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Whatever Happened to Insourcing? The Case of AMRI/Lilly

Albany Molecular (AMRI) has been a big name in contract research for many years now. They’ve had a lot of twists and turns in their history, including being taken private a couple of years ago after having taken on a good deal of debt by acquiring other companies in turn. But it sounds like they’re about to have one more.

Back in 2011, they announced an “in-sourcing” deal with Eli Lilly. Former Lilly chemists (who had already been let go by rounds of layoffs in Indiana) were re-hired by AMRI to go back and work in the same labs as before, just not as Lilly employees. And, one assumes with great confidence, not with Lilly salaries and benefits, although it certainly boosted AMRI’s head count in the area. But this arrangement seems to be coming to an end. I’m told that these chemists have been notified that almost all of these positions are being cut, though. The chemists involved have priority in the queue for any openings at other Lilly AMRI sites; otherwise I believe that they’re being offered severance packages. My understanding is that they’re not being replaced – at least for now, they leave behind a floor of empty labs.

I would assume that this was more of a Lilly decision than an AMRI one, although I don’t have any more details. And I’m also trying to match that up the news with this earlier announcement that AMRI was extending “a key insourcing relationship with a major pharmaceutical company” that had started in 2011 and was set to expire in December 2018. That sure sounds like the Lilly deal, both the starting and finishing dates – if it refers to someone else I’m glad to be corrected – but if so, what happened to that extension out to 2021? AMRI does a lot more than this sort of thing, of course, including a lot of contract manufacturing, etc. Last I heard, they had facilities in about ten different countries. But what’s been happening with the whole idea of insourcing chemists, anyway?

This was a big topic back in 2011 and 2012, but you don’t hear as much about it these days. Is that because it’s become quietly normal, or is it because it hasn’t taken off the way it looked like it was going to? I can tell you that at the time of the 2011 Lilly/AMRI deal that a number of chemists were rather pessimistic (I know, how unusual, but still), thinking that this was the look of the future: get downsized so you could be hired back at lower wages, because where were you going to go, eh? Perhaps one thing that’s happened to this model is the concentration of biopharma research into hubs like Boston/Cambridge. Lilly always had the reputation of being sort of an island unto itself out there around Indianapolis, and people laid off from there often had to uproot everything and move to a totally different part of the country. In that situation, being insourced might be well, not exactly attractive, but making the best of a bad situation. But you can be laid off in Cambridge with the hope of finding another job that lets you even keep using the same parking garage.

Unfortunately, that really doesn’t seem like it’s going to be the case with this Lilly announcement. If an insourcing move might have saved some people’s positions and family situations at one time, what to do when that goes away in turn?

44 comments on “Whatever Happened to Insourcing? The Case of AMRI/Lilly”

  1. Jeff says:

    Lilly has certainly not ended their use of insourced labor as they still have a sizable contract with at least one other company. I assume the drop off in talk has to do with it becoming normalized for entry level work, while experienced workers have realized that it basically always pays less for similar/the same work and isnt worth it.

  2. Bagger Vance says:

    Yeah that’s crazy.

    Crazy they weren’t immediately replaced by H1-Bs that they had to train. Globalism!

    1. loupgarous says:

      In the group I worked with (as a contract employee with Lilly at the House that Prozac Built in downtown Indianapolis), the statisticians were predominantly Russian and Chinese emigres, with a few Americans involved. Almost all of us SAS coders were US nationals.

      But as far as having to trarin H1-b visa holders to do Americans’ jobs? Not in the group I worked in. The statisticans I worked with (four Chinese, one Russian) were professional, knowledgeable, and very good to work with (I and other project analysts were frequent visitors to the statisticians’ cubicles, making sure our code did the statistical tests they wanted run on our clinical data).

    2. Anonymous says:

      I don’t know if there was a lawsuit, but when Meg Whitman was running HP, she did the same thing. Fired employees were required to train their H1-B replacements. (I knew a guy who had to train his replacements on some complicated HP software project. All of the experienced coders were laid off and the new H1-Bs were expected to pick up where the experienced coders had left off. On that project, the plan failed miserably. There was no legacy knowledge of the project, the program or the code. Many customers, internal and external, were disappointed. Meg Whitman was supposed to get a $50+ MM Golden Parachute but I don’t know the final amount she actually received.)

  3. Project Osprey says:

    To the best of my knowledge AMRI pulled out of the UK a few years back. They were not pleasant to work for – rolling 3 month contracts and endless unpaid overtime.

