Healthcare in the United States is a trillion-dollar business. Its vast complexity and breadth of scope has fascinated many business leaders, entrepreneurs, and investors. Over 15% of students at HBS have some type of work experience in healthcare, including biotechnology, health services, medical devices, and pharmaceuticals. Another significant number of students has had exposure to healthcare through venture capital and private equity.
There exists a substantial contingent of people at HBS, however, who have had minimal exposure to the healthcare industry, but would like to find out more about it. At roughly 14% of the American economy, the market for health products is huge. Medical devices alone are estimated to be a market of over $140 billion. In addition to its vast size, the healthcare industry is undergoing an incredible amount of change. Power is shifting from providers to payers to patients. The complexity of managed care has allowed for the emergence of fascinating new entities such as disease management companies and focused factories.
An excellent way for HBS students to find out about the healthcare industry is to do a summer internship in this area. Second year students who have worked in the industry either before business school or as summer interns are another excellent means of gaining insight into this exciting domain. We have compiled a basic guide to finding either a summer or full-time job in the rewarding field of healthcare. By no means exhaustive, we will provide a broad description of the categories of employment available.
The pharmaceutical sector has historically been among the most profitable in any field over the past four decades. Return on equity is over 20% for the sector and profit margins on drugs are typically tremendous. The research and development costs to produce medications are huge, typically around $500 million per drug, partly because of the cost of developing drugs that ultimately do not make it to market. Moreover, the time from identification of a compound to bringing it to market can be up over a decade. Most pharmaceutical companies, however, are flush with cash that they re-invest in finding new materials. HBS students have had a long history of entering “pharma” and rising to the top of the field. Indeed, Ray Gilmartin, the current CEO of Merck, is a graduate of HBS.
Pharmaceutical companies that have been popular with HBS students include Merck and Pfizer. Pfizer is based in New York City and has hosted students to learn about the subtleties of market management while enjoying the excitement of the city. Merck is located in Pennsylvania and New Jersey, and is very interested in hiring HBS students. Another firm that recruits heavily at HBS is Eli Lilly, based in Indianapolis. Lilly has been a strong supporter of HBS students and several career paths have sprouted from summer experiences at the company. Opportunities exist abroad as well in companies such as Novartis in Switzerland, Shire in Canada, Rh“ne-Poulenc Rorer in France, and GlaxoSmithKline in the United Kingdom.
Merck, Pfizer, and Eli Lilly are all renown for their marketing capabilities and typically offer opportunities for MBAs in the marketing department. Before new employees begin a marketing role, these companies may recommend that they spend some time in sales in order to gain a more complete understanding of the customer. For more finance-oriented persons, these companies also offer positions in their corporate finance and business development departments. Furthermore, in the past few years, both Pfizer and Lilly have started their own venture capital funds. HBS students interned at Merck, Pfizer, and Eli Lilly (in the venture capital arm and strategic planning department) last summer*. Another HBS student spent four years in sales with Merck before HBS*.
Biotechnology is defined as the use of substances from living organisms to make or modify products that benefit plants, animals, or humans. Over the past decade, “biotechnology” has become a buzzword as major milestones such as mapping the human genome have been reached. On a practical level, opportunities available to MBAs in biotech firms resemble those available in their pharma counterparts.
A host of biotech companies have connections to HBS. On the west coast, Genentech is one of the oldest and most successful biotechs. Others include Affymetrics and Amgen. In Boston, some key companies are Millennium, Genzyme, Biogen, Vertex, and ImmunoGen. Some of the other stronger biotech companies are Immunex, Cephalon, Variagenics, and Dyax. HBS students did internshops last summer at Genentech, Amgen, Millennium, Genzyme, and Celera*. Since most biotechnology firms are rather small, they do no recruit at HBS and students, therefore, may have to be more actively involved in their job search process in order to find available opportunities.
