November 15, 2008
Industry shakeups lead to job losses in '08
Merck's announcement in October to reorganize its business—and shed 6,800 employees in the process—caps a year of heavy job losses across the industry.
Prior to the general economic downturn, pharma had already begun to rein in costs by consolidating sales forces and other groups, mostly due to patent expiries, FDA strictures and sluggish pipelines.
If the industry wasn't directly hit by the coming home foreclosures and the subsequent financial crisis, it was perhaps a harbinger of hard times. Some of the major players, like Pfizer, Merck and AstraZeneca, had announced broad restructurings in 2005 (Merck) and 2007 (Pfizer, AstraZeneca), resulting in a significant loss of jobs.
Merck's 2005 restructuring was mostly completed by the end of Sept. 30, 2008, and trimmed 10,400 employees by that date, leaving the employee count at 56,700. The latest round of cuts announced in October are expected to be completed by 2011, and will focus on the creation of a more consumer-centric business model that maximizes resources like outside technologies and common sales and marketing activities. The company also cut 1,200 jobs over the summer, following the Vytorin ENHANCE controversy, and the FDA's rejection of cholesterol drug Cordaptive.
Pfizer's plan, announced in January 2007, will have eliminated 10,000 positions by the end of 2008, and closed two manufacturing sites in Brooklyn, NY, and Omaha, NE, and three research sites elsewhere in the US.
AstraZeneca said in July 2007 that it would cut staff by nearly 12%, or 7,600 positions, by 2010, although US sales and marketing positions specifically would not be affected, a company spokesperson told MM&M.
In November 2008, GlaxoSmithKline announced a 12% cut in sales forces, a reduction of sales personnel from 8,500 to 7,500. GSK attributed the decision to increased generic competition and a decrease in demand for primary care sales reps. GSK also shuttered its Reliant Pharmaceuticals headquarters in New Jersey this year, resulting in an additional loss of 109 workers.
Safety concerns and other problems surrounding Procrit and Vytorin in 2008 led to job losses at Johnson & Johnson's Ortho Biotech and Schering-Plough (who co-markets Vytorin with Merck), respectively. J&J merged Ortho Biotech and Centocor sales forces together, resulting in a loss of 400 field-based sales jobs.
Schering-Plough cut 10% of its workforce—about 5,500 jobs—following the Vytorin debacle. Those cuts mostly affected senior management and sales and marketing positions. “Our first action will be to execute reductions in high-overhead cost areas, beginning with reductions in higher management levels at the company's headquarters,” Fred Hassan, CEO at Schering-Plough, said during a conference call in April.
Two other company reorganizations at Wyeth and Novartis led to losses of 1,200 (Wyeth) and 550 (Novartis) in sales positions. At Wyeth, the cuts were part of a cost-cutting program titled “Project Impact,” announced last January and scheduled to eliminate 10% of the company's workforce by the end of 2010. Novartis's “Customer Centric Initiative,” announced in October, will establish five new cross-functional regional units for primary care, in addition to the job cuts.