Industry Overview: Pharmaceuticals and Biotech

Posted by The Editors on December 3, 2012

"Well, it's not like he's curing cancer." It's an off-the-cuff comment that is thrown around when people take their jobs too seriously. But what if you really could cure cancer or other diseases? Or come up with new technologies that could increase crop yields by 20 or 25 percent? That might be a good reason to take your job very seriously.

Working with plant- and chemical-based compounds, pharmaceutical companies work their mojo to make medicines that cure some diseases, manage others, and protect us from infection in the first place. Big Pharma includes a handful of major companies that dominate the industry. While many of these firms also produce animal health products, livestock feed supplements, vitamins, and a host of other goods, this profile will focus solely on their drug products used to treat human illness.

Big Pharma is one of the world's most profitable industries. During the last 30 years, the industry has spent billions of dollars on research and reaped billions in return. In 2006 alone, the pharmaceutical industry introduced 31 major drugs and sold $643 billion in products worldwide-a 7 percent increase over 2005 sales, according to the drug market research firm IMS Health. U.S. sales beat the national average with growth of 8.3 percent (up from 5.4 percent growth in 2005).

Depending on their size and strategy, pharma companies may conduct extensive research in-house or they may seek to license promising drugs from academia, other pharma firms, or biotechnology companies. The latter firms are generally smaller than their Big Pharma competitors, and they employ cellular and biomolecular processes to make medicines or diagnose illness.

Biotechnology, a newer area, has alternately been the sweetheart and the bane of investors in recent years. Simply put, biotechnology, the applied knowledge of biology, seeks to duplicate or change the function of a living cell so it will work in a more predictable and controllable way. The biotechnology industry uses advances in genetics research to develop products for human diseases and conditions. Several biotech companies also use genetic technology to other ends, like the manipulation of crops.

Biotech opportunities largely mirror those in the pharmaceutical industry. The key difference is that biotech firms are much more focused on research because they are still developing their initial products. Biotech firms tend to expand their marketing and sales forces when-and if-a viable product nears FDA approval. And it's become common for small companies to seek alliances with larger companies that already have the requisite infrastructure in place for these functions. This means that jobs for nonscientists are scarcer in biotech than in pharmaceuticals.

Biotech and pharma have been performing exceedingly well relative to other industries in recent years. And while there are problems lurking in the shadows at some companies, overall the future looks bright for these industries. Though there is plenty of public controversy (e.g., the moral and ethical questions surrounding genomics and the pricing and patent practices of Big Pharma), demand for drugs is growing, fueled by an aging population and blossoming international markets. Regardless of whether you choose to work for Big Pharma or small biotech, don't get too attached to the status quo. These days, the business environment can change overnight. One need only look at recent biotech stock volatility for ample evidence of that. And as one insider says, "Even in Big Pharma, if there's a merger or a spin-off, you can easily find yourself without a job."

Insiders say this may be the biggest issue the industry currently faces. Who will pay the cost of drug development? As more treatments become available, will only the wealthy have access to them?

Prescription drug prices are rising annually, while insurers are getting increasingly more stringent about which medications they'll reimburse their customers for. Exciting new drugs can cost thousands or even tens of thousands of dollars per treatment. Providing price relief for seniors has been an issue for several years. Many favor price controls to prevent costs from skyrocketing, a move the pharmaceutical industry opposes.

Partnerships and Strategic Alliances
A growing number of Big Pharma companies are partnering in drug development with innovation-rich biotech firms, or buying the firms outright. In 2006, Big Pharma spent roughly $17 billion for more than 250 biotech deals, up from 150 in 2003, according to venture capital firm Burrill & Company. What is more, Big Pharma is increasingly looking to biotech to help it find potential therapies for failed clinical compounds, a tactic called "repositioning." Pfizer's blockbuster Viagra is one example of finding a new use for a perceived failure: The well-known treatment for erectile dysfunction began its run through the pipeline as an experimental heart medication. Recently, Pfizer, Roche, and Eli Lilly all signed deals with the tiny biotech firm Gene Logic to investigate their failed clinical candidates in the hope of making their R&D programs more productive. Biotech companies, especially those dealing with agriculture, are also aligning with universities to maximize their research capabilities. Some universities, like the University of Rochester in New York, are developing centers and incubators that will give fledgling biotech companies the resources they need to grow.

