Strategies for Managing Pharmaceutical Workforce and Site Reductions: Analysis of legal, productivity, and quality control issues

Date: August 22, 2010
Pages: 174
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US$ 3,835.00
Publisher: Business Insights
Report type: Strategic Report
Delivery: E-mail Delivery (PDF)
ID: SCD4F412AA5EN
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Strategies for Managing Pharmaceutical Workforce and Site Reductions: Analysis of legal, productivity, and quality control issues
In 2007, due to the impending patent cliff and the consequent need to cut costs, big pharma began for the first time to outsource chemical API manufacturing to China and India. Prior to this only generic drug companies had manufactured in the two countries. Since then, big pharma has been undergoing waves of layoffs that have been accelerated by the economic downturn, with manufacturing and sales being particularly affected, and outsourcing levels in R&D and manufacturing are expected to increase further in the future.

This report examines the different strategies available for managing the layoffs and site closures resulting from not only the outsourcing of R&D and manufacturing, but also the transition from small-molecules to biologics and the need to exploit new markets. The factors causing change and producing the need for workforce reductions are analysed, and the expected impact across the pharmaceutical workforce in the US is detailed. The consequences of layoffs and site closures in terms of legal compliance, maintenance of productivity, and safeguarding of quality control are discussed in depth. Case studies from the pharmaceutical industry are provided to highlight pitfalls and illustrate best practice. The report concludes with discussion of the long-term risks associated with over-dependence on expansion in nonmarket economies and suggests methods to lower these risks.

Key features of this report
  • A single reference for comparing details on employment protection regulations in different countries, and for the US highlights of major differences in specific states with large pharma employment
  • Comprehensive coverage of the changes occurring in pharmaceutical industry employment in developed nations.
  • Demonstration of how to achieve a cost-effective workforce reduction while maintaining R&D innovation and manufacturing quality.
  • Case studies of issues resulting from workforce reductions and outsourcing of manufacturing and R&D, with numerous examples of pitfalls and best practice.
Scope of this report
  • Identify current and future trends in pharmaceutical industry employment and understand their causes.
  • Assess inter-country (and within the US inter-state) differences in employment protection regulations.
  • Gain insight into strategies that have been used for facility divestitures to achieve optimum returns.
  • Appreciate the benefits of engaging with key local stakeholders during workforce reductions and site closures, and understand the sanctions which local governments may attempt to impose.
  • Understand the important role of employee morale and identify measures to retain key staff.
Key Market Issues
  • From 1996–2005, US pharma’s sales force nearly doubled to 100,000 to support a 26% increase in practicing physicians. However, a significant number of drugs will lose patent protection over the next four years, 2010–2014, representing roughly $60bn in total, and the generic share of the drug market has increased from 49% to 74% of total sales in the US from 2000–2009.
  • Different companies are adopting various approaches for R&D outsourcing; for example, Eli Lilly plans to outsource 50%, whereas Novartis is committed to a large internal R&D team.
  • In 2007, global big pharma including AZ, Pfizer, GSK, and BMS, first announced its plans to outsource API manufacturing to China and India; in the same year, of the 1,154 generic drug applications to the US FDA, only 13% of the manufacturing plants were in the US, while 43% and 39% of the plants were abroad in China and India respectively.
  • Discovery R&D scientific jobs in the pharmaceutical industry require significant years of education and on the job training; in particular, the shift of chemistry jobs overseas will have long-term negative effects on the US pool of chemistry talent that will be difficult to reverse.
  • Regional stakeholders, including local business and government leaders, are keenly interested in identifying solutions for the future of manufacturing sites and supplying assistance for the displaced employees.
Key findings from this report
  • The projected growth from 2008–2018 for US pharmaceutical and medicine manufacturing employment lags behind the projected employment growth for all US industries, at 6% versus 11% respectively, due to generic competition and drug production moving overseas.
  • OECD synthetic indicators measure the strictness of overall employment protection against dismissals of part- and full-time employees and restrictions on temporary hires, and are low for the US, Canada, and the UK; intermediate for Ireland, Japan, and Hungary; and high for Germany, China, India, and France.
  • Companies that work closely with regional stakeholders will gain partners who assist with marketing and locating financial investment and potential buyers for the closed facility.
  • The timing of workforce reduction announcements can be crucial to the reception both within the workforce and in the wider community. In some cases, poorly chosen timing has significantly complicated the layoff process and has generated considerable bad press.
Key questions answered
  • What are the employment protection regulations regarding a mass layoff or facility closure in key states in the US and countries in Europe and Asia?
  • What happens to the government tax benefits and incentives when a company undergoes employment reduction?
  • When and why do companies provide additional severance and displacement support?
  • What two factors are key for a cost-efficient workforce reduction?
  • How does a company most effectively and quickly recover from a workforce reduction?
  • What is necessary to maintain an innovative R&D group after a workforce reduction?
  • What are the long-term risks of outsourcing to China and India? How does a company minimize risk exposure to nonmarket economies?

