Drug Company Merck Announces More Layoffs

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New Jersey-based pharmaceutical company Merck plans to cut another 8,500 jobs as the company continues to struggle with competition from cheaper generic medications.

Merck says the reductions are in addition to 7,500 cuts it had previously announced but hasn't carried out. That means it's slashing about 20 percent of its workforce of 81,000 people.

Ed Silverman writes about the pharmaceutical industry for Pharmalot. He said Merck was facing pressure to cut costs from several fronts at once.

"They have patents expiring on big sellers, and that means lower-cost generic versions become available. That deflates revenue," Silverman told WNYC's Soterios Johnson. "And at the same time there's a lot of pressure for what is called reimbursement rates—the amount that payers, whether it's a government agency or private insurers, will agree to reimburse the company for its drugs."

Merck is the world's third-largest drug maker. It says the restructuring will cost  between $2.5 billion and $3 billion before taxes, mainly due to employee severance costs. But it expects the moves will help generate annual savings of about $2.5 billion by the end of 2015.


To hear the full interview with Ed Silverman, click on the audio above.