    1. A Nonny Mouse says:

      The UK operation was a bit of a disaster all along; went from Palmer Research to JM (I think) then to Great Lakes (who I had dealings with), Ian Schott (when the Welsh Government built some fantastic labs rather than portacabins) and then to AMRI.

      That has closed and certain projects that they had moved out to facilities in India.

      To be honest, were I TomD’A (an old drinking buddy from the next lab at MIT) I would have just taken the royalties and gone to a low tax haven with lots of beaches rather than found a company.

    2. Dr Dodged-a-Bullet says:

      I was interviewed for an in-sourcing position with AMRI at the Lilly site in the UK near Ascott site a few years back fresh out my PhD. They put me up in a lavish Hotel overnight and at the end of the tour/interview day I was told the salary would be less (after tax) then what I was earning as a PhD (stipend + demonstrating pay).

      When I asked if you could live around there on that wage I was told ‘it was just about do-able’….Fortunately, I wasn’t offered the job.

      1. Dionysius Rex says:

        Can you quote a number for us? Moral of the story as a British medchem – learn German!

        1. oldnuke says:

          When I was an undergrad (1970), and ACS chem degree required a reading knowledge of German or Russian. I had 5 years of high school/jr high German and 2 more in college. I had sufficient German to translate some articles and blow up my hood. 🙂

          Guess that wouldn’t be much of a recommendation. Unless I was going for a job in Herr Doctor Klapotke’s lab. 🙂

        2. Not OP says:

          FWIW that does not seem to be always true any more.

        3. Dr Dodged-a-Bullet says:

          When you factored in I didn’t pay tax, my stipend was equiv to ~21K a year salary. Demonstrating pay pushed it to ~25-26K equiv before tax depending on how much I got.

          AMRI told me 24K starting salary

      2. Lambchops says:

        Sounds more or less in line with my experience interviewing at Lilly UK a few years back (though to be fair the salary was definitely more than I could have earned with stipend + demonstrating).

        Lesson learned not to travel on the day, sounds like I missed out on a dinner!

        The set up pre application was fairly opaque (I was under the impression I was applying for a contract position as a Lilly employee) but fortunately I got a heads up about the insourcing nature of the position and that whoever was running it (I can’t recall he exact names of the company or intermediary involved) was rather difficult to deal with should the terms of employment be questioned.

        Again to be fair the Lilly employees who interviewed me were very open and transparent about how things worked and that, while the job would be interesting from a synthetic perspective I wouldn’t be involved in any medicinal chemistry unless I was able to get a job with Lilly itself and that there were very few such positions and competition was fierce.

        Fortunately I secured another job with similar pay (lower salary but in a cheaper location so much of a muchness) which, while still having some of the constraints of working in a CRO, did actually involve doing some proper med chem and developing as a chemist rather than just being told to churn out some molecules.

        So yeah, doesn’t surprise me that the model is failing, once the settled old guard who may not have wanted to move are gone it’s not an attractive proposition for people starting out in their careers.

  4. Hap says:

    It seems like something that could only work in a place with a captive labor pool. For the company, they probably don’t get enough money from them for it to make sense (productivity? who cares about that?) – they could spend less sending their jobs elsewhere. While it could act as a stick for other employees, it probably also demotivates them (“we could do this to you, too”) which doesn’t make them more effective and so both the insourced employees and the ones not insourced might be more likely to leave if there were other opportunities. In addition, AMRI’s reputation is ungood, so if people had a choice between staying and leaving, with AMRI more people would be likely to leave anyway, even with few or no better choices in the area.

  5. John Wayne says:

    ‘Captive labor pool’

    To quote Derek, McKinsey probably has a slide about this.

    1. More than anonymous McKinsey victim says:

      McKinsey….I say we lift off and nuke the site from orbit.

      1. Hap says:

        It’s the only way to be sure.

  6. MTK says:

    The unfortunate truth is that often times a company’s HR department should be renamed HC, as in human commodities.

    I’m not sure when a company crosses that line from treating its employees like commodities rather than resources, but I’m pretty sure once it does things go bad. Not that it goes bankrupt or anything like that, just that from that point on productivity will have to be attained from sources that aren’t human.

    1. Dionysius Rex says:

      HR = Human Remains

    2. anon the II says:

      As soon as someone allows the use of the term “FTE”, you are hosed.

