Pharmaceutical employees are having to update their skills to keep up with new technologies and a changing market
The pharmaceutical industry has changed beyond recognition over the past few years and those who work in the sector have had to adapt to cope with many new pressures and influences. Not only have they seen a reduction in their security of tenure as companies rush for consolidation, but rapid technological advances have also changed their skill requirements. Added to this, the overarching drive to create shareholder value has put massive demands on productivity and the drug discovery process.
Globalisation has had an enormous impact on Europe’s pharmaceutical industry and companies are increasingly drawn to merger and acquisition (M & A) through a desire to improve their new product pipelines and portfolios. Many companies believe that the only way to convert massive R & D spending into financial returns is a continuous stream of new products in the so-called ’new drug substance pipeline’.
However, it is becoming increasingly clear that portfolio building in this way has yet to yield significant benefit to the industry. The rate at which pharmaceutical companies are clearing the final hurdle of clinical trials has declined since 1996 and in 2002 there were only 29 new molecular entities launched on the world market, eight of which were of European origin. This is a clear decline in approvals by health authorities since the heady days of 1996 when 56 new products were approved at a time when anti-viral drugs were launched to help cope with HIV. A new drug substance still takes over 12 years on average to reach the market, with only two substances in 10 000 ever reaching the market place as medicines. In fact there is some evidence, particularly from the industry’s fine-chemical supply chain, that mega-mergers inevitably slow down research programmes. Every time a mega-merger takes place, new product portfolios are revisited and reanalysed, slowing down the journey to market.
To make matters worse, the short-termism created by today’s financial markets results in a somewhat predictable management response. To justify the latest mega deal, corporation’s leaders generally resort to cutting costs in an effort to improve financial performance. However, as yet there has been little sign from the industry analysts that this activity has created any shareholder value. Inevitably there have been repercussions on employment, particularly in manufacturing. In the UK, for example, 14 pharmaceutical manufacturing facilities have closed over the past 10 years.
The pharmaceutical market has continued to grow in sales value during the early years of the 21st century.
In 2001, US sales grew by 10 per cent and European sales increased by 7.5 per cent. In 2002, global sales of pharmaceutical products were € 423 467m (ca ?288 000m). The North American market now accounts for over half of the total sales.
In spite of the major shifts in business conditions mentioned, the pharmaceutical industry remains one of Europe’s major employers in businesses that are regarded as an important part of the high-technology sector.
The pharmaceutical industry does more than any other high-technology sector to contribute to the European Union’s balance of trade. The sector has over 2000 small, medium and large companies which, according to the European Federation of Pharmaceutical Industries and Federations, employ 582 500 people, with 91 500 working in research and development.
The industry invested about € 19m on research and development in Europe in 2001 which is more than double that in 1990. Even so, the United States has become the leading inventor of new pharmaceutical molecules with 77 compared with Europe’s 68 between the years 1998 to 2002. Germany, the United Kingdom, France, Italy and Switzerland are Europe’s main centres for the industry.
The mega pharmaceutical companies are increasingly beginning to act more like the entrepreneurial businesses from whence they came. Few of them are now trying to go it alone to fill their research pipelines, because it seems they can match neither the speed of response nor the cost effectiveness of their smaller entrepreneurial cousins. As a result, the industry is seeing more and more research programmes, partnerships and collaborative consortia being set up with small research companies. Between January 2000 and September 2003, big pharmaceutical companies reported 1486 such relationships, according to strategy consulting firm, Strategic Decisions Group. This further demonstrates that, despite all of the cash flow that has been generated through M & A activity, there is a growing realisation that financial deals do not create value in this industry. There is no substitute for entrepreneurial zeal, scientific curiosity and focus on delivery. These are traits that are embodied in employees, not financial statements and technology platforms. Such human characteristics inevitably get suppressed the larger an organisation becomes.
