By Agnes Shanley, Editor in ChiefIn the U.S. today, few words provoke a more visceral response than downsizing and “offshoring,” the movement of U.S. jobs to other countries. News of drug company mega-mergers and layoffs only fuels a growing sense of anxiety. So do dire predictions from analysts like Forrester Research, which expects 15 million U.S.-based jobs to move offshore over the next 15 years.Offshoring is really the wrong word for an industry as global as pharmaceuticals. But, call it whatever you want, the trend isn’t going away. Today, across all industries, 3.4 million more jobs are offshored than brought into the U.S., and that gap is widening.As drug profit margins narrow, arguments for moving more U.S.-based drug development and manufacturing operations to India and China will become even more compelling. Outsourcing a new drug’s development to India, for example, could save a typical U.S.-based pharmaceutical company up to $200 million, according to McKinsey & Co.No doubt there are cases where offshoring or job cutting is the way to go. However, these should be last resorts, rather than the first steps, toward efficiency.Companies pay a high price for moving jobs offshore or overzealously downsizing. The wrong priorities are to blame — in particular, an excessive focus on short-term advantage and shareholder value, as extolled by Albert “The Chainsaw” Dunlap in Mean Business.Misplaced priorities have led some pharmaceutical companies down a number of ethically-challenged and economically destructive paths. We see the signs everywhere:
- Poorly conceived merger and acquisition strategies, where a company snaps up another firm to acquire a key product, then fails to integrate different corporate and compliance cultures.
- FDA compliance problems, where management is so bent on making product and generating revenues that it fails to ensure safety or quality.
- Bloated sales and marketing budgets. Today, some companies spend twice as much on sales as they do on R&D.
- Lack of focus. Remember what Enron did before its foray into e-commerce? Many drug companies seem bent on re-inventing themselves as consumer products companies. How many treatments for “E.D.” did the world really need?