The Rise of Generics
When a drug goes "off patent," other drug companies are free to sell generic versions, chemically identical copies that typically cost much less than the trademarked version. The patents on some of Big Pharma's most profitable drugs have expired in the past few years. Examples include Merck's Zocor, a cholesterol-lowering drug; Pfizer's onetime blockbuster Zoloft, used to alleviate depression; and Bristol-Myers Squibb's cholesterol reducer Pravachol. All of these drugs were targeted in 2006 by Teva, the Israel-based generic pharmaceuticals manufacturer.

But as generic drug manufacturers have become more aggressive in their sales and marketing efforts, producers of branded pharmaceuticals have become more vigorous in defending their turf. Some Big Pharma companies have acquired generic drug manufacturers, such as Novartis's acquisition of Eon and Hexal. Those additions, and the firm's acquisition of biotech firm Chiron, are part of Novartis's strategy of becoming a "one-stop shop" for its largest drug customers: governments and managed care organizations.

Vaccines long held a low spot on the drug development totem pole as Big Pharma pursued products that traditionally offered a better return on investment. (Part of the reason for this is that developing nations that need vaccines the most often lack the funds to pay for them.) The situation has changed, however, due to a renewed drive to produce vaccines that will prevent or treat devastating illnesses common in the developed world, such as cancer and Alzheimer's disease. Some experts are predicting that vaccines will eventually supplant other medications to become Big Pharma's biggest sellers.

Today, there are roughly 450 vaccines in development addressing such health threats as hepatitis, HIV, and breast cancer. Drug firms are charging more for newly developed vaccines than they were able to for older ones, a situation that is spurring vaccine R&D. But government/industry partnerships are improving the vaccine development picture, too. The Group of Seven industrialized nations announced its commitment in early 2007 to provide $1.5 billion in a so-called "advance market commitment" to subsidize developing countries' purchase of pneumococcal vaccines. The hope is that this initiative will provide an incentive for pharma companies to develop and manufacture new vaccines to fight infectious diseases.

Big Pharma
The majority of Big Pharma companies are headquartered in the United States, but several are based in western Europe-specifically the United Kingdom, Switzerland, Germany, and France. Most pharma companies headquartered in the United States are located east of the Mississippi, with the greatest concentration in New Jersey.

Big Pharma companies come in two styles: diversified and nondiversified. Diversified companies, which include Johnson & Johnson, Abbott Laboratories, and Wyeth, maintain other health care-related businesses, such as consumer health product divisions and medical device companies, while those that are nondiversified-Eli Lilly, Merck-focus solely on the development and sale of drugs. In recent times, though, diversified companies have been choosing to divest their nonpharma concerns in favor of the leaner and more profitable drug business. Bristol-Myers Squibb, for instance, sold Clairol, the number-one hair-products company in the United States, to Procter & Gamble in 2001.

Despite the success of such biotech giants as Amgen and Genentech, a large majority of biotech shops are still small enough for everyone to know everyone else's name. But a growing number is joining the elite group of biotech firms that have FDA-approved drugs on the market; between 2000 and 2003, the FDA approved some 132 new drugs and vaccines and new indications for existing products. Once a biotech company has reached the stage at which it has a product coming to market, its jobs expand from the primarily science-focused to include marketing, manufacturing, engineering, and sales. Culturally, companies tend to have growing pains as they move from R&D to commercialization, but their organizations tend to remain much leaner and flatter than those in Big Pharma.

Although there are 1,466 biotech firms in the United States (318 of them publicly traded), with some 200,000 total employees, the biotech industry is significantly smaller than the pharma industry. Still, this is a vibrant sector. Between 1992 and 2002, revenue for the industry more than tripled, from $8 billion in 1992 to nearly $30 billion in 2002. And while funding for biotech concerns dropped in the early 2000s, this remains one of the industries where investors are most likely to put their money.

Biotech companies tend to be located in geographical clusters, often near prominent research universities. The largest concentration of biotech companies is in California (in and around the San Francisco Bay Area and San Diego, mainly), followed closely by Massachusetts. You'll also find pockets in such far-flung regions as Washington, D.C.; Raleigh-Durham, North Carolina; and Boulder, Colorado, as well as in New Jersey and Wisconsin, as these states have recently made an effort to focus on drawing biotech companies by devoting finding and resources for them.

