Arnold Kling  

Jobless Science Ph.D's

Tipping, Status, and Signaling... Henderson on Robert Guest...

The Washington Post has the story, but buries the lede.

The pharmaceutical industry once was a haven for biologists and chemists who did not go into academia. Well-paying, stable research jobs were plentiful in the Northeast, the San Francisco Bay area and other hubs. But a decade of slash-and-burn mergers; stagnating profit; exporting of jobs to India, China and Europe; and declining investment in research and development have dramatically shrunk the U.S. drug industry, with research positions taking heavy hits.

So the real story here is that Big Pharma ain't what it used to be. I wonder why. Let's round up the usual suspects.

1. Aggregate demand. Slow nominal GDP growth.

2. Reversal of unsustainably past prior growth. A PSST story.

3. The Great Stagnation! Medical progress is not what folks had hoped for.

4. Unequal distribution of income, not enough money being spent on education and training, etc.

5. Regime uncertainty.

For most of the economy in this recession, I have championed (2) and been willing to concede that (1) is what most economists would believe is the main factor. I have dismissed (4) and given little or no weight to (3) or (5).

In the case of pharmaceuticals, however, my guess is that one can summon up a decent argument that (5) is the culprit. If pharma executives have become pessimistic about the regulatory outlook in their industry, can you blame them?

Comments and Sharing

COMMENTS (19 to date)
RPLong writes:

Good story, but bad example.

The pharmaceutical industry is centered around jumping through regulatory hoops. People in the US are more insulated from this, but abroad it is a well-known and obsessed-over issue in pharma.

It takes a relatively small staff to discover a new chemical (or buy one from a university or mom-and-pop pharma research company). On the other hand, it requires a pretty sizable workforce to craft the market access campaigns required to take a drug to market. Every stage of the process involves a complex web of government regulation. The people best-suited to this task are not necessarily scientists. Mostly, the best people for the job are MBAs, statisticians, corporate strategists, and marketers... the usual business school crowd.

It's true that many PhDs and pharmacists go on to work in Market Access divisions in major pharma companies, but my experience has been that there are more people with marketing and economics in their background than there are scientists. It certainly held true in my case.

gwern writes:

If regime uncertainty is the problem, why did this problem not strike in the past - the US was hardly a paragon of FDA restraint from 1900 to 2000 - and why do we not see a flood of blockbuster new drugs coming from any of the many other nations who have invested in biotech?

Bruce Cleaver writes:

Arnold -

If you check out the pharma research blog Pipeline ( this has been thoroughly discussed. Factor #3 is a significant one in their estimation.

Ken Plahn writes:

It's often cheaper to buy a new drug than to develop one. Startups tend to be more innovative and have less hierarchical structure to distract the process. This approach may be a more efficient model.

Tyler Cowen writes:

In this sector #3 -- TGS -- is a no-brainer, though without dismissing the relevance of #5.

David E writes:


I am a chemist in the chemical industry and my best friend is a chemist the pharmaceutical industry. The chemical industry severely cut back R&D in the 90's largely because R&D stopped producing block buster products in the 80's. The same thing happened with pharma and for the same reason, but 10 yrs later.

Preserve writes:

RpLong: Agreed.

Big Monopoly = Regulatory Hoops

It is the formula for profit. We see it in banks, cars, telcom, etc. They have little incentive to create blockbuster changes.

Peter St. Onge writes:

1996 to 2007, pharm R&D spending tripled while new approvals dropped by 2/3 (source)

Consistent with RPLong's regulatory burden story. I think that's what you mean by #5, though 'uncertainty' is a clumsy description. TGS seems absurd given the 96-07 macro background.

collin writes:

Could there be demand Great Stagnation? (Think of TVs where consumers are no longer simply buying the latest TVs because what they have is good enough.) There has been limited opportunity for drugs because there is limited blockbuster drugs for the marketplace. Cancer drugs are great but the buying pool is less.

Secondly, any idea how effective outsourcing R&D to China and India has been?


Doug writes:

Has anyone considered that maybe the quality of PhD graduates has on average declined?

Maybe pharma would be hiring more of these PhDs if they were the same caliber as bio/chem PhDs from previous decades.

Bryan Willman writes:

Stagnation by saturation. (Close to what is happening with TVs, and something we worried about in the PC industry.)

To make big money, pharma needs to succeed a solving different problems - a really strong drug for treating obesity? $$$$$$ Yet another drug for treating blood pressure? Almost don't bother.

quadrupole writes:

Doug, I think you have a winner. You kind of have to be dim to get a PhD in bio or chem these days... it's a bad choice financially (5-7 years of forgone wages) lifestyle wise, in pretty much every dimension. Punishingly bad. Same is true for most other science PhDs. It's just a really dumb career/lifetrack move.

Eelco Hoogendoorn writes:

Here is one I feel is missing from the list; Obamacare, or more generally, Americans no longer being willing to foot the world's medical R&D bill.

