.

Permalink to Comment

25. leftscienceawhileago on February 8, 2011 11:58 PM writes...

I just felt like it was relevant to note that "Outsourced" is actually a really really good TV show. Highly recommended to everyone here. Jolly vinadloo day to you!

Permalink to Comment

26. a-non on February 9, 2011 12:09 AM writes...

Milkshake, top management already do this - it's called management consulting

Permalink to Comment

27. processchemist on February 9, 2011 3:49 AM writes...

Maybe here I'm one of the few that spent their entire professional life in the outsourcing field. I've seen good times, when outsourcing was managed like a partnership to buy expertise or resources not available in house, and the service was not so cheap. Since about five years expertise, quality, accountability lost almost all their market value. And this is the main problem. Currently if you're cheap you're good, period. Only few customers want to pay for quality. And it's not only a budget size problem. Once upon a time was pretty common to perform tech transfer in the customer structures. Now the only requests are for tech transfer to asian contractors. Having no suicidal tendencies, I always answered "Sorry, no".

Permalink to Comment

28. milkshake on February 9, 2011 3:59 AM writes...

I thought consulting had nothing to do with the actual management process. Its more like outsourcing the problem of buzzword creation to a loony overpriced ad agency. Such collaborations often progress to identifying a straw man apparently responsible for all problems with the organization. Based on such insight, an incoherent reorganization is put forth - that coincidentally centralizes the power in hands of the executive who brought in the consultants

Permalink to Comment

29. ex big pharma chemist on February 9, 2011 8:32 AM writes...

In the last few years of my pharma career I was responsible for running a number of outsourcing collaborations to the usual places (India, China and Europe). My experience was generally that senior management could easily get budget to outsource stuff and once the money arrived we had to find something to spend it on. Hence all projects suddenly came up with a list of low priority compounds they didn't really want (but could now get someone else to make). Once the targets were sent out of house many hours were spent asking if the outsource chemists had run and LC-MS/NMR/heated the reaction/checked the aqueous layer etc. After several months the compounds arrived and were put on a shelf somewhere as the project had moved on and was to busy to move back. Then every so often the numbers of scaffolds/compounds/reference samples was collated and presented with a flourish to highlight how efficient we were.

As I have since been a victim of the recent rounds of job cuts I no longer do this for a living.

Permalink to Comment

30. Old Timer on February 9, 2011 8:46 AM writes...

19. Jackass: "What should also be mentioned is how this will effect the field of chemistry and science. Most students go where the jobs and money are. You have to wonder how many past students considering getting a PhD in chemistry, and after reading these blogs for the last few years, ran the other way into more lucrative, secure professions. This country will lose its scientific edge quickly."

I have heard different incarnations of this argument before. I think I agree with it in theory, but what are these other "lucrative, secure professions"? Does anybody know where all the exceedingly bright, hard-working students are going to go? Medical school isn't a smart move. Law school is a dead end these days. Business is far from secure. So what disciplines are the "science-minded" going to get into?

Permalink to Comment

31. Jose on February 9, 2011 9:02 AM writes...

Funny to think that Boeing's problems were mechanical.... literally parts where the edges and holes didn't line up with the mate, made in a different country. This was using engineered, high resolution spec sheets!

Now how, exactly, does anyone really think a messy, non-linear, non-reducable research cycle is going to work under those conditions??

Permalink to Comment

32. BFS on February 9, 2011 9:04 AM writes...

@19 - "Law school is a dead end these days."

For those entering general practice, yes, I agree. The old stories about law school grads finding only employment as cab drivers are parables.

However, for MS/PhD level chemists with law degrees, especially those with significant industrial experience, demand remains fairly strong.

Permalink to Comment

33. HelicalZz on February 9, 2011 9:55 AM writes...

As someone who manages outsourced projects, both in the US and occasionally overseas, I believe the key consideration is 'what' to outsource. Companies need to appreciate that there is value in building a core internal competency in a number of areas. That is an asset that is hard to measure from the CFO suite, but is critical to long term success.

The ideal outsourced project is first a project (not a program). Something temporary in nature that requires a competency not currently available within the company and not strategic to it long term. Clinical trials often fit the bill, as does manufacturing process development though the latter goes so much better if there is an internal process to develop from.

Discovery work is rarely suitable for outsourcing, but companies not set up to actually benefit from / communicate the lessons of discovery work might as well do it. I would note that big pharma has effectively outsourced a lot of discovery to start-up biotech (not an entirely bad thing IMO).


Permalink to Comment

34. sigma147 on February 9, 2011 10:21 AM writes...

#16 - milkshake,

You've got it all wrong. Management is being outsourced - from Asia to the US. It's just outsourcing in reverse. That way the Asian companies can access the US financial markets... Wheee!

What we really need to do is to *export* management somewhere. Unfortunately, third world countries are starting to crack down on the practice of dumping toxic waste on them.

