Merck abandons $7M in grants for long-term IT hiring plan in Austin

Merck will forfeit $7 million in state and local tax breaks and grants after abandoning its hiring plans at an Austin IT hub. (Merck)

When Merck moseyed into the Lone Star State as part of a global IT restructuring, it pitched a robust hiring plan in exchange for nearly $7 million in tax breaks and grants. Now, after Merck pulled back the reins on its Austin plans, those incentives have dried up.

Merck is walking away from incentive agreements with the state of Texas and the city of Austin after trotting back plans to invest $28.7 million and hire 600 full-time employees by 2023 at a new IT office at the University of Texas’ Dell Medical School. The pharma giant decided to abandon its long-term hiring plans due to “internal priorities and events over the last two years,” but it still plans to maintain the company’s location in Austin, according to Merck spokeswoman Pam Eisele.

"I do not have any further details beyond this but can confirm that we continue to maintain an IT office in Austin," Eisele said in an emailed statement.

Austin was one of four global cities targeted by Merck for a complete overhaul of the New Jersey-based drugmaker’s IT operations in an attempt to align its digital operations with drug development and research.

In its pitch to the city of Austin in summer 2017, Merck said the new office would help Merck staffers collect metadata and design “solution-based platforms for personalized, proactive and preventative healthcare,” according to a summary (PDF) of the project. Merck has produced the only FDA-approved app for diabetes patients. Other drugmakers are integrating monitoring systems, smart delivery devices and other tech products into clinical trials and pay-for-performance deals with payers.

RELATED: Pharma's digital revolution turns to Austin as Merck eyes sites for 600-person IT hub

As part of its deal, Merck pledged to hire 290 employees and invest a total of $7.2 million in its Austin office by the end of 2019, the Austin American-Statesman said. Merck previously pushed those plans back two years and quietly terminated its $856,000 tax incentive program with the city and $6 million Texas Enterprise Fund grant pledged by Gov. Greg Abbott.  

Merck is one of a suite of drugmakers that have announced big plans to boost in-house IT operations as companies search for digital solutions to drug R&D. In September 2014, AstraZeneca said it would hire 300 employees at a $9 million IT hub in Chennai, India, as part of its own digital push.

RELATED: AstraZeneca builds up in-house IT operations with 300 in India

As part of that plan, AstraZeneca also pledged to open another IT hub in San Francisco in 2015 and a third in Eastern Europe within two years. The jobs spree came during a time when AstraZeneca was actively hiring back most of its outsourced IT operations.