Strategies for Managing Pharmaceutical Workforce and
Site Reductions
Executive summary
Introduction
Pharmaceutical employment trends in developed nations
Legal regulations and considerations
Managing employees through workforce reductions
Biotech and pharma workforce reductions
R&D and manufacturing site closures
Outsourcing and offshoring for research and manufacturing
Long-term risks of outsourcing and offshoring

CHAPTER 1 INTRODUCTION

Summary
Introduction
Pharmaceutical industry background
Pharma background
Main pharma therapeutics
Biotech background
Main biotech therapeutics
Current snapshot of the pharmaceutical industry
Current sales, manufacturing, and R&D
Current challenges facing the pharmaceutical industry
Big pharma challenges
Biotech challenges
Current changes for the pharmaceutical industry
Mergers and acquisitions
Workforce reductions
Outsourcing of R&D
Manufacturing moving to China and India
Effects of change on the pharmaceutical industry
Convergence of big pharma and biotech
Effects of change on big pharma
Effect on big pharma sales
Effect on big pharma manufacturing
Effect on big pharma R&D
Effects of change on biotech
Effect on biotech R&D
Future models for the pharmaceutical industry
Smaller patient populations
Diagnostics and improved efficacy
Global markets, both branded and generic opportunities
Global market projections
Opportunities for generics and branded generics
Conclusion

CHAPTER 2 PHARMACEUTICAL EMPLOYMENT TRENDS IN DEVELOPED NATIONS

Summary
Introduction
US pharmaceutical and medicine manufacturing, 2008–2018
US pharma manufacturing background
US pharma manufacturing employment
US pharma manufacturing occupations
US pharma manufacturing employment change
US scientific research and development services, 2008–2018
US SRDS background
US SRDS employment
US SRDS occupations
US SRDS employment change
Conclusion

CHAPTER 3 LEGAL REGULATIONS AND CONSIDERATIONS

Summary
Introduction
General legal requirements for workforce reductions
North American regulations
US
US federal
US states and territories
Canada
Canadian provinces
European regulations
UK
Ireland
France
Germany
Bulgaria
Hungary
Asian regulations
Japan
China
India
Singapore
Beyond legal requirements
Conclusion

CHAPTER 4 MANAGING EMPLOYEES THROUGH WORKFORCE REDUCTIONS

Summary
Introduction
The employee
Significant factors
Communication
Phases of a workforce reduction
Before
Day of announcement
Initial transition
Later transition period
Case study
2009 sanofi-aventis us salesforce reduction near us thanksgiving holiday
2009 sanofi-aventis us sales background
Events over the Thanksgiving weekend
Review of Sanofi-Aventis’ timing
Conclusion

CHAPTER 5 BIOTECH AND PHARMA WORKFORCE REDUCTIONS

Summary
Introduction
Insight into employees
Biotech culture
Pharma culture
Survey of concerns regarding impact of workforce reductions
Strategies for employee retention and motivation
Training and opportunities
Financial incentives
Workplace conditions and environment
Maintenance of previous employment benefits
Strategies for workforce reduction
General strategies
Rigorous environment for quality R&D and manufacturing
R&D
Productivity
Administrative
Sales
Manufacturing
Case study
J&J product recalls at its McNeil Consumer Healthcare division
J&J and McNeil background
“Systemic quality issues” and potential phantom recall
Review of contributing factors
Conclusion

