Here's a nice post from Mike Wokasch's Pharma Reform blog entitled Painful Pharmaceutical Industry Downsizing was Avoidable. Certainly you'd have to be in a cave somewhere to be oblivious to the number of job cuts that have occurred in the pharma industry in the past couple years. Here's the latest numbers that I saw posted in the Pharmalot blog.
You can see from these numbers that through October, the industry has lost more than 103,000 jobs. These numbers wouldn't include the 4800 cuts announced by Roche, the 4500 announced today by Bayer, and the additional 11,300 that Pfizer may now cut subsequent to the Wyeth merger.
The point of the Wokasch piece is that this should have been more foreseeable by Big Pharma management when times were better - that they should have done a better job recognizing the changes that were occurring in the industry and the environment and acted accordingly to modify their business model. According to Wokasch, "Big Pharma executives could have and should have seen that their business model, product pipelines, and more importantly, their balance sheet projections were not sustainable in the evolving healthcare market that was becoming increasingly managed, more cost conscious, and more demanding for innovation, clinically meaningful differentiation, and proof of value. I believe the current layoffs are in large part a result of Big Pharma mismanaging the cash they were generating over the past two decades."
The results of pursuing developing strategies that focused on small incremental improvements versus true innovation, driving sales of those products through large, expensive and wasteful marketing programs, not improving operational efficiencies, and expanding headcount unnecessarily is what we have today. And, it is not the executives who necessarily pay the price, it is the front line employees who lose their job in the midst of an economy that is struggling to ignite.
Concludes Wokasch, "even without 20/20 hindsight, I believe the current situation was avoidable. Had Big Pharma pursued innovation in the mid-1990’s rather than relying on “tweaking chemistry” just to get products to the market, managed their expenses when cash was plentiful, and had the foresight to begin adjusting their strategies and workforce for the evolving new healthcare market rather than trying to be the biggest Big Pharma you would not be seeing the layoffs we have been experiencing."
I think he's right. The world is now going to change dramatically as a result of this slow move to shift their business model. In a piece in The New Economy on pharma's stalled R&D model, Sam Isaly, managing partner at OrbiMed Advisors, expects employment in the 14 Big Pharma companies across the US, Europe and Japan to fall around 20 percent between 2009 and 2015. That means some 200,000 jobs will disappear across the drugs business. In the 21st century, says Isaly, Big Pharma will primarily be a distribution business. Sobering thought.
Posted by Bruce Lehr November 19th 2010.