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There’s a laundry list of things that bothered me during pharmacy school. I’ll write about most of them, eventually. Towards the top of that list was the ignorance surrounding personal finance and my school’s mission (mainly fueled by the pharmacy professional organizations) of pushing students towards careers that just simply have no financial upside.
Before you dig in here, be sure to catch up on my past blogs for context:
Overall model assumptions
These are pre-tax dollars, simmer down.
Student loan balances not included. Uncle Sam will be collecting these on a very regular schedule. See the last section of this blog for a quick cash flow analysis with student loans taken into account at year 3, if interested.
Signing bonuses are also not included, which can be substantial in the world of consulting. Expect initial offers to include a cash sign-on bonus between 10-20% of base salary.
Also not included here are perks like 401k matching, which are just too difficult and variable to the model.
Not all consulting is created equally. Not all consulting is represented in this model.
This model highlights an upside offer, compensation package, and 5-year promotional scheme for a PharmD entering a “Tier 2” consulting firm. “Tier 2” typically refers to strategy firms that are not:
MBB: McKinsey, Bain, BCG
Big 4: Deloitte, KPMG, Strategy& (PwC), Parthenon (EY)
Life science boutique shops: ClearView, Huron, IQVIA, Putnam, Trinity, etc.
A quick google search will get you on the same page. An MBB offer for advanced degree candidates will net you north of $200,000 year 1 (full bonus included). Take this offer, you lucky 1% bastard, and run. Big 4 accounting firms typically only recruit MBAs, so tough luck. Lastly, the life science boutique shops don’t pay at the same level as these other groups of consulting firms. They compete for different types of projects, and therefore, are paid different amounts of money for their services. Compensation reflects this, as a top-dollar offer straight out of school for an advanced degree candidate (2021 hire cycle) was around $150,000 (full bonus included). This, obviously, makes subsequent pay bumps with promotion less lucrative.
DISCLAIMER: There are many life science boutiques that do fantastic work across biopharma. These are great jobs at baseline, but especially great jobs for the niche PharmD graduate. Landing a job at these firms is realistic for most to obtain. Shoot for the stars, but be very happy landing here.
In short, what I’ve highlighted above is a scenario for a PharmD who lands a “Tier 2” consulting position. I chose this scenario to highlight because:
I know this market the best
This reflects the realistic potential upside (in respect to cash, not opportunity) for PharmDs. To my knowledge, there are a very limited few PharmDs who have secured MBB offers straight out of pharmacy school. I personally aimed to be there, as you should, but don’t be surprised if you fail to receive an interview offer, as I didn’t.
There is still massive upside to fellowship.
Let’s level set quickly - your fellowship offer rocks. You’ll be about 30 years old with a $120,000 - $150,000 paycheck. Compared to the kid who bullied you in high school, life won’t be half bad. The “not-so-great” fellowship path is “not-so-great” for two fundamental reasons:
Slow progression due to missing promotion. Most likely driven by poor personal performance.
Functional areas with lower ceilings (think non-commercial and non-customer facing). If you’re not growing top-line revenues, your salary will reflect it.
Outside of these avoidable pitfalls, though, you’re in a great spot.
The massive upside to fellowship programs, which I did not highlight in the above model, are the kids who go from being a fellow to being hired on as directors (effectively skipping both manager and AD). This jump will increase your salary by no less than 300% and you’d be sitting with a comp package well north of $200,000 (full bonus included). Although seemingly unlikely, my network tells me that there is precedent and that the number of PharmDs being hired on as directors post-fellowship is greater than the number of PharmDs getting an MBB offer out of pharmacy school. Although you’d be securing the bag two years after your consultant friends, all else is equal in the world when you’re bringing home a quarter milli.
Don’t be fooled. It’s unlikely that you’ll capture full bonus.
A quote from someone in my network which I found both funny and probably true when chatting about consulting vs fellowship:
Anywhere near 30% bonus for someone coming out of school in consulting is probably near impossible. My perception is that 20% is considered very very good. Unlike pharma, a target bonus is not something you get if you have a pulse. Target in consulting actually means closer to the top end of the range.
