Pharma Job Cuts Are On The Rise Again
27 CommentsBy Ed Silverman // August 4th, 2010 // 7:43 am
After what appeared to be a slowdown in layoffs taking place in the pharmaceutical industry, job cuts are accelerating again, according to the latest monthly tally from Challenger, Gray & Christmas. There were 2,023 jobs lost in pharma in July, a notable uptick from the 830 lost in June. Overall, the industry has shed 37,010 jobs this year.
As we have noted before, however, it remains possible the picture is even worse, because the report may not capture every lost job. Layoffs often occur in dribs and drabs, which means some job losses do not land on radar screens monitored by the media or state labor departments, which require notice when a certain number of jobs are to be eliminated. Moreover, this approach to layoffs will continue for the foreseeable future, so getting a true picture remains challenging. UPDATE: Merck, however, has disclosed to the New Jersey Department of Labor that another 90 jobs will soon be lost (see here).
David Avitabile
This is terrible news for the US pharmaceutical industry and for those 37,000 people and their families who have lost their jobs this year.
Fortunately, the FDA seems to be expanding and hiring so they can continue to choke the life out of the US pharmaceutical industry.
Given their passion for protecting the health and wellbeing of the American people, I’m sure that the FDA will provide jobs to help feed the families of those that they’ve helped to make unemployed.
Jimmt Dean
What a relief. The fashion show is over boys and girls. Snotty 28 year olds will have to find a new way to make money. Stripper pole is an option for many as most are unqualified for any real job. Good riddance to ya.
Christopher
Jimmt Dean, that’s crass and tasteless. You’re on the wrong board.
Icarus
The truly sad thing is that the pharma leadership that put these companies in the unenviable state they are in are still in positions of leadership.
You may have a few new players, but most were already higher ups before anyway.
Given that they couldn’t innovate their way around the patent pitfalls, are we to believe that their new innovation is simply to cut headcount to save the bottom line?! Nothing innovative about that old play.
Unfortunately these “leaders” are still in charge and raking in the dough while throwing subordinates under the bus as they say.
As for Jimmt Dean, it is unfortunate that you have to see these sales people picking up donuts at the shop you work at, but it is not necessary for your glaring resentment to be exposed. Try a new wardrobe or some hair gel if you don’t feel good about your looks.
Tobias
The reps/managers are the people who will punished(fired) for upper managements lack of knowing what’s going on in their own industry. They hired 10′s of thousands of people for jobs that did not warrant that many people to be hired. There is still a ton of waste in pharma. There are companies that have 400 to 500 people selling one product and managers who only have 4 or 5 people in their district.
Nathan
I’d like to blame incompetent pharma management for these layoffs, but the more I think about it, the more I believe that there isn’t really any “blame” here. I truely think that this is simply a result of our own past success. We have largely succeeded in developing effective treatments for most major diseases. These are going off-patent. For society to be willing to pay the major premium for brand-name medications, they must be far safer and far more efficatious than generics. This is simply a hurdle that is too high to jump over with today’s technology.
As a result, the companies today just can’t affort to support the infrastructure that has been built up over the past 20 years. Big pharma is just shrinking in order to fit the new reality of healthcare.
Christopher
It’s true that while reps and their managers are in the firing line there are other distinct groups whose jobs are endangered. Aside from job losses following mergers and acquisitions – where there can be 2 people for one job – the increasing trend towards outsourcing functions that were traditionally ‘in-house’ jobs is also cutting into companies.
Much of R&D can now be outsourced to service businesses. AZ’s decision to outsource all its clin pharm work is a good example. What was once handled by staffers is now done by outside contractors.
Similarly the ‘R’ part of R&D is increasingly spread across many different sources (academia, biotech clusters, collaborative research alliances etc) rather than conducted primarliy in the company’s own facilities by their own scientists.
Manufacturing, packaging, distribution, sales, marketing, regulatory and pharmacovigilance can all be bought in. None of this is a bad thing financially, sadly, but is a growing trend in response to the realities of the market and companies’ inability to ‘grow their own futures’.
