1. Cytirps on December 7, 2011 9:13 AM writes...

One can tell the drug industry is not important at all in the mind of the US government although it is still one of the very few industries that we still have an edge. It will not allow any defense industry set up a shop in China.

2. jon on December 7, 2011 9:32 AM writes...

Wasn't this the way things worked in Japan for decades? This is not new - just the country has changed

3. David Formerly Known as a Chemist on December 7, 2011 9:38 AM writes...

So tell me again why Americans pay more for branded medicines than any other country? Our jobs are being shipped to other countries, but our high prices aren't.

4. anchor on December 7, 2011 9:47 AM writes...

Derek-...Now, in the long run, I don't think that this is good for China> Do you honestly think China and the Chinese care? Hey! anything goes.

5. Curious Wavefunction on December 7, 2011 9:54 AM writes...

I agree that in the long run these things are not good for China, or India for that matter. Both these countries need to invest their own resources in original, innovative, discovery-level research. When was the last time a major, wholly indigenous drug came out of China or India? As far as I know, most of the outsourced research there is still pretty much of the "service industry" type.

6. marcello on December 7, 2011 9:56 AM writes...

world is changing in an exponential rate.
I have recently saw a webinar where the presenter suggested: "Think whether instead of trying for a MBA your time would be better spent learning Mandarin"...

7. LMP on December 7, 2011 10:00 AM writes...

#7 - or both... there's a boom in B-schools offering MBAs to compete with the Harvards of the world; may have a Mandarin competency requirement to pass.

8. LMP on December 7, 2011 10:01 AM writes...

Oops.. "asian B-schools" that should be.

9. LMP on December 7, 2011 10:03 AM writes...

And "many" not "may"... what has happened to my ability to type today?!

10. Drbenway on December 7, 2011 10:28 AM writes...

I am a recently laid off Merck researcher. The problem is not moving to China, its the fact that they have laid off (or forced out) all the best scientists, removing the people who can oversee this work and losing a LOT of institutional knowledge. Merck is a oiltanker moving on inertia...

11. Dave on December 7, 2011 10:34 AM writes...

So, this day hiker comes across this guy crawling across the desert; weak, emaciated, dehydrated and sun-burned. She offers him some Red Bull and Doritoes. "Sorry, this is all I have." And of course he responds: "Thanks, but no thanks. In the long run those things are bad for me." True or false, his response is rational? I think the long term is composed of a smoothly connected overlapping sequence of short terms. The long term strategy most likely to be sucessful is composed of adaptive short-term policies coupled with clearly identified long-term goals.

12. barry on December 7, 2011 10:50 AM writes...

A decade of these outsourcings has shown that no Intellectual Property is safe in China. Maybe in 2012 this is purely a cyberwar and physical location doesn't matter; I don't believe that. A business like Pharma that lives and dies by IP is mad to locate to a country where Intellectual Piracy is the (barely secret) State policy.

13. Hap on December 7, 2011 10:59 AM writes...

Wouldn't they be doing something like this even if there weren't a nearly monolithic government and significant corruption present? Cheaper labor and research, a growing domestic market, and political effects (if there are local jobs at stake, the government is more likely to rule in a company's favor than if there are not).

In addition, the money-for-money regulation system (one of the reasons I think companies favor local regulations over federal regulations - it's easier to buy local compliance than federal compliance because the relative powers and cash flows are more in companies' favor at the local level) is probably something companies aren't necessarily averse to. Public opinion is unpredictable and not necessarily rational, and it probably makes companies' economic expectations easier when it is made irrelevant.

14. luysii on December 7, 2011 11:07 AM writes...

"many of those people are going to be hard-working and capable."

China is starting to eat our lunch because they are working harder. One son has been teaching for a year in a for profit school teaching computer animation. How many courses did he teach last semester? How many do you think? How many does an American academic teach?

He taught eight, and is expected to be there, teaching and working 8 hours a day, 5 days a week.

That's not to say grad students here don't work hard. We had breakfast last Saturday morning with a recent graduate working at a Harvard affiliated lab. She excused herself at about 11 saying she had to get back to the lab.

On the way back home we were handed a ticket by a human to get on the Mass. Pike, where we saw State Troopers sitting in their cars at construction sites, with lights flashing, essentially doing nothing.

15. BioBritSD on December 7, 2011 11:18 AM writes...

@David Formerly Known as a Chemist
who writes...
"So tell me again why Americans pay more for branded medicines than any other country? Our jobs are being shipped to other countries, but our high prices aren't."
I'll give you two reasons.
1. the regulatory burden for development and manufacturing is greater for drugs sold in the US than other countries. So, we have to pay extra for the extra we get.
2. Supply and demand. Other countries with national/socialized/more humane (pick your appropriate adjective here) medicine schemes provide drugs for a greater proportion of their residents than in the US, where access is effectively limited to those with good self/employer paid health insurance.

