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 $29 billion, we have a total for the top 10 of nearly 27,900.
Of course, the factors that eventually lead to layoffs are not simple. Some companies try to get ahead of the curve with cuts. Eli Lilly ($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.
Having grown up in a town that could stretch its population number to 25,000 when its small college was in session, I am often struck by how the tens of thousands that lose their jobs in pharma each year could represent an entire community. Many of you will have been affected by layoffs either directly or in some glancing blow. So if you have opinions, don't hesitate to express them in the comments section or on Twitter, or via email to me or Carly Helfand. Or join our LinkedIn group and go at it there. -- Eric Palmer (email | Twitter) | Carly Helfand (email | Twitter)