    3. Scott says:

      As an HR major, that is far too true to be funny, even as gallows humor.

      1. Orvan Taurus says:

        I’ve mused that coal, oil, and gas are considered resources, so…

    4. eub says:

      I don’t know, I think even by the time you’re calling people “resources” you’re already far down the smooth road to perdition. Resources are fungible material goods produced by extractive methods from natural deposits you didn’t create. Resources are what you strip-mine.

      1. MTK says:

        Valid point, eub, but at least a resource can (although not always) be rare and valued. A commodity? Never.

  7. Ted says:

    I’m torn by this sort of news. I’ve gone through multiple rounds of layoffs through my career, and I feel bad for anyone that has their job pulled out from under them.

    On the other hand, seeing the particular corporate entities of Lilly and AMRI extirpated would give my lizard brain an endorphin-rich jolt of satisfaction. And yes, I am keenly aware that their economic niches would be rapidly subsumed by new variants.


    1. Thanks Ted you just increased my vocabulary by 1.

  8. Tom says:

    While Lilly is the only pharma company in Indianapolis, by no means is it the only place chemists can work. Indianapolis has Roche, Corteva/Dow Ag, and Elanco (off the top of my head). I’d say in general the Midwest has been underutilized as a chemistry hub even though some of the best academic chemistry groups are located there (Michigan, Wisconsin, Purdue, UIUC). As tech moves to “fly over country” (e.g. Austin, Columbus, Indianapolis), pharma consolidates to SD and Boston. It doesn’t make sense. The three big players in chemistry left in the Midwest are Abbvie, Lilly, and Dow.
    That being said I believe Lilly opened a new site in La Jolla last year(?). Cutting this deal might be to relocate the med division to La Jolla and only do process chem in Indianapolis?

    1. Jim Audia says:

      Chiming in to support Tom’s point that there is an upward trajectory for biomedical (including drug discovery/development) in the Midwest which is becoming less ‘fly-over country’ over the past several years. Strong programs at Northwestern, UChicago and UIC, and significant external investment (see recent formation of Lakeside Discovery) in the area.

      1. Fluorine Chemist says:

        The two major Universities in Iowa – UI and ISU also have strong Chemistry programs!

        1. CMCguy says:

          You are fooling yourself if believe having a source of good chemist and other science types are even a consideration. Pharma/Biopharma today is driven by Finance types where most is controlled by elites from the schools on the East Coast and Bay area. If not located near the funding big wigs capital pipelines are much more restrictive and uncertain

          1. anon the II says:

            You’re right on this but it’s not new. Supposedly Bristol-Myers moved research from Syracuse, NY to Wallingford, CT because the CEO’s wife liked the quaint little town with lots of antique stores. Unfortunately, most of the scientists got no raises to compensate for the 3 to4 fold increase in housing prices. Those living the good life in Syracuse found themselves in small apartments in Wallingford.

  9. MoMo says:

    Never met a more dejected group of scientists than AMRI employee chemists that worked for Lilly. They didn’t even give them business cards and they exhibited signs of PTSD when in crowds.

  10. Isidore says:

    Back in the early 1990s, when I was leaving academia for industry and more money, I had interviews at a couple of companies in NJ (one since bought by Merck, the other having become part of Novartis). Back then NJ was more or less the hub of pharma industry in the US. At the time I also had an offer from Lilly for essentially the same type of position. The Lilly salary was only marginally lower than the almost identical salaries at the two NJ companies. Upon mentioning to the HR person of one of the NJ companies that the cost of living at their area was considerably higher than in Indy and so I would have expected a commensurately higher salary I was told that HR directors get together and discuss salaries so there are no great differences between companies and in any case, companies on the East or West coast can get away with paying less than those in the middle of the country, as most younger potential employees want to live at one of the coasts. The latter point explains perhaps the biopharma consolidation in SD and Boston, although there are other factors as well. As to the former point I pointed out that what he told me might be viewed as violating anti-trust regulations. I was not offered the NJ job and, to some lingering regrets, I did not take the Lilly job either.

    1. John Adams says:

      Isidore – I had precisely the SAME conversation with two HR reps from Merck in 1991. I even provided them with superior (both in salary and benefits) competing offers from two other East Coast large Pharma companies which they scoffed at (paraphrased response: if money is your driver, then by all means feel free to go elsewhere as ten other scientists would jump at the chance to join the best Pharma company in the world). What appalling arrogance ! Judging by the current turnover rate there, my, how things have changed ! Why? Because they started treating their scientists like “FTEs” rather than their best resource.