From the research I’ve done, I believe this to be true, as it’s cited that about 5-10% of consultants across the board actually receive the full bonus package year over year. Consulting is most definitely a grind, and the way that salaries are paid reflect/enforce this culture. Additionally, to receive the full bonus, both you and the firm have to kick ass for the entire fiscal year.
Per the offers that I’ve seen, it was common for the year 1 total potential bonus to have an upside between 30-40% of base salary. Because of this, my model above shows receiving half of this target bonus (20%) year over year. Just as huge upside exists for fellowship, hitting the full bonus every year is the huge upside for consulting (even outside of MBB). In the model above, hitting a full 40% bonus for 5 years straight would bring the lifetime total earnings past $1,000,000 for the “Tier 2” consultant.
Consulting promotional paths for PharmDs remain largely theoretical at the most prestigous firms.
My main point in the model above is to demonstrate “realistic potential upside”. This is reflected by:
The 20% bonus payout every year (discussed above)
Waiting until the end of year 3 to receive a promotion from the entry-level advanced degree candidate role (2 years to promotion is more status quo)
Staying at the PM role (aka leading a single workstream) through end of year 5
For comparison, rock start MBA hires may be promoted to engagement manager (aka leading an entire client engagement instead of a single workstream) by end of year 2 and then siphoned off into the partner track (senior manager, managing director, principal, partner) by around year 5. Unfortunately for us PharmDs (without MBAs), I’m not familiar with any plain-jane-PharmD who’s currently in a selling role at a top consulting firm. IMO, this can mainly be attributed to two specific things:
Exit opportunities are too lucrative to pass up. Consulting beats fellowship 10 outa 10 times when it comes to diversified exits across various industries (biopharma, VC/PE, med tech, etc). Taking a 10-20% raise to work less in an industry you’ve grown to be passionate about is a no brainer. This also speaks to the higher starting salary of consultants being lucrative for future you. If you’re good, it’s tough to pay you less.
The competencies for selling a project (partners work to sustain and bring new business into the firm) versus executing a project are vastly different. Think you can interpret medicine, crush Excel, and build the best slide deck? Great. But can you sell a Rolls Royce?
Also, be careful drinking the partner Kool-aid, because the path is not for the faint of heart. Those in my network that have burnt out at larger firms before making partner have told me all about their back, to back, to back, to back, to back….80 hour work weeks. Sure, Sr. Managers and above at these firms make well north of $500,000 a year (full bonus included), but you have to ask yourself, what good is that boat if you don’t have the time to use it?
Cash flow is king.
In this section, I built a model that may actually level the financial playing field between consulting and fellowship post-PharmD. Outside of the fact, of course, that being paid $50,000 for two years after you obtain an upper-level degree is absolute shit. And I know, you’re where you want to be and you’re learning what you want to learn, but objectively, it’s still shit.
Originally, my belief was that the increased cash flow during years 1 and 2 would set the “Tier 2 consultant” far apart compared to the “Good fellow”. Specifically, in the ability to break free of student debt. I then built a model. Tbh, I think I was wrong in my original assumption.
As we discussed above, both consulting and fellowships have upside. Also keep in mind that without any bonus captured over the 5 years modeled above, the “Tier 2 consultant” and “Good fellow” make essentially the same amount of money ($100,000 difference).
The model below estimates post-tax and post-loan-payment cash flows for the end of year 3. “Tier 2 consultant” vs “Good fellow”.
Tier 2 consultant (year 3) - $150,000 student loan
Good fellowship (year 3) - $150,0000 student loan
My takeaway is that even after stacking the chips against the “Good fellow”, monthly cash flows at the end of year 3 are the same (3% difference). Thus, the quality of living at this point in time will be equal. Sure, the “Tier 2 consultant” saves $20,000 in loan repayments and might have a larger nest egg, but in the grand scheme of a 30-year career? It’s a wash.
Cash is king my friends. I guess we can both be on top. See below for the links I used if you’d like to play around with these numbers.
https://smartasset.com/student-loans/student-loan-calculator
https://smartasset.com/taxes/income-taxes
Conclusion
Consulting - good. Fellowship - also good. Same, same, but different. Also, I’m literally afraid of being middle-class.