Workforce Trends: Research and Development Investment

The brand name pharmaceutical manufacturers in the United States are currently experiencing a change in the workforce. Due to the patent cliff In 2011, major companies have lost autonomy on the blockbuster drugs. This means that the generic pharmaceutical manufacturers can begin to produce similar drugs. This poses a threat to the brand name pharmaceuticals as they are at a price disadvantage. One way to retain profits and allow the industry to grow is through research and development investment. According to IBIS World US, there is a correlation between research and development investment and the number of new drugs (2012). If this statement is taken as a premise, then the follow up question would be, where is the best place to invest in research and development? Should the company invest internally in their own labs or should they outsource to countries such as India? This is subjective to the company because as stated earlier in the IBIS world US report, the brand name pharmaceuticals are generating profits by reducing operating costs and employment. This can be viewed as the industry not growing but adapting to economic conditions, yet as we begin to emerge from the recession, there must be this shift in business objectives from survival through cost cutting to innovation that leads to growth. Should the companies choose to invest internally to the research and development departments within their firms, than that should increase employment in the industry. However, this would provide its own set of pros and cons. The cons of this would be that costs will increase as their workforce increases, whereas outsourcing to India would prove to be less expensive. This is positive as the less expensive it is to research and develop the new drugs the more price competitive it will be against future similar generic drugs. According to IBISWorld, India is expected to contain 8.0% of the worlds clinical trials by 2016. Especially, since most drugs cannot generate as much profit as the amount of money invested in its research and development, all opportunities for more cost effective research and development are crucial to industry growth through product differentiation and diversification in the Ansoff Matrix.  In order to benefit from this information the next step would be to assess whether the companies provided will be able to best address research and development.  Abbott Laboratories recently invested in research and development,  it should be investigated whether it was internally or outsourced and what are the projected expectations from that research, should the information be attainable.

Resources:

IBISWorld US reports: Brand Name Pharmaceutical Manufacturers in the US. (2012).       

             As retrieved from: http://clients1.ibisworld.com/reports/us/industry/ataglance.aspx?entid=487