Last week we saw more signs that pharmaceutical megamegers bode ill for New Jersey workers. Business Week reported that Pfizer (New York) planned to close six research and development (R&D) facilities—some of its own, and some of Wyeth’s (Madison, NJ). Many of the 400 employees at Wyeth’s research offices in Monmouth Junction, New Jersey, could be laid off. And last Wednesday, Richard Clark, CEO of Merck (Whitehouse Station, NJ), told attendees at a Goldman Sachs conference that research jobs at Schering-Plough’s (Kenilworth, NJ) headquarters could be eliminated to reduce costs.
The loss of these jobs is certainly a blow to my home state, and it also made me wonder about the future of innovation in the pharmaceutical industry. As Pfizer and Merck absorb their respective acquisitions, their R&D staffs will become leaner. But will this mean that they will be more efficient or better able to find new drug candidates? R&D isn’t necessarily a clear process with a defined endpoint like manufacturing is. I don’t think R&D efficiency could be gained by using the same strategies that improve production processes.
One might also argue that mergers are bad for pharmaceutical R&D because, besides reducing the number of active researchers, they also reduce the amount of competition between companies. The greater the number of drugmakers battling for market share, the greater the incentive for creativity and persistence in R&D.
Mergers are also heightening companies’ desire to outsource R&D. Jim Miller writes that contract research organizations (CROs) are receiving more requests for proposals and more new project awards. Outsourcing R&D could certainly bring cost benefits, but I doubt that, on average, CROs are better able to discover new molecules than in-house R&D departments.
So, in New Jersey and around the world, we’re left with smaller workforces and an uncertain future for pharmaceutical pipelines.