A life science recruiter's blog on placing R&D professionals.

Blog/Pharma Outsourcing and Movement to China

Big Pharma Outsourcing to CROs and Setting up R&D in China

This past week I read a few well written posts, that I thought I would share with my readers, about pharmaceutical companies outsourcing more and more of their functions to CROs and building new R&D sites in China. This news is important to my business, Clark Executive Search, as it directly effects hiring decisions both here in the US and abroad.

Bruce Booth over at Life SCi VC blog, writes about “CROs as Change-Makers in the Pharma Ecosystem “. This is a very well written piece that summarizes everything I have seen as a long time recruiter of scientists for biotech and big pharma. For the last several years I have heard undercurrents about companies going virtual by using CROs, which allows the company to function with skeletal crews. Likewise big pharma has saved money by laying off entire departments and hiring a CRO to do the work. At both the virtual companies and the pharmas all that remain is an upper management structure of VPs and Directors left to monitor the CROs. Therefore it is the pure scientists or the ones on the scientific track who are being cut out of the employment chain in the US as these roles are farmed out to oversea CROs.

Years ago it was quite common for a pharmaceutical and biotechnology companies to use a CRO for their clinical trials. It is very expensive to have a full clinical department and even the big pharmas who have large clinical departments still need to augment their departments with help from a CRO. But lately I have heard from countless scientists in the drug discovery departments of pharma who are seeing their jobs eliminated and outsourced at CROs. This is especially true for medicinal chemists, who were once the proud backbone of the industry.  These chemists are being tossed aside often at the peak of their careers. I had a search recently for a medicinal chemist, a rarity in itself, and I couldn’t believe the number of outstanding CVs being sent to me. These were top chemists from prestigious universities with experience at the top pharmaceutical companies. In the past these same scientists would never have even taken a recruiter’s call for they were so well established within their companies. Many told me the job market was bleak for their highly technical backgrounds. Some were moving to university settings or consulting. There is just no place to absorb all these scientists.

I too have noted a shift in the perception of CROs. When I started recruiting in the industry, I quickly decided I wanted to recruit the “A” players and so did not do any work for CRO’s or generic companies. No self-respecting scientist would move to one of those organizations. But how the times have changed, as Bruce noted in his post. Now the action has shifted to the CROs and many top players are moving there. I used to think I was in a very safe niche recruiting drug discovery scientists and doctors for biotech and pharma. I thought these people would always be in high demand. This is of course not true today and I will have to adjust my niche or lose my business.

Related to the shift to CROs and the loss of more scientists jobs in pharma is the post by BioJobBlog, titled “Pharmaceutical R&D Continues Its Eastward Migration”. ( sorry, post no longer available)The action is in Asia and that is where all the pharmas are establishing R&D sites. Over at ChinaBio, Richard Daverman and Greg Scott recently wrote “ Roche has completed a $75 million expansion of its Shanghai operations center, located in Zhangjiang High-Tech Park. The new facilities include two new office buildings, a quality-control center and warehouses. Roche said it is making Shanghai, which is headquarters for its Asia-Pacific territory, the company’s third global strategic operations center, along with Basel, Switzerland and San Francisco.” That last sentence is important. The China site is not just a satellite site but also a full operations center equal to Basel and San Francisco. That is huge.

Not only is there a vast market for drugs in China, there is a cost incentive of hiring cheaper and sometimes better-educated workers. As mentioned in the post, a researcher in China has about one third the salary as an American researcher. I spoke with one scientist at Novartis who was going to China to train some of the workers there. This scientist said that he felt he was really training his replacement. Lately, I have observed many Chinese scientists, who have worked for years at various pharmaceutical companies, going back to China where their expertise is highly desired.

The tides have shifted to Asia and more and more search assignments will have some connection to actually working in Asia or at the minimum interacting with people already located there. I have seen this happen already in my small firm. One of my main clients is in Korea. If you had asked me 10 years ago if I would be placing people in Korea, I would have laughed at the question. But now Asia is where the most hiring is taking place. In order to capitalize on this trend, my firm, Clark Executive Search, produced a multi lingual brochure written in Chinese, Japanese, and Hindu last summer that I used at the BIO 2010 conference. It was interesting to see the foreign attendees picking up the brochure. Even though most of these people could read English quite well, they appreciated the gesture of my firm trying to reach out to them in their native tongue.

If someone is fortunate enough to land a job in Asia, does this mean they will have to move to Asia for many years of their careers? Not exactly. Several of my clients in Asia, and many others I am told, offer candidates packages on a renewable contract basis. The range is from 3-5 years. The companies recognize that not everyone from the West wishes to leave their own culture behind for lengthy periods. People have family issues requiring them to return to their homelands such as children needing to go to special schools or elderly parents that must be watched out for. A contract acts as an easy out when the time comes for such a move. I tell my candidates to look at the 3-year period in Asia as a time for adventure and exploration of the Eastern culture. The Asian countries are just a hop away by jet and make for attractive long weekend get-a-ways.

The bottom line is that business is moving to Asia and to the model of outsourcing to CROs. People in the pharmaceutical industry and the service companies that cater to the pharmas, like my recruiting firm, must adapt to this trend in order to survive. Where all the scientists, who are laid off from pharma, will go is hard to say. But hopefully some of these same CROs that are getting all the outsourced work will hire these highly qualified people.

07/12/13 China Arrests 30 GSK Employees over Corruption Charges

07/09/13 More on China and clinical trials from Bloomberg

June 4,2012:  Lilly Opens R&D Center in Shanghai 

Further Reading about Outsourcing

Further reading: A Big Pharma Scientist Outsources Himself

Nov 20 ,2011, Related post