Merck President and CEO Richard Clark announced last week that the company will cut 7,200 jobs-12 percent of its workforce-to compensate for a serious revenue shortfall. Clark laid off the layoffs to a decrease in sales of its blockbuster cholesterol medications, approval delays at FDA, and patent expirations. 

Recent downsizing alerts at Novartis, Schering Plough, and GlaxoSmithKline look paltry when compared to Merck’s major “restructuring,” as the preferred euphemism has it.  Approximately 40 percent of the jobs lost will be in the United States, and middle and senior management will constitute about 25 percent of the cuts. 

“Streamlining Merck to meet the demands of the ever-changing business environment includes the ever-painful reality of losing employees whose contributions have helped the company accomplish so much throughout the years,” Clark told investors yesterday. “But no matter how difficult the decisions are today, we know our long-term strategy is right.”

That said, Merck’s numbers weren’t all negative. Sales of first-in-class diabetes drug Januvia and novel HPV vaccine Gardasil beat analyst estimates, while asthma and allergy blockbuster Singulair revenue remained flat from the previous year. The biggest hit was to high-cholesterol drugs Vytorin and Zetia, which both saw sales drop 15 percent in light of the long-delayed Enhance data suggesting that Vytorin was no better than generic statins at decreasing arterial plaque, yet works fine for lowering cholesterol. 

“The combination of Merck’s base business, new product growth-including Gardasil, Januvia, and [breakthrough HIV drug] Isentress-we believe, will exceed $5 billion in peak sales,” Deutsche Bank analyst Barbara Ryan said in a letter. “An agile, increasingly lean cost structure will support superior growth over the next several years. Further, Merck’s late-stage pipeline has the potential to extend this record into the next decade.”


  For the 7,200 employees looking at unemployment, the prospect for new jobs could be bleak. 

Julie Kampf, president of JBK Associates, told 

 that her executive search company has seen a downward trend in senior level hiring recently. “We would all be foolish to put blinders on and not see that the economy has slowed and with that there is restructuring around layoffs,” Kampf said.

She warns that pharma companies must be careful, though, about who they choose to release. “At some point, we do expect the economy will recover, and companies have a history of laying people off and then realizing that they need those people,” she said.

One area that pharma seems not to be knifing is contract labor, said Pete Ferguson, president, health and life sciences at Yoh talent and outsourcing firm. “We haven’t seen much of a slowdown from a contingent labor standpoint,” Ferguson said. “We have a consistent job order flow from the pharma and biotech industries right now.” 

This isn’t too surprising. In September, Merck announced that it would be using contracted reps to fill holes in its sales force just months after it eliminated 1,200 sales positions. 

“During an economic downturn, pharma engages in buyouts and layoffs of permanent staff, but then tend to backfill those slots with contingent labor,” Ferguson said. “That doesn’t mean we won’t see a slowdown, just that we haven’t seen it yet.” 

Articles

News Analysis

Industry is cinching its belt, but news that Merck will shed 12 percent of its workforce - many senior and middle management positions - was a bombshell announcement.

Merck Restructures, Eliminates 7,200 Jobs

If you had a drug dealer selling heroin out of your living room, chances are you would do something about it. That’s the predicament many Web hosting and domain registration companies have faced, as the number of illegal online pharmacies has spiked in the past few years. 

President Bush, last week, signed into a law a bill that would give companies such as GoDaddy and Lunarpages the ability to remove Web sites of online pharmacies that are not registered as government-approved medication sellers. Under the new rules, if a Web site is making drugs available for sale in the US and they don't comply with the statute, the hosting companies can shut the site down regardless of where the pharmacy is located.

“We are seeing so many pharmaceuticals-a dramatic increase over the last three years-online,” said Christine Jones, general counsel for GoDaddy, host to 31 million online domains.  “We were looking for a better solution than simply redirecting domain names for SPAM, which is all we could do in the past.”

The legislation came into existence after Rep. Bart Stupak (D-MI) became involved with a case in which a 

. The drugs were obtained from an online pharmacy without a prescription. The Senate version of the bill made its way through the office of Sen. Dianne Feinstein (D-CA). 