Governmental collective bargaining for medicine is rather missing the point of patent law; 'yes, we will grant you a temporary monopoly, except that we get to set your prices'. Uhm, ok.

Most of the world has long made a mockery of patent law in this way, and with the US moving in that direction as well, why invest at all? If you find a cure for cancer, you sure will not be lauded for it, but rather dragged through the mud and be forced to sell it at production cost.

Our legal systems have decayed more and more by democractic shortsightedness, and it is paying off.

Not saying that this is the whole story; the others on the list make sense too, but together with general stagnation, id say these two factors explain the bulk of the effect.

Hunter writes:

I suspect the general quality of Ph.D.'s is lower, as they have been overproduced in the biological sciences for about a decade, that said I think there are as many or more high quality ones out there as there were previously. The good scientists of previous generations didn't do it for the money or the laid back lifestyle either. You do have to be stupid to do science for the money, but most good scientists aren't in it for the money (nor are most academic economists either, I suspect).

I think the regulatory issues have become worse, but I think we have also hit a wall with the old 'silver bullet' paradigm in pharmacology. Most common modern diseases are not single receptor or single pathogen entities. As a result the rational drug design approach that has worked for antibiotics or anti-hypertensives really isn't paying off as it used to, and the drug companies are acknowledging this by getting rid of obsolete apparatus (R&D staff) and waiting around until someone comes up with a better idea they can buy.

MingoV writes:

Here are my postulated reasons for the decline of pharmaceutical research and development in the USA:

1. Skyrocketing costs of clinical trials due to continually increasing FDA requirements and restrictions.

2. Skyrocketing legal costs due to the low bar for product liability lawsuits in some localities (venue shopping).

3. Requirements by many nations that drugs be sold at much lower costs than in the USA.

4. Greater restrictions on assigning profits to overseas divisions combined with a very high corporate tax rate in the USA.

5. Increasing unlicensed use of generic knock-offs in foreign countries that will not enforce US patents.

These could be labeled "regimes certainties."

quadrupole writes:


You don't have to be in it for the money or laid back lifestyle for the trends I'm referring to to effect you. Think of it this way... the lack of money and lifestyle issues are negatives pushing against the 'joy of science effect'. The harder you push, the more folks you loose at the margin. Right now, we are pushing *really* hard... basically, a PhD *reduces* your probability of getting a job, *reduces* dramatically your lifetime earnings (presuming someone bright enough to get a PhD compared to going into CS or finance)... no matter how much you love science... do you want to have to face sending your kids to the horror that is most public schools these days for it? Are you willing to not be able to afford a house for your family over it? We aren't talking about a fancy car or a boat kinds of money issues anymore, we are talking about basic provisions of making sure your kids have opportunities vaguely similar to yours.

Even if you love science, you eventually have to sit down and think it through... and if you do, unless the only thing in your life you value is science, these days, you leave.

(FYI... been there, done that, about 13 years ago... and watched my whole cohort go through it... very very very not pretty... but everyone who left the PhD track did OK, and everyone who stuck it out wished they hadn't).

Ken writes:

I've been in biotech for 24 years and take issue with the nostalgic contention that PHDs of yesteryear were so much better.

I find that many young BS employees are sharper than their older PHD supervisors. They also have more knowledge because much of modern day molecular biology wasn't even known when scientists who are currently in their 50s were in grad school.

Group think is a particular problem among older PHDs. The younger generation seems to entertain more models when searching for solutions. The older generation seems to focus more on small tweaks of dogmatic concepts.

Jacob AG writes:

In this case I feel like #2 is an instance of #3 -- past growth was unsustainable so we're seeing a slowdown, which is part and parcel of The Great Stagnation -- so I'm not sure why Arnold would dismiss #3 but champion #2.

Hunter writes:

I don't disagree with the idea that doing science at the doctoral level is an increasingly crappy job relative to others (I am being there and doing that now as you may have guessed), but my experience is that there are still a lot of good minds in the field. Given, I'm at Rockefeller, which is on the high end of the distribution in the biological sciences, but the phenotype of the old guys around here, Nobelists and National academy members for the most part, isn't that different than the sharper young guys. High end science seems to favor personalities with a capacity for extremely delayed gratification and no matter what it pays that will always be the type that succeeds at it. So what I would argue is at the high end the average scientist is highly money and lifestyle insensitive (very few of the old guys got by on fewer than two wives for instance, one of my mentors is looking for number six).

Below the top end institutions I think you are right though, most PhD programs probably should not exist anymore, we have a big pipeline with a tiny nozzle at this point, and that isn't good for the majority of people seeking Ph.D.s. The competition for resources also means that the people who should be here waste a lot of time doing things like grant writing instead of science. One of the best things we could do science policy wise is blow up the STEM pipeline. Science is a great vocation, but it isn't for everyone. The ones that belong will find their way in no matter what, and the rest, as you suggest, are doing themselves a horrible disservice by getting a Ph.D. and wasting huge amounts of resources in the meantime.

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