Permalink to Comment

35. David Formerly Known as a Chemist on February 9, 2011 11:20 AM writes...


I certainly didn't mean to sell chemical development and manufacturing short. I've been in that game, both on the CMO side and the user of CMOs, for process development and scale-up programs. The difference between the "outsourcability" (did I just coin a new word?) of discovery work and development work is that the specific work product is much more clearly defined in the latter. Discovery is very fluid. You need a molecule that satisfies a very wide, somewhat open, set of criteria (nanomolar potency against target, x-fold selectivity over other targets, acceptable PK, acceptable Cyp profile, clean saftey-pharm-tox, etc). A lot of variables that play with and against one another. In development, the work product is very well defined. I need 5 kg of THIS molecule, with this impurity profile. It's just an easier process to control from an outsourcing standpoint. When you outsource discovery, is lack of progress due to lackluster/lazy/unskilled/uncommitted scientists, or is the target untractable? In development, it's much more focused, easier to pinpoint the issues and solve them. At least that's been my experience, I suspect there are others who have different experiences and opinions.

Permalink to Comment

36. Hap on February 9, 2011 12:34 PM writes...

Oh, and I did like the comment that, despite all the problems with their outsourcing efforts, they need to "access the best technologies and capabilities that are available around the world." I guess that I wasn't aware that there was much of another reason other than cost. To quote Dr. Lowe (about Lilly's outsourcing):

To me, the main reason that Lilly has been using CROs so much (through an R&D unit named Chorus) is that they feel that they can do the job more cheaply. The next most important reasons after that one are (1) that they can do the job for less money, (2) that they can do the job without Lilly spending so much cash, and (3) that they can do the job at lower cost. Have I left anything out?

If the capabilities are important to your core business, they need to be in-house, regardless of cost. (People elsewhere shouldn't know how to do your business better than you do.) If the capabilities you're outsourcing aren't important to your core business, and you need them, then cheap should be a good enough reason to pay for someone else to do the jobs elsewhere.

Permalink to Comment

37. Terry on February 9, 2011 12:47 PM writes...

I really like #20 Wampeter's comments, and much of the really good thinking from others above; "... integrated process architecture of discovery, that's the issue" - suggesting what I see as a rational path towards success. However, the devil is in the first set of details. Since this issue will not "go away", smarter firms(?) are trying to experiment with designs reflecting the key success drivers cited by folks like #6, #8, #11, and more above. (I love the term "Swiss Army chainsaw")

I see clients really trying to deduce the characteristics of success for "decentralized R&D". They are trying to avoid leaving them on the cutting-room floor, as they shift from traditional models. One component of “R&D Architecture" I have drawn up for clients is in defining what R&D capabilities are key for success - not just in BAU, but when transforming to something else like a next generation biopharma... While I think these “capability impact frameworks" ARE the path to success (you have to believe in what you do), the devil again is in then creating metrics to prove the value as a whole, and also at the ground level.

That is where I think past outsourcing (and many other transforming) initiatives have fallen down (as with Boeing here.) The arguments above seem to fall into two camps: "The pendulum will swing back" and "damn you and the horse you rode in on" Call me an optimist but I think there is a third or fourth path/camp around "we just have to get smarter about this", recognizing the reality of global competition and economics.

Permalink to Comment

38. Natia on February 9, 2011 1:28 PM writes...

The endpoint of the outsourcing game will be a USA in which vast tracts of executive golf courses compete with farmland.

The peons..uh..people..will scrabble like rats for the remaining Mc-Jobs and live in card-board boxes.

It's so funny how this and many other science blogs comment on outsourcing as if it's stoppable.

Every gear of government and private industry is attempting to bring about the destruction of US society. And of course most scientists are brain-washed to mindlessly follow the blather they hear from their pseudo leaders that unions or limiting the number of degrees granted wont help things.

Duhhh- I wonder why Medical doctors have a secure profession? Because they are part of a union.

Permalink to Comment

39. Natia on February 9, 2011 1:30 PM writes...

The endpoint of the outsourcing game will be a USA in which vast tracts of executive golf courses compete with farmland.

The peons..uh..people..will scrabble like rats for the remaining Mc-Jobs and live in card-board boxes.

It's so funny how this and many other science blogs comment on outsourcing as if it's stoppable.

Every gear of government and private industry is attempting to bring about the destruction of US society. And of course most scientists are brain-washed to mindlessly follow the blather they hear from their pseudo leaders that unions or limiting the number of degrees granted wont help things.

Duhhh- I wonder why Medical doctors have a secure profession? Because they are part of a union.

Permalink to Comment

40. processchemist on February 9, 2011 1:39 PM writes...


In my line of work I heavily rely on models (statistical ones too), and honestly how can you measure outsourced R&D productivity? Every scientist here knows that productivity in R&D is not a linear, or square, or cubic, or exponential function. It's not a *continuos* function. I seriously doubt about the possibility to define sensible metrics to "prove the value". "Capability impact framework" can be the next buzzword (I wish you so), but if you can define the object maybe we can discuss if it's something with a real meaning or else.

