Merck Layoffs 2017: Focus on Top-Selling Drugs Leads to Job Cuts

Merck Layoffs to Affect 1,800 U.S. Sales Representatives in 2017

Leading pharmaceutical company Merck & Co., Inc. has announced over 800 mass job cuts as it makes changes to its U.S. sales teams. The Merck layoffs will affect the company’s U.S. sales reps as it shifts its focus toward its top-selling drugs, where it sees growth. The job cuts will help the drugmaker achieve cost savings.

As part of its reorganization plan, Merck is eliminating jobs in three of its U.S. sales teams. The sales representatives in those teams market the company’s drugs to primary care doctors, endocrinologists, and hospitals across the country. The pharma company is eliminating about 1,800 sales representatives across the country.

The pharma company will create a single new sales team with only 960 sales reps to promote its top-selling drugs for chronic care. That means a net loss of approximately 840 sales jobs. The new team will market drugs such as the diabetes treatment “Januvia” and its insomnia medication “Belsomra.”

The latest Merck layoffs will affect about seven percent of the company’s entire workforce in the United States The last time the company announced mass layoffs was in 2013, when it said that it would be cutting about 20% of its workforce.

A company spokesperson has said that the latest Merck layoffs will help the company shift its focus toward areas of growth, while cutting costs. Claire Gillespie said that the restructuring is “part of ongoing companywide efforts to sharpen Merck’s focus on innovative R&D that addresses significant unmet medical needs and on our best opportunities for growth, while reducing overall costs.”

The Merck layoffs were announced just a week ahead of the company’s third-quarter earnings release. The company is feeling pressured to cut costs as maintaining revenue growth becomes increasingly challenging amid the growing cutthroat competition in the U.S. pharmaceutical industry.

Merck Layoffs Follow Other Major Pharma Layoffs in 2017

Major U.S. pharma sector players are feeling threatened from generic drugmakers as many of their drug patents approach expiration. After these patents expire, the drug formulas will become available to generic drugmakers to replicate and ell at lower prices. As a consequence, the big players stand to lose millions of dollars in revenue from their branded drugs.

Big Pharma is now beginning to prepare for the arrival of more competition by slashing costs and diverting those savings toward the research and development (R&D) of new patented drugs.

Just last month, I reported on another major pharmaceutical company, Eli Lilly and Codownsizing its workforce in a cost-cutting move. The company jettisoned eight percent of its global workforce and closed a number of its manufacturing facilities to generate cost savings. That drugmaker shared its plans to reinvest the cost savings into R&D in order to create new medicines as many of its patents neared their expiration dates.

In August, a similar restructuring move was announced by Teva Pharmaceutical Industries Ltd (ADR), which announced mass layoffs following a disappointing second-quarter earnings report. Teva, like Eli Lilly, also had competition from generic drugs to blame for its slipping profits.

Teva shared its plans to lay off 7,000 employees from its global workforce of about 57,000, of which 7,500 were employed in the United States. In addition, the company announced that it was closing six of its manufacturing plants in 2017 and nine plants in 2018.

As competition from generic drugmakers stiffens, chances are that more pharma industry layoffs may follow the Merck layoffs in 2017.

Sources:

Merck to Lay Off About 1,800 U.S. Sales Reps in Cost-Cutting Move,” Fox Business, October 20, 2017.

Merck to lay off 1,800 sales reps,” Seeking Alpha, October 20, 2017

Categories: Job Cuts, NewsArticle

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