It should come as no surprise that some of Europe’s most creative research companies are in the biopharmaceutical and biotechnology sectors. These are currently composed of relatively young organisations, unlike those in the US which have existed since the first wave of start-ups in the 1980s. These companies are now moving from providing expertise in platform technologies to delivering products for Phase II and Phase III clinical trials. There are currently more products in clinical trials from small entrepreneurial organisations than there are from all the big pharmaceutical companies. It is thanks to these small companies that some analysts are predicting a reversal of the downward trend in drug approvals in the next two years. Remember, however, that the devil may be in the detail! We must bear in mind that quantity does not equal quality and that it will be some time before we see if this apparent productivity in research translates into market launches of new drugs.
Interestingly, despite ongoing industry rationalisation and the closure of some facilities in traditional manufacturing countries, the statistics show that employment has grown in Europe. Therefore the picture is not at all one of doom and gloom for careers in the European pharmaceutical industry. In fact, the high-profile closures have been more than matched by the blossoming of the industry in locations such as Ireland where lower corporation taxes have attracted a lot of the industry’s capital investments in new facilities. Between 1990 and 1998, Ireland attracted 65 major pharmaceutical investments totalling $3000m and nine of the top 10 companies have operations there. In addition, across Europe we have seen the emergence of drug research boutiques, biotech start-ups and virtual pharmaceutical companies.
Recent studies have highlighted a growing gap between the graduate output from universities and the requirements of the industry (Table 1). The study of traditional scientific disciplines has now been identified as a major stumbling block in the pharmaceutical industry’s growth during this century. From the way that the industry is beginning to operate, it can be seen that a multidisciplinary approach to scientific training is needed, even in emerging areas such as biotechnology and bioinformatics. This does not always happen and the problem is manifesting itself in many ways in the industry. For example, a recent survey of the pharmaceutical and biotechnology industries suggested that fewer than half of their present employees had sufficient commercial acumen to complement their technical knowledge. Until recently there had been little evidence of academe and industry collaborating sufficiently to influence the graduate output from universities. However, the industry is now in a dialogue with the academic institutions to demonstrate that the artificial boundaries that we have created over the past couple of centuries in science and engineering have no relevance to those that will be employed in the industry in future. The drive in Europe to create industrial cluster organisations, such as the Pharmaceutical and Speciality Cluster in the UK’s north east, is enabling companies to address such issues with their local universities. Disturbingly, it seems that left to their own devices, companies have been doing little to deal with the problem.
The rapid growth in bio-technology has also created a problem. For example, 60 per cent of UK companies are reporting specific biotechnology skill shortages. In The Netherlands and Belgium this is becoming a major issue for the development of the industry and the governments have responded by introducing new university courses in an attempt to rectify the problem.
Thirty years ago, 99 per cent of pharmacologists went to work in the pharmaceutical industry. Currently, some academic institutions report that fewer than half of the pharmacology graduates take jobs that use their specific pharmacological knowledge. Those that do enter the pharmaceutical industry often progress into other careers, ranging from product licensing and finance, to safety and business development. This skill drift happens in many scientific disciplines, where good, well-trained scientists have necessarily changed career aspirations in order to advance their status and salaries. Cleary the under-valuing of scientific disciplines by the industry is compounding the skill shortage. Many more companies will need to introduce scientific career ladders to match the salaries of managers and other professions in order to keep their scientists in the disciplines for which they are trained.
Employment conditions are undergoing radical change. Many of tomorrow’s scientists are not going to be working for fully integrated pharmaceutical companies in the same way as they did in the 1970s and 80s. There will simply be fewer and fewer of these types of companies around. More and more scientists will be working in boutique drug discovery and delivery companies, contract research organisations and virtual companies.
It is also pleasing to find that, in recruitment surveys, in the pharmaceutical industry at least, there is now no gender bias amongst the young scientists being recruited. However, it is likely to be some time before societies’ social and working policies enable our female scientists to have careers which will be unaffected by child bearing, so that their talents can contribute more at the board levels of our major corporations. There will also be a greater number of scientific entrepreneurs in Europe creating value for themselves rather than for big company shareholders. The days of joining a fully integrated pharmaceutical company for the whole of a scientist’s career have gone, perhaps forever.
Stan Higgins is CEO of the Pharmaceutical and Speciality Cluster, Sunderland, UK
This article is a co-production of the RSC and the Gesellschaft Deutscher Chemiker (GDCh) and is also published in Nachrichten aus der Chemie.
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