PharmExec Blog

2010: A Year of Big Layoffs for Big Pharma

What are the factors that are contributing to the layoffs that have taken place at virtually all the Big Pharma companies this year?

According to the newly released Job-Cut Announcement Report from outplacement consultancy firm Challenger, Gray & Christmas, pharma has cut more than 6,000 jobs in September alone, and more than 43,000 so far this year.

Which companies have contributed to this staggering number, and what are the underlying causes of job losses in the industry?

Most recently, Sanofi-Aventis announced its plans to eliminate 1,700 jobs in its US pharma business—about 25 percent of the company’s US pharma workers. The majority of jobs lost will be sales positions, and a small number of administrative jobs will disappear as well.

Before that, in September, Roche announced its “Operational Excellence Initiative,” which—while partly intended to analyze and restructure different segments of the company to maximize productivity and ROI—ultimately amounted to job cuts in an effort to “set the right priorities to ensure a successful future,” according to a statement released by Roche.

In May, Pfizer announced 6,000 layoffs that it said was part of “manufacturing reorganization” following its 2009 Wyeth acquisition. Possibly part of its plan to remain on track for its targeted cost reduction of $4 to $5 billion by the end of 2012, Pfizer has gone from nearly 114,000 employees internationally in Q 1 2010 to around 33,000 as of May of this year, according to a story on DailyFinance.com.

Following its 2009 acquisition of Schering-Plough, Merck began making cuts in February. The post-merger cuts would be a way to “eliminate some of the duplication,” according to a statement made in January by Merck CEO Dick Clark. “We have taken the best from both companies, from a process standpoint and a people standpoint,” he said.

And at the start of the year, way back in January, AstraZeneca announced its plan to cut around 8,000 jobs—four percent of its total workforce—over the next four years. As it does for so many Big Pharma players, the patent cliff lies at the heart of the issue. AstraZeneca products scheduled to lose patent protection this year are Armidex, a breast cancer therapy; and Pulmicort Respules, an asthma treatment.

Part of the trouble for drug manufacturers is the looming patent expiration dates and impending generics competition. Three of Sanofi’s top products—anticlotting medicines Lovenox and Plavix and cancer drug Taxotere—have or will soon have new generic competition, jeopardizing nearly $10 billion of the company’s $40 billion in annual sales, according to a story on Yahoo! Finance.

There are several other factors that are contributing to the layoffs trend:

• Structural transformations in the marketplace, focused on the declining relevance of a large sales force in an era of managed care as well as more targeted high-yield approaches to drug development that require less dedicated staff for R&D operations.

• Redeployment of assets in line with globalization and the ability to dig deep in untapped growth markets. Job losses in the US and Europe mean that more workers can be hired in countries like China—where, for example, turnover among sales forces is quite high and needs frequent replenishment.

• Advances in information technology that improve productivity for a smaller workforce. Information is not only a strategic asset; it is a labor-saving instrument to replace back-office functions and support more automation in manufacturing.

• The high cost of producing biologicals drugs are forcing companies to be more selective in where they manufacture, with fewer plants staffed by fewer people with more skills.

While such redistribution of assets and focus on greater ROI can be positive for a company as a whole, it can have negative effects on individual workers. In an industry that was once thought to be immune to layoffs, the dynamic can change if workers become wary of job loss, shifting toward a culture of bureaucratic self-preservation that may not always be in line with the importance of fostering entrepreurialism and prudent risk taking.

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2 Comments

  1. Kruger
    Posted October 25, 2010 at 8:58 am | Permalink

    Access to doctors and hospitals has reached an all time low. The need for drug reps dwindles from one day to the next.

  2. Posted October 25, 2010 at 12:47 pm | Permalink

    Big Pharma is doing an excellent job of managing itself right out of business, driving up costs, stifling innovation and contributing to the worryingly high level of unemployment, particularly in the US.

    Consolidation in the industry might provide a temporary boost to shareholder return, but the sad fact remains that fewer innovations are coming from Big Pharma. Acquisitions inevitably result in major layoffs (review pharma job cuts over the past 5 years if you need proof of this), and patients have fared no better with fewer, larger pharmaceutical companies compared to the days before M&A became the name of the game for Big Pharma.

    So where does it all end? Is driving out competition by acquiring everything you can healthy for the business overall? Or is it just making things worse?

    I wonder what some of those 43,000 people who have lost their jobs in the pharmaceutical industry this year alone would have to say about this.

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