Merck & Co.’s (Whitehouse Station, NJ) announcement last week that it plans to cut 15% of its workforce and cease operations at eight manufacturing sites and eight research sites as part of an integration plan following its 2009 acquisition of Schering-Plough (Kenilworth, NJ) is yet another sobering statistic regarding the employment patterns in the pharmaceutical industry. So in light of this news, where does the pharma industry stand in recent job losses?
A recent article in the New York Times cited a report by the outplacement firm Challenger, Gray and Christmas, which said that the pharmaceutical industry has cut approximately 34,987 jobs in the first half of 2010. The figures are based on the activity of US-headquartered companies and foreign companies with US operations and includes losses in the US and outside the US for those companies. The figure represented 12% of the 297,677 job losses in the first half of 2010, according to the report, giving the the pharmaceutical industry the dubious distinction of leading private-sector job losses thus far in 2010. Through the first half of 2010, the government/nonprofit sector ranked the highest among all industries with 98,776 job losses, followed by the nearly 35,000 job cuts in the pharmaceutical industry. The retail sector ranked third in job losses at 26,181, the computer sector fourth at 16,964 job losses, and then the telecommunications industry at 16,005 job cuts. In 2009, the pharmaceutical industry ranked third in job losses at 51,549, outpaced only by the retail sector, which cut 85,698 jobs, and the government/nonprofit sector, which reduced employment by 102,302 positions.
Unlike certain industries, such as retail, the computer, and telecommunications industries, which are closely tied to the cyclicality of the economy, the pharmaceutical industry, by providing a healthcare product, had traditionally been largely immune to macroeconomic vicissitudes. But it is those fundamentals that make the recent job statistics even more troubling. The losses reflect ongoing restructuring by Big Pharma companies following merger and acquisition activity or overall cost-reduction efforts as well as a constriction of the labor force among emerging pharmaceutical companies, many of which faced difficulty in securing financing in the recent economic downturn as well as in the inherent uncertainty in drug development.
So, unlike other sectors, where job growth may return with the gradual improvement of the economy as a whole, the pharmaceutical industry is in a transition as it faces increased generic-drug incursion in the innovator-drug sector, fewer new product introductions, and slowing market growth in the large and established markets in the United States and Western Europe. These trends are not new to anyone in the industry, particularly to those who may have been affected, but given the long lead times for product development inherent in the pharmaceutical industry, it doesn’t seem that job gains will be here anytime soon.