These days, mandatory furloughs and staff cuts have employees in all industries nervously glancing over their shoulders. The pharmaceutical industry is no exception. Last week, Merck (Whitehouse Station, NJ) revealed plans to reduce its workforce by 15% by the end of 2012.
The job cuts are part of the company’s restructuring program that began after the merger with Schering-Plough (Kenilworth, NJ). Certain manufacturing facilities and research and development (R&D) operations will be consolidated, but the company has not yet said which. In addition, positions that are considered “duplicative” will be eliminated.
Job cuts such as these, although unfortunate, are commonplace after mergers. For example, Pfizer (New York) has eliminated positions as part of its own restructuring program since it acquired Wyeth (Madison, NJ). But terminations are occurring even at companies that have not merged with or purchased any competitors.
One case in point is Eli Lilly (Indianapolis, IN), which will cut 5500 jobs worldwide. The cuts are intended to reduce costs and dodge the one-two punch of upcoming patent expirations and competition from generic drug companies. In 2009, the value of Lilly’s stock fluctuated widely and ultimately fell by 11%. The compensation of John L. Lechleiter, Lilly’s top executive, increased, however, by as much as 44%, depending on how you look at the numbers.
And, as I noted previously, AstraZeneca (London) will cut 3500 R&D jobs by 2014 to achieve “flexibility” and “effectiveness.” The company is hunkering down and cutting costs for reasons similar to those given by Merck.
Lean workforces seem to be the order of the day for Big Pharma. As a cost-reduction strategy, job cuts might be effective. Some manufacturing operations might be larger and less efficient than they could be. Yet the industrywide terminations do make me worry about the industry’s future. The cuts to R&D operations are particularly troubling, considering the industry’s recent history of lackluster pipelines.
I hope we are not witnessing Big Pharma cutting its nose off to spite its face. And I hope that laid-off employees can find rewarding work elsewhere and can continue to pursue pharmaceutical innovation.