Where'd the Jobs Go?
The Pharmaceutical Research and Manufacturers of America (PhRMA) took great exception to a recent story published in the New York Times. It suggested that drug manufacturers have raised prices this year to cushion themselves against future cuts that would come with health care reform.
Not so, says PhRMA senior vice president Ken Johnson. He notes that the costs cited in the article don't reflect many of the discounts and rebates that ultimately accrue to many consumers. And he raises some fair points. But one of the main thrusts of his argument is that the industry is in bad shape, financially speaking, and is responding to its own internal forces and those of the market, not the threat of new legislation. Raising prices is a matter of survival, not profiteering.
Certainly one could counter that price hikes, whatever the reason for them, are still price hikes. They are hard to shoulder for consumers that rely on brand name drugs, even if many others are now saving money with new generics. In any case, Johnson's attempt to challenge the indelible image of an industry awash in profits will probably fall on deaf ears, because he's a flak for a trade association, after all. But that's kind of his point--the image is too seldom challenged by ostensibly independent journalists.
This is a new wrinkle on an age-old battle, of course. But I was struck by one small detail in his piece: Johnson says that 58,000 industry jobs have been lost so far this year.
That statistic was attributed to Forbes. And I'm not saying I don't believe it--there have certainly been steep losses this year. But I can't find the original Forbes article that cites this number. (If anyone else can, I'd be grateful for a tip.) Assuming it's accurate, however, and assuming it's a recent reference, it's pretty chilling. If the last two months of the year show the same trend as the first ten, then 2009 is shaping up to be almost as bad as last year, when about 77,000 jobs were lost. (That figure, which you can see tallied here, came from the Pharmalot blog. And it doesn't count all the related lost support and service jobs outside of actual drug companies. I'm not sure what Forbes/PhRMA were counting, but to put it in perspective, 77,000 is about how many jobs were lost in the entire country during the month of April 2008.)
According to the Bureau of Labor Statistics, the U.S. pharma industry employed 292,000 people in 2006, with the worldwide industry employing maybe 1 million. Even if we assume the job losses tallied were evenly spread across the globe--which I don't think is the case--that means about 13.5% of global positions have disappeared over the past couple years. I suspect that number is far higher in the U.S., which certainly makes pharma's unemployment figure look a lot worse that the nation's as a whole, bad enough to begin with.
But Ken Johnson's point about pharma responding to its own internal forces applies here, too. These losses aren't primarily about the global recession; they're about patent expirations, productivity, and mergers. Pfizer's recent announcement that it's shuttering more R&D sites shows that the bloodletting isn't over yet. But we're in the eye of the storm of blockbuster patent expirations, and companies have already positioned themselves ahead of the worst blows yet to come. While it's hard to predict when we'll see healthy job growth again, it seems like we're probably in the seventh inning of the losses. I hope that's not just wishful thinking.
- Karl Thiel
Read the BioPharm Executive online newsletter November 2009.
Sign-up for the free monthly subscription to the BioPharm Executive.
More By Karl Thiel