Is Pfizer Outsourcing Innovation?

According to reports in the Pharma Blogosphere^TM (see below), Pfizer has laid off a "large number of PhD scientists" in an effort to get more lower-level "associates" to shoulder the company's basic research, aka innovation.

Perhaps "PhD Phobia" is behind this rollback of qualified scientists at a time when the industry needs more, not less innovation.

You may recall that back in January, when a study of DTC advertising was published in The Annals of Family Medicine, a Pfizer spokesman said in a phone interview: "It was a bunch of Ph.D.'s sitting around, looking at ads" (see "TV DTC Educate Little, Increase Sales Less").

I thought this apparent expression of "Pfizer PhD Phobia" was a bad image for the leading company in a research-based industry to project.

On the heels of this expression of PhD Phobia, we learn that Pfizer is laying off PhDs, according to Derek Lowe, a recently laid-off PhD chemist himself, and author of the blog In the Pipeline. Derek claims:

"I've heard from more than one source that Pfizer has laid off a large number of research staff this week in Groton. This seems to have taken people by surprise in many cases, since the expectation was just that everyone would find out where they were on the new organization charts. Well, in a way, they did." (See "Layoffs - Again").

"Rumor has it [Pfizer] wants to get to a 4:1 associate: Ph.D ratio..." said a commenter. Presumably, the ratio now is lower than that. Pfizer could have increased the ratio either by increasing the numerator -- ie, hiring more associates -- or by decreasing the denominator -- ie, firing PhDs. Pfizer went the decreasing the denominator route.

Is firing PhDs the best option?

From a financial, Wall Street, point of view, it makes sense. You can save a lot of money by getting rid of high-paid employees , especially if you have an ant-intellectual bias (as in "bunch of PhDs sitting around") to begin with.

From the perspective of winning the all-important PR war to win the hearts and minds of consumers, however, it certainly doesn't look good to be firing PhD researchers. If Americans are asked to pay more for their prescription drugs to finance future innovation -- which is an argument often made by the industry -- where is the money going if you are laying off PhDs who are best qualified to deliver innovation?

Saving Money by Outsourcing Innovation
Perhaps some -- but not all -- of the money is going towards licensing new molecules or outsourcing innovation to other countries where PhDs are cheaper. Sometimes this works and sometimes it doesn't.

Pfizer lost some credibility as an innovator when it had to halt the torcetrapib clinical trials and abandon the drug, which it licensed from Japanese researchers in the first place (see "torcetrapib: $800 Million Failure but Kindler Safe").

Large pharmaceutical companies like Pfizer are evolving to focus on what is becoming their core capability: drug development (ie, running clinical trials and getting FDA approval) and marketing. While it does that, industry proponents like PhRMA even more stridently proclaim that US pharmaceutical companies are "research-based" and "today's drugs [prices] finance tomorrow's innovations."

The talk on Wall Street now revolves around the innovation that Pfizer must buy through mergers, not innovation! In other words, Wall Street investors have little patience for the "Today’s drugs finance tomorrow’s innovation" argument. This is bad news for Pfizer's PhD research scientists!