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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: Twitter: Dereklowe

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November 8, 2011

In-Sourcing Chemistry: Lilly and AMRI

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Posted by Derek

Here's an interesting release from Albany Molecular: they're announcing that they're hiring "more than 40" chemists to work at Eli Lilly's facilities in Indianapolis. They plan to hire them from the surrounding area - that is, I assume, that they plan to hire from the pool of people that Lilly has already let go.

This is interesting on several levels. I assume that AMRI's salaries and benefits are such that it's cheaper for Lilly to hire people this way than it is to hire them as Lilly employees. This is a technique (one could use the word "ploy", depending on one's vantage point) to get the work done without having to actually shell out for it. But then again, that's what outsourcing is, exactly, and this is outsourcing without going to China or India. Instead, the invoices are routed through exotic Albany, NY, while you get to have the chemists right there in front of you, with the corresponding improvements in communication and turnaround.

Thoughts? Is this the beginning of the on-shoring of chemical jobs - albeit at a lower level of compensation? Or is this just a desperate move by a company that's facing a hideous, hair-pulling patent cliff? Or both?

Comments (92) + TrackBacks (0) | Category: Business and Markets


1. Anonymous on November 8, 2011 2:05 PM writes...

This has been commonplace at a number of companies for a while - Pfizer did it for ages and there was a whole building at Sandwich stuffed full of chemistry contractors. People were prepared to work long hours without sick pay or holiday pay with the carrot that maybe one day the temporary job would turn into a permanent one and of course all the time they were gaining "experience". All in all another way for big pharma to exploit the gullible. There were post-doc level chemists earning less than $30,000 a year. Fine if you can't find any other work, but really it is hardly a long term career option.

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2. weirdo on November 8, 2011 2:21 PM writes...

This is the direction Pfizer U.S. and Merck are going, too, yes? Not sure how this is "exploitation" -- these are real jobs with real pay. Just not at the levels to which medicinal chemists became accustomed. Those days are over, they're never coming back, better get used to it.

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3. Dickweed Jones on November 8, 2011 2:23 PM writes...

I think this is part of what we're seeing all over the country in most fields. People lose their jobs and if they're lucky, they manage to find one at 60% of their previous salary. Expenses are the same or more, so the standard of living takes a big hit. I know plenty of people in this situation.

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4. Anonymous on November 8, 2011 2:46 PM writes...

I would rather do what I love for less compensation, than what I hate for more. If money is your objective, why go into chemistry in the first place?

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5. Redneck, New Mexico on November 8, 2011 3:00 PM writes...

#4 (and #5)

Where I live, there are plenty of people who dabble in chemistry that make whopping sums of money... until they get caught, or their house explodes.

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6. hn on November 8, 2011 3:02 PM writes...

oh yeah, that's good for morale

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7. David Formerly Known as a Chemist on November 8, 2011 3:03 PM writes...

I really don't get this. There aren't enough details in the press release to explain why this makes any sense whatsoever. I can't imagine the differential in the cost of 40 chemists between AMRI and LLY are so great to make this worthwhile economically. Anyone from LLY or AMRI that has some insight on this?

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8. anon on November 8, 2011 3:10 PM writes...

It's Indianapolis...the cost of living is cheaper anyway. J&J has been insourcing for a while; this allows them to avoid offering permanent positions by periodically terminating long-term contractors and then re-hiring them.

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9. C on November 8, 2011 3:16 PM writes...

And let us not forget the middleman (AMRI) who will be able to skim $$$ for operating what amounts to a high end temp agency.

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10. ex chemist on November 8, 2011 3:31 PM writes...

As someone who has been a victim of a site closure and struggled to find a similar job I would advocate any-port-in-a-storm economics. Times are tough for medicinal chemists. If someone is going to offer you employment, even if it is on a much lower salary, I'd jump at the chance. I wouldn't want to be proud and out-of-work.
The only risk I can see is that few people on this sort of contract will have any second thoughts about moving as and when they can improve their salary, conditions or location. But at the moment there are a lot of well qualified people who will do an excellent job for much less money than big-pharma used to have to pay.

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11. Anonymous on November 8, 2011 3:49 PM writes...

Any port in a storm is a fine philosophy but, what message does it send when a experienced post doc earns less than almost every other graduate entry level career choice. The message it sends is that medicinal chemistry is a stupid career choice.

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12. PharmaHeretic on November 8, 2011 3:59 PM writes...

More good news for chemists, this time from Teva.

Teva Pharmaceutical Industries Limited (TEVA) to Sack 1,500 Cephalon, Inc. (CEPH) Workers

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13. Married to an Accountant on November 8, 2011 4:08 PM writes...