Christopher
Nathan’s comment posted while I was slogging through my own, so some overlap. I agree with Nathan.
hmm
Jimmt Dean, Right On!
With majority in the ranks of blonde, toned, attractive.. simple sexism on parade. Shame. And the digg about Deans employment, only showcases the arrogance found in these ranks.
David Avitabile
I think part of the problem lies with management at Big Pharma. But as I said in my post above, the regulatory environment in the US has a lot to do with why the industry is in such a bad state.
People need to be less afraid to stand up to what is becoming an out of control regulatory environment in this country.
If we have a regulatory system that makes it almost impossible for companies to bring new drugs to market, those companies will market their drugs elsewhere. And the American people will suffer as a result.
pharmavet
Ed, I must respectfully challenge your use of the term job “cuts”. In many cases jobs are being transferred to emerging markets both on the R&D side and Sales and Marketing side (see link to opening of marketing industry leader ZS Associates office in India) The reality is closer to a zero sum growth picture rather then overall reduction in headcount. It would not make sense for ZS to be opening up Marketing consulting offices ion New Delhi and Beijing, for example, if the hiring was not going on in these places.
A number of US financial services companies are sending new hires to courses to learn the relevant languages of the BRIC countries they might expect to be posted to. It would behoove the US pharma industry to follow suit.
http://www.zsassociates.com/news_events/news_media/zs_opens_new_delhi_office/
Christopher
PV Do you believe that the growth of pharma industry jobs in emerging markets offsets the losses in the USA and Europe? I haven’t seen (looked for…) any stats but I would be very surprised if this were so, not least because of the sheer scale of the Western industry.
Absolute populations in many of those countries are immense but the proportion that has access to healthcare is not proportional so I think the industry size and type of growth may still reflect that.
ZS may be opening offices because the industry is hiring there, or because New Delhi and Beijing represent an as yet unsaturated market opportunity for a Western consultancy. Dunno – good luck to them anyway.
M. Black
Yeah … as if “rising” assumed any type of pharma business in the last 5 years carried the tag of “healthy” by most means
MB.
JJack
As for Dean and hmm, extremely inappropriate comments! You really applaud the loss of jobs where many families are affected? I hope you never are in that situation.
As far as the job losses, it is a situation where big pharma was use to 7-10% yearly growth, and because of the lack of good pipelines and major money makers coming off patent, this situation was inevitable. It is a shame but a reality in today’s economy. Hope all ‘land on their feet’, as the sales teams (at least) are well trained and professional. They should not have a hard time finding other scientific sales positions. Good luck!
pharmavet
Christopher, this is not a quantitative answer to your question, but the links below show where the trend is moving; away from US and towards emerging markets.
PV
http://ducknetweb.blogspot.com/2010/01/pharma-cuts-jobs-in-us-hiring-in-china.html
http://trendsniff.com/2008/11/06/china-number-one-destination-in-asia-for-pharmaceutical-outsourcing/
http://www.fiercepharma.com/story/novartis-hiring-mood-china/2009-04-13
M. Black
There are plenty of reps. They brag about their workadys ending at 2PM. Then society wonders how things go wrong and how certain drugs do more than good. Make the reps cover more areas to fill more offices, and put more employees in the quality areas where it is needed on a larger scale. Pamphlets and samples could be mailed. Done.
~ M. Black
Dinosaur
The industry brought this on themselves. Hiring Barbies and Kens to be sample droppers ruined a once respected position. What also occurred in the meantime, was that the honest, intelligent, patient/doctor oriented, science-based promotion representatives were removed so that those that remained could play the “corporate game” and regurgitate what could be called “legal”, but unethical messages that were no more than marketing/television advertisements for improved medicines. Some with faults that would have been discussed in the past, understood, and identified to patients, while the majority of p[patients received improved care -where a risk did exist, but the benefits outweighed the side-effects as long as the side-effects were identified; but are minimized today for profits. And now, the only way for pharmaceutical companies to continue reaping enormous immediate profits is to lower (unnecessary) labor costs. But the companies are doing so at the expense of removing the honest, experienced representatives and keeping the less educated, photogenic representatives; all because the executives, marketing, and all levels of management have no real idea of what they’re doing. They think 15-30 second verbal blurbs to physicians are “educational” to the medical community.