16. Curious Wavefunction on December 7, 2011 11:19 AM writes...

-State Troopers sitting in their cars at construction sites, with lights flashing, essentially doing nothing.

That's pretty much the only thing cops in Cambridge seem to do.

17. KW's hairdresser on December 7, 2011 11:26 AM writes...

I used to be a laissez-faire Big Republican believer. American corporations, having a right to make a profit, always had American worker's best interests in mind. How freaking naive was I?

This country and its multinational corporations who have absolutely no allegiance to American workers are committing national and industrial suicide. Lest we forget. The recipient of all this outsourcing-industrial knowledge we will never regain-is a COMMUNIST regime! This regime routinely executes religious and political prisoners and extracts their organs-much to the Western rich!! And we want to set up shop there? Just yesterday Premier Hu Jintao told his navy to "prepare for combat" against the West over disputed territories. Hey, but at least we will have access to the vast market!!!

What have we exactly received in the way of tangible progress in pharmaceutical research? Sure, Chinese chemists can make some easy molecules on the cheap. Show me one soup to nuts program that has been successful. GSK started "GSK China" several years ago to much fanfare. I have yet to see any compounds go into the clinic from those labs. Perhaps Merck will have more success. Ha!

What is going on is nothing more than a complete destruction of an industry. Who is gaining? It is not shareholders. Compare stock prices of GSK, Merck, and Pfizer over the last 10 years. It is certainly not American scientists. The only parties I can see that are benefiting are upper management, hired guns such as McKinsey, and the CRO hyenas such as Chempartners.

Well, I have said enough. Back to my greeter position at Wal-Mart.

18. ALChemist on December 7, 2011 11:45 AM writes...

Shifting research work to China helps eliminate some costly overhead--and employees--in the U.S. and Europe while giving the company a more prominent place in the Chinese pharma industry.

Read more: Merck blueprints Asian R&D HQ in Beijing in $1.5B research blitz - FierceBiotech

why not send the Kim et.al. over to properly supervise the effort and see what it yields

19. Anonymous on December 7, 2011 12:16 PM writes...

#17
"Just yesterday Premier Hu Jintao told his navy to "prepare for combat" against the West over disputed territories."
Then what should President Hu tell his navy? Do nothing?

"Sure, Chinese chemists can make some easy molecules on the cheap. Show me one soup to nuts program that has been successful. GSK started "GSK China" several years ago to much fanfare. I have yet to see any compounds go into the clinic from those labs."
So do not worry about China and do not complain!!!

20. Anonymous on December 7, 2011 12:29 PM writes...

@17 - the issue is no way near as simple as you make out. The US and European scientists have (on the whole) been failing to produce for a couple of decades now. You cannot simply ignore that fact.

Don't get me wrong, I agree with elements of your post but to say this alone is destroying an industry is BS. Dozens of things have combined to destroy this industry, don't kid yourself otherwise

21. expat on December 7, 2011 12:37 PM writes...

This is bad longterm for three reasons: (1) you're gutting your staff, which kills the pipeline, (2) you're paying to train your competition and (3) you're helping erode the tax base that pays for your product.

But the we've proven that US industry views long term as "next quarter"... *sigh*

22. johnnyboy on December 7, 2011 1:09 PM writes...

@3 "So tell me again why Americans pay more for branded medicines than any other country?"

Because you elect governments that make it so ?

In every other country, government-managed health care systems negociate with drugmakers to establish price of new drugs, which is why drugs are generally cheaper than in the US. In the US, the Bush drug bill made it impossible for the largest health care provider (Medicare) to have any bargaining power over drug price. A pro-business US government that 'favors' the pharma industry will pretty much inevitably mean that patients will pay higher prices, either for the drugs themselves or for their insurance premiums.

23. Fedup on December 7, 2011 1:20 PM writes...

Curious Wavefunction, what have you ever discovered? You, a computationalist, argue for fundamental research? Look in the mirror buddy.

24. Nick on December 7, 2011 1:26 PM writes...

@14 said- "China is starting to eat our lunch because they are working harder"

That's the nonsense the globalist free traders want you to believe. Most Chinese are drones. Work smarter not harder.

How's that NAFT and WTO treating you?