According to the Bureau of Labor Statistics, employment in the biotech and pharmaceutical industries will increase at a faster rate than the average through 2012.

The pharmaceutical job market is healthy. While Big Pharma is under attack for its pricing and patent practices, it is among the most profitable industries in the United States. Biotech, on the other hand, relies on the public and private funding markets to survive the long years until a product is approved for sale; insiders advise that you ascertain whether your prospective biotech employer has at least 2 years of funding, and preferably more, in the bank.

In demand are people with scientific backgrounds, particularly those with that rare combination of science and computer skills required for bioinformatics, as well as those who combine scientific training with managerial ability. Folks with BS or MS degrees in chemistry, molecular biology, genetics, biochemistry, computer science, and physics can find absorbing careers. However, a PhD is required if you want to advance beyond the level of research associate. Nonscience undergrads can get a foot in the door in biotech manufacturing or pharma sales. MBAs who forgo consulting and investment banking careers will find a more palatable work/life balance along with good pay and some of the best benefits packages around. MDs can find well-paying, engaging work that offers regular hours and is free of managed-care administrivia.

Some biotech engineers are opting to work overseas, especially in China, Korea and India, with the lure of more research dollars and better-equipped labs among the key incentives. Fewer government restrictions are also attractive to biotech scientists who want the freedom to work in areas that are controversial in the U.S., such as stem cell research.

Above all, those who choose to work in this industry enjoy the very real satisfaction of knowing that they are laboring to produce drugs that could make a radical difference in the lives of thousands, even millions, of people.

Changing Lives
Most people in this industry believe deeply in what their company does. As one MBA says, "When you're in the pharmaceutical industry, yeah, you're there to make money, but there's also the underlying fact that you're doing something that is going to make a huge difference in thousands of people's lives."

The Good Life
Although there's some debate as to whether industry scientists work fewer hours than their academic colleagues, they most certainly earn more. And they don't have to hustle for money. "It's nice not always having to worry about funding," says one insider. For their part, MBAs can hit six figures not long after coming out of school without suffering through the travel and long hours imposed on classmates who opt for consulting or banking.

That Guy's Pretty Sharp
"A lot of brilliant people are attracted to this industry," says one recruiter. And while many of these industrial-strength geniuses are attracted by the research opportunities, it's often the presence of fellow thinkers that they find most enjoyable. "It is definitely a more intellectual industry than most, which is great," says one insider.

Business First
In the final analysis, the companies that comprise this industry are just that: companies. Their chief aim is to maximize profits, not save lives, and this goal is reflected in the decisions they make. If you end up working on the world's 99th drug for high blood pressure instead of the world's first drug to treat some incurable disease, don't say we didn't warn you.

Consolidation Blues
"There's always the risk of layoff," says an insider. "I don't care who you are [Big Pharma or start-up biotech]." Widespread mergers and acquisitions mean that Big Pharma simply doesn't offer the job security of yesteryear, particularly if you're in administration or manufacturing. While your experiences will likely serve you well in finding a new job in the industry, no one enjoys being laid off. And a merger can be an adjustment even if you keep your job. "Every time you turn around it seems you have a new title and you're still sitting at the same desk," says a veteran of three consolidations.

The Living Dead
The vast majority (5,999 of every 6,000) of promising compounds fail to develop into a marketable drug. So if you're working for a small biotech company, there's a serious possibility that your company's efforts will never produce a marketable product, which in turn would transform the small, vibrant company you joined into a stagnant mire. If you're considering a stint with a biotech shop, evaluate its prospects as thoroughly as possible, and heed an insider's warning: "You don't want to end up among the living dead."

A note about salaries: At large pharmaceutical companies, people in management positions earn significant bonuses in cash and stock options. At many biotech companies, all employees receive stock options, which, if the company does well, can be lucrative. These bonuses are not reflected in the salary ranges below.

Lab Tech
Lab techs perform the routine maintenance tasks-cleaning and maintaining glassware, working with animal colonies, operating lab equipment, and so on-that are needed to keep labs functioning. Only a high school diploma is required, though many people with college degrees start here as well. Salary range: $27,000 to $35,000.

Research Associate
A BS or MS in biochemistry or a related discipline and experience working in a lab are typically required to land this job. Associates work at the bench, conducting experiments under the guidance of PhD scientists. If you're coming out of school with some lab experience but no PhD and you want to work in R&D, this is the job for you. Salary range: $40,000 to $71,000.