As a result, the pharmaceutical/detail representative profession is almost dead, with those in managerial positions acting tough, but really dumb-founded as to what’s happened. Management has driven the profession into a managed-care/government bidding industry, which has and will destroy discoveries and “real” innovations (not the make a TID medicine BID, but new and real medicines for diseases).
The solution is for the companies to take a step backward, re-hire the experienced representatives who have long-term relationships with the physicians and the medical communities and, then hope/pray their former corporate attitude can be corrected by those with the talent, knowledge, and experience to save the profession and industry.
Stephanie
My understanding of the situation is that not only sales reps are losing their jobs, but the scientists, engineers, etc. As Christopher states above, the functions are moving to outsourced companies, so maybe some of these displaced people will or are going into the service sector (not included in the chart) in the outsourced companies.
I think this could be healthy as big pharma knows they are having trouble with their pipelines and instead of looking to change their culture/environment to encourage innovation they are buying up smaller innovative companies and converting them to their “big pharma” ways! When will big pharma realize this is a never ending, never succeeding cycle?
Doc
Years of fat profit margins – one of top 2 industries in the US, led to lazy, redundant, inefficient, ineffective efforts in many parts of big pharma – R&D, sales, marketing and more. Now that the industry will have to operate at more reasonable profit levels, there will be much more fat to cut in all departments. It is just beginning.
A fish rots from the head – senior executive management ignored all the waste for decades.
k
All the pharma companies are trying to figure out how to survive/thrive in an era of increasing regulatory requirements (think REMS), decreasing productivity of pipeline and increased pressure on reimbursement. Coping mechanisms beyond the standard mergers and licensing include: eliminating/streamlining functions, outsourcing R&D (Lilly), and figuring out how to emulate consumer products (Novartis’s Joe Jimenez). This trend has to continue- pharma companies must figure out how to cope in this changing environment.
Ed Silverman
Hi Pharmavet,
Thanks for the note and apologies for the belated reply. You make a good point and so I asked Challenger Gray & Christmas about the composition of the layoffs tracked and this is what came back:
“We track by the location of the headquarters. Here are a couple of scenarios that will help clarify how we categorize the cuts. 1) if a US-based company announced cuts that included overseas cuts, we would count those cuts, mainly because it is often unclear how the cuts will break down. So, a company might say it is cutting 5,000 workers, some of which will be overseas. Since, it is not clear how it will break down, we count the entire 5,000. 2) We would count cuts made by a foreign-based company, but only if the cuts impacted US workers. In this case, we would only count the number of US workers impacted (so, if the announcement did not clearly state the number of US workers impacted, we would not include). In these situations, it is usually the US-based division of the foreign company making the cuts, so that’s how it fits into our guidelines.”
In other words, the layoffs cited may include overseas jobs, given that some of the biggest drugmakers are shuttering facilites around the world, this would make sense. Merck, for instance, is closing plants and labs in various countries…
http://www.pharmalot.com/2010/07/merck-closing-numerous-labs-and-manufacturing-sites/
That said, jobs, as opposed to people, are being shifted, which would distort clarity on the headcount situation. Sanofi-Aventis, as an example, was happy to encourage reports about hiring in the Boston area, but in fact, some of those open positions were being filled by people from New Jersey and Pennsylvania who chose to transfer rather than take a package.
But in general, yes, you are certainly correct about overseas hiring. However, it appears, unfortunately, that the big picture is hard to ascertain. For now, at least, layoffs can be tracked. If a useful measure of overseas hiring emerges, I will gladly run something about that as well. Please share whatever you come across.
