Spare pharma the dot-com cleaver

Survivors of the dot-com bubble burst of a decade ago may recall that the victims were not just the cleverly named enterprises of new-media wunderkinds, but the big-name telecom companies that provided the infrastructure for their ride. The telecom companies didn't disappear like their fledgling online counterparts, however. They survived through a vicious business transformation--one that saw layoffs not so different from those in the pharma industry today.

Among the greatest similarities is the loss of experience. High-priced lifers in operations--those with decades of experience on equipment still in use--were replaced with lower cost contractors and newbies, and sometimes not replaced at all. At higher levels, spreadsheet-toting MBAs took over from through-the-ranks management.

Another similarity is the fat executive paychecks. Ten years ago, WorldCom CEO Bernard Ebbers received more than $34 million in salary, bonuses and long-term compensation, including stock options. Meanwhile, 6,000 of WorldCom's 77,000 employees were shown the door.

Today, the Institute for Policy Studies finds that CEOs of the 50 companies that have laid off the most workers since the onset of the recession took home 42 percent more pay in 2009 than their peers at S&P 500 firms. Pharma takes the top two spots on the list of 50. Fred Hassan of Schering-Plough, executing the merger with Merck, oversaw 16,000 employee departures as he earned $49.7 million, according to the report. J&J's Bill Weldon, with $25.6 million in compensation, signed off on 8,900 layoffs.

Among the greatest differences between the telecom and pharma layoff situations: customers don't metabolize telecom products. Interruptions to "adult entertainment"--the chief consumer of the rapidly multiplying bandwidth that telecom companies were then making available--had a consequence far less severe than drug-supply and pharma-quality interruptions. 

Layoff announcements like Genzyme's (see related story), in which company leadership makes ops decisions based on how it compares with like companies, show a startling disregard for the unique nature of the companies that make biopharma products, the products themselves, and their potential impact on consumers. This is not online shopping.

- here's where you can download the Institute for Policy Studies report