In fact, 2007 was a year of announced layoffs at most of the top firms: Pfizer, 10,000; AstraZeneca, 7,600; Bayer, 6,100; J&J, 5,000; BMS, 4,300; Novartis, 3,750; Amgen, 2,600. Merck set the trend in November 2005 with a "reorganization" that included 7,000 pink slips. About a third of the 30,000 lost jobs were US sales reps. While that's a troop cut of one-tenth, many analysts think deeper cuts are in store—or should be.

"While the sales force cuts have been large, they aren't as significant as previously anticipated—mostly fine-tuning based on changing portfolios," says Capgemini's Chane. "And they've already reached a threshold beyond which everyone seems afraid to move."

But as Big Pharma launches more and more biologics, the sales model will evolve, however gradually, to meet the demands of the specialty market. "I doubt that there will be many overnight changes," says Arcas Group President Jan Heybroek. "We'll see sales structures start to function more like a group of small autonomous companies, each focused on a single disease state within a specific therapeutic area."

Downsizing will continue to claim many manufacturing plants worldwide. AstraZeneca plans to get out of the business completely. Pfizer will be outsourcing as much as 30 percent of its manufacturing to China, India, and South Korea. "Last year, some drugmakers made big deals in outsourcing, and there will be more in 2008," says Patni Life Sciences head Mark Kolb. "Pharma is recognizing that in places like India, it can save money and get better talent and better processes than at home."

And as industry execs dig deeper into the 2008 balance sheet, says TGaS managing partner Stephen Gerard, they'll take the knife to former luxuries like redundant clinical trials. "They're going to outsource important functions," he says, ticking off information management, sales force automation, and especially primary research. Sanofi-Aventis broke the ice last year when it opened an R&D shop in Goa, India.

But Bain & Co.'s Farkas says that outsourcing is more than just a cost-cutting device. "Pharma needs to get outside its own walls," he says. "Some of the best science is being done in academia and biotechs, and companies should form ongoing partnerships to bring in more of an outside view." He notes that a growing number of new CFOs and even CEOs are coming from outside the industry—precisely because they're on good terms with major outsourcing, not to mention major change.

Major change must be driven by a vision that is proactive rather than reactive, analysts say. Even as industry leaders make decisions to protect their companies from the coming deluge, they also need to be laying the foundations for Big Pharma 2020. Most experts agree that the successful business model will involve many new forms of outside collaboration.

"Pharma needs to evolve from being a product-focused industry to being consumer-focused," says Deloitte Life Sciences leader Terry Hisey. That means not merely making and marketing medicines, as essential as they are. It means providing a whole range of products and services for disease management, including devices, diagnostics, information, and support. "And pharma needs to be on the cutting edge of this holistic trend," he says, "or it will be relegated to the sidelines."

Innovation in R&D

"All the large-cap pharmas are trying to beef up their product lines," says Peter Young of investment bank Young & Associates. "Since each starts with a different portfolio, each takes a different approach—and it will be interesting to see if the variations become more pronounced over the next year."