Hope this helps,
ed
Dana
Thank you to all who took an empathetic approach to those of us who have been displaced to layoffs.
Jimmy: I am one of the reps who was laid off. Here’s my story. BS in Biology, didn’t apply to med school for monetary reasons. Worked tirelessly in the field selling insulin and injectible diabetes products. Had a baby, got a new territory/business partner, diagnosed with cancer the following week, worked through 5 months of chemo, got laid off 5 months later for poor “numbers”.
There are many good people (thanks to those who mention all the brilliant R&D people) being laid off with nowhere to go. Many of my friends have been without jobs well over a year. These are smart, hard working, loyal people who simply didn’t make the business rules.
I do tend to blame many layers of management for being so out of touch with the customer and not providing the kind of rep, product, services needed in this environment. But, the numbers of lives devastated by the sheer volume of layoffs is catastrophic, and losing all these high paying jobs (R&D, Management, Sales) will have a negative impact on the economy as a whole.
pharmavet
Thanks, Ed.
PV
FDA
REMS are not increased regulation. They are protection for companies and nothing more.
When a new drug (even 10th in class) come in for review a REMS is simply a discussion of the most common AEs (i.e. > 5% and double placebo) that is in the proposed labeling and for less common but serious AEs (e.g. Liver failure and death) they simply regurgitate that it’s already known for the class even when it’s 100 times more common with their drug than most other drugs in the class and claim labeling is adequate to handle it. Then the REMS is sent off to be approved by someone in DDMAC (marketing and ad review) before the scientists and reviewers even look at the actual data.
pharmavet
Another nail in the coffin of the US Pharma market.
http://seekingalpha.com/article/219110-merck-looks-east?source=yahoo
Patrick
There are a number of reasons for the implosion of the pharma industry — definitely multifactorial. You cannot blame the reps — they are tactical implementers, not strategists. There has been significant waste in pharma but the real issue is the generation of me too products, largely driven by the pressures of wall street to capture ridiculous annual returns for investors (and wall street can be blamed for a lot else but we won’t go into that here.) This situation led pharma to capitalize on a system that was lucrative — me too products, modifications thereof for life cycle planning and patent extension, a system of tracking physician behavior (hence consumer behavior) that is unrivaled by any industry. Pharma execs knew how many details and sample drops would result in increased sales — there was an art to this.
But alas, novelty is king and new drugs were not coming up the pike and pharma’s inefficiencies became overwhelmingly burdened with high overhead associated with research, development and SG&A. It costs alot to develop drugs because of inefficiency. Now add on the ever evolving cost containment issue (pharma raising prices every year to compensate for increases in market share) have also burdened the industry. New healthcare legislation may actually help pharma sales since more will have access to healtchare and medicines.
The new pharma business model, that is partering with small biotech companies to serve as their R&D arms without having to build that infrastructure, with relationship and highly focused contract selling (reps will become more educated and focused) will be the wave of the future. It is for the best. And I am one of the many unemployed.
If you want to blame anyone for the layoffs, you need to blame pharma itself.
Max
This layoff is affecting pharmacist also…and I am one of them. My last full-time job as an employee was with Walgreens, and that ended February 2008. This was the beginning of job losses especially in retail pharmacy in certain markets. It was a year before I was able to obtain full-time work, and that was only possible because I reluctantly took a job as an independent contractor through agency. I am in a really bad spot because this is a temporary contract, and I have no health benefits, paid time off or anything of the sort. I have to live out of state during this contract also. I am not complaining though. After a year of unemployment as a pharmacist, I have learned the meaning of ”status anxiety”. I look at pharmacist who feel secure in their jobs and I really pity them now. They still look at my situation as crazy..why would you want to do that???..they ask. Don’t you want to be settled in one place?…They just don’t seem to be willing to admit what a mess this has become, but for those of us that have already fallen out of the ”comfort zone”…this is a grim reality.