#9, the differential is in accounting. There are fixed costs (buildings, full-time employees, etc..) which are accounted in one way. By hiring contractors your essentially saying "I can pull out of this at any time", so I'll decide to say those $$ don't really count in my fixed costs.

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14. billswift on November 8, 2011 4:21 PM writes...

>The message it sends is that medicinal chemistry is a stupid career choice.

Or that medicinal chemists' income had been inflated by unrealistic expectations. Hasn't one of the recurrent themes/issues here been the reduced productivity of pharmaceutical research? If you want more money, you have to produce; if it is simply too inherently hard to produce, then your pay will go down until expected benefits balance.

If you want more money than what an outsourced chemist makes, then you have to provide more benefit.

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15. anon the II on November 8, 2011 4:22 PM writes...

I have a little bit of an inside view on this. Although they will almost certainly make less money, I think the AMRI chemists might do a better job. They'll certainly attend fewer meetings.

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16. Hap on November 8, 2011 4:27 PM writes...

For people in the business, and for wherever they're hired (the cities that get their taxes), it's better than nothing, and the companies get people working for less without having to negotiate problems across ten time zones. It is better than what was happening. It may work out for Lilly, but if the management is the same (and if no one is certain of the science), it probably won't.

In the long run, paying people less to do what they want will encourage more people in the US (and maybe elsewhere) to work in chemistry than paying people to be chemists elsewhere will, but at some point fewer people will decide to be chemists in the US because the inputs of time and work to get the degrees necessary to work in chemistry haven't changed, only the pay. At some point in the not-too-distant future, the same companies will be complaining that there aren't enough science graduates to fill their needs while hoping that 1) no one notices that those jobs aren't paid well for their inputs, either here or elsewhere, and 2) their own pay indicates that if you want to make money, science isn't the place to go. (People may not go into chemistry to get paid, but they do want other things from their lives, and if being a chemist limits their abilities to do those things, it will be harder to choose science as a career.)

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17. billswift on November 8, 2011 4:28 PM writes...

>If you want more money than what an outsourced chemist makes, then you have to provide more benefit.

I thought I better add that simply by being in the US you provide more value in one way - reliability. The effect of the floods in Thailand on the Hard Drive market shows one risk of outsourcing to a Third World country with lower levels of social capital.

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18. Anon III on November 8, 2011 4:34 PM writes...

As an AMRI chemist, I'm not really sure what the mood is here. Personally, I'd rather see hiring here in Albany. Some good people I liked were laid off in the last couple years, though I don't know how many are still around or would take the job if offered. I haven't had a chance to talk with anyone in the nominally-affected department to see what they think.

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19. Hap on November 8, 2011 4:40 PM writes...

14: True, but most careers don't require 10-12 years of postgraduate education - lots of fixed costs and no money for them (or rarely) means no or few people doing them. As long as you have the whip hand, and there are people who have to work, you can do it - just don't turn your back.

Another part of the problem is that at least some of the problems are in management, but there doesn't seem to be any requirement that management actually produce more to get paid. Management may not actually be able to solve its company's problems (it can't make their drug candidate not crash and burn in P3, for example), but if solving problems and not solving them only pays the same for upper management, how long do you think your hive will have any worker bees?

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20. Lu on November 8, 2011 4:59 PM writes...

14. billswift
Or that medicinal chemists' income had been inflated by unrealistic expectations.

Sir, what are the numbers you are talking about?

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21. milkshake on November 8, 2011 5:03 PM writes...

Lilly sold an entire site in Greenfield, IN already in 2008, for a nominal cost, to a CRO called Covance. Then Lilly rehired its ex-employees as contractors via Covance and made long-term collaboration with this CRO. (I presume the management of both Covance and Lilly then rewarded themselves generous bonuses for pulling this neet trick).

We don't have to look to troubled big pharma companies - for example Vertex is doing great, and yet its management has been very keen on hiring short-term contactors both for process and medchem.

"We do what we must because we can."

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22. Nick K on November 8, 2011 5:24 PM writes...

Chemists are treated like dirt, and always will be until the problem of the oversupply of PhD's is solved.

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23. bbooooooya on November 8, 2011 5:51 PM writes...

"Chemists are treated like dirt, and always will be until the problem of the oversupply of PhD's is solved"

Unfortunately solving the issue of chemistry PhD oversupply will take some time.

VRTX is an example of the market crushing a company that is doing a lot of the right things. Incivek is looking to be one of the best drug launches in history (probably $1.5 to $2 billion next year, I get that there are some issues with sustainability), and the stock has been beaten like a rented mule since the drug was approved.