  11. Pieinthesky says:

    It’s sad how these companies choose to cluster in places with a high “misery index” when it comes to cost of living (west coast/NJ), weather (Boston/NJ) or both (Boston!). Poor scientists spend half their youthful years getting through Ph.D. and post-doc serfdom at sub-poverty line wages, and when they graduate they are condemned to even more penury and suffering. How stupid is this. There is no correlation between geo-coordinates and drug discovery success.

    1. pv=nrt says:

      Zillow says cost of living in NJ ain’t bad compared to Boston and SF/SD. Schools are great, too.

      1. The Truth says:

        NJ is a cheap place to live, if you want to live in Newark.
        You don’t want to live in Newark.

  12. Anonymous says:

    Rather than entrust the mail to a human being, Lilly had a robot that roamed the corridors delivering the mail. I wonder if it is still there or if it was insourced to AMRI or if it took the early retirement package.

    Klaatu barada nikto! (link in name)

  13. Anonymous says:

    I am a former AMRI/Indy employee, and I wanted to correct a few misconceptions about this. First off, very few former Lilly employees were hired by AMRI in 2011 (or any time since, for that matter). Rather, some people transferred from Albany, and the rest were new hires. I am grateful for the job, as they gave entry level work to many chemists, and allowed us to gain valuable experience. While it is true that we were paid much less and with worse benefits than the Lilly folks we worked with, we were grateful that they at least had kept the jobs in the U.S. We were not some sort of slave labor paid pennies on the dollar. On the whole, and especially over the last few years as the relationships matured, the AMRI and Lilly chemists got along fairly well, and the anonymous feedback we received from Lilly was usually very positive. We worked very hard and accomplished many difficult goals that were set for us. For all these reasons, I was shocked to hear this news that they had cut the contract. Having reached out to many of my former colleagues, they were equally stunned. This seems to have come out of left field, and I have no idea why Lilly did this.

    1. Molecular Mercenary says:

      I’m also a former AMRI/Indy employee, and I’m in agreement with this. For most folks who were brought on as AMRI contractors at Lilly, this was their first job out of undergrad / postgrad. While the quickness of the work could certainly overwhelm (it was a crucible of sorts) and turnover was high, most who stuck it out are highly skilled organic chemists, both in terms of efficiency and knowledge.

      Although I would always hear through the rumor mill that certain folks at Lilly were unhappy with AMRI’s presence (and I can understand why from a job security standpoint—the bane of just about every chemist), everyone my team worked with was all too happy to receive our synthetic support.

      Best of luck to those who are no doubt dusting off their resumes and preparing to either make a tangential career jump or move to a different area. There’s no way the Indianapolis area is going to be able to absorb that much scientific talent in a reasonable time frame.

      I also know that most AMRI employees were dissatisfied with the situation they were in, so I guess the silver lining is they have a chance to find a company that genuinely values them and sees them as more than just an FTE that cranks out molecules.

  14. ex-Lilly says:

    Former Lilly employee here – one who left at the end of 2017 with 2300 other Lilly FTEs. I suspect that this is just one more step in the new(-ish) Lilly CEO’s plan to turn Lilly into a sales and marketing company that co-promotes medicines developed by other companies. if you connect the dots, you will notice the 5 voluntary exit programs Lilly has run over the past several years (including the voluntary early retirements last Dec), the spin off of the animal health unit (Elanco), closure of the Lilly research site in Shanghai, divestment of legacy drugs sold in China (that required technical support to maintain the marketing authorizations) and now this action in the Discovery chemistry group. Lilly corporate management is trying to shed as many technical resources as quickly as possible. This is very likely not the last thing thing you will see in this vein from Lilly….

    1. Formal Lilly as well says:

      Totally agree. Lilly just can’t wait to be Pfizer 2.0.

  15. Andy Extance says:

    Didn’t a similar in-sourcing deal happen in the UK between Pfizer and Peakdale when Pfizer pulled out of Sandwich? Would be interested to get an update on that.

    1. ex_London Chemist says:

      Pfizer pulled out a few years ago. They had such a big team, Peakdale couldn’t redeploy them all and there were redundancies.

      And then, a few months later, Peakdale got more business and started hiring again.

      Nature of the business……

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