25. Curious Wavefunction on December 7, 2011 2:03 PM writes...

FedUp: It's best not to respond to ubertrolls but for a change let me bite. Since you are asking, at least one candidate about to enter clinical trials. But at least I am not an anonymous coward taking ad-hominem potshots at others. I am pretty sure you wouldn't know anything about modeling if it bit you in your brain stem; if you read my blog you would know that I write about both the strengths and limitations of modeling, the great opportunities for fundamental research in the area and the insights that other fields can bring to modeling.

But you don't want to do this, do you? You would rather undermine the multidisciplinary team work needed for productive drug discovery and engender more divisiveness and name-calling. But that's ok, the general level of discourse on Derek's blog is highly measured, appreciative and reasoned so I guess we can tolerate an occasional rotten egg.

26. pharmadude on December 7, 2011 2:34 PM writes...

Why wouldn't research take place in other countries rich in state subsidized scientists? Especially when thier population provides increasing revenues for pharma companies?

27. bbooooooya on December 7, 2011 5:37 PM writes...

"I'll give you two reasons.
1. the regulatory burden for development and manufacturing is greater for drugs sold in the US than other countries. So, we have to pay extra for the extra we get."

I do not believe that these regulatory burdens are higher in Western Europe/Canada. and yet drugs are cheaper there.

"2. Supply and demand. Other countries with national/socialized/more humane (pick your appropriate adjective here) medicine schemes provide drugs for a greater proportion of their residents than in the US, where access is effectively limited to those with good self/employer paid health insurance."

I don't believe this is true either. I don't know of any government that actually makes drugs: they may buy them, but they don't make them. They can also set a maximum price they'll pay, but they can't force companies to sell. If it were unprofitable for big pharms to sell their drugs overseas at lower prices they'd stop.

US residents are subsidizing drug research for the rest of the world. That's pretty generous, especially since Americans don't live as long as Europeans or Canadians. Paying more and getting less, very selfless.....

28. My 0.02 on December 7, 2011 6:00 PM writes...

I said this on this blog before and I'll say it again.

If scientists here and in Europe at pharma of all sizes (big, medium, small and virtual, you name it) have been producing in the last couple of decades, outsoucing to Chindia wouldn't be an issue at all. I am not taking about producing mega hits like Lipitor hand over fist. A healthy stream of $1B+ products from the industry as a whole would do.

No, I am not an apologist for upper management and Mckinsey MBA suits. I feel bad for people who lose their jobs (many colleagues and friends, I might add). But let us say you are running a company (in any industry) and paying people good salary/benefits to do a certain job, people are not producing, would you try something else, particularly with cost benefits of outsourcing? If I am in their shoes, I hate to say it. But the answer got to be "Yes, I will try it".

29. Reality on December 7, 2011 6:33 PM writes...

@Nick said:

@14 said- "China is starting to eat our lunch because they are working harder"

That's the nonsense the globalist free traders want you to believe. Most Chinese are drones. Work smarter not harder.

You are both wrong. The Chinese workers work cheaper, they aren't working very much harder and the US workers aren't very much smarter or more creative.

I have been to China and been told I am an idiot for working as many hours as I do. Many Chinese are exploited to work crazy hours, but those who are educated and in the research positions work comparable hours to their US counterparts. There are many studies to suggest this is true.

30. LegacyMerckGuy on December 7, 2011 7:08 PM writes...

@ 0.02.

I work st Merck and I can tell you that one of the reasons that the pipeline hasn't been producing like it should is because of the constant state of flux the people are in. Some are on projects no more than a month or so and we all know that isn't enough time to have an impact. Also, the people that we have that have actually walked a drug through the pipeline are too busy making spreadsheets and org charts to satisfy the upper suits to share their input on development. Hugely wasted talent. Additionally, the incompetence of Kim et. al. has virtually gutted the knowledgeable, experienced people. MRL as a whole is in utter turmoil. Is it any surprise that progress is painfully slow?

Personally, most of us are horrified because the uppers basically are giving the Chinese access to all of our IP. We know they'll steal it, even my Chinese colleagues say so. Also, the stuff from WuXi is crap. It is better then the others over there but it's still crap. Again, even my Chinese colleagues say the same thing. This new flavor of the month is more of a replacement to us in MRL and we all know it. We are all getting paycuts this year and it wouldn't surprise me whether it was designed to thin us out even more. I need to go stick more pins in my Pete Kim doll now.

31. Anonymous on December 7, 2011 7:57 PM writes...

Let’s see: $1.5 billion would keep 1000 drug discovery scientists employed in the US for 5 years in buildings Merck has already built. What is percentage of Merck drug discovery scientists does 1000 represent?

Maybe we should begin to re-import Merck drugs directly from China for patient's benefit and avoid the Merck sales and marketing surcharge.

