Avanir Pharmaceuticals Inc will reduce its employee headcount by 11% or 73 employees. The job cuts are expected to be completed by the end of January of the new year.
The Avanir Pharmaceuticals layoffs will impact the sales department and sales-related positions. The company stated in an email that “the restructuring is to streamline our current approach to sales and better position Avanir to pursue its long-term mission.”
Avanir is a company focused on developing pharmaceutical treatments for the central nervous system. Avanir Pharmaceuticals Inc is part of a larger company and is a business division of Otsuka Holdings Co Ltd (TYO:4578).
Why Is a Large Part of the Avanir Workforce Getting Axed?
This announcement of job cuts is a forced restructuring by the company. It is all due to the sales force of the company purportedly pushing its Food and Drug Administration (FDA)-approved treatment, “Nuedexta,” on to elderly patients with dementia. Nuedexta is a treatment for patients to stop them from crying or laughing uncontrollably.
The salespeople of the company were allegedly getting physicians to prescribe the medical treatment to elderly patients who had dementia and Alzheimer’s; who did not need the treatment. In turn, the physicians would receive large sums of cash for following the salespeople’s instructions. In total, there was approximately $14.0 million paid to about 500 doctors in order to promote and prescribe the treatment.
It is not illegal to pay a doctor for promotional speaking. However, it is illegal for doctors to prescribe certain treatments in exchange for kickbacks from the drug manufacturer.
The reason for the current job cuts is because there are lawsuits that need to be dealt with. The company needs to save as much money from its current expenses to handle any legal cost that may arise. Another reason is that the revenue once seen from Nuedexta won’t be realized any longer since the numbers may have been inflated due to the wrong patients allegedly receiving the medical treatment.
How Will the Future Look for Avanir Pharmaceuticals?
Since Avanir works in the pharmaceutical sector, the entire business relies on the research and development (R&D) division creating treatments that get approved by the FDA. If the FDA does not approve the treatment, then the company will have spent money and time for no reason because their treatment will not be available for sale.
Since the company has a negative image in the public eye, the future could become a lot harder when seeking the FDA’s approval for a treatment. Presently, there are treatments in different approval steps, which may be looked at with more scrutiny now.
This then could result in more job cuts being announced if drug treatments take longer to get the FDA’s seal of approval. There’s also the possibility of not getting any approval at all. This would once again force the company to reassess itself and could result in more Avanir Pharmaceuticals layoffs as the company struggles to preserve cash.
“Avanir Pharmaceuticals cuts 11% of workforce, including sales reps amid probe into marketing practices,” Becker’s Hospital Review, December 6, 2017.
“Avanir Restructures, Will Cut 11% of US Workforce,” Orange County Business Journal, December 7, 2017.
“Drugmaker paid doctors with problem records to promote its pill,” CNN, December 4, 2017.