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24. jobber on November 8, 2011 5:59 PM writes...

Several years ago, they laid off part of their PK Discovery group and then hired in-sourcing staff to do the same task. They eventually stopped it and recently sold the group to a CRO called Advion.

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25. R&Der on November 8, 2011 6:08 PM writes...

I work at another company but have heard our senior management use in-sourcing out-sourcing rationale as a way to prevent stranded resources or to staff only to meet trough needs. I've even heard some say they may slow down (suspend) or restart projects and this gives them great flexibility. If they think any of these are going to be the difference between success and failure, we're in trouble.

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26. bbooooooya on November 8, 2011 6:15 PM writes...

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27. Anonymous on November 8, 2011 6:31 PM writes...

"Unfortunately solving the issue of chemistry PhD oversupply will take some time."

This problem will never be solved until our government stops offering training visas for sciences. They do this to solve our 'horribe shortage of scientists'. Dangling H1B visas for chemists and other scientists will ensure that our salaries continue to fall.

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28. Student on November 8, 2011 6:32 PM writes...

There is an oversupply of PhDs, like previously mentioned and the problem won't be solved any time soon. Just a few weeks ago Congress held a committee meeting on this very topic and you had the Texas Instruments VP of Human Resources saying that there is a shortage of PhDs/Masters and that they can't find enough of them... The video is on their site if you care to watch. Though you might break your keyboard in frustration.

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29. RealityCHK on November 8, 2011 7:26 PM writes...

Interesting and encouraging that there is some hiring for med chemists. Over paid! I do not agree with it. Most of the med chem put more than 50-60 hr/week. The median salary of $85K/yr translates to around $30/hour. What you expect for a chemist who spent 5 yrs in Ph.D. and 5 yrs postdoc/job experience, should get? Minimum wages? Passion is good, however, one expects reasonable quality of life, true!
At this point when economy is no good, anything is good, however, for long term, and especially for new graduates it is not a pretty picture.

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30. Anonymous on November 8, 2011 7:44 PM writes...

And a 4 year B.A. in Business makes how much? Gee, could there be any correlation between their pay and the fact that government is not trying to oversupply them?

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31. anon on November 8, 2011 8:22 PM writes...

Is it possible to please never use the term "on-shoring" again?

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32. pharmadude on November 8, 2011 8:37 PM writes...

I had thought hiring on-site contractors to be standard for big pharma? AstraZ has been doing it for a long time, a large % of thier chemists are through a contract agency. The contract jobs aren't bad and you do get experience from them. Much rather have a contract job than no job. The downside is that you can't attend the company christmas parties (seriously, they won't let you attend to avoid lawsuits). I don't think the point of hiring contractors is to save $ in terms of wages. Rather, it allows the companies to remain flexible. If money gets tight and they have to get rid of the contractors its no big deal, no severance, and none of the shame of layoffs. This makes the regular empolyees feel safer in thier jobs. AZ could probably cut 1/3 of thier chemists without having to actually 'layoff' anyone.

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33. @12. PharmaHeretic on November 8, 2011 8:44 PM writes...

Aw c'mon dude, why do have to be such a downer? Can't you let us enjoy last week's announcement from the politburo, oops I mean Bureau of Labor Statistics, that the unemployment rate dropped to the magical 9.0%? The labor situation for chemists can only get better from here!

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34. Anonymous on November 8, 2011 9:56 PM writes...

Such a marginal cost saving measure for such a drastic cut in capability. The consulting groups who pitched this have no idea about drug discovery and assume a couple of individuals will make all the right decisions.

I have never seen a better example of a team effort then a drug development program.

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35. RB Woodweird on November 8, 2011 11:50 PM writes...

You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don’t you call me ’cause I can’t go
I owe my soul to the company store

Coal miners eventually got tired of being chattel. Chemists seemingly will never grow weary of thinking themselves above such concerns and will never have their United Bench Workers.

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36. Bbooooooya on November 9, 2011 12:04 AM writes...

In the past I have thought the notion of a chemists union ridiculous. This may have been wrongheaded. Chemists do get treated like chattel, and a union may be a way to improve that. The possible downside, though, is a Reaganesque mass firing and mo ing opperations to chindussia.

Is some type of union really achievable? What would it look like?? How would it function?

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37. London_chemist on November 9, 2011 3:27 AM writes...

More short-termism. Using the example of post number one, the quality of a lot of the stuff produced by the contractors at Sandwich was appalling. Why should they make the extra effort--they just turned up, did the minimum and took the (low