32. My 0.02 on December 7, 2011 8:43 PM writes...

@LegacyMercyGuy,

I hear you there. But the bottom line is still bottom line - that is, R&D hasn't been producing. If I were upper management, as long as you show me the results - approved drugs, I could care less how you get there.

33. Anonymous on December 7, 2011 9:00 PM writes...

Said it before and I'll say it again. Want to sell drugs in a new market. Open up a research centre, employee local scientists, lobby the government. It's not about R&D it's about selling drugs. That is the mantra is being fed to all major pharma by you know who. Should ask Boeing how that turned out for them btw.

Agree with everyone who posted about the constant needless change. It takes almost 10 years to walk a drug to phase III. That's now typically two CEO's!

Maybe I'm a little cynical after being laid off from a famously productive and lean site, ironically because it was under utilized.

But I really don't care where drugs are made, and believe there are smart capable people around the world. But it's the institutional experience that is not so easy to come by or measure.

Does anyone really think the real reason we can't develop drugs is because we can't make enough compounds fast/cheap enough?

34. luysii on December 7, 2011 9:02 PM writes...

For 18 reasons why "R&D hasn't been producing" see https://luysii.wordpress.com/2011/11/21/a-new-category/.

35. SDchemist on December 7, 2011 11:28 PM writes...

They steal from each other.
http://www.nytimes.com/2011/12/08/business/an-entrepeneurs-rival-in-china-the-state.html?hp

36. MoMo on December 7, 2011 11:46 PM writes...

All of you. China is a a corrupt and Communist country and Merck has committed high treason. And if you want to compare it to selling out that is OK as well.

But drug companies cave in to foriegn companies all the time. Wasnt GSK forced to open a research facility outside of Madrid at the behest of the government? Where are the drugs from them?

Merck is filled with wimps, simps, and pro-simians, and I am saving a dart for their leader, he needs studied as well.

And our legislators are asleep on this issue except for Scott Brown, but he is too aloof and entranced with the FDA follies for any real help.

Tis' the Season-for more Pharmaceutical Treason!

And to all Merckians- A Good Night!

You get what you deserve.

37. Student on December 8, 2011 1:09 AM writes...

This isn't small. One thing interesting to arise out of this is that because of the scale and tasks, there will be Chinese management [and eventually executives]. I mean, it makes sense that someone that understand Chinese culture and values runs the show. Kind of sound like upper Merck is shooting them selves in the foot (if they hang around the company long enough to feel it).

38. Tt on December 8, 2011 2:20 AM writes...

Yet another move desperate move from a company in a death spiral. I just wish Shmerck would go back to just making first in class drugs and seeing how the market shakes out. Good luck to Merck and their China experiment. I'm sure it will turn out different from all the others who tried this before them (sarcasm alert).

39. LegacyMerckGuy on December 8, 2011 2:27 AM writes...

@ 0.02:
I understand that the bottom line is the bottom line but half of the problem is the management NOT letting us do our jobs. This little experiment is a huge gamble and they are betting with our livelihoods, not theirs because they have golden parachutes. When they reband all of us this year we are all going to take huge paycuts. I can't wait to see what Ken's salary is going to increase to be next year.

@ MOMO, Screw you, dude!!! How dare you say that we get what we deserve!! It wasn't the guy at the bench who bought SiRNA, invested in ALIS, made a horrible acquisition of a foundering company, hired the same idiot consultants that Pfizer did, or constantly churned the waters of research. I don't know a single person who is enthusiastic about this, aside from Ken and his buddies who have nothing to lose and everything to gain. What do they care? They get paid handsomely to go away and we're left behind to pick up our shattered lives.

40. basudin on December 8, 2011 5:03 AM writes...

-State Troopers sitting in their cars at construction sites, with lights flashing, essentially doing nothing.

To be fair that's pretty much the only thing their Chinese equivalent are doing as well, that, and chain smoke 60 a day.

41. UE Med Chem on December 8, 2011 5:39 AM writes...

I am a medicinal chemist with 20+ years experience who has been unemployed for over 2 years and looking for work. I've had multiple offers to work and live in China vs. zero offers in the US. I am unwilling to leave my country to work in my field. It saddens me to see what is happening in our industry.

42. processchemist on December 8, 2011 6:22 AM writes...

@ 0.02

This is the kind of vulgata forged in the financial environment of every industry. Currently, in the pharma industry we see snake oil sellers covered with millions and teams that released products "restructured" (what about people that delivered Tykerb and Isentress?). The obvious conclusion is that outsourcing and offshoring are finanancial (not industrial) tools. This is not about productivity, but about balance sheets cosmetics: hype to feed investors.