“We’re one step closer to ending the practice of rogue pharmacies on the Internet,” said Feinstein in a 

. “We can no longer stand back and allow these outfits to sell highly addictive medications to anyone with a computer mouse and a credit card.”

Jones notes that there is no statutory obligation for an online pharmacy to receive verified Internet pharmacy practice sites (

) certification. “VIPPS is an extra layer of protection, but there is no requirement that says if you are not certified by VIPPS, you can’t sell drugs online,” she said. “We were looking for something that would make the sale of drugs without registration illegal. Just like child pornography is illegal and taken down immediately on the Web.”

By definition, the largest server providers also host the most illegal pharmacy sites. Last year, GoDaddy redirected 1,300 pharmacy related domain names for SPAM. In effect, if a spammer is sending emails from illegalpharmacy.com, and the host receives a SPAM complaint, the domain is taken away. GoDaddy wanted a tool that would easily allow the company to take a Web site offline without having to buy and test the drugs, get a prescription, or make people see a doctor. 

“[Under the old rules] we couldn’t take your content away, but you are not allowed to use domain names that are registered to GoDaddy,” Jones said. “We weren’t allowed to take the underlying Web site down, because they weren’t doing anything wrong.”

Even though the registration period isn’t for another six months, GoDaddy has taken a number of URLs that it knew to be violating the prescription rules and have redirected them. 

 “A lot goes into that law enforcement investigation before a site can come down-we would like to squash that a little earlier,” Jones said. “I always try to encourage people, when they come across a shady site, figure out who the hosting company is and send an email to their abuse department. We rely on those notices to do our investigation.”

New legislation gives US-based Web hosting companies the go-ahead to remove shady online pharmacies without a warrant. The new rule makes it harder to market counterfeit drugs, and for consumers to purchase medication without a prescription.

Web Registries Get OK to Shut Down Rogue Pharmacies

Novartis announced on Monday that it would eliminate 550 sales positions in a cost-cutting move designed to restructure the way the drug firm sells medication. This comes on the heels of a quarterly report that showed the company’s third quarter net income dropping 69 percent, due in part to the purchase of Alcon.

A spokesperson for the company explained that the job cuts are not necessarily layoffs-Many of the positions are vacant jobs that haven’t been filled.

The sales reorganization is part of Novartis’ plan to build a new commercial model in the United States. The drug firm is moving from what it calls a “once size fits all” national model of mirrored sales forces to a tailored sales model that will reflect different geographical regions. Rather than being broken down by brand, sales teams will be multi-brand teams trained to sell to local customers.

“The commercial model change allows us to modify our approach as the US changes,” a Novartis executive said during an analyst call. “As the US becomes more restrictive on a market-by-market basis, this regional model allows us to make modifications.”

Earlier this year, Novartis conducted three pilot programs in Michigan, Massachusetts, and Oregon to determine how well this new sales strategy will work. Novartis Pharma CEO Joe Jimenez told 

 that the programs turned out better than expected. 

“When I'm in those markets and I talk to our sales reps, they have a much higher level of satisfaction, because these are people that have been sitting in physician’s office in these restricted markets waiting for an hour for ten seconds with the physician-and they do that ten times a day,” Jimenez said. “Now there’s new access based on working with the customers at a different level.”

Each region will have a general manager who will oversee reps and be accountable for overall performance. The restructuring goes into effect early in 2009, and will cost about $20 million, which should return about $80 million annually starting in 2010. 

Finally, the company announced several leadership changes. Here’s the breakdown:

Novartis appointed Joerg Reinhardt chief operating officer, Andrin Oswald was named head of vaccines and diagnostics, George Gunn was named head of consumer health, Andreas Rummelt was appointed group head of quality assurance and technical operations, Jeff George was promoted to head of Sandoz, and David Epstein will lead the innovative molecular diagnostics group. 

Novartis is the latest pharma company to move away from the traditional sales model of blanketing sales reps for one drug across the nation. The company is restructuring its force (and cutting jobs) to focus on a regional sales model.

Pharmaceutical Executive-10-22-2008

Merck Restructures, Eliminates 7,200 Jobs

Web Registries Get OK to Shut Down Rogue Pharmacies

Novartis Trims 550 Sales Positions