Friday, April 22, 2011

The "New Economy" in the Drug Industry

This post by Matthew Herper in his Forbes magazine blog is a surprise to me. I knew that there layoffs, but I didn't realize the size of it:
Since 2000, the pharmaceutical industry has cut 297,650 jobs, according to consulting firm Challenger, Gray & Christmas. For reference, that is about as many people as currently work at the three largest drug makers — Pfizer, Merck, and GlaxoSmithKline — combined.

Of course, not all those people remained unemployed, and the total headcount of the pharmaceutical industry did not drop that much. Many of those who were laid off were probably hired back by other drug makers. Some folks have probably been laid off more than once. It’s also worth noting that big mergers are one reason for the cuts. These are synergies.

Still, that number — 300,000 people, give or take — is worth remembering whenever anyone talks about how profitable pharmaceutical companies are and how they are fleecing society.Look, also, at how the number of job cuts per year has been going up enormously.

It’s true that many medicines are way too expensive. But it’s also true that medical innovation has gotten incredibly difficult and that it is not clear that even truly beneficial medicines can find their market. If we don’t figure out how to solve that paradox, it really could mean no new medicines for anybody — and even more lay offs. The full data set is below.

A Decade In Drug Industry Layoffs
YearNumber of jobs cut
2011 (First three months)3,385
Source: Challenger, Gray & Christmas Inc. ©
That is a serious devastation of jobs. What I wonder is how this will affect drug discovery in the future. I would rather the drug companies confine this kind of slash-and-burn to their advertising budgets and not touch their research budgets.

To put that 297,650 job loss into perspective. This comment by rickwo showed up on Matthew Herper's blog:
Overall size of industry. According to the U.S. Bureau of Labor Statistics,, “Pharmaceutical and medicine manufacturing provided 289,800 wage and salary jobs in 2008.” This number includes R&D, sales, G&A as well as manufacturing. It’s harder to find worldwide data because of differences in the way nations define their industries. It’s very sobering to consider that the number of people laid off since 2000 (even worldwide) is larger than the total number of pharmaceutical employees in the U.S. at a given time (2008). In other words, the industry has laid of an entire “United States-worth” of its employees over this past decade.
Think about that. The number of jobs lost worldwide was roughly the size of the entire US workforce! This has to have a devastating effect on progress in discovering new drugs.

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