Research Scientist
After receiving a PhD and completing a postdoc, a scientist can get a job as a research scientist (sometimes the initial title is "associate scientist"), designing and conducting experiments and writing up results for publication when appropriate. Salary range: $65,000 to $110,000.

Sales Rep
Sales reps work with physicians, hospitals, HMOs, and countless other medical institutions to keep health-care professionals abreast of-and, if possible, partial toward-their company's line of products. Some of these jobs require extensive travel; others don't. A bachelor's degree in the sciences will help, but previous sales experience is more important in landing one of these jobs. Big Pharma companies have huge staffs of sales reps, so these positions can offer the necessary prerequisite for the more complex job of biotechnology sales, where salaries are higher and bonuses can exceed base salary. Average base salary for all sales reps: $68,600 plus generous incentives.

Marketing Analyst/Associate Product Manager
Job seekers without a background in science can also find work on the marketing side in Big Pharma and large biotech companies. A marketing analyst is primarily responsible for coordinating and implementing campaigns for specific drugs, audiences, or both. This involves a little strategy and a lot of execution-things like developing collateral pieces, working as a liaison to advertising agencies, and overseeing a company presence at conventions. Many MBAs enter the industry this way, and-perhaps more important-few without MBAs move far beyond the marketing analyst level, although this varies from company to company. Other people come to these positions from sales. Salary range: $46,000 to $75,000 (more for MBAs with industry or sales experience).

Product Manager
This job requires managing a team of people and working to determine price, distribution, brand image, forecasting, and overall strategy for one or more drugs. On a micro level, the job can be claustrophobic: Imagine spending 13 months of six-day weeks learning every aspect of a single drug, then having the company decide that it would be best simply to let the product die. But over the years you should be exposed to some of the most important, dynamic, and profitable drug markets in the industry, an experience that will give you a big-picture understanding of the industry and make you a greater asset to the company. Salary range: $65,000 to $120,000.

These titles cover a wide variety of jobs, but put simply, programmers/analysts are computer people. There's a lot of complex database work to be done in this industry, particularly for clinical trials, which can involve thousands of patients (sometimes in several countries) with elaborate medical histories and completely different responses to each of the drugs and placebos being tested. And the computational demands of postgenomic research are enormous, creating demand for job seekers who have backgrounds combining science with computers. Bachelor's degrees are usually required (though not always). Salary range: $56,000 to $74,000.

Regulatory Affairs Associate/Manager
The regulatory affairs career path suits job seekers who have a background in science but don't want to do lab work. Regulatory affairs specialists complete the paperwork required by regulatory agencies worldwide and communicate directly with the agencies to ask questions and resolve issues. Depending on their level of industry experience, they may also set regulatory strategy for a pharma company. A master's degree is typically the minimum requirement for entry-level positions. Salary range: $42,000 to $88,000.

Clinical Research Physician (CRP)
CRPs are MDs who develop and implement plans for ushering experimental drugs through preapproval clinical trials. They work on cross-functional teams to maximize understanding of the pharmacological, regulatory, and clinical dimensions of the drugs being studied. Salary range: $90,000 to $200,000; company-sponsored speaking tours and other promotional events offer the enterprising physician numerous other ways to increase net income.

  • Know your audience. A tiny biotech company will want you to be willing to roll up your sleeves and turn on a dime. A huge pharmaceutical company will want you to be comfortable with hierarchy and process. Even within a given sector, each company will have its own specific traits: research-driven, egalitarian, highly structured. By familiarizing yourself with these traits before the interview, you will be able to present yourself in the best possible light-and figure out whether you really want to work there.
  • Be flexible. There is plenty of horizontal movement in this industry, particularly in more-junior positions. If you can't find a job doing exactly what you want, consider taking a job doing something else with the intention of working your way into your ideal job over the course of a year or two.
  • Scientists: PhDs should have publications under their belts, preferably as first author. BS and MS job seekers should have some experience doing research in a lab. And the more relevant your experience is to the lab to which you're applying, the better. In the interview, technical folks should be ready to demonstrate that they can apply what they've learned in school. "If a candidate who's taken some chemistry courses can't tell us how to make a one-molar solution of a given reagent," says one insider, "it's a very bad sign."