Like every other industry, the pharmaceutical game is changing fast. It had a good ride doing business the traditional way, says David Finegold, dean of the School of Management and Labor Relations at Rutgers in New Brunswick, but “now that business model is broken.”
No longer can bioscience companies turn ideas into working, profitable drugs entirely by themselves. Research, development, and clinical trials are going outside U.S. borders. And New Jersey’s last great powerhouse industry could go with them, unless these organizations understand how to manage the abundant talent they have at their fingertips.
Finegold will present “Cutting-Edge Research On Organizational Development,” part of BioNJ’s human resources forum, on Thursday, June 26, at 11:30 a.m. at BioNJ’s offices, 1 AAA Drive, Suite 102, Hamilton. Free. Call 609-890-3185 or E-mail firstname.lastname@example.org.
Finegold is a staunch proponent of uniting the talent-rich, but collaboratively poor, bioscience avenues in New Jersey. He is a main player in Bio-1, a collaborative akin to the Delaware Valley Innovation Network and the Bioscience Collaborative, which seeks to promote the Princeton-to-New Brunswick corridor as the next hub of the global bioscience industry. In order to protect and enhance central New Jersey’s lock on what Finegold defines as its major assets — many companies and a slew world-class research facilities — the companies themselves need to understand how the industry is changing and how to attract, motivate, and retain top talent in the face of that change.
Pharma goes Hollywood. Traditionally, pharmaceutical and bioscience companies, on their own, have taken ideas from beginning to end. In-house talent came up with ideas, did research and trials, developed and reworked formulae, and even distributed new drugs.
Until recently, this model has worked extremely well, Finegold says. But these days more money is being spent in the middle stages of development but less is coming back. To combat the problem, pharmaceutical companies have done what the manufacturing industry did when its own ways of doing business started failing — it started exporting some of its work.
While the outsourcing path helps the immediate bottom line, it has gradually changed the industry and made it question what the future of New Jersey’s biopharma industry will be. But Finegold says big pharma can look to Hollywood for guidance. In the 1940s, he explains, the Hollywood studio system ran the world’s entertainment industry. It owned and manufactured everything, from the beginning (scripts) to the end (movie theaters), and crafted each project entirely on its own.
But long after the Supreme Court broke the studios, Hollywood’s major entertainment companies still run the entertainment world. The difference today is that they do it through partnerships and contracts. Hollywood still controls the game, it just does it through good cooperative management with myriad outside sources.
The old ball game. There is a paradox in human resources. The more talent and creativity directly drive the organization, the less human resource professionals are involved. Finegold, a native New Yorker and Yankee fan, points out his favorite team as an example. The Yankees are driven by the talent of the players, and those players ideally are managed not by people in suits but by coaches and managers who know how to play the game.
Historically, pharmaceutical companies have run their businesses the same way. Scientists, who know all there is to know about chemistry or biology, have monitored the talent pool. And it has worked because in order to be a successful biopharma, “you have to speak the language of science,” Finegold says. But while the strategy works in baseball, it no longer works so well in biopharma. Lots of businesses are started by scientists, but those scientists often do not understand how to run a business.
“The failures that are fattest,” Finegold says, “are the ones where they haven’t figured out the HR and how to scale each piece.” He says companies need to understand their HR strengths. What role HR will play in a company needs to be explored and to what degree scientists will take up the business of science will help define how well a company operates.
The new ball game. If you look into the Yankee dugout, you will find players from all corners of the planet. Similarly, says Finegold, if you walk into most pharma companies in New Jersey, you will find the same thing.
With major research programs at Rutgers and Princeton drawing top science talent from China, India, Russia, and many other parts of the globe, New Jersey’s pharma companies are packed with international personnel. But recently drug companies have taken early and middle-stage projects to these far-off lands directly. The reason is simple, Finegold says — companies get the same amount of work done for a quarter of the price.
What needs to be considered is not how to reverse the process but how to play into it smartly, he says. As outsourcing has become a staple in business, the polarization of opinion about the practice has grown wider. It has been seen as a loss for American workers and a gain for international workers.
But Finegold says that does not have to be the case. To get the win/win happening, we must stop looking at the bargain-basement price tag as the final arbiter. Here’s how it works:
In the pharma game, labor is not the main driver of the bottom line. Time is. In terms of a patent, you have 20 years to get from idea to marketing, and in terms of financial reward, it is certainly not unheard of for a drug to rake in $1 billion a year. Now say that development-to-marketing in a U.S. laboratory takes 12 years, but it only takes 10 if the work is outsourced — cheaper costs can translate into more manpower doing the research and shave two years from the project. Simple math shows that the extra two years translates into an extra $2 billion.
“The question is: How fast can an idea become a drug?” Finegold says. The ability to get a drug out faster means not just more money, but a better position from which to develop new drugs. Proper use of outsourcing can bring forth a drug that otherwise would never have seen the light of day.
The talent pool. The way to stay competitive in the big picture, Finegold says, is to tap the local resources and keep them close by. Novo Novartis, for example, built its global R&D facilities in Cambridge, Massachusetts, not because it’s cheap, but because the area offers an enviable font of the world’s top young minds.
This is why he so advocates a collaborative approach and wants to see New Jersey unify its talent and resources.
Finegold has made a career of successfully predicting how economic puzzles will play out. After graduating from Harvard with a degree in social science in 1985, he earned his Ph.D from Oxford in 1992. While at Oxford, he worked at Warwick University and probed the relationship between England’s inability to prosper since World War II and the skill/education level of its citizens. He theorized that low-levels of investment in the nations youth kept the country poor and convincingly argued that more investment in education and enterprise would turn things around.
England listened, Finegold says, and what was once a country that graduated only 10 percent of its populace from college is now one that graduates a higher percentage of its residents that the United States.
After college, Finegold worked in comparative skills at the Rand Corporation in Santa Monica, California. He later became a professor at USC’s Center for Effective Organizations. While in California he studied computer industry collaboratives in Silicon Valley and La Jolla. In 2000 he helped create the Keck Graduate Institute, a school designed to teach science as a business, in Claremont.
In September 2007 Finegold was recruited to Rutgers where he now is in the process of implementing the study of science as a business across the university’s statewide campuses. The goal, he says, is to teach more than science to the scientists. In order for the state’s bioscience industry to remain on top, he says, scientists must learn to speak the language of business.