Pharma has gone through wave after wave of layoffs and shutdowns in recent years, in concert with most other industries. You could argue that this is coincidental, that our industry's problems are more structural than external. Which is to say: we're not getting killed bythe recession; we're getting killed by patent expirationsand a lack of R&D productivity - and FDA/EMA skittishness, if you like - that would have struck with or without a recession.
Executives and analysts all agree that we've moved into a different environment, with fewer blockbusters, greater regulatory scrutiny, and tighter reimbursement . . . and that was before ObamaCare. So pharma is belt-tightening, looking to new markets, and still trying to figure out how to boost R&D.
To me, those huge personnel and infrastructure cuts seem intended to help them adjust to an era of smaller sales and reduced margins, not necessarily to make them more productive. I certainly hope that executives and directors have a sense of realism about their companies' prospects, but I worry that this is becoming tantamount to throwing in the towel.
My problem is, how do you know when you've cut enough? In recent quarters, many industrial companies have posted larger profits despite reduced revenues; it comes from paring away costs. This looks good for investors, but "growing by shrinking" can also lead to catastrophe.
Take my Christmas vacation, for example.
Every year, my wife and I visit her family in Louisiana for Christmas. (They don't say "the holidays" down there, although many of them do wish me a happy Chanukkah.) Because of her work schedule, we planned a short trip this time, flying down on Thursday, Dec. 23, and returning through Newark the Sunday after Christmas.
And then a blizzard hit the northeast, and all flights were cancelled through Monday, the 27th. I wasn't mad about the snow - as OutKast tells us, "You can plan a pretty picnic / but you can't control the weather" - and I trusted my airline, Continental, to reschedule us on a flight home in the next day or so.
The problem is, Continental has been shrinking to grow. The airline cut routes, shrank back-office staff and furloughed planes for months, making itself more profitable and putting it in a position to merge with United. The takeaway? Fewer flights! Less support! And, apparently, no one minding the TripAlert e-mail servers!
Mid-Monday, we got an e-mail saying that we were rescheduled to a 6:40 a.m. direct flight to Newark the next morning. It meant that we'd have to get up at 4:00 a.m., but that was a small price to pay. Tuesday morning, as we waited for my father-in-law to get the car started, I decided to check the flight status online. I hadn't received a TripAlert e-mail notice from Continental about the flight, but it never hurts to double-check, right?
The flight was cancelled. The news was on their website, but they didn't send a word to us. I looked for it at Newark Airport's site: cancelled. No word about a rescheduled flight. Amy went back to bed while I stewed and tried to find alternate flights home. Because of the backlog of flights, rescheduling wasn't allowed on Continental's website; it instructed me to call their 800 number. That number didn't even have voice-mail set up. It was simply an apology message about heavy volume, followed by a hangup.
By 10:30 a.m. that Tuesday, we finally got a TripAlerte-mail from Continental to let us know that the flight four hours earlier was cancelled. Also, they were putting us on a flight to Newark on January 3rd. And adding insult to incompetence, the flight would go through Houston, at 5:15 a.m.
Now, I love my in-laws, but spending another six days eating Cajun food would likely have led to either a heart attack or the need for a second seat to accommodate my boudin- and gumbo-expanded waistline. I considered renting a car and driving home from Louisiana, but my wife smartly suggested finding a flight that would get us near(ish) home, and driving from there.
And that's how we ended up flying to Cincinnati (via Houston) that afternoon, renting a car, staying with friends overnight, and then driving 650 miles through five states over 11 hours to get home on Wednesday, the 29th.
Obviously, Continental isn't a pharma company or a contract services provider. But it does have a major stake in deliverables and (somewhat) on-time service. And thanks to its shrink-to-grow philosophy, it managed to destroy its flexibility to handle a crisis and alienated long-time customers. But it had a profitable quarter! Huzzah!
P.S.: In other news, your esteemed editor turned 40 in January, so you can now expect a steady stream of articles about statins, hair-replacement drugs, and other lifestyle-oriented pharmaceuticals.
Editor - firstname.lastname@example.org