Big Pharma’s Financial Flu Killing Plants and Jobs Across the Nation

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Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas). Yesterday’s headlines heralding exciting new drug discoveries are increasingly being replaced by yet another announcement from Big Pharma of massive plant closings and a staggering number of accompanying job losses. A multitude of reasons, including blockbuster patent losses, weak pipelines and increasing economic pressures from lower cost generic rivals have fueled the almost 24-month run of bad news within the industry (see: 2007 Pharmaceutical-Biotech Industry Forecast.) AstraZeneca is the most recent to join fellow industry giants, Pfizer, Merck and Bayer, with its announced operational restructuring that will cut an estimated 3,000 jobs in an effort to increase productivity and reduce costs.

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 has revealed that in the time beginning January 1, 2005, a total of 64 North American plants or research centers have either already been closed or are targeted to do so in the ensuing months. Collectively, these facilities represent the potential for an estimated job loss count of over 16,000. Much like the most virulent diseases, no region appears to be escaping unscathed. Currently, the Northeast has taken the biggest hit with eight plants already closed and another five scheduled to follow.

Click on the image at right to view a chart showing the breakdown of closed plants by market region.

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 extremely good deals come on the market. Younger firms looking to save on manufacturing start-up costs are prime customers for these properties. For a few million dollars in renovations, the plants can often be reopened in just a matter of weeks. One such switch is taking place at the site of the former Dow Biopharma plant in Smithfield, Rhode Island. Alexion Pharmaceuticals (Cheshire, Connecticut) is investing $15 million in the plant to ready it for production of eculizumab, a blood disorder product. 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 any time 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 (see: Anatomy of a Pharmaceutical Plant: Final of a 3-part Series Examining the Financial Impact of New Plant Construction). 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. The losses to the community, in terms of ancillary businesses, the local educational system and more are often incalculable.

Many towns tend to grow around a major employer, such as the case of Merck and its huge Flint River Intermediate/API production facility in Albany, Georgia. Desperate to both sell the plant and somehow save the jobs of the 400 plus employed there, the company has set up an elaborate page on its website detailing the equipment and vast capabilities of the site. If the plant does not find a buyer, there is not a comparable employer in town that could absorb those who stand to lose their jobs. Hopefully, this painful reorganization of the industry will soon settle down, for unfortunately, there is not yet a drug made that cures unemployment.

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