There was a time when Merck was looked upon as the granddaddy of all pharma companies. As the self-proclaimed oldest pharmaceutical
and chemical company in the world, people wanted to work at Merck for its sterling reputation, excellent products, and job
security. But for a company that was once considered a model of stability, America's third-largest drug maker has experienced
quite a few public blows in recent months. The withdrawal of Vioxx (rofecoxib) and a grim outlook on the fate of Pargluva
(muraglitazar)—the diabetes drug Merck hoped would become its next blockbuster—not to mention several products going off patent,
has indeed made it an unstable environment.
Cheryl Buxton is global managing director of Korn/Ferry International's global healthcare markets group, specializing in identifying
top talent for pharmaceuticals, biotechnology, medical device, and healthcare contract service organizations. Prior to joining
Korn/Ferry, she was human resources director for Johnson & Johnson in the United Kingdom, and before that, she worked on OTC
and prescription brands at Bristol Myers. She can be reached at firstname.lastname@example.org
Cheryl Buxton, managing director for the executive search firm Korn/Ferry, which identifies top talent for pharmaceutical
companies, contends this situation is just part of a changing industry. Buxton spoke with Pharm Exec about what impact Merck's decision to cut nearly 11 percent of its work force (in hopes of saving $4 billion dollars by 2010)
will have on the company's future.
On November 28, Merck announced it would close five manufacturing plants and lay off 7,000 employees by 2008. Was the news
Buxton: Although it's one of the largest layoffs in recent history, it's definitely not the most surprising. Pfizer cut 3,000
jobs in April, but there was less uproar about it. Merck is late in the game with the trimming of its work force and budgets,
but its situation is more significant because the industry is going through so many changes.
Making Way for Generics
What about for Merck employees?
It hits Merck hard since the company has always been considered a bastion of stability. You went to Merck, you stayed there
23 years, and then you eventually took a retirement package. This is sweeping change.
How much did Vioxx have to do with the decision to cut jobs?
Vioxx is the catalyst, but not the cause. The cutbacks were inevitable because of a combination of a worryingly thin R&D pipeline
and a case of impending legal problems related to Vioxx. The other factor is that the company knows it can't sustain the current
profit level, with blockbuster drugs like Zocor (simvastatin) coming off patent. Merck knew it was going to have to do something.
From where you sit, do you think employees anticipated this?
People predicted it to some extent. When there is a change of leadership at the top—Richard T. Clark stepping in as CEO in
May—and with someone on board like Larry Bossidy, who's been known to do a fair amount of downsizing and cost cutting, layoffs
are bound to happen. But Merck has always been pretty fat in terms of number of executives, and it's always been pretty cash
rich. It's still going to be cash rich.
What are some of the internal changes that can be anticipated as a result of the job cuts?
There will be a high level of anxiety within the organization. There will be a few management shuffles in management and sales,
and morale will hit an all-time low. There will be a fair amount of natural attrition, and longtime employees will have to
wait to see what kind of packages they'll get. But morale had been quickly declining since the withdrawal of Vioxx, so it's
surprising Merck has been slow to react. Most of the other major pharmaceutical companies have consolidated most of their
manufacturing divisions over the last seven years, so the question that remains is why it took Merck so long to follow its