43. darwin on December 8, 2011 7:43 AM writes...

"Whatcha got ain't nothin new. This country's hard on people, you can't stop what's coming..."

44. LegacyMerckGuy on December 8, 2011 7:48 AM writes...

@processchemist.

I totally agree, it is about the APPEARANCE of success. On C&EN, they had a page spread on Ken Frazier and it made me want to vomit. He is touting MRL like it is some well oiled machine but in reality it is sputtering. I'm not saying it's his fault but he is giving shareholders the appearance of a healthy pipeline. These guys get paid based on the perception of performance. Lay off 30K workers in 2 years and WOW, there are profits to be shared by all because the stock price went up a little and we can tout that the reason is because of internal "progress". If the company is doing well, that is incidental. It is all about appearance

45. My 0.02 on December 8, 2011 9:09 AM writes...

@LegacyMerckGuy and processchemist,

I totally understand what you are saying. I used to be in your shoes(Ph.D. bench chemist myself). Since I am running my own show now, I certainly understand where upper management is coming from.
Take Apple vs. Motorola Mobility as examples. I don't think that outsourcing of their design and engineering is a big issue at Apple. On the other hands, Motorola got bought by Google. It was rumored that they are laying off 8-10,000 of the Motorola people. When was the last time when Motorola has a big hit? It was RAZR phone 10-15 years ago. Since then, Motorola has been producing one dud after another. We all know that politics is part of corporate culture here. The bigger the corporation, the worse it gets. The politics I saw and you experience are NOT unique in our industry. I am pretty certain that politics at APPLE is just as bad. The difference is that APPLE has been producing one mega hit after another.

46. MoMo on December 8, 2011 1:41 PM writes...

I'll take the screw you comment LegacyMerckGuy and raise you 5. I hired guys from Big Pharma and even worked at one time with Merck taking millions, giving them a product and watching them run away because they were too big to make a decision, and I will never do it again.

I always empathize with scientists in the trenches, except for the lazy egotistical bastards that ply the scientific waters from Big Pharma.

You are rats on a sinking ship with treasonous Captains at the bridge.

Bon Voyage!

47. Doug Steinman on December 8, 2011 4:50 PM writes...

Consider this. All of the pharma companies receive an R&D tax credit. It doesn't matter whether or not the money is spent in this country or somewhere else. So, all of us who pay taxes and work (or worked) in the pharma industry have, in a sense, been contributing to these companies to take away our jobs and send them to China and India. Maybe if a big enough stink is raised Congress would take notice and address this injustice (yea, right!). How's that for a thought for the day?

48. Anonymous on December 8, 2011 8:00 PM writes...

@10
What's your opinion on why the best people are forced out? I have my own beliefs but just want to see how others view it.

49. Kieth on December 8, 2011 8:11 PM writes...

It makes me sad and angry to read the above comments. We live in a gruesome situation where we (USA) no longer has the skills, expertise and knowledge to pay much higher wages than our competitors. At the very least the end of much higher wages in Western Europe and North America can be seen in future decades. A salient fact that exacerbates this condition is that it does no serious good to develop drugs that cost $50,000 a year for treatment of illnesses EVEN in the case where patients are spread across the the human lifespan fairly evenly (not 75% on Medicare). Does it really help us to develop treatment regimens that can only help rich people? well, maybe, but the dynamic seems to be that if a treatment works it gradually inveigles its way into insured coverage even if it is terribly expensive. Are we as a nation really better off with drugs that will bankrupt us?

50. Anonymous on December 11, 2011 9:55 PM writes...

# 46 you sound like a major butt monkey! Lots to say but all low value...go away

51. MoMo on December 12, 2011 6:08 PM writes...

50. Anonymous- No way while I go away, as long as I get your goat, I'll have my say.

You must be one of the coffee drinking slugs from from Big Pharma. That's all you are good for.

52. Anonymous on December 12, 2011 8:42 PM writes...

@51 Nope, I'm not much of a coffee drinker... So, what are your interests besides being annoying and possibly a cheek weasel?

53. MoMo on December 12, 2011 10:03 PM writes...

Creating drugs that have saved peoples lives and throwing a wrench into your psyche. But I must have hit a nerve in your brainstem, and for that I am grateful, as hard working scientists, especially those that are unemployed, cringe at guys like you and blame your ilk for for the decline in their American Dream.

And keep your homophobia to yourself, as behavioral differences are due to minute changes in one or two of God's enzymes affecting steroid synthesis.

But now you probably knew that, didn't you?

54. Anonymous on December 18, 2011 8:53 PM writes...

you're unemployed for a reason....