Bristol-Myers Squibb (NYSE: BMY) will cut nearly 1,000 workers. That is on top of large rounds of firings in 2007 and 2008. The company gave an odd reason for the action.”The ultimate goal of the initiative is not only to reduce costs but also to create an organization that is more agile.” The statement seems disingenuous. Bristol-Myers’ sales were down last year. Those sales will continue to drop as more and more of its drugs lose their patent protections.
Just two days before the Bristol-Myers announcement, Abbott Labs (NYSE: ABT) fired 3,000 people as part of its Solvay pharmaceuticals acquisition. Pfizer (NYSE: PFE) has fired thousands of people in R&D and sales and as part of its buyout of Wyeth. Merck (NSYE: MRK) has done the same as it consolidates its staff with the large rival that it bought last year–Schering-Plough.
Big pharma has cut tens of thousands of jobs since the beginning of the recession and is one of the largest sectors that has contributed to joblessness. The layoffs will not end with the recession. It has to be conceded that the industry is in a retreat that could last for years. The generic drug industry has simply robbed large pharma firms of too much of their revenues.
Big pharma has begun to die the sort of death that the American car industry did. There is simply too much competition for too few customers. Innovation, real innovation that adds to market share, is scarce. The pharma industry has begun to contribute to its own demise through large R&D layoffs. That essentially cuts the sector’s own throat, but most of these companies are publicly held, and they have to sacrifice something to show their shareholders bottom line growth.
The largest pharmaceutical companies are not willing to bet that a few years of lean profits for the sake of a large R&D push are worthwhile, because they have essentially lost faith in their own futures.
Douglas A. McIntyre