Permalink to Comment

41. Hap on February 9, 2011 2:35 PM writes...

#38-39: Of course! It worked out so well for the auto industry, it just has to work out well for pharmaceuticals, too. We'll be rolling in dough then.

When does Big Pharma get its bailout?

Permalink to Comment

42. Anonymous on February 9, 2011 3:25 PM writes...

Methinks he does protest too much about Boeing's outsourcing being only about "cutting costs" -- as I recall, much was driven by political deals, and production was spread out to grease future sales and US politicians who like to have work in their districts.

Permalink to Comment

43. CMCguy on February 9, 2011 3:44 PM writes...

#35 David FKaaC again not in disagreement and having been directly involved in Pharma/biotech outsourcing, also from both sides, for many years where my view is more that the whats and whys have changed drastically toward being overzealous. Yes more legitimate opportunities to outsource during development however is not as simple to execute as many consider it to be.

As others have pointed out most large Pharma formerly in development used CROs to access their technology which did not already have or often as supplement to internal efforts (because too many competing active projects to support) by outsourcing more established or "less difficult" portions of processes. Likewise working with CROs was fairly collaborative venture. Now seems so slanted to only focus on "reduced Costs" that time, quality and oversight factors are largely ignored, with selection of CRO accordingly. With the simultaneous cuts in development & manufacturing staff added to lack of training of people with the expertise there is almost the blind leading the blind-folded relationship now-a-day so when outsourcing done it is poorly executed (typically exceeding the savings predicted).

Permalink to Comment

44. Anonymous on February 9, 2011 7:15 PM writes...

I too have been on both sides of the outsourcing fence, and currently work in a CRO. While I do not claim to know how long this trend will last, I don't see it going away any time in the near future. However, I've made a few observations over the past few years. First, the best program teams I worked with in industry owed a significant amount of their success to strong program leadership. Similarly, the clients that have come to us with strong, sound program leaders have gained the most from this partnership. That is, working (and leading) across departments (which we all know can have plenty of horrible politics) is not so different than leading across businesses. Second, "outsourcing smarter" is cliche, but it's true. Depending on the CRO involved, there can be a tremendous amount of institutional knowledge available to a client. Knowing what you know and what you don't know, and hence, knowing what you do and don't need is the first and most critical step in dealing with a CRO.

If you need a counter-screen or an in vivo assay that you will use once in five years, while develop it in house if a CRO does it every week or month? But keeping your core is absolutely critical as if you lose that, you can never hope to know what you need, what you don't, what you know, and what you don't.

Permalink to Comment

45. marcello on February 10, 2011 12:03 PM writes...

Korean (supposedly) saying goes...
"The true fool is the one who stumbles on the same pebble more than once."

Permalink to Comment

46. silicon scientist on February 10, 2011 12:19 PM writes...

@30 Old Timer - "Does anybody know where all the exceedingly bright, hard-working students are going to go?"

My hunch is business or finance. The less fortunate will be relegated to underemployment in service industries. (Eventually, they'll stop going to college, bursting the education bubble.)

Regardless, where exactly these kids are going is irrelevant. It is a proven fact that they are not going into science or technology:

Why that might be so is a question for our employers to disregard and ignore as they complain about STEM shortages to the ignorant political class and demand more education funding and/or more work visas. I'm sure, however, that any of us here could offer a long list of valid hypotheses for why the smart kids have given up on science and engineering--the unintended consequences of outsourcing being just one.

Permalink to Comment

47. Pedro Gonsales on February 14, 2011 8:10 AM writes...

Well, the experiment is on the table. Pfizer's new model is to have an almost fully outsourced structure, in both research and development. Keeping most of senior management in place and a few key senior scientists.

Come back in a few years time and we shall see if the model is the right one or not.

Permalink to Comment

48. lumiere on February 21, 2011 2:50 PM writes...

As a student in chem/biochem at a well known university, I can attest to the fact that the "best and the brightest" are not going into pharmaceutical research because they either can't find a job in pharma or if they do, they'll quickly lose it to outsourcing.
The majority of students are putting their eggs into the medical game, hoping to become doctors. Whether this is smart is another matter entirely, but the fact of the matter is that the decreasing number of secure jobs for chemists/biochemists is scaring people off. I would also wager that the lack of entry level positions for newly graduated bachelors degree holders is also a problem.

In these tough economic times, students are looking more and more for the era when you entered a job after college and left at retirement. You can't have that when those jobs are being moved to other countries. Sure, it cuts costs, which is great for the bottom line, but lets think about what it does to our society.

Permalink to Comment


Remember Me?


Email this entry to:

Your email address:

Message (optional):

The Last Post
The GSK Layoffs Continue, By Proxy
The Move is Nigh
Another Alzheimer's IPO
Cutbacks at C&E News
Sanofi Pays to Get Back Into Oncology
An Irresponsible Statement About Curing Cancer
Oliver Sacks on Turning Back to Chemistry