Layoffs are always big news in pharma, as they are seen as an indicator of
the health of the industry. Companies don't like to have to announce them, but
when they decide to, getting plenty of attention becomes important. That is to
impress upon investors that their CEOs are making the hard decisions needed to
keep costs in line. Of course employees are interested. They know from the
inside what is about to happen, and having lived through the awful
anticipation, they want to see what the carnage is really going to be.
The patent cliff is often the big culprit. One might think that a
one-to-one relationship could be graphed between what is happening with the
patent cliff and layoffs, but that is not the case. Pharma analysis company
EvaluatePharma has forecast that there
were $41 billion in patent sales at risk in 2011, a year in which the top 10 pharma layoffs amounted to 26,500. In 2012, the peak year, EvalutePharma said a whopping $67 billion was at risk. In that year, the top layoffs tallied more than 34,600. Then in 2013, when at-risk sales fell to only $29 billion, we have a total for the top 10 of nearly 27,900.
were $41 billion in patent sales at risk in 2011, a year in which the top 10 pharma layoffs amounted to 26,500. In 2012, the peak year, EvalutePharma said a whopping $67 billion was at risk. In that year, the top layoffs tallied more than 34,600. Then in 2013, when at-risk sales fell to only $29 billion, we have a total for the top 10 of nearly 27,900.
Of course, the factors that eventually lead to layoffs are not simple. Some
companies try to get ahead of the curve with cuts. Eli Lilly ($LLY) is an example of that for 2013. Sometimes they cut and then have to cut
more because the pipeline is not hitting. Merck ($MRK) comes to mind, having announced its fourth wave of major cuts in four
years during 2013.
And sometimes there are even pleasant surprises. The patent for Novartis' ($NVS) hypertension blockbuster Diovan expired in September 2012, but because of regulatory issues, Ranbaxy Laboratories has yet to launch the first approved generic.
Speaking of regulatory issues, generic competition isn't always the impetus
for cuts. German drugmaker Boehringer Ingelheim laid off about 1,100 employees last year after the cost of bringing its
Bedford, OH, sterile manufacturing plant up to standards made it more
cost-effective to just close it up.
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