CHAPTER 6 R&D AND MANUFACTURING SITE CLOSURES

Summary
Introduction
Facility closures
R&D facility closures
Manufacturing facility closures
Survey of concerns and management methods with regard to facility closures
Case studies
Eli Lilly divests and outsources a manufacturing facility in one move
Lilly and the Tippancoe facility
Sale to Evonik with a nine-year products and services agreement
Lilly strategy: divest operating facility to a strong partner
Sanofi-Aventis training for the biologics transition in France
Sanofi-Aventis in France
Sanofi-Aventis to maintain a constant number of jobs in France, 2010-2014
The Sanofi-Aventis goal: champion of European vaccine production
New York tax break issues for Pfizer closure and workforce reduction
Pfizer closure of Brooklyn plant and employment reduction in NYC
Pfizer versus Manhattan
Tax breaks and negative consequences
Conclusion

CHAPTER 7 OUTSOURCING AND OFFSHORING FOR RESEARCH AND MANUFACTURING

Summary
Introduction
Managing R&D workload
R&D outsourcing
Maintaining quality
Location of contract research organization
Offshore research and manufacturing
Rule of Law in different countries
Rule of Law in India
China and India
China for small-molecule drugs and R&D
India for small-molecule drugs and vaccines
China and India drug quality issues
Case study of outsourced manufacturing
The generic drug company Teva
Teva background
Teva strategy for quality manufacturing
Teva future expansion
Conclusion

CHAPTER 8 LONG-TERM RISKS OF OFFSHORING

Summary
Introduction
Long-term risks of offshoring discovery R&D
Long-term risks of offshore manufacturing
Risks of drug quality and safety
Monitoring of manufacturing, storage, and transportation
Quality – a marketing attribute in China
Dealing with nonmarket economies
Dialogue with governments
Conclusion
Appendix
Primary research methodology
Survey rating experienced respondent concerns for workforce reductions and facility closures in the health industry
Abbreviations
Index
Footnotes

LIST OF FIGURES

Figure 2.1: Major occupational categories in US pharmaceutical and medicine manufacturing, May 2008
Figure 2.2: US pharmaceutical and medicine manufacturing employment of wage and salary workers by occupational category, 2008–2018
Figure 2.3: US scientific research and development services employment of wage and salary workers by occupational category, 2008–2018
Figure 2.4: Additional details for current and projected US scientific research and development services employment of wage and salary workers by occupation, 2008–2018
Figure 5.5: Individual rating of concerns regarding workforce reductions by layoff-experienced respondents in the health industry
Figure 5.6: Selection of top two concerns regarding workforce reductions by respondents experienced in the health industry
Figure 6.7: Individual rating of concerns for facility closures
Figure 6.8: Selection of top two concerns for facility closures
Figure 6.9: Methods used for managing facility closures in the health industry
Figure 6.10: Selection of two most important methods used for managing facility closures

LIST OF TABLES

Table 1.1: US R&D spend domestic and abroad, 2006
Table 1.2: US drug development costs for novel therapeutics
Table 1.3: Global pharma mergers and acquisitions, 2000–2009
Table 1.4: Global biotech mergers and acquisitions, 2000–2009
Table 1.5: Representation of protein therapeutics in global top-selling drugs, 2010 and 2014
Table 1.6: Active US clinical trials by select disease area, 2008
Table 1.7: Global pharmaceutical market by region, 2008 and 2020
Table 2.8: Overview US pharmaceutical industry employment, 2006
Table 2.9: US pharmaceutical employment by state/territory, 2006
Table 2.10: US pharmaceutical and medicine manufacturing employment of wage and salary workers, 2008–2018.
Table 2.11: US scientific research and development services employment of wage and salary workers, 2008–2018
Table 2.12: Additional details for US scientific research and development services employment of wage and salary workers, 2008–2018.
Table 3.13: International comparison of overall employment protection by OECD indicators
Table 3.14: Comparison of US federal and 2003 California WARN
Table 3.15: Comparison of US federal and 2005 Illinois WARN
Table 3.16: US federal and 2007 New Jersey WARN
Table 3.17: Comparison of US federal and 2010 New York state WARN
Table 3.18: Gross unemployment benefits as a proportion of gross annual income by country, February 2010
Table 4.19: Rating of major life stressors
Table 7.20: Cross-country comparison of Rule of Law indicator (percentile) from the Worldwide Governance Indicator project, 2008
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