Medical Devices and Diagnostic Equipment
The medical device and diagnostics industry is a field predicted to grow to over $200 billion in the next decade, dominated by several large companies and fragmented with thousands of pioneering, innovative smaller firms. This field deals with creating and manufacturing the tools used in patient care and in research and development. From the medical device perspective, Minneapolis-based Medtronic leads the pack and boasts Bill George, an HBS graduate, as its dynamic CEO. Medtronic has won awards such as “most ethical company,” while George has received awards such as “best manager.” Guidant, an Eli Lilly spin-off also based in Minneapolis, focuses on cardiovascular medical devices and has grown rapidly in the 1990s. Like their large counterparts in the pharmaceutical industry, Guidant and Medtronic have strong marketing, corporate finance and business development departments. Over the past few years these firms have also started their own venture capital funds. Both Guidant and Medtronic have full-time jobs and summer internships available in Minnesota and California. HBS students have both worked and interned at Guidant*. Of note, large conglomorates such as Johnson & Johnson, Hewlett-Packard, General Electrics, and Tyco have divisions dealing with medical devices and diagnostic equipment.
The healthcare services field refers to organizations that contribute to the process of delivering medical care to patients. Three major health care networks recruit at HBS-US Healthcare, Tenet, and United Health Group. Tenet offers internships in a unique program called the “Future CEO Program,” where after an 8-10 month period of orientation, associates transfer to a hospital as an entry level Chief Operating Officer (COO), with expected progression to hospital CEO within 4 to 7 years.
Many HBS students enter the healthcare field through work in consulting. Consulting offers general management exposure to numerous fields within the sector. Although most consultants start as generalists, several firms offer the opportunity to focus in the health care industry. The big players such as McKinsey, BCG, Bain, and Monitor all have significant healthcare practices. McKinsey’s focus is on pharmaceuticals and biotechnology, and its New Jersey and San Francisco/Silicon Valley offices head up the practice. BCG’s strengths range across pharmaceuticals, biotechnology, and managed care, with the US healthcare practice based in Boston. At a recent on-campus presentation, L.E.K. reported that up to half its revenues came from healthcare consulting, mainly based out of its Boston practice. Smaller, boutique consulting firms with a large percentage of healthcare clients include Integral, Health Advances, The Advisory Board, Braun’s Vertex Partners, the Wilkerson Group, and CSC Healthcare. Of these firms, Integral and Health Advances are based in Boston, have hired HBS alumni, and are currently recruiting at the school.
Another way HB
S students work in healthcare is through investment banking. Given the amount of consolidation in pharmaceuticals, and the thousands of small device and biotech companies that are either acquired or go public, there is plenty for bankers to do both in the United States and abroad. HBS students have worked in healthcare investment banking with Goldman Sachs in London*. Another option is equity research. There, analysts may focus on healthcare and study firms as investment opportunities. One HBS student spent his summer in equity research, also with Goldman Sachs*. Although most of the other large investment banks such as Merrill Lynch and Lehman Brothers have strong healthcare groups, many boutique or regional firms have significant practices as well. For example, A. G. Edwards, based in St. Louis, and Raymond James, based in Tampa , perform all the same functions as the mega-banks, but for smaller clients. One HBS student worked for A. G. Edwards before coming to HBS*.
Venture Capital and Private Equity
Almost all venture capital and private equity firms have a certain proportion of their portfolios in the health care sector. These include big name firms such as Warburg Pincus Ventures, Chase Venture Capital, Atlas Partners, the Sprout Group, and in Europe, Apax Partners. Even LBO firms such as KKR and Texas Pacific Group have sizeable holdings in the health care sector. Local VC firms with health care interests include MPM Capital, One Liberty Ventures, where one HBS student worked last summer*, and Summit Partners, home to many Harvard MBAs. There are even firms that focus specifically in health care including Tullis-Dickerson, Schroder Ventures International Life Sciences, Oxford Biosciences, Paramount Capital, and Frazier Health Care.
In summary, healthcare is a sector with tremendous impact in business and the economy. Although not without its own ebb and flow in industries such as biotechnology and managed care, the healthcare sector is an important backbone of our economy. During economic down-turn such as the one we are currently experiencing, non-cyclical or counter-cyclical industries such as some of those that make up healthcare may play an even greater role.
*To get in touch with any of these students, please contact the HBS Healthcare and Biotechnology Club.