Pharma's Global Hunt for Talent

EVERY EMPIRE HAS ITS DAY, and the sun may already be starting to set on U.S. and European domination of the world’s pharmaceutical industry. More than half of the 185 global industry executives recently surveyed by PriceWaterhouseCoopers (PwC) (see "Bullish on Asia" box, below) agree that global pharma’s center of gravity is shifting to Asia. A growing number of multinational drug companies now plan to move more strategic operations to India, China, Singapore and other growing pharmaceutical hubs [1].

Click here to read Business Week's June 18, 2007 cover story, "The Real Cost of Offshoring." What do YOU think about offshoring's affect on the pharma industry? Click here to take our poll.

While cost savings may still be important in pharma offshoring and outsourcing strategies, speed and access to new workforces and markets are becoming equally critical. Last year, drug and healthcare companies cited “expertise” as their top reason for selecting an offshore location, according to “Next Generation Outsourcing: The Globalization of Innovation,” a 2006 Outsourcing Research Network (ORN) survey and study by Arie Lewin, professor at Duke University’s Fuqua School of Business and director of the University’s Center for International Business Education and Research.

The consulting firm, Booz Allen Hamilton, became involved in the annual study for the first time last year, says coauthor and Booz Allen Hamilton analyst Mahadeva (“Matt”) Mani. “Access to talent is becoming much more important,” Mani says. Comparing survey data from 2004 and 2006, he says, speed to market as an offshoring driver grew by nearly 70%, while cost savings inched up by 5% during that period.

ORN’s study takes a generally rosy view of offshoring and its impact on onshore jobs, suggesting that, at least when it applies to R&D, the practice has little impact on U.S. jobs and may even create more positions at home (see "Debunking Myths or Creating Them?" box, below) [2]. Pharma companies that have already outsourced like the practice because they’re seeing positive bottom-line results, Mani says.

For some, offshoring may offer an easier alternative to recruiting talent in the U.S., Mani suggests. “We’re starting to see a gap in the supply of M.S. and Ph.D.-level U.S. candidates in science and engineering,” he says. “For the past few years [before caps on these visas were reduced from 135,000 to 65,000 per year], H-1B visas have masked the problem.”

Last year, ORN and BAH interviewed 537 corporate executives for the study, Mani says, and several of them, across all industries, agreed that fewer qualified people are applying for new scientific and engineering positions. “It’s taking many companies from six to 10 months to find the right person, and important projects are taking longer as a result,” Mani says. “We may not be in a crisis right now, but if we continue down this road for too long, some may start to think it’s crazy to try to hire people for some positions in the U.S. when a supply is available elsewhere.”

Biotech feels the pinch

Although biotech may not exactly be booming right now, demand for talent is strong and some biotech companies, particularly in California, are already feeling the pinch. A senior scientist at one small biopharma manufacturer near San Francisco, who asked to remain anonymous, says that some new mid- and senior-level positions at his company have been unfilled for over six months. The Golden State looked into workforce issues across all industries last month, and concluded that the number of highly educated immigrants to California would have to more than double to meet projected needs. [3]

“Increasing the number of H-1B visa holders allowed to work in the U.S. is a good temporary fix, but the real solution is to create programs that continue to train the workforce,” says Joe Panetta, CEO of BIOCOM, a consortium of 550 leading biotech companies based in California. The organization has established a Life Sciences summer institute to allow students and teachers to work in the industry and experience “real-world” situations.

Is U.S. Pharma heading the way of U.S. IT?

But some fear that pharma and biopharma offshoring are already heading the way of IT and telecom in the U.S., and that the industry will offshore or increase reliance on foreign workers with H-1B visas, simply to avoid having to pay U.S. scientists and technical staff competitive salaries.

Although there’s no single, organized lobby for scientists and engineers, public concern has registered in Washington. In April, Senators Dick Durbin and Chuck Grassley introduced a bill designed to prevent exploitation of foreign workers and the loss of U.S. jobs. “Our immigration policy should seek to complement our U.S. workforce, not replace it,” Durbin said.

Blogger and former Dartmouth professor Geoff Davis, who now works for Microsoft Corp. and runs the Engineering Science blog on phds.org, has tracked NSF data and noted that the number of Ph.D.s awarded in the U.S. has been increasing since the mid-1990s. Indications are strong, he wrote last December, that the latest Ph.D.s may run into a tough job market. [4] In 2005, the U.S. graduated over 9,000 doctorates in life sciences fields.