Big Pharma Layoffs Mounting - 26 More Plants to Close

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Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas)--Despite the fact that millions of people consume prescription drug products on a daily basis, a tsunami of job cuts continues to roll across the Pharmaceuticals Industry. This unfortunate trend goes hand in hand with dozens of site closures. While global in scope, when an examination of this disturbing trend is restricted to just North American facilities, the collective numbers are still staggering. It becomes even more troubling when it is taken into consideration that the jobs to be lost generally pay a very handsome above-average wage with solid benefits. A recent analysis of Industrial Info Resources' Pharmaceutical Tracker - Online Database reveals 26 North American plants and research facilities currently targeted for closure.

Click on the image at right for a list of scheduled Pharma-Bio closures.

The latest layoff announcement by Pharma giant Pfizer (NYSE:PFE) (New York, New York) came in at relatively light 250 being dropped from the payroll in Kalamazoo, Michigan. But that figure is indeed just a drop in the bucket of 11,000 global job cuts the company has in store while it systematically closes eight facilities. The news came on the heels of Schering-Plough's (NYSE:SGP) (Kenilworth, New Jersey) stunning blow to New Jersey that beginning in August, it would begin cutting at least 500 jobs in the state, which in turn is part of its global plan to shed 5,500. The Garden State took another blow when Johnson & Johnson (NYSE:JNJ) (New Brunswick) decided that 260 of its planned 300 job cuts would be made in New Jersey.

The bigger picture emerges when choosing the starting point of January 2007 and moving forward. In just that relatively short period of time, a combined total of 77 industry sites employing more than 14,000 people have either been closed or have been put on notice of such. A litany of reasons, including blockbuster patent losses, weak pipelines and increasing economic pressures from lower-cost generic rivals, have fueled the run of bad news. A veritable who's who of Big Pharma is rolling up the red carpet while chanting the increasingly popular "restructuring" mantra and showing thousands of employees the door. And the folks hitting the streets include everyone from the maintenance staff to the suits upstairs.

It was bound to happen. The industry's decades-long upward trajectory of unbridled growth and prosperity begged for a fall. In many ways, the public embraced the bad news. It is a rare person who had not covetously listened for years about the six-figure salaries with perks galore paid to those hired to convince the family doc to push their company's latest offering, without recognizing that the unbranded, generic version worked as well if not better. Slick multimillion-dollar television ads convinced (and continue to do so) the masses that a bout of burping had somehow transformed into something degenerative, but, if one took the properly colored little pill, a body's decay could be held at bay until another day.

For years a prevalent belief was, "Who cares? That's what insurance is for." But then insurance companies across the board began developing and using something called formulary charts. And then people cared. Brand loyalty is often tossed out the window when a patient is faced with the choice of a $5-$15 co-payment for a generic on the list as opposed to the branded version that can cost hundreds of dollars without insurance. Tiered formulary charts that offer the branded versions do so at a greatly increased deductible, and then often require a patient to first try out other less inexpensive meds before graduating to the desired one. New laws emerged to curb the practice of encouraging prolific prescription writers by sending them on "educational seminars" in exotic locales. Industry associations such as PhRMA are issuing new guidelines that promise continued curtailment of the days of wine and roses in regard to physicians.

Some of the plants targeted for closure will undoubtedly be reopened by others. With companies eager to shed the buildings, and often the equipment inside, some good deals come on the market. Younger firms looking to save on manufacturing start-up costs are prime customers for these properties. Others, like Pfizer in Michigan, are donating buildings and equipment to local colleges, universities and economic development boards to bolster education and, ironically, new job creation for emerging companies. For a few million dollars in renovations, the plants and research sites can often be reopened in just a matter of weeks. Yet, in other cases, some of these sites are tainted by the very factors that targeted them for closure. Aging facilities and equipment coupled with stringent FDA regulations place a particular burden on reopening the doors anytime soon.

One of the main reasons communities across North America wage fierce campaigns to land a major Pharmaceutical-Biotech manufacturing plant or research facility is for the quality of the jobs offered. The positive collateral effect on the local economy has also provided a strong draw for these projects as the generous benefits and higher-than-average wages spurred from the new facilities are extremely attractive, especially when packaged in a state-of-the-art working environment. The larger pharmaceutical companies have a tendency to maintain a high local profile in terms of community support, with generous charitable donations and events integrating them even more into the local surroundings. Adjusting to the loss of such an attractive anchor can be devastating to the entire community. While highly skilled employees are often offered other positions, the new jobs are more often than not located elsewhere out of state. The losses sustained by the community in terms of ancillary businesses, the local educational system and beyond are often incalculable.

In reality, many of the industry's restructuring plans have been on the books for a long while. Bad economic times are actually a good time to clear the slate, shake out some bad practices and delete redundancies. While noticed, the layoffs and plant closures do not stand out quite as much as they would in more prosperous eras. The industry is able to deflect some of the "big bad pharma" karma when the news is filled with foreclosures and gasoline approaches $5 per gallon. Despite the dire straits, the industry will survive and prosper, albeit in a leaner, hybrid form. Now, if they could just come up with a little purple pill for unemployment.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.