Op Ex & Lean Six Sigma / Facilty Design & Management

OpEd: Offshoring and Immigrants in the Workforce

Immigrant education in math and science is discussed as necessary to U.S. Pharma, while readers respond to June's cover story on offshoring.

Skilled Immigrants Vital to U.S. Pharma

By Robert E. Litan and Vivek Wadhwa

It is sometimes easy to lose sight of the forest for the trees in major policy debates, and the recent controversy over immigration reform is no exception. In this era of globalization, it is vital that we do all we can to retain our competitive edge, particularly in the high-tech industries.

New research shows that skilled immigrants are one important source of comparative advantage. In the engineering and technology fields alone, they have created more jobs than all of the skilled immigrants we have admitted over the last decade. Further, foreign nationals last year accounted for 25% of all U.S. patent applications. The backgrounds of these immigrants remind us that when you combine higher education in engineering and science with motivation and entrepreneurship, you get economic growth and prosperity.

A report published earlier this year by researchers at Duke and Berkeley Universities made this amply clear. Based on a survey of roughly 2,000 engineering and technology firms founded from 1995 to 2005, this study found that in 25% of these companies, either the CEO or lead technologist was foreign-born. In 2005, these companies had $52 billion in sales and employed 450,000 workers.

New research released by the Kauffman Foundation fleshes out some important information about these immigrants. For one thing, the vast majority (74%) of immigrant founders had completed master’s or Ph.D.s, and these degrees were mostly (75%) in science, technology, engineering or mathematics – precisely the kinds of people who are essential to America’s globally dominant pharmaceutical industry. Further, the majority (53%) of these immigrants came to the U.S. to study and ended up staying and founding companies an average of 13 years after their arrival. Most (77%) entered the U.S. after 1980.

The new research debunks the myth that immigrants who are highly technically proficient have come from only a handful of prestigious foreign universities, or attended a few elite U.S. universities. Immigrants who received undergrad degrees in India or China, in particular, graduated from an assortment of institutions. Even the famed Indian Institutes of Technology educated only 15% of Indian company founders.

Not surprisingly, immigrant entrepreneurs are concentrated in the nation’s leading technology centers. The regions with the largest immigrant populations also tend to have the greatest number of technology startups.

Skilled immigrants tend to come from upper- and middle-class families. Those who take the risk of leaving behind comfortable homes and jobs in their native lands tend to be more entrepreneurial. That, combined with the right education and America’s fertile environment for entrepreneurship, has helped fuel the tech boom that has benefited the U.S. and other nations.

Our higher education system has historically attracted talented immigrants from around the world. Today, nearly 60% of PhDs and 40% of master’s degrees in engineering from U.S. universities are awarded to foreign nationals, but these figures are down a bit since 9/11. Other countries have picked up the slack and are increasing their share of talented immigrants.

As more immigrants choose to stay home or go elsewhere, the ramifications could become significant. Already we are seeing shifts in manufacturing toward Asia, and no longer simply labor-intensive, low-skilled work. Pharmaceutical manufacturers are finding a growing supply of highly educated and skilled workers in Asia.

Given the entrepreneurial success of skilled immigrants, we ought to be expanding rather than limiting the numbers of immigrants who want to earn degrees in science, math and technology, and giving them permanent work permits once they obtain these degrees. Meanwhile, we must encourage our own students to study math, science or technology. In an age of increasing technological complexity, such training is essential to starting or working for the high-growth businesses on which our future economic health depends.

About the Authors
Robert Litan is vice president for Research and Policy at the Kauffman Foundation and senior fellow at the Brookings Institution. Vivek Wadhwa is executive in residence at the Pratt School of Engineering at Duke University and a founder of two software companies.


Additional Letters to the Editor

Industry’s to Blame For U.S. Skills Shortage

In response to “Pharma’s Hunt for Talent” (June 2007), I found it interesting that drug industry CEOs are complaining about the lack of well-trained scientists in the area of pharmaceutical product development. They should look in the mirror to see who is to blame for this situation.

Most colleges of pharmacy have abandoned research and even course work in that area because faculty can obtain NIH funding only in the biological sciences. Consequently, new faculty hires continue to churn out carbon copies of themselves, biological scientists who proceed from one post-doc to another.

The few colleges that have at least modest programs in product development — Iowa, Purdue, Maryland, and Minnesota — receive very little support from the industry. Sure, they get short-term contracts from pharmaceutical companies to solve specific problems, but they don’t get the kind of long-term support that deans value. To college deans, NIH funding is the sine qua non, and NIH support is simply not available for fundamental work in pharmaceutical product development.

Unless that situation changes, and soon, even the few schools with good programs will see them dwindle as older faculty retire and are replaced by biological scientists. Already, industry is hiring engineers and chemists to do formulation work that people with pharmaceutics backgrounds once did.
— J. Keith Guillory, Professor Emeritus, The University of Iowa College of Pharmacy


Can Robotics help Improve Pharma Efficiency?

June’s article (“Who’s Your Role Model, Toyota or Edsel?”) brought up the issue of competition from generics. After reading the headline findings of a new report “Generic Competition 2007 to 2011 — The impact of patent expiries on sales of major drugs”, published by URCH Publishing in the USA, it comes as no great surprise that U.S. and EU pharmaceuticals manufacturers will lose up to £50.5 billion in revenues over the next five years as generic products take advantage of branded products losing its patents.

If large pharmaceutical and drug producers are to compete once patents expire (and some expire even before volume production begins), they have to compete commercially. This often means removing costs from the manufacturing process to compete on price and quality.

Manufacturing processes are largely governed by the laws of chemistry and hence, present few opportunities for savings achieved from efficiency or efficacy improvements. At the end of the line, however, there remains scope for investment that can yield dividends — not just in economies and cost reductions, but also to introduce commercial differentiators such as pack sizes, types and styles. Another report, published by Frost and Sullivan last year, proposes that the major growth for robotics over the coming years lies in packaging applications.

Robot technology means that it is now possible for a fully automated system to take a pharmaceutical product from the manufacturing process right through to the delivery point. Further development of open control technology and existing robot mechanisms will lead to robots taking on an ever more critical role in systems of the future. Inflexible proprietary automation counterparts will be pushed further into the background and may possibly disappear altogether from potential pharmaceutical applications.

If branded pharmaceuticals businesses can compete on price with the cheapest producers, while offering better quality, it will remove some of the imperative for generic producers to enter the market by undercutting prices. Is flexible robotics the answer?
— Bengt Stom, Pharmaceutical Industry Segment Manager, ABB Robotics, U.K.

Author Girish Malhotra responds:

I agree that manufacturing chemistry is governed by the laws of chemistry. However, it takes the creativity and ingenuity of the chemist and an engineer to apply the laws of chemistry, kinetics, and unit operations to their advantage and better them. If we can’t do that, then why are we here?

Anything is possible if we can think and act out of the box. It is possible for branded pharmaceuticals to compete on price, but in order to get there we need efficient processes and new rules. The only way to get there is to be creative.

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