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Merck Reveals Plans to Implement Massive Cuts, Including Thousands of Staff

Oct 4, 2013

Drug maker Merck just announced that it plans on implementing severe cost-cutting steps, including laying off thousands of employees. The drug maker will also be cost-cutting to the tune of billions of dollars over the next two years.

In addition to laying of 8,500 staff, Merck will be cutting $2.5 billion over its research and development unit’s restructuring, according to The New York Times, which pointed out that the unit has experienced some significant setbacks.

According to Merck chief executive Kenneth C. Frazier, the moves are meant to increase competitiveness and enable the drug maker to be “better positioned to drive innovation and to more effectively commercialize medicines and vaccines for the people who need them,” the Times reported. This is not the first time that Merck has slashed staff. A prior announcement discussed a 7,500-staff member layoff, which brings the staff reduction to 20 percent, leaving a total of 81,000 workers worldwide.

The staff- and cost-cutting measures appear to be tied to larger issues in Merck’s research group. For example, Merck’s Type 2 diabetes drug, the incretin mimetic, Januvia, is typically associated with its quarterly earnings. Now, however, Januvia is under investigation by the U.S. Food and Drug Administration (FDA) due to possible pancreatic cancer and pancreatic cellular change reactions, as well as mounting wrongful death and injury lawsuits.

Also, Fosamax, Merck’s bisphosphonate medication, is at the center of thousands of lawsuits that involve allegations of serious Fosamax injuries, including femur fractures, osteocrenosis of the jaw (dead jaw syndrome), esophageal cancer, atrial fibrillation, and severe musculoskeletal pain. Some lawsuits allege that Merck knew about the side effects associated with the heavily marketed medication yet never advised consumers and the medical community.

Device maker Medtronic also recently cut thousands of staff in the wake of issues with its bone graft product, Infuse. When the 2,000-staff layoff was announced, Omar Ishrak, Medtronic CEO, told The Star Tribune: “These are never easy decisions but are necessary.”

Medtronic executives said the layoffs are expected to save the device maker $225 million annually. About half of the layoffs are planned for U.S. employees and most have been completed; the rest are scheduled for 2012, said Medtronic spokeswoman Cindy Resman. Medtronic employs some 45,000 people worldwide, according to The Star Tribune.

About one year ago, Medtronic also announced an additional 1,000 layoffs in the U.S. and overseas. Some Medtronic units report strong fiscal growth and full-year earnings, The Star Tribune reported, noting that stock rose nearly 5 percent.

Medtronic’s issues are likely associated with the debacle it made of the research and marketing of Infuse, which was presented as a way to stop the painful need to harvest bone from patients’ own hips during vertebrae fusions, according to Healthworks Collective. Two independent studies overseen by Yale University revealed serious issues, including that there is little, if any, difference in the efficacy of Infuse when compared to a traditional bone graft. Medtronic approached Yale researchers after a June 2011 study published in The Spine Journal indicated that Medtronic-paid researchers did not report significant potential complications tied to Infuse in spinal surgery. Some accusations, according to BMJ, involved Medtronic minimizing Infuse’s adverse reactions. Researchers also discovered that, among the published Infuse trials, 56-88 percent of the product’s known efficacy outcomes were reported while six out of 17 clinical trials conducted by Medtronic never reached publication, according to BMJ. Also, 23 percent of the known adverse events recorded in the Infuse trial data were never included in the journal publications.

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